IGT reports decline in net profit

Jan 29, 2008 6:37 AM

A slowdown, both nationally and internationally, resulted in a drop in net profit during the first fiscal quarter at International Game Technology (IGT) that ended on Dec. 31, 2007.

The company said it earned $113.7 million or $0.36 per share compared to $121 million or $0.35 per share last year. Despite lower earnings, the per share number exceeded last year because the company’s buyback program has reduced the number of shares outstanding.

In the reporting quarter, the company said it had repurchased three and one-half million shares for a total cost of $149.2 million. The remaining authorization under the company’s stock repurchase program totaled 29.8 million shares as of Dec. 31, 2007, the company added.

During the first fiscal quarter, gross profit from gaming operations improved to $199.4 million as opposed to the previous year’s $186.7 million. Year-over-year lease operation placements increased 2,300 units, primarily due to placements in Mexico, New York and Rhode Island. Casino operation placements increased 3.400 units due to expansions in Oklahoma and Florida.

Product sales, however, were down worldwide with shipments totaling 20,200 units compared to the 26,800 units shipped in the comparable period of a year earlier. In North America, the unit shipment totaled 7,300 units, down 40% from last year’s 12,200 units.

Commenting on the quarter, TJ Mathews, chairman and CEO, remarked, "During the first quarter, IGT made progress towards achieving our long-term objectives, including demonstrating at the Global Gaming Expo this past November our vision for the right slot floor today and in the future. Operationally, we continued to generate margin improvements and moderate revenue growth despite reduced marketplace demand."

Operating expenses during the first quarter increased by $4 million due to additional staffing and a greater investment in research and development, the company said.

Dover Downs

Denis McGlynn, president and CEO of Dover Downs Gaming & Entertainment Inc. (DDE) blamed both competition as well as an economic slowdown in reporting a 12% drop in profit during the fourth quarter that ended on Dec. 31, 2007.

Net income during the period fell to $5.4 million or $0.17 per share compared to the $6.1 million or $0.19 per share reported in the previous year.

Analysts had expected the company to report earnings of $0.20 per share on revenue of $62.1 million, far better than the $59.3 million revenue the company reported.

In a statement accompanying the report, McGlynn said the company was hurt by local competition and difficult economic conditions during the quarter. Consumers have tightened spending of late due to eroding credit, a continued housing downturn and recession fears, he said.

The statement, analysts noted, was significant because it was the first indication from a gaming operator that economic conditions were affecting its gaming business.