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International Game Technology PLC Reports Second Quarter 2016 Results
- Net income of $73 million; adjusted Net income of $87 million
- Adjusted EBITDA rose 4% to $443 million on strong service revenues in Italy and North America
- Continued expansion in Lottery, resilience in Gaming
- Stable net debt despite initial Italian Lotto concession payment

LONDON, July 28, 2016 /PRNewswire/ -- International Game Technology PLC ("IGT") (NYSE:IGT) today reported financial results for the second quarter and six months ended June 30, 2016. Today, at 8:00 a.m. EDT / 1:00 p.m. BST / 2:00 p.m. CEST, management will host a conference call and webcast to present the second quarter results; access details are provided below.

IGT is the global leader in gaming. We enable players to experience their favorite games across all channels and regulated segments, from Gaming Machines and Lotteries to Interactive and Social Gaming. Leveraging a wealth of premium content, substantial investment in innovation, in-depth customer intelligence, operational expertise and leading-edge technology, our gaming solutions anticipate the demands of consumers wherever they decide to play. We have a well-established local presence and relationships...

"Robust growth in our global lottery operations, notably in Italy and North America, and the resilience of our global gaming business are the key takeaways from our second quarter results," said Marco Sala, CEO of IGT. "Service revenues, which account for the bulk of our business and are mostly supported by long-term contracts, rose a solid 6% at constant currency in the period. We are making good progress implementing our strategy of developing innovative content and technology that we can leverage across gaming platforms and around the world. We look forward to showcasing the full scope of our new gaming and lottery offerings at high-profile trade shows later this fall."

"This is our third consecutive quarter of year-over-year adjusted EBITDA growth," said Alberto Fornaro, CFO of IGT. "A solid increase in service revenue, additional synergy savings and disciplined operational management all supported significant operating cash flow generation during the quarter. As a result, we maintained a stable net debt and leverage profile in the period when we paid the largest installment of the upfront Italian Lotto concession payment."

Summary of Consolidated Second Quarter 2016 Financial Results


Quarter Ended June 30,

Change

Constant
Currency
Change 


2016

2015

(%)

(%)

(In $ millions, unless otherwise noted)





Revenue

1,285

1,274

1%

1%

Operating Income

171

116

48%

48%

Net income (loss) per diluted share

0.36

(0.59)

NM


Net debt

7,830

8,384

-7%


Adjusted EBITDA

443

427

4%

4%

Adjusted Operating Income

290

283

2%

2%

Adjusted net income per diluted share

0.43

0.38

13%




Note:

Adjusted EBITDA, adjusted operating income, and adjusted net income per diluted share are non-GAAP financial measures.  Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are provided at the end of this news release. 

Comparability of Results

All figures presented in this news release are prepared under U.S. GAAP, unless noted otherwise. Adjusted figures exclude the impact of items such as purchase accounting, impairment charges, restructuring expense, foreign exchange, and certain one-time, primarily transaction-related items. Reconciliations to the most directly comparable U.S. GAAP measures are included in the tables in this news release. Constant currency changes for 2016 are calculated using the same foreign exchange rates as the corresponding 2015 period.

Overview of Consolidated Second Quarter Results

Consolidated revenue grew 1% to $1,285 million from $1,274 million in the second quarter of 2015. Revenue growth primarily reflects strong lottery performance, particularly in Italy and North America. Global lottery same-store revenue, excluding Italy, increased 6% during the second quarter while Italy lottery wagers increased 8%. Gaming service revenue grew 5% during the second quarter, primarily on increased software contribution that was partially offset by a lower global installed base. Product sales declined on a challenging comparison with the prior year given significant lottery product sales in South Africa and large Canada video lottery terminal ("VLT") sales in 2015. The Company shipped 8,152 gaming machines worldwide during the second quarter.

Operating income grew 48% to $171 million from $116 million in the second quarter of 2015 driven by revenue growth, synergy savings and lower transaction-related expenses. Adjusted operating income grew 2% to $290 million from $283 million in the second quarter of 2015 as revenue growth and synergies were partially offset by higher operating expenses. 

Adjusted EBITDA of $443 million was 4% higher than the second quarter of 2015 driven by the growth in service revenue.

Interest expense was $118 million compared to $122 million in the prior-year period.

Net income attributable to IGT was $73 million in the second quarter of 2016. On an adjusted basis, net income attributable to IGT rose 14% to $87 million. The Company reported net income per diluted share of $0.36 and earned $0.43 per diluted share on an adjusted basis.

