Slot machine giant International Game Technology tried to lessen the damage from a planned $77 million in noncash charges by revealing the decision Wednesday, three weeks before it announces its fourth-quarter earnings.
The move seemed to work. Wall Street downplayed any harm the charges would do to the company, and investors reacted positively, sending shares of IGT to $22.22, up 62 cents, or 2.87 percent on the New York Stock Exchange.
The Reno-based company said in a statement that the charges came following an assessment of its 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 noncash 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 noncash 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 expects 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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