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International Game Technology Reports Record $0.51 Per Diluted Share For Q3 of Fiscal 2000

In the prior year period, net income before extraordinary items totaled $37.5 million or $0.39 per diluted share on revenues of $258.9 million. Revenue improvements and strengthening margins along with the Company's share repurchase program drove the growth in quarterly earnings per share.

Fiscal year-to-date net income of $104.8 million resulted in $1.33 per diluted share compared to net income before extraordinary items of $105.8 million or $1.02 per diluted share for the prior year-to-date period.

In the third quarter of fiscal 1999, IGT redeemed its 7.84% Senior Notes due 2004, resulting in an extraordinary expense of $0.03 per diluted share. The current year-to-date results benefited from the legal settlement received in the first quarter from WMS Gaming, Inc. of $0.22 per diluted share.

Product sales revenue totaled $166.7 million and $395.1 million for the current quarter and year-to-date periods versus $167.6 million and $443.8 million for the corresponding periods of fiscal 1999.

Quarter and year-to-date sales totaled 32,000 and 74,300 units compared to 33,700 and 91,600 units in the corresponding periods of fiscal 1999. Current quarter sales benefited from the commencement of legalized gaming in California.

IGT sales to California Native American casinos totaled 1,900 machines representing approximately 64% of all the machines shipped into this new market.

Domestically, IGT sold 12,600 units during the quarter compared to 13,000 in the prior third quarter and 28,600 year-to-date versus 32,500 in the same period of last year. Shipments during the prior year-to-date period included sales of over 13,000 machines to new casino openings in Nevada, Washington, Midwestern markets and the Ontario Lottery Commission in Canada.

In the current year-to-date period, new casinos represented fewer shipments and consisted primarily of the Belterra Resort in Indiana, the Greektown Casino in Michigan and the aforementioned opening of the California Native American market in late June.

International sales for the third quarter totaled 19,400 units compared to 20,700 for the third quarter of fiscal 1999. For the first nine months of fiscal 2000, 45,700 machines were delivered internationally compared to 59,100 in the corresponding prior-year period. In Japan, the new Terminator pachisuro game received favorable reviews resulting in sales of 7,000 units during the third quarter.

The gross profit on product sales for the current quarter grew to $65.2 million or 39% versus $61.2 million or 37% for the third quarter of fiscal 1999. Year-to-date product sales produced gross profits of $150.2 million or 38% compared to $162.2 million or 37% for the year-earlier period.

The improvements in product gross margins resulted primarily from the inclusion of Sodak Gaming, Inc. in the quarter and full year results.

Revenues from gaming operations reached $96.9 million and $293.1 million for the quarter and nine months ended July 1, 2000 versus $91.3 million and $257.6 million for the comparable periods of fiscal 1999. This represents growth rates of 6% and 14% for the quarter and year-to-date periods.

The installed base of Wheel of Fortune® now totals over 10,000 games driven by the continued strength of both the video and the original spinning reel versions of this popular product. During the last three months, placements of the original Wheel of Fortune grew over 200 units along with 900 additional video version units.

Additionally, outstanding orders for the video version are currently in excess of 1,200. IGT's latest MegaJackpot(TM) game, The Addams Family®, debuted in May to excellent reviews. Currently 140 machines are on line with outstanding orders in excess of 1,400.

The total installed base of MegaJackpot(TM) machines including joint venture units totaled 17,600 at quarter end compared to 14,600 one year earlier. Of these, approximately 14,600 are new platform, higher performing games.

``We also began operation of our first Native American MegaJackpot games in the California market. In July, we awarded our first MegaJackpot of approximately $250,000 on a Quartermania machine at the Barona Casino,'' added Baker. ``Players seem to be enjoying the addition of our MegaJackpot products in the market, and we look forward to expanding that base as we go forward.''

Gross profit from gaming operations increased to $66.7 million or 69% in the current quarter over $57.5 million or 63% for the third quarter of fiscal 1999. For the year-to-date periods of fiscal 2000 and 1999, gross profit totaled $196.7 million or 67% versus $154.1 million or 60%.

The improvement in gaming operations margins resulted from lower costs of funding jackpot payments along with a higher mix of joint-venture revenues which, for accounting purposes, are reported net of expenses.

Operating profit for the quarter just ended grew to $72.2 million or 27% of revenues compared to $63.3 million or 24% last year. For the first nine months of fiscal 2000, operating profit reached $176.0 million or 26% versus $162.2 million or 23% in the prior-year period.

Fiscal 2000 benefited from improved margins in both product sales and gaming operations as discussed above. These gains were partially offset by increases in selling, general and administration costs resulting from the inclusion of Sodak Gaming, Inc. and higher personnel costs in the research and development area.

EBITDA, which consists of income from operations excluding depreciation and amortization as reflected on IGT's consolidated statements of cash flows and joint venture depreciation, totaled $87.2 million and $227.9 million for the current quarter and nine months versus $82.4 million and $215.5 million for the comparable periods of fiscal 1999.

Other income and expense resulted in net expense in the current quarter of $13.4 million versus $6.9 million for the same period of last year. For the nine months, net expense was $12.2 million in fiscal 2000 versus $3.1 million in the year-earlier period.

