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International Game Technology Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: February 12, 2009 02:10PM
International Game Technology (IGT) filed Quarterly Report for the period ended 2008-12-31. International Game Technology is one of the largest manufacturers of computerized casino gaming products and operators of proprietary gaming systems in the world and was the first to develop computerized video gaming machines. International Game Technology has a market cap of $3.12 billion; its shares were traded at around $10.07 with a P/E ratio of 8.5 and P/S ratio of 1.24. The dividend yield of International Game Technology stocks is 5.47%. International Game Technology had an annual average earning growth of 18.3% over the past 10 years. GuruFocus rated International Game Technology the business predictability rank of 2-star.
Highlight of Business Operations:
During the current quarter we completed initial restructuring initiatives by reducing our global workforce by approximately 8%, incurring charges of $17.4 million, net of stock-compensation forfeitures, in the first quarter of fiscal 2009. We anticipate we will begin to realize quarterly cost reductions from these efforts ranging from $20.0 million to $25.0 million beginning in the second quarter of fiscal 2009. We also plan to further reduce our workforce by approximately 200 manufacturing-related positions resulting in additional charges of approximately $7.0 million to $9.0 million during the third quarter of fiscal 2009. We will continue to conduct a company-wide strategic review of our costs and organizational structure for further opportunities to maximize efficiency and align our expenses with our current and long-term business outlook.
In addition, gross profit and margin in the current quarter were adversely affected by unfavorable interest rate impacts on jackpot expense, unfavorable foreign exchange rates, and obsolescence charges with new product transitions. The extra week of operations in the current quarter contributed approximately $22.4 million and $11.5 million in consolidated revenues and gross profit, respectively.
During the current quarter we implemented restructuring initiatives with the goal of maximizing operational efficiencies and controlling expenses through the reduction our global workforce by approximately 8%. The reduction in employees was accomplished through a combination of early retirement and involuntary employee separation arrangements. Non-recurring restructuring charges during the current quarter included severance and one-time termination costs of $17.4 million, net of stock-compensation forfeitures. We expect this initiative to reduce our quarterly operating costs by $20.0 million to $25.0 million beginning in the second quarter of fiscal 2009.
In addition to the restructuring charges, the current quarter also included approximately $12.6 million in SG&A and R&D expenses associated with the extra week of operations. SG&A also includes an unfavorable fluctuation in bad debt provision of $15.9 million from the prior year due to increased credit risk related to the current economic climate and its impact on certain customers operations. These unfavorable fluctuations were partially offset by lower incentives related to reduced operating income and a variety of other cost cutting measures.
We also plan to further reduce our workforce by approximately 200 manufacturing-related positions and expect to incur additional severance charges ranging from $7.0 million to $9.0 million in the third quarter of fiscal 2009.
Gurus who own IGTIGT is in the portfolios of Bruce Sherman, Tom Gayner, John Rogers, Richard Aster Jr, Richard Aster Jr.
Stocks Discussed: IGT,