IGT announced operating results for the second quarter of fiscal 2008 today. Figures for the period ended 31 March 2008 show net income of US$68.4 million compared to US$128.2 million in the same quarter last year. Net income for the six months was US$182.1 million, down from US$249.2 million for the same period last year. According to the company release, results were unfavourably impacted by a number of significant items.

For the second quarter these items collectively totalled US$20.4 million and included a steep decline in interest rates, technological obsolescence charges related to the transition toward new cabinets and platforms, additional bad debt provisions and discrete tax items. The second quarter of the previous year was said to have been positively impacted by insurance proceeds from Gulf Coast hurricane property damage and business interruption, the sale of a corporate aircraft and favourable bad debt provisions, collectively totalling US$17.1 million.

"IGT's second quarter results were challenged by the current market environment," said Chairman and CEO TJ Matthews. "We remain focused on strategic initiatives which will maintain our standing as the leading worldwide provider of innovative gaming products and services. We continue to prepare for the introduction of the next generation of technological innovations and look forward to the market-driven expansion in domestic and international jurisdictions we believe will develop in the near future. Recent strategic accomplishments that will enhance IGT's long-term opportunities include our sb-related agreements with Harrah's and CityCenter, our cross-licensing agreement with WMS, our strategic alliances with Progressive Gaming, Games Media and The Global Draw, and our potential acquisition of Cyberview Technology, Inc."

The company achieved increased game placements but lower play levels, attributed to recent economic conditions, meant that revenues were comparable to the prior year. Gross margins on gaming operations for the current quarter and year-to-date were 54% and 57% respectively, compared to 62% and 60% the previous year. A 200 basis-point reduction in interest rates resulted in US$12.3 million of additional jackpot expense for the quarter due to higher costs to fund jackpot liabilities.

As of March 31, 2008, IGT gaming operations installed base totalled 58,700, an increase of 3,900 units from the prior year quarter and down 100 units from the immediately preceding quarter. Year-over-year growth was primarily the result of expansion in Oklahoma, Mexico, Florida and Africa. The sequential quarter reduction primarily resulted from the transition of Class II products to for-sale Class III machines in Florida and California.

Worldwide product sales revenues generated second quarter gross profit of $126.6 million compared to $145.5 million in the prior year, primarily due to lower machine shipments across all markets. Domestic shipments were low primarily due to minimal new or expansion opportunities during the quarter combined with the continued trough in North America replacement demand. Internationally, lower shipments, primarily in the UK and Japan, were the result of slower market conditions.

This downturn in global economies and the fact that fewer than anticipated casino projects will be completed is having a negative effect on most gaming stocks. IGT was down almost 8% following the release of its operating results. During the second quarter, IGT repurchased 2.3 million shares at an aggregate cost of $95.8 million. Year-to-date, share repurchases totalled 5.8 million shares at an aggregate cost of $245.0 million. (E-04.17.08)

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