Thursday, maker of slot machines International Game Technology (IGT) reported a loss in its fourth quarter, hurt primarily by non-cash charges. The company witnessed a decline in revenues, reflecting the on-going effects of difficult global economic conditions that have impacted both gaming operators and casino patrons.
International Game Technology is a designer and manufacturer of slot machines. The company produces video gaming, player tracking, accounting systems, video gaming terminals for state-run lotteries and accompanying monitoring systems and progressive jackpot slot-machine networks. The company also provides internet gaming services in jurisdictions where online gaming is legal.
The Reno, Nevada-based company reported a net loss for the fourth quarter of $21.3 million or $0.07 per share, compared to net income of $52.1 million or $0.18 per share in the year-ago quarter.
On average, eighteen analysts polled by Thomson Reuters expected the company to earn $0.17 per share for the quarter. Analysts' estimates typically exclude special items.
Net income for the most recent quarter included non-cash charges of $0.26 per share and restructuring expense of $0.01 per share, while the year-ago quarter included non-cash investment write-downs of $0.10 per share.
On October 14, IGT said it expects to incur non-cash charges of about $77 million, net of tax, or about $0.26 per share for the fourth quarter, reflecting a reduction in the carrying value of IGT's investment in Walker Digital Gaming, Inc.
The anticipated fourth-quarter charges also included an expected non-cash charge related to IGT's investment in Las Vegas Gaming International and additional tax provisions related to the establishment of a valuation allowance against foreign deferred tax assets which will not likely be realized.
Total revenues for the quarter decreased to $514.6 million from $632.2 million in the prior-year quarter. Fifteen analysts had a revenue consensus of $497.89 million for the fourth quarter.
Revenues for North America declined 31% from last year, largely driven by fewer new openings and replacement sales, while overseas revenues decreased 11%, 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.
Commenting on the results, the company's chief executive officer, Patti Hart said, "Our fiscal 2009 results reflect a challenging operating environment which we believe stabilized during our fiscal third and fourth quarters. 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."
In the immediately preceding third quarter, IGT reported net income of $66.3 million or $0.22 per share, compared with $108.3 million or $0.35 per share in the prior-year quarter. Quarterly revenues decreased to $287.9 million from $333.6 million in the year-ago quarter.
Among the competitors, the Las Vegas, Nevada-based gaming company Bally Technologies, Inc. (BYI) reported a slight increase in profit for the first quarter, helped by improved margins, despite a decline in revenue. Bally's net income attributable to the company rose to $30.6 million or $0.53 per share from $30.3 million or $0.52 per share in the year-ago period. Revenues declined to $196.5 million from $237.4 million in the prior-year period.
Another runner, WMS Industries, Inc. (WMS) reported a 26% increase in profit for the first quarter on higher revenues. WMS' first quarter net income rose to $19.8 million or $0.34 per share from $15.7 million or $0.27 per share in the year-ago period. Total revenues increased 9% to $165.3 million from $151.4 million in the year-earlier.
Segment wise, IGT's Gaming operations generated revenues of $283.2 million, down from $331.0 million in the last year, primarily due to lower play levels and continued shifts in installed base mix to include more lower-yielding, stand-alone lease machines.
Product sales revenues, comprising the sale of gaming machines, network systems, parts, game theme conversion kits, related equipment, services, and intellectual property licensing, decreased 23% to $231.4 million from $301.2 million last year, while units shipped worldwide decreased 30% over the prior year quarter.
As of September 30, IGT's gaming operations installed base totaled 61,400 units, an increase of 900 units over the prior year. Installed base growth in international markets was partially offset by a reduction in domestic placements.
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.
Total costs and operating expenses for the quarter increased to $487.3 million from $482.2 million in the same quarter last year. Operating income for the quarter declined to $27.3 million from $150.0 million in the same quarter last year.
For the full year, net income dropped to $149.0 million or $0.51 per share from $342.5 million or $1.10 per share in the previous year. Total revenues for the full year 2009 decreased to $2.11 billion from $2.53 billion last year. Analysts were looking for earnings of $0.76 per share on revenues of $2.10 billion for fiscal 2009.
IGT closed Thursday's regular trading session at $18.56, down $0.04 on a volume of 6.86 million shares, higher than the three-month average volume of 4.47 million shares. In the after hours, the further lost $0.09 or $0.48%. In the past 52-week period, the stock has been trading in a range of $6.81 to $23.30.
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