Cash from operations was $524 million in the first half of the year and capital expenditures were $220 million. In addition, the Company made the first of three upfront installment payments for the new Lotto concession in Italy during the second quarter.

Cash and cash equivalents were $390 million as of June 30, 2016, compared to $627 million as of December 31, 2015. Consolidated shareholders' equity totaled $3,409 million and net debt was $7,830 million as of June 30, 2016.

Operating Segment Review

North America Gaming & Interactive   

North America Gaming & Interactive revenue was $350 million compared to $353 million in the second quarter of 2015.

Service revenue was $246 million, a 4% increase over $237 million in the prior-year period as higher software revenue offset a decline in the installed base. DoubleDown revenue was down modestly from the prior year.

Product sales were $104 million compared to $116 million in the second quarter of 2015, primarily due to lower machine unit volume that was partially offset by higher systems sales. The segment shipped 5,163 units compared to 6,218 units in the second quarter of 2015, which included large Canada VLT sales.

Operating income for North America Gaming & Interactive was $87 million compared to $96 million in the second quarter of 2015. The decline was largely attributed to lower revenue from terminal sales and incremental investments to support the Company's Gaming turnaround efforts.

North America Lottery

North America Lottery revenue was $286 million in the second quarter of 2016, 6% higher than the $270 million reported in the second quarter of 2015.

Service revenue of $267 million was 6% higher than the prior-year period, reflecting 7.3% same-store revenue growth. The same-store revenue growth was broad-based and supported by continued strength in Jackpot games and Instant tickets. Product sales were $19 million in the second quarter of 2016, compared to $17 million in the prior-year period.

Operating income for North America Lottery rose 31% to $62 million reflecting the strong operating leverage profile of the business and favorable product mix. 

International

International revenue was $207 million compared to $247 million in the second quarter of 2015. At constant currency, International revenue declined 12% from the prior year, which included large lottery product sales in South Africa.

International lottery service revenue of $70 million was 10% higher than the prior-year period at constant currency. Same-store revenue growth of 2.2% was supported by strength in Latin America and Eastern Europe, partially offset by weakness in the United Kingdom. Lottery service revenue also benefitted from a higher effective rate in the period. Lottery product sales were below the prior-year period, which included large terminal and systems sales in South Africa.

International gaming service revenue was $46 million compared to $50 million in the second quarter of 2015. At constant currency, International gaming service revenue was flat, with EMEA performance offsetting a lower Latin America installed base. Revenue from gaming product sales declined from the prior-year period. The segment shipped a total of 2,989 gaming machines during the second quarter of 2016 compared to 3,929 units in the prior-year period, which benefitted from higher sales of new and expansion units.

International operating income was $28 million compared to $47 million in the second quarter of 2015. Operating income declined on lower product sales and adverse foreign exchange impact. 

Italy

Italy revenue was $443 million, 6% higher than the second quarter of 2015.   

Total Lotto wagers in the quarter were €2,056 million, a 19% increase over the prior-year period, when wagers had already posted 11% growth. Strong Lotto performance was achieved with double-digit expansion for 10eLotto and a significant contribution from late numbers. Excluding late numbers, Lotto wagers increased 7% over the same period last year. Instant-ticket wagers were flat at €2,200 million.

Machine gaming service revenue increased 6% on higher wagers per machine and lower return to player. The strength in revenues was partially offset by lower installed units and higher Stability Law taxes. 

Operating income for the Italy segment was $161 million, 14% higher than the second quarter of 2015. The increase in operating income was mainly attributable to strong lottery and gaming performance, a shift in timing of certain marketing expenses, and a multi-year value-added tax ("VAT") credit. These benefits were partially offset by higher Stability Law taxes.

Other Developments

The Company entered into an amendment agreement with respect to its $1.8 billion and €1.05 billion multicurrency revolving credit facilities pursuant to which the maturity date was extended from November 2019 to July 2021, and the maximum leverage ratio was increased by 0.25x through the third quarter of 2019. The amendment reflects advantageous market conditions that provide the Company with substantial financial flexibility for the next several years.

Outlook

The Company continues to expect adjusted EBITDA of $1,740-$1,790 million for the full year 2016 period. Capital expenditures excluding upfront Lotto concession payments are now expected to be $550-$580 million, which includes Lotto-related infrastructure upgrades. This compares to previous guidance of $575-$625 million in capital expenditures, which did not include an estimated $35 million in Lotto-related infrastructure investments. The 2016 portion of the Lotto-related, upfront concession payments is €600 million. Net debt is still expected to be $7,700-$7,900 million at the end of 2016.

