IGT earnings flat; 50m
share buyback set

Apr 24, 2007 6:32 AM

What was expected from International Game Technology (IGT) in its quarterly report delivered last week was a rather flat performance when compared to a year ago.

What was unexpected was the announcement that the company’s directors had authorized the purchase of more than 50 million of the company’s shares on the open market, an activity that began on Friday.

The buyback was evident in the amount of shares traded for the day. Before trading ended, with the shares up $0.70 for the day, more than six and one-half million shares had changed hands. On a normal trading day, about half that many trades would have been recorded. On Monday, the shares fell $1.54 with a closing price of $38.46.

Analysts suggested the re-purchase program signified the company’s confidence that product sales and earnings would improve in the coming quarters.

Shareholders can "take comfort" in the company’s authorization to repurchase what amounts to about 16 percent of its outstanding shares, said David Katz, gaming analyst at CIBC World Markets.

For the quarter that ended on March 31, 2007, the company said earnings climbed to $128.2 million or $0.38 per share compared to the previous year’s $124 million or $0.35 per share.

However, revenue for the period fell 5% to $609.7 million. In the comparable quarter, revenue had reached $644.4 million. Wall Street’s consensus estimate was $677 million.

The quarter included an insurance settlement related to Gulf Coast property damage and business interruption because of Hurricane Katrina. The settlement totaled $13.5 million or $0.04 per diluted share.

Principal cause of the quarter’s revenue decline was sagging product sales, the company said. For the period, sales revenue was $268.6 million compared to $333.2 million in the prior year.

In a research note, Steven Kent of Goldman Sachs, remarked, "The operating results once again reflected the difficult domestic market, which continues to experience softness in replacement and new market sales and timing uncertainty of international sales."

The fiscal second quarter, just completed, was expected to be the slowest period for the company this year. Especially bright was the report that the company’s recurring revenue gaming operations continued to grow with revenues climbing 10% and the installed base rising 19% to 54,800 gaming units.

Galaxy Entertainment

Despite soaring revenues, Galaxy Entertainment Group Ltd. reported a net loss for fiscal year 2006, after reporting a profit for the previous year.

Galaxy is one of six casino license holders in Macau.

For the year, Galaxy said revenues soared to $597.83 million, almost four times the revenues reported for 2005, but the cost of borrowings weighed heavily on the earnings.

The net loss, the company said, was $195.85 million. Last year, the company’s net profit was $280 million.

During the period, the company had interest expenses that increased nearly five times to more than $70 million.

In addition to its current operations, Galaxy is building a casino resort in the Cotai area of Macau.

Isle of Capri

In a filing with the Securities & Exchange Commission, Isle of Capri Casinos Inc. (ISLE) advised that it intended to restate its financial statements for fiscal years 2004, 2005 and 2006. It also will file quarterly results for fiscal 2005 and fiscal 2006 and the two first quarters of 2007.

The company added that the previously filed statements "should not be relied upon."

However, in the interim, the company gave a preliminary quarter report that did not break results down by casinos, making it difficult for investors to interpret the gaming company’s third-quarter results.

For the period, the company said, it had a loss of $9.5 million or $0.31 per share versus a profit of $4.2 million or $0.13 per share in the prior-year period.

Revenue edged up less than 1% to $230.8 million from last year’s $229 million but fell short of analysts’ expectations of $238.8 million.

A more detailed report is anticipated.

Meanwhile, Nevada Gold & Casinos Inc. (UWN) advised Isle of Capri that it will terminate discussions relative to the sale of its 43% stake in a joint venture operation at the Isle of Capri Black Hawk Casino in Colorado.