CONTENTS
CEO STATEMENT.................................................................................................................................
1. STRATEGIC REPORT.......................................................................................................................
Key Performance Indicators.......................................................................................................
Business Overview......................................................................................................................
Financial Performance.................................................................................................................
Market Trends...............................................................................................................................
Section 172 Statement.................................................................................................................
Corporate Social Responsibility.................................................................................................
Principal Risks and Uncertainties..............................................................................................
2. DIRECTORS' REMUNERATION REPORT........................................................................................
Annual Statement.........................................................................................................................
Remuneration Report...................................................................................................................
Remuneration Policy....................................................................................................................
3. DIRECTORS' REPORT......................................................................................................................
4. INDEPENDENT AUDITORS’ REPORT..............................................................................................
5. FINANCIAL STATEMENTS...............................................................................................................
Consolidated Financial Statements...........................................................................................
4
7
8
9
19
28
30
36
42
48
48
50
62
76
82
90
90
Parent Financial Statements.......................................................................................................
165
Annual Report and Accounts 2020 Page | 3
CEO STATEMENT
we expected to be significantly impacted by the
pandemic.
The aforementioned swift actions and cost-saving
measures applied to manage the crisis at the outset,
combined with the resilient nature of our business
and diversity of our portfolio, allowed us to achieve
results that helped mitigate the pandemic impact.
for
financial
flexibility
increased
In addition, we successfully amended our senior
revolving credit facilities and our term loan facility to
allow
and
demonstrated efficient access to the capital markets
with the issuance of notes with an 8-year term at the
Company’s lowest historical interest rate for U.S.
Dollar denominated notes. The proceeds were used
partially to retire a portion of our 2022 USD bonds
and partially to build additional liquidity to our balance
sheet.
Dear Stakeholder,
IGT’s business showed extraordinary
resilience
despite the unique circumstances that COVID-19
brought upon our industry and the world in 2020. We
adapted to new ways of working and successfully
navigated through unprecedented challenges. I am
grateful for the hard work and dedication of our
employees who continue to go above and beyond for
our customers, shareholders, and each other.
When the virus began to have an impact in the
countries where we do business, the safety and well-
being of our employees and customers around the
globe became our top priority. A cross-functional
COVID-19 crisis management team was created to
execute robust business continuity plans and ensure
that we had the tools in place to support our
customers.
As more fully described in the Financial Performance
section of the Strategic Report, the pandemic impact
was significant to our financial results in 2020, as
revenue fell 23% with a more severe decline affecting
our Gaming business, while Lottery, despite an initial
decline suffered at the outset of the pandemic, was
able to recover swiftly with a resilient performance in
the second half of the year. The impact from the
revenue decline was partially mitigated by actions
taken to preserve cash across our business portfolio,
which resulted in $365 million of temporary cost
savings and $138 million of capital expenditure
avoidance. Despite these actions, we recorded an
operating loss of $91 million, which included a $296
million
impairment charge. This
reduced the value of our former International and
North America Gaming and Interactive segments that
interim goodwill
focused on
Streamlining the Business
In July 2020, we announced a new organizational
structure primarily
two business
segments, Global Lottery and Global Gaming, with a
streamlined corporate support function. This change
was designed to provide greater responsiveness to
customers and players, increase our effectiveness,
harmonize best practices across both the B2B and
B2C channels in each product category, and increase
organizational efficiency.
Additionally, a New Business and Strategic Initiatives
group was created for managing new in-country
initiatives during the start-up phase, and offering on-
demand commercial support globally for key accounts
with multiple product requirements.
In late 2020, we agreed to sell our Italian businesses
relating to B2C gaming machines, sports betting and
digital gaming to Gamenet Group S.p.A., a leading
company in the Italian regulated gaming sector. This
agreement allows us to focus on our Italian lottery
contracts, which continue to be top strategic priorities.
It also helps improve our portfolio performance and
supports equity market re-rating objectives. We
expect this transaction to be finalized in the first half
of 2021.
Global Lottery
We streamlined our lottery organization to provide
better insight into the unique attributes of our Global
Lottery business. Lottery has consistently provided
stability in our quarterly earnings, and throughout the
pandemic, it demonstrated substantial strength. In
fact, despite global game and market closures at the
onset of the pandemic, we achieved record revenue
and profit levels in the second half of the year. In the
fourth quarter, global same-store sales grew by 8%.
For the full year, North America same-store sales
Annual Report and Accounts 2020 Page | 4
grew by 7%, marking the strongest growth for instants
and draw games we have seen in the region in seven
years.
Our lottery leadership was strengthened in 2020 with
new long-term facilities management contracts in
certain jurisdictions including Nebraska, Poland, and
the Czech Republic, and extensions in New York and
Tennessee. We also signed a six-year primary instant
ticket contract in Virginia, displacing the incumbent.
Instant ticket extensions were awarded to us in
Minnesota, Missouri, and Washington, D.C.
IGT continues to lead the lottery industry through new
retailer experiences such as our GameTouch™ 20
self-service vending machines or in-lane solutions;
increased player engagement solutions such as
mobile convenience apps; and gameplay mechanics
such as IGT’s proprietary Cash Pop™ game or $2
lotto with the double play add-on feature. We have a
steady long-term growth profile, and our Global
Lottery outlook remains compelling.
Global Gaming
The Global Gaming business was significantly
impacted by the pandemic as casinos throughout the
world were forced to shut down. Despite these
challenges, we successfully propelled our leadership
in cashless gaming, introduced new hardware and
game content, and expanded our PlayDigital and
PlaySports footprint, positively positioning us for
strong post-pandemic success. Our B2B digital and
betting service revenue grew nearly 50% in 2020, led
by iGaming and iLottery growth.
new growth opportunities such as the launch of the
Historical Horse Racing solutions, entry
into
Pennsylvania route market, and the debut of IGT’s
Reel Poker™ games on VLTs in Louisiana.
Channel expansion continues to be an area of focus,
and we see significant opportunity for iLottery and
iGaming. The pandemic heightened this area of
opportunity as many jurisdictions were faced with
stay-at-home orders. We expect to be a market
leading provider of digital gaming technology and
other solutions with 20%-30% of the North America
iGaming market in the near-term as momentum
grows. We are also well-positioned for further iLottery
expansion given our dominant lottery technology
presence in the U.S.
in wagers
IGT’s PlaySports sports betting platform continues to
be one of the leading solutions in the U.S., with
deployments in 16 of the 19 states that have
regulated sports betting. Our systems processed $5
billion
for
approximately one-third of the U.S. market, driven by
strategic partnerships with FanDuel Group, Boyd
Gaming, and the National Basketball Association
(“NBA”). Additionally, we enhanced our offering with
an in-house trading team, providing customers with
an “all-in-one” sports betting solution.
in 2020, accounting
We see tremendous opportunity in 2021 to expand
and grow our Global Gaming businesses as casinos
continue to reopen and capacity levels increase, and
as more states plan to regulate digital gaming and
sports betting.
risen
IGT cashless solution known as Resort Wallet™,
have
in prominence as casinos have
implemented increased distancing and sanitization
protocols. Resort Wallet is part of the award-winning
IGT ADVANTAGE® casino management system
solution and has been implemented at Resorts World
IGTPay™, our proven
Catskills
proprietary external funding gateway, is also currently
in operation at Svenska Spel venues throughout
Sweden.
in New York.
Our Commitment to Corporate Social
Responsibility
IGT’s corporate social responsibility strategy
is
centered on four key priorities: valuing our people,
advancing responsibility, supporting our communities,
and
operations. Our
to employees’ well-being, high
commitments
standards of integrity and ethical conduct, diversity
and inclusion, and professional development are
constantly improving our Company from within.
sustainable
fostering
We diversified our hardware portfolio in 2020. We
expanded our Peak series cabinets with launches of
the PeakBarTop™, PeakSlant32™, PeakSlant49™
and PeakSlant49™ Wheel gaming machines. IGT
also won three awards, the most of any gaming
supplier, as part of Casino Journal’s esteemed 2020
Innovative Gaming Technology
“Top 20 Most
game,
3
Awards.” Our Hexbreaker®
PeakBarTop cabinet, and PlaySports Bank and
PlaySports Pod were all winners.
slots
Our experience in developing the industry’s best
specialty market innovations was highlighted with
In 2020, we earned notable achievements such as
the Sustainable Business Award in the Supplier
category at the 2020 Industry Community Awards,
and our 2018 Sustainability Report ranked in the top
10 worldwide in the Credibility Through Assurance
category as part of the 2020 Corporate Register
Reporting Awards. We were also recertified by the
Global Gambling Guidance Group for our digital and
gaming operations. In addition, IGT was rated as an
“outperformer” in Sustainalytics’ 2020 Environmental,
Social and Governance (“ESG”) report, and we
received a strong 4.6 out of 5 ESG rating from FTSE
Russell.
Annual Report and Accounts 2020 Page | 5
Diversity and Inclusion
In 2020, we demonstrated our commitment
to
diversity and inclusion at the highest level. We
doubled the number of women reporting to the CEO
and increased the number of females on our Board of
Directors.
recently
launched
We
the Advancing Cultural
Education (ACE) group at IGT, which is dedicated to
advancing people of African descent within the
gaming industry through professional development,
networking, promoting
inclusion and diversity, a
sense of belonging, and creating positive connections
within our communities.
IGT showcased our diversity and inclusion leadership
when we were invited to join the Global Workplace
Code of Practice steering committee. Additionally, we
were recognized as one of 325 global companies
across 50 industries selected for the 2020 Bloomberg
Gender-Equality
Index. This honor distinguishes
companies committed to advancing women’s equality
and reporting gender data transparently.
Looking Ahead
Our 2020 results confirm the resiliency of IGT’s
business and demonstrate the advantage of having a
diverse mix of business across products and
geographies. From the beginning of the pandemic,
we have proved our ability to be very nimble in driving
operational leverage, and we remain committed to
doing so. We are well-positioned to benefit from a
global recovery as we focus on bringing the richest
player experiences and compelling solutions
to
market, while adhering to strict capital allocation
disciplines.
Once again, I want to thank our people for the
dedication they have shown in the last year, despite
the challenges at hand, and also thank our customers
for
I wish you all
their continued partnership.
continued health and well-being for 2021.
Marco Sala
Chief Executive Officer
Annual Report and Accounts 2020 Page | 6
1. STRATEGIC REPORT
The Board of Directors (the "Directors" or the "Board") present their Strategic Report on International Game
Technology PLC (the "Parent") and its subsidiaries (together, the "Company" or "IGT") for the year ended December
31, 2020.
The consolidated balance sheet on page 91 presents the Company's financial position at December 31, 2020 and
December 31, 2019. Movements in cash balances are presented in the consolidated statement of cash flows.
Material assets and liabilities have been disclosed within the respective notes to the consolidated financial
statements. Net assets were $1.2 billion and $2.2 billion at December 31, 2020 and 2019, respectively. Cash and
cash equivalents were $0.9 billion and $0.7 billion at December 31, 2020 and 2019, respectively.
OPERATIONAL HIGHLIGHTS
•
Focused on the COVID-19 pandemic by ensuring
the health and safety of our employees, quickly
implementing robust business continuity plans,
taking swift action on cash preservation and cost
structure, and increasing customer engagement
to help them navigate the crisis
Agreed to sell 100% of Italian B2C gaming
machine, sports betting and digital gaming
businesses to Gamenet Group S.p.A.
•
• Global
Lottery
demonstrated
substantial
resilience as revenue and operating income from
the segment was $2.2 billion and $644.1 million,
respectively
•
•
•
• Global Gaming revenue and operating loss of
$953.2 million and $202.0 million, respectively
• Won significant long-term lottery contracts in
Virginia, Nebraska, Poland and Czech Republic
Revolutionized cashless gaming through Resort
Wallet in New York, Nevada and Sweden
Expanded Peak series cabinets with launches of
PeakBarTop™, PeakSlant32™, PeakSlant49™
and PeakSlant49™ Wheel
The growing acceptance of digital across
iGaming, sports betting, and iLottery propelled a
nearly 50% increase in service revenue for our
B2B digital and betting activities
Signed strategic sports betting partnerships with
FanDuel, Boyd Gaming, and the NBA
IGT PlaySports is the leading sports betting
solution in the U.S. and in 2020, it expanded
sports betting operations to 16 states
Introduced full-service in-house trading team to
enhance the entire PlaySports offering enabling
an
for
“all-in-one” sports betting solution
operators
•
•
•
•
•
•
•
•
•
•
CORPORATE HIGHLIGHTS
•
• Massimiliano
Restructured the business into two business
segments to enhance growth potential – Global
Lottery, led by Fabio Cairoli and Global Gaming,
led by Renato Ascoli
Created a new business function, New Business
and Strategic Initiatives, led by Walter Bugno,
Executive Vice President
Dorothy Costa, Global Head of People and
Transformation, and Christopher Spears, Senior
Vice President and General Counsel, were both
appointed to IGT’s Senior Leadership Team
joined
(Max) Chiara
IGT as
Executive Vice President and Chief Financial
Officer, and a member of the Board
Beatrice Bassey was appointed as an
Independent Director of the Board; Paget Alves
stepped down
Scott Gunn, Senior Vice President of Corporate
Public Affairs, was inducted into Public Gaming
Research Institute’s Lottery Industry Hall of Fame
Selected as one of 325 companies across 50
industries
the 2020 Bloomberg Gender-
Equality
Index, which highlights companies
committed to advancing women’s equality and
transparently reporting gender data
Recognized as the only gaming company finalist
in
for
the 2020 CR Reporting Awards
Sustainability Reporting Excellence
for
• Won Sustainable Business Award in the inaugural
Industry Community Awards
Products honored with industry awards:
◦
Hexbreaker 3 slots game, PeakBarTop
cabinet and PlaySports Bank, and PlaySports
Pod were all winners of Casino Journal's
2020 "Top 20 Most
Innovative Gaming
Technology Products Awards"
Ultimate X Poker™ won Top Performing
Video Poker Game and IGT was named Most
Improved Supplier-Core at the Eilers-Krejcik
Slot Awards
◦
◦ Won Slot Provider of the Year at the 13th
Annual International Gaming Awards
Annual Report and Accounts 2020 Page | 7
KEY PERFORMANCE INDICATORS
$ millions (except per share amounts)
Company Revenue by Segment
* Represents net loss from continuing operations attributable to International Game Technology PLC per ordinary share
Annual Report and Accounts 2020 Page | 8
Revenue3,1154,03020202019Diluted Loss Per Share*$(4.76)$(0.57)20202019Operating (Loss) Income(91)53420202019Dividends Per Share$0.20$0.8020202019202069%31%Global LotteryGlobal Gaming201957%43%Global LotteryGlobal Gaming content,
BUSINESS OVERVIEW
The Company is a global leader in gaming that
responsible gaming
delivers entertaining and
experiences for players across all channels and
regulated segments, from gaming machines and
lotteries to sports betting and digital. Leveraging
in
compelling
innovation, player insights, operational expertise, and
leading-edge technology, the Company’s solutions
deliver gaming experiences that responsibly engage
players and drive sustainable growth. The Company
local presence and
has a well-established
relationships with governments and regulators in
more than 100 countries around the world, and
creates value by adhering to the highest standards of
service, integrity, and responsibility.
investment
substantial
The Company operates and provides an integrated
portfolio of innovative gaming technology products
and services, including: lottery management services,
instant lottery systems, gaming systems, instant ticket
printing, electronic gaming machines, sports betting,
digital gaming, and commercial services. The
Company is headquartered in London, with principal
operating facilities located in Providence, Rhode
Island; Las Vegas, Nevada; and Rome,
Italy.
Research and development and product assembly
in North America. The
are mostly centralized
Company had approximately 11,000 employees at
December 31, 2020.
Effective July 1, 2020, the Company adopted a new organizational structure focused on two business segments,
Global Lottery and Global Gaming, along with a streamlined corporate support function. This resulted in a change in
our operating segments and cash-generating units. Prior to this change, the Company had four cash-generating
units: North America Gaming and Interactive, North America Lottery, International, and Italy. The key intended
benefits of the new structure include:
•
•
•
•
•
•
Enabling greater responsiveness to customers and players;
Increasing effectiveness and competitiveness in each segment;
Harmonizing best practices in each product category;
Increasing organizational efficiency by leveraging economies of scale;
Improving market understanding of segment performance by enhancing peer comparability; and
Reducing complexity to support the Parent’s intrinsic value.
The Company's operations for the periods presented herein are reported under this new organizational structure.
On December 7, 2020, the Parent announced that its wholly-owned subsidiary, Lottomatica Holding S.r.l., had
entered into a definitive agreement to sell one hundred percent of the share capital of Lottomatica Videolot Rete
S.p.A. and Lottomatica Scommesse S.r.l., the members of the IGT group which conduct its Italian B2C gaming
machine, sports betting, and digital gaming businesses, to Gamenet Group S.p.A. for a sale price of €950 million
(the "Italy B2C Transaction"). This action stemmed from the Company's decision to monetize its leadership positions
in the Italian B2C gaming machine, sports betting, and digital spaces at an attractive multiple to comparable Italian
transactions, providing the Company with enhanced financial flexibility. The Italy B2C Transaction is expected to
close in the first half of 2021, and is subject to customary closing conditions, including regulatory approvals. As a
result, this disposition is accounted for as discontinued operations in our consolidated financial statements. Refer to
Note 3, Discontinued Operations and Assets Held for Sale to the Consolidated Financial Statements for additional
information.
Annual Report and Accounts 2020 Page | 9
BUSINESS MODEL
The Company's new organizational structure is focused on two business segments, Global Lottery and Global
Gaming, which are supported by streamlined corporate functions and operating in support of the businesses as
shared services centers. The segments have the key operating capabilities and autonomy necessary to manage the
business, including product management, sales, technology, and research and development.
A New Business and Strategic Initiatives group was also created to lead business development in jurisdictions
where IGT is not present or where there is no defined product segment presence. The group will work in unison with
the two global business segments in delivery of all initiatives, with financials rolling up to Global Lottery and Global
Gaming.
The global market for regulated gaming is characterized by two main dynamics: strong player demand and
governments that look to regulated gaming as a way to fund good causes. In this context, IGT is uniquely positioned
to provide responsible solutions by leveraging its global leadership position, long history of innovation, and the
breadth and depth of its product offerings.
The Company’s resilient business model is characterized by robust recurring revenues and a balanced geographic
and product mix. Innovation is the key growth driver across all the Company’s activities in many different areas
including content, technology, distribution, and marketing. Our goal is to create value for all our stakeholders and we
are focused on supporting our industry, our community, and our world.
Global Lottery
IGT has a broad, global footprint in lottery and provides full coverage of the value chain for both B2B and B2C
operations. The Company serves 37 of the 46 U.S. lotteries and is the dominant operator in Italy.
This business is primarily comprised of multi-year, recurring revenue contracts. Initial terms are usually five to 10
years and there are typically multiple, multi-year extension periods that are almost always executed. The long-term
nature of these contracts, in addition to the consistent growth profile of the global lottery business, results in a
proven and predictable record of revenue and profit generation.
Global Lottery sales have historically maintained a consistent low-single digit growth profile and have proved to be
extraordinarily resilient in economic downturns. In fact, IGT’s global lottery same-store sales increased 0.1% in 2020
despite significant pandemic-related mobility restrictions that were in place in several markets around the world.
Annual Report and Accounts 2020 Page | 10
The Company believes it can continue to grow its Global Lottery sales and profits through a continued focus on
innovation in existing markets, entering new markets, and increasing acceptance of digital lottery solutions,
especially in Italy and the U.S.
Global Gaming
The Company maintains significant, long-standing relationships with commercial casino and government sponsored
Video Lottery Terminal customers around the world. IGT’s Global Gaming leadership is bolstered by its large
portfolios of games and intellectual property, in addition to best-in-class central systems, for both land-based and
digital gaming and sports betting activities.
IGT’s gaming revenue is primarily comprised of recurring service revenue that comes from the leasing and
operation of gaming machines. The Company also generates revenue through the outright sale of gaming machines
and systems.
Global Gaming activities were significantly impacted by the global pandemic throughout 2020. In most parts of the
world, casinos and gaming halls were either closed or operated with significant restrictions for several months.
While player demand trends were strong as venues reopened in the second half of 2020, the Company expects the
operational landscape to remain challenging. Depending on the success of vaccine programs around the world, it
may take a few years for customer demand to return to pre-pandemic levels.
When overall market conditions improve, IGT believes it is well positioned to grow its Global Gaming revenue and
profit, supported by the continued introduction of compelling new games and hardware, innovative systems
solutions, and increased regulatory acceptance of digital and sports betting activities, especially in North America.
STRATEGY
The Company's vision is to consolidate its leading presence in the global gaming industry through sustained
innovation, compelling product and service offerings, excellent customer and stakeholder relationships, and
continued focus on operations excellence. The Company has the resources, content, technologies, market leading
research and development capabilities to support this vision. The Company is focused on the following broad
strategic initiatives:
Continue to leverage a player-centric mentality, product innovation, and operational
excellence to capture the post-pandemic market growth potential
The Company currently enjoys a strong market position in the global gaming market and intends to further expand
its competitive edge by maintaining a player-centric mentality and excellent relationships with its customers and all
stakeholders, which should provide the Company with recurring and predictable revenue streams and give the
Company valuable insight into its customers' needs. The new and simplified organization structure adopted in July
2020 is focused primarily on two global business segments - Global Lottery and Global Gaming - and will enable the
Company to continue to capture market growth potential and to deliver stakeholders’ value by:
•
•
•
•
Providing greater responsiveness to customers and players;
Increasing IGT's effectiveness and competitiveness in providing products and solutions that address the
opportunities of each market segment;
Harmonizing best practices across both B2B and B2C channels in each product category; and
Reducing complexity and increasing organizational efficiency to support IGT's intrinsic value.
Additionally, the Company seeks to provide customized products and services to meet local market regulations and
support player preferences. The Company’s sustained research and development investments strive to develop
content and products which the Company can then distribute to its customers across all available platforms and
technologies. The Company also plans to strengthen its role as one of the industry's leading innovator by
introducing new platforms and point of access devices.
Finally, the Company has also launched a multi-year global efficiency effort (OPtiMA program) focused on
operational excellence, product simplification, and operating margin improvement. The Company is committed to
achieve over $200 million in structural cost savings over the next two years (compared against 2019). These
savings will free up resources that will be used to significantly reduce debt and leverage, as well as support the
Company’s focus on sustained investment in product and services innovation.
Annual Report and Accounts 2020 Page | 11
Grow Lottery worldwide while preserving leading positions in Italy and across the U.S.
The global lottery industry has demonstrated remarkable resilience during the pandemic and is expected to continue
growing at mid-single digit in the short to medium term. The Company seeks to maintain its market leader position
in lotteries as it continues to operate in sophisticated lottery markets, while also driving growth in the overall market.
The Company will provide and operate highly secure online lottery transaction processing systems to regulated
markets and deliver technologically advanced instant game tickets and related services. More specifically, the
Company is focused on continuing to drive same‑store sales growth and achieving growth in instant tickets and
draw-based games in the U.S. by innovating game development, modernizing customer and retailer technology
solutions, and driving customer engagement, loyalty, and performance. The Company will also seek to expand its
instant ticket printing customer base and has invested in additional production capacity to do so. In Italy, the
Company believes leveraging its digital product innovation and channel convergence will help drive long‑term wager
stability and modest growth. The Company is also focused on securing several new contracts, rebids, and multiple
contract extensions to strengthen its recurring revenue stream and leverage the wins on future competitive
positioning for upcoming contract opportunities.
Land-based gaming focused on sustained product investments and operation efficiencies
to recover post pandemic and generate healthy cash flows
The land-based casino industry has been heavily impacted by COVID-19 pandemic in 2020, and is not expected to
fully recover before 2022 or 2023. The Company will seek to get back to pre-pandemic performance through
sustained investment in product innovation, operational improvement initiatives and cost efficiencies.
The Company will focus on supporting a reinvigoration in the premium recurring category. In particular, the
Company will seek to take advantage of growth opportunities in specific high-potential product segments, such as
Multi Level Progressive games. The Company aims to achieve this by focusing research and development
investment on a wide‑scale hardware refresh, improved discipline in game development, and extensive player
insight and customer engagement.
Further, the Company seeks to increase market positioning in high-growth specialty product segments such as
Electronic Table Games (ETGs), Class II and Historical Horse Racing (HHRs) as well as growing its gaming
operations and product sales in international markets through an expansion of localized content.
The Company strives to increase its casino management systems' market share with its innovative technology
solutions. IGT will continue to invest in and deploy its cashless solutions, including Resort Wallet, a fully integrated,
turnkey cashless solution. IGT’s cashless solutions allow its customers to boost player convenience, reduce
contact, and increase liquidity. Along cashless solutions, the Company will also continue expanding its suite of
compelling system modules, offering features and functionalities that will revolutionize the gaming experience, such
as bonusing and Mobile responder.
The recent sale of the Italy B2C gaming machine, sports betting and digital gaming business for €950 million,
expected to close in the first half of 2021, also reinforced the Company’s focus in the B2B market segment. This
transaction reframed and simplified the Company’s priorities, improved future profit margin, cash flow generation,
and debt profile, while de-risking Italy’s portfolio by exiting the highest regulatory risk market segment.
Expand digital gaming and sports betting businesses profiting from market trends and its
unique competitive positioning
The digital gaming industry experienced rapid, double-digit growth in 2020, also supported by the business and
mobility restrictions imposed by governments to contain the COVID-19 pandemic. Shifts in players preferences are
expected to be structural and will support solid market growth going forward. In the short-term, regulation is also
expected to be a catalyst for growth, especially in the U.S. The Company is uniquely positioned to capitalize on
these favorable market trends across all its main three verticals: PlayCasino, PlaySports, and PlayLottery.
In iGaming, the Company offers slot and table games via Remote Gaming Server (RGS) to all North American and
European most relevant Real Money Gaming (RMG) operators. It also offers Player Account Management (PAM),
Poker & Bingo, to a limited number of operators. In iGaming, the Company is well positioned to maintain its
significant market share in North America. To achieve this goal, the Company will leverage its excellent game quality
and performance, as well as its strong and long-lasting relationship with operators. The Company also enjoys a
Annual Report and Accounts 2020 Page | 12
unique position in Canada across all provincial markets thanks to a 20+ year commercial relationship with all five
regional operators.
In sports betting, the Company offers a turnkey solution to U.S. sports betting operators for both the mobile and
retail channel. This offering includes software and hosting services as well as lines and odds setting and risk
management, ensuring fast, successful start-up for its partners and continued growth for their sports betting
operations. The Company’s platform is currently present in 16 U.S. states powering over 40 sportsbooks. The
Company is very well positioned to build and maintain a strong market share in the B2B U.S. sports betting market.
In iLottery, the Company offers a turnkey solution to lottery operators which includes traditional draw-based games,
e-Instant games, website and mobile app solutions, a complete player management platform, and “managed
services”. PlayLottery also provides a full spectrum of digital products and services to those operators that do not
offer a full digital lottery wagering program but are looking for digital solutions such as loyalty and convenience
apps. PlayLottery’s strategic ambition is to capture strong online growth through continued product innovation.
PRODUCTS AND SERVICES
The Company has five broad categories of products and services: (1) Lottery, (2) Machine Gaming, (3) Sports
Betting, (4) Digital, and (5) Commercial Services.
Lottery
The Company supplies a unique set of lottery solutions to approximately 90 customers worldwide, including to 37 of
the 46 U.S. lotteries through its Global Lottery segment. Lottery customers frequently designate their revenues for
particular purposes, such as education, economic development, conservation, transportation, programs for senior
citizens and veterans, health care, sports facilities, capital construction projects, cultural activities, tax relief, and
others. Many governments have become increasingly dependent on their lotteries as revenues from lottery ticket
sales are often a significant source of funding for these programs.
