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International Game Technology PLC Reports Fourth Quarter And Full Year 2016 Results

LONDON, March 9, 2017 /PRNewswire/ --

  • Fourth quarter net income of $233 million; adjusted EBITDA of $422 million reflects broad-based lottery growth and higher gaming product sales
  • 2016 net income of $211 million; adjusted 2016 EBITDA of $1,755 million on strong North America and Italy performance
  • Net debt of $7,569 million at year end
  • Cash dividend declared of $0.20 per ordinary share

 

 

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...

 

International Game Technology PLC ("IGT") (NYSE:IGT) today reported financial results for the fourth quarter and year ended December 31, 2016. Today, at 8:00 a.m. EST / 1:00 p.m. GMT / 2:00 p.m. CET, management will host a conference call and webcast to present the fourth quarter and full year 2016 results; access details are provided below.

"We reached many important milestones in 2016," said Marco Sala, CEO of IGT. "We reinforced our number one position in Lottery globally, achieving robust same-store revenue growth and securing valuable, multi-year contracts. We also made good progress with our Gaming turnaround, developing compelling new titles and hardware, in addition to expanding our International presence.  We operate in growing global market segments and IGT has a long history of investing in innovation to create shareholder value."

"We achieved our financial goals for 2016 and ended the year in strong financial condition," said Alberto Fornaro, CFO of IGT. "Disciplined capital management enabled us to reduce our debt and improve our leverage profile despite the large upfront investment in the Italy Lotto. We expect 2017 to evolve as a year of two halves, with difficult comparisons in the first part of the year easing as we reach the second half."

Summary of Consolidated Fourth Quarter and Full Year Financial Results

 

Reported

       
       

Constant

     

Quarter Ended December 31,

2016

2015

Change

Currency

     
     

(%)

Change

(%)

     

(In US $ millions, unless otherwise noted)

             

Revenue

1,321

1,365

-3%

-2%

     

Operating Income

138

132

5%

5%

     

Net income per diluted share

1.15

0.37

NM

 NM 

     

Net debt

7,569

7,707

-2%

-

     

Adjusted EBITDA

422

449

-6%

-6%

     

Adjusted Operating Income

281

293

-4%

-4%

     

Adjusted net income per diluted share

0.88

0.63

40%

 NA 

     
               
 

Reported

Pro forma

             

Constant

Year Ended December 31,

2016

2015

Change

2016

2015

Change

Currency

     

(%)

   

(%)

Change (%)

(In US $ millions, unless otherwise noted)

             

Revenue

5,154

4,689

10%

5,154

5,088

1%

2%

Operating Income

660

540

22%

660

533

24%

24%

Net income (loss) per diluted share

1.05

(0.39)

NM

1.05

 NA 

NA

 NA 

Net debt

7,569

7,707

-2%

7,569

7,707

-2%

-

Adjusted EBITDA

1,755

1,611

9%

1,755

1,704

3%

3%

Adjusted Operating Income

1,167

1,043

12%

1,167

1,069

9%

9%

Adjusted net income per diluted share

2.33

1.88

24%

2.33

 NA 

NA

 NA 

 

Note: Pro forma is defined as the combined results of GTECH and legacy IGT for period prior to the second quarter of 2015. Adjusted operating income, adjusted EBITDA, 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.

As a result of the combination of GTECH S.p.A. ("GTECH") and International Game Technology ("legacy IGT"), which was completed on April 7, 2015, a number of items affect the comparability of reported results.  Reported financial information for the full year 2016 includes the results of operations of IGT PLC for the entire period, while reported financial information for the full year 2015 period includes IGT PLC for the second, third, and fourth quarters and only GTECH operations in the first quarter. Pro forma figures represent the combined results of both companies.

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.

Reported 2016 results were impacted by the strengthening of the U.S. dollar compared to the euro; the daily average Euro to U.S. dollar foreign exchange rate was 1.08 in the fourth quarter of 2016 compared to 1.10 in the fourth quarter of 2015, and was 1.11 for the full year 2016 period compared to 1.11 in 2015. Constant currency changes for 2016 are calculated using the same foreign exchange rates as the corresponding 2015 period.

Management believes that referring to certain pro forma, constant currency, or adjusted measures is a more useful way to evaluate the Company's underlying performance.

Overview of Consolidated Fourth Quarter Results

Consolidated revenue declined 3% to $1,321 million from $1,365 million in the fourth quarter of 2015, which included approximately $20 million of revenue benefits related to the catch-up reclassification of Stability Law taxes on gaming machines in Italy. Lower revenue reflects global lottery growth that was more than offset by lower gaming service revenue, mostly at DoubleDown.

Global lottery same-store revenue, excluding Italy, increased 2% during the fourth quarter while Italy lottery wagers increased 4%. Product sales rose 1% in the quarter on higher North America systems sales and the contribution from a recent intellectual property settlement. The Company shipped 10,320 gaming machines worldwide during the fourth quarter.

