UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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INTERNATIONAL GAME TECHNOLOGY |
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Announcement from Patti Hart |
IGT Announcement Corporate Communications January 14, 2013 |
Dear Colleagues,
As part of IGTs upcoming Board of Directors election, we are issuing a letter to our shareholders urging them to vote for our experienced Director nominees. We believe IGTs highly experienced, and independent Board is acting in best interests of all shareholders. Highlights of the shareholder letter are detailed below:
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The Board and management team remain confident that the continued execution of the IGT growth strategy will create significant shareholder value. |
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Shareholders should consider the facts about Mr. Mathewsons leadership and corporate governance practices. |
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The Ader Groups nominees experience would not be additive to the Board and should be rejected. |
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IGTs Board urges shareholders to vote for the Companys experienced director nominees. |
We are confident that our Board, management and workforce are a winning team. Together, we are committed to enhancing our financial strength, building on our thirty-year tradition of innovation and maintaining our industry leadership. Thank you all for staying focused on your jobs, serving our customers, and driving business results.
We will continue to keep you informed, and conversely, should you receive any inquiries from external sources please forward them to Susan Cartwright, VP Corporate Communications at susan.cartwright@igt.com.
Best,
Patti
Letter to IGT shareholders issued on Monday, January 14th
Dear Fellow Shareholders:
Over the past three years, IGTs Board of Directors and management team have successfully charted a course for the Company that is both strategically and financially sound. As a result, IGTs financial performance has improved, and significant capital has been returned directly to shareholders. Today, the Company is positioned for sustained growth through continued investment in its core electronic gaming business and disciplined investments in related business opportunities and new markets.
In connection with the upcoming Annual Meeting of Shareholders, you will face an
important
decision about the future of your investment in the Company. Ader Investment
Management LP, on behalf of former IGT Chairman and CEO Charles N. Mathewson
and Richard H. Pickup, a longtime associate of Mr. Mathewson, has nominated three directors for election to the Companys Board at the 2013 Annual Meeting. The Mathewson Group has indicated that it has beneficial ownership of
approximately 3% of total IGT shares and intends to nominate Mr. Mathewson
and two others. Your Board comprises eight highly qualified and experienced directorsPaget L. Alves, Janice Chaffin, Greg Creed, Patti S. Hart, Robert J. Miller, David E. Roberson, Vincent L. Sadusky and Philip G. Satre. In the coming weeks, you will receive the
Companys proxy materials, including a WHITE proxy card. The IGT Board recommends that you vote FOR all of IGTs directors on the WHITE proxy card in advance of the Companys 2013 Annual Meeting. The Board and management team remain confident that the continued execution of the IGT growth strategy will create significant shareholder value. IGTs Financial Performance is Strong and Continues to Improve
In 2012, IGT increased total revenues by more than 10% to over $2.1 billion and grew adjusted earnings per share from continuing operations by 12% to $1.04.[1] IGTs fourth quarter 2012 revenues were the highest in four years, and North American machine sales revenues were the highest in eight years. The Companys North American ship share is currently at 37%, its highest level since 2008. IGT maintains its industry leadership, holding a 31% revenue share in an expanding market. In 2013, the Company expects to build on this momentum and to deliver its FOURTH consecutive year of double-digit growth in adjusted earnings per share from continuing operations. IGT is an Innovative Industry Leader, Shaping the Future of Gaming Entertainment
IGT is using its expertise, content and vision to innovate and deliver industry-altering firsts for its core business, developing technologies that:
Elevate our core gaming experience (MLD, SoundSync, Joy Stick play and Center Stage); and Enhance operators management and delivery systems (sbX, Cloud, and Advantage System enhancements).
IGT also advanced its position as an innovator and leader in online social casino gaming with the acquisition of Double Down Interactive LLC. Double Down provides IGT with an industry-leading position in the rapidly growing online social casino
market and will enable IGT to leverage its unrivaled content library across multiple platforms to anyone, anytime and anywhere.
