Slot machine giant International Game Technology tried to lessen the impact of planned $77 million in non-cash charges by revealing the decision Wednesday, three weeks before the Reno-based company announces its fourth-quarter earnings.
The move seemingly worked. Wall Street downplayed any impact the charges would have on the company’s stock price and investors reacted positively, sending shares of IGT to $22.22, up 62 cents or 2.87 percent on the New York Stock Exchange.
In a statement, IGT said the charges came following an assessment of the company’s long-term strategic goals, part of an overall examination of the slot machine maker by new Chief Executive Officer Patti Hart, who took over in April.
“(IGT) has completed a review of several of its strategic investments and partnerships,” the company said. Oppenheimer gaming analyst David Katz said the charges, which are expected to amount to about 26 cents per share, were in line with expectations.
“Although these are non-cash charges and will not alter our operating earnings estimates, they support our negative view of the capital decisions of prior management,” Katz told investors. “We believe there could be further charges in future quarters, although we do not expect these charges to have a meaningful impact on the stock.”
IGT plans to announce the company’s fourth-quarter and fiscal year earnings on Nov. 5, along with non cash charges that will total about $77 million.
The charges included $78 million related to the lower carrying value of its investment in Walker Digital Gaming. IGT reworked its relationship with Walker in August.
The company also anticipates a charge of about $13 million related to a decline in the value of its investment in Las Vegas Gaming International.
The charges will give IGT additional tax provisions of $15 million.
IGT said it doesn’t expect the charges to affect its ability to comply with debt requirements.
Macquarie Securities gaming analyst Joel Simkins likened the move to more of a housekeeping task.
“IGT tried to be all things to all people, and previous management likely stretched the company’s resources by entering into businesses or new markets that didn’t add much strategic value,” Simkins told investors. “We like that fact that the company’s new CEO is refocusing the company’s direction and figuring out what IGT does best.”
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