SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of report (date of earliest event reported):
July 22, 1999
INTERNATIONAL GAME TECHNOLOGY
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(Exact name of registrant as specified in its charter)
Nevada 001-10684 88-0173041
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(State or Other (Commission (I.R.S. Employer
Jurisdiction File Number) Identification Number)
of Formation)
9295 Prototype Drive, Reno, Nevada 89511
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(Address of principal executive offices) (Zip Code)
(775) 448-7777
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(Registrant's telephone number, including area code)
not applicable
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(Former name or former address, if changed since last report.)
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<PAGE>
Item 5. Other Events
On July 22, 1999, International Game Technology announced results for its
third quarter and nine months ended July 3, 1999. The full text of the press
release is included as Exhibit 99 to this report and is incorporated herein by
reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
The following exhibit is part of this current report on Form 8-K and is
numbered in accordance with Item 601 of Regulation S-K.
Exhibit No. Description
99 Press release issued by International Game Technology on
July 22, 1999 announcing results for the quarter and
nine month period ended July 3, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
International Game Technology
(Registrant)
Date: July 22, 1999 By: /s/ Maureen Mullarkey
Maureen Mullarkey
Its: Chief Financial Officer and
Vice President, Finance
INTERNATIONAL GAME TECHNOLOGY REPORTS
THIRD QUARTER 1999 RESULTS
FOR IMMEDIATE RELEASE CONTACT: Maureen Mullarkey
July 22, 1999 TELEPHONE: (775) 448-0127
(Reno, Nev.) International Game Technology (NYSE "IGT") today announced
results for its third quarter and nine months ended July 3, 1999. Income before
extraordinary items totaled $37.5 million or $0.39 per diluted share for the
quarter compared to $45.6 million or $0.40 per diluted share for the same
quarter of fiscal 1998. In the current quarter, IGT redeemed its 7.84% Senior
Notes due 2004 resulting in an extraordinary expense of $0.03 per diluted share.
The third quarter of fiscal 1998 benefited from a gain on the sale of the
Australian manufacturing building of $0.06 per diluted share. Net income was
$34.3 million and $102.5 million for the current quarter and year-to-date
periods, respectively, versus $45.6 million and $110.8 million for the
corresponding periods of fiscal 1998. Although net income declined for both the
quarter and year-to-date periods due to interest expense on higher debt
balances, operating profit improved on stronger product sales. Earnings per
diluted share for fiscal 1999 benefited from IGT's treasury stock purchase
activity.
<PAGE>
FISCAL YEAR 1999 - PAGE 2
Total revenues reached $258.9 million and $701.4 million for the quarter and
year-to-date periods of fiscal 1999 versus $223.0 million and $570.1 million for
the same periods of fiscal 1998. International sales and new casino
opportunities domestically drove the positive movement in total revenues.
Product sales revenue totaled $167.6 million and $443.8 million for the quarter
and nine months ended July 3, 1999, respectively, a 28% and 40% improvement over
the corresponding periods of fiscal 1998. Shipments for the third quarter and
year-to-date periods were 33,700 and 91,600 units, respectively, compared to
2,100 and 49,300 units in the corresponding prior year periods.
Domestically, IGT shipped 13,000 units during the quarter compared to 9,500
in the prior third quarter and 32,500 machines for the current year versus
27,300 in the prior year-to-date period. The four major new casino openings in
the Las Vegas area positively impacted IGT during 1999. Current quarter
shipments included Park Place's Paris Resort and the Resort at Summerlin, two of
the newest Las Vegas properties. IGT also provided 1,300 machines or a 67%
market share to the MGM temporary casino in Detroit, Michigan, opening in late
July 1999. Increased demand in the Native American markets during fiscal 1999
also positively impacted domestic revenues for the quarter and nine-month
periods. In June 1999, IGT became a licensed manufacturer for Native American
<PAGE>
FISCAL YEAR 1999 - PAGE 3
venues in Washington. During the quarter, IGT sold 1,500 games, approximately a
93% market share, to a Washington licensee who designs and markets gaming
machines for placement in eight Native American casinos.