Adjusted EBITDA of $422 million was 6% below the fourth quarter of 2015. Operating income was $138 million compared to $132 million in the fourth quarter of 2015, and adjusted operating income was $281 million compared to $293 million in the prior year. The declines in adjusted EBITDA and adjusted operating income primarily reflect an incremental $14 million of Italy value-added tax ("VAT") credit in the prior-year period, in addition to higher selling, general and administrative expenses.

Interest expense was $116 million compared to $119 million in the prior-year period.

Net income attributable to IGT was $233 million in the fourth quarter of 2016, reflecting the impact of $196 million in primarily non-cash foreign exchange gains and the favorable settlement of discrete tax items. On an adjusted basis, net income attributable to IGT was $179 million. The Company reported net income per diluted share of $1.15 and earned $0.88 per diluted share on an adjusted basis.

Cash from operations was $985 million in the full-year period and capital expenditures were $557 million. The Company made two of three upfront installment payments for the new Lotto concession in Italy during the year. 

Cash and cash equivalents were $294 million as of December 31, 2016, compared to $627 million as of December 31, 2015. Net debt was $7,569 million as of December 31, 2016.

Operating Segment Review

North America Gaming & Interactive   
Revenue for the North America Gaming & Interactive segment was $368 million compared to $378 million in the fourth quarter of 2015.

Gaming service revenue was $230 million compared to $263 million in the prior-year period, primarily driven by fewer daily active users ("DAU") at DoubleDown and a year-on-year decrease in the installed base.

Product sales rose 20% to $138 million in the quarter primarily driven by large systems sales; the contribution from a recent intellectual property settlement; and, as previously communicated, revenue associated with certain gaming machines shipped in the third quarter of 2016. The segment shipped 5,419 units in the period compared to 6,597 units in the fourth quarter of 2015, which included an additional 1,100 Canada video lottery terminals ("VLT").

Operating income for North America Gaming & Interactive was $101 million compared to $106 million in the fourth quarter of 2015. The decline is primarily due to lower DoubleDown and gaming service revenue, partially offset by higher product sales.

North America Lottery
North America Lottery revenue was $284 million, up 6% from the fourth quarter of 2015.

Service revenue of $267 million increased 5%. Lottery same-store revenue rose 1.5%, supported by the third consecutive year of strong instant tickets performance. Multi-state Jackpot game performance was modestly below the prior year's level after several quarters of above-average results. 

Product sales were $17 million, compared to $14 million in the fourth quarter of 2015, primarily due to increased instant ticket printing activity.

Operating income for North America Lottery increased 54% to $65 million compared to the fourth quarter of 2015. Higher revenues, in addition to lower depreciation and amortization expense associated with recent lottery contract extensions, contributed to the substantial profit growth.

International 
International revenue was $220 million compared to $265 million in the fourth quarter of 2015. On a constant currency basis, International revenue declined 15%.

International lottery same-store revenue increased 2.6% on broad-based geographical strength that was tempered by weakness in the United Kingdom. 

International gaming service revenue rose 6% on a constant currency basis, primarily due to growth in the commercial gaming installed base, and despite approximately 600 units that were converted to product sales. The installed base grew in Eastern Europe, South Africa and Mexico.

Product sales were below the prior-year period, mostly on lottery product sales, which reflect the natural variability of that business. Gaming terminal sales declined slightly on lower unit volume. Systems sales increased double-digits year-over-year. The segment shipped a total of 4,901 gaming machines compared to 4,965 last year.

International operating income was $44 million compared to $55 million in the fourth quarter of 2015, reflecting lower revenue.

Italy
Italy revenue was $449 million compared to $455 million in the fourth quarter of 2015. At constant currency, revenue was in line with the prior year. The fourth quarter comparisons are impacted by an approximately $20 million catch-up Stability Law reclassification booked in the prior-year period, in addition to one month of amortization of the new Lotto upfront concession fee.

Total Lotto wagers in the quarter were €2,141 million, 15% greater than the €1,855 million achieved in the prior-year period. Strong Lotto performance was a result of significant late number activity and high single-digit growth in 10eLotto. Excluding late numbers, Lotto wagers increased 2% over the same period last year. Instant-ticket wagers were €2,289 million versus €2,391 million in the fourth quarter of 2015.

Machine gaming service revenue was down given the prior-year Stability Law reclassification. Sports betting wagers increased 6% on growth in live wagers.  

Operating income for the Italy segment was $130 million compared to $132 million in the fourth quarter of 2015. At constant currency, operating income was stable as strong Lotto growth compensated for the VAT credit in the prior year. 

Overview of Consolidated Full Year 2016 Results

Reported consolidated revenue was $5,154 million compared to $4,689 million in 2015. On a pro forma, constant currency basis, consolidated revenue increased 2%, primarily reflecting growth in lottery service revenue that was partially offset by lower DoubleDown performance and gaming product sales.