Lottery products and services are provided through operating contracts, facilities management contracts (“FMCs”),
lottery management agreements (“LMAs”), and product sales contracts. In the majority of jurisdictions, lottery
authorities award contracts through a competitive bidding process. Typical service contracts are five to 10 years in
duration, often with multi-year extension options. After the expiration of the initial or extended contract term, a lottery
authority generally may either seek to negotiate further extensions or commence a new competitive bidding
process. Certain customers may require the Company to pay an upfront fee for the right to exclusively manage their
lottery.
The Company designs, sells, leases, and operates a complete suite of point-of-sale machines that are electronically
linked with a centralized transaction processing system that reconciles lottery funds between the retailer and the
lottery authority. The Company provides and operates highly secure, online lottery transaction processing systems
that are capable of processing over 500,000 transactions per minute. The Company provides more than 450,000
point-of-sale devices to lottery customers and lotteries that it supports worldwide. The Company also produces high-
quality instant ticket games and provides printing services such as instant ticket marketing plans and graphic
design, programming, packaging, shipping, and delivery services.
The Company has developed and continues to develop new lottery games, licenses new game brands from third
parties, and installs a range of new lottery distribution devices, all of which are designed to drive responsible same-
store sales growth for its customers. In connection with its delivery of lottery services, the Company actively advises
its customers on growth strategies. Depending on the type of contract and the jurisdiction, the Company also
provides marketing services, including retail optimization and lottery brand awareness campaigns. The Company
works closely with its lottery customers and retailers to help retailers sell lottery games more effectively. These
programs include product merchandising and display recommendations, a selection of appropriate lottery product
mix for each location, and account reviews to plan lottery sales growth strategies. The Company leverages years of
experience accumulated from being the exclusive licensee for the Italian Scratch & Win instant lottery game and the
Italian Lotto, one of the world’s largest lotteries. This B2C expertise in Italy, which includes management of all the
activities along the lottery value chain, allows the Company to better serve B2B customers. The Company’s primary
competitors in the Lottery business include Camelot, Intralot, La Francaise des Jeux, Neogames, Pollard, SAZKA,
Scientific Games, Sisal, and Tabcorp.
Annual Report and Accounts 2020 Page | 13
The primary types of lottery agreements are outlined below:
Operating and Facilities Management Contracts
The majority of the Company’s revenue in the Lottery business comes from operating contracts and FMCs. Since
1998, the Company has been the exclusive licensee for the Italian Lotto game (management of operations
commenced in 1994). Beginning in November of 2016, the Company’s exclusive license for the Italian Lotto
includes partners as part of a joint venture. Lottoitalia S.r.l. (“Lottoitalia”), a joint venture company among
Lottomatica Holding S.r.l. ("Lottomatica"), Italian Gaming Holding a.s., Arianna 2001 S.p.A. (an entity associated
with the Federation of Italian Tobacconists), and Novomatic Italia S.p.A., is the exclusive manager of the Italian Lotto
game. Lottoitalia is 61.5% owned by Lottomatica. The Company, through Lottoitalia, manages the activities along
the lottery value chain, such as creating games, determining payouts, collecting wagers through its network, paying
out prizes, managing all accounting and other back-office functions, running advertising and promotions, operating
data transmission networks and processing centers, training staff, providing retailers with assistance, and supplying
materials including play slips, tickets and receipts, and marketing and point-of-sale materials for the game. Since
2004, and for a term expiring in 2028, the Company also has been the exclusive licensee for the instant ticket lottery
(“Gratta e Vinci”) through Lotterie Nazionali S.r.l., a joint venture 64.0% owned by Lottomatica, with the remainder
directly and indirectly owned by Scientific Games Corporation and Arianna 2001. As of December 31, 2020, the
revenue weighted average remaining term of the Company's existing lottery contracts in Italy was 6.1 years.
The Company’s FMCs typically require the Company to design, install, and operate the lottery system and retail
terminal network for an initial term, which is typically five to 10 years. The Company’s FMCs are granted on an
exclusive basis, and usually contain extension options under the same or similar terms and conditions, generally
ranging from one to five years. Under a typical FMC, the Company maintains ownership of the technology and
equipment, and is responsible for capital investments throughout the duration of the contract, although the
investments are generally concentrated during the early years. The Company provides a wide range of services to
lottery customers related to the technology, equipment, and facilities such as hosting, maintenance, marketing, and
other support services. The Company generally provides its lottery customers retailer terminal and communication
network equipment through operating leases. In return, the Company typically receives fees based upon a
percentage of the sales of draw-based and/or instant ticket games, though under certain of its agreements, the
Company may receive fixed fees for certain goods or services. In limited instances, the Company provides instant
tickets and online lottery systems and services under the same FMC. As of February 24, 2021, the Company had
FMCs with or for the benefit of 24 U.S. jurisdictions. As of December 31, 2020, the Company’s largest FMCs by
annual revenue were Texas, California, Florida, New York, and Michigan, and the revenue weighted-average
remaining term of the Company’s existing FMCs (excluding Italy) was 5.6 years (7.4 years including available
extensions). Also, as of February 24, 2021, the Company operated under operating contracts or FMCs in 17
international jurisdictions, excluding Italy.
Operating contracts and FMCs often require the Company to pay substantial monetary liquidated damages in the
event of non-performance by the Company. The Company’s revenues from operating contracts and FMCs are
generally service fees paid to the Company directly by the lottery authority based on a percentage of such lottery’s
wagers or ticket sales. The Company categorizes revenue from operating contracts and FMCs as service revenue
from “Operating and facilities management contracts” as described in Note 4, Revenue Recognition to the
Consolidated Financial Statements.
Another form of operating contract is our Lottery Management Agreements ("LMAs"). Under an LMA, the Company
manages, within parameters determined by the lottery customer, the core lottery functions, including the lottery
systems and the majority of the day-to-day activities along the lottery value chain. This includes collecting wagers,
managing accounting and other back-office functions, running advertising and promotions, operating data
transmission networks and processing centers, training staff, providing retailers with assistance, and supplying
materials for the games. LMAs also include a separate FMC, pursuant to which the Company leases certain
hardware and equipment, and provides access to software and support services. The Company provides lottery
management services in New Jersey as part of a joint venture and in Indiana through a wholly-owned subsidiary of
the Parent. The Company’s revenues from LMAs are based on achievement of contractual metrics and, with respect
to the supply agreements are based generally on a percentage of wagers. The Company is also subject to penalties
for failure to achieve contractual metrics under its LMAs. The Company categorizes revenue from LMAs as service
revenue from “Operating and facilities management contracts” as described in Note 4, Revenue Recognition to the
Consolidated Financial Statements.
Annual Report and Accounts 2020 Page | 14
Instant Ticket Printing Contracts
As an end-to-end provider of instant tickets and related services, the Company produces high-quality instant ticket
games and provides ancillary printing services such as instant ticket marketing plans and graphic design,
programming, packaging, shipping, and delivery services. Instant tickets are sold at numerous types of retail outlets
but most successfully in grocery and convenience stores.
Instant ticket contracts are priced based on a percentage of ticket sales revenues or on a price per unit basis and
generally range from two to five years with extension opportunities. Government-sponsored lotteries grant printing
contracts on both an exclusive and non-exclusive basis where there is typically one primary vendor and one or more
secondary vendors. A primary contract permits the vendor to supply the majority of the lottery’s ticket printing needs
and includes the complete production process from concept development through production and shipment. It also
typically includes marketing and research support. A primary printing contract can include any or all of the following
services: warehousing, distribution, telemarketing, and sales/field support. A secondary printing contract includes
providing backup printing services and alternate product sources. It may or may not include a guarantee of a
minimum or maximum number of games. As of February 24, 2021, the Company provided instant ticket printing
products and services to 31 customers in North America and 21 customers in international jurisdictions. The
Company categorizes revenue from instant ticket printing contracts, that are not part of an operator or LMA contract,
as product sales from “Lottery products” as described in Note 4, Revenue Recognition to the Consolidated Financial
Statements. The instant ticket production business is also highly competitive and subject to strong, price-based
competition.
Product Sales and Services Contracts
Under product sales and services contracts, the Company assembles, sells, delivers, and installs turnkey lottery
systems or lottery equipment, provides related services, and licenses related software. The lottery authority
maintains, in most instances, responsibility for lottery operations. The Company sells additional machines and
central computers to expand existing systems and/or replace existing equipment and provides ancillary
maintenance and support services related to the systems, equipment sold, and software licensed. The Company
categorizes revenue from product sales and services contracts on a case-by-case basis as either service revenue
or product sales from “Systems, software, and other” or “Lottery products” respectively, as described in Note 4,
Revenue Recognition to the Consolidated Financial Statements.
Machine Gaming
The Company designs, develops, assembles or orders the assembly of, and provides cabinets, games, systems,
and software for customers in regulated gaming markets throughout the world under fixed fee, participation and
product sales contracts. The Company holds more than 450 global gaming licenses and does business with
commercial casino operators, tribal casino operators, and governmental organizations (primarily consisting of
Lottery operators). Machine gaming products and services are provided through the Global Gaming segment.
The Company’s primary global competitors in Machine Gaming are American Gaming Systems, Aristocrat, Everi,
Euro Games Technology, Konami, Novomatic, and Scientific Games.
Gaming Machines and Game Content
The Company offers a diverse range of gaming machine cabinets from which land-based casino customers can
choose to maximize functionality, flexibility, and player comfort. In addition to cabinets, the Company develops a
wide range of casino games taking into account local jurisdictional requirements, market dynamics, and player
preferences. The Company combines elements of math, play mechanics, sound, art, and technological
advancements with a library of entertainment licenses and a proprietary intellectual property portfolio to provide
gaming products designed to provide a high degree of player appeal and entertainment. The Company offers a wide
array of casino-style games in a variety of multi-line, multi-coin, and multi-currency configurations.
The Company’s casino games typically fall into two categories: premium games and core games.
Premium games include:
• Wide Area Progressives - games that are linked across several casinos and/or jurisdictions and share a
large common jackpot, including The Wheel of Fortune® franchise; and
• Multi-Level Progressives - games that are linked to a number of other games within the casino itself and
offer players the opportunity to win different levels of jackpots, such as Fortune Coin™ Boost.
Annual Report and Accounts 2020 Page | 15
Core games, which include video reel, mechanical reel, and video poker, are typically sold and in some situations
leased to customers. Some of the Company's most popular core games in 2020 included Hexbreaker 3, Wolf Run
Gold and Treasure Box Kingdom, which are all video slot games.
The Company produces other types of games including:
•
•
•
“Centrally Determined” games which are games connected to a central server that determines the game
outcome;
Class II games which are electronic video bingo machines that can be typically found in North American
tribal casinos and certain other jurisdictions like South Africa; and
Random-number-generated and live dealer electronic table games, including baccarat and roulette.
Gaming service revenue is primarily generated through providing premium game content and cabinets on short
duration leases to customers. The pricing of these arrangements is largely variable where the casino customer pays
fees to the Company based on a percentage of amounts wagered, net win, or a daily fixed fee for use of the game
content, cabinets, and related support services.
Machine gaming product sales revenues are generated from the sales of land-based gaming machines (equipment
and game content), systems, component parts (including game conversion sales), other equipment and services.
The Company categorizes revenue from gaming machines as product sales from “Gaming terminals” and revenue
from game content as product sales from “Gaming other” as described in Note 4, Revenue Recognition to the
Consolidated Financial Statements.
Video Lottery Terminals ("VLT") and Amusement with Prize Machines ("AWP")
The Company provides VLTs, VLT central systems, and VLT games worldwide. VLTs are gaming machines which
are regulated by lotteries, and are usually connected to a central system. In addition, the Company provides AWPs
and games to licensed operators in Europe. AWPs are typically low-denomination gaming machines installed in
retail outlets.
The Company provides systems and machines to other machine gaming licensees, either as a product sale or with
long-term, fee-based contracts where the service revenue earned is generally based on a percentage of wagers,
net of applicable gaming taxes. The Company categorizes revenue from VLTs as either service revenue from
“Gaming terminal services” or product sales from “Gaming terminals”, depending on the nature of the transaction,
as described in Note 4, Revenue Recognition to the Consolidated Financial Statements.
Gaming Management Systems
The Company offers a comprehensive range of system modules and applications for all areas of casino
management. Gaming systems products include infrastructure and applications for casino management, customer
relationship management, patron management, and server-based gaming. The Company’s main casino
management system offering is the Advantage® System, which offers solutions and modules for a wide-range of
activities from accounting and payment processing to patron management and regulatory compliance.
The Company’s systems feature customized player messaging, tournament management, and integrated marketing
and business intelligence modules that provide analytical, predictive, and management tools for maximizing casino
operational effectiveness. The server-based solutions enable electronic game delivery and configuration for slot
machines, as well as providing casino operators with opportunities to increase profits by enhancing the players’
experience, connecting with players interactively, and creating operational efficiencies. Service Window enables
operators to market to customers more effectively by leveraging an additional piece of hardware onto existing
machines for delivering in-screen messaging. The Company’s systems portfolio also extends to encompass mobile
solutions such as the Resort Wallet™, which is a cardless, cashless loyalty solution for casino players. Resort
Wallet™ includes IGTPay, a fully cashless land-based offering for casino operators which provides a direct link to
external funding, allowing customers to sustain operations in a changing environment, including through the
COVID-19 pandemic. Mobile solutions that drive efficiencies and enable floor monitoring for operators while
decreasing response time to player needs include Mobile Host, Mobile Responder, and Mobile Notifier. The
Company categorizes revenue from gaming management systems as product sales from “Gaming other” as
described in Note 4, Revenue Recognition to the Consolidated Financial Statements.
Annual Report and Accounts 2020 Page | 16
Sports Betting
The Company provides sports betting technology and management services to licensed sports betting operators in
16 states in the U.S. through the Global Gaming segment. The Company does not operate direct to consumer
sports betting in the U.S.
The Company offers a combination of technology and services to U.S. licensed sports book operators in each state
where sports betting is legal. The offering may be different in each market in order to comply with local regulations
and market conditions. The Company currently packages services in two ways:
•
•
"Sports betting platform" solutions offer modular services hosted and maintained in each U.S. state or tribal
jurisdiction where Sports Betting is legal. These solutions provide certified and managed sports betting
software made available for customers to operate retail and account-based interactive sports and pari-
mutuel race wagering in a particular jurisdiction; and
“Turnkey” managed service solutions combine the Company’s end-to-end sports betting management
technology with a portfolio of value-added services including offer management, payments, fraud
management, advisory functions, as well as retail components such as kiosks and betting terminals,
interactive components such as mobile web and desktop applications, and trading support services, all of
which support the operations of land-based, digital, and omni-channel sports betting operators.
The Company also manufactures and sells a range of retail point-of-sale products for use by its sports betting
customers in the U.S. which includes a variety of self-service kiosks and over the counter betting solutions.
Sports betting operators who are customers of the Company in the U.S. include: FanDuel (Flutter plc), PointsBet,
FoxBet (Stars Group), Delaware North, Boyd Gaming Corporation and the Rhode Island Lottery. The Company’s
primary competitors in the U.S. sports betting market include Scientific Games and Kambi.
The Company categorizes revenue from sports betting as service revenue from “Systems, software, and other” as
described in Note 4, Revenue Recognition to the Consolidated Financial Statements.
Digital
Digital gaming enables game play via the internet for real money or for fun (social). The Company designs,
assembles, and distributes a full suite of configurable products, systems, content, and services, and holds more
than 30 licenses that authorize the provision of digital gaming products and services worldwide, including digital
products such as slot games, poker, bingo, and online casino table games with features such as single and
multiplayer options with branded titles and select third-party content. The Company provides social casino content
as part of a multi-year strategic partnership with DoubleU Games, and its complete suite of PlayLottery solutions,
services, and professional expertise allows lotteries to fully engage their players on any digital channel in regulated
markets. Existing lottery game portfolios are extended to the digital channel to provide a spectrum of engaging
content such as e-Instant tickets.
The Company’s iGaming systems and digital platforms offer customers an integrated system that provides player
account management, advanced marketing and analytical capabilities, and a highly reliable and secure payment
system. IGT Connect™ integrates third-party player account management systems, third-party game engines, and
regulatory systems. The Company also offers a remote game server, which is a fast gateway to extensive casino
and e-Instant content, and digital and social gaming services that enhance player experiences and create marketing
opportunities around either the Company’s games or third-party games.
The Company’s diverse iGaming B2B customer base includes Caesar’s Entertainment, FanDuel, the Georgia
Lottery, Loto-Quebec, Ontario Lottery and Gaming, Penn National Gaming and William Hill, among others. Digital
and social gaming products and services are provided through the Global Gaming segment. The Company faces
competition from operators, such as 888 Holdings and bwin.party, and broad-based traditional B2B providers, such
as Playtech plc and Microgaming. The Company also faces competition in the digital space from other machine
gaming suppliers, such as Scientific Games and GAN.
The Company categorizes revenue from digital gaming products as product sales from “Gaming other”, revenue
from digital gaming services as service revenue from “Systems, software, and other”, and revenue from PlayLottery
services as service revenue from “Operating and facilities management contracts” as described in Note 4, Revenue
Recognition to the Consolidated Financial Statements.
Annual Report and Accounts 2020 Page | 17
Commercial Services
The Company develops innovative technology to enable lotteries to offer commercial services over their existing
lottery infrastructure or over standalone networks separate from the lottery. Leveraging its distribution network and
secure transaction processing experience, the Company offers high-volume processing of commercial transactions
including: prepaid cellular telephone recharges, bill payments, e-vouchers and retail-based programs, electronic tax
payments, stamp duty services, prepaid card recharges, and money transfers. These services are primarily offered
outside of North America. In Italy, the Company’s commercial payment and eMoney services network comprises
points-of-sale divided among the primary retailers of lottery products: tobacconists, bars, petrol stations, newspaper
stands, and motorway restaurants. The Company categorizes revenue from commercial services as service
revenue from “Systems, software, and other” as described in Note 4, Revenue Recognition to the Consolidated
Financial Statements.
RESEARCH AND DEVELOPMENT (R&D)
To remain competitive, the Company invests resources toward its R&D efforts to introduce new and innovative
games with dynamic features to attract new customers and retain existing customers. The Company’s R&D efforts
cover multiple creative and engineering disciplines, including creative game content, hardware, electrical, systems,
and software for lottery, land-based, online social, and digital real-money applications. R&D costs include salaries
and benefits, stock-based compensation, consultants' fees, facilities-related costs, material costs, depreciation, and
travel and are expensed as incurred.
The Company devotes substantial resources to R&D and incurred $190.4 million and $265.8 million of related
expenses in 2020 and 2019, respectively.
Annual Report and Accounts 2020 Page | 18
FINANCIAL PERFORMANCE
Results of Operations
Comparison of the years ended December 31, 2020 and 2019
($ thousands)
Service revenue by segment
Global Lottery
Global Gaming
Total service revenue
Product sales by segment
Global Lottery
Global Gaming
Total product sales
Total revenue
Cost of services
Cost of product sales
Selling, general and administrative
Research and development
Restructuring
Goodwill impairment
Other operating expense
Other operating income
Total operating expenses
For the year ended
December 31, 2020
December 31, 2019
Change
$
% of
Revenue
$
% of
Revenue
$
%
2,040,971
598,614
2,639,585
121,346
354,552
475,898
65.5
19.2
84.7
3.9
11.4
15.3
2,181,321
917,895
3,099,216
109,884
821,005
930,889
54.1
22.8
76.9
2.7
20.4
23.1
(140,350)
(319,281)
(459,631)
11,462
(466,453)
(454,991)
3,115,483
100.0
4,030,105
100.0
(914,622)
1,629,569
345,478
695,594
190,362
45,045
296,000
4,282
—
52.3
11.1
22.3
6.1
1.4
9.5
0.1
—
1,773,179
557,670
838,880
265,815
24,855
57,000
6,582
(27,694)
3,206,330
102.9
3,496,287
44.0
13.8
20.8
6.6
0.6
1.4
0.2
(0.7)
86.8
(143,610)
(212,192)
(143,286)
(75,453)
20,190
239,000
(2,300)
27,694
(289,957)
(6.4)
(34.8)
(14.8)
10.4
(56.8)
(48.9)
(22.7)
(8.1)
(38.0)
(17.1)
(28.4)
81.2
> 200.0
(34.9)
100.0
(8.3)
Operating (loss) income
(90,847)
(2.9)
533,818
13.2
(624,665)
(117.0)
Interest expense, net
Foreign exchange (loss) gain, net
Other expense
Other income
Total non-operating expenses
(Loss) income from continuing
operations before provision for
income taxes
Provision for income taxes
Loss from continuing operations
Income from discontinued operations
Income tax - discontinued operations
Income from discontinued operations,
net of tax
Net (loss) income
Less: Net income attributable to non-
controlling interests from continuing
operations
Less: Net (loss) income attributable to
non-controlling interest from discontinued
operations
Net loss attributable to IGT PLC
(429,162)
(309,689)
(120,491)
4,775
(13.8)
(9.9)
(3.9)
0.2
(433,057)
(10.7)
3,895
0.9
39,911
(116,305)
38,051
1.0
(2.9)
0.9
(4,186)
(33,276)
(349,600)
> 200.0
(854,567)
(27.4)
(471,400)
(11.7)
(383,167)
(945,414)
21,733
(967,147)
42,810
6,726
36,084
(931,063)
(30.3)
0.7
(31.0)
1.4
0.2
1.2
(29.9)
62,418
131,636
(69,218)
154,106
41,847
112,259
43,041
1.5
3.3
(1.7)
3.8
1.0
2.8
1.1
(1,007,832)
(109,903)
(897,929)
(111,296)
(35,121)
(76,175)
(974,104)
(3.6)
(87.5)
(81.3)
> 200.0
(83.5)
> 200.0
(72.2)
(83.9)
(67.9)
> 200.0
6,373
0.2
48,233
1.2
(41,860)
(86.8)
(4,760)
(932,676)
(0.2)
(29.9)
4,539
(9,731)
0.1
(0.2)
(9,299)
(922,945)
> 200.0
> 200.0
Annual Report and Accounts 2020 Page | 19
Revenue
Total revenue for the year ended December 31, 2020 decreased $914.6 million, or 22.7%, to $3,115.5 million from
$4,030.1 million for the prior corresponding period. Total service revenues were adversely affected by mobility and
social distancing restrictions imposed by governmental authorities in an effort to mitigate the spread of COVID-19.
Total product sale declines were primarily caused by COVID-19 budgetary constraints and social distancing
restrictions. See “Segment Revenues and Key Performance Indicators” section below for further discussion related
to the principal drivers of these changes.
Operating expenses
Cost of services
Cost of services for the year ended December 31, 2020 decreased $143.6 million, or 8.1%, to $1,629.6 million from
$1,773.2 million for the prior corresponding period. This decrease is primarily attributable to a $109.5 million
decrease within our Global Gaming segment primarily resulting from a $38.5 million decrease in licensing and
royalty fees principally due to lower royalties on installed base and poker units due to inactive machines. Global
Gaming expenses related to payroll, employee benefits and incentive compensation decreased $29.7 million due to
temporary salary reductions, cancellation of the 2020 short-term incentive compensation program and employee
furloughs. Cost of services for our Global Lottery segment decreased by $19.3 million primarily as a result of a
$20.8 million decrease in marketing and advertising; a $19.8 million decrease in payroll, employee benefits and
incentive compensation due to temporary salary reductions, cancellation of the 2020 short-term incentive
compensation program, and employee furloughs; a $10.3 million decrease in communications, consumables, and
travel; and a $7.1 million decrease in outside services, primarily consultants. These decreases were partially offset
by a $55.6 million increase in point of sale (“POS”) and partner fees, primarily related to an increase in commercial
service sales in Italy.
Cost of product sales
Cost of product sales for the year ended December 31, 2020 decreased $212.2 million, or 38.0%, to $345.5 million
from $557.7 million for the prior corresponding period. This decrease is primarily attributable to a $200.2 million
decrease within our Global Gaming segment primarily resulting from the $466.5 million decrease in product sales.
Cost of product sales for our Global Lottery segment decreased $4.8 million primarily related to product mix. In
addition, there was a $6.9 million decrease in Corporate and Other, principally associated with a decrease in
amortization of acquired intangible assets.
Selling, general and administrative
Selling, general and administrative for the year ended December 31, 2020 decreased $143.3 million, or 17.1%, to
$695.6 million from $838.9 million for the prior corresponding period. This decrease is primarily attributable to a
$68.2 million decrease within our Global Gaming segment. This decrease was primarily due to a $59.7 million
decrease in corporate allocations; a $28.3 million decrease in payroll, employee benefits, and incentive
compensation principally due to temporary salary deductions, cancellation of the 2020 short-term incentive
compensation program, and employee furloughs; a $12.5 million decrease in license and royalty fees; and an
$8.6 million decrease in travel expenses. These decreases were partially offset by a $44.5 million increase in
expected credit losses on long-term customer financing receivables resulting primarily from the impact of COVID-19
within Latin America and the Caribbean.
Selling, general and administrative expense for our Global Lottery segment decreased $42.6 million primarily as a
result of a decrease of $19.1 million in non-deductible value-added tax (“VAT”) driven by lower spending and the
implementation of the Italy VAT group from January 1, 2020, a $14.3 million decrease in payroll, employee benefits,
and incentive compensation principally due to temporary salary deductions, cancellation of the 2020 short-term
incentive compensation program, and employee furloughs; and an $8.8 million reduction in corporate allocations.
These decreases within our Global Lottery segment were partially offset by an $8.6 million increase in other
expenses primarily relating to legal settlements.
Selling, general and administrative expense for Corporate and Other decreased $31.9 million primarily as a result of
a $52.1 million decrease in payroll, employee benefits, and incentive compensation principally due to temporary
salary reductions, cancellation of the 2020 short-term incentive compensation program, and employee furloughs.
Annual Report and Accounts 2020 Page | 20
Corporate and Other expenses also decreased related to an $18.6 million decrease in outside services, principally
related to external consultants; a $10.6 million reduction in advertising; and a $6.0 million reduction in travel. These
decreases were partially offset by a $55.8 million reduction of costs allocated to our business segments caused by
an overall reduction of Corporate and Other costs.
Research and development
Research and development for the year ended December 31, 2020 decreased $75.5 million, or 28.4%, to $190.4
million from $265.8 million for the prior corresponding period. This decrease is primarily due to decreases of
$46.3 million and $12.4 million in payroll, employee benefits, and incentive compensation in our Global Gaming and
Global Lottery segments, respectively. These decreases were the result of temporary salary reductions, cancellation
of the 2020 short-term incentive compensation program, and employee furloughs. Additionally, there were
decreases related to outside services primarily due to a reduction in consulting services provided to the Company
for the Global Gaming and Global Lottery segments of $9.2 million and $10.4 million, respectively.
Restructuring
Restructuring for the year ended December 31, 2020 increased $20.2 million, or 81.2%, to $45.0 million from $24.9
million for the prior corresponding period. This increase was primarily due to management initiating restructuring
plans in 2020 to achieve long-term structural cost savings by simplifying our organizational structure, optimizing our
global supply chain, and consolidating our global technology organization.
Goodwill impairment
Goodwill impairment for the year ended December 31, 2020 was $296.0 million compared to $57.0 million for the
prior corresponding period. During the first quarter of 2020, we determined there was an interim goodwill triggering
event caused by the COVID-19 pandemic. Based principally on management’s financial projections, which included
the estimated impact of COVID-19, we recorded $193.0 million and $103.0 million non-cash impairment losses
within the former International and North America Gaming and Interactive cash-generating units, respectively, to
reduce the carrying amount of these cash-generating units to fair value. For the year ended December 31, 2019, we
determined there was a goodwill impairment of $57.0 million within the former International cash-generating unit due
to lower forecasted cash flows along with a higher weighted-average cost of capital.