IGT Takes a Balanced Approach to Investing in its Business and Returning Capital to Shareholders [1] Adjusted earnings per share from continuing operations is a non-GAAP financial measure; reconciliation of non-GAAP to GAAP measures is included at the end of this letter. 2
Under this management team, IGT is delivering the strong and improving financial results that the Board expects from the successful execution of its strategy.
IGT is building upon its thirty-year tradition of leading innovation and reimagining the gaming experience. From the casino floor to the internet to mobile devices, IGT is propelling the evolution of gaming.
Since 2009, the Company has prudently allocated capital to drive growth and return capital to shareholders.
IGT has invested nearly $800 million on Research and Development, the largest such investment in the industry. IGT has strategically deployed $750 million in capital to enhance its core electronic gaming machine business. IGT has strategically invested $350 million for growth in new businesses and markets. Over the last three years, IGT has returned more than $860 million of capital to shareholders. In fiscal 2012 alone, IGT returned $546 million in cash to shareholders, and an additional $600 million remains available under the Companys current
share repurchase authorization. IGTs Board Is Acting in the Best Interests of All Shareholders
IGTs Nominating and Corporate Governance Committee regularly reviews the representation of relevant skills and experience on the Board and considers new, qualified candidates in this regard. As a result, the Company has substantially
reconstituted its eight-member Board, adding six new independent directors over the last five years. IGTs seven independent directors have considerable public company experience and a wide range of views and backgrounds, encompassing, among other fields, the gaming industry, the financial sector, consumer sales and marketing, technology
and compliance. The Company is committed to, and has implemented, leading corporate governance practices. IGT Has a Strong Strategy to Take the Company Forward Do Not Allow Mr. Mathewson to Take Us Backward Since
Mr. Mathewson last served as CEO, the industry and technology
have changed dramatically. Mr. Mathewson has advocated a return
to a dated business model that does not reflect the changes in gaming
trends, technologies, customer demand and industry dynamics of the
last ten years. As
Chairman in 2003, Mr. Mathewson maintained his influence over
the operations of the Company by handpicking Thomas J. T.J. Matthews
as CEO and by maintaining a suite of offices at the corporate headquarters
for himself and his personal legal and financial advisors. With
Mr. Mathewsons support, Mr. Matthews implemented a
flawed product and acquisition strategy, and failed to address an unsustainable
cost structure, even in the face of the greatest industry downturn
on record. As a result of these actions, IGTs performance from
2004 through 2009 declined precipitously, as evidenced by a: 15%
decrease in total revenues 56%
decrease in operating income 48%
decrease in operating income margins 44%
decline in North American ship share Decrease
of over 60,000 units shipped annually 42%
decline in gaming operations yield 26%
decline in revenue per employee Mr. Mathewsons
influence and Mr. Matthews failed strategies wiped out
over $6.6 billion or 70% of IGTs market capitalization,
leading to the resignation of Mr. Matthews in 2009. 3
IGTs highly experienced eight-member Board is committed to strong corporate governance and is open to communications with shareholders.
The Company believes that its strategy is the right one to propel IGT into the future and that the election of Mr. Mathewson and his associates would be a step in the wrong direction. Shareholders should consider the facts about Mr. Mathewsons
leadership.
In 2010, with an eye towards enhancing corporate governance, the Board declined to re-nominate Mr. Mathewsons son, Robert, for the slate of directors to stand for election at the 2011 Annual Meeting of Shareholders. The Board also rejected
Mr. Mathewsons repeated requests for reimbursement of personal expenses and terminated all perquisites. Lastly, contrary to Mr. Mathewsons recent statements, he does not qualify to serve as an independent Board member under the New York Stock Exchange rules, as he was an employee of IGT through September 16, 2010. The Remaining Two Mathewson Group Nominees Would Not Be Additive to the Board and Should Be Rejected
Mr. Brooks career as a distressed investor and turnaround manager is not relevant to IGTs current financial health and growth outlook.