During the year, the Company shipped 33,147 gaming machines worldwide and global lottery same-store revenue, excluding Italy, increased 8%. Italy lottery wagers rose 6% in 2016.

On a reported basis, adjusted EBITDA of $1,755 million was 9% greater than the 2015 level. On a pro forma, constant currency basis, adjusted EBITDA increased 3%.     

Reported operating income was $660 million compared to $540 million in 2015. On a pro forma, constant currency basis, adjusted operating income was 9% greater than 2015, primarily reflecting higher lottery service revenue that was partially offset by lower lottery product sales.

Interest expense was $469 million compared to $458 million in the prior-year period.

Net income attributable to IGT was $211 million in 2016. On an adjusted basis, net income was $472 million. The Company reported earnings per diluted share of $1.05 and earned $2.33 per diluted share on an adjusted basis in 2016.

Other Developments

In a separate news release issued today, the Company announced that Heather J. McGregor was appointed as an independent director to its board of directors.

Additionally, the Company's board of directors has declared a quarterly cash dividend of $0.20 per ordinary share. The dividend is payable on April 6, 2017 to all shareholders of record as of the close of business on March 23, 2017.

Outlook

The Company currently expects to achieve adjusted EBITDA of $1,680-$1,760 million for the full year 2017 period, as operational growth compensates for the Powerball and late numbers benefits recorded in 2016, in addition to new Lotto concession impacts in 2017. 

Maintenance capital expenditures are expected to be $525-$575 million, including approximately $100 million related to the timing of the new Florida Lottery contract. Growth capital expenditures will be approximately $100 million.

The Italy Lotto renewal will require an outlay of approximately $320 million ($195 million net, after minority partner contribution), relating to the final upfront concession payment and associated network and infrastructure upgrades. Net debt is expected to be $7,600-$7,800 million at the end of 2017.

The Company's outlook assumes an average euro/dollar exchange rate of 1.10.

Conference Call and Webcast

Today, at 8:00 a.m. EST / 1:00 p.m. GMT / 2:00 p.m. CET, management will host a conference call to present the fourth quarter and full year 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 3427 1904 for participants in the United Kingdom and +1-646-254-3362 for listeners outside the United Kingdom. The conference ID/confirmation code is 6623346. A telephone replay of the call will be available for one week at +44 (0) 20 3427 0598 or +1-347-366-9565 using the conference ID/confirmation code 6623346.

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 U.K. 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 news release 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 news release 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

Condensed Consolidated Statements of Operations

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

Unaudited

         
   

 For the three months ended  

   

 December 31, 

   

2016

 

2015

         

Service revenue

 

1,061,669

 

1,109,029

Product sales

 

259,547

 

255,928

Total revenue

 

1,321,216

 

1,364,957

         

Cost of services

 

641,649

 

674,302

Cost of sales

 

179,240

 

180,021

Selling, general and administrative

 

236,547

 

242,997

Research and development

 

87,182

 

84,552

Restructuring expense

 

6,420

 

35,326

Impairment loss

 

31,162

 

12,497

Transaction expense, net

 

1,030

 

3,701

Total operating expenses

 

1,183,230

 

1,233,396

         

Operating income

 

137,986

 

131,561

         

Interest income

 

2,553

 

4,765

Other income (expense), net

 

23,359

 

(2,074)

Foreign exchange gain, net

 

195,587

 

91,105

Interest expense

 

(115,520)

 

(119,334)

Total non-operating income (expenses)

 

105,979

 

(25,538)

         

Income before provision for income taxes

 

243,965

 

106,023

         

(Benefit from) provision for income taxes

 

(5,387)

 

22,990

         

Net income

 

249,352

 

83,033

         

Less: Net income attributable to non-controlling interests

 

16,034

 

9,533

         

Net income attributable to IGT PLC

 

233,318

 

73,500

         
         

Net income attributable to IGT PLC per common share - basic

 

1.15

 

0.37

Net income attributable to IGT PLC per common share - diluted

1.15

 

0.37

         

Weighted-average shares - basic

 

202,324

 

199,862

Weighted-average shares - diluted

 

203,146

 

200,731

 

International Game Technology PLC

Condensed Consolidated Statements of Operations

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

Unaudited

         
   

 For the year ended 

   

 December 31, 

   

2016

 

2015

         

Service revenue

 

4,375,586

 

3,977,693

Product sales

 

778,310

 

711,363

Total revenue

 

5,153,896

 

4,689,056

         

Cost of services

 

2,553,479

 

2,417,315

Cost of sales

 

582,358

 

520,343

Selling, general and administrative

 

945,824

 

795,252

Research and development

 

343,531

 

277,401

Restructuring expense

 

27,934

 

76,896

Impairment loss

 

37,744

 

12,497

Transaction expense, net

 