Other operating expense
Other operating expense for the year ended December 31, 2020 decreased $2.3 million, or 34.9%, to $4.3 million
from $6.6 million for the prior corresponding period.
Other operating income
There was no other operating income for the year ended December 31, 2020. For the year ended December 31,
2019, other operating income was $27.7 million which was primarily the result of a non-recurring gain on the sale of
assets to a distributor.
Interest expense, net
Interest expense, net for the year ended December 31, 2020 decreased $3.9 million, or 0.9%, to $429.2 million from
$433.1 million for the prior corresponding period. This decrease was primarily due to lower LIBOR interest rates on
floating rate debt and a decrease in Senior Secured Notes, principally due to the following 2020 refinancing
activities: redemption, upon maturity, of the remaining €387.9 million 4.75% Senior Secured Notes due March 2020;
partial redemption, in June 2020, of the $1.5 billion 6.25% Senior Secured Notes due February 2022; issuance, in
June 2020, of the $750.0 million 5.25% Senior Secured Notes due June 2029; and redemption, upon maturity, of
the remaining $27.3 million 5.50% Senior Secured Notes due June 2020.
Foreign exchange (loss) gain, net
Foreign exchange (loss) gain, net for the year ended December 31, 2020 was $(309.7) million, compared to foreign
exchange gain, net of $39.9 million for the prior corresponding period. Foreign exchange (loss) gain, net is
principally related to fluctuations in the euro to U.S. dollar exchange rate on euro-denominated debt.
Annual Report and Accounts 2020 Page | 21
Other expense
Other expense for the year ended December 31, 2020 increased $4.2 million, or 3.6%, to $120.5 million from
$116.3 million for the prior corresponding period.
Other income
Other income for the year ended December 31, 2020 decreased $33.3 million, or 87.5%, to $4.8 million from $38.1
million for the prior corresponding period. In 2019, the Company recorded gains of $33.9 million on the sale of
investments, primarily related to the May 2019 sale of its ownership interest in Yeonama Holdings Co. Limited for a
$29.1 million pre-tax gain.
Provision for income taxes
Provision for income taxes for the year ended December 31, 2020 decreased $109.9 million, or 83.5%, to $21.7
million from $131.6 million for the prior corresponding period. In 2020, the Company’s effective tax rate was higher
than the U.K. statutory rate of 19.0% primarily due to increases in valuation allowances on deferred tax assets, the
impact of the international provisions of the Tax Act (BEAT and GILTI), foreign rate differences, non-deductible
expenses, and a goodwill impairment with no associated tax benefit. In 2019, the Company's effective tax rate was
higher than the U.K. statutory rate of 19.0% primarily due to the impact of the international provisions of the Tax Act
(BEAT and GILTI), foreign rate differences, non-deductible expenses and a goodwill impairment with no associated
tax benefit.
Income from discontinued operations, net of tax
Income from discontinued operations, net of tax for the year ended December 31, 2020 decreased $76.2 million, or
67.9%, from $112.3 million for the prior corresponding period. Discontinued operations reflects the operating
activities of our Italian B2C gaming machine, sports betting, and digital gaming businesses. The decline in income
was primarily due to lower wagers caused by temporary casino and gaming hall closures required by the Italian
government to mitigate the spread of COVID-19. Refer to Note 3 - Discontinued Operations and Assets Held for
Sale for further information.
Annual Report and Accounts 2020 Page | 22
Segment Revenues and Key Performance Indicators
Global Lottery
($ thousands)
Service revenue
Operating and facilities management contracts
Systems, software, and other
Product sales
Lottery products
For the year ended
December 31,
Change
2020
2019
$
%
1,742,235
298,736
2,040,971
1,929,121
252,200
2,181,321
(186,886)
46,536
(140,350)
121,346
121,346
109,884
109,884
11,462
11,462
Global Lottery segment revenue
2,162,317
2,291,205
(128,888)
(9.7)
18.5
(6.4)
10.4
10.4
(5.6)
(% on a constant-currency basis)
Global same-store sales growth (%)
Instant ticket & draw games
Multi-jurisdiction jackpots
Total
North America & Rest of world same-store sales
growth (%)
Instant ticket & draw games
Multi-jurisdiction jackpots
Total
Italy same-store sales growth (%)
Instant ticket & draw games
Operating and facilities management contracts
For the year ended
December 31,
2020
2019
1.6 %
(17.0) %
0.1 %
4.1 %
(18.3) %
1.7 %
7.3 %
(17.0) %
4.7 %
5.2 %
(18.3) %
2.0 %
(16.1) %
0.8 %
Service revenue from Operating and facilities management contracts decreased $186.9 million, or 9.7%, from
$1,929.1 million for the prior corresponding period. This decrease was primarily the result of lower same-store sales
in Italy for draw-based and instant ticket games resulting from the impact of COVID-19 mobility restrictions, and
lower incentives arising within our Lottery Management Agreements. These decreases were partially offset by
increases in same-store sales primarily driven by customer demand in North America, and favorable foreign
currency translation of $15.7 million.
Systems, software, and other
Service revenue from Systems, software, and other increased $46.5 million, or 18.5% from $252.2 million for the
prior corresponding period. This increase was primarily the result of a $52.0 million increase from our commercial
service offering in Italy due to expanded offerings which more than offset the reduction of revenue caused by the
sale of the Company’s BillBird subsidiary in the fourth quarter of 2019.
Annual Report and Accounts 2020 Page | 23
Lottery products
Lottery products revenue increased $11.5 million, or 10.4% from $109.9 million for the prior corresponding period.
This increase was primarily the result of an increase of $10.4 million in lottery terminal sales primarily related to a
customer network refresh and an increase in lottery software sales of $11.3 million as a result of increased
customer demand. These increases were partially offset by a decrease in other lottery sales of $11.2 million
primarily due to lower sales of printed instant tickets.
Global Gaming
($ thousands, except yields)
Service revenue
Gaming terminal services
Systems, software, and other
Product sales
Gaming terminals
Gaming other
For the year ended
December 31,
Change
2020
2019
$
%
297,418
301,196
598,614
205,289
149,263
354,552
567,849
348,316
916,165
581,017
239,989
821,006
(270,431)
(47,120)
(317,551)
(375,728)
(90,726)
(466,454)
(785,746)
(47.6)
(13.5)
(34.7)
(64.7)
(37.8)
(56.8)
(45.2)
Global Gaming segment revenue
953,166
1,738,912
Installed base units
Total installed base units
For the year ended
December 31,
Change
2020
2019
Units / $
%
49,300
50,834
(1,534)
(3.0)
Total yields
$18.06
$31.45
$(13.39)
(42.6)
Global machine units sold
Total machine units sold
Gaming terminal services
14,662
42,076
(27,414)
(65.2)
Service revenue from Gaming terminal services decreased $270.4 million, or 47.6%, to $297.4 million from $567.8
million for the prior corresponding period. This decrease was principally driven by social distancing measures
implemented by government authorities to mitigate the spread of COVID-19. These measures resulted in the
temporary closure of casinos and gaming halls and upon reopening, fewer active machines available for use by
players driving lower wagers and yields.
System, software, and other
Service revenue from Systems, software, and other decreased $47.1 million, or 13.5%, to $301.2 million from
$348.3 million for the prior corresponding period. The decline was primarily due to a $67.0 million decrease in
software revenue primarily related to non-recurring multi-year poker site license contracts executed in the prior year,
and lower recurring poker software license fees due to inactive machines resulting from COVID-19 social distancing
requirements. Additionally, there was a $24.6 million decrease in system revenue primarily due to lower demand
during the COVID-19 pandemic. These decreases were partially offset by an increase of $34.7 million in iGaming.
Annual Report and Accounts 2020 Page | 24
Gaming terminals
Product sales from Gaming terminals decreased $375.7 million, or 64.7%, to $205.3 million from $581.0 million for
the prior corresponding period. This decrease was primarily associated with fewer machines sold during the year
driven by lower demand due to customer capital constraints resulting from COVID-19.
Gaming other
Product sales from Gaming other decreased $90.7 million, or 37.8%, to $149.3 million from $240.0 million for the
prior corresponding period primarily related to lower demand due to customer capital constraints resulting from
COVID-19, and multi-year licenses of intellectual property.
Operating results by segment
($ thousands)
Operating (loss) income
Global Lottery
Global Gaming
Corporate and Other
Operating income
For the year ended
December 31,
Change
2020
2019
$
%
644,078
(201,968)
(532,957)
699,039
188,083
(353,304)
(90,847)
533,818
(55,337)
(385,205)
(144,839)
(585,381)
(7.9)
> 200.0
(36.3)
(122.5)
Operating margin - Global Lottery
Operating margin - Global Gaming
29.8 %
(21.2) %
30.5 %
10.8 %
Global Lottery segment
Segment operating margin decreased from 30.5% for the year ended December 31, 2019 to 29.8% for the year
ended December 31, 2020, primarily due to a decrease in revenues of $128.9 million resulting from the global
impacts of COVID-19. Despite a 5.6% decline in revenue, operating margins decreased by approximately 70 basis
points due primarily to management’s cost saving initiatives developed in response to COVID-19, partially offsetting
the decrease in revenue.
Global Gaming segment
Segment operating margin decreased from 10.8% for the year ended December 31, 2019 to (21.2)% for the year
ended December 31, 2020, primarily due to a decrease in revenues of $785.7 million resulting from the global
impacts of COVID-19, of which $466.5 million was related to product sales which were impacted at a greater rate
than service revenue due to capital constraints within the market, thereby contributing a more significant negative
impact to operating margin. The negative impacts on margin have been partially mitigated by management’s
implementation of cost savings initiatives to decrease or eliminate fixed and discretionary costs amidst the global
pandemic.
Liquidity
The Company’s business is capital intensive and requires liquidity to meet its obligations and fund growth.
Historically, the Company’s primary sources of liquidity have been cash flows from operations and, to a lesser
extent, cash proceeds from financing activities, including amounts available under the Revolving Credit Facilities
due July 2024. In addition to general working capital and operational needs, the Company’s liquidity requirements
arise primarily from its need to meet debt service requirements and to fund capital expenditures and upfront license
fee payments. The Company also requires liquidity to fund any acquisitions and associated costs. The Company’s
cash flows generated from operating activities together with cash flows generated from financing activities have
historically been sufficient to meet the Company's liquidity requirements; however, the Company implemented
robust business continuity plans with cost reduction and capital spending avoidance initiatives in anticipation of the
impact on liquidity arising from COVID-19.
Annual Report and Accounts 2020 Page | 25
The Company believes its ability to generate cash from operations to reinvest in its business, primarily due to the
long-term nature of its contracts, is one of its fundamental financial strengths. Combined with funds currently
available and committed borrowing capacity, the Company expects to have sufficient liquidity to meet its financial
obligations and working capital requirements in the ordinary course of business for at least the next 12 months from
the date of issuance of these consolidated financial statements.
The cash management, funding of operations, and investment of excess liquidity are centrally coordinated by a
dedicated treasury team with the objective of ensuring effective and efficient management of funds.
At December 31, 2020 and 2019, Company’s total available liquidity was as follows:
($ thousands)
Revolving Credit Facilities due July 2024
Cash and cash equivalents
Total Liquidity
December 31,
2020
2019
1,816,938
907,015
2,723,953
1,752,125
654,628
2,406,753
The Revolving Credit Facilities due July 2024 are subject to customary covenants (including maintaining a minimum
ratio of EBITDA to net interest costs and a maximum ratio of total net debt to EBITDA) and events of default, none
of which are expected to impact the Company’s liquidity or capital resources. During the COVID-19 pandemic, most
casinos and gaming halls throughout the globe closed in the first half of 2020, and some casinos and gaming halls
have yet to reopen. The closure of casinos and gaming halls has significantly disrupted the Company’s ability to
generate revenues. In order to remain in compliance with the Company’s debt covenants and meet its payment
obligations, the Company entered into amendments to the Revolving Credit Facilities due July 2024 (the
“Amendments”) to provide temporary relief from its financial covenants. The Amendments, among other things,
provide a waiver for the Company’s obligation to maintain a minimum ratio of EBITDA to net interest costs and a
maximum ratio of total net debt to EBITDA from the fiscal quarter ending June 30, 2020 through the fiscal quarter
ending June 30, 2021. During the period beginning on the date of the Amendments and ending on August 31, 2021,
the Company will be subject to a minimum liquidity covenant that requires the Company to maintain liquidity of at
least $500 million.
The Company completed multiple debt transactions in 2020 and 2019. Refer to the “Notes to the Consolidated
Financial Statements—17. Debt” included in “Item 18. Financial Statements” for further discussion of these
transactions as well as information regarding the Company’s other debt obligations, including the maturity profile of
borrowings and committed borrowing facilities, and further details regarding the Amendments.
At December 31, 2020 and 2019, approximately 23% and 24% of the Company’s net debt portfolio was exposed to
interest rate fluctuations, respectively. The Company’s exposure to floating rates of interest primarily relates to the
Euro Term Loan Facility due January 2023 and Revolving Credit Facilities due July 2024. At December 31, 2020,
the Company held $425.0 million (notional amount) in interest rate swaps that were no longer designated as
hedging relationships and the fair value of the swaps is recognized in interest expense with no corresponding offset
to debt. At December 31, 2019, the Company held $625.0 million (notional amount) in interest rate swaps that
effectively convert $625.0 million of the 6.25% Notes from fixed interest rate debt to variable rate debt.
Cash Flow Summary
The following table summarizes the statements of cash flows from continuing operations. A complete statement of
cash flows is provided in the Consolidated Financial Statements included herein.
($ thousands)
Net cash provided by operating activities from
continuing operations
Net cash used in investing activities from continuing
operations
Net cash used in financing activities
Net cash flows of continuing operations
For the year ended December 31,
Change
2020
2019
$
%
667,947
978,343
(310,396)
(31.7)
(227,834)
(485,687)
(45,574)
(242,204)
(425,274)
310,865
14,370
(60,413)
(5.9)
14.2
Annual Report and Accounts 2020 Page | 26
Analysis of Cash Flows
Net Cash Provided by Operating Activities from Continuing Operations
During the year ended December 31, 2020, the Company generated $667.9 million of net cash provided by
operating activities of continuing operations, a decrease of $310.4 million compared to the year ended
December 31, 2019. The decrease was principally attributed to a decline in operating income of $585.4 million.
Non-cash adjustments to net loss for the year ended December 31, 2020 were $1.48 billion, compared to
$951.3 million for the prior corresponding period. The principal drivers of the increase in non-cash adjustments were
a $347.2 million increase in unfavorable foreign exchange losses, and a $296.0 million goodwill impairment charge
incurred during the year, compared to a $57.0 million goodwill impairment charge incurred in the prior corresponding
period.
Changes in operating assets and liabilities for the year ended December 31, 2020 increased to $157.6 million, from
$96.2 million in the prior corresponding period.
Net Cash Used in Investing Activities from Continuing Operations
During the year ended December 31, 2020, the Company used $227.8 million of net cash for investing activities, a
decrease of $14.4 million compared to the year ended December 31, 2019. The decrease in net cash used in
investing activities was principally attributed to a reduction of capital expenditures of $122.6 million, primarily
attributable to overall economic slowdown from COVID-19.
Proceeds from the sale of assets for the year ended December 31, 2020 were $9.3 million, compared to $123.9
million from the prior corresponding period. During the prior year, the Company sold its investment in Yeonama, had
sales of used, non-premium equipment, which were previously included within Systems & Equipment as part of a
strategic agreement with a distributor in Oklahoma, and sold its BillBird subsidiary.
Net Cash Used in Financing Activities
During the year ended December 31, 2020, the Company used $485.7 million of net cash for financing activities, an
increase of $60.4 million compared to the year ended December 31, 2019.
During 2020, cash flows used in financing activities primarily included proceeds from long-term debt of $750.0
million, principal payments on long-term debt of $988.4 million, dividends paid to shareholders of $40.9 million,
dividends paid to non-controlling interests of $136.4 million, and returned $32.3 million of capital to non-controlling
shareholders.
During 2019, cash flows used in financing activities primarily included proceeds from long-term debt of
$1,397.0 million, principal payments on long-term debt of $1,264.6 million, dividends paid to shareholders of
$163.5 million, dividends paid to non-controlling interests of $134.9 million, and returned $98.8 million of capital to
non-controlling shareholders.
Non-financial measures
Non-financial measures have a useful role alongside financial measures to inform decision making and to evaluate
the Company's performance. Refer to the Strategic Report and the Directors' Report for further information on non-
financial measures.
Annual Report and Accounts 2020 Page | 27
MARKET TRENDS
In general, the Company’s business is not materially
affected by seasonal variation. In the lottery business,
lottery consumption may decrease over the summer
months due to the tendency of consumers to be on
vacation during that time. Seasonal gaming trends
generally show higher play levels in the spring and
summer months and lower levels in the fall and winter
months. Gaming product sales may be uneven
throughout the year, and can be affected by factors
including the timing of large transactions, new casino
openings and trade shows.
In any event, the Company’s worldwide operations
can be affected by industrial, economic, and political
factors on both a regional and global level. The
following are the principal factors which have affected
the Company’s results of operations and financial
condition and/or which may affect
results of
operations and financial condition for future periods.
COVID-19
to combat
limitations on
In January 2020, an outbreak of a new strain of
identified and has
coronavirus, COVID-19, was
spread around the world, including in the Company’s
core markets of the United States and Italy. The
World Health Organization declared the outbreak to
be a pandemic on March 11, 2020. The global spread
of COVID-19 has been, and continues to be, complex
rapidly evolving, with governments, public
and
imposing or
institutions and other organizations
recommending, and businesses and
individuals
implementing, restrictions on various activities or
other actions
its spread, such as
restrictions and bans on travel or transportation, stay-
at-home directives,
the size of
gatherings, closures of work facilities, schools, public
buildings and businesses, cancellation of events,
including sporting events, concerts, conferences and
meetings, and quarantines and lock-downs. The
the
its consequences,
pandemic and
closure of almost all casinos and gaming halls
globally in the second quarter of 2020, dramatically
reduced demand for gaming products and services,
which has had a negative impact on all aspects of the
Company’s business. While many casinos and
gaming halls have since reopened, some remain
closed. The Company continues to take all prudent
measures to protect the health and safety of our
employees, such as practicing social distancing,
performing deep cleaning
facilities, and
enabling our employees to work from home where
possible.
including
in our
to
the
timing of
players, resulting in a lower level of lottery ticket
purchases. During the first and second quarter, our
Global Lottery segment was significantly impacted
due
the government-imposed
quarantines and lockdowns to mitigate the spread of
the virus. The scope and duration of these measures
varied greatly by jurisdiction. The most significant
impact on our results arose from measures imposed
by
the
suspension of all lottery games under the Lotto
license starting in April 2020 with a phased reopening
strategy starting in early May. During the third quarter
and fourth quarters of 2020 we saw an 8.7% and a
7.9% increase in same-store sales, respectively, in
particular with the lotteries in North America and
recovery within our Italian lottery businesses.
Italian government which
included
the
revenue and cash
Our Global Gaming segment was significantly
impacted due to the widespread temporary closures
of a substantial number of gaming establishments
coupled with the global economic uncertainty. Our
service
flows have been
significantly affected, as they are largely driven by the
level of gaming activity and players’ disposable
incomes. As the level of play declined due to casino
closures or quarantines,
there was a directly
in our gaming businesses.
correlated decline
Additionally, our product sales largely depend on our
customers’ liquidity and operating results, which has
begun to impact the replacement cycle and demand
for products and opportunities from new or expanded
markets. Further, we granted customer concessions
for the portion of the time for which such customers’
operations were impacted by closures or quarantines.
The temporary closure of gaming establishments,
disruptions to lottery operations, travel restrictions,
cancellation of sporting events, expected
lower
disposable incomes of consumers, and adverse
impact on our casino and gaming customers’ liquidity
and
the COVID-19
pandemic, had, and continues to have, an adverse
effect on our results of operations, cash flows, and
financial condition.
financial results caused by
Product Sales
Product sales fluctuate from year to year due to the
mix, volume, and timing of the transactions. Product
sales amounted to $475.9 million and $930.9 million,
or approximately 15.3% and 23.1% of total revenues,
for the years ended December 31, 2020 and 2019,
respectively.
Our Global Lottery segment was affected as certain
lottery retail establishments were temporarily closed
and others experienced the general slowdown due to
lower foot traffic and reduced spending by end
Annual Report and Accounts 2020 Page | 28
the functional currency of that subsidiary. In preparing
consolidated
financial statements, assets and
liabilities measured in the functional currency of the
subsidiaries are translated into U.S. dollars using the
exchange rate prevailing at the balance sheet date,
while income and expenses are translated using the
average exchange rates for the period covered.
Accordingly, fluctuations in the exchange rate of the
functional currencies of the Company’s subsidiaries
against the U.S. dollar impacts the Company’s results
of operations. The Company is particularly exposed
to movements in the euro/U.S. dollar exchange rate.
Although the fluctuations in exchange rates have had
a significant impact on the Company’s revenues, net
income, and net debt, the impact on operating income
and cash flows is less significant as revenues are
typically matched to costs denominated in the same
currency.
legal developments, and
The U.S. Interstate Wire Act of 1961 ("Wire Act")
The Company’s management is evaluating the Wire
Act and related
their
implications to the Company, its customers, and the
industries in which the Company operates. If the Wire
Act is broadly interpreted and enforced to prohibit
activities in which the Company and its customers are
engaged,
to
investigations, criminal and civil penalties, sanctions
and/or other remedial measures and/or the Company
may be required to substantially change the way it
conducts its business, any of which could have a
material adverse effect on the Company’s results of
or
operations,
prospects.
the Company could be subject
condition,
business,
financial
Jackpots and Late Numbers
The Company believes that the performance of lottery
products is influenced by the size of available
jackpots in jurisdictions that offer such jackpots. In
general, when jackpots increase, sales of lottery
tickets also increase, further increasing the jackpot.
The Company also believes that consumers in Italy
monitor “late numbers” (numbers that have not been
drawn for more than 100 draws) and when there is a
good pipeline of late numbers, wagers in Italy
increase. Under both circumstances, the Company’s
service revenues are positively impacted.
Non-Cash Goodwill Impairments
in
the
In 2019, the Company determined that there was an
International cash-
former
impairment
generating unit’s goodwill due to the results being
lower than forecasted along with higher weighted
average cost of capital. In 2019, a $57.0 million non-
cash goodwill impairment loss with no income tax
benefit was recorded to reduce the carrying amount
of the former International cash-generating unit to fair
value. During the first quarter of 2020, the Company
determined that the expected impact of COVID-19 to
the Company’s future operations indicated that it was
more likely than not that an impairment loss had been
incurred within certain cash-generating units. As a
result of changes to the discount rates and changes
to management’s forecasted results for the former
International and North America Gaming and
Interactive cash-generating units,
the Company
recorded non-cash goodwill impairments of $193.0
million and $103.0 million, respectively. As a result of
the change in cash-generating units on July 1, 2020,
and as discussed in Note 22, Segment Information to
the Consolidated Financial Statements, we allocated
goodwill to our new cash-generating units using a
relative fair value approach. The goodwill allocated to
the Global Lottery and Global Gaming cash-
generating units was $3,071.6 million and $2,168.7
million, respectively. As of December 31, 2020, the
excess of recoverable value over carrying value in the
Global Lottery and Global Gaming cash-generating
units was 63.4% and 10.8%, respectively.
Effects of Foreign Exchange Rates
The Company is affected by fluctuations in foreign
exchange rates (i) through translation of foreign
currency financial statements into U.S. dollars for
consolidation, which is referred to as the translation
impact, and (ii) through transactions by subsidiaries in
currencies other than their own functional currencies,
which is referred to as the transaction impact.
Translation impacts arise in the preparation of the
consolidated financial statements; in particular, the
consolidated financial statements are prepared in
U.S. dollars while the financial statements of each of
the Company’s subsidiaries are generally prepared in
Annual Report and Accounts 2020 Page | 29
SECTION 172 STATEMENT
The Directors are accountable to shareholders and, in accordance with section 172 of the Companies Act 2006,
must act in a way that is likely to promote the success of the Company for the benefit of its members as a whole. In
doing so, the Directors must have regard, amongst other matters, to (a) the likely consequences of any decision in
the long-term; (b) the interests of the Company’s employees; (c) the need to foster the Company’s business
relationships with suppliers, customers and others; (d) the desirability of the Company maintaining a reputation for
high standards of business conduct; and (e) the need to act fairly as between members of the Company, consistent
with the Company’s core and sustainable business objectives.
The Board has broad responsibilities to establish the Company’s structure, strategy, and risk profile. To this end, the
Board holds an annual strategy session with management present to review and discuss the market trends and
IGT’s strategic initiatives (including assumptions, projections and conclusions) which takes into account the longer-
term value creation and business growth of the Company whilst honoring commitments to stakeholders.
The Board is supported by an Audit Committee, a Nominating and Corporate Governance Committee and a
Compensation Committee, with a clear framework of matters delegated to each committee. Material business
decisions are reserved for the Board and certain strategic and financial thresholds have been determined to identify
matters requiring Board consideration and approval. Specifically, the Nominating and Corporate Governance
Committee reviews and approves the Company's annual Sustainability Report demonstrating to both internal and
external stakeholders the organization’s commitment to sustainable development. The Audit Committee receives
periodic reports and updates on the organization's systems and controls as well as risks and exposures, whilst the
Compensation Committee receives reports and updates on employee-related activities. The Company's investor
outreach program is reported to the Board directly.
The day-to-day management of the business has been delegated to the Chief Executive Officer, and senior
management have also been delegated authority to make decisions within specified parameters which the
Nominating and Corporate Governance Committee reviews annually. The Board and its committees receive from
management information, reports and proposals for Board approval relating to operations across IGT, including the
interests and views of key stakeholders for consideration and discussion to help the Board in making specific
decisions and in providing ongoing oversight at group level.
Key decisions
For each matter which comes before the Board and its committees, the likely consequences of any decision in the
long-term were taken into consideration, including the stakeholders who may be affected, their interests and any
potential impact as part of the decision making process. In 2020, in addition to the five scheduled meetings (six for
the Audit Committee), the Board and its committees held several additional meetings to consider the fast-changing
environment, including to address the impact arising from the COVID-19 pandemic.
COVID-19
The COVID-19 pandemic brought significant impact on businesses and the economy worldwide. Responding to the
crisis, a cross-functional crisis management team led by senior management was established to drive, coordinate
and oversee various workstreams, identify actions and evaluate potential impacts, and report to the Audit
Committee and the Board of various activities and outcome. The Board considered IGT’s employees, customers,
and communities, whose safety and well-being remained IGT’s highest priority during the challenging time. The
Board also approved the implementation of a host of measures to contain the impact of the outbreak including
taking steps to stabilize the supply chain and build contingency operational plans for all geographies and all aspects
of the business to ensure business continuity. Cost saving initiatives were also implemented, including cancelling or
delaying non-essential capital expenditures and temporary company-wide salary reductions (including incentive
compensation), furloughs and hiring freezes. In May 2020, the Board also approved amendments to IGT’s revolving
credit facilities agreement and term loan facility agreement to provide IGT flexibility to navigate the near-term
uncertainty caused by the pandemic. The amendments modify the agreements by, amongst other things, waiving
the covenants requiring IGT to maintain a maximum ratio of total net debt to EBITDA and a minimum ratio of
EBITDA to net interest costs from the fiscal quarter ending June 30, 2020 through the fiscal quarter ending June 30,
2021, and prohibiting dividends and share repurchases through June 30, 2021 and permitting dividends and share
repurchases thereafter if the ratio of total net debt to EBITDA is below specified thresholds, which evidence the
Board’s efforts in balancing the needs of different classes of stakeholders.