Adjusted EBITDA is a non-GAAP measure. Management uses non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, and to evaluate the Company's financial performance. Management believes these Non-GAAP financial measures reflect the Company's ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of business trends.

Conference Call and Webcast

Today, at 8:00 a.m. EDT / 1:00 p.m. BST / 2:00 p.m. CEST, management will host a conference call to present the second quarter 2016 results. Listeners may access a live webcast of the conference call along with accompanying slides under "News, Events and Presentations" on IGT's Investor Relations website at www.IGT.com. A replay of the webcast will be available on the website following the live event. To listen by telephone, the dial in number is +44 (0) 20 7136 2051 for participants in the United Kingdom and +1 877 280 2296 for listeners outside the United Kingdom. The conference ID/confirmation code is 5641427. A telephone replay of the call will be available for one week at +44 (0) 20 3427 0598 or +1 866 932 5017 using the conference ID/confirmation code 5641427.

About IGT
IGT (NYSE:IGT) is the global leader in gaming. We enable players to experience their favorite games across all channels and regulated segments, from Gaming Machines and Lotteries to Interactive and Social Gaming. Leveraging a wealth of premium content, substantial investment in innovation, in-depth customer intelligence, operational expertise and leading-edge technology, our gaming solutions anticipate the demands of consumers wherever they decide to play. We have a well-established local presence and relationships with governments and regulators in more than 100 countries around the world, and create value by adhering to the highest standards of service, integrity, and responsibility. IGT has over 12,000 employees. For more information, please visit www.IGT.com.

Cautionary Statement Regarding Forward-Looking Statements
This news release may contain forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning International Game Technology PLC and other matters. These statements may discuss goals, intentions and expectations as to future plans, trends, events, dividends, results of operations or financial condition, or otherwise, based on current beliefs of the management of International Game Technology PLC as well as assumptions made by, and information currently available to, such management. Forward-looking statements may be accompanied by words such as "aim," "anticipate," "believe," "plan," "could," "would," "should," "shall," "continue," "estimate," "expect," "forecast," "future," "guidance," "intend," "may," "will," "possible," "potential," "predict," "project" or the negative or other variations of them. These forward-looking statements are subject to various risks and uncertainties, many of which are outside International Game Technology PLC's control. Should one or more of these risks or uncertainties materialize, or should any of the underlying assumptions prove incorrect, actual results may differ materially from those predicted in the forward-looking statements and from past results, performance or achievements. Therefore, you should not place undue reliance on the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include (but are not limited to) the possibility that the businesses of International Game Technology (Nevada) and GTECH S.p.A. will not be integrated successfully, or that the combined companies will not realize estimated cost savings, synergies, growth or other anticipated benefits or that such benefits may take longer to realize than expected; unanticipated costs of integration of International Game Technology (Nevada) and GTECH S.p.A.; the possibility that International Game Technology PLC will be unable to pay future dividends to shareholders or that the amount of such dividends may be less than anticipated; the possibility that International Game Technology PLC may not obtain its anticipated financial results in one or more future periods; reductions in customer spending; a slowdown in customer payments and changes in customer demand for products and services as a result of changing economic conditions or otherwise; unanticipated changes relating to competitive factors in the industries in which International Game Technology PLC operates; International Game Technology PLC's ability to hire and retain key personnel; the impact of the consummation of the business combination on relationships with third parties, including customers, employees and competitors; International Game Technology PLC's ability to attract new customers and retain existing customers in the manner anticipated; reliance on and integration of information technology systems; changes in legislation or governmental regulations affecting International Game Technology PLC, including as a consequence of the announced withdrawal of the UK from the EU; international, national or local economic, social or political conditions that could adversely affect International Game Technology PLC or its customers; conditions in the credit markets; changes in the top management team; risks associated with assumptions International Game Technology PLC makes in connection with its critical accounting estimates; the resolution of pending and potential future legal, regulatory or tax proceedings and investigations; and International Game Technology PLC's international operations, which are subject to the risks of currency fluctuations and foreign exchange controls. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that affect International Game Technology PLC's business, including those described in International Game Technology PLC's annual report on Form 20-F for the financial year ended December 31, 2015 and other documents filed from time to time with the Securities and Exchange Commission (the "SEC"), which are available on the SEC website at www.sec.gov and on the investor relations section of International Game Technology PLC's website at www.IGT.com. Except as required under applicable law, International Game Technology PLC does not assume any obligation to update the forward-looking statements. Nothing in this presentation is intended, or is to be construed, as a profit forecast or to be interpreted to mean that earnings per International Game Technology PLC share for the current or any future financial years will necessarily match or exceed the historical published earnings per International Game Technology PLC share, as applicable. All forward-looking statements contained in this presentation are qualified in their entirety by this cautionary statement. All subsequent written or oral forward-looking statements attributable to International Game Technology PLC, or persons acting on its behalf, are expressly qualified in their entirety by this cautionary statement.

