Edgar Filing: INTERNATIONAL GAME TECHNOLOGY

igt_10k-100210.htm

United States Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended October 2, 2010

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number 001-10684

International Game Technology

Nevada	88-0173041
(State or other jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

9295 Prototype Drive, Reno, Nevada 89521

(Address of Principal Executive Offices)(Zip Code)

Registrant’s Telephone Number, Including Area code: (775) 448-7777

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, Par Value $.00015625	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well known seasoned issuer (as defined in Rule 405 of the Securities Act).

Yes [X] No [ ]

Indicate by check mark if registrant is not required to file reports pursuant to Section 13 or 15(d) of Securities Exchange Act of 1934

Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The aggregate market value of voting stock held by non-affiliates of the registrant on April 2, 2010: $5.5 billion.

The number of shares outstanding of each of the registrant’s classes of common stock, as of November 29, 2010:

298.2 million shares of common stock at $.00015625 par value.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of our Proxy Statement relating to the 2011 annual shareholders meeting are incorporated by reference in Part III. Such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the conclusion of the registrant’s fiscal year ended October 2, 2010.

TABLE OF CONTENTS

GLOSSARY OF TERMS AND ABBREVIATIONS (as used in this document)		3

PART I

Item 1.	Business	5

Item 1A.	Risk Factors	13

Item 1B.	Unresolved Staff Comments	20

Item 2.	Properties	20

Item 3.	Legal Proceedings	20

Item 4.	(Removed and Reserved)	20

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	21

Item 6.	Selected Financial Data	23

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	45

Item 8.	Financial Statements and Supplementary Data	47
	REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	47
	CONSOLIDATED INCOME STATEMENTS	49
	CONSOLIDATED BALANCE SHEETS	50
	CONSOLIDATED STATEMENTS OF CASH FLOWS	51
	CONSOLIDATED STATEMENTS OF TOTAL EQUITY AND COMPREHENSIVE INCOME	53
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	54

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	95

Item 9A.	Controls and Procedures	95

Item 9B.	Other Information	96

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	96

Item 11.	Executive Compensation	96

Item 12.	Security Ownership of Certain Beneficial Owners, Management, Related Stockholder Matters	96

Item 13.	Certain Relationships and Related Transactions, and Director Independence	96

Item 14.	Principal Accountant Fees and Services	96

PART IV

Item 15.	Exhibits and Financial Statement Schedules	96

GLOSSARY OF TERMS AND ABBREVIATIONS (as used in this document)

Abbreviation/term	Definition
Anchor	Anchor Gaming
ARS	auction rate securities
ASU	Accounting Standards Update
AVP®	Advanced Video Platform®
AWP	amusement with prize
5.5% Bonds	5.5% fixed rate notes due 2020
7.5% Bonds	7.5% fixed rate notes due 2019
bps	basis points
CAD	Canadian dollars
CCSC	Colorado Central Station Casino
CDS	central determination system
CEO	chief executive officer
CFO	chief financial officer
CLS	China LotSynergy Holdings, Ltd.
CRM	customer relationship marketing
Cyberview	Cyberview Technology, Inc.
DCF	discounted cash flow
Debentures	2.6% convertible debentures
DigiDeal	DigiDeal Corporation
EBIT	earnings before interest and taxes
EBITDA	earnings before interest, taxes, depreciation, and amortization
EPA	Environmental Protection Agency
EPS	earnings per share
ERISA	Employee Retirement Income Security Act
FASB	Financial Accounting Standards Board
GAAP	generally accepted accounting principles
GSA	Gaming Standards Association
IGT, we, our, the Company	International Game Technology and its consolidated entities
IP	intellectual property
IRS	Internal Revenue Service
LIBOR	London inter-bank offering rate
LVGI	Las Vegas Gaming International
JV	joint venture
M-2-1	Million-2-1
MDA	management’s discussion and analysis of financial condition and results of operations
MLD®	Multi-layer display®
M-P	multi-player
Notes	3.25% convertible notes due 2014
NCI	noncontrolling interests
OSHA	Occupational Safety & Health Administration
pp	percentage points
PGIC	Progressive Gaming International Corporation
R&D	research and development
sbX™	IGT’s complete server-based player experience management solution
SEC	Securities and Exchange Commission
SIP	Stock Incentive Plan
UK	United Kingdom
US	United States
VIE	variable interest entity
VSOE	vendor specific objective evidence
WAP	wide area progressive
WDG	Walker Digital Gaming, LLC
WMS	WMS Industries Inc.
*	not meaningful (in tables)

FORWARD LOOKING STATEMENTS

This report contains statements that do not relate to historical or current facts, but are “forward looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to future events or trends, our future prospects and proposed new products, services, developments, or business strategies, among other things. These statements can generally (although not always) be identified by their use of terms and phrases such as anticipate, appear, believe, could, would, estimate, expect, indicate, intend, may, plan, predict, project, pursue, will, continue, and other similar terms and phrases, as well as the use of the future tense.

Examples of forward looking statements in this report include, but are not limited to, the following categories of expectations about:

ª	our ability to successfully introduce new products and their impact on replacement demand

ª	the timing, features, benefits, and expected continued or future success of new product introductions and ongoing product and marketing initiatives

ª	our leadership position in the gaming industry

ª	the advantages offered to customers by our anticipated products and product features

ª	gaming growth, expansion, and new market opportunities

ª	fluctuations in future gross margins and tax rates

ª	increasing product sales or machine placements

ª	legislative or regulatory developments and related market opportunities

ª	available capital resources to fund future operating requirements, capital expenditures, payment obligations, and share repurchases

ª	expectations related to the timing and cost associated with restructuring efforts and deconsolidations

ª	losses from off-balance sheet arrangements

ª	financial returns to shareholders related to management of our costs

ª	the impact of recently adopted accounting pronouncements

ª	the outcome and expense of litigation

ª	anticipated increased revenue yields and operating margin if general economic conditions improve

Actual results could differ materially from those expressed or implied in our forward looking statements. Our future financial condition and results of operations, as well as any forward looking statements, are subject to change and to inherent known and unknown risks and uncertainties. See Part 1 Item 1A, Risk Factors, in this report for a discussion of these and other risks and uncertainties. You should not assume at any point in the future that the forward looking statements in this report are still valid. We do not intend, and undertake no obligation, to update our forward looking statements to reflect future events or circumstances.

PART I

Item 1. Business

International Game Technology is a global gaming company specializing in the design, manufacture, and marketing of electronic gaming equipment and systems. IGT maintains a wide array of entertainment-inspired gaming product lines and targets gaming markets in all legal jurisdictions worldwide.

International Game Technology was incorporated in Nevada in December 1980 to acquire the gaming licensee and operating entity, IGT, and to facilitate our initial public offering. Principally serving the US gaming markets when founded, we expanded into jurisdictions outside the US in 1986. Unless the context indicates otherwise, International Game Technology, IGT, we, our, or the Company refers to International Game Technology and its consolidated entities. Italicized text in this document with an attached superscript trademark or copyright notation indicates trademarks of IGT or its licensors. Information about IGT trademarks and copyrights is available on our website at www.IGT.com.

Our fiscal year is reported on a 52/53-week period that ends on the Saturday nearest to September 30. For simplicity, this report presents all fiscal years using the calendar month end as outlined in the table below.

Fiscal Year	Ended		Weeks
	Actual	Presented as
2010	October 2, 2010	September 30, 2010	52
2009	October 3, 2009	September 30, 2009	53
2008	September 27, 2008	September 30, 2008	52
2007	September 29, 2007	September 30, 2007	52
2006	September 30, 2006	September 30, 2006	52

BUSINESS SEGMENTS

We derive our revenues from the distribution of electronic gaming equipment, systems, services and licensing. Operating results reviewed by our chief operating decision maker encompass all revenue sources within each geographical customer region. We currently view our business in two operating segments as stated below, each incorporating all types of revenues. Unless otherwise noted, prior year amounts throughout this report have been adjusted for Japan and DigiDeal operations discontinued during fiscal 2010, as further described in Note 7 of our Consolidated Financial Statements.

ª	North America consists of our operations in the US and Canada, comprising 72% of consolidated revenues from continuing operations in fiscal 2010, 78% in 2009, and 76% in 2008.

ª	International consists of our operations in all other jurisdictions worldwide, comprising 28% of consolidated revenues from continuing operations in fiscal 2010, 22% in 2009, and 24% in 2008.

We measure segment profit on the basis of operating income. Certain income and expenses related to company-wide initiatives are managed at the corporate level and not allocated to an operating segment. Other segment and financial information contained in BUSINESS SEGMENT RESULTS of our MDA and Note 21 of our Consolidated Financial Statements is incorporated here by this reference.

REVENUE STREAMS

We have two revenue streams within each business segment -- gaming operations and product sales.

Gaming Operations

Comprising 55% of consolidated revenues in fiscal 2010, 56% in 2009, and 53% in 2008, gaming operations generates recurring revenues by providing our customers with proprietary gaming equipment, systems and services. Our gaming operations pricing arrangements are largely variable where casinos pay service fees to IGT based on a percentage of amounts wagered or net win. Variable fee units comprised 82% of our gaming operations installed base at September 30, 2010. Fixed fee pricing arrangements are typically based on a daily or monthly fee. A portion of WAP fees paid to IGT is used for the funding and administration of progressive jackpots. The cost of funding progressive jackpots is subject to interest rate volatility as further described in Note 1 of our Consolidated Financial Statements and the MDA—CRITICAL ACCOUNTING ESTIMATES.

Gaming operations revenues are affected by variations in the number and type of machines in service, levels of player wagers, and pricing arrangement terms. Levels of play are dependent on game popularity, casino seasonality trends, economic conditions, and other player preferences. Seasonal trends generally show higher play levels in the spring and summer months and lower in the fall and winter months. We monitor the productive life cycles of our gaming operations machines and systematically replace units experiencing declining play levels with newer games.

The IGT installed base of gaming devices includes both variable fee and fixed fee machines, which are recorded on our balance sheet as part of our property, plant and equipment. Casino-owned units are machines sold that also provide a recurring royalty fee. Gaming operations revenues are generated from the units reflected in the table below, as well as service fees for internet gaming, systems access, game content, and other gaming equipment rentals and leasing.

September 30,	2010		2009		2008
IGT owned units - variable fee		47,000		52,000		44,800
IGT owned units - fixed fee		10,000		9,300		15,700
IGT installed base		57,000		61,300		60,500

Casino-owned units		17,900		18,200		17,600
Total Gaming Operations Units		74,900		79,500		78,100

Product Sales

Comprising 45% of consolidated revenues in 2010, 44% in 2009, and 47% in 2008, product sales includes gaming equipment, systems, services, licensing, and component parts. Non-machine sales are comprised of gaming systems, licensing fees, parts, conversions, and miscellaneous royalty fees and services.

	Fiscal Years
Product Sales Composition	2010			2009			2008
Video & spinning reel machines		59	%		59	%		62	%
AWP machines		4	%		4	%		4	%
Total machine sales		63	%		63	%		66	%
Gaming systems		21	%		21	%		18	%
Parts & conversions		13	%		14	%		14	%
Other fees & services		3	%		2	%		2	%
Total non-machine sales		37	%		37	%		34	%

STRATEGIC BUSINESS ARRANGEMENTS

We complement our internal resources through strategic alliances, investments, and business acquisitions that:

ª	diversify our geographic reach

ª	expand our product lines and customer base

ª	leverage our technological and manufacturing infrastructure to increase our rates of return

Our most recent acquisitions and affiliate investments are discussed in Notes 3 and 7 of our Consolidated Financial Statements.

During fiscal 2010, we continued to evaluate and assess whether certain investments fit into our core business strategy. A discussion of the resulting recognition of material losses or impairment and discontinued operations during the current periods is contained in the OVERVIEW and CONSOLIDATED RESULTS of our MDA and Notes 2 and 7 of our Consolidated Financial Statements.

PRODUCTS

We provide a broad range of electronic gaming equipment and systems, as well as licensing, services, and component parts that may be sold or placed under recurring revenue arrangements.

