International Game Technology (IGT)
F2Q10 (Qtr End 03/31/10) Earnings Call Transcript
April 22, 2010 5:00 pm ET
Patrick Cavanaugh – EVP, CFO and Treasurer
Patti Hart – President and CEO
Eric Tom – EVP, North America Sales and Global Marketing
Robin Farley – UBS
Joe Greff – JP Morgan
Steven Kent – Goldman Sachs
Steven Wieczynski – Stifel Nicolaus
David Bain – Sterne, Agee & Leach
Cameron McKnight – Buckingham Research Group
Todd Eilers – Roth Capital Partners
Previous Statements by IGT
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Welcome and thank you for holding. At this time all lines are in a listen-only status until today’s
question and answer session. The call is being recorded. If you have any objections to record a call please disconnect your lines at this time.
I would be turning today’s call over to Patrick. Sir, you may begin.
Thank you, operator, and good afternoon, everyone.
Welcome to IGT’s Second Quarter Fiscal 2010 Earnings Call. With me today are Patti Hart, our President and CEO and Eric Tom, our Executive Vice President of Sales and Marketing.
Before we begin, we would like to remind listeners that our discussion reflects management’s views based on the marketplace environment, as of today, April 22, 2010 and will include forward-looking statements, including forecasts of future performance and estimates of amounts not yet determinable, the potential for growth of existing and the opening of new markets for our products, levels for install base of recurring revenue gains as well as future prospects and proposed new products, services, developments or business strategies.
Our future financial condition and results of operation as well as our forward-looking statements are subject to change and to inherent known and unknown risks and uncertainties. We do not intend and undertake no obligation to update our forward-looking statements to reflect future events or circumstances and you should not assume later in the quarter or the year that the comments we made today are still valid.
Actual results may differ materially. Additional information about factors which could potentially impact our financial results is included in today’s press release and our filings with the SEC included in our most recent Annual Report on Form 10-K and our reports on Form 10-Q filed during fiscal 2010.
During this call we may discuss certain non-GAAP financial measures. In our press release and our filings with the SEC, each of which is posted on our Web site at igt.com you will additional disclosures regarding any non-GAAP measures including reconciliations of the measures with comparable GAAP measures.
With that I will turn to the discussion of the business. This afternoon IGT reported its second quarter results for fiscal 2010. Net income totaled $36 million or $0.12 per diluted share. This compares to $34 million and $0.11 per diluted share in the prior year quarter. The current quarter including restructuring and inventory obsolescence charges of 18 million after tax or $0.06 per diluted share. These were all primarily related to the decision to close our Japan operations as well as an impairment for intellectual property of 7 million with no tax benefits or $0.02 per diluted share, primarily due to uncertainties about how certain patterns sit in with our strategic direction.
The prior year quarter included restructuring charges of 8 million, 5 million after tax or $0.02 per diluted share. So excluding these charges mentioned above, second quarter adjusted net income was 61 million or $0.20 per diluted share for fiscal 2010 and 39 million or $0.13 per diluted share in fiscal 2009.
Additionally, the second quarter comparability was affected by a number of notable items, the details of which are broken out in our earnings press release, which went out this afternoon. The prior year quarter includes certain restated amounts due to the required retrospect of application of new accounting standards associated with our convertible debt.
On a consolidated basis our revenues for the second quarter were $498 million of which 57% was generated from gaming operations and the other 43% from product sales compared to $476 million for the same quarter last year.
For the six months ended March 31, 2010, consolidated revenues were 1 billion compared to 1.1 billion in the same period last year. Consolidated gross profit and operating income for the quarter was $276 million and $95 million respectively and $573 million and $235 million respectively for the six months ended March 31.
During the first fiscal quarter of 2010, we adopted new accounting standards to acquire retrospective application
to prior periods associated with our convertible debt and with equity classification of non-controlling interest. The retrospective adjustments are outlined in the supplemental schedule at the end of our press release. The new accounting standards for convertible debt resulted in reduced diluted EPS of $0.01 for the current quarter and $0.02 for the prior year quarter.
Moving on to gaming operations, game op revenues were 285 million in the current quarter which was up 3% sequentially but down 3% year-over-year. Approximately 5 million of the decrease in the revenues in the current quarter was attributed to property closures of electronic charitable bingo terminal being operated in Alabama compared to the same period last year.
Gross margins were 62% for the quarter versus 59% in the prior year quarter. Current quarter margins were positively impacted primarily by lower depreciation. We earned an average of $51 and $0.70 a share in revenue per unit per day which is up 5% sequentially and down from $52.96 in the last year’s second quarter.