Contact:

Robert K. Vincent, Corporate Communications, toll free in U.S./Canada +1 (844) IGT-7452; outside U.S./Canada +1 (401) 392-7452
James Hurley, Investor Relations, +1 (401) 392-7190
Simone Cantagallo, +39 06 51899030; for Italian media inquiries

 

International Game Technology PLC

Consolidated Statements of Operations

($ and shares in thousands, except per share data)

Unaudited








 For the three months ended  



 June 30, 



2016


2015






Service revenue


1,089,954


1,034,693

Product sales


195,515


239,591

Total revenue


1,285,469


1,274,284






Cost of services


637,832


616,648

Cost of sales


144,640


177,244

Selling, general and administrative


239,241


232,216

Research and development


84,288


84,514

Restructuring expense


6,438


15,818

Impairment loss


2,352


-

Transaction (income) expense, net


(43)


32,344

Total operating expenses


1,114,748


1,158,784






Operating income


170,721


115,500






Interest income


2,754


7,506

Equity income, net


414


243

Other income


3,474


2,341

Other expense


(4,463)


(1,563)

Foreign exchange gain (loss), net


88,152


(102,345)

Interest expense


(117,715)


(122,418)

Total non-operating expenses


(27,384)


(216,236)






Income (loss) before provision for income taxes


143,337


(100,736)






Provision for income taxes


60,439


11,599






Net income (loss)


82,898


(112,335)






Less: Net income attributable to non-controlling interests


10,202


4,555






Net income (loss) attributable to IGT PLC


72,696


(116,890)











Net income (loss) attributable to IGT PLC per common share - basic

0.36


(0.59)

Net income (loss) attributable to IGT PLC per common share - diluted

0.36


(0.59)






Weighted-average shares - basic


201,229


197,149

Weighted-average shares - diluted


201,565


197,149

 

International Game Technology PLC

Consolidated Statements of Operations

($ and shares in thousands, except per share data)

Unaudited








 For the six months ended  



 June 30, 



2016


2015






Service revenue


2,225,075


1,824,955

Product sales


341,955


297,571

Total revenue


2,567,030


2,122,526






Cost of services


1,286,595


1,123,383

Cost of sales


266,416


212,342

Selling, general and administrative


466,767


327,767

Research and development


168,995


106,985

Restructuring expense


15,856


30,299

Impairment loss


2,352


-

Transaction expense, net


1,431


43,394

Total operating expenses


2,208,412


1,844,170






Operating income


358,618


278,356






Interest income


7,047


8,119

Equity income, net


414


15

Other income


4,700


2,955

Other expense


(13,015)


(122,684)

Foreign exchange loss, net


(73,404)


(95,341)

Interest expense


(236,130)


(216,806)

Total non-operating expenses


(310,388)


(423,742)






Income (loss) before provision for income taxes


48,230


(145,386)






Provision for income taxes


51,781


2,540






Net loss


(3,551)


(147,926)






Less: Net income attributable to non-controlling interests


16,527


8,281






Net loss attributable to IGT PLC


(20,078)


(156,207)











Net loss attributable to IGT PLC per common share - basic


(0.10)


(0.84)

Net loss attributable to IGT PLC per common share - diluted


(0.10)


(0.84)






Weighted-average shares - basic


200,840


185,007

Weighted-average shares - diluted


200,840


185,007

 

International Game Technology PLC

Condensed Consolidated Balance Sheets

($ thousands)

Unaudited






 June 30, 


 December 31,  


2016


2015

ASSETS




Current assets:




Cash and cash equivalents

390,012


627,484

Restricted cash and investments

137,614


169,101

Trade and other receivables, net

930,748


959,592

Inventories

284,096


269,982

Other current assets

436,475


423,701

Income taxes receivable

30,906


35,514

Total current assets

2,209,851


2,485,374





Systems, equipment and other assets related to contracts, net

1,123,496


1,127,518

Property, plant and equipment, net

343,005


349,677

Goodwill, net

6,838,652


6,830,499

Intangible assets, net

3,112,165


3,335,633

Other non-current assets

1,734,795


937,917

Deferred income taxes

47,202


48,074

Total non-current assets

13,199,315


12,629,318





Total Assets

15,409,166


15,114,692





LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

1,014,140


1,057,860

Other current liabilities

1,318,684


922,586

Current portion of long-term debt

163


160

Income taxes payable

124,841


30,020

Total current liabilities

2,457,828


2,010,626





Long-term debt, less current portion

8,219,711


8,334,013

Deferred income taxes

861,520


941,418

Other non-current liabilities

461,091


462,493

Total non-current liabilities

9,542,322


9,737,924





Total Liabilities

12,000,150


11,748,550





Commitments and contingencies

-


-





Shareholders' equity

3,409,016


3,366,142





Total liabilities and shareholders' equity

15,409,166


15,114,692

 

International Game Technology PLC

Consolidated Statements of Cash Flows

($ thousands)

Unaudited













 For the six months ended  



 June 30, 



2016


2015

Operating activities





Net loss


(3,551)


(147,926)

Adjustments for:





Amortization 


253,074


152,135

Depreciation 


198,881


164,543

Foreign exchange loss, net


73,404


95,341

Amortization of upfront payments to customers


55,178


53,876

Stock-based compensation expense


17,034


20,970

Debt issuance cost amortization


9,086


34,168

Loss on early extinguishment of debt


-


73,806

Write-off of bridge facility costs


-


35,061

Other, net


21,598


4,175

Cash flows before changes in operating assets and liabilities


624,704


486,149

Changes in operating assets and liabilities:





Trade and other receivables


35,133


(2,266)

Inventories


(6,271)


(556)

Accounts payable


(68,596)


(145,140)

Other assets and liabilities


(61,163)


(121,102)

Net cash flows from operating activities


523,807


217,085






Investing activities





Upfront payments to customers


(390,390)


-

Capital expenditures


(219,632)


(167,092)

Purchases of jackpot annuity investments


(1,446)


(786)

Proceeds from jackpot annuity investments


11,625


12,184

Proceeds from sale of assets


49,394


7,136

Acquisition of IGT, net of cash acquired


-


(3,241,415)

Other


2,825


3,927

Net cash flows used in investing activities


(547,624)


(3,386,046)






Financing activities





Principal payments on long-term debt


(236,669)


(2,300,504)

Dividends paid 


(80,340)


(129,524)

Return of capital - non-controlling interest


(35,407)


(30,281)

Dividends paid - non-controlling interest 


(27,552)


(27,205)

Net proceeds from (payments on) financial liabilities


4,510


(54,493)

Capital contribution non-controlling interest


151,359


-

Proceeds from issuance of long-term debt


-


6,599,368

Payments in connection with note consents


-


(29,022)

Payments on bridge facility


-


(51,409)

Debt issuance costs paid


-


(78,878)

Payments in connection with the early extinguishment of debt


-


(79,526)

Payments to withdrawing shareholders


-


(407,759)

Other


(2,288)


24,313

Net cash flows (used in) provided by financing activities


(226,387)


3,435,080






Net (decrease) increase in cash and cash equivalents


(250,204)


266,119

Effect of exchange rate changes on cash


12,732


(26,132)

Cash and cash equivalents at the beginning of the period


627,484


317,106

Cash and cash equivalents at the end of the period


390,012


557,093











Supplemental Cash Flow Information:





Interest paid


(256,331)


(162,732)

Income taxes paid


(38,742)


(27,785)

 

International Game Technology PLC

Net Debt

($ thousands)










June 30,


December 31,


2016


2015

Long-term debt, less current portion




6.250% Senior Secured Notes due 2022

1,502,024


1,468,875

6.500% Senior Secured Notes due 2025

1,084,882


1,084,249

4.750% Senior Secured Notes due 2023

931,215


912,418

4.125% Senior Secured Notes due 2020

768,191


752,212

5.625% Senior Secured Notes due 2020

593,087


592,245

Senior Secured Notes

4,879,399


4,809,999





6.625% Senior Secured Notes due 2018

546,834


533,915

4.750% Senior Secured Notes due 2020

533,495


520,649

Legacy GTECH Notes

1,080,329


1,054,564





7.500% Senior Secured Notes due 2019

526,029


530,009

5.500% Senior Secured Notes due 2020

126,570


126,833

5.350% Senior Secured Notes due 2023

61,243


61,303

Legacy IGT Notes

713,842


718,145





Term Loan Facilities due 2019

884,607


866,785

Revolving Credit Facilities due 2019

661,494


834,968

Capital Securities

-


49,472

Other

40


80

Long-term debt, less current portion

8,219,711


8,334,013





Current portion of long-term debt 

163


160

Total debt

8,219,874


8,334,173





Cash and cash equivalents

390,012


627,484





Net debt

7,829,862


7,706,689

 