2,590

 

49,396

Total operating expenses

 

4,493,460

 

4,149,100

         

Operating income

 

660,436

 

539,956

         

Interest income

 

12,840

 

17,681

Other income (expense), net

 

18,365

 

(122,295)

Foreign exchange gain, net

 

101,040

 

5,611

Interest expense

 

(469,268)

 

(457,984)

Total non-operating expenses

 

(337,023)

 

(556,987)

         

Income (loss) before provision for income taxes

 

323,413

 

(17,031)

         

Provision for income taxes

 

59,206

 

38,896

         

Net income (loss)

 

264,207

 

(55,927)

         

Less: Net income attributable to non-controlling interests

 

52,870

 

19,647

         

Net income (loss) attributable to IGT PLC

 

211,337

 

(75,574)

         
         

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

 

1.05

 

(0.39)

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

1.05

 

(0.39)

         

Weighted-average shares - basic

 

201,511

 

192,398

Weighted-average shares - diluted

 

202,214

 

192,398

 

International Game Technology PLC

Condensed Consolidated Balance Sheets

($ thousands)

Unaudited

       
 

 December 31, 

 

2016

 

2015

ASSETS

     

Current assets:

     

Cash and cash equivalents

294,094

 

627,484

Restricted cash and investments

247,222

 

169,101

Trade and other receivables, net

947,237

 

959,592

Inventories

347,494

 

269,982

Other current assets

424,727

 

423,701

Income taxes receivable

28,792

 

35,514

Total current assets

2,289,566

 

2,485,374

       

Systems, equipment and other assets related to contracts, net

1,199,674

 

1,127,518

Property, plant and equipment, net

357,841

 

349,677

Goodwill, net

6,810,012

 

6,830,499

Intangible assets, net

2,874,031

 

3,335,633

Other non-current assets

1,497,662

 

937,917

Deferred income taxes

31,376

 

48,074

Total non-current assets

12,770,596

 

12,629,318

       

  Total Assets

15,060,162

 

15,114,692

       

LIABILITIES AND SHAREHOLDERS' EQUITY

     

Current liabilities:

     

Accounts payable

1,216,079

 

1,057,860

Other current liabilities

1,097,045

 

922,586

Current portion of long-term debt

77

 

160

Income taxes payable

28,590

 

30,020

Total current liabilities

2,341,791

 

2,010,626

       

Long-term debt, less current portion

7,863,085

 

8,334,013

Deferred income taxes

761,924

 

941,418

Other non-current liabilities

444,556

 

462,493

Total non-current liabilities

9,069,565

 

9,737,924

       

Total Liabilities

11,411,356

 

11,748,550

       

Commitments and contingencies

-

 

-

       

Shareholders' and mezzanine equity

3,648,806

 

3,366,142

       

Total liabilities and shareholders' equity

15,060,162

 

15,114,692

 

International Game Technology PLC

Consolidated Statements of Cash Flows

($ thousands)

Unaudited

         
         
     
   

  For the year ended December 31, 

   

2016

 

2015

Operating activities

       

Net income (loss)

 

264,207

 

(55,927)

Adjustments for:

       

Amortization 

 

492,021

 

410,264

Depreciation 

 

390,448

 

369,564

Amortization of upfront payments to customers

 

116,980

 

107,812

Impairment loss

 

37,744

 

12,497

Stock-based compensation expense

 

26,346

 

36,067

Debt issuance cost amortization

 

18,347

 

40,366

Foreign exchange gain, net

 

(101,040)

 

(5,611)

Loss on extinguishment of debt

 

-

 

73,806

Other, net

 

(142)

 

50,626

Cash flows before changes in operating assets and liabilities

 

1,244,911

 

1,039,464

Changes in operating assets and liabilities:

       

Trade and other receivables

 

(23,758)

 

83,218

Inventories

 

(61,026)

 

72

Accounts payable

 

(27,123)

 

(53,762)

Other assets and liabilities

 

(147,661)

 

(282,995)

Net cash flows from operating activities

 

985,343

 

785,997

         

Investing activities

       

Upfront payments to customers

 

(665,260)

 

-

Capital expenditures

 

(557,238)

 

(402,634)

Purchases of jackpot annuity investments

 

(2,596)

 

(6,799)

Proceeds from jackpot annuity investments

 

16,565

 

36,215

Proceeds from sale of assets

 

185,798

 

230,587

Acquisition of IGT, net of cash acquired

 

-

 

(3,241,415)

Other

 

2,735

 

22,523

Net cash flows used in investing activities

 

(1,019,996)

 

(3,361,523)

         

Financing activities

       

Principal payments on long-term debt

 

(357,513)

 

(2,714,867)

Dividends paid 

 

(161,179)

 

(209,589)

Return of capital - non-controlling interest

 

(35,407)

 

(30,568)

Dividends paid - non-controlling interest 

 

(32,717)

 