International shipments grew to 20,700 gaming machines, or 61% of total
units, during the current quarter compared to 12,500 for the same quarter of
fiscal 1998. For the current year, IGT sold 59,100 machines in international
markets compared to 22,000 last year. Three popular Japanese Pachisuro game
themes, Popper King, Dynamite and Elvis, accounted for an increase of 7,100 and
20,000 units for the quarter and year-to-date periods, respectively. Barcrest,
IGT's wholly owned U.K. subsidiary acquired in March of 1998, increased
quarterly and yearly shipments by 2,000 and 17,600 units compared to the prior
periods.
The gross profit on product sales for the current quarter and year totaled
$61.2 million and $162.2 million, respectively, representing an 11% and 21%
increase over last year. The gross profit margin percentage realized on product
sales for both the current quarter and nine-month period was 37% compared to 42%
for the same periods of fiscal 1998. IGT's expansion in the international
markets and continued growth in new platform product shipments domestically,
positively impacted total gross profit dollars but resulted in lower gross
profit margins.
Revenues from gaming operations were $91.3 million and $257.6 million for
the quarter and nine-month periods, respectively, versus $92.1 million and
<PAGE>
FISCAL YEAR 1999 - PAGE 4
$252.2 million for the corresponding periods of last year. Consistent with
second quarter results, the fluctuation in third quarter revenues over last year
was primarily due to Nevada Megabucks(R). The jackpot on Nevada Megabucks(R)
grew throughout fiscal 1998 to a record-breaking $27.0 million in November 1998,
resulting in higher play levels during that period. The introduction of games
such as Elvis in all jurisdictions, Triple Play in a MegaJackpots(TM) format in
Atlantic City and the newest game theme, Barcrest's Partytime offsets maturing
systems and maintains the popularity of MegaJackpots(TM) on the casino floor.
The installed base of machines operating on MegaJackpots(TM) systems grew to
14,600 at the end of the quarter, up from 13,900 one year earlier. Of these,
approximately 10,200 are new platform, higher performing games.
Gross profit from gaming operations was $57.5 million or 63% versus $51.7
million or 56% for the third quarter of fiscal 1999 and 1998, respectively. For
the year-to-date periods of fiscal 1999 and 1998, gross profit totaled $154.1
million or 60% versus $137.6 million or 55%, respectively. Rising interest rates
during fiscal 1999 resulted in lower costs of funding jackpots compared to the
prior year.
Total operating expenses were 21% of total revenues for both the current and
prior year third quarters. For the year-to-date period, operating expenses were
22% of total revenues compared to 20% in the prior year period. Bad debt expense
recorded in the current quarter relating to overall increased sales and a higher
<PAGE>
FISCAL YEAR 1999 - PAGE 5
mix of international sales contributed to the growth in operating expenses in
both periods. The year-to-date period of fiscal 1998 included only three months
of expenses related to the Barcrest and Olympic businesses, which were acquired
in March 1998.
Other income and expense totaled $6.9 million and $3.1 million in net
expenses for the quarter and year-to-date periods of fiscal 1999, respectively.
Comparatively, in fiscal 1998, IGT reported other income of $9.9 million and
$14.2 million for the same quarter and year periods. This fluctuation resulted
from the growth in interest expense due to borrowings used for acquisitions and
treasury stock purchases. Additionally, the third quarter of fiscal 1998
benefited from a gain of $10.4 million on the sale of the Australian
manufacturing and office facility.
In May 1999, IGT announced the private placement of $1 billion in aggregate
principal amount of Senior Notes (the "Notes"). A portion of the proceeds was
used to redeem previously outstanding 7.84% Senior Notes due 2004 resulting in a
prepayment penalty of $3.3 million after tax extraordinary expense.
Under its stock repurchase program, IGT has purchased 10.0 million shares of
its common stock for an aggregate purchase price of $159.7 million since April
3, 1999. Fiscal 1999 purchases of treasury stock totaled 18.4 million shares for
$300.5 million through July 21, 1999.
<PAGE>
FISCAL YEAR 1999 - PAGE 6
The historical results achieved are not necessarily indicative of future
prospects of the Company. Information on factors that may affect the Company's
financial results are included in the Company's Report on Form 10-K for the year
ended September 30, 1998 and subsequent periodic reports filed with the
Securities and Exchange Commission.
IGT is a world leader in the design, development and manufacture of
microprocessor-based gaming products and software systems in all jurisdictions
where gaming is legal.
For more information on International Game Technology, visit the company
website at www.igtgame.com.
