Nov. 5, 2009 (PR Newswire) -- RENO, Nev. Nov. 5 /PRNewswire-FirstCall/ -- International Game Technology (NYSE: IGT) announced today operating results for the fourth quarter and fiscal year ended September 30, 2009. Net loss for the quarter was $21.3 million or $0.07 per diluted share, inclusive of previously disclosed non-cash charges of $0.26 per diluted share and restructuring expense of $0.01 per diluted share. Net income for the same quarter last year was $52.1 million or $0.18 per diluted share, inclusive of non-cash investment write-downs of $0.10 per diluted share. For the fiscal year, net income was $149.0 million or $0.51 per diluted share, inclusive of the aforementioned fourth quarter charges of $0.26 per diluted share and restructuring expense of $0.07 per diluted share. Net Income for the prior fiscal year was $342.5 million or $1.10 per diluted share. Comparability for the quarter and fiscal year was affected by a number of items included in a supplemental schedule at the end of this release.
"Our fiscal 2009 results reflect a challenging operating environment which we believe stabilized during our fiscal third and fourth quarters," said CEO Patti Hart. "While we remain cautious on the timing and extent of the replacement cycle, we have been encouraged by modest upticks in spending by many of our casino operator customers over the past two quarters."
Gaming Operations
Fourth quarter revenues and gross profit from gaming operations totaled $283.2 million and $170.2 million, respectively, compared to $331.0 million and $192.7 million for the same quarter last year. For the year ended September 30, 2009, revenues and gross profit from gaming operations totaled $1.2 billion and $683.8 million, respectively, compared to $1.3 billion and $778.1 million in the prior year. Revenues and gross profit decreased primarily due to lower play levels and continued shifts in installed base mix to include more lower-yielding, stand-alone lease machines.
For the current quarter and fiscal year, gross margins on gaming operations were 60% and 58% respectively, compared to 58% for both prior year periods. The current quarter benefited from a larger base of fully depreciated units.
As of September 30, 2009, IGT's gaming operations installed base totaled 61,400 units, an increase of 300 units from the immediately preceding quarter and an increase of 900 units over the prior year. Installed base growth in international markets was partially offset by a reduction in domestic placements. As of September 30, 2009, approximately 85% of our installed base was comprised of variable fee games that earn a percentage of machine play levels rather than a fixed daily fee.
Product Sales
Quarters Ended Years Ended
September 30, September 30,
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2009 2008 2009 2008
---- ---- ---- ----
Revenues (in millions)
North America - Machine $67.9 $114.0 $376.9 $432.2
North America - Non-Machine 59.4 69.6 240.6 299.4
International - Machine 66.0 93.0 212.4 362.6
International - Non-Machine 38.1 24.6 105.2 96.5
---- ---- ----- ----
Total $231.4 $301.2 $935.1 $1,190.7
Gross Margin
North America 50% 54% 51% 54%
International 53% 53% 48% 54%
Total 51% 54% 50% 54%
Unit Information
North America
Units Shipped 6,100 11,000 26,400 37,100
Shipped, Not Recognized (2,000) (2,100) (2,800) (2,100)
Recognized, Previously Shipped 100 - 2,300 -
--- --- ----- ---
Equivalent Units Recognized 4,200 8,900 25,900 35,000
International
Units Shipped 9,500 11,200 29,800 37,700
Shipped, Not Recognized (1,700) - (2,200) -
Recognized, Previously Shipped 100 - 100 -
--- --- --- ---
Equivalent Units Recognized 7,900 11,200 27,700 37,700
Product sales revenues and gross profit in the fourth quarter declined 23% and 26%, respectively, while units shipped worldwide decreased 30% over the prior year quarter. For the fiscal year ended September 30, 2009, product sales revenues and gross profit declined 21% and 27%, respectively, while units shipped worldwide decreased 25% over the prior year. North America revenues decreased 31% for the quarter and 16% for the fiscal year, largely driven by fewer new openings and replacement sales. International revenues declined 11% for the quarter and 31% for the fiscal year as international markets continue to feel the effects of the economic slowdown, most notably in Continental Europe, Japan and South America, and unfavorable changes in currency exchange rates. Consolidated gross margin on product sales for the quarter was 51% compared to 54% in the prior year quarter, and 50% for the full year compared to 54% last year. Both periods were unfavorably impacted by lower volumes spread across fixed manufacturing costs, as well as higher costs related to systems upgrades and fewer systems sales, which carry higher margins.