Gaming Equipment

We offer our customers a wide variety of video and physical reel slot machines that may be tailored to meet specific needs. Customers can choose from an extensive library of games combined with several new machine cabinet models designed to maximize functionality, flexibility, and player comfort. Additionally, IGT’s AVP® machines are designed to support server-based gaming networks. Machine configurations vary by jurisdiction and may include:

ª	Stand-alone casino-style slot machines that determine the game play outcome at the machine, known as Class III in tribal jurisdictions

ª	WAP jackpot systems with linked machines across several casinos

ª	CDS machines connected to a central server that determines the game outcome, encompassing VLT’s (video lottery terminals) used primarily in government-sponsored applications and electronic or video bingo machines, known as Class II in tribal jurisdictions

We also offer multi-player community-style configurations with a common display, especially useful in jurisdictions where live table games are not allowed. Our electronic table games include live dealer hosted configurations with virtual chips/electronic credits, as well as a fully virtual platform that can be approved as a slot game, providing table-like gaming for slot only or limited table jurisdictions.

Our international gaming machines also include AWP games, which generally incorporate lower payouts with features that allow players to exercise an element of skill and strategy.

Systems

IGT systems products include applications for casino management, CRM, server-based games and player management. Our casino management solutions include integrated modules for machine accounting, patron management, cage and table accounting, ticket-in/ticket-out, bonusing (jackpots and promotions), and table game automation. Our CRM solution features integrated marketing and business intelligence modules that provide analytical, predictive, and management tools for maximizing casino operational effectiveness. Our server-based solutions enable game delivery to slot machines, computers, mobile phones, tablets and other networked devices, as well as providing casino operators with opportunities to increase profits by enhancing the players’ experience, connecting with players interactively, and creating operational efficiencies.

PRODUCT DEVELOPMENT

The focus of our product development is to enhance the player experience through interactive networked gaming, information technology, innovative game design, and customer relationship services, thereby maximizing the potential for casino operator profitability. The foundation of our product development is built on the creation and delivery of high quality game content through interoperable systems and client casino platforms. Our product innovation reflects the combination of customer research, design experience and engineering excellence.

Since 1986 with the introduction of microprocessor based S+ slots and Megabucks® , the world’s first WAP slot machine, IGT’s most significant product innovations have also included:

ª	Multi-denomination play

ª	Wheel of Fortune® ,the most popular game theme to date

ª	EZ Pay® ticket-in / ticket-out

ª	Internet gaming through WagerWorks™

ª	sbX® complete player experience management solution

ª	MLD® 3-D multi-layer display

We support our product development efforts through a considerable emphasis and investment in the R&D of future technology, which we believe enables IGT to maintain a leadership position in the industry. We dedicate more than 1,600 employees worldwide to product development covering multiple engineering disciplines, including hardware, electrical, systems and software. We also specialize in creative development such as game design, game math, cutting edge graphics and audio development. Our investment in R&D from continuing operations totaled $200.1 million in fiscal 2010, $204.1 million in 2009, and $216.5 million in 2008.

Our primary development facilities are located in Nevada (Reno and Las Vegas), California (San Francisco) and China (Beijing). Additionally, IGT global design centers provide local community presence, customized products, and regional production where beneficial or required.

During fiscal 2010, we initiated the use of our next-generation of game development tools aimed to increase velocity of production, reduce cost, improve quality and enhance new game innovation. We also continued our process improvements, enabling added efficiency by reducing the number of hardware and software platforms. Additionally, we increased our use of proven third-party technologies to improve the yield of our development investments and concentrate increased resources on differentiated engineering.

Games

We combine elements of math, play mechanics, sound, art, and technological advancements with our library of entertainment licenses and patented IP to provide gaming products with a high degree of player appeal. During fiscal 2010, we continued expanding our game libraries with rich content, compelling brands and engaging bonuses to address changing player preferences and other market trends.

Our games are created primarily by employee designers, engineers, and artists, augmented by third-party content creators. We develop video-reel and poker games, as well as enhancements for our classic spinning-reel games, such as multi-line, and multi-coin configurations. We build on our traditional game development with unique customization for video lottery, CDS, Class II, and international markets. We also continually upgrade and optimize our proprietary flagship themes, such as Wheel of Fortune® and Megabucks®, with game refreshers and innovative features to enhance play.

In today’s gaming markets we face highly capable and aggressive competitors, demanding gaming patrons, and increasing game complexity. Today’s market requires constant innovation and increased velocity in providing quality game content across all platforms, particularly in video slots, at attractive pricing for our customers. During fiscal 2010, we sharpened our R&D efforts toward content development with a more effective use of our game design resources and IP portfolio. We used real-time patron level market information obtained through our consumer research group for the development and deployment of game content with a “customer first” focus.

Fiscal 2010 highlights

ª	IGT released enhanced MLD® spinning-reel games featuring curved reels that shake, wobble, and bounce. MLD® technology is used to create virtual spinning reels that mimic the look, feel, and sound of mechanical reels.

ª	MLD® technology advancements were incorporated into Double Jeweled 7s™ and Blackbeard’s Double Doubloons™ games, as well as the Triple Red Hot 7s™ MLD® tournament game. MLD® tournament games provide the flexibility to toggle instantly between tournament and regular play at the touch of a button.

ª	We continued to refresh legacy game libraries with the release of many new themes for the S2000® spinning-reel and 80960 video-reel games.

ª	We launched Siberian Storm™, Three Kings™, and Figaro™ with innovative features such as Connected Lines™, Split Symbols®, and Progressive Free Games™.

ª	We released our first in-demand “configurable cost-to-cover” feature, which allows for low or high denomination play configuration options, offered on 25% of new video themes.

ª	Sex and the City™ with a MultiPLAY interface was introduced in gaming operations. We released the big-screen Center Stage Series, delivering cinema-style entertainment to players, as well as game and hardware flexibility to operators.

ª	We continued to innovate with our flagship brand, Wheel of Fortune®, by offering new experiences, including Wheel of Fortune® Secret Spins™, featuring our exclusive tilting Reel Wheel, and Wheel of Fortune® Reel MultiPLAY, which gives players the chance at four consecutive wheel spins.

ª	Other gaming operations releases in fiscal 2010 included The Amazing Race™, Top Dollar® Reel MultiPLAY, Megabucks® Multi-Level Progressives, Crystal Fortunes™, House of 9 Dragons™, Bombs Away™, and Star Wars™ Droid™ Hunt.

ª	We developed upcoming Center Stage releases, such as American Idol®, Wheel of Fortune® Triple Spin™, Wheel of Fortune® Experience 2™, and The Dark Knight™.

ª	M-P Series® Triple Towers® Horse Racing was introduced, where much like a live racetrack, players can place bets for Win, Place, Show, Exacta, or Quinella with horse history and handicap information displayed on a large-format LCD screen.

ª	New video poker games developed included Ultimate X Poker™, with exciting multipliers for current and next-game hands, and Super Star Poker®, designed specifically to bring versatility and entertainment to areas with limited floor space.

Systems

Gaming continues to become increasingly systems-centric, as operators have come to expect network functionality to manage game performance and adapt to player preferences. As we develop and integrate our gaming systems products, we recognize that networks have the power to dramatically change the delivery of game content and significantly enhance the player experience.

IGT systems infrastructure and Service Window applications are available in enterprise, floor-wide, or bank-level implementations, scalable and versatile to meet the diverse needs of our customer base. Our ongoing systems development continues to focus on network solutions designed to provide operators with tools for more effective casino floor management and new ways to engage and interact with players.

During fiscal 2010, we successfully installed the first floor-wide version of our sbX® Experience Management system at the Las Vegas ARIA Resort and Casino at City Center. This installation included a one-of-a-kind combination of IGT’s server-based network applications, including the Service Window, sbX® Floor Manager and Media Manager, and IGT Advantage® casino management, powering 970 IGT machines and 100 WMS machines. Worldwide expansion of sbX® continued, with several floor-wide and Tier-One package installations completed throughout the US and Europe.

The IGT Global Technology and Interoperability Center continued to facilitate testing by third-party manufacturers and strategic partners of GSA protocol product interface integration, compatibility, and performance throughout fiscal 2010. The center actively tests the interaction of our GSA compliant sbX® system with other vendor systems, while we continue to engineer new applications and demonstrate the security, efficiency, and innovative casino player marketing features this technology can provide. This collaborative approach ensures that rigorous testing is conducted in a true-to-life environment with full-scale systems.

As operators continuously look for more ways to increase player loyalty and convenience while optimizing current investments, we continue to develop cost-effective server-based applications to deliver a variety of new marketing, loyalty, and casino management tools. During fiscal 2010, we installed the first Taxable Accrual application, which enables players to process taxable jackpots through the intuitive Service Window interface. Our proven bonusing applications Xtra Credit®, Point Play®, and Lucky Coin® were also adapted for the Service Window.

Platforms

Platforms are a combination of hardware and software used to deliver games to players. We support several platforms in order to maximize our game distribution reach. Our platform development is focused on empowering game development teams with the best environment for creativity and innovation, while targeting global markets with the best balance of cost and features. Our goal is to supply quality gaming content through traditional and new interactive channels worldwide.

During fiscal 2010, we initiated a new strategy to unify the land and interactive gaming realms through further development of our remote gaming platform to support increased innovation and an expansion of addressable markets. Accordingly, we now deliver games to computers, mobile phones, tablets and other networked devices through multiple partners in international markets. We also introduced new features that make it easier for partners to integrate and monetize IGT games.

During fiscal 2010, we standardized our machine cabinets, increasing the efficiency of operations and capital deployment. Our AVP ® DynamiX™ platform was launched, containing our most configurable and future ready set of features yet, such as Multi-Layer Display (MLD ®), surround sound capability, dynamic buttons, Service Window and GSA open standards compliance. We believe this combination of features allows for the richest, most engaging games for the player while providing maximum systems flexibility for the casino operator.

Transition to AVP® as our standard development and delivery platform on a worldwide basis continued during fiscal 2010. In addition to North and South America, we now use AVP® in Australia and the UK. With the majority of development concentrated on AVP®, we also maintain support for a variety of legacy platforms.

Intellectual Property

Our IP portfolio of patents, trademarks, copyrights, and other licensed rights are significant to our business. We currently own nearly 5,000 patents and patent applications, and hold more than 3,100 filed and registered trademarks worldwide. Our capitalized patents have a weighted average remaining useful life of 6 years. Additionally, our material brand licensing arrangements have various expiration dates through 2018, frequently with options to extend.

We seek to protect our investment in R&D and the distinct features of our products by perfecting and maintaining our IP rights. We obtain patent protection covering many of our products and have a significant number of U.S. and foreign patent applications pending. Our portfolio is widely diversified with patents related to a variety of gaming products, including game designs, bonus and secondary game features, device components, and online or mobile functionality.

We market most of our products under trademarks and copyrights that provide product recognition and promote widespread acceptance. We seek protection for our copyrights and trademarks in the US and various foreign countries, where applicable. We use IP assets not just from a defensive standpoint, but also offensively to protect our innovation, and we license our IP under reasonable terms to promote standardization in the gaming industry. IP litigation is described in Note 16 of our Consolidated Financial Statements and related risk factors are described in Part1, Item 1A.

SALES AND MARKETING REGIONS

We market our products and services in legalized gaming jurisdictions around the world. We have a substantial market share in the US and growing international operations. We promote our products through a worldwide network of sales associates. We use third-party distributors and agents in certain markets under arrangements that generally specify no minimum purchase and require specified performance standards be maintained. We also offer equipment contract financing for qualified customers and development financing loans to select customers for new or expanding gaming facilities.

Our overall marketing strategy places the “Customer First.” At September 30, 2010, we had 65 offices across six continents to respond to customer needs. In addition, we maintain a Global Support Center staffed by experienced consultants for technical issue resolutions. We provide access to product information and 24-hour customer service through our website and a variety of customer training to ensure their success in using our products to their full potential.

North America

The gaming industry in the US and Canada continues to grow, albeit at a slower pace in the last few years due to the economic downturn. We estimate the installed base of legal gaming devices in North America increased slightly from 943,000 in fiscal 2009 to over 947,000 machines in fiscal 2010.

The growth of legalized gaming is largely driven by new jurisdictions considering gaming tax revenues as a means to address budget shortfalls. Sales or placements of gaming machines are also affected by new openings or expansion of existing gaming properties and the machine replacement cycle, as well as economic conditions. Legislative action and voter referendums during fiscal 2010 provided new opportunities for gaming growth in Illinois, Ohio, Kansas, Maryland, Pennsylvania, and Florida. We are closely monitoring ongoing gaming actions in Kentucky, Massachusetts, New Hampshire, North Carolina, Texas, and Canada.