Annual Report and Accounts 2020 Page | 30
Board and committee membership
In light of Paget Alves’ decision to stand down from his position as a director of the Company at the conclusion of
the 2020 annual general meeting (and consequently his retirement as a member of each of the Audit Committee
and the Compensation Committee) and the desire to reinstate the 11-member Board composition, the Board with
support from the Nominating and Corporate Governance Committee, considered the composition of, and evaluated
the new appointments to be made to, the Board and each Board committee to ensure their effective functioning in
supporting the Board in its decision making process, providing entrepreneurial leadership and meeting objectives of
the Company with a view to enhancing shareholder value over the long-term. This led to the appointments of
Beatrice Bassey and Max Chiara to the Board on March 20, 2020 and April 14, 2020, respectively, Alberto Dessy to
the Audit Committee (having stepped down from the Nominating and Corporate Governance Committee,
considering his other membership of the Compensation Committee), Samantha Ravich to the Compensation
Committee, and Beatrice Bassey to the Nominating and Corporate Governance Committee each effective from the
Company's 2020 annual general meeting.
Global Supply Chain Optimization and Technology Organization Consolidation
During the first quarter of 2020, IGT initiated a restructuring plan to optimize its global supply chain and footprint
resulting in a significant reduction to its primary manufacturing operations. IGT will utilize contract manufacturers
that are worldwide experts in manufacturing and which excel at sourcing and assembly activities, and intends to
utilize these third-party contract manufacturers to reduce costs and achieve efficiencies in fulfilling future demand
for our products. During the second quarter of 2020, the Company also initiated a restructuring plan to realign and
consolidate operations, reduce costs, and improve operational efficiencies within its Technology group. The goal of
the restructuring exercises is to increase value for all stakeholders in the long-term. The Company also launched its
OPtiMa business efficiency program with an aim to achieve targeted savings in 2021.
Financing
In June 2020, the Board approved the issue of up to $750 million new senior secured notes and the use of a portion
of the net proceeds to tender for up to $500 million existing senior secured notes due in 2022. A key driver of the
decision was to extend the average life of the Company’s debt instruments and reduce the average cost of
borrowing going forward. The decision helped strengthen the outlook for IGT’s liquidity position whilst management
explored other sources of liquidity including government loan programs made available during the pandemic, and
enabled IGT to support and preserve its operations, protect the long-term value of the business and further
strengthen the Company’s financial resilience. In making decisions, the Board considered investor expectations,
business needs of the Company, and the flexibility offered by the new issue and tender offer.
New organization
The Company announced a new organizational structure in July 2020 which focused primarily on two business
segments - Global Lottery and Global Gaming - thus streamlining IGT’s business and leadership under the new
structure. The new structure is designed, amongst other things, to provide greater responsiveness to customers and
players, increase IGT's effectiveness and competitiveness in providing products and solutions that address the
opportunities of each market segment, reduce complexity and increase organizational efficiency to support IGT's
intrinsic value. The new organization is also aimed at easing analysts’ and investors’ comprehension of IGT’s
business model and making IGT more comparable to peers. Potential organizational cultural differences as well as
customer and other stakeholder relationships were considered in the planning for these changes which began well
before the outbreak of COVID-19.
Disposal of Italian B2C gaming business
In December 2020, the Board approved the sale of IGT's interests in Lottomatica Videolot Rete S.p.A. and
Lottomatica Scommesse S.r.l., the members of the IGT group which conduct its Italian B2C gaming machine, sports
betting, and digital gaming businesses, to Gamenet Group S.p.A., subject to customary closing conditions including
regulatory approvals. This action stemmed from IGT's decision to monetize its leadership positions in the Italian
B2C gaming machine, sports betting, and digital spaces at an attractive multiple to comparable Italian transactions,
providing IGT with enhanced financial flexibility. The Board believes the disposal would allow IGT to rebalance its
business and geographic mix and further allow its Global Gaming segment to focus on core competency as a B2B
service provider.
Annual Report and Accounts 2020 Page | 31
Our stakeholders
The processes and activities in respect of the Company’s key stakeholders as described below and in this Strategic
Report demonstrate how the Directors have addressed their responsibility under section 172 of the Companies Act
2006.
REGULATORS
IGT’s activities are subject to extensive and complex governmental and regulatory requirements, which are
constantly evolving and may vary from jurisdiction to jurisdiction. Regulators rely on IGT’s capabilities and
experience in preventing and reacting to illegal and problem gambling.
Approach, engagement and initiatives
•
IGT continues to build on its well-established local presence and relationships with regulators in the countries where
it operates around the world. IGT’s top managers regularly attend meetings with public authorities and institutions at
local and global levels to actively provide updates and share knowledge and expertise. During 2020:
•
Four regular and two special meetings of the Global Compliance Governance Committee (established in
accordance with the Twelfth Revised Order of Registration issued by the Nevada Gaming Commission and
Nevada Gaming Control Board, item 12, requirement to maintain a “gaming compliance program plan”), were
held;
Four regular meetings of the Government Affairs Committee, established by IGT to oversee, amongst other
things, its government relation matters, were held;
IGT cooperated with 14 regulatory authority investigations for the purposes of renewing its global regulatory
licensing portfolio; 39 personal interviews and one corporate visit were conducted;
IGT continued its efforts to work with gaming authorities and industry groups to expand IGT’s responsible
gambling product offerings that go above and beyond jurisdictional regulations; and
The Enterprise Risk Management team conducted a detailed assessment of IGT’s Compliance and Governance
Program and subsequently suggested a series of continual improvement opportunities e.g. automation, to
ensure best-in-class.
Information on stakeholders
•
•
•
•
•
•
•
The Audit Committee receives quarterly updates on all cases of regulatory violations, citations and fines, as well
as general regulatory compliance updates, which are reported by the Audit Committee chair to the Board.
The Audit Committee receives quarterly risk management updates, which are reported by the Audit Committee
chair to the Board, so that Directors are aware of risks, potential impact and mitigating actions.
The Audit Committee receives an annual report on activities of the IGT Global Compliance Governance
Committee (which in turn, receives reports on activities of the IGT Government Affairs Committee, including on
new and amended government relations agreements and quarterly financial contributions made by IGT), with a
year end presentation provided by the committee’s chair.
Each Board committee also receives general regulatory and market practice updates, so that the Directors are
kept informed of regulatory and market developments and can respond and take action accordingly.
EMPLOYEES
It is IGT's people who will enable us to continue to meet the business challenges posed in today’s gaming market.
IGT’s overall goal is to increase the presence of underrepresented groups at all levels and create a more inclusive
organizational culture.
Approach, engagement and initiatives
IGT is committed to creating an engaging employee experience. During 2020:
•
Several Company-wide meetings to provide employees with important information and field employee questions
were held;
Directors took part in internal initiatives such as meeting with members of a Diversity and Inclusion Group and
participating in an International Women’s Day video distributed to employees throughout the Company;
IGT conducted its biennial employee engagement survey, also referred to as MyVoice@IGT. As of 2020, IGT
has a response rate of 77% and an engagement index of 79% favorable, which has continued to increase over
time;
IGT launched its exit survey globally in January, capturing the reasons for employees who voluntarily decide to
leave, as well as information about the quality of the organization, in order to assess and improve the work
environment, culture, processes and systems, and management and development;
IGT launched many trainings for employees for ongoing growth and development, dedicated to various aspects
including to develop core management capabilities, to improve communication and cross-cultural awareness, to
•
•
•
•
Annual Report and Accounts 2020 Page | 32
provide employees with insights into bias and strategies to mitigate bias in the workplace, to support our
employees in educating children at home and as they make the transition to remote work as a result of the
global pandemic, to support employees during a significant organizational change, and as required by all
regular, active employees covering topics consistent with our Code of Conduct policy and expectations; and
There were ongoing development of employee diversity and inclusion groups, and employee networks
structured around underrepresented dimensions of diversity.
•
Information on stakeholders
•
•
•
•
The Nominating and Corporate Governance Committee receives annual updates on how IGT is ensuring fair
labor and favorable working conditions and the respect of health and safety standards, and on IGT’s Global
Strategic Plan for Diversity and Inclusion to create a more inclusive organizational culture.
The Compensation Committee reviews management recommendations and advises management on broad
compensation policies.
The Compensation Committee receives updates from its People and Transformation department on talent
management processes to ensure IGT attracts and retains talent, particularly to meet market expectations for
senior management remuneration packages. Following the expansion of the committee's mission to human
capital management, the Compensation Committee will also receive reports on human capital matters going
forward.
The Audit Committee reviews any cases of whistleblowing.
COMMUNITY AND ENVIRONMENT
IGT recognizes the importance of contributing to communities and reducing any damaging effects on the
environment from business processes.
Approach, engagement and initiatives
IGT is committed to community involvement and supporting programs that enrich and strengthen the communities
where IGT operates. During 2020:
•
IGT Community Ambassadors refocused community efforts dedicated to virtual volunteering and contact-less
efforts;
IGT also prioritized giving to basic needs organizations and causes. This effort aligns with IGT’s adopted
Sustainability Development Goals;
Increased efforts were made to encourage employees to engage with non-profit organizations independently
when possible;
The Virtual Volunteering Event which included events in areas across the globe was held in October. During this
event, three lunch and learns were held to update IGT employees on the impact COVID-19 made on local food
banks; and
IGT also continued with the After School Advantage Program while adjusting its processes to ensure everyone’s
health and safety.
•
•
•
•
See CORPORATE SOCIAL RESPONSIBILITY - COMMUNITY AND RESPONSIBLE GAMING of this Strategic
Report, for community activities carried out by the Company.
IGT is committed to achieving environmental sustainability in its operations and strives for continuous improvement
in its environmental management systems and reduction of its environmental impact. During 2020, IGT’s facilities
located worldwide have carried out several activities, mainly focused on replacement of old lighting systems and on
energy efficiency of heating, ventilation and air conditioning systems. See CORPORATE SOCIAL
RESPONSIBILITY - ENVIRONMENT of this Strategic Report, for the Company’s environmental activities.
Information on stakeholders
•
•
•
The Nominating and Corporate Governance Committee reviews management’s Corporate Social Responsibility
program which gives due consideration to environmental and social matters that could impact IGT, the
environment or the communities in which IGT operates, and receives updates on initiatives and programs
carried out by Corporate Social Responsibility.
The Nominating and Corporate Governance Committee receives IGT’s annual Sustainability Report to ensure it
is consistent with IGT’s business strategy and core values.
The Directors review the findings on greenhouse gas emissions and global energy produced by IGT activities as
reported in the U.K. annual report and accounts and the annual Sustainability Report.
Annual Report and Accounts 2020 Page | 33
SHAREHOLDERS
Our retail and institutional shareholders are the owners of the Company, and they play an important role in
monitoring the performance of the Company.
Approach, engagement and initiatives
As a publicly listed company, IGT maintains a regular dialogue with shareholders, institutional investors, and
analysts through a combination of meetings, correspondence and reporting. During 2020:
•
IGT representatives participated in investor conferences e.g. Deutsche Bank Gaming, Lodging & Leisure
Conference; Truist Gaming, Lodging, Leisure & Restaurants Conference; Bank of America Gaming & Lodging
Conference; Goldman Sachs Gaming Conference; JP Morgan Gaming, Lodging, Restaurants & Leisure
Conference; Jefferies Consumer Conference; JP Morgan European High Yield Conference; Bank of America
Leveraged Finance Conference; Barclays Eat, Sleep, Play Consumer Conference; and
A virtual roadshow in connection with the new senior secured notes offering in June was held.
•
Information on stakeholders
•
•
•
•
The Audit Committee and the Directors receive updates and feedback from the continued dialogue between IGT
and our institutional investors through meetings, calls, conferences and emails.
The Directors review and approve IGT's investor outreach strategies.
Each Board committee receives updates from management on IGT’s legal obligations, e.g. changes to law and
regulations, including in the context of corporate governance.
Each Board committee receives regular updates from management on market guidelines, recommendations
and associated guidelines from advisors, professional bodies and proxy advisory firms or any notes analysts
may have.
PLAYERS AND CUSTOMERS
IGT's business relies on players' discretionary income and their level of gaming activity. IGT works to attract and
retain new players, and devotes significant resources to developing innovative services and products to enhance
player experience and player safety. Customer relationships are the foundation of IGT’s leadership.
Approach, engagement and initiatives
IGT strives to deliver unrivalled gaming experiences that engage players and drive growth, whilst also maintaining a
long-standing commitment to player protection through close relationships with customers, gaming regulators,
research institutes, and advocacy groups that promote tools to prevent problem gambling and support responsible
gaming. During 2020:
•
IGT achieved responsible gaming re-accreditation by the Global Gambling Guidance Group (G4) for its IGT
Gaming and PlayDigital™ operations;
Lottomatica in Italy provided a brand-new format for Live Lotto Draw to engage players and provide visibility to
the transparency of drawing procedures;
In November, Lottomatica accomplished the partial assessment stating its alignment to the European State
Lottery and Toto Association (EL) Responsible Gaming Standard; and
IGT participated in six industry association events; two in person (EL/WLA Marketing Seminar and PGRI Smart
Tech) and four virtual (NASPL DeskCon, PGRI Lottery Expo, La Fleur's DC Conference and EL Innovation
Seminar).
•
•
•
IGT operates as a trusted growth partner for both lottery and gaming customers, including government customers
worldwide. Attention and dedication to IGT customers are integrated into the strategies IGT uses to provide them
with prompt and complete assistance. During 2020:
•
IGT transformed its in-person Lottery Retail Workshop, to weekly virtual sessions held in October, where 17
international lotteries and two industry vendors used these weekly Teams video sessions to share challenges,
best practices, and lessons learned throughout the pandemic and in the rapidly changing environment;
IGT hosted its North America lottery customers in virtual customer meetings to present a global business update
and to keep its customers informed on business continuity initiatives and engage customers in a live Q&A;
IGT participated in the Global Gaming Expo (G2E) Virtual Experience 2020;
IGT representatives participated in the virtual event series for EMEA and LAC including a live webinar;
IGT participated in the ICE Totally Gaming event in February;
IGT PlaySports Trading Team provided monthly newsletters and designed promotional materials for Sports
Betting Customers;
IGT, via its Roadshow Trailer initiative in North America, ensured customers who were unable to travel had
access to the wider gaming portfolio and COVID-19 applicable products and services;
•
•
•
•
•
•
Annual Report and Accounts 2020 Page | 34
•
•
•
•
•
•
•
•
IGT managed three customer forums in Australia to educate customers on IGT products as well as broader
issues affecting our customers' businesses;
IGT managed webinars in Australia and New Zealand to educate IGT customers on our products;
IGT designed and delivered four customer-facing magazines in Asia Pacific;
IGT designed and delivered customer-facing direct mail with product promotions and game performance
information via email and post;
IGT produced multiple videos featuring Gaming Chief Operating Officer Nick Khin, highlighting industry updates,
resources, and helpful information to keep our operators informed and supported as they navigated the
pandemic;
IGT produced its own Virtual Gaming Showcase event to help supplement the American Gaming Association's
(AGA) G2E, sharing product and solution updates relevant and supportive of player safety in a COVID-19
gaming environment;
Lottomatica in Italy provided new services to educate and engage its retailers - Rivenditore 10eLode - a new
way gamification inspired training; MyLotteries news; online onboarding Lotto training; retailer APP for Scratch
Tickets Purchasing; and
IGT produced multiple videos to help support the first virtual Video Lottery Customer Advisory Board; in
attendance were all Canadian Video Lottery customers, as well as, Oregon State Lottery, Svenska Spel, OPAP
and Lottomatica.
Information on stakeholders
•
The Nominating and Corporate Governance Committee reviews management’s Corporate Social Responsibility
program, which includes (i) updates on its main objectives pertaining to players such as (a) promoting protective
tools to prevent problem gambling, (b) supporting responsible gaming organizations that address problem
gambling, and (c) preventing underage gambling, and (ii) activities undertaken in connection with its customers.
SUPPLIERS
Suppliers play a key role in IGT’s ability to support its customers’ requirements.
Approach, engagement and initiatives
IGT works with suppliers that can ensure high quality goods and services and meet high economic, ethical, and
socio-environmental standards. During 2020:
•
IGT initiated a restructuring plan to optimize its global supply chain and footprint resulting in a significant
reduction to its primary manufacturing operations;
Periodic business and quality reviews were undertaken on suppliers, which serve to review the performance
and provide feedback to suppliers;
Lottomatica in Italy worked to add the Supplier Code of Conduct in the Supplier Qualification Process in addition
to the other requirements that the supplier must accept upon verification; and
Sustainable Development Goals engagement questions were added to the Supplier Self-Assessment and the
Supplier Quality Management Audit forms.
•
•
•
Information on stakeholders
•
•
•
The Audit Committee receives periodic risk management updates (including risks pertaining to the Company's
supply chain), which are reported by the Audit Committee chair to the Board, so that Directors are aware of
risks, potential impact and mitigating actions.
The Directors receive periodic updates on compliance with IGT’s Code of Conduct which sets out the
Company’s zero-tolerance approach to modern slavery and its commitment to implementing and enforcing
effective systems and controls to promote an ethically sensitive business and reduce the risk of contracting with
suppliers who are not aligned to these principles.
The Directors receive information on the initiatives and activities undertaken in connection with the Company's
supply chain as part of its review and approval of the UK Modern Slavery Act statement.
Annual Report and Accounts 2020 Page | 35
CORPORATE SOCIAL RESPONSIBILITY
APPROACH TO SUSTAINABILITY
Perceptions and implications of Sustainability and
Corporate Social Responsibility
("CSR") have
changed year after year, and they continue to evolve
as social awareness and public concerns are
heightened.
As a company operating on a global scale, IGT has
embraced sustainability efforts since their introduction
into the public debate. This is evident by how IGT has
sustainability
acknowledged
principles needed
the
in
to guide
marketplace. From being a good corporate citizen to
actively engaging at a local level, IGT contributes to
international efforts aimed at operating in a more
responsible world.
fundamental
its actions
the
being
values:
passionate,
IGT’s internal corporate culture is guided by a set of
five
pioneering,
responsible, authentic, and collaborative. When
conducting business with local governments and
organizations, IGT is committed to ensuring strict
adherence to the principles of lawful conduct in every
jurisdiction it serves. Integrity, in terms of behavior as
well as business conduct, is the foremost prerequisite
for creating value for all stakeholders.
IGT has developed a solid approach to sustainability
that includes key sustainability topics within the
corporation’s scope of operations.
IGT’s ongoing pledge to sustainable growth within the
gaming industry includes the guiding principles set
forth by the 2030 United Nations ("UN") Agenda for
its Sustainable
Sustainable Development and
Development Goals ("SDGs"). This 2030 Agenda and
its 17 SDGs form an action program for people, the
planet, and prosperity and was signed in September
2015 by the governments of the 193 UN member
countries to meet three key objectives by 2030: end
extreme poverty, fight inequality and injustice, and
limit climate change. Based on its business activities
and its sustainability priorities, IGT has identified the
relevant SDGs with which it could contribute the most
(e.g. including no poverty, good health and wellbeing,
quality education, gender equality, affordable and
clean energy, decent work and economic growth,
industry
reduced
inequalities, and climate action) and began an
ongoing process to develop specific targets and
initiatives that could effectively contribute to the
achievement of the SDGs in the future.
innovation and
infrastructure,
In addition, IGT has joined the United Nations Global
Compact, the largest corporate responsibility initiative
in the world for the development, implementation, and
disclosure of responsible corporate policies and
practices. Endorsed by chief executives, the UN
Global Compact is a call to companies everywhere to
voluntarily align their operations and strategies with
ten universally accepted principles in the areas of
human rights, labor, environment, and anti-corruption.
IGT is committed to making the UN Global Compact
principles part of the Company’s strategy, culture, and
day-to-day operations.
IGT is actively contributing to this global effort by
refocusing
the
sustainable development goals within the Company’s
scope of operations according to four strategic pillars:
to pursue
its CSR
initiatives
•
•
•
•
Valuing and protecting people;
Advancing responsibility;
Supporting communities; and
Fostering sustainable operations.
to pursue
By committing
the UN’s Sustainable
Development Goals and voluntarily disclosing
information through the annual Sustainability Report,
IGT is leveraging the long-standing results of its CSR
strategy to strengthen its reputation, and improve
customers’ confidence.
COMMUNITY AND RESPONSIBLE
GAMING
IGT is a global leader in one of the most regulated
industries. With operations
than 100
countries, there are recognizable differences related
not only to laws and regulations, but also to cultural
and social attitudes. Through a solid commitment to
corporate social responsibility, IGT strives to be a
international
responsible partner
authorities, customers, and players in markets and
jurisdictions where the Company operates.
local and
in more
for
IGT is determined to have a significant and positive
impact on the communities in which the Company
operates
through community sponsorships and
employee driven community programs. IGT has an
that allows any non-profit
online giving portal
organizations to request funding or sponsorship.
Community requests are reviewed by IGT’s Social
Impact Committee to ensure that the organization and
its mission aligns with IGT's adopted SDGs. In 2020,
organizations that support no poverty and good
health and wellbeing were prioritized.
IGT also created a Community Ambassador program
that fosters community efforts on the local site level. It
is through the Community Ambassador program that
we traditionally celebrate the Global Food Collection
Challenge, the Global Giving Week and the Global
Book Collection. With these local efforts, sites are
Annual Report and Accounts 2020 Page | 36
donating or volunteering to causes within their local
communities. Given pandemic
the
Community Ambassadors shifted
to virtual and
contactless efforts. Globally, a Virtual Volunteering
Event was held in place of the three traditional
events.
restrictions,
IGT’s employee-driven programs provide employees
the opportunity to give back to their local communities
by giving their time, talent, or money.
Being part of a community at large also means a
focus on player protection and engaging with key
stakeholders for a well-rounded responsible gaming
program.
IGT maintains close relationships with
customers, gaming regulators, and researchers to
further its support of player protection. IGT also works
closely with advocacy groups who promote tools to
prevent problem gambling, support
responsible
gaming organizations, and work to prevent underage
gambling.
IGT’s commitment to responsible gaming starts with
its own people and is woven into the fabric of product
development, services, programs, and policies. With
approximately 11,000 employees serving customers
in over 100 countries, IGT ensures that employees at
all levels and responsibilities are trained to support
their daily
and promote responsible gaming
activities, with additional
for
employees in specific roles such as game designers
and contact center associates. All products, games,
systems, and portals include advanced responsible
gaming tools that help safeguard players’ interests
and address regulators’ concerns.
in
in-depth courses
to
to
The certifications awarded to IGT by respected
industry associations worldwide are a
gaming
testament
responsible
IGT’s commitment
gaming. IGT has been the first lottery vendor to
receive the World Lottery Association’s Responsible
Gaming Standards for Associate Members, covering
IGT’s lottery operations. IGT received G4 (Global
Gambling Guidance Group)
responsible gaming
certification in 2017 and in 2019 for its land-based
casino operations and digital services, respectively,
making it the first supplier to be certified across both
operations. In 2020, G4 re-evaluated IGT for both
certifications
simultaneously. These
operations
require renewal on a regular basis. Therefore, IGT
continuously
responsible gaming
programming to fulfil recertification requirements.
improves
its
the UN Global Compact network,
HUMAN RIGHTS
As a global leader in the gaming industry, IGT is
to supporting and cooperating with
committed
international institutions and authorities to promote
corporate actions that advance societal goals. By
IGT
joining
rights
strengthens
principles, which
international
derive
conventions such as the International Bill of Human
Rights
the United Nations Universal
Declaration of Human Rights and the fundamental
Conventions of the International Labour Organization
(“ILO”).
to human
from
its commitment
including
towards human
to human rights and
that businesses should
The first two principles of the UN’s Global Compact
they
are directly related
respectively state
first,
support and respect the protection of internationally
proclaimed human rights and second, ensure that
they are not complicit in human rights abuses. IGT
identifies these two principles as a major guide for its
action
rights protection and
promotion; nonetheless, in line with the third principle
- relating to labor principles - which states that
businesses should uphold the freedom of association
and the effective recognition of the right to collective
the value of using
bargaining,
to achieve positive
dialogue and negotiation
outcomes in employment practices. The Company
abides by non-discriminatory policies and procedures
with respect to trade unions, union memberships, and
their activities. IGT provides workers’ representatives
with appropriate services to assist in the development
of effective collective agreements. IGT is involved in
collective bargaining
is
committed to accommodating specific local laws and
regulations, and is providing the tools needed for
union representatives to perform their duties.
in different countries,
IGT recognizes
composed of different
As previously mentioned, in order to develop specific
targets and initiatives to achieve the SDGs, in 2018
IGT began an ongoing process that involved seven
working groups
IGT
departments. Among them, four working groups are
focused, from an internal IGT point of view, on
promoting measures
forms of
to
discrimination, fostering a productive employment
environment, guaranteeing fair and favorable working
conditions, raising awareness about human rights
practices and supporting vulnerable groups’ rights.
Specifically, the Human Rights Respect working
group is committed to protecting human rights within
the Company boundaries, thus minimizing the risk of
human rights violation.
fight all
Annual Report and Accounts 2020 Page | 37
From an external perspective,
the Sustainable
Procurement working group is the one focusing on
the protection of human rights and environment along
the entire supply chain of the organization.
Tito Scalo (IT), and assembling, which primarily
occurs in Reno (NV).
The working groups cooperate to guarantee that
there is a clear, aligned and consistent connection
between
the Company’s existing commitments,
policies and actions, and the topic of human rights,
also considering the best-practices available on a
global scale.
IGT has a zero-tolerance approach
to modern
slavery. The Company is committed to implementing
and enforcing initiatives to reduce the risk of modern
slavery and human rights violations in the Company
businesses and its supply chain. IGT’s Code of
Conduct serves as a guide to the moral, legal, and
ethical standards expected of employees and
suppliers when doing business with IGT, and it sets
parameters for acceptable behaviors of employees
when liaising with suppliers.
related
In 2019, IGT also published its Supplier Code of
Conduct and defined criteria to distribute it to its
suppliers. The Supplier Code of Conduct includes
to business ethics and
requirements
regulatory compliance, human rights and
labor
practices, environmental regulations and protection,
responsible mineral sourcing, health and safety, and
confidential and proprietary information. The code
has been sent to selected existing suppliers and it
forms part of the on-boarding process for new
suppliers.
environmental
Responsibilities for health and safety are shared. IGT
is committed to providing, maintaining and promoting
a safe, healthy and productive work environment for
all employees and ensuring compliance with all
applicable
safety
regulations. The Safe and Healthy Work Environment
policy covers topics such as Workplace Violence,
Illegal Drug and Alcohol Use, Tobacco Use, Fitness
for Duty and additionally covers the actions that
should be taken if someone needs to report a
violation.
health
and
ENVIRONMENT
As part of the Company's approach to sustainability,
IGT is committed to ensuring that its operations
interact with the environment in a socially responsible
manner in order to reduce environmental impact. The
Company's activities are primarily related to office
work,
implementation,
research and development, and administrative work.
The Company’s largest offices are in Providence (RI),
Reno (NV), Las Vegas (NV) and Rome (IT). IGT's
industrial activities are
its printing
processes, which take place in Lakeland (FL) and in
encompassing
software
related
to
by
implementing
IGT is committed to improving its environmental
performance
Environmental
Management Systems (“EMSs”) certified according to
the ISO 14001 Standard, which are in place in the
following company sites: Lakeland, Rome and Reno.