 International Game Technology PLC 

 Consolidated Statement of Operations 

 Reconciliation of Non-GAAP Financial Measures 

 ($ and shares in thousands, except share amounts) 































Adjustments





Q2 2016






Impairment/


Transaction


Q2 2016



As


Purchase


Foreign


Restructuring


(Income)


As



Reported


Accounting


Exchange


Expense


Expense


Adjusted














 Total revenue 


1,285,469


264


-


-


-


1,285,733














 Cost of services 


637,832


(45,340)


-


-


-


592,492

 Cost of sales 


144,640


(29,687)


-


-


-


114,953

 Selling, general and administrative 


239,241


(34,857)


-


-


-


204,384

 Research and development 


84,288


(496)


-


-


-


83,792

 Restructuring expense 


6,438


-


-


(6,438)


-


-

 Impairment loss 


2,352


-


-


(2,352)


-


-

 Transaction (income) expense, net 


(43)


-


-


-


43


-

 Total operating expenses 


1,114,748


(110,380)


-


(8,790)


43


995,621














 Operating income 


170,721


110,644


-


8,790


(43)


290,112














 Foreign exchange gain, net 


88,152


-


(88,152)


-


-


-

 Other expense, net 


(575)


1,260


-


-


-


685

 Interest expense, net 


(114,961)


2,036


-


-


-


(112,925)

 Total non-operating expenses 


(27,384)


3,296


(88,152)


-


-


(112,240)














 Income (loss) before provision for income taxes 


143,337


113,940


(88,152)


8,790


(43)


177,872














 Provision for (benefit from) income taxes (a) 


60,439


41,330


(22,703)


2,054


(32)


81,088














 Net income (loss) 


82,898


72,610


(65,449)


6,736


(11)


96,784














 Less: Net income attributable to non-controlling interests 


10,202


25


-


-


-


10,227














 Net income (loss) attributable to IGT PLC 


72,696


72,585


(65,449)


6,736


(11)


86,557














 Net income per common share - diluted 


0.36










0.43

 Weighted-average shares - diluted 


201,565










201,565



























 (a) Provision for (benefit from) income taxes was determined based on the statutory tax rate in effect in the respective jurisdiction where the adjustment originated. 

 


 International Game Technology PLC 

 Consolidated Statement of Operations 

 Reconciliation of Non-GAAP Financial Measures 

 ($ and shares in thousands, except share amounts) 

































Adjustments






Q2 2015








Transaction


Q2 2015




As


Purchase


Foreign


Restructuring


and Refinancing


As




Reported


Accounting


Exchange


Expense


Expense


Adjusted
















 Total revenue 


1,274,284


11,826


-


-


-


1,286,110
















 Cost of services 


616,648


(40,446)


-


-


-


576,202


 Cost of sales 


177,244


(32,213)


-


-


-


145,031


 Selling, general and administrative 


232,216


(34,579)


-


-


-


197,637


 Research and development 


84,514


(561)


-


-


-


83,953


 Restructuring expense 


15,818


-


-


(15,818)


-


-


 Transaction expense, net 


32,344


-


-


-


(32,344)


-


 Total operating expenses 


1,158,784


(107,799)


-


(15,818)


(32,344)


1,002,823
















 Operating income 


115,500


119,625


-


15,818


32,344


283,287
















 Foreign exchange loss, net 


(102,345)


-


102,345


-


-


-


 Other income, net 


1,021


6,454


-


-


8


7,483


 Interest expense, net 


(114,912)


(33)


-


-


-


(114,945)


 Total non-operating expenses 


(216,236)


6,421


102,345


-


8


(107,462)
















 (Loss) income before provision for income taxes 


(100,736)


126,046


102,345


15,818


32,352


175,825
















 Provision for income taxes (a) 


11,599


45,387


23,482


4,873


10,125


95,466
















 Net (loss) income 


(112,335)


80,659


78,863


10,945


22,227


80,359
















 Less: Net income attributable to non-controlling interests 


4,555


26


-


-


-


4,581
















 Net (loss) income attributable to IGT PLC 


(116,890)


80,633


78,863


10,945


22,227


75,778
















 Net (loss) income per common share - diluted 


(0.59)










0.38


 Weighted-average shares - diluted 


197,149










198,612












































 (a) Provision for (benefit from) income taxes was determined based on the statutory tax rate in effect in the respective jurisdiction where the adjustment originated. 


