International Game Technology Sends Letter to Shareholders To Set the Record
Board of Directors Reiterates Recommendation that Shareholders Vote FOR IGT's
LAS VEGAS, Feb. 1, 2013
LAS VEGAS, Feb. 1, 2013 /PRNewswire/ -- International Game Technology (NYSE:
IGT) ("IGT" or "the Company"), a global leader in casino gaming entertainment
and systems technology, today announced that it has mailed a letter to
shareholders in relation to its Annual Meeting of Shareholders to be held on
March 5, 2013.
The letter reiterates the Board's unanimous recommendation that IGT
shareholders vote FOR the eight highly-qualified incumbent directors standing
for reelection at the Company's 2013 Annual Meeting on the WHITE proxy card.
The full text of the IGT Board's letter is below:
Dear Fellow IGT Shareholder:
IGT's 2013 Annual Meeting of Shareholders, scheduled for March 5^th, is fast
approaching. You have an opportunity to help determine the future of your
investment and whether IGT maintains the significant value creation strategy
it has been implementing over the past four years.
To maintain this momentum, your Board, which comprises eight highly qualified
and experienced directors – Paget L. Alves, Janice Chaffin, Greg Creed, Patti
S. Hart, Robert J. Miller, David E. Roberson, Vincent L. Sadusky and Philip G.
Satre – unanimously recommends that you vote FOR all of IGT's directors by
telephone, Internet or by signing, dating and returning the enclosed WHITE
proxy card TODAY.
Your Board and management team have been executing a comprehensive strategy
designed to capitalize on emerging growth opportunities, position IGT for
success in an evolving marketplace, and enhance our core business. The success
of this strategy to date is clearly demonstrated by, among other things, the
fact that IGT delivered outstanding 2013 fiscal first quarter results and is
on track to achieve its fourth consecutive year of double-digit growth in
adjusted earnings per share from continuing operations.
In the days and weeks ahead, you may receive materials – including a gold
proxy card – from Ader Investment Management LP, which has nominated three
candidates, including former IGT Chairman and CEO Charles N. Mathewson, to
stand for election to the IGT Board of Directors (collectively, the "Ader /
Mathewson Group"). The IGT Board recommends that you reject the Ader /
Mathewson Group nominees by declining to vote for them online, by telephone or
by mail, and by discarding any gold proxy card you receive.
Your Board's commitment to the highest standards of corporate governance is in
stark contrast to Mr. Mathewson's archaic approach. We believe our nominees'
experience and expertise are far superior to those of the Ader / Mathewson
IGT Is Executing a Comprehensive, Forward-Looking Strategy Focused on Growing
the Core Business, Leveraging Content and Evolving Our Business Model to
Deliver Shareholder Value
The comprehensive strategy that your Board and management team initiated in
2009 is working, and is creating meaningful value for IGT shareholders. Since
2009, IGT has strengthened its core business, enhanced its content strategy,
expanded its international presence, improved its internal infrastructure and
cost structure, and returned significant capital to shareholders.
Among other actions to enhance value, your Leadership Team has:
oLeveraged IGT's expertise, content and vision to deliver innovative,
industry-altering firsts for the Company's core business. IGT has elevated
its core gaming experience (with innovations such as MLD, SoundSync, Joy
Stick play and Center Stage) and has enhanced operators' management and
delivery systems (with offerings such as sbX, Cloud, and Advantage System
enhancements). This is most recently highlighted by IGT's 2013 fiscal
first quarter, during which IGT shipped more units within its core product
sales business than in any first quarter in four years.
oAdhered to its guiding principle – "Customers First" - by working closely
with its core customers and effectively managing the business to meet
their needs. Evidence of this commitment is detailed below:
oNorth American ship share, at 37%, has attained its highest level
oInternationally, IGT is the clear leader among its domestic peers
with revenue three times that of its closest competitor; and
oCustomer Satisfaction is at an all-time high, with 46% of customers
identifying IGT as having the highest win per machine in 2012; its
highest level since 2007.
oSuccessfully executed forward-looking strategic acquisitions to stay ahead
of the gaming trends that are reshaping the industry. Double Down
Interactive LLC has provided the Company with a strong entry point into
the rapidly growing online social casino market, and has generated total
revenues of $128 million since its acquisition. In the fiscal first
quarter of 2013, Double Down revenues grew 15% from the previous quarter.