The current year-to-date results benefited from the above-mentioned legal settlement from WMS Gaming, Inc. Increased interest expense from the $1.0 billion senior notes issued in May 1999 offset other income in both fiscal 2000 periods.

No shares were purchased under IGT's stock repurchase program, during the quarter just ended. Fiscal 2000 year-to-date purchases totaled 15.7 million shares for an aggregate purchase price of $318.5 million. As of July 20, 2000, the remaining share repurchase authorization totaled 10.8 million additional shares.

    IGT Fiscal Year 2000
    Statements of Income

                             Three Months Ended          Nine Months Ended
                            Jul. 1,     Jul. 3,        Jul. 1,      Jul. 3,
                              2000       1999           2000         1999
    (in thousands, except
     per share amounts)

    Revenues
      Product sales        $166,728     $167,573       $395,144    $443,793
      Gaming operations      96,942       91,286        293,096     257,643
      Total revenues        263,670      258,859        688,240     701,436
    Costs and expenses
      Cost of product sales 101,495      106,339        244,978     281,635
      Cost of gaming
       operations            30,247       33,759         96,418     103,498
      Selling, general, and
       administrative        38,218       34,552        106,927      96,265
      Depreciation and
       amortization           5,210        6,468         15,858      18,841
      Research and
       development           12,874       11,167         39,580      32,279
      Provision for
       bad debts              4,009        3,240          7,284       6,761
      Impairment of
       assets and
       restructuring
       charges                 (550)          --          1,229          --
      Total costs and
       expenses             191,503      195,525        512,274     539,279
    Income from operations   72,167       63,334        175,966     162,157
    Other income (expense)
      Interest income        11,682       13,938         38,787      40,052
      Interest expense      (25,618)     (21,068)       (76,532)    (46,253)
      Gain on sale of
       assets                 1,052        1,048            280       4,917
      Other                    (491)        (828)        25,235      (1,784)
      Other expense, net    (13,375)      (6,910)       (12,230)     (3,068)
    Income before
     income taxes            58,792       56,424        163,736     159,089
    Provision for
     income taxes            21,165       18,903         58,944      53,295
    Income before
     extraordinary item      37,627       37,521        104,792     105,794
    Extraordinary loss
     on early redemption
      of debt, net of tax        --       (3,254)            --      (3,254)

    Net income              $37,627      $34,267       $104,792    $102,540

    Basic earnings per share
      Continuing operations   $0.52        $0.39          $1.34       $1.03
      Extraordinary item         --        (0.03)            --       (0.03)
      Net income              $0.52        $0.36          $1.34       $1.00

    Diluted earnings per share
      Continuing operations   $0.51        $0.39          $1.33       $1.02
      Extraordinary item         --        (0.03)            --       (0.03)
      Net income              $0.51        $0.36          $1.33       $0.99

    Weighted average common
     shares outstanding      72,212       95,378         77,953     102,819

    Weighted average common
     and potential shares
      outstanding            73,718       95,951         79,014     103,642


    IGT Fiscal Year 2000
    Condensed Balance Sheets

                                                        Jul. 1,     Oct. 2,
                                                         2000         1999
    (Dollars in thousands)
    Assets
      Current assets
        Cash and cash equivalents                      $204,021    $426,343
        Investment securities, at market value           20,578      18,546
        Accounts receivable                             190,040     193,479
        Current maturities of long-term
         notes and contracts receivable                  58,017      74,987
        Inventories                                     134,763     116,612
        Investments to fund liabilities to
         jackpot winners                                 28,015      27,702
        Deferred income taxes                            22,276      23,977
        Prepaid expenses and other                       72,720      93,594
          Total current assets                          730,430     975,240

      Long-term notes and contracts receivable           75,218      60,870

      Property, plant and equipment, at cost            302,889     303,760
        Less accumulated depreciation and
         amortization                                  (137,900)   (121,644)
          Property, plant and equipment, net            164,989     182,116
      Investments to fund liabilities to
       jackpot winners                                  232,691     235,230
      Intangible assets, net of amortization            153,409     152,036
      Other assets                                      182,696     159,568
          Total Assets                               $1,539,433  $1,765,060

    Liabilities and Stockholders' Equity
      Current liabilities
        Current maturities of long-term notes
         payable and capital lease obligations          $11,319      $3,278
        Accounts payable                                 71,209      55,705
        Jackpot liabilities                              56,628      81,141
        Accrued employee benefit plan liabilities        18,833      23,746
        Accrued interest                                 10,987      30,684
        Other accrued liabilities                        62,251      58,013
          Total current liabilities                     231,227     252,567
    Long-term notes payable and capital lease
     obligations, net of current maturities             991,231     990,436
    Long-term jackpot liabilities                       273,090     276,815
    Other liabilities                                       817       3,024
        Total liabilities                             1,496,365   1,522,842

    Stockholders' equity
      Common stock                                           96          96
      Additional paid-in capital                        274,078     261,941
      Retained earnings                                 991,414     886,392
      Treasury stock                                 (1,215,707)   (897,234)
      Accumulated other comprehensive income             (6,813)     (8,977)
        Total stockholders' equity                       43,068     242,218
        Total Liabilities and Stockholders' Equity   $1,539,433  $1,765,060

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