In addition, Tito Scalo, in Italy, has an environmental
policy inspired by principles of the ISO 14001
Standard. Moreover, since 2011, the Company has
ISO 50001 certified Energy
implemented an
Management System (“EMS”) for the Rome site. In
addition, the Reno facility has a LEED (Leadership in
Energy and Environmental Design) gold certification
awarded by the United States Green Building Council
in 2015, valid until 2025.
related
activities
Effective and reliable monitoring allows IGT to assess
its progress reaching its environmental commitments.
Over the years, the Company has gradually improved
to Energy
its monitoring
Consumption and Greenhouse Gas
(“GHG”)
emissions data, through an internal web-based tool
aimed at collecting data on a business-site basis. The
GHG emissions data presented in this report contains
the energy consumption and emissions data resulting
from the Company’s activities as evidenced by the
data collection process.
•
During the time period covered by this Annual Report
and Accounts, the Company has been committed to
reducing the environmental impact of the IGT’s
facilities around the world. The initiatives carried out
have primarily involved the replacement of old lighting
systems and energy efficiency of heating, ventilation
and air conditioning (“HVAC”) systems. Among them:
The PCC site (Italy) has continued
the
substitution of the old lighting systems with
LED installations. In 2020, the percentage of
electric power from LED sources was equal
to 15.6%, allowing a saving of 2,580 kWh
during 2020;
The Reno site (Nevada) has continued its
LED lighting projects through which the site
was able to convert the 90% of light sources
to LED and has adopted an automated
Building Management System (“BMS”) to
increasing
control environment conditions
energy efficiency; and
The Urquhart Avenue
facility, Moncton
(Canada), has adopted an energy saving
program that rewards participants for making
simple energy-saving changes. In 2020, this
initiative resulted in the reduction of the
power peak demand by 78 kW.
•
•
Annual Report and Accounts 2020 Page | 38
Energy Consumption and Greenhouse Gas
For the year ended December 31,
2020
For the year ended December 31,
20192
UK and offshore
Global
(excluding UK
and offshore)
UK and offshore
Global
(excluding UK
and offshore)
59
75
134
26,215
35,272
61,487
85
147
232
32,134
46,231
78,365
592,425
195,489,970
1,011,496
246,110,726
Global GHG emissions and
energy use data1
Combustion of fuel and operation
of facilities - Scope I emissions
(tCO2e)3
Electricity, heat, steam and cooling
purchased for own use - Scope II
emissions (tCO2e)4
Total gross Scope I and Scope II
emissions (tCO2e)5
Energy consumption used to
calculate above emissions (kWh)6
Notes:
(1) Data related to the GHG emissions for 2020 could be updated based on data that will be available after the publication of this Annual Report and Accounts. The
updated data will be published in the IGT Sustainability Report 2020.
(2) 2019 GHG emissions data has been aligned to the data published in the IGT Sustainability Report 2019.
(3) Scope I: fuel consumption (including: natural gas; diesel, propane and liquified petroleum gas (“LPG”) consumption for generators; diesel, gasoline and LPG for
vehicles such as company cars, small trucks or forklifts) and fugitive emissions of refrigerants.
Ton CO2eq = data (fuel consumption or refrigerants refill) * Emission Factor.
Data has been mainly collected from invoices. In addition, in order to calculate Scope I GHG emissions with reference to 100% of IGT locations active in 2020,
only with reference to those offices that were unable to provide natural gas data in 2020, they have been estimated based on an average emission per square
meter, actual use of the asset due to the COVID-19 pandemic and natural gas consumption of the previous year.
(4) Scope II: Electricity consumption only.
Ton CO2eq = kWh * Emission Factor.
The ratio of the annual emissions associated with the Company’s activities based on the quantity of tonnage per thousand dollars is equal to 0.0198 (Scope I
and Scope II divided by total revenues in U.S. thousand dollars).
Data has been mainly collected from invoices. In addition, in order to calculate Scope II GHG emissions with reference to 100% of IGT locations active in 2020,
only with reference to those offices that were unable to provide electricity consumption data for 2020, they have been estimated based on an average emission
per square meter, actual use of the asset due to the COVID-19 pandemic and electricity consumption of the previous year.
(5) The decrease in CO2eq Scope I and Scope II emissions is mainly due to the COVID-19 pandemic, as some activities have stopped and offices were closed in
certain months of 2020. With reference to Scope II emissions only, another cause of the decrease is due to the update of the emission factors.
The methodology used is based on voluntary and mandatory GHG reporting guidance issued by the Department for Environment, Food and Rural Affairs
(“DEFRA”). For GHG emissions related to electricity, we have used the emission factors (“EFs”) issued by the International Energy Agency (IEA), except for
U.S. states for which we used state-based U.S. Environmental Protection Agency emission factors, and for countries for which the IEA EFs were not available,
we used and the Institute for Global Environmental Strategies EFs.
(6) For fuel and operations energy consumption, we have used DEFRA protocol conversion factors in order to obtain data expressed in kWh.
EMPLOYEE
Diversity and Inclusion; Equal
Employment
IGT is committed to providing equal employment
opportunities for all applicants and employees on the
basis of qualification. The Company will not permit
discrimination on the basis of characteristics such as,
race, color, religion, sex, gender, sexual orientation,
gender identity or expression, pregnancy, marital
status or civil partnership status, national origin,
citizenship, covered veteran status, ancestry, age,
physical or mental disability, medical condition,
genetic information, or any other legally protected
status in accordance with applicable local, state, and
federal laws. To the extent reasonably possible, IGT
will accommodate applicants and employees with
disabilities, including those who acquire temporary or
long-term disabilities during their employment with
IGT. In addition, IGT may offer training and other
professional development opportunities to employees
with disabilities or those who become disabled during
their employment.
by
set
IGT values workplace diversity and respect for all
employees. As reported, the Company follows the
principles
Labour
the
Organization Declaration on Fundamental Principles
and Rights at Work in the member countries where
the Company operates and is committed to providing
a work environment where everyone is treated with
fairness, dignity, and respect without discrimination.
International
its policies, outlining
IGT regularly updates
the
to equal employment
Company’s commitment
opportunities and non-discrimination, thus fostering a
work environment that reflects a fair and inclusive
culture that values unity and diversity. The Company
enforces compliance by implementing practices to
Annual Report and Accounts 2020 Page | 39
in business conduct,
execute policies
training
employees in the application of procedures, and
taking appropriate disciplinary action up to and
including termination of employment for violation of
the Company’s policies except where prohibited by
law or contrary
local collective bargaining
agreements. IGT has a specific anti-harassment
policy, that reflects best practices and addresses
company culture, designed to set the expectations
and standards of behavior required for all IGT
employees.
to
launched in the midst of global unrest in response to
current and historic racial inequity most visible in
police interactions with people of African descent in
the United States. The Company reaffirmed its
commitment to its values through a clear statement
from the Company's Chief Executive Officer (“CEO”)
and hosting a series of global conversations about
race, racism and concrete actions we can take as a
Company to open lines of communication on this
important, yet difficult, topic.
IGT
is actively engaged
At IGT, diversity and inclusion are critical to who we
are.
in building and
sustaining a diverse and inclusive company that
anticipates and meets the needs of the global
customer base and the evolving demographics of the
communities where our employees and customers
are located. In 2018, the Company established the
Office of Diversity and Inclusion which is responsible
for implementing the Company’s Global Strategic
Plan for Diversity and Inclusion.
In 2019, the Company formally launched its Diversity
and Inclusion Groups (“DIGs"). DIGs are employee
networks structured around dimensions of diversity
and are open
to all employees. DIGs provide
engagement and development opportunities, help
develop awareness of the unique issues faced by
employees, and promote inclusion at every level of
the company. By 2020, the Company launched six
DIGs with
including
twelve chapters worldwide,
for black employees; military veterans;
groups
persons with disabilities; employees who are 50 years
of age and above; lesbian, gay, bisexual, transgender
and queer employees and their supporters; and
women. Over 10% of the Company’s employees
belong to at least one Diversity and Inclusion Group
and thousands more participate in programming and
development opportunities hosted by our DIGs. To
ensure the continued growth and expansion of our
DIGs, the Company hosted a weeklong “boot camp”
for DIG leaders and Company leaders who serve as
Executive Sponsors to ensure the group’s purpose,
direction, and vision is still meaningful, reflective of
the needs of members, and supported by DIG
leadership. This series of workshops also prepared
group leaders for 2021 planning.
DIGs are instrumental in addressing and articulating
employee needs and concerns in response to the
impact of COVID-19 on the Company’s business and
the work and personal lives of all employees.
In August 2020, ACE (Advancing Cultural Education)
at IGT, focused on employees and communities of
African descent, became the Company’s sixth DIG.
While in the planning stages earlier, ACE at IGT
The Company is the only member of the gaming
industry to be invited by the British Standards
Institution, the national standards body of the United
Kingdom, and the All-in Diversity Project ("AIDP") to
join the Workplace Code of Practice Steering Group.
The group is committed to developing a global
diversity, equality, and inclusion standard applicable
to any organization, in any industry, across all
organizational level. In addition, the Company is one
of 325 companies across 50 industries selected for
the 2020 Bloomberg Gender-Equality Index, which
distinguishes companies committed to advancing
women's equality and transparently reporting gender
data. The Company was also recognized by the
AIDP as one of the highest-ranking participants in
AIDP’s 2019 All-Index™ report, an annually published
benchmarking tool that measures the global gaming
and betting industry’s progress toward inclusion in the
workplace. Of the 26 entities from around the world
that participated in the 2019 survey, the Company
received the second-highest score out of 100, with
only a five-point difference between it and the top-
represents a
ranked participant.
significant
its ninth-place
results among 25 respondents in the AIDP’s inaugural
2018 report.
increase compared
ranking
to
IGT’s
All the Company’s employees participated in training
that focused on building awareness of the Company’s
global policies relating to equal employment and anti-
harassment and bullying. In 2020, the Company
added additional education around actively and
immediately challenging or “calling out” inappropriate
behavior in a way that supports a culture of respect
and safety for all employees.
In 2020, the Company expanded its diversity and
inclusion education program by rolling out global
education on unconscious bias through a combination
of videos, self-directed e-learnings and small group
discussions. In addition, leaders, including members
of
Inclusion Council
participated in “Fostering Diversity and Inclusion,”
offered through Exec Online and the Yale University
School of Management.
the Global Diversity and
Annual Report and Accounts 2020 Page | 40
The Company also hosted regular “Open Door
Sessions” to give all employees the opportunity to
to diversity, equity and
explore
inclusion in a welcoming and affirming environment.
issues related
Additionally, in 2020, IGT administered its biennial
employee engagement survey, MyVoice@IGT. The
survey - offered to all employees worldwide - allows
every member of
to
express
such as
technology. The
communication and access
survey’s results shape Company-wide and business
unit-specific action plans.
the Company’s workforce
their opinions on
topics
to
Historically, as part of encouraging employee
involvement in the performance of the Company, IGT
has offered several performance-based programs,
such as a share-award program for employees at a
certain level. The share award is based on a three-
year performance cycle, based on the achievement of
several pre-determined
financial metrics. Setting
these thresholds and offering this share incentive
accountability which
helps
significantly impacts the overall performance of the
Company. The Company also offers a short-term
incentive program based on achievement of pre-
determined fiscal year financial results as well as
pre-
individual
determined goals.
performance
leadership
specific
against
drive
time-based
In addition,
Further, IGT offers an employee recognition program,
Spotlight, that provides monetary and non-monetary
awards for employee contributions. However, due to
the challenges experienced in 2020, the Company
suspended the short-term incentive and Spotlight
the Company
programs until 2021.
granted
restricted stock unit share
awards, for which vesting is based on continued
to certain
through
service
the
in
employees
challenge of establishing
long-term performance
metrics during this continued time of uncertainty. The
Company expects to reinstate performance-based
programs for employees in 2021, including the short-
term
incentive program and performance-based
share awards, consistent with historical practice.
Additionally, the Spotlight program is expected to be
reinstated in 2021.
leadership positions, given
the vesting dates,
Communication
The Company maintains communication tools and
channels that facilitate the distribution of information
to employees. Communication outlets include email,
internal social networking, a file sharing and instant
messaging platform, print materials and an internal
website OneIGT. Across platforms,
information
distributed to employees touches on everything from
financial and economic news
to organizational
updates, new product launches, policies, programs
and stories about individual accomplishments, among
other topics. As of January 2021, OneIGT has
received more than 1 million site visits.
facets of
financial performance,
IGT also regularly hosts Company-wide meetings to
provide employees with important information and to
field employee questions. In 2020, IGT hosted more
than six such events, including sessions highlighting
talent
the Company’s
development processes, diversity and
inclusion
initiatives and business-specific events highlighting
core
IGT’s operations. These events
featured leaders including but not limited to the
Company’s CEO, the Chief Financial Officer, the
Global Head of People and Transformation, the CEO
of Global Lottery and the CEO of Global Gaming.
Directors engaged with employees in 2020 by taking
part in internal initiatives such as meeting with
in an
members of a DIG and participating
International Women’s Day video distributed
to
employees throughout the Company.
Annual Report and Accounts 2020 Page | 41
PRINCIPAL RISKS AND UNCERTAINTIES
The Company seeks to minimize, control, and monitor the impact of risks to profitability whilst maximizing the
opportunities they present.
The Company acknowledges that it faces a number of risks which could impact the achievement of its strategy.
While it is not possible to identify or anticipate every risk due to the changing business environment, the Company
has an established risk management process to manage and mitigate risk. The Company’s process for identifying
and managing risk is set by the Board, which avails itself of its Audit Committee.
Risks are considered in terms of their impact and likelihood from both a financial and reputational perspective.
Although not exhaustive, the principal risks facing the Company are essentially categorized into the following broad
risk categories:
Risks relating to the Company’s business and industry;
Legal and compliance risks;
•
•
• Operational risks; and
•
Financial risks.
The potential impact of these risks, and the mitigating controls in place to manage their impact, are as follows:
DESCRIPTION AND CONTEXT
Business and Industry
Termination of or failure to renew or extend existing contracts and win new contracts
The Company derives a substantial portion of its revenues from its portfolio of long-term
contracts in the Global Lottery segment awarded through competitive procurement processes.
In addition, the Company’s U.S. lottery contracts typically permit a lottery authority to terminate
the contract at any time for material, uncured breaches and for other specified reasons out of
the Company's control. The termination of or failure to renew or extend one or more of the
Company's lottery contracts, or the renewal or extension of one or more of the Company's
lottery contracts on materially altered terms, could have a material adverse effect on the
Company's results of the Company’s operations, business, financial conditions or prospects.
The outbreak of the novel coronavirus COVID-19
The extent and duration of the COVID-19 pandemic and related government actions has
impacted, and may continue to impact, many aspects of the Company's business, including
through workforce limitations, travel restrictions, closure of public buildings and businesses,
cancellation of events, supply chain disruptions, decreased customer demand for its products
and services and decreased consumer demand for some of the products and services that the
Company provides to its customers and, in some cases, directly to consumers. Further, the
perception of risk of infection have contributed to consumer unease, decreased discretionary
spending and consumer travel, which have had and will continue to have a negative effect on
the Company. The unfavorable economic condition resulting from the outbreak of COVID-19
has impacted and could continue to impact the business of the Company's customers, including
their ability to make timely payments. The current and uncertain future impact of the COVID-19
outbreak is expected to continue to impact the Company's results, operations, outlooks, plans,
goals, growth, reputation, cash flows, and liquidity.
Adverse changes in discretionary consumer spending and behavior, due to general
social, economic and political conditions
Socio-political and economic factors that impact consumer confidence may result in decreased
discretionary spending by consumers and have a negative effect on the Company's business.
Unfavorable changes in social, political and economic conditions and economic uncertainties, as
well as decreased discretionary spending by consumers including as a result of the COVID-19
pandemic, may adversely impact customers, suppliers and business partners in a variety of
ways. A decline in discretionary income over an extended period could cause some of the
Company’s customers to close casinos or other gaming operations, which would adversely
affect the Company's business.
MITIGATION
strong
We maintain
open
and
the regulators and
relationships with
operators, carefully monitoring, reviewing,
and
improving our customer base
relationships. We have a strong history of
renewing long-term important contracts,
including the Italian Lotto and Scratch &
Win licenses.
We have implemented a cross-functional,
company-wide COVID-19 response team
focused on addressing the impact of the
global pandemic on our employees,
customers, liquidity, financial position and
continuity of services. We continue to
monitor the extent of the pandemic and its
the Company's
results,
impact on
operations,
goals,
plans,
outlooks,
growth, cash flows, and liquidity.
We constantly
review our business
strategy and remain closely aligned with
governments and other policy makers
across our markets. We also have a
diverse portfolio across many regions. We
implement pricing initiatives and prize
to
payout strategies, and continue
improve our players experience.
Annual Report and Accounts 2020 Page | 42
DESCRIPTION AND CONTEXT
Penalties for failure to perform
The Company's Italian licenses, lottery contracts in the U.S. and in other jurisdictions, and other
service contracts often require performance bonds or letters of credit to secure its performance
under such contracts and require the Company to pay substantial monetary liquidated damages
in the event of non-performance by the Company. At December 31, 2020, the Company had
outstanding performance bonds and letters of credit in an aggregate amount of approximately
$1.7 billion. These instruments present a potential for expense for the Company and divert
financial resources from other uses. Claims on performance bonds, drawings on letters of credit,
and payment of liquidated damages could individually or in the aggregate have a material
adverse effect on the Company's results of operations, business, financial condition, or
prospects.
Slow growth or declines (including as a result of COVID-19) and competition in the lottery
and gaming markets, and lower cost of entry into the gaming industry
The Company’s future success will depend, in part, on the success of the lottery industry and
the gaming industry in attracting and retaining new players in the face of such increased
competition in the entertainment and gaming markets. In addition, there is a risk that new
products and services may replace existing products and services and the Company's
customers might acquire or develop competencies that reduce their dependencies on the
Company's product and services. As a result of developments in digital and internet gaming, the
cost of entry to the gaming market has decreased significantly. This results in a highly
competitive environment. Reduced demand for the Company's products and services and
increased pricing pressures on a number of its products and services may impact the Company
and its operations, business, financial condition or prospects.
Uncertainty created by Brexit
The U.K. exited the E.U. on January 31, 2020, and the transition period concluded on December
31, 2020. In December 2020, the U.K. and E.U. announced they had entered into a post-Brexit
deal on certain aspects of trade and other strategic and political issues. As the Company
maintains significant operations in the E.U., the terms of the December 2020 post-Brexit deal
could subject the Company to increased risk.
Ability to develop and manage frequent introductions of innovative products and the
ability to respond to technological changes
If the Company's competitors develop new game content and technologically innovative
products and the Company fails to keep pace, its business could be adversely affected. In
addition, if the Company fails to accurately anticipate customer needs and end-user preferences
through the development of new products and technologies, the Company could lose business
to its competitors, which would adversely affect its results of operations, business, financial
condition, or prospects.
Intellectual property laws may afford differing and limited protection for our proprietary
technology and intellectual property
Competitors may duplicate the Company's products, design around its patented products, or
gain access to its proprietary technology and intellectual property. The Company may not be
able to prevent the unauthorized disclosure or use of its technical knowledge or trade secrets.
The Company may not be able to detect the unauthorized use of its intellectual property,
prevent breaches of its cybersecurity efforts, or take appropriate steps to enforce its intellectual
property rights effectively.
MITIGATION
We strive to perform under each of our
contracts. To date, we have not had to
pay any substantial monetary liquidated
result of our non-
damages as a
performance.
We work with other participants in the
lottery industry to attract and retain new
players, and devote significant resources
to
services,
products, and distribution methods/
systems.
developing
innovative
We continue to evaluate the impact of the
December 2020 post-Brexit deal on our
business,
future operations, operating
results and cash flows. Our flexibility as a
global organization enables us to timely
react with structural and operational
changes as may be appropriate.
intend
We invest heavily in product development
in various disciplines and
to
continue investing resources in research
and development. We continue to refine
the design, development, and delivery
capabilities of our products across all
channels to ensure product innovation.
We vigorously protect our proprietary
technology and intellectual property to
ensure that our competitors do not use
such technology and intellectual property.
trade
We also prevent disclosure of
secrets
know-how
through non-disclosure and confidentiality
contractual
agreements
non-compete
restrictions
arrangements.
and
including
proprietary
other
and
Annual Report and Accounts 2020 Page | 43
DESCRIPTION AND CONTEXT
Risks arising out of divestitures
Divestitures involve risks, including difficulties in the separation of operations, services, products
and personnel, the diversion of management's attention from other business concerns, the
disruption of business, the potential loss of key employees and the retention of uncertain
contingent liabilities related to the divested business. The Company may not be successful in
managing these or any other significant risks that it encounters. Any such divestiture could
materially and adversely affect the Company’s business, financial condition, results of
operations and cash flows, and may also result in a diversion of management attention,
operational difficulties and losses.
Loyalty Voting Structure may limit other shareholders’ ability to influence corporate
decisions
As of March 11, 2021, De Agostini S.p.A. ("De Agostini") had an economic interest of
approximately 50.49% in the Parent and, due to its election to exercise the special voting shares
associated with its ordinary shares pursuant to the loyalty plan, a voting interest in the Parent of
approximately 65.05% of the total voting rights. This shareholder may make decisions with
which other shareholders may disagree, including, among other things, delaying, discouraging,
or preventing a change of control of the Company or a potential merger, consolidation, tender
takeover, or other business combination and may also prevent or discourage
offer,
shareholders’ initiatives aimed at changes in the Parent’s management.
Legal and Compliance
Changing enforcement of the U.S. Interstate Wire Act of 1961
On January 14, 2019, the U.S. Department of Justice (the "DOJ") published an opinion (the
"2019 Opinion") reversing its previously-issued opinion that the Wire Act, which prohibits several
types of wager-related communications over a "wire communications facility", was applicable
only to sports betting. The 2019 Opinion interprets the Wire Act as applying to other forms of
gambling that cross state lines. On June 3, 2019, the U.S. District Court for the District of New
Hampshire ruled that the Wire Act applies only to sports betting and related activities, and the
decision was affirmed in part by the United States Court of Appeals for the First Circuit on
January 20, 2021. It is unclear whether the DOJ will appeal the First Circuit decision to the
Supreme Court of the United States. If the Wire Act is broadly interpreted and enforced to
prohibit activities in which the Company and its customers are engaged, the Company could be
subject to investigations, criminal and civil penalties, sanctions and/or other remedial measures
and/or the Company may be required to substantially change the way it conducts its business,
any of which could have a material adverse effect on the Company's results of operations,
business, financial condition, or prospects.
The extensive and complex laws and regulations applicable to our operations
Regulatory requirements are constantly evolving and may vary from jurisdiction to jurisdiction. In
particular, the Italian government has recently banned gaming advertising and significantly
raised gaming taxes. Any changes in the legal or regulatory framework or other changes, such
as increases in the taxation of sports betting or gaming, changes in the compensation paid to
licensees, or increases in the number of licenses, authorizations, or licenses awarded to the
Company's competitors, could materially affect its profitability. Lower than anticipated sales due
to regulatory constraints could have a materially adverse effect on the results of the Company’s
operations, business, financial conditions or prospects.
to
its
relevance
MITIGATION
review our business
We constantly
the
portfolio and
Company's long-term business strategy.
We
to
take a systematic approach
evaluating divestiture opportunities - from
considering the complexity, viability, and
the costs and benefits of separating a
business unit in preparation for a sale, to
establishing a project plan, timeline and
deliverables and execution of such plan.
Our Directors must, in good faith, act in a
way that they consider most likely to
promote the success of the Company for
the benefit of its members as a whole. We
robust Related Person
enforce our
Transactions Policy through ample of
internal publicity and
training, and
rigorous controls implemented by our
Internal Audit team. The Audit Committee
conducts thorough reviews of key related
party transactions, with all Independent
Directors participating
the decision
making process and involvement from
external legal and financial advisors, if
necessary, the costs associated with such
advisors being shared between
the
Company the related party in question.
in
We continue to monitor and evaluate the
2019 Opinion, the development of the
legal challenge against the 2019 Opinion
and the DOJ's position on the issues and
the
to us, our
customers, and the industries in which we
operate.
implications
thereof
We continuously evaluate our exposure to
such types of risks for any changes in
government regulations and their effect
on our operations, business, financial
conditions or prospects. We adjust our
business strategy as necessary to remain
compliant with laws and regulations and
also remain profitable.
Annual Report and Accounts 2020 Page | 44
DESCRIPTION AND CONTEXT
Adverse changes in tax regulation and differing interpretations by authorities on taxation
While the Company believes its tax positions are consistent with the tax laws in the jurisdictions
in which it conducts business, it is possible that these positions may be overturned by tax
authorities, which may have a significant impact on the Company’s global provision for income
taxes. Furthermore, changes in tax laws or regulations may be proposed or enacted that could
significantly affect the Company’s overall tax expense. Any increases in the levels of taxation or
duties to which the Company is subject, or the implementation of any new taxes or levies to
which the Company will be subject, could increase the Company's tax obligations in countries
where it does business, which may adversely affect on the Company's results of operations,
business, financial condition, or prospects.
Operational
Failure to attract, retain and motivate personnel
The Company's success relies on the continued service of its senior management and technical
personnel, and on its ability to continue to attract, motivate, and retain highly qualified
employees and maintain a diverse workforce. Particularly in the lottery and gaming industries,
the market for qualified executives and highly-skilled technical workers is intensely competitive,
and the loss of key employees or an inability to hire a sufficient number of technical staff could
limit the Company's ability to develop successful products and could cause delays in getting
new products to market.
Lack of integrity of our employees, directors and agents
The Company strives to set exacting standards of personal integrity for its employees and
directors and its reputation in this regard is an important factor in its business dealings with
lottery, gaming, and other governmental agencies. An allegation or a finding of improper
conduct on the Company's part, or on the part of one or more of its current or former employees,
directors or agents, or the failure to detect fraudulent activity by employees in a timely manner,
could have a material adverse effect upon the Company's results of operations, business,
financial condition, or prospects, including its ability to retain or renew existing contracts or
obtain new contracts. For example, in October 2020, the Italian Tax Police announced that it is
investigating alleged misconduct by a small number of the Company's former employees which
involved unauthorized access to the Company's lottery system in Italy in order to identify and
redeem winning scratch-off lottery tickets. The Company is fully cooperating with the Italian Tax
Police in order to facilitate its investigation into the alleged misconduct and has taken proactive
steps to ensure the integrity of the Company's games and to protect the interests of the
Company's customers.
Lack of integrity of our products and systems
The real and perceived integrity and security of the Company's products and systems are critical
to its ability to attract customers and players. In the event of an actual or alleged defect in a
Company product or unauthorized access of a Company system, the Company's existing and
prospective customers may lose confidence in the integrity and security of the Company's
products and systems. Such a failure could have a material adverse effect upon the Company's
results of operations, business, financial condition or prospects, including its ability to attract
new customers and retain its existing customers.
MITIGATION
tax
We maintain a well qualified
department as well as good relationships
with third party tax experts, helping to
achieve
risks
assess
tax
the
compliance with
legislation. We strive
to maintain a
consultative and collaborative relationship
with the tax authorities.
and
relevant
these
in
them
to support
to attract and retain
We put in place and improve on our
succession plans
for key roles. We
provide well-structured and competitive
reward and benefit packages that ensure
our ability
the
employees we need. We invest in training
and career development opportunities for
our people
their
careers. We strive to create a fair and
inclusive culture
that values unity,
diversity, and belonging in our people,
players, customers, and communities.
We strive to set exacting standards of
personal integrity for our employees and
directors as part of our process
to
maintain the highest levels of integrity in
our operations and fulfil regulatory and
licensing processes. We have a robust
global compliance program that requires
they
to acknowledge
employees
understand and comply with company
policies. The Audit Committee reviews the
Company's procedures for its systems
the prevention of
and controls
corruption and bribery, including the Anti-
Corruption Compliance and Ethics Policy,
and receive periodic compliance reports.
review our
We
operational systems and processes
designed to prevent fraudulent activities.
take measures
that
for
to
to
improving
We are committed
the
technologically advanced
design of
systems intended to increase products’
security and maintaining integrity and we
strive
to set exacting standards of
integrity and security for our products and
systems.