The acquisition is performing better than anticipated and remains on track
to be GAAP accretive in 2014. IGT's strategy has also been validated by
the entrance of other supplier and operator companies seeking to gain a
foothold in online casino-style gaming.
oAllocated capital to drive growth and return value to shareholders. Since
the beginning of 2009, IGT has invested nearly $800 million in Research
and Development, the largest such investment in the industry, and has
strategically deployed $750 million to enhance its core electronic gaming
machine business. Over the same time period, IGT has returned more than
$860 million to shareholders. Furthermore, since the Company announced its
accelerated share repurchase in June 2012, IGT has repurchased 30 million
shares of common stock at an average price of $13.22 per share, a discount
of more than 12% to the closing stock price on January 25, 2013.
The Board believes that the Ader / Mathewson Group has no plan to enhance
shareholder value and does not recognize that online, social and mobile gaming
represent a significant opportunity for future value creation. The Board
believes that the Ader / Mathewson Group nominees, if elected, would seek to
pursue a path that represents a large step backward for IGT.
The Ader / Mathewson Group Has Presented Misleading Information Intended to
IGT and its Board believe the Ader / Mathewson Group is purposely distorting
oCLAIM: Purporting to show a decline in stock price under IGT's current
management team, the Ader / Mathewson Group chose to present stock price
data for a period beginning on October 5, 2009, even though your
management team had been in place six months earlier.
oFACT: From the date that Ms. Hart became CEO, April 1, 2009, through
January 25, 2013, IGT's share price after adjusting for dividends has
increased by nearly 70%.
oCLAIM: Mr. Ader stated recently, "There is a big opportunity to pursue
growth in Macau and the Philippines in the electronic table games
oFACT: This statement demonstrates a fundamental lack of understanding of
the electronic gaming equipment industry. IGT has extensively analyzed
this potential opportunity and determined that investment in the Asian
eTable game market does not represent a value accretive opportunity for
oThe total addressable market for electronic table games in Asia is
minimal (approximately $26 million) and gross margins for such
products are substantially below those enjoyed by other IGT
oThere is minimal product differentiation, limiting IGT's ability to
leverage its proprietary, best-in-class content; and
oThere are already several entrenched players in this space, including
Novomatic Games Inc., Interblock Luxury Gaming Products, and SHFL
oCLAIM: In discussing the timing of IGT's 2012 accelerated share buyback
(ASB) program, the Ader / Mathewson Group presents a false and misleading
criticism of the timing of the Company's ASB and the prices at which the
shares were repurchased. The Ader / Mathewson Group then relies upon its
misleading analysis to make a baseless claim that the Company's ASB did
not create value.
oFACT: The Ader / Mathewson Group's criticism is just wrong and
demonstrates an apparent lack of familiarity with IGT's capital markets
oUnder the terms of the ASB, the effective repurchase price was based
upon the volume weighted average price of IGT's shares over a
six-month period and not a specific point-in-time.
oImportantly, upon conclusion of the ASB, IGT repurchased 30 million
shares of common stock at an average price of $13.22 per share, a
discount of more than 12% to the closing stock price on January 25,
oCLAIM: The Ader / Mathewson Group has falsely alleged that it has not had
sufficient access to the IGT Board and management team.
oFACT: IGT has provided extraordinary access and ample opportunity for the
Ader / Mathewson Group to share its views with the Company's directors and
officers and to make specific recommendations. In addition to providing
access to all normally scheduled earnings calls and our 2013 Investor
Conference, we note the following engagement between the Ader / Mathewson
Group and IGT:
oA phone call with our independent Chairman of the Board, on August 1,
oA follow-up phone call with our Chairman on August 28, 2012;
oAn in-person meeting with IGT's CEO and CFO on September 19, 2012;
oAn in-person follow-up meeting with IGT's CFO on October 10, 2012;
oA phone call with our Chairman on October 19, 2012;
oA telephonic presentation, complete with a slide deck, to the full
IGT Board of Directors on November 15, 2012;
oA phone call with former Nevada Governor and IGT independent
director, Robert J. Miller, on November 19, 2012; and
oA phone call between our Chairman and Mr. Raymond Brooks on January
7, 2013 to discuss Mr. Brooks' views on our industry and the company.
oCLAIM: The Ader / Mathewson Group claims that the IGT Board lacks
financial and gaming expertise.
oFACT: IGT's Board is comprised of highly experienced professionals with
expertise across a wide range of disciplines and industries critical to
IGT's business, including gaming, hospitality, technology and finance.