Mr. Brooks has no relevant industry experience or public company board experience. His senior management credentials are limited to his role as CEO at two small, private financial services companies, both in distressed turnaround situations.
Mr. Silvers has no relevant operating or management experience in the gaming industry.
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. Mr. Silvers has no executive management experience other than serving under the direction and supervision of Mr. Ader at:
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Ader Investment Management, a small asset management firm. ¡ HCCP Manager LLC, a small merchant bank focused on real estate and the consumer sector. ¡ Western Liberty Bancorp, a small regional bank holding company.
Mr. Silvers experience is not relevant, and his employment by Mr. Ader could inappropriately influence him as a member of the Board of IGT.
Mr. Aders Confusing Statements Demonstrate a Lack of Credibility The Board Believes Its Directors are Best Equipped to Protect and Grow Your Investment in IGT 4
The Board believes that the other two candidates the Mathewson Group intends to nominate Raymond J. Brooks and Daniel B. Silvers would negatively impact the strength of IGTs Board. IGT believes that the nominees do not offer diversity or
experience, nor do they offer any unique or necessary skills that are not already present on the Board.
The IGT Board strongly believes that the Mathewson Group and Mr. Ader seek to advance an agenda that would not be in the best interests of all IGT shareholders.
Furthermore, we find Mr. Aders recent actions questionable. As disclosed in Mr. Aders own filings, on December 20, 2012 IGT received his Notice of Intent to Nominate in which Mr. Ader stated that he would nominate himself and the other three
nominees of the Mathewson Group. Two weeks later, Mr. Ader updated his Notice with additional information about himself. Then, on January 10, 2013, Mr. Ader further updated his Notice, withdrawing his name from his proposed slate of nominees. The
following day, in a public statement Mr. Ader denied his withdrawal, but then confirmed his withdrawal in his preliminary proxy filing with the SEC. We believe these actions demonstrate that Mr. Ader and the Mathewson Group lack credibility and are not
suitable to represent shareholders.
The IGT Board is focused on the future. The Company is executing its strategy, meeting its financial objectives and positioning itself for long-term industry leadership and profitability. IGTs highly experienced, engaged and independent Board is acting in
the best interests of
all
shareholders. In conclusion, the IGT Board recommends that you vote FOR all of IGTs directors on the WHITE proxy card in
advance of the Companys 2013 Annual Meeting. On behalf of the International Game Technology Board of Directors:
Philip G. Satre
Patti S. Hart Forward-Looking Statements Important Additional Information 5
Chairman of the Board
Chief Executive Officer
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 Mathewson Group; and the additional risks and uncertainties included
under the captions Risk Factors and Managements 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.gov and 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.
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 IGTs 2013 annual meeting of stockholders. IGT intends to file a definitive
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 ANY SUCH PROXY STATEMENT AND ACCOMPANYING PROXY CARD
WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. Information regarding the ownership of IGTs 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
IGTs 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, will be set forth in the proxy statement and other materials to be filed with the SEC in
connection with IGTs 2013 annual meeting of stockholders. Information can also be found in IGTs Annual Report on Form 10-K for the year ended September 29, 2012, filed with the SEC on November 28, 2012. Stockholders will be able to obtain any proxy statement, any amendments or
supplements to the proxy statement and other documents filed by IGT with the SEC for no charge at the SECs website at www.sec.gov. Copies will also be available at no charge at IGTs 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
Year Ended September 30, 2012
GAAP Diluted Earnings Per Share (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
(0.10
) Distributor settlement
0.01 Severance
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
0.01 Impairment
0.03 Investment gain
(0.01
) Certain discrete tax items (benefits)
(0.07
)
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 managements 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.
[1] Adjusted earnings per share from continuing operations is a non-GAAP financial measure; reconciliation of non-GAAP to GAAP measures is included at the end of this letter.
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