Deferred revenue increased approximately $48.8 million during the quarter to $122.0 million as of September 30, 2009, as a result of additional multi-element contracts. As we continue to pursue our sales strategy, we may experience increasing levels of deferred revenues from multi-element contracts including systems software and machines bundled together. Units shipped for the current periods reflect all units shipped to customers and include units for which revenues have been deferred. "Equivalent units recognized" represents units recognized in revenues during the periods under U.S. generally accepted accounting principles and includes units for which revenues were previously deferred. We have included in the table above a reconciliation of units shipped to units recognized in revenue for each period presented.
Operating Expenses and Other Income/Expense
Fourth quarter operating expenses totaled $261.9 million, compared to $204.4 million in the prior year period. Excluding a non-cash charge of $78.0 million associated with our investment in Walker Digital, restructuring charges of $5.2 million and bad debt expense of $9.0 million, operating expense would have been $169.7 million, a 16% decrease from the prior year quarter. For the full year, operating expenses increased to $830.3 million, compared to $759.8 million in fiscal 2008, primarily due to the above mentioned non-cash charges, restructuring charges and higher bad debt provisions.
Other expense, net, in the fourth quarter totaled $34.8 million, a decrease of $12.0 million from the prior year period. The decrease was mostly due to reduced investment write-downs, which included LVGI impairment of $13.3 million in the current quarter and less foreign exchange loss, partially offset by increased borrowing costs on our recent refinancings. Other expense, net, for the full year increased $14.8 million to $83.3 million, driven primarily by additional interest expense, partially offset by reduced investment write-downs.
Cash Flows, Balance Sheet and Capital Deployment
For the fiscal year ended September 30, 2009, IGT generated $547.9 million in cash from operations on net income of $149.0 million compared to $486.5 million on net income of $342.5 million in the prior year. Increases in year-over-year cash from operations were primarily the result of reductions in receivable and inventory balances and additional pre-payments for long-term licensing rights in the prior year.
Working capital decreased to $609.2 million at September 30, 2009 compared to $733.4 million at September 30, 2008. Cash equivalents and short-term investments (inclusive of restricted amounts) totaled $247.4 million at September 30, 2009 versus $374.4 million at September 30, 2008. Debt totaled $2.2 billion at September 30, 2009 compared to $2.3 billion at September 30, 2008. The available capacity on our $1.8 billion line of credit totaled $1.7 billion as of September 30, 2009.
Our 3.25% convertible notes and warrants were excluded from diluted shares outstanding for the periods ended September 30, 2009, because the conversion price and exercise price exceeded the average market price of our common stock. The weighted average stock price during the fourth quarter and the period from issuance to September 30, 2009 was $19.62 and $18.18, respectively.
Earnings Conference Call
As previously announced on October 14, 2009, IGT will host a conference call regarding its Fourth Quarter and Fiscal Year 2009 earnings release on Thursday, November 5, 2009 at 2:00 p.m. (Pacific Time). The access numbers are as follows:
Domestic callers dial 888-843-9209, passcode IGT
International callers dial 415-228-4953, passcode IGT
The conference call will also be broadcast live over the Internet. A link to the webcast is available at our website http://www.IGT.com/InvestorRelations. If you are unable to participate during the live webcast, the call will be archived until Friday, November 13, 2009 at http://www.IGT.com/InvestorRelations.
Interested parties not having access to the Internet may listen to a taped replay of the entire conference call commencing at approximately 4:00 p.m. (Pacific Time) on Thursday, November 5, 2009. This replay will run through Friday, November 13, 2009. The access numbers are as follows:
Domestic callers dial 800-293-4240
International callers dial 203-369-3224
In this release, we make some "forward looking" statements, which are not historical facts, but are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects and proposed new products, services, developments or business strategies.
