International Game Technology (IGT)
F4Q2010 (Qtr End 09/30/10) Earnings Conference Call
November 9, 2010 5:00 PM ET
Matt Moyer – VP, Investor Relations
Patti Hart – President and CEO
Pat Cavanaugh – CFO
Eric Tom – COO
Robin Farley – UBS
Joe Greff – JPMorgan
Chris Woronka – Deutsche Bank
Carlo Santarelli – Wells Fargo
Steve Wieczynski – Stifel Nicolaus
Cameron McKnight – Buckingham Research
David Katz – Jefferies & Company
Ryan Worst – Brean Murray
Previous Statements by IGT
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And now I’d like to turn the meeting over to Mr. Matt Moyer, Vice President of Investor Relations. You may begin, sir.
Good afternoon everyone and welcome to IGT’s fourth quarter and fiscal year 2010 earnings conference call.
On the call with me today is Patti Hart, President and CEO; Pat Cavanaugh, CFO; and Eric Tom, COO.
Before beginning, we’d like to remind listeners our discussion reflects management’s views based on the business environment as of today, November 9, 2010, and will include forward-looking statements, including forecast of future performance and estimates of amounts not yet determined or the potential for growth of existing and the opening of new jurisdictions for our products, play levels for our installed base of recurring revenue games, as well as our future prospects and proposed new products, services, developments or business strategies. We do not intend and undertake no obligation to update our forward-looking statements to reflect future events or circumstances. Actual results may differ materially.
Additional information about factors which could potentially impact our financial results is included in today’s press release and our filings with the SEC including our most recent annual report on Form 10-K and our quarterly reports on Form 10-Q filed during fiscal 2010.
During this call we may discuss certain non-GAAP financial measures including adjusted earnings per share, adjusted operating expenses, adjusted operating margin, adjusted EBITDA and free cash flow. In our press release which is posted on our website, www.igt.com, you will find additional disclosures regarding any non-GAAP measures including reconciliations of these measures with comparable GAAP measures.
With that in mind, I’ll turn the call over to Patti.
Thanks, Matt, and good afternoon everyone.
In fiscal year 2010 we continued to have relatively strong financial performance in an economy that remains weakened. More importantly, we set the company on a course to achieve greater financial and operational performance in the future. Our 2010 financial achievements include growing our international revenues by 21% to $559 million, increasing our adjusted operating margins by 200 basis to 25%, and reducing our debt obligations by over $400 million.
Despite the challenging macro environment, our revenues were nearly $2 billion and we produced over $770 million of adjusted EBITDA, demonstrating our significant cash flow generation capabilities. We also improved our leverage ratio, increased our inventory turns and accomplished all of this with much lower overhead. We are intent on driving higher returns for our stakeholders. Meanwhile, many of our customers are improving their financial position which gives them the opportunity to increase investment in their slot floors. This is a very important step in getting our industry back on a growth track.
The bottom line results of these achievements are adjusted EPS of 85 cents for the year, at the upper end of our latest guidance. It also represents my team’s intent focus on making IGT the leanest, most competitive organization that it can be. As I have said before, driving constant improvement at IGT is a short, medium and long-term theme for me and my management team. I am proud of our 2010 financial results and our company’s focus on making the coming quarters and years even better.
Personally I have been spending a lot of time with our customers both domestically and internationally. These meetings solidify my faith that IGT is an industry leader and that we are doing the right things. That said, I’m still cautiously optimistic about the coming year. While it appears that the visitation numbers are stabilizing, it is still too early to call the bottom. We need to see a marked improvement in the economy in the form of more jobs, higher consumer confidence and disposable income before we can expect to see a return to healthy top line growth in our industry. Internationally we are enthusiastic about our growing business and the potential we see in new jurisdictions.
Finally, 2010 essentially completed my transition into the CEO role at IGT. And my leadership team is fully embedded into the business. Our long-term global strategies are now in place and every employee has a clear understanding of our goals. Fiscal 2011 is shaping up to be a rewarding year as we start seeing the results of our well-planned strategy.
I will now ask Pat to share with you some of the financial details for both the fourth quarter and the fiscal year. Pat?
Thanks, Patti, and good afternoon everyone.
This afternoon IGT reported its results for the fourth quarter and the fiscal year 2010, GAAP net income and continuing ops came in for the fourth quarter at $26 million or 9 cents per share, inclusive of non-cash charges of $27 million after tax or 9 cents per share. This compares to a net loss of $10 million or 4 cents a share in the previous fourth quarter, last year’s fourth quarter.