Changes in existing gaming regulation or new interpretations of existing gaming laws may hinder or prevent us from continuing to operate in certain jurisdictions. See further discussion surrounding regulatory challenges in Alabama in MDA-CONSOLIDATED RESULTS and MDA-BUSINESS SEGMENT RESULTS.

International

Our international strategy capitalizes on our North America experience, while customizing products for unique local preferences and regulatory requirements. During fiscal 2010, our international gaming markets were organized into the following customer regions:

ª	Europe, the Middle East, and Africa (EMEA)

ª	Mexico and South/Central America (LatAm)

ª	Asia, Australia, New Zealand, the Pacific (AsiaPac)

the UK

During fiscal 2010, we discontinued our operations in Japan due to ongoing difficult market conditions and changes in our core business strategy. See Note 7 of our Consolidated Financial Statements for additional information about discontinued operations.

As “harm minimization” measures for gaming machines continues to negatively affect Australia and New Zealand markets, we anticipate new growth opportunities in the Philippines, Macau, and Italy. We are also closely monitoring ongoing gaming actions in Brazil and Greece for possible future expansion into these countries.

OPERATIONAL OVERVIEW

Manufacturing and Suppliers

In addition to our main production facility in Nevada, we manufacture in the UK and through third-party manufacturers in China. We also have reconditioning and re-manufacturing processes in our Las Vegas facility for gaming operations fixed assets. Our manufacturing operations primarily involve the configuration and assembly of electronic components, cables, harnesses, video monitors, and prefabricated parts purchased from outside sources. We also operate facilities for silkscreen manufacturing and digital design.

We use a variety of raw materials to manufacture our gaming devices including metals, wood, plastics, glass, electronic components, and LCD screens. We have a broad base of material suppliers and utilize multi-sourcing practices to ensure component availability. We believe the availability of materials used to manufacture our products is adequate and we are not substantially dependent on any single supplier.

We currently devote more than 800,000 square feet in our Reno facility and more than 270,000 square feet in our Las Vegas facility to product development, manufacturing, warehousing, shipping, and receiving. Maintaining our commitment to quality, we recertified our ISO 9001.2008 Quality Management System certification at all of our manufacturing facilities during fiscal 2010. In addition, we added our Advantage and sbX systems to our certification in fiscal 2010. ISO standards represent an international consensus with respect to the design, manufacture, and use of practices intended to ensure ongoing customer satisfaction with consistent delivery of products and services.

We generally carry a significant amount of inventory related to the breadth of our product lines. We reasonably expect to fill our order backlog within the next fiscal year. Backlog totaled approximately $239.9 million at October 31, 2010 and $331.2 million at October 31, 2009.

Regulatory Compliance

IGT is dedicated to regulatory compliance worldwide in order to ensure that our products meet requirements in each gaming jurisdiction and that we obtain the necessary approvals and licenses. We conduct business in most jurisdictions where gaming is legal and hold licenses where required.

Employees

As of September 30, 2010, we employed 4,900 individuals worldwide, 3,900 in our North America segment and 1,000 in our International segment. In light of the economic downturn and reduced demand for our products and services, we have been conducting an ongoing comprehensive strategic review of our costs and organizational structure to maximize efficiency and align expenses with the current and long-term business outlook. As a result of restructuring efforts during fiscal 2009 and 2010, our global workforce was reduced by approximately 16% through a combination of voluntary and involuntary separation arrangements. For discussion of related restructuring costs, see Note 2 of our Consolidated Financial Statements and MDA—CONSOLIDATED RESULTS.

COMPETITION AND PRODUCT DEMAND

IGT has been met with increasingly aggressive competition. The market for gaming devices and systems is constantly evolving and technological advances increasingly employ personal computers, mobile communication, and other digital media devices. Our competitors range from small, localized companies to large, multi-national corporations in every jurisdiction in which we conduct business. Our most significant competitors include Aristocrat Leisure Limited, Bally Technologies, Inc., and WMS Industries, Inc.

We believe replacement sales are driven by customer strategies to upgrade casino floors with newer games and technologies that combine higher yields with cost savings, convenience, and other benefits. Emerging technologies that improve operators’ profitability, such as delivery platforms with increased capabilities, game features that increase player appeal, or application modules which increase operator efficiencies, can accelerate the replacement cycle.

New or expanding casinos generate new product demand and stimulate replacement demand at neighboring properties compelled to upgrade their gaming floors to remain competitive. New jurisdictions establishing legalized gaming also create product demand and continue to grow the overall installed base of gaming devices.

We endeavor to create gaming products with superior functionality and features, using innovative architecture and technologies, resulting in a high degree of customer acceptance and player preference. We also strive to maintain an edge in our quality of support and efficient product implementation. The breadth of our gaming products and diversity of our innovative game library contribute to our competitive advantage.

We believe IGT also has competitive advantages resulting from broad alliances and a long history with customers, the financial strength to aggressively invest in R&D, and an extensive collection of intellectual properties. Our historically high levels of customer service and support, extensive and well-established infrastructure of sales and manufacturing, worldwide name recognition, and geographic diversity are competitive assets. We believe our reputation for consistently delivering and supporting quality products will encourage operators to select our products and enable us to maintain a substantial market position. Risk factors related to competition are discussed in Part 1, Item 1A.

AVAILABLE INFORMATION

IGT’s principal corporate executive offices are located at:

9295 Prototype Drive

Reno, Nevada 89521

(775) 448-7777

All reporting information filed with or furnished to the SEC is available free of charge through the Investor Relations link on our website at www.IGT.com as soon as reasonably practicable after we electronically file or furnish such information to the SEC. Our corporate governance guidelines and charters for our Audit, Compensation, and Nominating and Corporate Governance Committees are also available on our website. This information will be mailed in print form free of charge to any shareholder upon request.

GOVERNMENT GAMING REGULATION

We operate in most legal casino gaming jurisdictions worldwide, as well as in several legalized lottery and online jurisdictions. The manufacture and distribution of gaming equipment, systems, and services, as well as the operation of casinos, is subject to regulation by a variety of local and federal agencies, with the majority of oversight provided by individual state gaming control boards.

While the regulatory requirements vary from jurisdiction to jurisdiction, most require:

ª	licenses and/or permits

ª	findings of suitability for the company, as well as individual officers, directors, major shareholders, and key employees

ª	documentation of qualification, including evidence of financial stability

ª	specific approvals for gaming equipment manufacturers and distributors

Our operating entities and key personnel have obtained or applied for all required government licenses, permits, registrations, findings of suitability, and approvals necessary to manufacture and distribute gaming products in all jurisdictions where we do business. Although many regulations at each level are similar or overlapping, we must satisfy all conditions individually for each jurisdiction.

Laws of the various gaming regulatory agencies serve to protect the public and ensure that gaming related activity is conducted honestly, competitively, and free of corruption. Regulatory oversight additionally ensures that the local authorities receive the appropriate amount of gaming tax revenues. As such, our financial systems and reporting functions must demonstrate high levels of detail and integrity.

Certain regulators not only govern the activities within their jurisdiction, but also oversee activities that occur in other jurisdictions to ensure that we comply with local standards on a worldwide basis. As a Nevada licensee, state regulatory authorities require us to maintain Nevada standards for all operations worldwide. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions. A more detailed description of the regulations to which we are subject is provided in Exhibit 99 of this Annual Report on Form 10-K, incorporated herein by reference.

The nature of the industry and our worldwide operations make this process very time consuming and require extensive resources. We employ additional community staff members and legal resources familiar with local customs in certain jurisdictions to assist in keeping us compliant with applicable regulations worldwide. Through this process, we seek to assure both regulators and investors that all our operations maintain the highest levels of integrity and avoid any appearance of impropriety. We have never been denied a gaming related license, nor have our licenses ever been suspended or revoked.

Risk factors related to gaming regulation are included in Part 1, Item 1A.

Item 1A. Risk Factors

Our business is vulnerable to changing economic conditions and to other factors that adversely affect the casino industry, which have negatively impacted and could continue to negatively impact the play levels of our participation games, our product sales, and our ability to collect outstanding receivables from our customers.

Demand for our products and services depends largely upon favorable conditions in the casino industry, which is highly sensitive to casino patrons’ disposable incomes and gaming activities. Discretionary spending on entertainment activities could further decline for reasons beyond our control, such as continued negative economic conditions, natural disasters, acts of war or terrorism, transportation disruptions or health issues. Any prolonged or significant decrease in consumer spending on entertainment activities could result in reduced play levels on our participation games, causing our cash flows and revenues from a large share of our recurring revenue products to decline. Unfavorable economic conditions have also resulted in a tightening in the credit markets, decreased liquidity in many financial markets, and significant volatility in the credit and equity markets.

A decline in the relative health of the gaming industry and the difficulty or inability of our customers to obtain adequate levels of capital to finance their ongoing operations reduces their resources available to purchase our products and services, which adversely affects our revenues. If we experience a significant unexpected decrease in demand for our products, we could also be required to increase our inventory obsolescence charges.

Furthermore, the extended economic downturn has impacted and could continue to impact the ability of our customers to make timely payments to us. We have, and may continue, to incur additional provisions for bad debt related to credit concerns on certain receivables.

Our ability to operate in our existing markets or expand into new jurisdictions could be adversely affected by changing regulations, new interpretations of existing laws, and difficulties or delays in obtaining or maintaining needed licenses or approvals.

We operate only in jurisdictions where gaming is legal. The gaming industry is subject to extensive governmental regulation by US federal, state and local governments, as well as tribal officials or organizations and foreign governments. While the regulatory requirements vary by jurisdiction, most require:

ª	licenses and/or permits

ª	findings of suitability

ª	documentation of qualifications, including evidence of financial stability

ª	other required approvals for companies who manufacture or distribute gaming equipment and services

ª	individual suitability of officers, directors, major shareholders and key employees

Any license, permit, approval or finding of suitability may be revoked, suspended or conditioned at any time. We may not be able to obtain or maintain all necessary registrations, licenses, permits or approvals, or could experience delays related to the licensing process which could adversely affect our operations and our ability to maintain key employees.

To expand into new jurisdictions, we may need to be licensed, obtain approvals of our products and/or seek licensure of our officers, directors, major stockholders, key employees or business partners. If we fail to seek, do not receive or receive a revocation of a license in a particular jurisdiction for our games and gaming machines, hardware or software, we cannot sell or place on a participation or leased basis our products in that jurisdiction. Any delays in obtaining or difficulty in maintaining regulatory approvals needed for expansion within existing markets or into new jurisdictions can negatively affect our opportunities for growth.

Further, changes in existing gaming regulations or new interpretations of existing gaming laws may hinder or prevent us from continuing to operate in those jurisdictions where we currently do business, which would harm our operating results. In particular, the enactment of unfavorable legislation or government efforts affecting or directed at manufacturers or gaming operators, such as referendums to increase gaming taxes or requirements to use local distributors, would likely have a negative impact on our operations.

Slow growth in the establishment of new gaming jurisdictions or the number of new casinos, declines in the rate of replacement of existing gaming machines and ownership changes and consolidation in the casino industry could limit or reduce our future profits.

Demand for our products is driven substantially by the establishment of new gaming jurisdictions, the addition of new casinos or expansion of existing casinos within existing gaming jurisdictions and the replacement of existing gaming machines. The establishment or expansion of gaming in any jurisdiction typically requires a public referendum or other legislative action. As a result, gaming continues to be the subject of public debate, and there are numerous active organizations that oppose gaming. Opposition to gaming could result in restrictions on or even prohibitions of gaming operations or the expansion of operations in any jurisdiction.

In addition, the construction of new casinos or expansion of existing casinos fluctuates with demand, general economic conditions and the availability of financing. The rate of gaming growth in North America has diminished and machine replacements are at historically low levels. Slow growth in the establishment of new gaming jurisdictions or delays in the opening of new or expanded casinos and continued declines in, or low levels of demand for, machine replacements could reduce the demand for our products and our future profits. Because a substantial portion of our sales come from repeat customers, our business could be affected if one or more of our customers is sold to or merges with another entity that utilizes more of the products and services of one of our competitors or that reduces spending on our products or causes downward pricing pressures. Such consolidations could lead to order cancellations, a slowing in the rate of gaming machine replacements, or require our current customers to switch to our competitors’ products, any of which could negatively impact our results of operations.