Annual Report and Accounts 2020 Page | 45
DESCRIPTION AND CONTEXT
Cyber-attacks and cyber-security risks
Theft and security breaches may expose the Company to a risk of loss of, or improper use and
disclosure of, confidential business and personal information, which may result in significant
litigation expenses and liability exposure, seriously harm the Company's reputation, and have a
material adverse effect on the Company's results of operations, business, financial condition, or
prospects. Additionally, cyber-attacks could also compromise trade secrets and other sensitive
information and result in such information being disclosed to others and becoming less valuable,
which could have a material adverse effect upon the Company's results of operations, business,
financial condition, or prospects.
Decreased operational efficiency and productivity due to measures taken to reduce the
impact of the COVID-19 pandemic
The outbreak of COVID-19 has caused, and may continue to cause us and certain of the
Company’s suppliers, to implement temporary measures mandating employees to work from
home and collaborate remotely where possible. Furthermore, the COVID-19 pandemic has
changed the way the Company connects with customers. The extent to which this outbreak
impacts the Company’s results of operations, cash flows, and financial condition will depend on
future developments, which are highly uncertain and unpredictable, including new information
which may emerge concerning the severity and duration of this outbreak and the actions taken
by governmental authorities and us to contain it or treat its impact.
Systems, network or telecommunications failures
Any disruption in the Company's network or telecommunications services, or those of third
parties that the Company uses in its operations, could affect the Company’s ability to operate its
systems, which could result in reduced revenues and customer downtime. Disruptions with
Company's network and databases of business and customer information and those of third
parties the Company uses could result in a wide range of negative outcomes, including
devaluation of the Company's intellectual property, increased expenditures on data security, and
costly litigation and potential payment of liquidated damages, each of which could have a
material adverse effect on the Company's results of operations, business, financial condition, or
prospects.
Financial
Covenants in the Company’s debt agreements may limit its ability to operate its business
Certain of the Company's debt agreements require it to comply with covenants that may limit the
Company's ability to, amongst other things, pay dividends and repurchase shares, dispose
assets and incur indebtedness. For example, in May 2020, the Company entered into
agreements to amend its senior debt arrangements which, among other things, prohibit the
Company from making restricted payments (including dividends, ordinary share repurchases)
during the period commencing on April 1, 2020 and expiring on June 30, 2021. A breach of such
covenants could, if not cured or waived, result in acceleration of its indebtedness, result in the
enforcement of security interests or force the Company into liquidation. Such a breach or any
failure to otherwise timely repay outstanding indebtedness could have a material adverse effect
on the Company's results of operations, business, financial condition, or prospects.
The Company may incur additional impairment charges
The Company may be required to record a significant charge in its consolidated financial
statement during the period in which any impairment of goodwill or intangible assets is
determined, which would negatively affect the Company’s results of operations. In light of the
COVID-19 pandemic and the resulting unfavorable social, political, economic, and financial
conditions, the Company performed an interim goodwill impairment assessment under IFRS in
the three months ended March 31, 2020, which resulted in a $296.0 million goodwill impairment
charge reducing the value of its former International and North America Gaming and Interactive
segments.
MITIGATION
We continuously implement and improve
network security measures and data
protection safeguards to prevent or detect
cyber-attacks. We put
in place and
improve our
internal policies and
insurance
procedures, and also hold
policies that can mitigate losses incurred
due to cyber-attacks.
the
and
enhanced
We have taken measures to monitor and
reduce
the outbreak,
impact of
including establishing a cross-functional
global crisis management team, protocols
for
responding when employees are
cleaning
infected,
procedures at all sites. We have also
taken measures to reduce operating costs
and ensure liquidity given the uncertain
impact of COVID-19 on revenue, deferred
all non-critical capital expenditures, have
implemented a number of employee-
related actions, and may in the future
implement further actions.
safeguards,
We continuously implement and improve
network security measures and data
protection
a
disaster recovery strategy for back office
systems. We also hold insurance policies
that can mitigate losses incurred due to
cyber-attacks.
including
We maintain long debt maturities and
reasonable net debt to EBITDA leverage
to help minimize our refinancing risk. We
meticulously monitor and forecast the
leverage
threshold and other
ratio
financial covenant measures.
in
We monitor events and changes
the
impact
circumstances which may
carrying
value of our amortizable
intangible assets. We continue to review
our amortizable
for
impairment, and tests goodwill and other
indefinite-lived
for
impairment at least annually.
intangible assets
intangible assets
Annual Report and Accounts 2020 Page | 46
The impact of COVID-19
Please refer to the CEO statement and the Section 172 Statement for the impact of COVID-19 on operations and
actions taken by the Company.
Given the uncertainty associated with pandemic-related restrictions, mainly on the Global Gaming segment, the
Company is not providing a full-year outlook at this time.
Approval
This Strategic Report has been approved by the Directors on March 11, 2021 and signed on its behalf on March 16,
2021.
Signed on behalf of the Directors by:
Marco Sala
Chief Executive Officer
Annual Report and Accounts 2020 Page | 47
2. DIRECTORS' REMUNERATION REPORT
ANNUAL STATEMENT
Dear Recipient,
As the chairperson of the Compensation Committee
(the "Committee"), I am pleased to present the
Directors' Remuneration Report for the financial year
ended December 31, 2020. This report is split into
three sections:
•
•
•
the
the activities of
year, and explains how
This Annual Statement summarizing the work
of the Committee, our approach to Directors’
remuneration, and
the
Committee in the year;
The Remuneration Report, which sets out the
payments and awards made
to Directors,
the Parent’s
link between
details
performance and remuneration for the 2020
financial
the
Remuneration Policy was implemented in the
financial year under review. The Remuneration
Report is designed to demonstrate the link
between
its
performance and the remuneration outcomes of
our Directors and particularly those of our
Executive Director and Chief Executive Officer
("CEO"), Marco Sala, and our Executive
Director and Executive Vice President and
Chief Financial Officer ("CFO"), Max Chiara;
and
The Remuneration Policy, which presents our
proposed Directors’ Remuneration Policy to be
put before shareholders for approval at the
forthcoming annual general meeting (“AGM”).
The current Remuneration Policy was approved
at the May 2019 AGM.
the Company's
strategy,
Following the appointment of new Directors, including
an additional Executive Director, to the Board during
2020, the Committee commenced a detailed review
of the Remuneration Policy to identify areas of
change,
if any. The key policy changes are
summarized in the proposed Remuneration Policy
contained in this Directors’ Remuneration Report. The
proposed Remuneration Policy, subject to approval
by shareholders (binding vote), will last for three
years from the forthcoming AGM or until another
remuneration policy is approved in a general meeting.
Remuneration program
is a common component of Director
Equity
remuneration within our remuneration peer group and
it is common and appropriately competitive within our
market to use non-performance based equity for
compensating Directors. The Committee regularly
reviews IGT's remuneration structures, taking into
account external emerging
in corporate
governance developments.
trends
responsibilities
Our remuneration arrangements take into account the
additional director
involved with
service on the board of a public limited company
incorporated under the laws of England and Wales,
listed on the New York Stock Exchange and subject
to the U.S. Securities and Exchange Commission
reporting requirements, as compared with other
companies that are listed and incorporated solely in
the U.K. We are sensitive
to U.K. corporate
governance practices and remuneration policies, and
recognize
that some aspects of our current
remuneration arrangements may not be consistent
with these practices and policies. The Committee
aims to balance any conflict between those practices
and policies and the need to effectively compete for
talent in a complex, global marketplace.
While the U.K. Corporate Governance Code does not
apply to the Company, we nevertheless seek to apply
its provisions where consistent with Company’s
needs and operating environment. The Directors’
Remuneration Report has been prepared
in
accordance with all applicable U.K. legislation while
taking account of applicable corporate governance
and proxy guidelines. The Committee continues to
the Company’s
look
for opportunities
latest proxy
remuneration structures with
guidelines and shareholder expectations.
to align
the
is subject
The Remuneration Report, together with this Annual
to an annual advisory
Statement,
shareholder vote at the forthcoming AGM and does
not affect
to an
individual Director.
the actual remuneration paid
Overall, the Committee has concluded that our
current remuneration program is competitive and
appropriate within the market where we primarily
compete for directors and executive talent.
Annual Report and Accounts 2020 Page | 48
Changes to the Board
Paget Alves did not stand for re-election to the Board
at the 2020 AGM thus his term ended on June 25,
2020. He was also a member of the Committee
during 2020 until his Board term ended.
Beatrice Bassey was appointed to the Board on
March 20, 2020. She received pro-rated remuneration
for service during the year and an award of pro-rated
restricted share units (“RSUs”) which vested on June
25, 2020. Beatrice Bassey was appointed to the
Nominating and Corporate Governance Committee
on June 25, 2020.
On April 14, 2020, Max Chiara joined the Board as an
the
Executive Director, after having
Company on April 6, 2020 as Executive Vice
President and Chief Financial Officer.
joined
first
2020 Remuneration highlights
Executive Directors
Below are the highlights of the remuneration-related
circumstances that impacted our Executive Directors
during 2020:
•
•
•
•
for
cancelled
annual
the same six-month period.
the Committee
2020
Key remuneration decisions related
to
COVID-19: As a result of the global onset of
COVID-19, the Committee approved six-month
salary reductions of 50% and 30% for Marco
Sala and Max Chiara, respectively, effective
April 1, 2020 through September 30, 2020. This
salary reduction further impacted certain global
leadership roles on a declining percentage
In
scale
the
addition,
performance-based
bonus
program for all eligible employees, including the
Executive Directors.
The Committee
Performance metrics:
reviewed performance achievement of
the
2018-2020 LTIP (as defined below) against
metrics at
the February 2021 Committee
meeting and determined them to be appropriate
in light of business performance across the
the
relevant performance periods despite
impact of COVID-19 on operations.
Performance achievements: The performance
metrics of the 2018-2020 LTIP (as defined
below) performance shares units ("PSUs") did
not meet threshold achievement and, therefore,
no awards under the 2018-2020 LTIP vested for
Executive Directors or other eligible employees.
2020 Long-Term Incentive Plan ("LTIP"):
Historically, IGT has awarded equity in the form
of PSUs, which vest based on achievement
against predetermined company
financial
performance targets. This practice, however,
proved challenging in 2020 amid the COVID-19
Establishing
pandemic.
forward-looking
performance metrics during this continued time
of uncertainty led us to consider alternatives for
this year’s process. Consistent with the 2015
Equity Incentive Plan, the Committee modified
its typical practices of awarding only PSUs and,
instead approved a one-time award of RSUs.
The Committee determined that time-based
RSUs was the most effective way to reward
Executive Directors
eligible
employees for their extraordinary efforts and
IGT’s results during this unprecedented year.
other
and
Non-Executive Directors
There were no substantial changes to the Non-
Executive Directors' remuneration during 2020.
Use of discretion during 2020
During 2020, and as a result of COVID-19's impact
on business operations, the Committee:
•
•
in
the section headed
Cancelled the performance-based 2020 annual
bonus program and approved salary reductions
for the Executive Directors, as more fully
"2020
described
Remuneration Highlights" of
this Annual
Statement; and
Altered the practice governing the LTIP by
granting a one-time time-based awards, with
vesting based on continued service through
each of the vesting dates - December 31, 2021
and December 31, 2022.
Other than as disclosed above, the Committee did not
exercise
its discretion when awarding Directors’
remuneration during 2020.
In conclusion
I would like to thank our shareholders for their
continued support during the year. We continue to
welcome your feedback as we remain committed to
open and transparent dialogue with shareholders and
we hope to receive your support at the forthcoming
AGM.
Gianmario Tondato Da Ruos
Chairperson of the Compensation Committee
Annual Report and Accounts 2020 Page | 49
REMUNERATION REPORT
This Remuneration Report, prepared in accordance with the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008, as amended, explains how the Remuneration Policy was implemented in
2020 and the resulting payments each of the Directors received. The information in this report has been audited
where required under the Regulations, which is indicated for the applicable sections.
This report is subject to an advisory vote by shareholders at the forthcoming AGM.
Executive Directors’ remuneration as a single figure - audited
The remuneration of the Executive Directors for the financial years ended December 31, 2020 and 2019 is set out
below and relates to the performance of their roles as the Executive Directors of the Parent or in connection with the
management of the affairs of any subsidiary of the Parent.
($)
Salary(1)
Benefits(2)
Pension(3)
Other(4)
Total
Fixed Pay
Annual
Bonus(5)
LTIP(6)
Total
Variable Pay
Total(7)
Marco Sala
2020
2019
979,998
280,988
1,195,884
1,277,768
265,452
500,343
—
—
2,456,870
—
3,368,947
2,043,563
3,797,237
657,840
3,368,947
4,455,077
5,825,817
6,498,640
Max Chiara
2020
453,846
294,711
754
500,000
1,249,311
—
1,054,735
1,054,735
2,304,046
(1) Marco Sala’s annual salary is $1,000,000 paid monthly, of which 70% is paid in GBP and 30% in Euros, both of which are converted using fiscal year-to-date
exchange rates. In addition to base salary, the amount includes true-up payments related to foreign currency fluctuations and tax equalization, per his
employment contract. Marco Sala's 2020 salary also reflects a 50% reduction for the April 2020 to September 2020 period.
Max Chiara’s annual salary is $800,000 paid bi-weekly. He joined the Company in April 2020; therefore, his salary reflects a pro-rated annual amount as well as
a 30% reduction for the April 2020 to September 2020 period.
(2) Taxable benefits include the following:
($)
Housing
Car Benefit
Meals & Travel
Allowances
Insurance(a)
Tax(b)
Other (c)
Total
Taxable
Benefits
Marco Sala
2020
2019
Max Chiara
2020
17,762
18,624
22,959
22,207
7,335
9,326
4,569
4,459
228,363
210,836
—
—
280,988
265,452
—
—
—
5,529
—
289,182
294,711
(a) Includes health and life insurance.
(b) Represents tax equalization related to LTIP and allowances as well as tax preparation services.
(c) Includes benefits paid to Max Chiara for costs incurred to re-locate from his prior residence to Rhode Island as required for his employment, as well as his
pro-rated perquisite.
(3) Marco Sala's pension includes base pension contributions, severance and employer social tax contributions in respect of his Italian service agreement. Marco
Sala’s 2020 pension includes a $766,717 pension contribution related to his 2019 annual bonus which was paid in 2020.
In March 2019, the HMRC granted a formal Section 690 Payroll Directive for Marco Sala (under U.K. Legislation Section 690 ITEPA 2003). This applied for the
2018 to 2019 UK tax year on a cumulative basis resulting in a one-time large payroll credit of income tax for Marco Sala in March 2019 and corresponding
reduction to employer pension contributions, the impact of which is included in 2019 pension.
Max Chiara's pension includes employer contributions to his United States defined contribution 401(k) plan.
(4) The amount relates to the first installment of a $2.0 million bonus as part of Max Chiara's offer of employment to compensate for his forfeited remuneration at
his previous employer, which is to be paid in four equal installments as follows: (1) within 30-days of his employment start date; and (2) on each of the first,
second and third anniversaries of his employment start date. He must remain employed with the Company through the applicable payment date to receive each
installment.
(5) The Committee cancelled the annual performance-based bonus program in 2020; therefore, no bonus was earned in 2020. Marco Sala's 2019 amount
represents annual bonus earned for the annual performance period ended 2019 paid in 2020. This amount also includes the estimated true-up payments
related to foreign currency fluctuations and tax equalization, per Marco Sala's employment contract.
(6) Total LTIP is as follows:
Marco Sala
2020
2019
Max Chiara
2020
Performance Units(a)
($)
Shares
Restricted Share Units(b)
($)
Shares
Total LTIP
Shares
($)
—
70,508
—
657,840
277,508
3,368,947
—
—
277,508
70,508
3,368,947
657,840
—
—
86,881
1,054,735
86,881
1,054,735
(a) The 2020 amount reflects 0% performance achievement subject to the 2018 through 2020 performance period, therefore no shares will vest under this
plan. The 2019 amount represents 38.2% of target PSUs subject to the 2017 through 2019 performance period, of which 50% vested on April 1, 2020,
multiplied by $6.52, the share price on the date of vesting, and the remaining 50% of which will vest on April 1, 2021. The 2019 amount has been updated
to reflect the number of units scheduled to vest in April 2021 multiplied by $12.14, the three-month ending share price as of December 31, 2020.
Annual Report and Accounts 2020 Page | 50
(b) The amount reflects the number of RSUs granted on November 6, 2020 multiplied by $12.14, the three-month ending share price as of December 31,
2020. 50% of the RSUs vest on December 31, 2021 and the remaining 50% vest on December 31, 2022, subject to continued service through the
applicable vesting dates.
(c) Details on share price appreciation is included in “Interests and vesting criteria shares awarded during the financial year - audited” below.
(7) Marco Sala's total remuneration reflects all remuneration related to his employment contract with the Parent, and for the avoidance of doubt, under his
employment contract with Lottomatica S.p.A. which merged with and was absorbed by Lottomatica Holding S.r.l., effective December 1, 2018.
Performance against performance conditions for the annual bonus program - audited
Annual bonuses under the annual bonus program were cancelled for all eligible participants in 2020 due to the
impact of COVID-19 on business operations.
Performance against performance conditions for the LTIP vesting - audited
The LTIP amount included in performance units of the 2020 single-figure table of remuneration reflects the
performance share units granted in 2018. Vesting was dependent on performance over three financial years ended
on December 31, 2020 and continued service until April 1, 2021 for 50% of the units earned and April 1, 2022 for the
remaining 50% of units earned. The vesting of the 2018 PSUs were tied to first achieving a three-year Cumulative
Consolidated Adjusted EBITDA of at least 92.5% of target adjusted by an Adjusted Net Debt scoring factor
measured on the Adjusted EBITDA/Adjusted Net Debt Scoring Matrix that positively or negatively adjusts the
Adjusted Cumulative EBITDA payout based on Adjusted Net Debt results versus the plan target. The performance
of these awards is further modified by the Company’s relative Total Shareholder Return performance against the
Russell Midcap Index. Given the impact of COVID-19 on the Company’s financial results, threshold Adjusted
Cumulative EBITDA performance for vesting was not achieved and the Committee did not use discretion to vest any
portion of the 2018 PSUs. No shares were earned in respect of this performance period; therefore, no value has
been realized related to share price appreciation.
The performance achieved against the performance targets is shown below.
($ in millions)
2018 - 2020
Adjusted Cumulative EBITDA
Adjusted Net Debt
EBITDA/Net Debt Matrix Result
Relative TSR(1) Modifier
Performance results (% of target)(2)
Total units earned (% of maximum)(3)
Threshold
Target
Maximum
2020
Performance
Performance
% of Target
Payout %
4,867
7,681
5,262
7,381
5,525
7,081
4,565
6,968
87%
106%
<25th
60th
>75th
7.8%
13%
—%
—%
—%
75.0%
—%
—%
(1) Total Shareholder Return.
(2) EBITDA/Net Debt Matrix Result payout (0.0%) multiplied by relative Total Shareholder Return Percentile payout (75.0%).
(3) The maximum number of shares to be earned under the plan is 145% of target.
Interests and vesting criteria shares awarded during the financial year - audited
Historically, the Parent has granted awards under the LTIP which are subject to conditions based on the
achievement of predetermined company financial performance, modified by the company's relative Total
Shareholder Return (“TSR”) compared to the Russell Midcap Index, over a three-year period. Given the challenges
in setting long-term financial performance targets amid the COVID-19 pandemic, in 2020 the Committee altered the
practice governing the LTIP to grant time-based RSUs to the Executive Directors, for which vesting is based on
continued service through the applicable vesting dates, upon which 50% of units vest on December 31, 2021 and
the remaining 50% vest on December 31, 2022.
Annual Report and Accounts 2020 Page | 51
The long-term incentive plan amount included in the RSUs of the 2020 single-figure table of remuneration reflects
the RSUs granted in 2020. The details of these RSUs are included in the table below:
Executive
Director
Marco Sala
Max Chiara
Type of Award
RSU
RSU
Maximum
Units
277,508
86,881
Price on Grant
Date ($)
9.08
9.08
Face Value on
Grant Date(1)
($)
2,519,773
788,879
Share Price
Appreciation(2)
($)
849,174
265,856
(1) The face value on grant date is calculated as the maximum number of units which could be earned under the award times the Price on Grant Date. The
maximum number of units which could be earned is equal to the number of shares granted.
(2) Share price appreciation is calculated as the three-month ending share price as of December 31, 2020, $12.14, less the Price on Grant Date, $9.08, multiplied
by the number of shares granted. The Committee has not exercised discretion related to share price appreciation.
Pensions - audited
Marco Sala
Marco Sala participates in the Company’s Italian pension funds at the same rates eligible employees participate, the
rate of which may be different by entry date into the plan and job level. The amount in the single-figure table reflects
Marco Sala's Italian pension under his service agreement with Lottomatica S.p.A. which merged with and was
absorbed by Lottomatica Holding S.r.l. (“Lottomatica”), effective December 1, 2018, and the Italian integrative
pension fund, both of which are structured as a contribution scheme. Under the pension fund subject to his service
agreement, the employee contribution rate is equal to 10.19% and the employer quota is approximately 27% of
base salary, allowances and annual bonus. Marco Sala’s contributions subject to the Italian integrative pension fund
(PREVIP) are levied at a rate of 3.45% and employer contributions are 8.55% of base salary. Both pension funds’
contribution rates are applied to Marco Sala’s remuneration earned under both of his service agreements with the
Parent and Lottomatica as disclosed in the single figure table. Employer contributions are allocated to the Parent
and Lottomatica based on remuneration earned under such agreement.
In addition, the Company makes mandatory contributions to PREVIP for TFR (Italy’s severance program) at a
6.90% rate of Marco Sala’s base salary, allowances and annual bonus earned under both of his service
agreements. At the time Marco Sala’s employment ends with the Company, he may receive this benefit as a lump
sum payment or keep the balance in PREVIP. As of December 31, 2020, there was no accrual for an Italian
severance payment for Marco Sala.
The estimated retirement date for Marco Sala is in January 2027, which, in accordance with Italian regulations,
could be postponed to March 2027.
Max Chiara
Max Chiara is eligible to participate in the Company's U.S. defined contribution 401(k) plan, which is offered to all
U.S. employees. IGT provides a 3.5% company match on the first 6% of employee contributions as follows: 100%
match on the first 1% of employee contributions and 50% match on the next 5% of employee contributions, subject
to the U.S. Internal Revenue Services (IRS) limits then in effect, which is $19,500 in 2020 with an additional "catch-
up" contribution of $6,500 for employees age 50 or older as of December 31, 2020.
Annual Report and Accounts 2020 Page | 52
Non-Executive Directors' remuneration as a single figure - audited
The remuneration of the Non-Executive Directors for the financial years ended December 31, 2020 and 2019 is set
out below and relates to his or her performance of his or her role as a Non-Executive Director of the Parent.
Retainers
Other Fees(1)
RSUs(2)
Total(3)
($)
Lorenzo Pellicioli (Chairperson)
2020
2019
James McCann (Vice Chairperson and Lead Independent Director)
Paget Alves(4)
Beatrice Bassey(5)
Alberto Dessy(6)
Marco Drago
Patti Hart(7)
Heather McGregor
Samantha Ravich(8)
Vincent Sadusky
2020
2019
2020
2019
2020
2020
2019
2020
2019
2019
2020
2019
2020
2019
2020
2019
Gianmario Tondato Da Ruos
2020
2019
150,000
150,000
140,000
140,000
48,974
100,000
78,077
104,000
103,000
100,000
100,000
—
—
20,478
54,053
9,441
26,993
345,662
155,898
304,180
137,188
—
124,720
495,662
305,898
464,658
331,241
58,415
251,713
—
330,552
408,629
5,377
3,722
—
—
276,537
124,720
276,537
124,720
385,914
231,442
376,537
224,720
75,000
5,969
—
80,969
100,000
100,000
100,000
42,436
140,000
140,000
130,000
130,000
—
—
—
—
6,720
13,720
—
—
276,537
124,720
276,537
100,074
276,537
124,720
276,537
124,720
376,537
224,720
376,537
142,510
423,257
278,440
406,537
254,720
(1)
These figures primarily relate to reimbursable meal and travel expenses for attending Board meetings in the U.K.
(2) Amounts for 2020 reflect the number of RSUs granted at the 2020 AGM multiplied by $12.14, the three-month ending share price as of December 31, 2020.
The RSUs vest on the date of the 2021 AGM. Beatrice Bassey’s 2020 RSU also includes a pro-rated award for her services from March 20, 2020 to June 25,
2020, the amount of which is equal to the number of shares granted times the share price on the vesting date, $8.78. Amounts for 2019 have been updated to
reflect the number of RSUs granted at the 2019 AGM times the share price on the vesting date, $8.78. Samantha Ravich’s 2019 RSU is pro-rated for her
services from when she was appointed to the Board on July 31, 2019.
(3)
(4)
(5)
(6)
Non-Executive Directors are not eligible to receive variable remuneration; therefore, Total remuneration equals fixed remuneration.
Paget Alves did not stand for re-election at the 2020 AGM and his term ended on June 25, 2020. He received a pro-rated amount of compensation for his
services during the year.
Beatrice Bassey was appointed to the Board on March 20, 2020 and received a pro-rated amount of compensation for her services during the year.
Alberto Dessy's fees include a 4% stipend related to Italian regulatory requirements.
(7) Patti Hart did not stand for re-election at the 2019 AGM and her term ended on May 17, 2019. She received pro-rated compensation for her services during the
year.
(8)
Samantha Ravich was appointed to the Board on July 31, 2019 and received a pro-rated amount of compensation for her services during the year.
Annual Report and Accounts 2020 Page | 53
Payments to past Directors and payments for loss of office - audited
Paget Alves retired as a member of the Board of the Parent on June 25, 2020. His fees and RSU awards have been
included in the Non-Executive Directors' remuneration as a single figure table and share interests table of this
report.
There have been no other payments of money or other assets made to any director of the Parent or for loss of
office, in each case, at any time during the financial year ended December 31, 2020.
Statement of Director's shareholding and share interests - audited
Share Ownership Guidelines
Executive Directors are required to acquire and maintain shares with a fair market value equal to at least three
times base salary (which is the case for the current CFO, Max Chiara) and a maximum of at least five times base
salary (which is the case for the current CEO, Marco Sala). Shares included in the ownership criteria include shares
which are beneficially owned regardless of whether the shares were issued under a Company plan or purchased on
the market, and vested shares held in trust to benefit the Executive Director or his family members. Unearned
performance shares do not count towards the ownership criteria until such shares have been earned. Unvested
RSUs and unexercised share options are not taken into account for purposes of the guidelines. If the Executive
Director has a co-investment agreement, 50% of shares committed to the co-investment will not be taken into
account for purposes of the guidelines.
Executive Directors must hold all of the net settled shares they receive under the LTIP and the co-investment plan
for a period of at least five years from the date of grant. The period expires on the fifth anniversary of the date of
grant, provided the relevant director meets his or her holding requirements under the Share Ownership Guidelines.
Executive Directors are required to hold (i) during the first year post departure, the lower of their respective
shareholding guideline and the actual shareholding immediately prior to departure, and (ii) during the second year
post departure, the lower of 50% of their respective shareholding guideline and the actual shareholding at the start
of the second year post departure.
