When International Game Technology last week reported recordsetting financial results, the figures showed the leverage that's possible as production runs lengthen.
IGT said the gross margin on its gaming machines rose to 52 percent during the quarter ended Sept.
27, compared with 47 percent a year earlier.
Of the seven percentage point improvement, about three percentage points were attributable to more efficient manufacturing at IGT's plant in Reno, said Maureen Mullarkey, the company's chief financial officer.
That facility in South Meadows produced 27,700 gaming machines in the most recent quarter, a 26 percent improvement over year-earlier figures.
"We're spreading fixed costs over a greater number of machines," said Mullarkey.
And the company projects that the market for replacement machines in the United States will remain strong in its newly dawning fiscal year.Mullarkey said the company expects to sell 60,000 to 65,000 replacement machines domestically in this fiscal year, compared with 58,000 in the fiscal year that just ended.
Total sales in the new fiscal year, however, remain a question.
IGT officials told investors last week that total sales might not reach the 134,800 units sold in most recent year.
The company's high-flying stock slumped for a day on that news, but perked up 24 hours later after voters in Indiana and Maine approved modest expansions of gaming.
The company begins its new fiscal year with 29,000 machines on order the company gets an average of about $8,300 from each machine it sells and 11 of the nation's top casino operators have inked deals with IGT for slotreplacement programs going into 2005 and beyond.
With all the cash it's generating IGT's net was $108 million in its fourth quarter and $390.7 million for the year analysts last week wondered if the company might be scouting an acquisition.
T.J.
Matthews, recently promoted to president and chief executive officer, said the company continually looks at acquisitions that strengthen its position in games, platforms or operating system.
"There are a lot of smallish opportunities in the industry," Matthews said.
In fact, he said, IGT in the past year made a number of purchases, mostly to acquire intellectual property.
The biggest acquisition of the year was the approximately $125 million IGT paid for Acres Gaming, which developed software that helps build loyalty among slot players.
Another use of cash, Matthews reminded analysts, is payment of dividends.
The company this year began paying a quarterly dividend of 7.5 cents a share, later raising the payout to 10 cents a share.
It also repurchased about 8.4 million shares at an average price of $19.13 a share.
At the same time, Matthews noted that the company is days away from closing its $143 million sale of IGT OnLine Entertainment Systems to Scientific Games Corp.
With that sale, he said, "Our sole focus is on being the very best in the slot machine business." The company has about 70 percent of the U.S.
market for gaming machines a dominance that limits its ability to acquire direct competitors without triggering anti-trust provisions.
