Light & Wonder (LNW) Q4 2008 earnings summary

Executive summary

• FY08 revenue rose 7% to $1.119B, while operating income fell to $21.6M and net income to $8.5M, chiefly amid major asset impairments and contract losses.

• Global expansion continued, with half of revenue generated outside the U.S.; management launched cost, capital and contract-return initiatives as the recession deepened.

Financial highlights

• Revenue was $1,118.8M, up 7% YoY; services revenue increased 8% to $1,000.0M, while sales revenue declined 4% to $118.9M.

• Operating income was $21.6M vs. $105.8M; net income was $8.5M vs. $65.4M; diluted EPS was $0.09 vs. $0.68.

• Operating expenses included $76.2M of long-lived asset impairments, $13.7M in employee termination costs and $7.8M of Mexico and Oklahoma contract loss accruals.

• Operating cash flow was $208.5M; year-end cash was $140.6M, and cash, short-term investments and borrowing capacity totaled $330.8M.

Outlook and guidance

• FY09 plans target lower operating costs and capital spending and $50M–$100M of debt repayment; the actual repayment may fall outside that range.

• Approximately 20,000 China Sports Lottery ticket-checking machines are expected to cost $11.8M in 2009; a Global Draw earn-out of $80M–$90M may also be payable.

• Cash flow, cash on hand and revolving capacity were expected to cover foreseeable liquidity needs, subject to contract renewals and financing-market conditions.