IGT profits fall in first quarter

LAS VEGAS, Nevada -- International Game Technology left the investment community disappointed with the company's first quarter results Tuesday, but the slot machine giant's chief executive tried to calm any worries during an early morning conference call with analysts.

IGT CEO Patti Hart told analysts that fewer new casino openings in North America last year and limited activity in the expansion market cut into the company's overall revenues and profits. However, Hart said the company remained on track to meet its fiscal year marketing objective.

"As anticipated, our North American product sales are off to a slow start in what is historically our softest seasonal quarter," Hart said. "We expect to gain momentum throughout the year given the planned increase in new openings and a more active replacement market."

IGT, which has corporate offices in Las Vegas with its manufacturing headquarters in Reno, said its net income was $50 million, or 17 cents per share, in the quarter that ended Dec. 31. In the same quarter a year ago, the company reported net income of $73 million, or 25 cents per share.

In a statement, IGT said certain discrete tax benefits and an investment gain helped the 2011 first quarter.

Total revenues in the 2012 first quarter were $446 million, a decline of 1 percent, compared with $451 million for the same quarter last year.

Despite sagging sales, Hart said the company generated $100 million in operating income.

"Our international business and gaming operations business continue to show strength and our cost controls remain tight," Hart said.

Many of the questions from analysts concerned the company's recently announced $500 million acquisition of Double Down Interactive, an online social gaming company that developed Facebook's Double Down casino.

Hart told analysts the purchase, which is expected to close in the spring, doesn't take away from the company's core business, which is game development.

"We view the Double Down transaction as one more distribution channel for our content, which actually creates more (research and development) efficiency for our (slot machine) business because we're able to spread the (R&D) across more distribution channels," Hart said. "It connects to our core business.'

During the first quarter, IGT said its revenues from gaming operations -- slot machines where the company shares revenues with casino operators -- increased 5 percent to $265 million.

However, revenue from direct slot machine sales to casinos fell 9 percent, to $181 million.

Analysts called the earnings announcement "soft," with net income below projections of 22 cents per share.

"The backbone of the company, gaming operations was a bright spot in the results," Macquarie Securities gaming analyst Chad Beynon told investors. He noted that IGT's installed base of revenue-sharing slot machines grew to 55,600 games, thanks in part to the opening of Resorts World New York.

Deutsche Bank gaming analyst Carlo Santarelli suspects other slot machine manufacturers may have earnings reports that mirror IGT's issues in the quarter.

"Net-net, we find the quarter to be a tale of two segments, with gaming operations performing largely in line with our forecasts and product sales showing considerable weakness versus expectations," Santarelli said.

Shares of IGT fell 26 cents, or 1.61 percent, Tuesday to close at $15.87 on the New York Stock Exchange.

IGT announced the results in the early morning hours because company representatives were in London for the ICE gaming show.