Demand for our products and the level of play of our products could be adversely affected by changes in player and operator preferences.

As a supplier of gaming machines, we must offer themes and products that appeal to gaming operators and players. There is constant pressure to develop and market new game content and technologically innovative products. Our revenues are dependent on the earning power and life span of our games. We therefore face continuous pressure to design and deploy new and successful game themes to maintain our revenue and remain competitive. If we are unable to anticipate or react timely to any significant changes in player preferences, such as a negative change in the trend of acceptance of our newest systems innovations or jackpot fatigue (declining play levels on smaller jackpots), the demand for our gaming products and the level of play of our gaming products could decline. Further, our products could suffer a loss of floor space to table games or other more technologically advanced games or operators may reduce revenue sharing arrangements, each of which would harm our sales and financial results. In addition, general changes in consumer behavior, such as reduced travel activity or redirection of entertainment dollars to other venues, could result in reduced demand and reduced play levels for our gaming products.

The gaming industry is intensely competitive. We face competition from a growing number of companies and, if we are unable to compete effectively, our business could be negatively impacted.

Competition among manufacturers of electronic gaming equipment and systems products is intense. Competition in our industry is primarily based on the amount of profit our products generate for our customers, together with cost savings, convenience, and other benefits. Additionally, we compete on the basis of price and financing terms made available to customers, the appeal of game content and features to the end player, and the features and functionality of our hardware and software products. Our competitors range from small, localized companies to large, multi-national corporations, several of which have substantial resources.

Competition in the gaming industry is intense due to the increasing number of providers, combined with the limited number of casino operators and jurisdictions in which they operate. This combination of a growing number of providers and a limited number of casino operators has resulted in an increased focus on price to value. To compete effectively, providers must offer innovative products, with increasing features and functionality benefiting the operators along with game content appealing to the end player, at prices that are attractive to operators.

Obtaining space and favorable placement on casino gaming floors is also a competitive factor in our industry. In addition, the level of competition among equipment providers has increased significantly due to consolidation among casino operators and cutbacks in capital spending by casino operators resulting from the economic downturn and decreased player spend.

Our success in the competitive gaming industry depends in large part on our ability to develop and manage frequent introductions of innovative products.

The gaming industry is characterized by dynamic customer demand and technological advances. As a result, we must continually introduce and successfully market new themes and technologies in order to remain competitive and effectively stimulate customer demand.

There is no assurance that our investments in research and development will lead to successful new technologies or timely new products. We invest heavily in product development in various disciplines from hardware, software, and firmware engineering to game design, video, multimedia, graphics, and sound. Because our newer products are generally more technologically sophisticated than those we have produced in the past, we must continually refine our production capabilities to meet the needs of our product innovation. If we cannot efficiently adapt our manufacturing infrastructure to meet the needs of our product innovations, or if we are unable to make upgrades in our production capacity in a timely manner, our business could be negatively impacted.

Our customers will accept a new product only if it is likely to increase operator profits more than competitors’ products. The amount of operator profits primarily depends on consumer play levels, which are influenced by player demand for our product. There is no certainty that our new products will attain this market acceptance or that our competitors will not more effectively anticipate or respond to changing customer preferences. In addition, any delays by us in introducing new products on schedule could negatively impact our operating results by providing an opportunity for our competitors to introduce new products and gain market share ahead of us. For example, our business and results could be adversely affected if we experience delays or problems in our continued deployment of sbX™ gaming management systems, or if we do not gain market acceptance for these or other systems that are currently under development.

New products require regulatory approval and may be subject to complex and dynamic revenue recognition standards, which could materially affect our financial results.

As we introduce new products and transactions become increasingly complex, additional analysis and judgment is required to account for and recognize revenues in accordance with generally accepted accounting principles. Transactions may include multiple element arrangements and/or software components and applicable accounting principles or regulatory product approval delays could further change the timing of revenue recognition and could adversely affect our financial results for any given period. Fluctuations may occur in our deferred revenues and reflect our continued shift toward more multiple element contracts that include systems and software.

A decline in and/or sustained low interest rates causes an increase in our jackpot expense which could limit or reduce our future profits.

Changes in prime and/or treasury and agency interest rates during a given period cause fluctuations in jackpot expense largely due to the revaluation of future winner liabilities. When rates increase, jackpot liabilities are reduced as it costs less to fund the liability. However, when interest rates decline or remain low the value of the liability (and related jackpot expense) increases because the cost to fund the liability increases. Our results may continue to be negatively impacted by continuing low interest rates or further declines in interest rates, resulting in increased jackpot expense and a reduction of our investment income, which could limit or reduce our future profits.

We may be unable to protect our IP.

A significant portion of our revenues is generated from products using certain IP rights and our operating results would be negatively impacted if we are unsuccessful in protecting these rights from infringement. In addition, some of our most popular games and features are based on trademarks, patents and other IP licensed from third parties. Our future success may depend upon our ability to obtain, retain and/or expand licenses for popular IP rights with reasonable terms in a competitive market. In the event that we cannot renew and/or expand existing licenses, we may be required to discontinue or limit our use of the games or gaming machines that use the licensed technology or bear the licensed marks.

Our success may depend in part on our ability to obtain trademark protection for the names or symbols under which we market our products and to obtain copyright protection and patent protection of our proprietary technologies, intellectual property and other game innovations. We may not be able to build and maintain goodwill in our trademarks or obtain trademark or patent protection, and there can be no assurance that any trademark, copyright or issued patent will provide competitive advantages for us or that our intellectual properties will not be successfully challenged or circumvented by competitors.

We also rely on trade secrets and proprietary know-how to protect certain proprietary knowledge and have entered into confidentiality agreements with our employees and independent contractors regarding our trade secrets and proprietary information. However, there can be no guarantees that our employees and consultants will not breach these agreements, and if these agreements are breached it is unlikely that the remedies available to us will be sufficient to compensate us for the damages suffered. Additionally, despite various confidentiality agreements and other trade secret protections, our trade secrets and proprietary know-how could become known to, or independently developed by, competitors.

We may be subject to claims of IP infringement or invalidity and adverse outcomes of litigation could unfavorably affect our operating results.

Competitors and others may infringe on our intellectual property rights, or may allege that we have infringed on theirs. Monitoring infringement and misappropriation of intellectual property can be difficult and expensive, and we may not be able to detect infringement or misappropriation of our proprietary rights. We may also incur significant litigation expenses protecting our intellectual property or defending our use of intellectual property, reducing our ability to bring new products to market in the future. These expenses could have an adverse effect on our future cash flows and results of operations. Our assessment of current IP litigation could change in light of the discovery of facts not presently known to us or determinations by judges, juries or others that do not agree with our evaluation of the possible liability or outcome of such litigation. If we are found to infringe on the rights of others we could be required to discontinue offering certain products or systems, to pay damages, or purchase a license to use the intellectual property in question from its owner. Litigation can also distract management from the day-to-day operations of the business. There can be no assurances that certain of our products, including those with currently pending patent applications, will not be determined to have infringed upon an existing third party patent.

The risks related to operations in foreign countries and outside of traditional US jurisdictions could negatively affect our results.

We operate in many countries outside of the US and in tribal jurisdictions with sovereign immunity which subjects us to certain inherent risks. Developments such as noted below could adversely affect our financial condition and results of operations:

ª	social, political or economic instability

ª	additional costs of compliance with international laws or unexpected changes in regulatory requirements

ª	tariffs and other trade barriers

ª	fluctuations in foreign exchange rates outside the US

ª	adverse changes in the creditworthiness of parties with whom we have significant receivables or forward currency exchange contracts

ª	expropriation, nationalization and restrictions on repatriation of funds or assets

ª	difficulty protecting our intellectual property

ª	recessions in foreign economies

ª	difficulties in maintaining foreign operations

ª	changes in consumer tastes and trends

ª	acts of war or terrorism

ª	US government requirements for export.

Our outstanding domestic credit facility subjects us to financial covenants which may limit our flexibility.

Our domestic credit facility subjects us to a number of financial covenants, including a minimum ratio of Adjusted EBITDA to interest expense minus interest on jackpot liabilities and a maximum ratio of debt to Adjusted EBITDA. Our failure or inability to comply with these covenants will cause an event of default that, if not cured, could cause the entire outstanding borrowings under our domestic credit facility, 5.5% Bonds, 7.5% Bonds and Notes to become immediately due and payable. In addition, our interest rate under the domestic credit facility can vary based on our public credit rating or our debt-to-capitalization ratio. Each of these measures may be adversely impacted by unfavorable economic conditions. The domestic credit facility also includes restrictions that may limit our flexibility in planning for, or reacting to, changes in our business and the industry.

Our obligations under our domestic credit facility are generally unsecured, except that we have agreed that, in the event of certain declines in our debt ratings as described in the domestic credit facility, as soon as reasonably practicable thereafter, we will grant a lien on 100% of the equity interests of IGT's direct and wholly-owned domestic subsidiaries and 66% of the equity interests of IGT's direct and wholly-owned foreign subsidiaries. Additionally, holders of the Notes issued and sold by us in May 2009, the 7.5% Bonds, 5.5% Bonds or similar securities issued by us and certain interest rate hedges provided by lenders under our domestic credit facility or their affiliates are permitted to share in any collateral that may be granted in the event our debt rating declines. To the extent a lien is granted such lien will be subsequently released if we thereafter satisfy the minimum debt rating requirements set forth in our domestic credit facility for at least three consecutive calendar months.

Initially, and in the future our 7.5% Bonds and 5.5% Bonds are not expected to, be secured by any of our assets. We may be required in connection with any future indebtedness, or the terms with respect to existing indebtedness including under our domestic credit facility, to provide a lien against some or all of our assets. To the extent that a lien on our assets is not also granted on an equal and ratable basis with our domestic credit facility in favor of the 7.5% Bonds and 5.5% Bonds, then if we become insolvent or are liquidated, or in the event that our existing indebtedness becomes secured, as described above, and payment of such secured indebtedness is accelerated, the holders of the secured indebtedness will be entitled to exercise the remedies available to them under applicable law, including the ability to foreclose on and sell the assets securing such indebtedness in order to satisfy such indebtedness. In any such case, any remaining assets may be insufficient to repay the notes and our other unsecured indebtedness.

Our outstanding Notes subject us to additional risks.

Our Notes issued in May 2009 contain a net settlement feature, which entitles holders to receive cash up to $1,000 per Note and shares for any excess conversion value as determined by the respective governing indentures. Consequently, if a significant number of Notes are converted or redeemed, we would be required to make significant cash payments to the holders who convert or redeem the Notes.

In connection with the offering of the Notes, we entered into additional separate transactions for note hedges and warrant transactions. In connection with these transactions, the hedge counterparties and/or their respective affiliates may enter into various derivative transactions with respect to our common stock and may enter into or unwind various derivative transactions and/or purchase or sell our common stock in secondary market transactions prior to maturity of the Notes. These activities could have the effect of increasing or preventing a decline in, or having a negative effect on, the value of our common stock and could have the effect of increasing or preventing a decline in the value of our common stock during any conversion reference period related to a conversion of the Notes. The warrant transactions could separately have a dilutive effect from the issuance of our common stock pursuant to the warrants.

Our gaming machines and online operations may experience losses due to technical problems or fraudulent activities.

Our success depends on our ability to avoid, detect, replicate and correct software and hardware anomalies and fraudulent manipulation of our gaming machines. We incorporate security features into the design of our gaming machines and other systems, including those responsible for our online operations, which are designed to prevent us and our patrons from being defrauded. We also monitor our software and hardware to avoid, detect and correct any technical errors. However, there can be no guarantee that our security features or technical efforts will continue to be effective in the future. If our security systems fail to prevent fraud or if we experience any significant technical difficulties, our operating results could be adversely affected. Additionally, if third parties breach our security systems and defraud our patrons, or if our hardware or software experiences any technical anomalies, the public may lose confidence in our gaming machines and operations or we could become subject to legal claims by our customers or to investigation by gaming authorities.

Our gaming machines have experienced anomalies and fraudulent manipulation in the past. Games and gaming machines may be replaced by casinos and other gaming machine operators if they do not perform according to expectations, or may be shut down by regulators. The occurrence of anomalies in, or fraudulent manipulation of, our gaming machines may give rise to claims for lost revenues and related litigation by our customers and may subject us to investigation or other action by gaming regulatory authorities including suspension or revocation of our gaming licenses, or disciplinary action.