Beginning November 10, 2020 (or five years after joining the Board if such date is subsequent to November 10,
2020), a Non-Executive Director is expected to hold, for as long as he or she remains on the Board, ordinary shares
of the Parent that have a fair market value equal to at least three times the base annual retainer amount then in
effect for that Non-Executive Director. Unvested RSUs and unexercised share options are not taken into account for
the purposes of the guidelines.
The Committee has the discretion to amend the shareholding guidelines at any time.
Each of the Directors are on track to meet the requirements of the share ownership guidelines and their respective
share interests at December 31, 2020 (including shares held by connected persons) are as disclosed in this
Remuneration Report.
Annual Report and Accounts 2020 Page | 54
Executive Directors’ interests in performance share awards - audited
The table below sets out details of the interests of the Executive Directors in share awards for the year ended
December 31, 2020:
Awards Held
at January
1, 2020
Granted/
Performance
Adjustments
During the
Year(1)
Shares
Vested
During the
Year
Awards Held
at December
31, 2020
Market Price
at Grant Date
End of
Performance
Period
44,829
70,508
157,084
172,500
212,927
—
—
—
(157,084)
—
—
277,508
(44,829)
(35,254)
—
—
—
—
—
35,254
—
172,500
212,927
277,508
$21.11
$20.63
$30.12
$30.12
$13.86
$9.08
2018
2019
2020
2021
2021
Not Applicable
Vesting Date
2019 & 2020
2020 & 2021
2021 & 2022
2021
2022 & 2023
2021 & 2022
—
86,881
—
86,881
$9.08
Not Applicable
2021 & 2022
Date of Grant
Marco Sala
Jul 26, 2016
May 23, 2017
May 15, 2018
May 15, 2018
Jul 29, 2019
Nov 06, 2020
Max Chiara
Nov 06, 2020
(1) Prior year decreases relate to adjustments for actual performance achieved.
Executive Directors’ interests in share options - audited
The table below sets out details of the interests of the Marco Sala in share options which are outstanding as of
December 31, 2020:
Date of
Grant
Jul 31, 2014
Nov 30, 2015
May 15, 2018
Awards
Held at
January
1, 2020
328,124
250,000
172,500
Granted
During
the Year
—
—
—
Exercised
During the
Year
—
—
—
Expired
During the
Year
(328,124)
—
—
Awards
Held at
December
31, 2020
—
250,000
172,500
(1)
The market price at grant date is equal to the exercise price of the stock option.
Exercise
Price(1)
$20.29
$15.53
$30.12
End of
Performance
Period
2016
2017
2021
Vesting
Date
2017
2018
2021
Expires
On
2020
2022
2024
Max Chiara does not have any interests in share options as of December 31, 2020.
Executive Directors’ total share interests - audited
The table below shows the Executive Directors’ share interests as of December 31, 2020, including shares held by
connected persons.
Executive Director
Marco Sala
Max Chiara
RSUs
277,508
86,881
PSUs
420,681
—
Share Options
422,500
—
(1) All shareholding ownership guideline requirements have been complied with to the extent applicable.
Total of
Outstanding
Options and Shares
1,120,689
86,881
Shares Beneficially
Owned Outright(1)
1,151,491
—
Annual Report and Accounts 2020 Page | 55
Non-Executive Directors’ share interests - audited
The table below shows the Non-Executive Directors’ share interests as of December 31, 2020, unless otherwise
noted, including shares held by connected persons.
Name
Lorenzo Pellicioli
James McCann
Paget Alves(3)
Beatrice Bassey
Alberto Dessy
Marco Drago
Heather McGregor
Samantha Ravich
Vincent Sadusky
Gianmario Tondato Da Ruos
RSUs(1)
28,473
26,056
—
28,931
22,779
22,779
22,779
22,779
22,779
22,779
Shares Beneficially
Owned Outright(2)
117,325
113,029
33,310
6,081
41,088
44,367
16,936
9,802
51,035
40,117
(1)
(2)
(3)
Non-Executive Directors do not have options outstanding.
All shareholding ownership guideline requirements have been complied with to the extent applicable.
Paget Alves’ Board service ended on June 25, 2020 and does not have any outstanding equity subject to the Parent's incentive plans. His beneficial ownership
is as of his service end date.
External directorships
The Directors are required to inform the Nominating and Corporate Governance Committee in the event an external
commitment (e.g. employment or directorship) is taken up in a publicly held company. Salary and fees for such
external commitments may be retained by the Director in question.
Performance graph and table
Total shareholder return (TSR)
The chart below shows the TSR index for the Company as against the Russell Midcap Index. The Company
considers it appropriate to benchmark its performance to the Russell Midcap Index due to the Company's nature
and size.
(1)
TSR calculation utilizes the 60-day average price for the period 60 days before the start dates and end dates of each period for the Parent's ordinary shares
and the Russell Midcap Index; TSR includes impact of dividend payments.
Annual Report and Accounts 2020 Page | 56
Period EndedIndex ValueTSR PerformanceCompanyRussell Midcap Index29 June201531 Dec201531 Dec201631 Dec201731 Dec201831 Dec201931 Dec20206080100120140160180200 Total remuneration of the Chief Executive Officer
The table below sets out the total remuneration of the CEO for the financial years ended December 31, 2011 to
2020, inclusive. Please note that Marco Sala was CEO of the Parent from April 7, 2015 to the year ended December
31, 2020 and remains CEO as of the date of this Remuneration Report. Prior to this time, he was a director of the
Parent's predecessor entities.
2020 ($)
2019 ($)
2018 ($) (1)
2017 ($)
2016 ($)
2015 ($) (1)
2014 (€)
2013 (€)
2012 (€)
2011 (€)
Total Remuneration
5,825,817
6,498,640
19,487,373
9,238,964
7,553,912
9,646,006
7,155,968
6,884,167
6,428,145
6,167,166
Annual bonus paid as
% of maximum
—%
83%
78%
61%
82%
75%
96%
93%
96%
85%
LTIP vested as a % of
maximum (awards actually
vested in year)
—%
26%
37%
86%
72%
78%
100%
92%
66%
0% - 2008 LTI
(1) Total remuneration includes a housing allowance paid once every three years subject to his Lottomatica contract.
Percentage change in Director and Employee remuneration
The following table compares the annual percentage change, year over year, of each Director's remuneration to the
Company's employees as a whole, in all jurisdictions, calculated on a full-time equivalent basis.
Employees(2)
Directors
Marco Sala (CEO)
Max Chiara (CFO)(3)
Lorenzo Pellicioli
James McCann
Beatrice Bassey(4)
Alberto Dessy
Marco Drago
Heather McGregor
Samantha Ravich(5)
Vincent Sadusky
Gianmario Tondato Da Ruos
Salary and Fees
(8)%
2020
Benefits(1)
(1)%
Annual Bonus(1)
(100)%
(23)%
—%
—%
(17)%
—%
2%
—%
—%
136%
(5)%
—%
9%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
(100)%
—%
—%
—%
—%
—%
—%
—%
—%
—%
—%
(1)
(2)
Non-Executive Directors do not receive benefits or annual bonuses.
Employee percentages exclude payments made to Directors.
(3) Max Chiara joined the Company in April 2020, therefore no change between 2020 and 2019 is reflected in the table above.
(4)
(5)
Beatrice Bassey was appointed to the Board on March 20, 2020, therefore no change between 2020 and 2019 is reflected in the table above.
Samantha Ravich was appointed to the Board on July 31, 2019 and received a pro-rated amount of compensation for her services in 2019.
CEO Pay Ratios
The average number of U.K. employees for the financial years ended December 31, 2019 and 2020 was no more
than 250; the Company was therefore exempt from reporting pay ratios in relation to the total remuneration of the
CEO.
Annual Report and Accounts 2020 Page | 57
Relative importance of spend on pay
The following table shows the year-on-year movement in total remuneration of all employees, compared to the level
of dividends paid and declared on ordinary shares in respect of the financial years ended December 31, 2019 and
2020:
(1) The total pay decreased 16% in 2020 when compared to 2019, based on constant 2019 foreign currency rates. The Parent is not aware of any other
extraordinary payments utilizing cash flow or profit. Total Pay includes wages, benefits, annual bonus, LTIP and training and other personnel costs. Total Pay in
2020 is calculated at the prior year's foreign exchange rate to 2019 actual Total Pay.
(2) Following amendments to IGT’s revolving credit facilities agreement and term loan facility agreement in May 2020, dividends and share repurchases are
prohibited, at least, through June 30, 2021. Therefore, dividends decreased 75% in 2020 when compared to 2019.
(3) There were no share buy-backs for the financial years ended December 31, 2020 and 2019.
Compensation Committee meetings and consideration of matters relating to Directors'
remuneration
The Committee is responsible for setting the remuneration packages for the Chairperson, the Executive Directors
and each Non-Executive Director and for recommending to the Board the remuneration policy for Directors. The
Committee also has oversight of the remuneration policy and packages for other senior members of staff.
The Committee currently comprises three independent Non-Executive Directors. As of the date of this
Remuneration Report, the Committee is chaired by Gianmario Tondato Da Ruos, and its other members are Alberto
Dessy and Samantha Ravich.
The Committee held six meetings during the year. Attendance at the meetings is shown in the table below.
Director
Gianmario Tondato Da Ruos (Chairman)
Paget Alves(1)
Alberto Dessy
Samantha Ravich(2)
Attendance Percentage
100%
100%
100%
100%
(1) Paget Alves’ service ended on June 25, 2020 and attended all four meetings in 2020 during the term of his appointment.
(2) Samantha Ravich’s service commenced on June 25, 2020 and attended all two meetings in 2020 during the term of her appointment.
The CEO does not usually attend the meetings of the Committee. However, certain officers and employees, such as
the Senior Vice President, Global Head of People and Transformation, the CFO, the General Counsel and the
Company Secretary of the Parent, usually attend meetings of the Committee, except if that person is the subject of
the meeting.
The principal activities undertaken by the Committee for the year ended December 31, 2020 consisted of:
•
•
Reviewing and benchmarking the remuneration of the Executive Directors and Non-Executive Directors,
and recommending the CFO’s remuneration arrangements;
Reviewing and approving compensation and incentive compensation plans with respect to senior
management;
• Monitoring business conditions as a result of the global onset of the COVID-19 pandemic and approving
adjustments to the remuneration programs for the year 2020;
Annual Report and Accounts 2020 Page | 58
Millions$931.9$40.9$1,110.8$163.520202019Total Pay(1)Dividends(2)$0$200$400$600$800$1,000$1,200$1,400$1,600 • Monitoring compliance with guidelines on share ownership by the Directors in the Parent;
•
•
Reviewing legal and market practice updates in the U.K. and the U.S.;
Reviewing and approving long term incentive (“LTI”) / annual bonus scoring projections and results, LTI/
annual bonus awards, LTI/annual bonus plan design, employee historical payment trends; and
Reviewing the Committee charter, executive compensation recoupment (clawback) policy, board expense
reimbursement policy and other compensation related policies.
•
While the Remuneration Policy provides the framework for Directors’ remuneration, it is intended that the Committee
be entitled to exercise a level of discretion in certain circumstances, when it deems appropriate. The Committee
may not use any discretion outside the Remuneration Policy without first seeking shareholder approval.
The Committee has been advised by Mercer for the financial year ended December 31, 2020 in its consideration of
matters in relation to executive remuneration. Mercer is part of the Marsh & McLennan Companies, Inc., a global
professional services firm and a third party unconnected with the Parent. Mercer has been acting as independent
adviser to the Committee since 2015 and the Committee has renewed Mercer’s appointment for the financial year
2021. The Committee has satisfied itself that the advice received from Mercer was objective and independent.
The total fees in relation to the advice provided to the Committee and the Board during the year were $204,944.
Mercer also assists the Company in providing general consulting services, salary surveys, and advice on its 401(k)
plans in the U.S.
Statement of voting
The outcome of the votes in respect of the Remuneration Report and the Remuneration Policy for 2020 and 2019
are shown below. There was no binding vote in respect of the Remuneration Policy at the 2020 AGM as the policy
remained unchanged from 2019.
Remuneration Report (advisory vote)
Remuneration policy (binding vote)
AGM
2020
2019
Votes for
367,012,306
(99.71%)
329,208,187
(89.60%)
Votes
against
1,078,897
(0.29%)
38,193,915
(10.40%)
Total votes
cast
368,091,203
Votes
withheld
194,289
Votes for
Votes
against
Total votes
cast
Votes
withheld
-
-
-
-
367,402,102
925,614
328,620,852
(89.28%)
39,442,871
(10.72%)
368,063,723
263,993
Implementation of the Remuneration Policy for the year ending December 31, 2021
This section sets out how the Company intends to implement the approved Remuneration Policy (see the
Remuneration Policy section of this Directors' Remuneration Report) for the financial year ending December 31,
2021.
Executive Director
Elements
Salary
Implementation
The Committee has determined not to increase the salary of the Chief Executive Officer, Marco
Sala. His annual salary is equal to $1,000,000, which is paid 70% in the U.K. in pounds sterling
(£512,070) and 30% in Italy in Euros (€244,479). This payment arrangement requires periodic
true-ups for currency fluctuations to ensure he is paid $1,000,000 annually. Salary amounts
disclosed in the single-figure table include the impact of foreign exchange rate fluctuations and
tax equalization which will therefore vary from the annual salary above.
Max Chiara, who was appointed Executive Vice President and Chief Financial Officer effective
April 6, 2020, and as Executive Director effective April 14, 2020, will receive an annual salary
of $800,000.
Annual Report and Accounts 2020 Page | 59
Elements
Implementation
The results of the salary review are set out in the table below:
Benefits
Pension
Annual Salary 2021
$1,000,000
$800,000
Annual Salary 2020(1)
$1,000,000
$800,000
Percentage Change
—%
—%
Marco Sala
Max Chiara
(1) For comparative purposes, the 2020 annual salaries for both Marco Sala and Max Chiara exclude the impact of
the six-month salary reductions of 50% and 30%, respectively, in 2020 due to COVID-19. Additionally, Max
Chiara's 2020 annual salary excludes the effect of pro-ration due to his April 6, 2020 employment start date.
The Executive Directors will continue to be eligible to receive selected benefits including life
insurance, private medical insurance, private dental insurance, income protection, and critical
illness insurance, travel indemnity, tax preparation services, tax equalization, and housing and
car allowances or a cash perquisite allowance in lieu of housing, car or other allowances.
Marco Sala will continue to participate in the Company’s Italian pension under his service
agreement with Lottomatica and the Italian integrative pension fund, both of which are
structured as a contribution scheme. Under the pension fund subject to his service agreement,
the employee contribution rate is equal to 10.19% and the employer quota is approximately
27% of base salary, allowances and annual bonus. Marco Sala’s contributions subject to the
Italian integrative pension fund are levied at a rate of 3.45% and employer contributions are
8.55% of base salary. Both pension funds’ contribution rates are applied to Marco Sala’s
remuneration earned under both of his service agreements with the Parent and Lottomatica. In
addition, the Company makes mandatory contributions to PREVIP for TFR (Italy’s severance
program) at a 6.90% rate of Marco Sala’s base salary, allowances and annual bonus earned
under both of his service agreements. Employer contributions are allocated to the Parent and
Lottomatica based on remuneration earned under such agreement.
Max Chiara will continue to participate in the Company’s defined contribution 401(k) plan. IGT
provides a 3.5% company match on the first 6% of employee contributions as follows: 100%
match on the first 1% of employee contributions and 50% match on the next 5% of employee
contributions, subject to the U.S. Internal Revenue Services (IRS) employee contribution limits
then in effect, which is $19,500 in 2021 with an additional "catch-up" contribution of $6,500 for
employees age 50 or older as of December 31, 2021.
The Company expects to reinstate the annual bonus for fiscal year 2021 based on a mix of
predetermined company financial and individual performance metrics. Marco Sala’s and Max
Chiara's maximum annual bonus award opportunity will be 300% and 175% of base salary,
respectively.
The Committee approved the annual performance measures, weighting and targets to ensure
they appropriately align to the overall business strategy. The annual bonus will continue to be
weighted 80% on the Company’s financial performance and 20% on individual performance,
the metrics of which will be disclosed retrospectively.
In 2021, the Committee expects to award performance-based shares subject to two separate
fiscal period performance cycles: (i) 2021 - 2022; and (ii) 2021 - 2023, both of which will be
100% based on predetermined financial performance targets aligned with the Company's long-
term strategy and modified by the Company's relative TSR performance compared to the
Russell Midcap Index. Actual payout opportunity will be based on performance achievement
against the targets and will range between 0% to 145% of target shares. The value of each
award subject to the individual performance periods will be weighted based on the years in
each cycle (i.e. 40% and 60% of total award value allocated to the two year and three year
performance plans, respectively). The financial metrics and achievement will be disclosed
retrospectively.
The Committee will determine whether co-investment arrangements will be entered into with
the Executive Directors, and if so, the terms of such arrangements.
Annual Bonus
LTIP
Co-investment
plan
Annual Report and Accounts 2020 Page | 60
Non-Executive Directors
Elements
Fees
Implementation
As of the date of this Directors' Remuneration Report, the fees of Chairperson and other Non-
Executive Directors remain unchanged from the year ended December 31, 2020, as set out below.
The Committee retains discretion to review the fees of the Non-Executive Directors for the
remainder of the financial year ending December 31, 2021, and any changes to fees will be in line
with the Remuneration Policy.
Non-Executive Director
with additional fees related to service for
Chairperson
Lead Independent Director
Chair of Audit Committee
Chair of Compensation Committee
Chair of Nominating and Corporate Governance Committee
Retainers
2021
$100,000
Retainers
2020
$100,000
$50,000
$20,000
$40,000
$30,000
$20,000
$50,000
$20,000
$40,000
$30,000
$20,000
RSU
The Committee has reviewed the terms of the Non-Executive Directors’ RSU agreement and has
determined that RSU agreement will operate in a broadly similar manner to the year ended
December 31, 2020.
Non-Executive Director
with additional RSU related to service for
Chairperson
Lead Independent Director
RSU 2021
$200,000
RSU 2020
$200,000
$50,000
$20,000
$50,000
$20,000
Annual Report and Accounts 2020 Page | 61
REMUNERATION POLICY
In this part of the Director’s Remuneration Report, prepared in accordance with Schedule 8 to the Large and
Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, as amended, we set out the
proposed Remuneration Policy for 2021 and subsequent years.
The current Remuneration Policy (which can be found in the 2019 Annual Report and Accounts) was approved by
shareholders at the annual general meeting on 17 May 2019 and is therefore not required to be put to shareholders
for approval until the 2022 AGM. Following the Committee’s periodic review of the Remuneration Policy, the
Committee believes setting forth a new policy to clarify and modernize its philosophy and remuneration elements
both to support the Company's strategy and growth and to align with peer company practice, allowing the Company
to compete effectively for talent on a global basis. We will therefore present this policy to shareholders at the 2021
AGM and, if approved, it will remain in effect until shareholders approve changes to the policy or until a new policy
is put before shareholders for approval at the 2024 AGM, whichever is sooner.
The Remuneration Policy begins with the Executive Director and Non-Executive Director Remuneration Policy
tables and narrative, and is followed by an outline of remuneration structures.
Setting the Remuneration Policy
The Committee is constituted to assist the Board of Directors of the Parent (the "Board") in discharging its
responsibilities relating to the compensation of the Company’s CEO and other executive officers and Directors. The
Committee, which is made up of independent Non-Executive Directors, was mindful in its deliberations on the
Remuneration Policy of any potential conflicts of interest (e.g. in accordance with the Committee’s charter, no
member of the Committee shall act to fix his or her own compensation except for uniform compensation to directors
for their service as directors), and sought to minimize them through an open and transparent internal discussion
process and by seeking independent advice from its external advisors where necessary.
The Committee undertakes a review of the Remuneration Policy periodically, taking into account all elements of
remuneration together to ensure the Remuneration Policy, as a whole, continues to position the Company to be able
to provide competitive compensation to existing and prospective directors which is aligned to market practice, while
ensuring the appropriate balance of fixed remuneration with variable remuneration tied to the achievement of the
Company's strategic goals and growth objectives. In preparation for the review of our Remuneration Policy, the
Committee:
•
•
•
•
•
•
Considered how the current Remuneration Policy related to and supported the Company’s strategy, and
formed its own views on the changes required to the current Remuneration Policy to align with the strategy
and to be consistent with the Company’s desired level of business risk;
Considered the impact of applicable law and regulations, corporate governance standards, best practice
and guidance issued by regulators and other interested parties, including proxy advisors;
Considered views from shareholders on past Remuneration Reports;
Considered the remuneration practices found in other companies of comparable size and industries, and
markets in which IGT competes for talent at the senior executive level, particularly in the United States and
Italy;
Considered the wider workforce remuneration structure to ensure the approach to executive remuneration
is consistent; and
Consulted with legal and compensation advisors and relevant members of the Company’s senior
management on the proposed changes to the current Remuneration Policy.
The structure of the Company’s remuneration program is outlined in the Annual Statement of this Directors’
Remuneration Report. The Committee, when determining the Remuneration Policy, strives to ensure that the
Company’s remuneration structures:
•
•
•
•
•
•
•
Attract, retain, and motivate high caliber directors globally;
Support the delivery of the Company’s strategic and business objectives;
Reflect the global operating model of the Company whilst taking account of governance best practices;
Promote a strong and sustainable performance culture;
Align the interests of directors with those of the shareholders;
Are transparent and easily understood; and
Are flexible and accommodating to attract and retain talent in different geographies.
Annual Report and Accounts 2020 Page | 62
Consideration of employment conditions
When determining remuneration arrangements for the Directors, the Committee takes into account compensation
and employment conditions throughout the Company, those of our global peer companies, performance and market
trends and practices to evaluate whether the structure and quantum of the Directors’ pay opportunities remain
appropriate in this context. The Committee receives periodic updates from the People and Transformation (HR)
department on the overall remuneration structures and policies for senior executives with support from
compensation advisors, including benchmarking the Company's senior executive remuneration with peer
companies. We do not consult with employees on the Remuneration Policy.
At other levels of the Company, employees receive a remuneration package that is reflective of their role and
responsibilities, set by reference to relative remuneration throughout the Company and external market data, where
applicable. Employees at an executive level will typically have a greater emphasis on performance-related and long-
term pay compared to those below this level. Annual incentives may be payable based on performance measures
which are suitable to the nature and responsibility of the role. This is considered when determining the policy for
Executive Directors.
Consideration of shareholder views
The Committee values shareholder feedback when forming the Remuneration Policy. There are established
processes in place whereby our management and our investor relations team meet periodically with investors and
shareholders either at their request or at industry events to discuss and gather feedback, which is formally
presented to the Committee and Board for ongoing evaluation of the Company's strategy and governance practices,
including remuneration practices. To date, remuneration has not been a significant topic raised by shareholders as a
part of this process and, therefore, no specific views have been taken into account. The Committee also reviews
shareholder views and votes received in relation to resolutions brought forward at the AGM each year and takes
these into account when developing remuneration and related policy.
Summary of key changes from the previous policy
While the structure of the 2019 Remuneration Policy has been retained, the Committee has updated and clarified a
number of elements of the Remuneration Policy to better enable the Company to compete for, attract and retain
executive talent to support the long-term interests of the Company and its stakeholders and further align to U.K.
best practices. Key changes include the following:
•
•
•
•
•
•
•
•
Clarifying the broad, global nature of the market in which the Company competes for executive talent,
particularly in the United States and Italy, to tailor the remuneration to meet these needs;
Defining the benefits and pension programs, which are tailored to the market in which the executive is
employed or resides;
Clarifying the different levels at which bonus may be paid;
Setting out the process for considering shareholder views;
Clarifying the factors taken into consideration when setting remuneration for new recruits;
Clarifying the awards typically granted under the Long Term Incentive Plan and increasing the maximum
values associated with such awards aimed to provide the Committee with added flexibility to align our
compensation opportunity with market practice;
Clarifying the purpose of the different components of remuneration; and
Identifying the typical division of performance targets between financial and non-financial targets.
Annual Report and Accounts 2020 Page | 63
Future Policy Table
The table on the following pages sets out the proposed Remuneration Policy for Executive Directors and Non-
Executive Directors, explaining how each element operates and how each part links to the corporate strategy.
Executive Directors
An Executive Director plays a key role in the management and success of a company. The Remuneration Policy
and structures are designed to promote these combined roles, to incentivize the delivery of sustained performance
consistent with the Company's strategic goals and appropriate risk management, and to reward success in doing
so.
Fixed Pay: Base Salary
Purpose and Link
Strategy
to
Operation
To pay a salary that (1) reflects the role, responsibilities, experience and knowledge of
the individual; (2) is competitive with other employers with whom the Company
competes for talent, including companies in our industry, other complex industries,
companies of comparable size, and in the geographies in which the Company
operates; and (3) allows the Company to attract and retain appropriate Executive
Directors to support the long-term interests of the Company.
Base salaries are set taking into account:
•
•
•
•
The individual’s skills, experience and current remuneration package;
The size and scope of the role;
Salary and total remuneration levels at similar sized companies; and
Remuneration of other executives and group employees.
Salaries are reviewed annually by the Committee.
Performance Conditions There are no performance conditions.
Maximum Opportunity
There is no set maximum salary given the global market in which the Company
competes for talent; however, the Company annually reviews salaries of global
companies in similar industries, of similar size and with similar complexities to ensure
Executive Director salaries are within a market competitive range.
The maximum opportunity for an increase in base salary on an annual basis is 10% of
that year's annual base salary. Increases may be made above this level up to 20% of
that base salary in exceptional circumstances, such as:
• Where an individual is brought in on a lower salary with the intention of
increasing the salary level gradually dependent on performance in the role;
There is a material increase in the size and scope of the role; and
•
• Market practice has evolved to mean that the salary is no longer considered
to be competitive.
Personal performance is taken into account when considering base salary increases.
Recovery or Withholding There is no provision for recovery.
Fixed Pay: Benefits
Purpose and Link
Strategy
to
Operation
To provide market competitive benefits to enable Executive Directors to undertake
their role through ensuring well-being, security and access to the support and
resources necessary or appropriate to perform their role as expected by the
Company.
Executive Directors receive a range of benefits, which may vary by location and be
tailored to reflect market practice. These may include, but are not limited to, private
medical insurance, private dental insurance, life and permanent disability insurance,
travel indemnity, tax preparation services, tax equalization, housing and car
allowances or a cash perquisite allowance in lieu of housing, car or other allowances.
In line with the policy for other employees, Executive Directors may be eligible to
receive relocation allowances and transfer-related benefits as appropriate.
Where an Executive Director incurs expenses in the ordinary conduct of business and
such expenses give rise to tax, the Company may reimburse the director for any tax
for which the director may be liable.
Benefits are reviewed regularly but not on a pre-determined schedule.
Annual Report and Accounts 2020 Page | 64
Performance Conditions There are no performance conditions.
Maximum Opportunity
There is no maximum level of benefits. However, Executive Directors generally
participate in the same level of medical, dental and other health and welfare programs
of the workforce in the jurisdiction, adjusted to accommodate statutory requirements,
market practice and/or job level.
Life insurance of up to 4 times base salary, payable on death in service.
Cash perquisite allowances may be offered to Executive Directors in lieu of other
allowances. Such allowances do not exceed $100,000 on an annual basis.
Recovery or Withholding There is no provision for recovery.
Fixed Pay: Pension
Purpose and Link
Strategy
Operation
to
To provide Executive Directors an appropriate level of savings for their retirement
which is motivating and appropriately competitive within the relevant labor market.
Executive Directors are offered the same or similar pension schemes which are
offered to the workforce in the jurisdiction in which they are employed or likely to
retire. All pension schemes are defined contribution and no defined benefit
arrangements are offered to Executive Directors. Contribution levels may vary by
jurisdiction to accommodate statutory requirements, market practice and/or job level
of the individuals.