(29,156)

Debt issuance costs paid

 

(10,825)

 

(84,859)

Payments for accelerated stock awards

 

(3,489)

 

(14,867)

Proceeds from stock options

 

12,699

 

10,672

Net receipts from (payments of) financial liabilities

 

30,595

 

(21,539)

Capital increase - non-controlling interest

 

256,455

 

9,049

Payments in connection with note consents

 

-

 

(29,022)

Payments on bridge facility

 

-

 

(51,409)

Payments in connection with the early extinguishment of debt

 

-

 

(79,526)

Payments to withdrawing shareholders

 

-

 

(407,759)

Proceeds from interest rate swaps

 

-

 

67,773

Proceeds from issuance of long-term debt

 

-

 

6,521,991

Other

 

(10,758)

 

(16,158)

Net cash flows (used in) provided by financing activities

 

(312,139)

 

2,920,166

         

Net (decrease) increase in cash and cash equivalents

 

(346,792)

 

344,640

Effect of exchange rate changes on cash

 

13,402

 

(34,262)

Cash and cash equivalents at the beginning of the period

 

627,484

 

317,106

Cash and cash equivalents at the end of the period

 

294,094

 

627,484

         
         

Supplemental Cash Flow Information:

       

Interest paid

 

(450,655)

 

(365,479)

Income taxes paid

 

(183,278)

 

(199,195)

 

International Game Technology PLC

Net Debt

($ thousands)

       
       
 

December 31,

 

2016

 

2015

Long-term debt, less current portion

     

6.250% Senior Secured Notes due 2022

1,472,150

 

1,468,875

6.500% Senior Secured Notes due 2025

1,085,537

 

1,084,249

4.750% Senior Secured Notes due 2023

884,917

 

912,418

4.125% Senior Secured Notes due 2020

730,465

 

752,212

5.625% Senior Secured Notes due 2020

593,954

 

592,245

7.500% Senior Secured Notes due 2019

521,894

 

530,009

6.625% Senior Secured Notes due 2018

521,556

 

533,915

4.750% Senior Secured Notes due 2020

509,050

 

520,649

5.500% Senior Secured Notes due 2020

126,294

 

126,833

5.350% Senior Secured Notes due 2023

61,187

 

61,303

Senior Secured Notes

6,507,004

 

6,582,708

       

Term Loan Facilities due 2019

839,552

 

866,785

Revolving Credit Facilities due 2021

516,529

 

834,968

Capital Securities

-

 

49,472

Other

-

 

80

Long-term debt, less current portion

7,863,085

 

8,334,013

       

Current portion of long-term debt 

77

 

160

Total debt

7,863,162

 

8,334,173

       

Cash and cash equivalents

294,094

 

627,484

       

Net debt

7,569,068

 

7,706,689

 

International Game Technology PLC

Adjusted EBITDA and Free Cash Flow

Reconciliations of Non-GAAP Financial Measures

($ thousands)

         
         
   

For the three months ended

   

December 31,

   

2016

 

2015

         

Net income

 

249,352

 

83,033

(Benefit from) provision for income taxes

 

(5,387)

 

22,990

Non-operating (income) expenses

 

(105,979)

 

25,538

Amortization

 

114,858

 

124,000

Depreciation 

 

97,164

 

109,888

Amortization of upfront payments to customers

 

31,820

 

26,634

Impairment loss

 

31,162

 

12,497

Restructuring expense

 

6,420

 

35,326

Stock-based compensation expense

 

1,844

 

3,335

Transaction expense, net

 

1,030

 

3,701

Non-cash purchase accounting (excluding D&A)

 

(126)

 

1,865

Adjusted EBITDA

 

422,158

 

448,807

         
         
         

Cash flows from operating activities

 

364,346

 

315,003

Capital expenditures

 

(185,741)

 

(113,891)

Upfront payments to customers

 

(274,870)

 

-

Free Cash Flow

 

(96,265)

 

201,112

 

International Game Technology PLC

Adjusted EBITDA and Free Cash Flow

Reconciliations of Non-GAAP Financial Measures

($ thousands)

                 
                 
   

For the year ended

   

December 31, 2016

 

December 31, 2015

       

As Reported

 

Legacy IGT

 

Pro Forma

                 

Net income (loss)

 

264,207

 

(55,927)

 

(13,085)

 

(69,012)

Provision for (benefit from) income taxes

 

59,206

 

38,896

 

(4,126)

 

34,770

Non-operating expenses

 

337,023

 

556,987

 

10,057

 

567,044

Amortization

 

492,021

 

410,264

 

6,107

 

416,371

Depreciation 

 

390,448

 

369,564

 

28,960

 

398,524

Amortization of upfront payments to customers

 

116,980

 

107,812

 

3,556

 

111,368

Impairment loss

 

37,744

 

12,497

 

6,100

 

18,597

Restructuring expense

 

27,934

 