IGT's Nominating and Corporate Governance Committee regularly reviews the
representation of relevant skills and experience on the Board. As a
result, half of the IGT Board has gaming / relevant industry experience,
and all have relevant financial, technology, or marketing experience.
oCLAIM: Mr. Ader falsely asserts in his proxy materials that Mr. Mathewson
would be an independent director.
oFACT: Mr. Mathewson maintained his status as an employee of IGT through
September 16, 2010. Thus, he does not meet the NYSE's standards for
director independence, which require that the director in question must
not have been an employee of the company within the last three years.
Consequently, Mr. Mathewson would be ineligible to sit on any major
standing committees of the IGT Board.
IGT believes that the Ader / Mathewson Group is manipulating data and making
misleading assertions. Don't be fooled by the Ader / Mathewson Group's
deception – the truth speaks for itself.
Your Board Has Demonstrated that It Is Committed to Upholding the Highest
Standards of Corporate Governance
IGT understands the value and importance of an independent, diverse and
experienced board, and believes its Board possesses the qualifications, fresh
perspectives and diversity necessary to provide effective oversight and
direction to the Company.
Since 2009, your Board has taken numerous measures to institute an effective
and rigorous corporate governance structure, including substantially
reconstituting its eight-member board with six new independent directors over
the last five years. As a result, seven of IGT's eight directors – including
its Chairman – are independent.
In keeping with best practices, the Board is diverse in terms of both race and
gender. Additional governance policies include:
oElection of the entire board annually;
oSeparate Chairman and CEO roles;
oShareholder ability to act by written consent; and
oNo shareholder rights plan.
This month, Casino Journal published an evaluation by HVS Executive Search of
corporate governance practices at public gaming companies. That evaluation,
recognizing the effectiveness of the Board's practices, ranked IGT's Board of
Directors second out of 32 gaming companies for Board performance in 2012.
IGT Believes Mr. Mathewson's Archaic Approach to Corporate Governance Cannot
The Board believes that Mr. Mathewson's decidedly "old-school" approach to
corporate governance, which was driven by his own self-interests during his
tenure as both CEO and Chairman, would not be in the best interests of
shareholders or even considered acceptable by today's standards. Among other
things, Mr. Mathewson engaged in questionable compensation practices, expected
IGT to fund his lavish lifestyle, and exerted his influence over the Board
long after retiring as Chairman in 2003.
Mr. Mathewson engaged in questionable compensation practices following his
return to the Company as CEO in 1996, despite publicly trumpeting an annual
salary of $1.00. According to IGT's 1996 Compensation Committee and Board
meeting minutes and other records:
oOn May 13, 1996, the Compensation Committee ratified and approved a grant
of options entitling Mr. Mathewson to acquire 1,000,000 shares of IGT
common stock. These options were priced as of February 20, 1996 – three
months earlier – at an exercise price of $13.625 and scheduled to vest
over the company standard five-year period. As of May 13, 1996, IGT's
stock was trading at $16.00, immediately putting Mr. Mathewson's
mega-grant approximately $2,375,000 in the money.
oOn August 27, 1996, the Compensation Committee further increased the value
of the grant by re-pricing the grant to an even earlier date, February 13,
1996, and a lower strike price. The exercise price for these options was
thereby reduced to $13.25 – an additional windfall of nearly $400,000.
oFinally, on December 2, 1996, the Compensation Committee, citing IGT's
performance over a mere ten-month period, voted to make all 1,000,000 of
the options previously granted fully vested as of that date, more than
four years earlier than originally planned and just over seven months
after Mr. Mathewson received the grant.