<PAGE>
Statements of Income
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Jul.3, Jun. 30, Jul. 3, Jun. 30,
1999 1998 1999 1998
(in thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Revenues
Product sales $167,573 $130,843 $443,793 $317,859
Gaming operations 91,286 92,139 257,643 252,225
------ ------ ------- -------
Total revenues 258,859 222,982 701,436 570,084
------- ------- ------- -------
Costs and expenses
Cost of product sales 106,339 75,586 281,635 183,351
Cost of gaming operations 33,759 40,442 103,498 114,578
Selling, general, and
administrative 34,552 29,021 96,265 72,755
Depreciation and
amortization 6,468 5,861 18,841 12,667
Research and development 11,167 11,366 32,279 26,848
Provision for bad debts 3,240 496 6,761 3,660
----- --- ----- -----
Total costs and expenses 195,525 162,772 539,279 413,859
------- ------- ------- -------
Income from operations 63,334 60,210 162,157 156,225
Other income (expense)
Interest income 13,938 11,181 40,052 33,517
Interest expense (21,068) (11,195) (46,253) (29,187)
Gain on sale of assets 1,048 10,332 4,917 11,414
Other (828) (381) (1,784) (1,572)
---- ---- ------ ------
Other income, net (6,910) 9,937 (3,068) 14,172
------ ----- ------ ------
Income before income taxes 56,424 70,147 159,089 170,397
Provision for income taxes 18,903 24,552 53,295 59,639
------ ------ ------ ------
Income before extraordinary
item 37,521 45,595 105,794 110,758
------ ------ ------- -------
Extraordinary loss on early
redemption of debt, net
of tax (3,254) - (3,254) -
------ - ------ -
Net income $34,267 $45,595 $102,540 $110,758
======= ======= ======== ========
Basic earnings per share
Continuing operations $0.39 $0.40 $1.03 $0.97
Extraordinary item (0.03) - (0.03) -
----- - ----- -
Net income $0.36 $0.40 $1.00 $0.97
===== ===== ===== =====
Diluted earnings per share
Continuing operations $0.39 $0.40 $1.02 $0.96
Extraordinary item (0.03) - (0.03) -
----- - ----- -
Net income $0.36 $0.40 $0.99 $0.96
===== ===== ===== =====
Weighted average common
shares outstanding 95,378 113,385 102,819 113,675
Weighted average common and
potential shares
outstanding 95,951 115,154 103,642 115,457
</TABLE>
<PAGE>
Condensed Balance Sheets
<TABLE>
<CAPTION>
July 3, Sept. 30,
1999 1998
(Dollars in thousands)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $629,796 $175,413
Investment securities, at market
value 14,008 19,354
Accounts receivable 203,971 189,521
Current maturities of long-term
notes and contracts receivable 61,143 63,022
Inventories 115,385 133,154
Investments to fund liabilities to
jackpot winners 41,796 41,216
Deferred income taxes 16,878 16,517
Prepaid expenses and other 30,189 32,346
------ ------
Total current assets 1,113,166 670,543
--------- -------
Long-term notes and contracts
receivable 30,165 37,750
Property, plant and equipment, at
cost 295,726 278,295
Less accumulated depreciation and
amortization (118,515) (109,542)
-------- --------
Property, plant and
equipment, net 177,211 168,753
------- -------
Investments to fund liabilities to
jackpot winners 365,732 369,427
Intangible assets 137,831 131,552
Other assets 184,733 165,603
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Total Assets $2,008,838 $1,543,628
========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of long-term
notes payable and capital lease
obligations $1,674 $30,311
Accounts payable 53,326 57,277
Jackpot liabilities 67,054 50,659
Accrued employee benefit plan
liabilities 18,198 17,512
Other accrued liabilities 78,692 44,781
------ ------
Total current liabilities 218,944 200,540
------- -------
Long-term notes payable and capital
lease obligations, net of current
maturities 990,182 322,510
Long-term jackpot liabilities 452,055 479,217
Other liabilities 279 85
--- --
Total liabilities 1,661,460 1,002,352
--------- ---------
Stockholders' equity
Common stock 95 95
Additional paid-in capital 260,781 256,656
Retained earnings 926,771 827,542
Treasury stock (836,324) (535,797)
Accumulated other comprehensive
income (3,945) (7,220)
------ ------
Total stockholders' equity 347,378 541,276
------- -------
Total Liabilities and
Stockholders' Equity $2,008,838 $1,543,628
========== ==========
</TABLE>