76,896

 

-

 

76,896

Stock-based compensation expense

 

26,346

 

36,067

 

5,951

 

42,018

Transaction expense, net

 

2,590

 

34,529

 

18,782

 

53,311

Non-cash purchase accounting (excluding D&A)

 

795

 

23,099

 

-

 

23,099

Other

 

-

 

-

 

30,956

 

30,956

Adjusted EBITDA

 

1,755,294

 

1,610,684

 

93,258

 

1,703,942

                 
                 
                 

Cash flows from operating activities

 

985,343

 

785,997

 

82,698

 

868,695

Capital expenditures

 

(557,238)

 

(402,634)

 

(26,096)

 

(428,730)

Upfront payments to customers

 

(665,260)

 

-

 

-

 

-

Free Cash Flow

 

(237,155)

 

383,363

 

56,602

 

439,965

 

 International Game Technology PLC 

 Condensed Consolidated Statement of Operations 

 Reconciliation of Non-GAAP Financial Measures 

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

                         
                         
       

Adjustments

   
   

Q4 2016

         

Impairment/

 

Transaction

 

Q4 2016

   

As

 

Purchase

 

Foreign

 

Restructuring

 

(Income)

 

As

   

Reported

 

Accounting

 

Exchange

 

Expense

 

Expense

 

Adjusted

                         

 Total revenue 

 

1,321,216

 

244

 

-

 

-

 

-

 

1,321,460

                         

 Cost of services 

 

641,649

 

(44,186)

 

-

 

-

 

-

 

597,463

 Cost of sales 

 

179,240

 

(29,845)

 

-

 

-

 

-

 

149,395

 Selling, general and administrative 

 

236,547

 

(29,468)

 

-

 

-

 

-

 

207,079

 Research and development 

 

87,182

 

(277)

 

-

 

-

 

-

 

86,905

 Restructuring expense 

 

6,420

 

-

 

-

 

(6,420)

 

-

 

-

 Impairment loss 

 

31,162

 

(30,000)

 

-

 

(1,162)

 

-

 

-

 Transaction expense, net 

 

1,030

 

-

 

-

 

-

 

(1,030)

 

-

 Total operating expenses 

 

1,183,230

 

(133,776)

 

-

 

(7,582)

 

(1,030)

 

1,040,842

                         

 Operating income 

 

137,986

 

134,020

 

-

 

7,582

 

1,030

 

280,618

                         

 Foreign exchange gain, net 

 

195,587

 

-

 

(195,587)

 

-

 

-

 

-

 Other income, net 

 

23,359

 

11,672

 

-

 

-

 

-

 

35,031

 Interest expense, net 

 

(112,967)

 

2,084

 

-

 

-

 

-

 

(110,883)

 Total non-operating income (expenses) 

 

105,979

 

13,756

 

(195,587)

 

-

 

-

 

(75,852)

                         

 Income before provision for income taxes 

 

243,965

 

147,776

 

(195,587)

 

7,582

 

1,030

 

204,766

                         

 (Benefit from) provision for income taxes (a) 

 

(5,387)

 

51,662

 

(50,323)

 

13,230

 

356

 

9,538

                         

 Net income 

 

249,352

 

96,114

 

(145,264)

 

(5,648)

 

674

 

195,228

                         

 Less: Net income attributable to non-controlling interests 

 

16,034

 

26

 

-

 

-

 

-

 

16,060

                         

 Net income attributable to IGT PLC 

 

233,318

 

96,088

 

(145,264)

 

(5,648)

 

674

 

179,168

                         

 Net income per common share - diluted 

 

1.15

                 

0.88

 Weighted-average shares - diluted 

 

203,146

                 

203,146

                         
                         

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

 

International Game Technology PLC

Condensed Consolidated Statement of Operations

Reconciliation of Non-GAAP Financial Measures

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

                           
                           
       

Adjustments

     
   

Q4 2015

         

Impairment/

 

Transaction

 

Q4 2015

 
   

As

 

Purchase

 

Foreign

 

Restructuring

 

and Refinancing

 

As

 
   

Reported

 

Accounting

 

Exchange

 

Expense

 

Expense

 

Adjusted

 
                           

 Total revenue 

 

1,364,957

 

1,622

 

-

 

-

 

-

 

1,366,579

 
                           

 Cost of services 

 

674,302

 

(44,064)

 

-

 

-

 

-

 

630,238

 

 Cost of sales 

 

180,021

 

(29,897)

 

-

 

-

 

-

 

150,124

 

 Selling, general and administrative 

 

242,997

 

(34,295)

 

-

 

-

 

-

 

208,702

 

 Research and development 

 

84,552

 

(466)

 

-

 

-

 

-

 

84,086

 

 Restructuring expense 

 

35,326

 

-

 

-

 

(35,326)

 

-

 

-

 

 Impairment loss 

 

12,497

 

-

 