Further, despite having amassed enormous personal wealth over the course of
his tenure at IGT, Mr. Mathewson expected IGT's shareholders to continue
funding his lavish lifestyle after his retirement from the Board. IGT
shareholders reimbursed Mr. Mathewson and his personal staff for numerous
perquisites, benefits and expenses.
oBetween 2003 and 2012, the Company and the industry were facing
challenging times. As a result, IGT was forced to take severe cost control
measures, including reducing its workforce. However, during this time IGT
shareholders paid for Mr. Mathewson's personal staff and office space, and
reimbursed him for perquisites, benefits and expenses such as:
oNearly $7.6 million for a $10 million life insurance policy and
associated taxes benefiting Mr. Mathewson's estate (over a 10 year
period, payments related to this policy totaled nearly $12 million);
oOver $400,000 for multiple country club memberships;
oAlmost $64,000 of medical insurance premiums, including coverage for
one of his ex-wives; and
oIn excess of $12,000 for personal fitness training.
oIn addition to the amount paid above, Mr. Mathewson also sought
o$18,000 related to payments for his personal Bentley automobile; and
o$560,204 related to the maintenance of his personal airplane.
Even after his retirement, Mr. Mathewson repeatedly attempted to influence the
Board by using his son as his personal liaison:
oIn 2003, the year he stepped down from his role as Chairman, Mr. Mathewson
orchestrated the installation of his son, Robert Mathewson, on the IGT
Board. Robert Mathewson was elected to the board despite the fact that
his entire post-college employment history from 1987 through 1992 was
comprised of (i) eight months as an assistant to a securities broker, (ii)
one year and five months as an intern at Harrah's and (iii) three months
as a project manager at IGT. From 1992 through the date of his election
to the IGT board in 2003 (and subsequently), he was self-employed and/or
employed by his father's consulting company.
oRobert Mathewson served as a Director of IGT until 2011, but was not
re-nominated for the 2011 Annual Meeting after the Board became concerned
about his independence and other factors.
We Believe the Other Nominees of the Ader / Mathewson Group Have No Relevant
Experience and Will Weaken Your Board
In addition to evaluating the qualifications of Mr. Mathewson, the Nominating
and Corporate Governance Committee also evaluated the other two candidates on
Ader Investment Management's proposed slate, and found that:
oMr. Brooks has no relevant gaming experience or public company board
experience, and his career as a distressed investor and turnaround advisor
to monoline bond insurers and other companies outside the gaming industry
is not relevant to IGT's current investment grade profile and growth
oMr. Silvers has no relevant operating or management experience in the
gaming industry, and has only held executive management roles at the
discretion and under the supervision of his longtime supervisor, Mr. Ader.
Mr. Silvers has less than five years of experience as a board member,
including only two years at India Hospitality Corp., an Ader-led public
company that was delisted in March 2012, and only two years at Universal
Health Services, Inc. Further, as best as we can tell, Mr. Silvers
"extensive experience investing in gaming equipment assets" consists
primarily of holding stock in IGT through his personal 401(k) account.
Finally, the Board questions the substance of Mr. Silvers' 17 years of
"extensive financial markets experience," considering that he is only 36
Your Board believes that the Ader / Mathewson Group and its dissident nominees
lack an in-depth understanding of the gaming industry and IGT's unique
opportunities to continue growing and generating value for shareholders. IGT
is confident that the Ader / Mathewson Group nominees, if elected, will NOT
strengthen the IGT Board.
Don't Let Mr. Mathewson's Personal Grievances Against IGT Determine the Future
of Your Investment
The Board believes that the Ader / Mathewson Group's proxy fight is largely
the result of a long-running dispute between IGT and Mr. Mathewson. The Board
believes that shareholders should have all the facts before they vote:
oIn October 2003, Mr. Mathewson retired as a director.
oIn 2003, Mr. Mathewson orchestrated the installation of his son, Robert
Mathewson, on the IGT Board.
oThat same year, Mr. Mathewson supported the nomination of T.J. Matthews as
Chairman and CEO of IGT, who executed failed strategies that wiped out
$6.6 billion or 70% of IGT's market capitalization during his tenure.
oIn April 2009, the Board appointed Ms. Hart CEO of IGT, following a
decision process that included an interview with, and support from, Mr.
oIn September 2010, following a review of the business and multiple cost
control actions taken by the company, the Board severed its funding of Mr.