 


 International Game Technology PLC 

 Consolidated Statement of Operations 

 Reconciliation of Non-GAAP Financial Measures 

 ($ and shares in thousands, except share amounts) 





























 Year to date 


Adjustments


 Year to date 



June 2016






Impairment/




June 2016



As


Purchase


Foreign


Restructuring


Transaction


As



Reported


Accounting


Exchange


Expense


Expense


Adjusted














 Total revenue 


2,567,030


956


-


-


-


2,567,986














 Cost of services 


1,286,595


(91,144)


-


-


-


1,195,451

 Cost of sales 


266,416


(59,351)


-


-


-


207,065

 Selling, general and administrative 


466,767


(69,603)


-


-


-


397,164

 Research and development 


168,995


(994)


-


-


-


168,001

 Restructuring expense 


15,856


-


-


(15,856)


-


-

 Impairment loss 


2,352


-


-


(2,352)


-


-

 Transaction expense, net 


1,431


-


-


-


(1,431)


-

 Total operating expenses 


2,208,412


(221,092)


-


(18,208)


(1,431)


1,967,681














 Operating income 


358,618


222,048


-


18,208


1,431


600,305














 Foreign exchange loss, net 


(73,404)


-


73,404


-


-


-

 Other expense, net 


(7,901)


4,092


-


-


-


(3,809)

 Interest expense, net 


(229,083)


4,074


-


-


-


(225,009)

 Total non-operating expenses 


(310,388)


8,166


73,404


-


-


(228,818)














 Income (loss) before provision for income taxes 


48,230


230,214


73,404


18,208


1,431


371,487














 Provision for income taxes (a) 


51,781


81,901


13,574


5,180


262


152,698














 Net (loss) income 


(3,551)


148,313


59,830


13,028


1,169


218,789














 Less: Net income attributable to non-controlling interests 


16,527


50


-


-


-


16,577














 Net (loss) income attributable to IGT PLC 


(20,078)


148,263


59,830


13,028


1,169


202,212














 Net (loss) income per common share - diluted 


(0.10)










1.00

 Weighted-average shares - diluted 


200,840










201,547



























 (a) Provision for (benefit from) income taxes was determined based on the statutory tax rate in effect in the respective jurisdiction where the adjustment originated. 

 


 International Game Technology PLC 

 Consolidated Statement of Operations 

 Reconciliation of Non-GAAP Financial Measures 

 ($ and shares in thousands, except share amounts) 





































 Year to date 


Adjustments


 Year to date 




 Year to date 



June 2015








Transaction


June 2015




June 2015



As


Purchase


Foreign


Restructuring


and Refinancing


As


Pro Forma


Pro



Reported


Accounting


Exchange


Expense


Expense


Adjusted


Adjustments


Forma


















 Total revenue 


2,122,526


11,648


-


-


-


2,134,174


399,387


2,533,561


















 Cost of services 


1,123,383


(56,664)


-


-


-


1,066,719


113,306


1,180,025

 Cost of sales 


212,342


(32,228)


-


-


-


180,114


63,355


243,469

 Selling, general and administrative 


327,767


(34,576)


-


-


-


293,191


134,166


427,357

 Research and development 


106,985


(1,129)


-


-


-


105,856


62,760


168,616

 Restructuring expense 


30,299


-


-


(30,299)


-


-


-


-

 Transaction expense, net 


43,394


-


-


-


(43,394)


-


-


-

 Total operating expenses 


1,844,170


(124,597)


-


(30,299)


(43,394)


1,645,880


373,587


2,019,467


















 Operating income 


278,356


136,245


-


30,299


43,394


488,294


25,800


514,094


















 Foreign exchange loss, net 


(95,341)


-


95,341


-


-


-





 Other (expense) income, net 


(119,714)


6,250


-


-


117,252


3,788





 Interest expense, net 


(208,687)


(20)


-


-


-


(208,707)





 Total non-operating expenses 


(423,742)


6,230


95,341


-


117,252


(204,919)






















 (Loss) income before provision for income taxes 


(145,386)


142,475


95,341


30,299


160,646


283,375






















 Provision for income taxes (a) 


2,540


51,146


21,556


9,182


40,600


125,024






















 Net (loss) income 


(147,926)


91,329


73,785


21,117


120,046


158,351






















 Less: Net income attributable to non-controlling interests 


8,281


51


-


-


-


8,332






















 Net (loss) income attributable to IGT PLC 


(156,207)


91,278


73,785


21,117


120,046


150,019






















 Net (loss) income per common share - diluted 


(0.84)










0.81





 Weighted-average shares - diluted 


185,007










186,179
























































 (a) Provision for (benefit from) income taxes was determined based on the statutory tax rate in effect in the respective jurisdiction where the adjustment originated. 