-

 

(12,497)

 

-

 

-

 

 Transaction expense, net 

 

3,701

 

-

 

-

 

-

 

(3,701)

 

-

 

 Total operating expenses 

 

1,233,396

 

(108,722)

 

-

 

(47,823)

 

(3,701)

 

1,073,150

 
                           

 Operating income 

 

131,561

 

110,344

 

-

 

47,823

 

3,701

 

293,429

 
                           

 Interest expense, net 

 

(114,569)

 

3,531

 

-

 

-

 

-

 

(111,038)

 

 Other (expense) income, net 

 

(2,074)

 

13,540

 

-

 

-

 

-

 

11,466

 

 Foreign exchange gain, net 

 

91,105

 

-

 

(91,105)

 

-

 

-

 

-

 

 Total non-operating expenses 

 

(25,538)

 

17,071

 

(91,105)

 

-

 

-

 

(99,572)

 
                           

 Income before provision for income taxes 

 

106,023

 

127,415

 

(91,105)

 

47,823

 

3,701

 

193,857

 
                           

 Provision for income taxes (a) 

 

22,990

 

40,283

 

(22,895)

 

16,165

 

414

 

56,957

 
                           

 Net income 

 

83,033

 

87,132

 

(68,210)

 

31,658

 

3,287

 

136,900

 
                           

 Less: Net income attributable to non-controlling interests 

 

9,533

 

25

 

-

 

-

 

-

 

9,558

 
                           

 Net income attributable to IGT PLC 

 

73,500

 

87,107

 

(68,210)

 

31,658

 

3,287

 

127,342

 
                           

 Net income per common share - diluted 

 

0.37

                 

0.63

 

 Weighted-average shares - diluted 

 

200,731

                 

200,731

 
                           
                           
                           

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

 

 International Game Technology PLC 

 Condensed Consolidated Statement of Operations 

 Reconciliation of Non-GAAP Financial Measures 

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

                         
                         
   

 Year to date 

 

Adjustments

 

 Year to date 

   

December 2016

         

Impairment/

     

December 2016

   

As

 

Purchase

 

Foreign

 

Restructuring

 

Transaction

 

As

   

Reported

 

Accounting

 

Exchange

 

Expense

 

Expense

 

Adjusted

                         

 Total revenue 

 

5,153,896

 

1,576

 

-

 

-

 

-

 

5,155,472

                         

 Cost of services 

 

2,553,479

 

(181,552)

 

-

 

-

 

-

 

2,371,927

 Cost of sales 

 

582,358

 

(118,936)

 

-

 

-

 

-

 

463,422

 Selling, general and administrative 

 

945,824

 

(134,325)

 

-

 

-

 

-

 

811,499

 Research and development 

 

343,531

 

(1,736)

 

-

 

-

 

-

 

341,795

 Restructuring expense 

 

27,934

 

-

 

-

 

(27,934)

 

-

 

-

 Impairment loss 

 

37,744

 

(30,000)

 

-

 

(7,744)

 

-

 

-

 Transaction expense, net 

 

2,590

 

-

 

-

 

-

 

(2,590)

 

-

 Total operating expenses 

 

4,493,460

 

(466,549)

 

-

 

(35,678)

 

(2,590)

 

3,988,643

                         

 Operating income 

 

660,436

 

468,125

 

-

 

35,678

 

2,590

 

1,166,829

                         

 Foreign exchange gain, net 

 

101,040

 

-

 

(101,040)

 

-

 

-

 

-

 Other income, net 

 

18,365

 

15,553

 

-

 

-

 

-

 

33,918

 Interest expense, net 

 

(456,428)

 

8,231

 

-

 

-

 

-

 

(448,197)

 Total non-operating expenses 

 

(337,023)

 

23,784

 

(101,040)

 

-

 

-

 

(414,279)

                         

 Income before provision for income taxes 

 

323,413

 

491,909

 

(101,040)

 

35,678

 

2,590

 

752,550

                         

 Provision for income taxes (a) 

 

59,206

 

174,000

 

(26,892)

 

20,948

 

658

 

227,920

                         

 Net income 

 

264,207

 

317,909

 

(74,148)

 

14,730

 

1,932

 

524,630

                         

 Less: Net income attributable to non-controlling interests 

 

52,870

 

102

 

-

 

-

 

-

 

52,972

                         

 Net income attributable to IGT PLC 

 

211,337

 

317,807

 

(74,148)

 

14,730

 

1,932

 

471,658

                         

 Net income per common share - diluted 

 

1.05

                 

2.33

 Weighted-average shares - diluted 

 

202,214

                 

202,214

                         
                         

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

 

 International Game Technology PLC 

 Condensed Consolidated Statement of Operations 

 Reconciliation of Non-GAAP Financial Measures 

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

                                 
                                 
   

 Year to date 

 

Adjustments

 

 Year to date 

     

 Year to date 

   

