International Game Technology has released its results for the fourth quarter and fiscal year ended 30 September 2008. Net income for the quarter was $52.1 million or $0.18 per diluted share, inclusive of a non-cash charge of $28.6 million or $0.10 per diluted share from write-downs of certain investments, versus $122.6 million or $0.38 per diluted share in the same quarter last year. For the fiscal year, net income was $342.5 million or $1.10 per diluted share compared to $508.2 million or $1.51 per diluted share in the same period last year.

"Our fiscal 2008 results reflect challenging economic operating conditions affecting our customers and in turn our business," said Chairman and CEO TJ Matthews. "Despite these challenges, we remained focused on key business initiatives. During 2008, IGT released several new models on our Advanced Video Platform (AVP(R)) and released close to 700 game titles worldwide across all platforms. We made significant progress in the development of our server-based gaming initiatives and will begin commercially deploying initial versions of this technology in 2009."

Fourth quarter gaming operations revenues and gross profit from gaming operations totaled $331.0 million and $192.7 million, respectively, compared to $353.3 million and $214.7 million for the same quarter last year. For the year ended September 30, 2008, revenues and gross profit from gaming operations totaled $1.3 billion and $778.1 million, respectively, compared to $1.4 billion and $823.0 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 and central determination machines.

Worldwide product sales generated fourth quarter gross profit of $161.7 million compared to $161.0 million in the prior year. Non-machine revenues (gaming systems, parts, conversions and other fees) comprised 31% of total product sales versus 38% in the comparable prior year quarter. Domestic shipments increased due to the release of IGT’s new AVP(R) models in the fourth quarter. Internationally, lower shipments into Japan compared to the prior year quarter were partially offset by increased shipments into Latin America.

For the fiscal year ended September 30, 2008, worldwide product sales generated gross profit of $641.0 million versus $657.8 million in the prior year, reflecting a reduction in machine revenues due to continued slow domestic replacement demand and lower Japan sales. Non-machine revenues comprised 33% of total product sales for fiscal 2008 compared to 30% of total product sales in the prior year. The increase in non-machine revenues was driven by increased intellectual property licensing fees and systems sales.

Fourth quarter operating expenses totalled $204.4 million compared to $179.1 million in the prior year period. Higher legal and compliance fees and staffing costs comprised the majority of the increase. For the full year, operating expenses increased to $759.8 million compared to $680.5 million in fiscal 2007, primarily due to higher staffing costs, bad debt provisions, and legal and compliance fees, as well as prior year gains from hurricane insurance and the sale of a corporate airplane.

Other expense, net, in the fourth quarter increased $44.4 million to $46.8 million, largely due to $28.6 million related to write-downs of company investments in China LotSynergy Holdings and Progressive Gaming International Corporation. Other expense for the full year increased $73.0 million from fiscal 2007 to $68.5 million. These increases were also driven by additional interest expense on higher borrowings, reduced interest income and unfavourable foreign currency exchange losses.
(E-10.30.08)

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