Business combinations and investments in intellectual properties or affiliates present risk, and we may not be able to realize the financial and strategic goals that were contemplated at the time of the transaction, which could materially affect our financial results.

We have invested in strategic business combinations and acquisitions of important technologies and IP that we believe will expand our geographic reach, product lines, and/or customer base. We may encounter difficulties in the assimilation of acquired operations, technologies and/or products, or an acquisition may prove to be less valuable than the price we paid. We also may encounter difficulties applying our internal controls to an acquired business. Any of these events or circumstances may have an adverse effect on our business by requiring us to, among other things, record substantial impairment charges on goodwill and other intangible assets, resulting in a negative impact on our operating results.

Moreover, as we continue the process of evaluating our business in conjunction with an assessment of our long-term strategic goals, we will also further evaluate past and potential investments to determine if and how they will fit into our organizational structure going forward. If an event or change occurs in affiliate relationships or agreements associated with business combinations, we may be required to reassess cash flows, recoverability, useful lives, and fair value measurements, which may result in material impairment charges.

Failure to attract, retain and motivate key employees may adversely affect our ability to compete.

Our success depends largely on recruiting and retaining talented employees. The market for qualified executives and highly skilled, technical workers is intensely competitive. The loss of key employees or an inability to hire a sufficient number of technical staff could limit our ability to develop successful products and cause delays in getting new products to market.

Investments and development financing loans could adversely impact liquidity or cause us to incur loan losses or record a charge to earnings if our investments become impaired.

We invest in and/or provide financing for expansion or construction of gaming locations and other business purposes, including locations abroad. Such investment and financing activities subject us to increased credit risk in certain regions, which could be exacerbated by current unfavorable economic conditions or other political or economic instability in those regions. We monitor our investments and financing activities to assess impairment on a quarterly basis.

We have in the past and may in the future incur losses on these types of investments and loans. Our results of operations, liquidity or financial position may be negatively impacted if we are unable to collect on loans or derive benefit from our investments.

Current environmental laws and regulations, or those enacted in the future, could result in additional liabilities and costs.

The manufacturing of our products may require the use of materials that are subject to a variety of environmental, health and safety laws and regulations (such as climate change legislation). Compliance with these laws could increase our costs and impact the availability of components required to manufacture our products. Violation of these laws may subject us to significant fines, penalties or disposal costs, which could negatively impact our results of operations, financial position or cash flows.

Item 1B. Unresolved Staff Comments

None

Item 2. Properties

Our properties consist primarily of facilities worldwide used for manufacturing, engineering, sales, corporate administration, customer service and technical support. We own our corporate headquarters in Reno, Nevada, which serves as our primary manufacturing, engineering and warehousing facility. We also own a Las Vegas, Nevada campus, which serves as our primary sales and service facility. Additional sales and service facilities worldwide are occupied under leases that expire at various times through 2020.

Square Footage Of Facilities At September 30, 2010

	Approximate Square Footage
	Owned		Leased
(in thousands)
North America (US and Canada)		1,856		419

International
Europe, the Middle East and Africa		149		98
Mexico and South/Central America		-		78
Asia, Australia, New Zealand, the Pacific		15		193

We expect our current properties will be adequate for our near-term business needs and that the productive capacity of our facilities is substantially utilized. In fiscal 2010, we discontinued operations and terminated all facility lease agreements in Japan. See Note 7 of our Consolidated Financial Statements for more information regarding discontinued operations.

Item 3. Legal Proceedings

IGT has been named in and has brought lawsuits in the normal course of business. We do not expect the outcome of these suits to have a material adverse effect on our results of operations, financial position, or cash flows. A description of certain of these matters is contained in Note 16 of our Consolidated Financial Statements and is incorporated herein by this reference.

Item 4. (Removed and Reserved)

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed and traded on the New York Stock Exchange under the symbol “IGT.”

	Quarters
	First		Second		Third		Fourth
Fiscal 2010
Stock price - high	$	22.42	$	21.94	$	21.86	$	16.90
Stock price - low		17.53		16.18		15.21		13.65
Dividends declared		0.06		0.06		0.06		0.06
Fiscal 2009
Stock price - high	$	18.18	$	14.24	$	18.15	$	23.30
Stock price - low		7.03		6.81		10.01		13.58
Dividends declared		0.15		0.06		0.06		0.06

We are currently restricted from declaring or making cash dividends in excess of certain amounts by the terms of our domestic credit facility as described in MDA-LIQUIDITY AND CAPITAL RESOURCES-CREDIT FACILITIES AND INDEBTEDNESS and Note 13 of our Consolidated Financial Statements.

As of November 29, 2010, there were approximately 2,900 record holders of IGT’s common stock and the closing price was $15.54.

IGT transfer agent and registrar

Wells Fargo Shareowner Services

161 North Concord Exchange

South St. Paul, MN 55075-1139

(800) 468-9716

www.wellsfargo.com/contactshareownerservices

Performance Graph

The following graph reflects the cumulative total return (change in stock price plus reinvested dividends) of a $100 investment in our common stock for five fiscal years ended September 30, 2010 in comparison to the Standard and Poor’s 500 Composite Index and two customized peer groups.

The old peer group consists of Bally Technologies, Inc., Progressive Gaming International Corporation, Scientific Games Corp., Shuffle Master, Inc., and WMS Industries, Inc. The new peer group excludes Progressive Gaming International Corporation, which declared bankruptcy and is not considered a comparable peer. The comparisons are not intended to be indicative of future performance of our common stock.

The following graph is not “soliciting material,” is not deemed filed with the SEC and is not to be incorporated by reference in any filing by us under the Securities Act of 1933, as amended (the Securities Act), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. The stock price performance included in this graph is not necessarily indicative of future stock price performance.

	2005		2006		2007		2008		2009		2010

International Game Technology	$	100.00	$	156.16	$	164.23	$	71.75	$	79.57	$	57.90
S&P 500		100.00		110.79		129.01		100.66		93.70		103.22
Old Peer Group		100.00		102.70		129.83		91.32		97.19		84.64
New Peer Group		100.00		109.17		141.57		101.78		108.48		94.48

Share Repurchases

The purpose of our 1990 common stock repurchase authorization, as amended, is to return value to our shareholders and reduce the number of shares outstanding. We use open market or privately negotiated transactions, as well as Rule 10b5-1 trading plans, depending on market conditions and other factors. The authorization does not specify an expiration date.

Our share repurchases for the quarter ended September 30, 2010 summarized below consist only of shares of common stock tendered by employees to satisfy tax withholding obligations arising from restricted stock or units vested under our stock incentive plan. The shares were repurchased for their fair market value on the vesting date and were not part of a publicly announced program to purchase our common stock.

Periods	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as part of a Publicly Announced Plan	Maximum Number of Shares Still Available for Purchase Under the Plan
					(millions)
July 4 - July 31, 2010	3,595	$	15.68	-	7.7
August 1 - August 28, 2010	2,380		15.71	-	7.7
August 29 - October 2, 2010	2,003		14.80	-	7.7
Total	7,978	$	15.47	-

Item 6. Selected Financial Data

The following selected financial highlights should be read in conjunction with Item 7, MDA, and Item 8, Financial Statements and Supplementary Data. All amounts have been updated to include the retrospective application of accounting standards adopted at the beginning of fiscal 2010 related to convertible debt, noncontrolling interests, and participating securities. See Notes 1 and 7 of our Consolidated Financial Statements for additional information about these recently adopted accounting standards and discontinued operations reclassified in the income statement.

As of and for Years Ended September 30,	2010			2009			2008			2007			2006
(In millions, except per share amounts)

Revenues	$	1,987.2		$	2,091.6		$	2,499.0		$	2,532.9		$	2,467.2
Gross profit		1,120.6			1,148.2			1,409.2			1,452.7			1,358.2
Operating income		433.3			338.1			669.8			788.4			722.0
Income from continuing operations, net of tax (1)		224.3			152.5			334.3			487.1			463.5
Discontinued operations, net of tax		(38.3	)		(25.7	)		(6.3	)		6.0			2.9
Net income		186.0			126.8			328.0			493.1			466.4

Basic earnings per share
Continuing operations	$	0.75		$	0.52		$	1.07		$	1.47		$	1.37
Discontinued operations	$	(0.13	)	$	(0.09	)	$	(0.01	)	$	0.02		$	0.01
Net income	$	0.62		$	0.43		$	1.06		$	1.49		$	1.38

Diluted earnings per share
Continuing operations	$	0.75		$	0.52		$	1.06		$	1.45		$	1.31
Discontinued operations	$	(0.13	)	$	(0.09	)	$	(0.01	)	$	0.02		$	0.01
Net income	$	0.62		$	0.43		$	1.05		$	1.47		$	1.32

Weighted average shares outstanding
Basic		296.3			293.8			308.0			330.1			336.8
Diluted		297.8			294.0			310.2			335.7			355.8

Cash dividends declared per share	$	0.24		$	0.33		$	0.57		$	0.53		$	0.51

Net operating cash flows	$	591.0		$	547.9		$	486.5		$	821.5		$	624.1
Net investing cash flows		(117.7	)		(288.4	)		(365.7	)		(296.7	)		(234.0	)
Net financing cash flows		(462.1	)		(381.2	)		(115.2	)		(556.5	)		(386.9	)
Capital expenditures (2)		240.2			257.4			298.2			344.3			310.5
Cash used for share repurchases		-			-			779.7			1,118.3			426.7

Cash and short-term investment securities (3)	$	248.9		$	247.4		$	374.4		$	400.7		$	589.1
Working capital		620.1			609.2			733.4			595.5			147.4
Total assets		4,007.0			4,328.1			4,546.9			4,147.8			3,892.0
Debt, net (current and non-current)		1,674.3			2,020.0			2,235.4			1,457.2			803.4
Jackpot liabilities (current and non-current)		570.9			588.1			650.7			643.1			546.7
Non-current liabilities		2,190.4			2,640.0			2,881.9			1,960.0			604.6
Total equity (4)		1,234.3			1,063.6			928.3			1,496.3			2,069.8

(1)

Fiscal 2010 included impairment of $61.3 million related to the Alabama charitable bingo market and $2.4 million related to DigiDeal tables (collectively $39.9 million after tax), and a loss of $20.5 million ($20.1 million after tax) associated with our affiliate investment in CLS.

Fiscal 2009 included a loss on other assets of $78.0 million ($48.8 million after tax) associated with WDG IP, restructuring charges of $33.9 million ($21.2 million after tax), and losses of $15.4 million ($14.2 million after tax) associated with affiliate investments in LVGI and PGIC.

(2)	Fiscal 2006 & 2007 capital expenditures included Las Vegas campus construction.

(3)	Includes restricted amounts.

(4)	Fiscal 2008 and 2007 equity was significantly reduced by treasury share repurchases.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following MDA is intended to enhance the reader’s understanding of our operations and current business environment. MDA is provided as a supplement to, and should be read in conjunction with, our Item 1, Business, and Item 8, Financial Statements and Supplementary Data.

Unless the context indicates otherwise, International Game Technology, IGT, we, our, or the Company refers to International Game Technology and its consolidated entities. Italicized text in this document with an attached superscript trademark or copyright notation indicates trademarks of IGT or its licensors. All comparisons herein refer to the fiscal year ended September 30, 2010 as compared with fiscal 2009, unless otherwise noted. As used in this report, “current” refers to the fiscal year ended September 30, 2010.

OVERVIEW

International Game Technology is a global company specializing in the design, manufacture, and marketing of electronic gaming equipment and systems products. We are a leading supplier of gaming products in substantially all legal jurisdictions worldwide and provide a diverse offering of quality products and services at competitive prices, designed to increase the potential for gaming operator profits by enhancing the player’s experience.

We manage our operations in two geographic segments, North America and International, with certain unallocated company-wide income and expenses managed at the corporate level. See BUSINESS SEGMENT RESULTS below and Note 21 of our Consolidated Financial Statements for additional segment information.