December 2015

         

Impairment/

 

Transaction

 

December 2015

     

December 2015

   

As

 

Purchase

 

Foreign

 

Restructuring

 

and Refinancing

 

As

 

Pro Forma

 

Pro forma

   

Reported

 

Accounting

 

Exchange

 

Expense

 

Expense

 

Adjusted

 

Adjustments

 

and Adjusted

                                 

 Total revenue 

 

4,689,056

 

15,541

 

-

 

-

 

-

 

4,704,597

 

399,387

 

5,103,984

                                 

 Cost of services 

 

2,417,315

 

(148,750)

 

-

 

-

 

-

 

2,268,565

 

113,306

 

2,381,871

 Cost of sales 

 

520,343

 

(96,661)

 

-

 

-

 

-

 

423,682

 

63,355

 

487,037

 Selling, general and administrative 

 

795,252

 

(101,319)

 

-

 

-

 

-

 

693,933

 

134,166

 

828,099

 Research and development 

 

277,401

 

(2,159)

 

-

 

-

 

-

 

275,242

 

62,760

 

338,002

 Restructuring expense 

 

76,896

 

-

 

-

 

(76,896)

 

-

 

-

 

-

 

-

 Impairment loss 

 

12,497

 

-

 

-

 

(12,497)

 

-

 

-

 

-

 

-

 Transaction expense, net 

 

49,396

 

-

 

-

 

-

 

(49,396)

 

-

 

-

 

-

 Total operating expenses 

 

4,149,100

 

(348,889)

 

-

 

(89,393)

 

(49,396)

 

3,661,422

 

373,587

 

4,035,009

                                 

 Operating income 

 

539,956

 

364,430

 

-

 

89,393

 

49,396

 

1,043,175

 

25,800

 

1,068,975

                                 

 Interest expense, net 

 

(440,303)

 

3,530

 

-

 

-

 

-

 

(436,773)

       

 Other (expense) income, net 

 

(122,295)

 

19,581

 

-

 

-

 

117,877

 

15,163

       

 Foreign exchange gain, net 

 

5,611

 

-

 

(5,611)

 

-

 

-

 

-

       

 Total non-operating expenses 

 

(556,987)

 

23,111

 

(5,611)

 

-

 

117,877

 

(421,610)

       
                                 

 (Loss) income before provision for income taxes 

 

(17,031)

 

387,541

 

(5,611)

 

89,393

 

167,273

 

621,565

       
                                 

 Provision for income taxes (a) 

 

38,896

 

132,298

 

(3,127)

 

29,165

 

41,529

 

238,761

       
                                 

 Net (loss) income 

 

(55,927)

 

255,243

 

(2,484)

 

60,228

 

125,744

 

382,804

       
                                 

 Less: Net income attributable to non-controlling interests 

 

19,647

 

102

 

-

 

-

 

-

 

19,749

       
                                 

 Net (loss) income attributable to IGT PLC 

 

(75,574)

 

255,141

 

(2,484)

 

60,228

 

125,744

 

363,055

       
                                 

 Net (loss) income per common share - diluted 

 

(0.39)

                 

1.88

       

 Weighted-average shares - diluted 

 

192,398

                 

193,559

       
                                 
                                 
                                 

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

 

International Game Technology PLC Segment Performance (Pro forma)

Revenue Detail 

($ millions)

                           
                           
       

INTERNATIONAL GAME TECHNOLOGY PLC

   

Quarter Change

YTD Change

       

2015

2016

   

Percentage

Constant FX

Percentage

Constant FX

       

Q4 

YTD

Q4 

YTD

   

Q4

Q4

YTD

YTD

Gaming

 

Total Revenue

762

2,725

730

2,667

   

-4.3%

-3.3%

-2.2%

-1.4%

                         
 

Gaming Services

547

2,036

492

1,976

   

-9.9%

-8.5%

-3.0%

-1.9%

   

Terminal 

359

1,343

325

1,282

   

-9.6%

-8.6%

-4.6%

-3.7%

   

Social (DDI)

84

317

61

279

   

-27.6%

-27.4%

-12.0%

-12.0%

   

Other

104

375

107

415

   

3.1%

6.8%

10.5%

13.1%

                         
 

Product Sales

216

690

237

691

   

10.0%

9.9%

0.2%

0.2%

   

Terminal 

154

482

157

449

   

1.9%

1.9%

-6.7%

-6.8%

   

Other

62

208

81

242

   

30.0%

29.6%

16.4%

16.5%

                           

Lottery

 

Total Revenue

521

2,046

514

2,170

   

-1.3%

-0.8%

6.1%

6.6%

                         
 

Lottery Services

484

1,930

494

2,086

   

1.9%

2.5%

8.0%

8.6%

   

FM/Concessions

430

1,717

444

1,829

   

3.1%

4.5%

6.5%

7.3%

   

LMA

35

128