Mathewson's extensive and lavish perquisites and expenses.
oIn January 2011, Robert Mathewson was not re-nominated as a director after
the Board became concerned about his independence and other factors.
oOn the heels of his son not being re-nominated, Mr. Mathewson continued to
insert himself in the affairs of the business and, it is our
understanding, repeatedly stated that he intended to take back control of
oIn November 2012, during a phone conversation Mr. Mathewson initiated with
independent IGT director and former Nevada Governor Robert Miller, Mr.
Mathewson indicated that a proxy contest would be averted if the Board
were to replace Ms. Hart.
The Company believes that, as a result of these events, Mr. Mathewson harbors
resentment and ill-will toward IGT's Board and management team and is pursuing
this proxy contest in furtherance of his own personal grievances, NOT the
interests of shareholders. Moreover, the Board believes that Mr. Mathewson is
ten years out of date with industry developments and more than ten years out
of date with good governance practices. He should not be on your Board.
Protect Your Investment – Cast Your Vote on the Enclosed WHITE PROXY CARD Now!
Your Board is made up of eight highly qualified and experienced directors –
Paget L. Alves, Janice Chaffin, Greg Creed, Patti S. Hart, Robert J. Miller,
David E. Roberson, Vincent L. Sadusky and Philip G. Satre – all committed to
acting in the best interests of shareholders. IGT has embraced high standards
for corporate governance and has taken measures to achieve those goals. The
Board believes its adherence to best practices in corporate governance has
helped it to oversee the successful implementation of a strategy that is
already driving strong financial results while returning significant capital
On behalf of the International Game Technology Board of Directors, we thank
you for your continued support:
Philip G. Satre, Chairman of the Board
Patti S. Hart, Chief Executive Officer
If you have questions or need assistance voting your shares please contact:
MacKenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016
Call Collect: (212) 929-5500
Toll-Free (800) 322-2885
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International Game Technology(NYSE: IGT) is a global leader in casino gaming
entertainment and continues to transform the industry by translating casino
player experiences to social, mobile and interactive environments for
regulated markets around the world. IGT's recent acquisition of DoubleDown
Interactive provides engaging casino style entertainment to more than 5
million players monthly. More information about IGT is available
atwww.IGT.comor connect with IGT at@IGTNewsor facebook.com/IGT. Anyone can
play at theDoubleDown Casinoby
This document contains forward-looking statements that involve risks and
uncertainties. These statements include our expected future financial and
operational performance and our strategic and operational plans. Actual
results may differ materially from the results predicted, and reported results
should not be considered an indication of future performance. The potential
risks and uncertainties that could cause actual results to differ from the
results predicted include, among others, general economic conditions and
changes in economic conditions affecting the gaming industry; difficulties or
delays in obtaining or maintaining necessary licenses or approvals; slow
growth in the number of new gaming jurisdictions or new casinos or the rate of
replacement of existing gaming machines; changes in operator or player
preferences for our products; our ability to compete in the gaming industry
with new or existing competitors; changes in laws or regulations affecting our
business; our ability to develop and introduce new products and their
acceptance by our customers; risks related to our international operations;
our ability to protect our intellectual property; adverse results of
litigation, including intellectual property infringement claims; risks related
to business combinations, investments in intellectual property and the
integration of acquisitions; business disruptions, costs and future events
related to the proxy contest initiated by the insurgent group; and the
additional risks and uncertainties included under the captions "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in our Annual Report on Form 10-K for fiscal 2012 filed with
the SEC on November 28, 2012 and available on the SEC website at
www.sec.govand on the investor relations section of our website at
www.IGT.com.All information provided in this document is as of the date
hereof, and IGT undertakes no duty to update this information.
Important Additional Information
International Game Technology ("IGT"), its directors and certain of its
executive officers may be deemed to be participants in the solicitation of
proxies from IGT stockholders in connection with the matters to be considered
at IGT's 2013 annual meeting of stockholders. IGT has filed its definitive
Proxy Statement (as it may be amended, the "Proxy Statement") with the U.S.