Demand for our gaming products and services has been negatively affected by global macroeconomic factors, as well as intense competition among suppliers. While our customers’ capital spending remains conservative due to continued economic uncertainty, we continue to focus our efforts on making IGT financially stronger and operationally more efficient. During fiscal 2010:

ª	We refinanced $300.0 million of debt to improve our borrowing flexibility by extending maturities. We issued 5.5% bonds due 2020 under our shelf registration statement and reduced the size of our domestic credit facility. We also reduced our outstanding debt obligations by $412.3 million.

ª	We managed our cost structure and fiscal 2010 operating expense decreased 15% from the prior year. Our operating margin improved to 22% from 16% in the prior year, largely due to the realization of operational efficiencies from our restructuring efforts.

We addressed the need for increased efficiency among our global research and development resources by unifying and standardizing platforms and processes, increasing focus with a streamlined portfolio of products, and increasing engineering efforts on sbX™ applications and content. In the first quarter of fiscal 2010, we installed the industry’s first large-scale GSA compliant server-based open platform. As of September 30, 2010, we had completed 19 sbX™ installations, with an additional five in-process, and numerous others in various stages of contract negotiation. We believe the open network approach is driving our customers and outside content developers to create applications for sbX™ that will differentiate the next-generation slot floor.

We continued to develop and deliver our latest product innovations. Gaming operations yields (revenue per unit per day) improved compared to the prior year in North America and International segments, but declined slightly overall due to the higher contribution from lower priced non-WAP units. Our new Sex and the City™ participation placements (non-WAP), with approximately 1,600 units deployed at September 30, 2010, performed well throughout fiscal 2010. We released over 100 new for-sale game titles in North America, with approximately 30% of new games for our legacy 80960 platform enabling customers to refresh their floors during these tough economic times. We sold 5,300 Dynamix™ promotional packages bundling one AVP® slot machine with two free 80960 platform conversions. This promotion allowed our customers to refresh three machines concurrently and enabled IGT to preserve floor space.

We continued to build and strengthen our senior management team, with the appointments of our chief operating officer, vice president of core products, chief marketing officer, and executive vice president of interactive new media, and centralized the leadership of research and development under our chief technology officer. Additionally, an experienced media executive was appointed to our Board of Directors.

We believe new market opportunities will arise when the economy improves and new jurisdictions consider gaming tax revenues as a means to address budget shortfalls. We are closely monitoring ongoing gaming actions in Maryland, Illinois, Massachusetts, Italy, Brazil, and Greece. We may also be negatively impacted by changes in existing gaming regulations or new interpretations of existing gaming laws that may hinder or prevent us from continuing to operate in jurisdictions where we currently do business. See further discussion surrounding regulatory challenges in Alabama in CONSOLIDATED RESULTS and BUSINESS SEGMENT RESULTS later in this MDA.

As part of our ongoing evaluation of long-term strategic goals, it is necessary to assess if and how existing investments will fit into our core business strategy. The resulting recognition of material losses or impairment and discontinued operations during the periods of this analysis is further discussed under CONSOLIDATED RESULTS and BUSINESS SEGMENT RESULTS later in this MDA.

During fiscal 2010, we discontinued our operations in Japan and divested our majority interest in Digideal. All prior year income statements and earnings related information reflect the reclassification of these operations to discontinued operations. See Note 7 of our Consolidated Financial Statements for additional information related to these discontinued operations.

RECENTLY ISSUED ACCOUNTING STANDARDS

Other recently issued accounting standards that may impact our financial statements, as well as those noted below in this MDA, are discussed further in Note 1 of our Consolidated Financial Statements.

Revenue Recognition For Software-enabled Products and Multi-element Arrangements

In October 2009, the FASB issued ASUs about revenue recognition for certain software-enabled products and multi-element arrangements. Under these ASUs, tangible products, containing both software and nonsoftware components that function together to deliver a tangible product’s essential functionality, are no longer subject to software revenue accounting. These ASUs also established a more economically aligned model for allocating revenues among deliverables in a multi-element arrangement, based on relative selling prices.

We elected to early adopt these ASUs prospectively for new or materially modified arrangements entered into on or after the beginning of fiscal 2010. See our revenue recognition accounting policies in Note 1 of our Consolidated Financial Statements for additional information about our application of these ASUs.

Convertible Debt Instruments

At the beginning of fiscal 2010, we adopted an ASU issued in May 2008 requiring the separation of liability (debt) and equity (conversion option) components for convertible debt instruments that may settle in cash upon conversion to reflect an effective nonconvertible borrowing rate when the debt was issued. We estimated the fair value of our convertible debt using similar debt instruments at issuance that did not have a conversion feature and allocated the residual fair value to an equity component that represents the estimated fair value of the conversion feature at issuance.

The adoption of this ASU reduced diluted EPS $0.06 in fiscal 2010, $0.08 in fiscal 2009, and $0.05 in fiscal 2008 related to additional noncash interest discussed below under MDA-CONSOLIDATED RESULTS—Other Income (Expense). Additionally, the adoption of this ASU decreased long-term debt, deferred tax assets and deferred offering costs, and increased paid-in-capital in shareholders’ equity. See Note 1 and Note 13 of our Consolidated Financial Statements for a comprehensive list of adjustments related to the retrospective application of this ASU and additional information about our convertible debt.

CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements were prepared in conformity with US GAAP. Accordingly, we are required to make estimates incorporating judgments and assumptions we believe are reasonable based on our historical experience, contract terms, trends in our company and the industry as a whole, as well as information available from other outside sources. Our estimates affect amounts recorded in the financial statements and actual results may differ from initial estimates.

We consider the following accounting estimates to be the most critical to fully understand and evaluate our reported financial results. They require us to make subjective or complex judgments about matters that are inherently uncertain or variable. The following accounting estimates are considered the most sensitive to changes from external factors.

Revenue Recognition

We receive revenues from the distribution of electronic gaming equipment and network systems, as well as licensing and services. Revenues are recognized when all of the following have been satisfied:

ª	persuasive evidence of an arrangement exists

ª	the price to the customer is fixed and determinable

ª	delivery has occurred and any acceptance terms have been fulfilled

ª	collection is reasonably assured

Determining whether these requirements have been met may require us to make assumptions and exercise judgment that could significantly impact the timing and amount of revenue reported each period. In addition, we may enter into arrangements which include multiple elements or deliverables, such as gaming devices bundled with software systems and services. In such cases additional judgments and estimates are necessary to ensure the appropriate amounts of revenue are recorded in a given period. These judgments relate primarily to the allocation of revenues based on VSOE or management’s best estimate of each element’s selling price, and may affect the amounts and timing of revenue recorded. If we are unable to establish VSOE for undelivered software and software-related elements, we may be required to defer software revenues in certain arrangements.

The application of our revenue recognition policies and changes in our assumptions or judgments affect the timing and amounts of our revenues and costs. Deferred revenue decreased to $90.2 million at September 30, 2010 from $122.0 million at September 30, 2009, primarily related to the completion of obligations under multiple element contracts. Complex systems and/or multiple element contracts may take several months to complete and deferred revenue may increase as our products evolve toward a more software systems-centric environment. Additionally, see discussion above under RECENTLY ISSUED ACCOUNTING STANDARDS—Revenue Recognition for Software-enabled Products and Multi-element Arrangements for information about how our revenue accounting changed in fiscal 2010.

Goodwill, Other Intangible Assets, Royalties, and Affiliate Investments

Impairment testing for goodwill, other intangibles, affiliate investments and royalties requires judgment, including the identification of reporting units, allocation of related goodwill, assignment of corporate shared assets and liabilities to reporting units, estimated cash flows, and determinations of fair value. While we believe our estimates of future revenues and cash flows are reasonable, different assumptions could materially affect the assessment of useful lives, recoverability and fair value. If actual cash flows fall below initial forecasts, we may need to record additional amortization and/or impairment charges.

Goodwill

We measure and test goodwill for impairment at least annually, or more often if there are indicators of impairment. The fair value of the reporting unit is first compared to its carrying amount including goodwill. If the fair value of the reporting unit is greater than its carrying amount, goodwill is not considered impaired. In the event that the fair value of the reporting unit is less than its carrying value, the amount of the impairment loss will be measured by comparing the implied fair value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized equal to that excess.

Our two reporting units, North America and International, were determined on the basis of customer regions and in accordance with accounting guidance on reporting units. Components below our North America and International business segments were evaluated to have similar economic characteristics and therefore aggregated. In determining the fair value of our reporting units, we apply the income approach using the DCF method. We then compare the implied valuation multiples (such as enterprise value to revenue, EBITDA and EBIT) of comparable gaming companies under the market approach to validate the reasonableness of our DCF results.

Our DCF analysis is based on the present value of two components: the sum of our five-year projected cash flows and a terminal value assuming a long-term growth rate. The cash flow estimates are prepared based on our business plans for each reporting unit, considering historical results and anticipated future performance based on our expectations regarding product introductions and market opportunities. The discount rates used to determine the present value of future cash flows were derived from the weighted average cost of capital of a group of comparable companies with consideration for the size and specific risks of each IGT reporting unit. The discount rate used for each reporting unit was 12% for our fiscal 2010 test and ranged from 12% to 13% for our 2009 test.

Our goodwill totaled $1.2 billion at September 30, 2010 and 2009. Our fiscal 2010 annual goodwill impairment test indicated the fair value of each reporting unit was significantly in excess of its carrying value. Inherent in such fair value determinations are significant judgments and estimates, including assumptions about our future revenues, profitability, cash flows, and long-term growth rates, as well as our operational plans and interpretation of current economic indicators and market valuations.

Changes in our assumptions used from the fiscal 2009 test to the fiscal 2010 test included updated five-year forecasts with reduced and delayed growth and lower discount rates. The fair value for North America reporting unit decreased 29% from fiscal 2009, and increased 27% for International. The excess of fair value over carrying value at the 2010 testing date was $1.8 billion for each reporting unit.

If our assumptions do not prove correct or economic conditions affecting future operations change, our goodwill could become impaired and result in a material adverse effect on our results of operations and financial position. To illustrate the sensitivity of the fair value calculations on our goodwill impairment test, we modified our 2010 test assumptions to create a hypothetical 50% decrease to the fair values of each reporting unit. The resulting hypothetical excess of fair value over carrying value would be approximately $0.6 billion for each reporting unit, and we would therefore have no impairment.

Other Intangibles

Our portfolio of other intangibles substantially consists of finite-lived patents, contracts, trademarks, developed technology, reacquired rights and customer relationships. We regularly monitor events or changes in circumstances that indicate the carrying value of these intangibles may not be recoverable or require a revision to the estimated remaining useful life. Our other intangibles totaled $202.1 million at September 30, 2010 and $259.2 million at September 30, 2009.

If an event or change occurs, we estimate cash flows directly associated with the use of the intangible to test recoverability and remaining useful lives based on the forecasted utilization of the asset and expected product revenues. In developing estimated cash flows, we incorporate assumptions regarding changes in legal factors, related industry climate, regulatory actions, contractual factors, operational performance and the company’s strategic business plans, as well as the effects of obsolescence, demand, competition, and other market conditions. When the carrying amount exceeds the undiscounted cash flows expected to result from the use and eventual disposition of a finite-lived intangible asset or asset group, we then compare the carrying amount to its current fair value. We estimate the fair value using prices for similar assets, if available, or more typically using a DCF model. We recognize an impairment loss if the carrying amount is not recoverable and exceeds its fair value.

Royalties

We also regularly evaluate the estimated future benefit of prepaid and deferred royalties to determine amounts unlikely to be realized from forecasted sales or placements of our games. The carrying value of our prepaid and deferred royalties totaled $63.0 million at September 30, 2010 and $101.5 million at September 30, 2009.

Affiliate investments

Our affiliate investments consist of strategic alliances with other gaming technology companies. We regularly monitor events or changes in circumstances that indicate the carrying value of these affiliate investments may be impaired. Future adverse changes in market conditions or operating results related to these affiliates could impair our ability to recover part or all of an investment, causing us to record impairment or other losses.

In September 2010, we modified our relationship with CLS in conjunction with changes to our strategy in China. As part of the modification, we reduced the outstanding note receivable, accelerated payments due IGT, eliminated restrictions on IGT’s exclusivity and ability to sell CLS shares, and recorded a loss of $20.5 million. In fiscal 2009, we recorded losses of $78.0 million related to restructuring our relationship and strategy pertaining to the use of WDG IP rights and $13.3 million related to adverse changes in LVGI’s financial capacity and changes in our business strategy.

