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CR78-p24-Interview IGT:SJC-Casino Review 22/3/09 00:55 Page 1
As the world’s major
slot producer, IGT
has perhaps been
hardest hit by the
global recession. It
was forced in
November to lay off
around 700
employees, equating
to just over 10 per
cent of its global
work force of 5,000.
According to CFO
Pat Cavanaugh,
the emphasis in
2009 remains on
making the company
more efficient so it
can rebound as
strongly as possible
once the economic
problems clear and
that could include
another US$100m of
The year ahead for IGT
shapingup in our business and share in income fell to US$ 1.10 per known as MutliHand poker. going through department
INTERNATIONAL GAME TECHNOLOGY the revenue. We’re also out share on revenue of US$ We’ve tried this same by department, identifying
there extending credit lines 342.5m, down from US$ 1.51 concept now in the world of those costs which we can
Despite the challenging eco- to customers to improve our on US$ 508.2 in revenue in video slots and we hope that take out without impacting
nomic recession, Interna- market position. We’re also 2007. this may now be the start of a near term deliverables or our
tional Game Technology looking at strategic acquisi- Whilst accepting that the new franchise.” long term objectives particu-
executives have said that the tions and partnerships last year has been a ‘very Cavanaugh said that larly as it relates to research
company is repositioning although we have to be more challenging year by a number finances had been hit by a and development. We’re just
itself for a strong rebound selective obviously.” of metrics,’ with operating number of external head- making the organisation as a
once the global economy Cavanaugh also suggests income, net income, and winds, which affected both whole more mindful that
returns to normal. that steps could be taken to operating cash flow all off the health of the end con- costs are a very important
It has already made properly scale down R&D in double-digit percentages, sumer and the casino thing. Fortunately, we’ve had
US$100m of savings by order to provide the best Cavanaugh was keen to point owners. Record interest rate the luxury for a number of
streamlining its business and product line today and in the out some positives. declines, meanwhile, directly years of not having to be as
intends to find more areas in future for IGT. “Are we doing Our top line characteris- affected the cost of funding concerned on costs but on
which it can become more too much in R&D?” he asked. tics were generally stable IGT’s mega jackpot busi- brainstorming how we can
efficient without damaging “Are there areas we should and held up remarkably well ness. “We’re really the only grow the business either
its potential for growth in be spending more money, with revenues and gross company in the industry to organically or strategically.
the future. particularly if you look at our profit down just four per be exposed by that,” Now we find ourselves in an
Pat Cavanaugh, chief finan- IGT’s Pat Cavanaugh: game operations business cent, which are testimony to Cavanaugh said. “Funding environment where we
cial officer, told shareholders
We’re laying the groundwork
which accounts for over half the diversification of IGT’s these jackpots involves the really do have to focus on the
at IGT’s annual meeting at its
for improved results and the
efficiency gains made in
of our revenues.” product line and geographic time value of money so inter- cost side of the equation too.
Reno headquarters that the
2009 should yield greater
Whilst this only remains spread. The health of our est rates dramatically effect Whilst we generate very
cutbacks were essential if
upside when the
an avenue that IGT will inves- margins remains good. this. The good news is that strong cash it is not as good
IGT was going to bounce marketplace recovers tigate, Cavanaugh is keen to Market ship share improve- we’re really at the bottom of as it once was.
back when the global slow echo the views of many busi- ments were also seen in the that as there is no more room “We’re doing everything
down does eventually speed not a one off exercise but nessmen in these times, that second half of 2008.” for interest rates to go down that we can to drive revenues
back up. But he also warned more us instilling a new way liquidity is key. He alluded to a 60 per cent so we should see incremen- but also that we properly
that the quest for savings of operating the business. We “Cash is king in this envi- share in many new builds tal improvement. We also saw position the business so that
isn’t over yet. need to ensure that we gen- ronment,” he said. “Credit and improved share in play levels start to deterio- when things start to improve
“During the December erate sufficient returns on markets are closed to a lot of ongoing replacement cycles. rate, really beginning in we can be a much more lean
quarter we implemented the investment in all areas of our borrowers. We have access “In the second half of the December last year, but and efficient organisation,”
first round of these cost company and keep a contin- to $2.5bn line of credit due year we drove our share in becoming very pronounced Cavanaugh continued.
reductions generating ued focus on financial and 12/10 and we also have the replacement environ- in the March quarter with “We’re laying the ground-
approximately $100m in operating efficiency as well $900m convertible bond ment and the good news is a progressive declines work for improved results
annual savings, about 25m a as keeping costs in-line with issue likely to be put 12/09. lot of our new products are throughout the year. By and the efficiency gains
quarter,” he explained. “We’re expected revenue levels.” We’re very focused on working,” he said. “These December when the world made in 2009 should yield
currently in the process of For Cavanaugh, the end making sure we have ade- include technology such as financial crisis hit we saw greater upside when the mar-
identifying additional effi- goal is to achieve 30 per cent quate liquidity. The end goal multi-layer display, which yields drop off dramatically.” ketplace recovers. Despite
ciencies in the business. Ini- operating margins when is to maintain sufficient allows us to do true three Cavanaugh said that any the lingering effects of the
tially this will be in business conditions nor- resources to fund our busi- dimensional imaging allow- further cost cutting exer- credit crunch, we are in posi-
rationalisation in manufac- malise. ness at a reasonable cost and ing us to replicate the look cises would be carried out tion to effectively address
turing costs implemented in “We’re probably going to leverage level. The business and feel of a physical reel slot with the utmost of care. our financing needs. Finan-
early Q3. Including manufac- be challenged to do that in continues to generate very machine on video. MultiWay “We’re trying to preserve cial discipline will guide our
turing reductions, we’re the current environment,” he strong cash flows but they is also off to a very strong the health and integrity of a decisions about investments
working to realise additional conceded. “Our capital are down on previous levels. start. This is a very successful long term business,” he in our business and our
annual savings of $100m of deployment objectives For the 2008 fiscal year game that has been in our explained. “We’ve taken a overall capital deployment
savings by mid 2010. This is remain how best to reinvest ending October 30, IGT’s product stable a long time very methodical approach strategy.”
24 April 2009 • interview
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