Securities and Exchange Commission (the "SEC") in connection with any such
solicitation of proxies from IGT stockholders. IGT STOCKHOLDERS ARE STRONGLY
ENCOURAGED TO READ THE PROXY STATEMENT AND ACCOMPANYING PROXY CARD AS THEY
CONTAIN IMPORTANT INFORMATION. Information regarding the ownership of IGT's
directors and executive officers in IGT stock, restricted stock units and
stock options is included in their SEC filings on Forms 3, 4 and 5, which can
be found at IGT's website (www.igt.com)in the section "Investor Relations."
More detailed information regarding the identity of potential participants,
and their direct or indirect interests, by security holdings or otherwise, is
set forth in the Proxy Statement and other materials to be filed with the SEC
in connection with IGT's 2013 annual meeting of stockholders. Stockholders can
obtain the Proxy Statement, any amendments or supplements to the Proxy
Statement and other documents filed by IGT with the SEC for no charge at the
SEC's website at www.sec.gov. Copies are also available at no charge at IGT's
website at www.igt.com or by writing to IGT at 6355 South Buffalo Drive, Las
Vegas, Nevada 89113, Attn: Corporate Secretary.
Presentation and Reconciliation of Non-GAAP Measures to GAAP
First Quarter Ended December 31, 2012
GAAP Diluted Earnings Per Share ("EPS") from Continuing Operations $0.24
Acquisition related charges: ^(a)
Contingent retention & earn-out 0.04
Amortization of intangibles 0.02
Royalty settlement -0.02
Total non-GAAP adjustments 0.04
Adjusted EPS from Continuing Operations $0.28
^(a) Primarily related to acquisition of Double Down Interactive LLC
Year Ended September 30, 2012
GAAP Diluted EPS from Continuing Operations $0.86
Acquisition related charges: ^(a)
Contingent retention & earn-out 0.15
Amortization of intangibles 0.04
Professional fees 0.01
Impairment and restructuring:
Patents (Walker Digital) 0.03
Notes (Alabama) 0.03
Entraction reorganization -0.1
Distributor settlement 0.01
Total non-GAAP adjustments 0.18
Adjusted EPS from Continuing Operations $1.04
^(a) Primarily related to acquisition of Double Down Interactive LLC.
Year Ended September 30, 2011
GAAP Diluted EPS from Continuing Operations $0.97
IP Usage settlements
Certain discrete tax items (benefits)
Total non-GAAP adjustments -0.04
Adjusted EPS from Continuing Operations $0.93
Year Ended September 30, 2010
GAAP Diluted EPS from Continuing Operations $0.73
Impairment and restructuring 0.15
Investment loss 0.07
Debt refinancing charges 0.01
Certain discrete tax items (benefits) -0.12
Total non-GAAP adjustments 0.11
Adjusted EPS from Continuing Operations $0.84
Year Ended September 30, 2009
GAAP Diluted EPS from Continuing Operations $0.50
Impairment and restructuring 0.24
Investment loss 0.05
Debt refinancing charges 0.01
Certain discrete tax items (benefits) -0.06
Total non-GAAP adjustments 0.24
Adjusted EPS from Continuing Operations $0.74
Adjusted earnings per share from continuing operations is a non-GAAP financial
measure. We believe that certain non-GAAP measures, when presented in
conjunction with comparable GAAP (Generally Accepted Accounting Principles)
measures, are useful because that information is an appropriate measure for
evaluating our operating performance. Non-GAAP information is used to evaluate
business performance and management's effectiveness. These measures should be
considered in addition to, not as a substitute for, or superior to, measures
of financial performance prepared in accordance with GAAP. Non-GAAP measures
may not be calculated in the same manner by all companies and therefore may
not be comparable.
 Peters, C. & Mukherjee, A. (2013, January 29). "Investor urges IGT to
rethink online gaming move," Reuters. Permission to refer to this source
neither sought nor obtained.
 Kefgen, K., Boone, J., & Singe, M. (2013, January), "ACTIVE Approach,"
Casino Journal, 16-20. Permission to refer to this source neither sought nor
Contact: Matt Moyer, Vice President, Investor Relations of IGT,
+1-866-296-4232; Andrew Siegel / Jed Repko, Joele Frank, Wilkinson Brimmer
Katcher, +1-212-355-4449; Dan Burch / Larry Dennedy, MacKenzie Partners, Inc.,
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