IGT reports 2011 third quarter results

Adjusted income from continuing operations for the quarter improved to us$ 78 million, compared to us$ 64 million in the same quarter last year.

For the nine months ended June 30, 2011, GAAP income from continuing operations grew to us$ 232 million, compared to us$ 197 million for the same period last year. The current nine-month period was impacted favorably by us$ 0.08 per share from certain discrete tax benefits and a gain on the sale of IGT's equity investment in China LotSynergy Holdings. Adjusted income from continuing operations for the first nine months improved to us$ 207 million for fiscal 2011 compared to us$ 197 million for fiscal 2010.

"Our third quarter results further demonstrate the positive momentum generated by our new games, platforms and internal process improvements," said Patti Hart, CEO of IGT. "We are expanding our business in new and existing markets around the world in a capital-efficient manner driven by our customer-first philosophy. The investments we are making today are expected to position the company to deliver continued revenue and earnings growth."

Consolidated Operations
Total revenues for the third quarter increased 3% to us$ 489 million, of which 55% was generated from gaming operations and 45% from product sales, compared to us$ 475 million for the same quarter last year. Consolidated gross profit for the quarter increased 8% to us$ 289 million compared to us$ 268 million in the prior year's third quarter, due to improved product sales volume.

Operating income for the third quarter was us$ 141 million, an increase of 17%, compared to us$ 120 million in last year's third quarter, due to higher revenues, lower cost of sales and flat operating expenses. For the nine months ended June 30, 2011, total revenues decreased 2% to us$ 1.42 billion, gross profit improved 2% to us$ 841 million and operating income increased 19% to us$ 389 million.

Gaming Operations
Third quarter revenues from gaming operations totaled us$ 267 million compared to us$ 269 million for the same quarter last year.Average revenue per unit per day in the third quarter was us$ 55.55, up us$ 1.47 over the prior year's quarter on performance improvements in our MegaJackpots brands globally, and down us$ 0.83 from the immediately preceding quarter due to a higher mix of lower-yielding international units.

Gaming operations gross profit improved to us$ 165 million and gross margin to 62% in the third quarter compared to us$ 156 million and 58%, respectively, in the prior year's quarter. Margins for this year's quarter were impacted positively by improved game performance and lower jackpot expenses.

At June 30, 2011, IGT's gaming operations installed base totaled 53,300 units, an increase of 800 units from the immediately preceding quarter primarily due to additions in international lease operations.

Product Sales
Third quarter product sales revenues were us$ 222 million, up 8% from us$ 206 million a year ago. Globally, the company recognized 8,900 units in the quarter, up 7% from last year's third quarter, primarily due to increases in domestic replacement and Latin America sales and down 2% sequentially, primarily due to fewer new openings domestically. The company recognized 9% and 5% more units in North America and International, respectively, year over year for the third quarter.
 
Domestic  average selling prices increased 2% compared to last year's third quarter due to a higher percentage of new cabinets, specifically, the Universal Slant and G23 MLD products. International average selling prices increased 16% compared to last year's third quarter primarily due to favorable geographical and product mix, particularly in Europe and Australia, and favorable foreign exchange rates.

Product sales gross profit in the third quarter increased 10% to us$ 124 million and gross margin improved 100 bps to 56% compared to last year's third quarter. The increase in gross margin was driven by increased higher-margin international machine sales.

Operating Expenses and other income/Expense
Third quarter operating expenses of us$ 148 million were essentially flat compared to the prior year third quarter. SG&A totaled 17% of revenues, and was also flat compared to last year's third quarter, as lower bad debt provisions offset higher variable compensation expenses. Other expense, net, in the third quarter decreased to us$ 19 million compared to us$ 24 million in the prior year's quarter, primarily due to lower interest expense on reduced borrowings.

For the first nine months of fiscal 2011, IGT generated us$ 449 million in cash from operations compared to us$ 424 million in the prior year period.

Working capital increased to us$ 781 million at June 30, 2011 compared to us$ 620 million at September 30, 2010.Cash equivalents and short-term investments (inclusive of restricted amounts) totaled us$ 401 million andcontractual debt obligations totaled us$ 1.65 billion at June 30, 2011. As of June 30, 2011, there were no outstanding borrowings under the company's domestic credit facility.

As previously announced on June 8, 2011, the Company's Board of Directors authorized a share repurchase program of up to us$ 500 million of the company's outstanding common stock. During the quarter, it repurchased 1.5 million shares of common stock at an average price of us$ 16.25 per share for a total cost of us$ 25 million.