See Note 3 of our Consolidated Financial Statements for additional information about our affiliate investments.

Jackpot Liabilities and Expenses

A portion of our gaming operations recurring revenue arrangements incorporates IGT paid WAP jackpots for which we recognize corresponding jackpot liabilities and expense. Changes in our estimated amounts for WAP jackpot liabilities and associated jackpot expense are attributable to regular analysis and evaluation of the following factors:

ª	variations in slot play (frequency of WAP jackpots and patterns of coin-in driving WAP jackpot growth)

ª	volume (number of WAP units in service and levels of coin-in per unit)

ª	interest rate movements

ª	the size of base WAP jackpots (startup amount) at initial setup or after a WAP win

Interest rates applicable to jackpot funding vary by jurisdiction and are impacted by market forces, as well as winner elections to receive a lump sum payment in lieu of periodic annual payments. Current and noncurrent portions of jackpot liabilities, as well as jackpot expense, may also be impacted by changes in our estimates and assumptions regarding the expected number of future winners who may elect a lump sum payout.

Changes in prime and/or treasury and agency interest rates during a given period cause fluctuations in our jackpot expense largely due to the revaluation of future winner liabilities. The value of the liability (and related jackpot expense) increases when rates decline because it increases the cost to fund the liability. Conversely, when rates increase, jackpot liabilities are reduced as it costs less to fund the liability. Our results may be materially affected by significant changes in interest rates.

Our jackpot liabilities decreased to $570.9 million at September 30, 2010 compared to $588.1 million at September 30, 2009. Consolidated jackpot expense totaled $112.1 million for fiscal 2010, $129.3 million for fiscal 2009, and $160.0 million in fiscal 2008. The decline in jackpot expense for fiscal 2010 resulted from decreased WAP units in our installed base and favorable interest rate movements, partially offset by improved variations in slot play.

BUSINESS SEGMENT RESULTS, later in this MDA, provides additional details regarding the fluctuation in jackpot expense. Note 1 of our Consolidated Financial Statements summarizes our accounting policies related to jackpot liabilities and expense.

Inventory and Gaming Operations Equipment

The determination of obsolete or excess inventory requires us to estimate the future demand for our products within specific time horizons, generally one year or less. If we experience a significant unexpected decrease in demand for our products or a higher occurrence of inventory obsolescence because of changes in technology or customer requirements, we would recognize additional obsolescence charges. Inventory management remains an area of focus as we balance the need to maintain strategic inventory levels to ensure competitive lead times versus the risk of inventory obsolescence because of rapidly changing technology and customer requirements. The decrease in inventories to $97.6 million at September 30, 2010 from $157.8 million at September 30, 2009, was primarily related to lower product demand and cost containment efforts.

We are also required to estimate salvage values and useful lives for our gaming operations equipment. Trends in market demand and technological obsolescence may require us to record additional asset charges which would negatively impact gross profit.

Income Taxes

We conduct business globally and are subject to income taxes in US federal, state, local, and foreign jurisdictions. Determination of the appropriate amount and classification of income taxes depends on several factors, including estimates of the timing and probability of realization of deferred income taxes, reserves for uncertain tax positions, and income tax payment timing.

We record deferred tax assets and liabilities based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. The ability to realize the deferred tax assets is evaluated through the forecasting of taxable income in each jurisdiction, using historical and projected future operating results, the reversal of existing temporary differences, and the availability of tax planning strategies. Net deferred tax assets totaled $221.1 million at September 30, 2010 and $255.0 million at September 30, 2009.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Changes in tax laws, enacted tax rates, geographic mix, or estimated annual taxable income could change our valuation of deferred tax assets and liabilities, which in turn impacts our tax provision. We carefully monitor many factors, including the impact of current economic conditions, in our valuation of deferred tax assets. During fiscal 2010, we recorded additional valuation allowances of $25.5 million, primarily related to foreign deferred tax assets and capital losses. At September 30, 2010, our total valuation allowance of $62.6 million, related to investment write-downs, capital losses, net operating losses, and foreign deferred assets not expected to be fully realized because we cannot conclude that it is more likely than not that we will earn income of the specific character required to utilize these assets before they expire.

In the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We are required to recognize uncertain tax positions taken or expected to be taken in a tax return, when it is “more likely than not” to be sustained upon examination. This assessment further presumes that tax authorities evaluate the technical merits of transactions individually with full knowledge of all facts and circumstances surrounding the issue. The amount recognized in the financial statements is the largest benefit that we believe is more than 50% likely of being realized upon settlement. Changes in facts or information as well as the expiration of statutes of limitations and/or settlements with tax jurisdictions may result in material adjustments to these estimates in the future.

Our income tax provision will be impacted to the extent the final outcome of these tax positions differs from the amount recorded. At September 30, 2010, our unrecognized tax benefits totaled $83.8 million, of which $65.6 million would impact the effective tax rate if recognized. At September 30, 2009, our unrecognized tax benefits totaled $91.5 million, of which $70.2 million would impact the effective tax rate if recognized.

Our tax provision for fiscal 2010 was reduced by settlements with tax authorities, partially offset by increases in valuation allowances and uncertain tax positions. See Notes 1 and 17 of our Consolidated Financial Statements for additional information about our income taxes.

CONSOLIDATED RESULTS – A Year Over Year Comparative Analysis

										Favorable (Unfavorable)
	2010			2009			2008			10 vs 09						09 vs 08
(In millions except units & EPS)
Revenues	$	1,987.2		$	2,091.6		$	2,499.0		$	(104.4	)		-5	%	$	(407.4	)		-16	%
Gaming operations		1,101.0			1,167.0			1,328.4			(66.0	)		-6	%		(161.4	)		-12	%
Product sales		886.2			924.6			1,170.6			(38.4	)		-4	%		(246.0	)		-21	%
Machines		556.9			578.9			779.6			(22.0	)		-4	%		(200.7	)		-26	%
Non-machine		329.3			345.7			391.0			(16.4	)		-5	%		(45.3	)		-12	%
Gross profit	$	1,120.6		$	1,148.2		$	1,409.2		$	(27.6	)		-2	%	$	(261.0	)		-19	%
Gaming operations		662.8			678.6			773.1			(15.8	)		-2	%		(94.5	)		-12	%
Product sales		457.8			469.6			636.1			(11.8	)		-3	%		(166.5	)		-26	%
Gross margin		56	%		55	%		56	%	1			pp	2	%	(1		)	pp	-2	%
Gaming operations		60	%		58	%		58	%	2			pp	3	%	-			pp	-
Product sales		52	%		51	%		54	%	1			pp	2	%	(3		)	pp	-6	%
Units
Gaming operations installed base		57,000			61,300			60,500			(4,300	)		-7	%		800			1	%
Fixed		10,000			9,300			15,700			700			8	%		(6,400	)		-41	%
Variable		47,000			52,000			44,800			(5,000	)		-10	%		7,200			16	%
Product sales shipped (1)		41,200			52,400			68,300			(11,200	)		-21	%		(15,900	)		-23	%
New		13,400			22,500			30,600			(9,100	)		-40	%		(8,100	)		-26	%
Replacement		27,800			29,900			37,700			(2,100	)		-7	%		(7,800	)		-21	%
Product sales recognized (2)		43,200			49,700			66,200			(6,500	)		-13	%		(16,500	)		-25	%

Operating income	$	433.3		$	338.1		$	669.8		$	95.2			28	%	$	(331.7	)		-50	%
Operating margin		22	%		16	%		27	%	6			pp	38	%	(11		)	pp	-41	%
Income from continuing operations	$	224.3		$	152.5		$	334.3		$	71.8			47	%	$	(181.8	)		-54	%
Loss from discontinued operations		(38.3	)		(25.7	)		(6.3	)		(12.6	)		*			(19.4	)		*
Net income		186.0			126.8			328.0			59.2			47	%		(201.2	)		-61	%

Diluted EPS
Continuing operations	$	0.75		$	0.52		$	1.06		$	0.23			44	%	$	(0.54	)		-51	%
Discontinued operations	$	(0.13	)	$	(0.09	)	$	(0.01	)	$	(0.04	)		*		$	(0.08	)		*
Net income	$	0.62		$	0.43		$	1.05		$	0.19			44	%	$	(0.62	)		-59	%

(1) includes units where revenues were deferred to future periods
(2) correlates with revenues recognized during the period

Fiscal 2010 Compared With Fiscal 2009

Significant items affecting comparability included:

impairment charges of $63.7 million ($39.9 million after tax) in fiscal 2010, including $61.3 million related to the Alabama charitable bingo market and $2.4 million related primarily to remaining DigiDeal tables held by IGT, and loss on other assets of $78.0 million ($48.8 million after tax) in fiscal 2009, related to WDG IP as further discussed below under “Operating Expenses”

ª	restructuring charges of $4.7 million ($2.9 million after tax) in fiscal 2010 and $33.9 million ($21.2 million after tax) in fiscal 2009, as further discussed below under “Operating Expenses”

ª	investment losses of $20.5 million ($20.1 million after tax) in fiscal 2010 and $15.4 million ($14.2 million after tax) in fiscal 2009, as further discussed below under “Other Income (Expense)”

certain favorable discrete tax items of $36.7 million in fiscal 2010 related to settlements with tax authorities for fiscal years 2002 through 2005, partially offset by other changes in uncertain tax liabilities, and $17.1 million in fiscal 2009, including settlements with tax authorities for fiscal years 2000 and 2001

Increased operating income was largely the result of cost saving initiatives. Revenue declines in both gaming operations and product sales were primarily attributable to fewer new casino openings, additional competitive pressure and lower casino capital spending in an uncertain economy. North America revenue declines were partially offset by International revenue increases. Changes in foreign exchange rates increased revenues by approximately $28.7 million in fiscal 2010.

Operating income improvements were also due to lower restructuring and impairment and loss on other assets in fiscal 2010. Restructuring charges included in operating expenses related to the reorganization of certain US facilities in fiscal 2010 and to our global workforce reduction in fiscal 2009. Additionally, fiscal 2009 included an extra week due to our 52/53-week accounting year, primarily increasing gaming operations revenues and gross profit, as well as operating expenses.

The early adoption of revenue recognition ASUs for certain software-enable products and multi-element arrangements at the beginning of fiscal 2010 resulted in the recognition of $46.4 million of revenues in fiscal 2010 that would have been recognized in later periods under the prior accounting guidance. See additional discussion about these ASUs under RECENTLY ISSUED ACCOUNTING STANDARDS above in this MDA.

Loss from Discontinued Operations

During fiscal 2010, we closed of our operations in Japan due to difficult market conditions and changes in our core business strategy. In September 2010, we also divested our equity interest in DigiDeal and ceased to manufacture and distribute DigiDeal products. Results from Japan and DigiDeal were reclassified to discontinued operations for all periods presented. See Note 7 of our Consolidated Financial Statements for additional information about discontinued operations.

Alabama

The legality of electronic charitable bingo in Alabama was challenged during fiscal 2010 and continues to be discussed. Legislation that would have allowed Alabama voters to decide on the addition of a state constitutional amendment authorizing electronic bingo failed to pass the legislative session concluded in April 2010. As of September 30, 2010, three locations in Alabama where IGT placed electronic bingo machines, VictoryLand, Country Crossing, and Greenetrack, have closed their charitable bingo operations. On October 4, 2010, the Department of Justice executed grand jury indictments for eleven individuals who are charged with conspiracy to bribe Alabama legislators for their support of proposed legislation to legalize charitable bingo in Alabama.

Individuals associated with VictoryLand and Country Crossing were among those charged in the grand jury indictments. In November 2010, the Governor-elect of Alabama indicated that he will consider allowing legal charitable bingo operations to re-open, although the likelihood and timing of any such decision is currently unknown.

Consolidated Gaming Operations

Gaming operations revenues and gross profit decreased primarily due to a lower installed base, largely from the closure of certain charitable bingo facilities in Alabama, and the continued shift toward lower price-point machines. Additionally, the extra week in fiscal 2009 contributed approximately $22.4 million in consolidated gaming operations revenues and approximately $11.5 million in gross profit. Growth in our International installed base partially offset declines in North America. Decreased average revenues per unit reflect our continued shift toward lower price-point non-WAP machines.