 

International Game Technology PLC

Adjusted EBITDA and Free Cash Flow

Reconciliations of Non-GAAP Financial Measures

($ thousands)













For the three months ended



June 30,



2016


2015






Net income (loss)


82,898


(112,335)

Provision for income taxes


60,439


11,599

Non-operating expenses


27,384


216,236

Amortization


127,578


118,763

Depreciation 


100,364


92,687

Amortization of upfront payments to customers


27,769


27,033

Stock-based compensation expense


7,732


5,109

Restructuring expense


6,438


15,818

Impairment loss


2,352


-

Non-cash purchase accounting (excluding D&A)


224


19,372

Transaction (income) expense, net


(43)


32,344

Adjusted EBITDA


443,135


426,626
















Cash flows from operating activities


318,202


163,302

Capital expenditures


(121,961)


(95,452)

Upfront payments to customers


(390,390)


-

Free Cash Flow


(194,149)


67,850

 

International Game Technology PLC Segment Performance





Revenue Detail 






($ millions)




























INTERNATIONAL GAME TECHNOLOGY PLC


Quarter Change





2015

2016


Percentage

Constant FX





Q2 

Q2 


Q2

Q2

Gaming


Total Revenue

670

663


-1.1%

-0.4%










Gaming Services

474

495


4.5%

5.3%



Terminal 

322

320


-0.7%

-0.2%



Social (DDI)

73

72


-0.9%

-1.0%



Other

78

102


30.7%

33.7%










Product Sales

197

168


-14.5%

-13.9%



Terminal 

143

106


-26.2%

-25.7%



Other

54

63


16.8%

17.5%










Lottery


Total Revenue

524

546


4.3%

4.6%










Lottery Services

481

519


7.9%

8.3%



FM/Concessions

424

458


7.9%

8.1%



LMA

38

39


3.4%

3.4%



Other Services

19

22


16.3%

20.5%










Product Sales

43

27


-36.4%

-36.0%



Terminal 

21

8


-60.2%

-59.7%



Systems/Other

22

19


-13.3%

-13.1%










Other


Total Revenue

80

76


-5.0%

-3.7%










Service Revenue

80

76


-5.0%

-3.8%


Product Sales

0

0


-10.3%

31.5%










Consolidated


Revenue

1,274

1,285


0.9%

1.5%


















Operating Income:








Segment Total

331

338


2.2%

2.5%



Purchase Accounting

(120)

(111)


-7.5%

-7.5%



Corporate Support

(96)

(57)


-40.6%

-39.4%



Total

116

171


47.8%

47.5%









 














NORTH AMERICA GAMING & INTERACTIVE


Quarter Change





2015

2016


Percentage

Constant FX





Q2 

Q2 


Q2

Q2

Gaming


Total Revenue

353

350


-1.0%

-0.9%










Gaming Services

237

246


3.7%

3.7%



Terminal 

140

132


-6.0%

-5.8%



Social (DDI)

73

72


-0.9%

-1.0%



Other

24

42


73.1%

73.2%










Product Sales

116

104


-10.5%

-10.2%



Terminal 

84

64


-23.9%

-23.7%



Other

32

40


24.5%

24.8%










Total


Revenue

353

350


-1.0%

-0.9%










Operating Income

96

87


-9.0%

-13.0%









 





NORTH AMERICA LOTTERY


Quarter Change





2015

2016


Percentage

Constant FX





Q2 

Q2 


Q2

Q2

Gaming


Total Revenue

37

37


-0.8%

1.0%










Gaming Services

37

37


0.2%

2.0%



Terminal 

25

26


3.0%

3.0%



Social (DDI)

0

0


0.0%

0.0%



Other

12

12


-5.4%

0.1%










Product Sales

0

0


-82.9%

-82.9%



Terminal 

0

0


-91.9%

-91.9%



Other

0

0


-81.1%

-81.1%










Lottery


Total Revenue

233

249


7.1%

7.1%










Lottery Services

216

230


6.4%

6.4%



FM/Concessions

154

163


6.1%

6.1%



LMA

38

39


3.4%

3.4%



Other Services

25

28


13.2%

13.2%