Updated from 8:35 a.m. EST

International Game Technology

(IGT) - Get Report

shares rose Tuesday after the slot-machine maker's third-quarter results beat Wall Street estimates as the gaming industry continued its expansion.

IGT reported net income of $54.3 million, or 15 cents a share, down from $108.3 million, or 31 cents a share, a year earlier. The decrease resulted from the company's early redemption of senior debt in July, which reduced income from continuing operations by $77 million on an after-tax basis, or 21 cents a share. IGT also reported a $3.6 million tax adjustment related to changes in its geographic mix of estimated taxable income.

Excluding those items, IGT said adjusted earnings were $127.7 million, or 35 cents a share, beating the Wall Street consensus by two cents and up 21% from $101.6 million, or 29 cents a share, a year earlier.

Revenue came in at $621.7 million, up 13.6% from $547.5 million a year earlier and better than the $605.8 million average analyst estimate according to Thomson First Call. The latest quarter capped IGT's 2004 fiscal year.

Shares were up 50 cents, or 1.5%, to $33.59.

"We had a record year at IGT in every significant measure of our business," said T.J. Matthews, the company's chief executive, in a news release. "We continue to succeed due to the strength of IGT's development efforts for games, platforms and systems. ... By adapting IGT technology, we gained access to new markets in New York, Alabama and Oklahoma, further expanding our geographic reach."

The company shipped 32,500 machines in the third quarter, down from 32,800 a year earlier. Product sales revenue increased, however, to $312.9 million from $272.8 million a year earlier, the result of higher prices and increased international sales.

Operating costs totaled $125.8 million, up 8.2% from $116.3 million a year earlier. The increase was primarily due to the acquisition of Acres Gaming in October 2003, along with additional research and development expenses.

In a conference call, company executives said they were comfortable with previously announced guidance for 15% EPS growth in each of the next five years.

For all of fiscal 2004, IGT generated $623.6 million in cash flow. At the end of the quarter, the company's cash totaled $765 million, down from $1.31 billion a year before, but the decrease was primarily due to IGT's redemption of its senior notes.

IGT also returned cash to investors in the form of a quarterly dividend of 12 cents a share, paid Oct. 26. It also repurchased 3.4 million shares during the quarter at an average price of $31.01 a share.

"With record earnings and cash flows, we returned significant profits back to our shareholders in the form of dividends and share repurchases," Matthews said in the news release.