Gross margins improved due to reduced costs, primarily depreciation, royalties, and jackpot expense. Jackpot expense decreased $17.2 million overall, $17.5 million due to fewer WAP units and $3.8 million due to favorable interest rate effect, partially offset by variations in slot play. See MDA—CRITICAL ACCOUNTING ESTIMATES—Jackpot Liabilities and Expenses for additional information about factors affecting jackpot expense.

Consolidated Product Sales

Product sales revenues and gross profit decreased primarily due to decreased units in North America from fewer new openings, partially offset by increased International units and favorable changes in foreign exchange rates. Gross margin improvement was primarily attributable to reduced material costs and obsolescence.

Deferred revenue decreased $31.8 million during fiscal 2010 to $90.2 million at September 30, 2010, primarily related to the completion of obligations under multi-element contracts. During fiscal 2010, we shipped 3,700 units for which revenues were deferred and recognized revenues for 5,700 units previously shipped, for a net decrease of 2,000 units in deferred revenue.

Fiscal 2009 Compared With Fiscal 2008

Consolidated net income declined in fiscal 2009 primarily due to reduced volumes, largely attributable to the impact of the extended economic downturn on casino play levels and capital spending, as well as increased competition. Comparability was also significantly affected by:

ª	fiscal 2009 non-cash loss of $78.0 million ($48.8 million after tax) associated with our WDG IP transaction

ª	fiscal 2009 workforce restructuring costs of $33.9 million ($21.2 million after tax)

ª	fiscal 2008 write-downs of investments in unconsolidated affiliates totaling $28.6 million

Increased interest expense related to debt refinancing, additional bad debt provisions, and unfavorable changes in foreign exchange rates further burdened fiscal 2009 earnings. Unfavorable changes in foreign exchange rates accounted for approximately $76.0 million of the decrease in fiscal 2009 revenues.

Although fiscal 2009 included an extra week due to our 52/53-week accounting year, the benefit to gaming operations was more than offset by increased operating expenses.

Consolidated Gaming Operations

Revenues and gross profit from gaming operations declined primarily due to lower play levels and continued shifts in our installed base mix toward lower-yielding non-WAP machines. Non-WAP units generally provide lower revenues and gross profit because they carry a lower pricing structure and generate lower average play levels. At the same time, non-WAP units provide higher gross margin because there is no associated jackpot expense. Growth in our International installed base partially offset declines in North America, reflecting strength in our geographic diversity.

Jackpot expense decreased $35.0 million in fiscal 2009 primarily due to fewer WAP units and decreased play levels, partially offset by unfavorable interest rate changes. Interest rate movement increased jackpot expense by $2.2 million in fiscal 2009 compared to the prior year.

The extra week during fiscal 2009 contributed approximately $22.4 million in gaming operations revenues and $11.5 million in gross profit.

Consolidated Product Sales

Revenues and gross profit for product sales declined from the prior year primarily due to lower unit volume across most markets, largely attributed to fewer new openings and weakness in replacement demand. International markets were further impacted by unfavorable changes in foreign exchange rates. Gross margin was negatively impacted by reduced volume, as well as higher systems upgrade costs and fewer new systems installations. Consolidated product sales margins fluctuate depending on the geographic mix and types of products sold.

Deferred revenue increased $59.9 million during fiscal 2009 to $122.0 million at September 30, 2009, primarily as a result of multi-element contracts with systems software and machines bundled together. During fiscal 2009, we shipped 5,000 units for which revenues were deferred and recognized revenues for 2,300 units previously shipped, for a net growth of 2,700 units in our deferred revenue balance.

Operating Expenses

										Favorable (Unfavorable)
	2010			2009			2008			10 vs 09				09 vs 08
(In millions)
Selling, general and administrative	$	343.8		$	414.8		$	445.9		$	71.0	17	%	$	31.1		7	%
Research and development		200.1			204.1			216.5			4.0	2	%		12.4		6	%
Depreciation and amortization		75.0			79.3			75.4			4.3	5	%		(3.9	)	-5	%
Restructuring		4.7			33.9			1.6			29.2	86	%		(32.3	)	*
Impairment and loss on other assets		63.7			78.0			-			14.3	18	%		(78.0	)	-
Total operating expenses	$	687.3		$	810.1		$	739.4		$	122.8	15	%	$	(70.7	)	-10	%
Percent of revenues		35	%		39	%		30	%

Fiscal 2010 Compared With Fiscal 2009

The decrease in operating expenses in fiscal 2010 was primarily due to reduced restructuring and impairment and loss on other assets, expense reduction efforts and lower bad debt. Bad debt provisions decreased $30.0 million, excluding the Alabama impairment discussed below, as fiscal 2009 included higher customer reserves resulting from the economic downturn. Additionally, fiscal 2009 included an extra week, which added approximately $12.6 million to operating expenses and the impact of foreign currency exchange increased operating expenses by approximately $6.0 million during fiscal 2010 compared to fiscal 2009.

With the Alabama regulatory challenges described above, we recognized $61.3 million of impairment charges in fiscal 2010, including allowances for notes and accounts receivable of $54.7 million and gaming operations equipment impairment of $6.6 million. The remaining net carrying amount of our related assets at September 30, 2010 totaled $33.0 million.

Fiscal 2010 restructuring charges related primarily to the reorganization of certain US facilities and for fiscal 2009 related primarily to global workforce reductions. See Note 2 of our Consolidated Financial Statements for additional information about our restructuring charges.

Fiscal 2009 Compared With Fiscal 2008

The increase in operating expenses in fiscal 2009 was primarily due to the loss on other assets associated with our WDG IP and restructuring charges, partially offset by cost reduction efforts. Decreases in staffing costs, professional fees, advertising, supplies, and travel were partially offset by higher bad debt provisions, up $25.1 million during fiscal 2009 due to certain specific customer credit concerns amidst the economic downturn. Additionally, the extra week of operations added $12.6 million and the impact of foreign currency exchange reduced operating expenses by approximately $24.2 million during fiscal 2009 compared to fiscal 2008. See Note 3 of our Consolidated Financial Statements for additional information about WDG IP.

Our fiscal 2009 cost rationalization efforts were executed through workforce reduction and other non-wage cost controls. We reduced our global workforce by approximately 16% during fiscal 2009 from September 30, 2008 levels, through a combination of voluntary and involuntary separation arrangements. Restructuring charges included cash severance and one-time termination costs, reduced by stock compensation forfeitures.

Other Income (Expense)

										Favorable (Unfavorable)
	2010			2009			2008			10 vs 09					09 vs 08
(In millions)
Interest Income	$	61.2		$	61.8		$	67.4		$	(0.6	)	-1	%	$	(5.6	)	-8	%
WAP investments		24.9			27.9			32.2			(3.0	)	-11	%		(4.3	)	-13	%
Receivables and investments		36.3			33.9			35.2			2.4		7	%		(1.3	)	-4	%
Interest Expense		(161.7	)		(159.2	)		(123.3	)		(2.5	)	-2	%		(35.9	)	-29	%
WAP jackpot liabilities		(24.6	)		(27.4	)		(28.6	)		2.8		10	%		1.2		4	%
Borrowings		(107.4	)		(101.9	)		(71.5	)		(5.5	)	-5	%		(30.4	)	-43	%
Convertible debt equity discount		(29.7	)		(29.9	)		(23.2	)		0.2		1	%		(6.7	)	-29	%
Other		(19.8	)		(21.4	)		(36.3	)		1.6		7	%		14.9		41	%
Total other income (expense)	$	(120.3	)	$	(118.8	)	$	(92.2	)	$	(1.5	)	-1	%	$	(26.6	)	-29	%

Retrospective Application

All prior years presented include the retrospective application of accounting guidance adopted at the beginning of fiscal 2010 requiring the separation of liability and equity components of our convertible debt to reflect an effective nonconvertible borrowing rate at issuance. Additional amortization related to convertible debt equity discount required under this guidance increased interest expense $29.7 million for fiscal 2010, $29.9 million for fiscal 2009, and $23.2 million in fiscal 2008, and reduced Debenture repurchase gains $5.2 million in fiscal 2009. See Note 1 and Note 13 of our Consolidated Financial Statements for additional information about the impact of this accounting guidance.

Fiscal 2010 Compared With Fiscal 2009

The unfavorable variance in total other income (expense) was primarily due to increased interest expense resulting from higher borrowing costs. WAP interest income and expense relates to previous jackpot winner liabilities and accretes at approximately the same rate. WAP interest income also includes earnings on restricted cash and investments held for future winners.

“Other” expense included affiliate investment losses primarily related to changes in our core business strategy of $20.5 million on our CLS notes receivable in fiscal 2010 and $15.4 million on LVGI and PGIC in fiscal 2009. See Note 3 of our Consolidated Financial Statements for additional information about affiliate investments.

Fiscal 2009 Compared With Fiscal 2008

The unfavorable variance in fiscal 2009 compared with fiscal 2008 in total other income (expense) was primarily due to higher interest expense, partially offset by reduced investment write-downs. Higher interest costs were primarily due to higher rates on refinancing completed in June 2009 and included non-recurring refinancing charges of $4.4 million. The extra week in fiscal 2009 also contributed to higher interest expense.

Fiscal 2009 included affiliate investment write-downs of $13.3 million for LVGI and $2.1 million for PGIC compared to $21.4 million for CLS and $7.2 million for PGIC in fiscal 2008, driven by the economic downturn and changes in our core business strategy.

Income Tax Provision

										Favorable (Unfavorable)
	2010			2009			2008			10 vs 09			09 vs 08
(In millions)
Income tax provision	$	88.7		$	66.8		$	243.3		$	(21.9	)	$	176.5
Effective tax rate		28.3	%		30.5	%		42.1	%	2.2		pp	11.6		pp

Our effective tax rate on income from continuing operations for fiscal 2010 benefited from settlements with tax authorities of $50.9 million as the IRS closed its examination of our tax returns for fiscal 2002 through 2005. In general, we are no longer subject to any significant US federal, state, local or foreign income tax examination by tax authorities for years before fiscal 2004. The benefit was partially offset by increases in valuation allowances of $7.5 million and uncertain tax positions of $15.5 million.

Our effective tax rate for fiscal 2009 benefited from settlement with tax authorities, partially offset by increases in valuation allowance established against foreign deferred tax assets not likely to be realized. See Note 17 of our Consolidated Financial Statements for additional information about income taxes.

BUSINESS SEGMENT RESULTS – A Year Over Year Comparative Analysis

Operating income for each regional segment below reflects applicable operating expenses. See Note 21 of our Consolidated Financial Statements for additional business segment information.

North America

										Favorable (Unfavorable)
	2010			2009			2008			10 vs 09						09 vs 08
(In millions except units)
Revenues	$	1,428.4		$	1,629.4		$	1,905.5		$	(201.0	)		-12	%	$	(276.1	)		-14	%
Gaming operations		933.0			1,012.0			1,178.8			(79.0	)		-8	%		(166.8	)		-14	%
Product sales		495.4			617.4			726.7			(122.0	)		-20	%		(109.3	)		-15	%
Machines		268.2			376.9			432.1			(108.7	)		-29	%		(55.2	)		-13	%
Non-machine		227.2			240.5			294.6			(13.3	)		-6	%		(54.1	)		-18	%
Gross profit	$	800.9		$	892.4		$	1,079.9		$	(91.5	)		-10	%	$	(187.5	)		-17	%
Gaming operations		541.1			578.3			686.8			(37.2	)		-6	%		(108.5	)		-16	%
Product sales		259.8			314.1			393.1			(54.3	)		-17	%		(79.0	)		-20	%
Gross margin		56	%		55	%		57	%	1			pp	2	%	(2		)	pp	-4	%
Gaming operations		58	%		57	%		58	%	1			pp	2	%	(1		)	pp	-2	%
Product sales		52	%		51	%		54	%	1			pp	2	%	(3		)	pp	-6	%
Units
Gaming operations installed base		40,900			45,500			47,300			(4,600	)		-10	%		(1,800	)		-4	%
Fixed		7,100			6,500			6,800			600			9	%		(300	)		-4	%
Variable		33,800			39,000			40,500			(5,200	)		-13	%		(1,500	)		-4	%
Product sales shipped		18,100			26,400			37,100			(8,300	)		-31	%		(10,700	)		-29	%
New		5,700			15,600			20,600			(9,900	)		-63	%		(5,000	)		-24	%
Replacement		12,400			10,800			16,500			1,600