Business Context and Reporting Period
This Form 6-K filing by International Game Technology PLC (IGT) covers the month of February 2018. The report addresses the resolution of a comment letter exchange with the SEC Staff regarding the classification of upfront payments made in connection with the Italian Lotto Concession. The filing discloses a material weakness in internal controls over financial reporting as of December 31, 2016, stemming from this classification error.
Key Financial Metrics
The filing does not provide current period revenue, profit, cash flow, or margin figures. It specifically addresses historical cash flow classifications:
- 2016 Upfront Payment: $665.3 million paid to the Italian governmental authority in two installments. Originally classified as an investing activity; reclassified as an operating activity.
- 2017 Upfront Payment: $185.4 million (third and final payment). Originally classified as an investing cash outflow; will be reclassified as an operating cash outflow.
- Impact on Metrics: The reclassification has no impact on Net Income, Adjusted EBITDA, net change in cash and cash equivalents, Free Cash Flow, or Net Debt.
Material Changes Versus Prior Period
The primary material change is the restatement of the Consolidated Statements of Cash Flows for fiscal years 2016 and 2015 to correct the classification of the Italian Lotto Concession payments from investing activities to operating activities. Additionally, immaterial accounting adjustments will be reflected in these restated statements. The filing notes that the Company's internal controls over financial reporting were deemed ineffective as of December 31, 2016, solely due to this classification error.
Guidance, Outlook, and Risks
Management Commentary and Outlook: Management has recommended restating the 2016 financial statements and will correct the 2017 Consolidated Statement of Cash Flows upon filing the 2017 Form 20-F. The Company has modified technical accounting procedures and implemented additional controls to evaluate significant judgments regarding cash flow classifications for material upfront payments.
Risks and Contingencies: The filing identifies a material weakness in internal control over financial reporting. While the accounting correction does not alter profitability or liquidity measures, it required a formal disclosure of ineffective internal controls for the 2016 period.
Investor Verification Checklist
- Verify the upcoming 2017 Form 20-F filing for the corrected Consolidated Statements of Cash Flows for 2016 and 2017.
- Confirm that the reclassification of the $665.3 million and $185.4 million payments does not alter previously reported GAAP or non-GAAP profitability measures.
- Review the Company's updated internal control procedures to ensure the material weakness identified for 2016 has been remediated.
- Note that the filing text does not provide updated revenue or earnings guidance for the current fiscal year.