Performance Conditions There are no performance conditions.
Maximum Opportunity
Maximum opportunities vary by jurisdiction and job level; however, the Company
provides pension schemes which are aligned with market practice of the employing
jurisdiction.
Subject to compliance with specific jurisdictional requirements which may change
from time to time, annual employer contributions are no higher than 42.5% of base
salary or a combination of fixed remuneration and annual bonus.
Recovery or Withholding There is no provision for recovery.
Variable Pay: Annual Bonus
Purpose and Link to
Strategy
Operation
the Committee determines
To align a component of remuneration with the achievement of Company performance
measured against predetermined annual financial and strategic objectives.
The annual bonus is performance-based, and performance is assessed over one
year.
individual
Annually
performance metrics utilized in the program based on the Company's short-term
objectives. The Committee approves the threshold, target and maximum performance
measures for these metrics, which will generally align with the Company's annual
financial and strategic plan, as well as the coinciding payouts at each level of
achievement.
Upon completion of the fiscal year, the Committee reviews and certifies the
performance achievement against each of the performance measures and resulting
payments under the plan.
The annual bonus does not generally have any additional vesting or deferral period.
the appropriate
financial and
Performance Conditions Performance measures, weightings and targets will be set annually based on the
Company's short-term objectives. Generally 80% of the bonus will be based on
financial performance measures which may include, but are not limited to, profitability,
cash flow, liquidity or balance sheet metrics.
Details of the measures, weightings and targets applicable to the annual incentive
bonus for each year, including a description of how they were chosen and whether
they were met, will be disclosed retrospectively in the annual report on Directors'
remuneration for the relevant financial year (subject to commercial sensitivity).
The ongoing maximum annual bonus target opportunity will be limited to 300% of
base salary.
Maximum Opportunity
Annual Report and Accounts 2020 Page | 65
Threshold performance will result in a pay out of up to 25% of maximum and on-target
bonus will pay out up to 50% of maximum.
Payouts under the plan will not exceed the following:
Below threshold: 0% of target
•
Threshold: 50% of target
•
•
Target: 100% of target
• Maximum: 200% of target
The Committee retains discretion to increase or reduce pay-outs (including to nil)
based on an assessment of regulatory conduct and general Company performance
over the performance period, subject always to the maximum payout and to ensure
that the rewards properly reflect business performance.
Recovery or Withholding The Company has implemented an executive compensation recoupment policy
pursuant to which incentive compensation may be recouped in certain instances, such
as a material restatement of the Company’s financial statements resulting from
material noncompliance with financial reporting requirements under applicable law or
fraud, and incentive compensation is generally subject to any clawback, recoupment,
or forfeiture provisions required by laws applicable to the Company or its subsidiaries
or affiliates. The executive compensation recoupment policy may be amended from
time to time by the Board or a committee thereof.
Variable Pay: Long-Term Incentive Plan (“LTIP”)
Purpose and Link to
Strategy
Operation
Long-term incentive compensation is designed to: (1) balance and align the interests
of Executive Directors and shareholders; (2) reward Executive Directors for
demonstrated leadership and performance aimed towards the creation of shareholder
value; (3) increase equity holding levels; (4) align with competitive levels of
compensation opportunity within our peer group; and (5) support in attracting,
retaining and motivating Executive Directors.
Annual LTIP awards are usually granted in the form of performance-based restricted
share units (“PSUs”), but time-based restricted share units, restricted stock, stock
options, performance-based stock options, share appreciation rights or any
combination thereof may also be granted.
Awards granted under the LTIP have a vesting period of at least one year.
Performance-based awards normally have a three-year performance-period aligned
with the fiscal year and vest in two equal tranches approximately three- and four-
years after the grant date, subject to achievement of pre-established performance
conditions.
Award levels and the framework for determining vesting are reviewed annually.
Executive Directors must hold all of the net settled shares they receive under the LTIP
for a period of at least five years from the date of grant. The period expires on the fifth
anniversary of the date of grant, provided that the relevant director meets his or her
holding requirements under the Share Ownership Guidelines, a summary of which is
included in the Directors' remuneration report. Separately, the Share Ownership
Guidelines require Executive Directors to hold a certain amount of shares for a period
of up to two years after cessation of service.
The Committee has discretion to amend the terms and conditions of any award within
the limits of this policy and the terms of the award agreement.
Performance Conditions Performance measures, weightings and targets for the entire performance period of
the LTIP awards are set annually prior to the award date, align with the Company's
operating and strategic priorities for the upcoming performance period. Typically, all of
the performance measurements are financial or market-based in nature including, but
not limited to profitability, cash flow, liquidity, other balance sheet or shareholder return
measures.
Annual Report and Accounts 2020 Page | 66
Maximum Opportunity
Details of the measures, weightings and targets applicable to the annual LTIP
program for each year will be disclosed retrospectively in the annual report on
Directors' remuneration in the year following the completion of the performance period
(subject to commercial sensitivity).
The maximum target is 800% of base salary measured at the award's grant date.
Payouts under each LTIP will not exceed the following:
Below threshold: 0% of target
•
Threshold: 50% of target
•
•
Target: 100% of target
• Maximum: 200% of target
The Committee retains discretion to increase or reduce pay-outs (including to nil)
based on an assessment of regulatory conduct and general Company performance
over the performance period, subject always to the maximum payout and to ensure
that the rewards properly reflect business performance, as adjusted to reflect
fluctuations in the applicable currency exchange rate, non-recurring items such as
acquisitions and disposals and other extraordinary circumstances.
Recovery or Withholding The Company has implemented an executive compensation recoupment policy
pursuant to which incentive compensation may be recouped in certain instances, such
as a material restatement of the Company’s financial statements resulting from
material noncompliance with financial reporting requirements under applicable law or
fraud, and incentive compensation is generally subject to any clawback, recoupment,
or forfeiture provisions required by laws applicable to the Company or its subsidiaries
or affiliates. The executive compensation recoupment policy may be amended from
time to time by the Board or a committee thereof.
Variable Pay: Co-investment plan
Purpose and Link to
Strategy
Operation
Co-investment plans are designed to: (1) balance and align the interests of Executive
Directors and shareholders; (2) reward for demonstrated leadership and performance
aimed towards the creation of shareholder value; (3) as an incentive for Executive
Directors to achieve one or more specified performance targets; (4) increase equity
holding levels; and (5) provide Executive Directors with a commitment to hold a
minimum number of shares in the Company for a period as determined by the
Committee.
A co-investment plan is performance-based and is generally granted once every three
years. Typically, a co-investment plan award coincides with an Executive Director's
reappointment to the Board.
Under a co-investment plan, the Company may issue and/or grant options over
shares, share appreciation
restricted share units,
performance units, performance shares or other share-based awards or any
combination thereof. Typically, the Company matches the co-investment plan
participant's commitment to hold shares on a 1:1 ratio.
Awards vest after the performance period, typically subject to: (1) achievement of pre-
established performance metrics; (2) the Executive Director continuing to hold the
specified number of shares during the performance period; (3) the Executive Director
reinvesting up to 50% of net shares received subject to the plan in the next cycle of
co-investment plan, if requested to do so; and (4) the Executive Director continuing to
serve as a Director on the Board during the performance period.
Options vested under a co-investment plan generally expire four years after the
vesting date.
restricted shares,
rights,
Annual Report and Accounts 2020 Page | 67
Executive Directors must hold all of the net settled shares they receive under a co-
investment plan for a period of at least five years from the date of grant. The period
expires on the fifth anniversary of the date of grant, provided that the relevant
director meets his or her holding requirements under the Share Ownership
Guidelines, a summary of which is included in the Directors' remuneration report.
Separately, the Share Ownership Guidelines require Executive Directors to hold a
certain amount of shares for a period of up to two years after cessation of service.
The Committee has discretion to amend the terms and conditions of any co-
investment plan within the limits of this policy and the terms of the relevant
agreement.
Performance Conditions Performance measures, weightings and targets for the entire performance period of a
co-investment plan are set at the time of grant. Typically, at least 80% of the
performance measurements are financial or market-based in nature including, but not
limited to profitability, cash flow, liquidity, other balance sheet or shareholder return
measures.
Details of the measures, weightings and targets applicable to a co-investment plan
will be disclosed retrospectively in the annual report on Directors' remuneration in the
year following the completion of the performance period (subject to commercial
sensitivity).
There is no over-riding maximum opportunity for the co-investment plans. The
Committee sets a target (which may include different levels of achievement) for each
co-investment plan in its discretion on grant, and awards vest if the applicable
performance conditions are met.
Maximum Opportunity
Recovery or Withholding The Company has implemented an executive compensation recoupment policy
pursuant to which incentive compensation may be recouped in certain instances, such
as a material restatement of the Company’s financial statements resulting from
material noncompliance with financial reporting requirements under applicable law or
fraud, and incentive compensation is generally subject to any clawback, recoupment,
or forfeiture provisions required by laws applicable to the Company or its subsidiaries
or affiliates. The executive compensation recoupment policy may be amended from
time to time by the Board or a committee thereof.
Non-Executive Directors
Fixed pay: Fees
Purpose and Link to
Strategy
Operation
To attract and retain high-calibre individuals, with appropriate experience or industry-
related skills, by offering market competitive fee levels.
Non-Executive Directors receive a basic fee for their Board services. Additional fees
may be paid in relation to additional responsibilities including:
•
•
•
•
The role of the Chairperson;
The role of Lead Independent Director;
Chairing
the Audit, Compensation and Nominating and Corporate
Governance Committees and any other Board committees as may be
established from time to time; and
Carrying out specific and/or ad hoc projects or tasks.
The fee of the Chairperson is set taking into account the individual’s circumstances,
skills and experience, the scope of the role and the needs and circumstances of the
Company. Non-Executive Director fees are set taking into account market practice
levels and commitment required of the Directors in connection with, but not limited to,
regulatory and licensing procedures.
Fees are reviewed annually by the Committee.
Expenses incurred in the course of duties may be reimbursed by the Company.
Certain benefits, including statutory pension contributions, may be payable by virtue
of the payment of fees and the grant of equity awards, depending on the location of
the Non-Executive Director.
Performance Conditions There are no performance conditions.
Annual Report and Accounts 2020 Page | 68
Maximum Opportunity
There are no set maximum fees; however, fee levels of peer companies will be taken
into account when considering increases.
The maximum opportunity for an increase in fees on an annual basis is 10% of that
year’s annual fees rising to a maximum of 20% of those fees in exceptional
circumstances, as determined by the Committee in its sole discretion.
Current fee levels are set out in the annual report on Directors' remuneration.
Recovery or Withholding There is no provision for recovery.
Fixed pay: Equity Awards
Purpose and Link to
Strategy
Operation
To reward Non-Executive Directors for continued service, whilst aligning Non-
Executive Directors with shareholders through linking an element of compensation to
share performance.
Typically, each Non-Executive Director is granted a time-vesting restricted share unit
("RSU") award, generally unconnected to the performance of such Non-Executive
Director. The Committee retains the discretion to grant equity awards to Non-
Executive Directors as permitted under the Company's Long Term Incentive Plan.
An RSU award is normally granted to each existing Non-Executive Director annually
and to a new Non-Executive Director at the time of appointment.
The number of RSUs covered by each award is generally determined by dividing (i)
the Annual Grant Value (the current level of which is set out in the annual report on
Directors' remuneration) by (2) the closing price of an ordinary share as of the date of
grant, prorated accordingly in respect of grants made to new Non-Executive Directors.
There is no set maximum for the Annual Grant Value, but the Committee determines
the amount based on its periodic benchmarking of compensation for the Non-
Executive Directors.
Awarded units normally vest at the next annual general meeting of the Parent after
grant date, subject to continued service of the Non-Executive Director as a Director on
the Board.
Equity awards do not have a post-vest holding or deferral requirement. Instead, the
Company maintains Share Ownership Guidelines, which require the Non-Executive
Director to maintain a level of share ownership measured as a multiple of base fee. A
summary of
the Directors'
remuneration report.
Award levels and the framework for determining vesting are reviewed periodically,
generally every one or two years.
The Committee has discretion to amend the terms and conditions of any award within
the limits of this policy and the terms of the award agreement.
the Share Ownership Guidelines
included
in
is
Performance Conditions There are no performance conditions.
Maximum Opportunity
The maximum target is 100% of the grant value.
The maximum increase of the Annual Grant Value on an annual basis is 10% of that
year's Annual Grant Value, rising to a maximum of 20% of that year's Annual Grant
Value in exceptional circumstances, as determined by the Committee in its sole
discretion.
Recovery or Withholding Awards made to Non-Executive Directors may be recouped in certain instances, such
as error in calculation or fraud, and the RSUs are generally subject to any clawback,
recoupment, or forfeiture provisions required by laws applicable to the Company or its
subsidiaries or affiliates. Such recoupment policy may be amended from time to time
by the Board or a committee thereof.
Annual Report and Accounts 2020 Page | 69
Notes to the Future Policy Table
Performance measures and targets
Each year, the Committee gives careful consideration to the performance measures that should apply to incentives.
•
•
For the annual bonus, the Committee considers that a combination of financial measures relating to the
Company's strategic objectives and business strategy and individual financial measures, is most
appropriate for assessing performance over the short to medium term. Other non-financial measures,
including customer, people, and culture, and encompassing environmental, social and governance aspects,
may be used in combination with the aforementioned measures.
For the LTIP and the co-investment plan, the Committee considers that financial or market performance
metrics, including shareholder return, profitability, cash flow and certain balance sheet metrics, provide the
optimum balance to assess the long-term financial performance of the Company and growth in shareholder
returns on an absolute and relative basis. Non-financial measures, including customer, people and culture,
and encompassing environmental, social and governance aspects, may be used in combination with
financial measures.
The Committee reserves the right to amend, introduce and/or remove performance measures and targets for
awards as it considers appropriate, subject to the rules of the relevant plan and any legal or regulatory restrictions.
Remuneration policy for other employees
While our Remuneration Policy follows the same fundamental principles across the Company, packages offered to
employees reflect differences in market practice in the different countries, role and seniority.
Like the Executive Directors, employees at management level and above receive a fixed salary and may receive a
variable annual bonus. The annual bonus differs between employee levels of seniority: the Executive Directors and
senior management employees are generally subject to an 80% bonus weighting as to financial results and a bonus
weighting of 20% based on personal performance. The annual bonus is paid out on an annual basis subject to the
financial results of the Parent and the personal performance of each employee. Manager and above level
employees in general also participate in the same annual bonus plan. The percentage of the plan allocated to
financial and individual objectives varies by level. Target as a percentage of base salary also varies by level.
Eligible employees participate in the same LTIP as the Executive Directors or such other long-term incentive plans
as may be adopted by the Committee from time to time.
Employees, other than the Executive Directors, are not eligible to participate in the co-investment plan, which is
specifically aimed at Executive Directors.
Approach to recruitment remuneration
The Company operates in a complex, global and specialized sector and competes for talent on a global basis and,
in many instances, outside of the U.K. and across industries. The Committee’s approach to recruitment
remuneration is to develop remuneration packages that put the Company in a position to effectively attract and
retain executive talent based on competitive pay, benefits and practices in relevant markets, sectors and
geographies.
Although the remuneration package for a newly appointed Non-Executive Director would normally be in line with the
structure set out in the Remuneration Policy table, the Committee determines the remuneration of new Executive
Directors on a case-by-case basis. Generally, the level of fixed remuneration will be determined after considering
the candidate’s skills and experience and the market data for the role that they will be undertaking and the
remuneration needed to attract talent under the circumstances. It is expected that for new Executive Directors:
•
•
•
•
Base salary will be set in line with the Remuneration Policy.
Benefits will be in line with the Remuneration Policy. Additional benefits may be offered for new Executive
Directors, such as relocation benefits.
Pensions will be in line with the Remuneration Policy.
The annual bonus quantum and performance measures will generally be in line with the ongoing
Remuneration Policy as implemented for other Executive Directors during the year. However, the
Committee reserves the right to vary the performance measures and targets for the year of recruitment if it
Annual Report and Accounts 2020 Page | 70
considers appropriate (e.g. where a large portion of the year has already elapsed). The annual bonus
maximum will generally reflect the ongoing policy for current Executive Directors, pro-rated as relevant.
The LTIP quantum, performance measures and targets will be line with the ongoing Remuneration Policy as
implemented for other Executive Directors during the year. The LTIP award maximum for new Executive
Directors will generally reflect the ongoing policy for current Executive Directors.
The co-investment quantum, performance measures and targets will be line with the ongoing Remuneration
Policy as implemented for other Executive Directors during the year.
•
•
The Company may also pay reasonable fees and expenses for a new Executive Director in relation to their
appointment.
The Committee recognizes that a new Executive Director may forfeit remuneration as a result of leaving a previous
employer and the Committee will consider mitigating that loss or part of that loss by making buy-out awards in
addition to the remuneration outlined above. In making buy-out awards, the Committee will consider any relevant
factors, including any performance conditions attached to any previous incentive arrangements and the likelihood of
these conditions being met, the proportion of the performance period remaining and the form of award. Where
possible, buy-out awards will be made using existing incentive plans and may be settled in cash or shares and in
one payment or over a period of years.
The Committee retains discretion to offer other payments, whether in cash or in shares, which reflect market
conditions or practice by location when it considers these to be in the best interests of the Company and, therefore,
shareholders. The Committee does not intend to use this discretion to make a non-performance related incentive
payment but considers it important to retain the ability to do so in order to attract and retain executive talent. In any
case, the Committee may consult with its external, independent compensation consultant to confirm the package
provided at recruitment is market competitive and aligned with the standard remuneration elements for the role and
location.
Directors' contractual arrangements
Executive Directors' service contracts
The Company does not have a policy of fixed term contracts for Executive Directors. Generally, contracts include a
notice period of no more than 12 months.
An Executive Director, following cessation of his or her service, is subject to confidentiality undertaking and certain
restrictive covenants, including restrictions on soliciting or providing goods or services to certain customers,
employing or enticing away from the group certain persons employed by any group company or being involved with
any business in competition with the company, among others, for a period of time after such cessation.
Marco Sala
The current CEO and Executive Director, Marco Sala, has a service agreement with the Parent (70% of
employment) and a service agreement with its wholly owned subsidiary, Lottomatica (30% of employment). There is
no fixed term for the service agreement with the Parent and the Lottomatica service agreement; however, as a
matter of best practice, Marco Sala’s appointment as a director of the Parent will be made subject to reappointment
by shareholders at the Parent’s annual general meeting. Marco Sala’s service agreement can be terminated by
either party on the giving of six months’ notice, if not, immediately for cause. He cannot resign without prior approval
from the Board.
Max Chiara
The current CFO and Executive Director, Max Chiara, has a service agreement with the Parent. There is no fixed
term for the service agreement with the Parent; however, as a matter of best practice, it is expected that Max
Chiara’s appointment as a director of the Parent will be made subject to annual reappointment by shareholders at
the Parent’s AGM. Max Chiara’s service agreement with the Parent can be terminated by the Parent if Max Chiara
fails to cure the grounds for such termination as specified in the agreement within a 60-day notice period, or
immediately in any other cases. Max Chiara may terminate the service agreement on the giving of 60 days’ notice,
following which the Board may elect to have such termination become effective immediately or on such later date
(but no later than the date specified in the notice).
Annual Report and Accounts 2020 Page | 71
Non-Executive Directors' appointment agreements
All Non-Executive Directors’ services are provided for in accordance with the prior appointment of the Directors and
their individual appointment agreements. Non-Executive Directors are generally expected to be re-appointed
annually on each AGM date, unless his/her appointment is terminated earlier by either party on the giving of one
month's notice.
Details of the terms of the appointment of the current Non-Executive Directors are as follows:
Non-Executive Director
Lorenzo Pellicioli (Chairperson)
James McCann (Vice Chairperson and Lead Independent Director)
Beatrice Bassey
Alberto Dessy
Marco Drago
Heather McGregor
Samantha Ravich
Vincent Sadusky
Gianmario Tondato Da Ruos
Start of Current
Term
June 25, 2020
June 25, 2020
June 25, 2020
June 25, 2020
June 25, 2020
June 25, 2020
June 25, 2020
June 25, 2020
June 25, 2020
Expected Expiry of
Current Term
May 11, 2021
May 11, 2021
May 11, 2021
May 11, 2021
May 11, 2021
May 11, 2021
May 11, 2021
May 11, 2021
May 11, 2021
Loss of office
When a Director leaves the Company, the Committee will review the circumstances and apply the appropriate
treatment having regard to the practice for other senior employees of the Company which may vary by location, and
in accordance with the Director’s contractual entitlements established and as may be amended by the Committee
specifically to facilitate the exit of a particular individual. Where applicable, the Committee aims to avoid rewarding
poor performance and to recoup undue or excessive pay.
When determining the treatment of the various elements of compensation upon cessation of service, the Committee
will give regard to the rationale for the departure. An individual may be treated as a ‘good leaver’ for these purposes
if they leave by way of the following circumstances – (i) death, (ii) injury, ill-health or disability, (iii) redundancy, (iv)
retirement, and/or (v) any other circumstances as determined by the Committee or the Board.
The Company’s equity incentive plan(s) contains provisions relating to a change in control which provides for full
accelerated vesting of all outstanding share options, share appreciation rights and full value awards (other than
performance-based awards), when a replacement award is not provided. In addition, any performance-based award
for which a replacement award is not issued, will be deemed to be earned and payable with all applicable
performance metrics deemed achieved at the greater of: (a) the applicable target level; or (b) the level of
achievement as determined by the Committee not later than the date of the change in control, taking into account
performance through the latest date preceding the change in control as to which performance can practically be
determined, but in no case, later than the end of the applicable performance period. In the event of a reorganization
or other transactions which would affect the current or future value of any award, an adjustment may be made to the
number of shares if considered appropriate.
The Committee also retains discretion to make additional payments in respect of (i) settling any statutory claims
which the Committee considers, in its reasonable judgment, may arise in respect of the termination (whilst seeking
to ensure that there is no reward for failure), and (ii) reasonable legal costs and other expenses reasonably incurred
by the Director in respect of the termination and any settlement arrangements; provided in all cases that the
Committee considers that it would be in the best interests of the Company to do so.
Annual Report and Accounts 2020 Page | 72
Executive Directors
The table below summarizes the policies which will apply in respect of the various elements of compensation in the
event of cessation of an Executive Director’s service with the Company, unless determined otherwise at the
discretion of the Committee:
Element of remuneration Loss of office payment policy
Base Salary
Benefits
Pension
Annual Bonus
LTIP
Co-investment
Salary will continue to be paid throughout the notice period although the Committee has
the discretion to make a payment in lieu of notice.
A good leaver may be entitled to receive up to 24 months of base salary.
Benefits will continue to be paid throughout the notice period although the Committee
has the discretion to make a payment in lieu of notice.
A good leaver may continue to receive a range of benefits, including without limitation,
health and welfare benefits, tax preparation and perquisites, following cessation for up
to 24 months.
Pensions will continue to be paid throughout the notice period although the Committee
has the discretion to make a payment in lieu of notice.
Any accrued but unpaid annual bonuses for the prior fiscal year will be paid.
A director may be entitled to an annual bonus, pro-rated if applicable and subject to
performance assessment, in respect of the financial year in which the cessation occurs.
A good leaver may be entitled up to 18 months annual bonus (based upon a three-year
average).
Share awards and options will be treated in accordance with the relevant plan rules. The
Committee would consider whether outstanding and unvested awards and/or options
should lapse on leaving or should, at the Committee’s discretion, be preserved. If
awards and/or options are preserved, they would continue until the vesting date or be
accelerated, and they would be pro-rated based on service over the performance period
or vest in full.
A good leaver may exercise vested stock options up until the original expiration date
under the original terms and conditions of the award, generally a three-year period after
the vest date.
All outstanding and unvested awards and/or options will be automatically and
immediately forfeited for no consideration as of cessation of service.
A Director may also be entitled to additional payments, including but not limited to certain payments or benefits
which are in line with and which reflect market practice, including the provision of outplacement support, reasonable
costs associated with relocation back to an individual’s home country, and tax preparation. In some countries, it may
be a legal requirement to provide on-going consideration for post-termination restrictive covenants. The Committee
may impose post-termination restrictive covenants on Directors which continue for up to two years after cessation of
service and which may require payment of appropriate consideration.
Marco Sala
As consideration for compliance with the post-employment restrictive covenants, Marco Sala is entitled to a lump
sum payment equal to two years’ base salary and any annual bonus payments for the two financial years prior to
the date of termination.
According to a severance agreement entered into between the Company and Marco Sala (which supersedes a
stability agreement originally entered into on February 20, 2012 between him and legacy GTECH S.p.A. and then
assigned to Lottomatica S.p.A. as part of the merger), subject to Marco Sala working his notice period, he is entitled
to a severance payment equal to one year’s base salary (plus any amounts owed to him) and a pro-rated short term
incentive bonus payment as of the date of termination based on the projection of the Company's full year business
and financial results. The severance payment is subject to the Company determining that he is a good leaver which
includes, but is not limited to, circumstances involving redundancy, permanent incapacity, or retirement with the
agreement of the Company. No severance payment will be made if Marco Sala’s employment is terminated for
cause.
Annual Report and Accounts 2020 Page | 73
Non-Executive Directors
No remuneration is payable upon a Non-Executive Director's termination, other than accrued fees and expenses,
subject to the discretion of the Committee.
RSU awards will be treated in accordance with the relevant plan rules and the terms and conditions of the award
agreement. The Committee would consider whether outstanding and unvested awards should lapse on leaving or
should, at the Committee’s discretion, be preserved. If awards are preserved, they would continue until the vesting
date or be accelerated, and they would be pro-rated based on service over the period or vest in full.
Remuneration illustrations
The chart below gives an indication of what could be received by an Executive Director in the first year of
implementation after the Remuneration Policy is approved at the 2021 AGM. The bar chart shows: (1) the minimum
remuneration receivable; (2) the remuneration receivable for performance in line with the Company’s expectations;
(3) the maximum remuneration receivable, each as a percentage of the total comprised by each of the parts; and (4)
the maximum remuneration receivable with share price appreciation of 50%.
Fixed remuneration, shown in the chart below, is comprised of salary, pension contributions, other benefits and any
cash alternative. Variable remuneration comprises remuneration under the annual bonus plan, the LTIP and the co-
investment plan. Future remuneration will be determined based on profitability and performance as described in the
proposed Remuneration Policy.
Marco Sala’s minimum compensation includes annual base salary plus estimated foreign currency fluctuations and
tax equalization and pension and benefits that approximate the value in the 2020 single figure table plus an
additional $1 million related to his housing allowance paid one time every three years and is payable in 2021.
Max Chiara’s minimum compensation is estimated based on his annual base salary plus his pension and benefits
included in the 2020 single figure table.
Both Marco Sala’s and Max Chiara’s target annual bonus amounts are based on their applicable annual bonus
target amounts, 150% and 87.5%, respectively, of annual base salary. Maximum annual bonus amounts reflect
target annual bonus multiplied by the current annual bonus plan maximum payout (200%).
Annual Report and Accounts 2020 Page | 74
$ in MillionsCEO100%23%18%14%10%16%12%40%46%34%26%20%15%25%Fixed PayAnnual BonusPSUCo-Investment AwardShare Price Appreciation$3.5Minimum$14.9Target$19.1Maximum$25.4Maximumwith 50%SharePriceGrowth0%25%50%75%100%$ in MillionsCFO100%23%16%12%11%16%12%66%67%50%25%Fixed PayAnnual BonusPSUShare Price Appreciation$1.4Minimum$6.1Target$8.6Maximum$11.5Maximumwith 50%SharePriceAppreciation0%25%50%75%100%
Typically, the Company grants one PSU award annually; however, in 2021 the Company expects to grant two
performance-based awards under the LTIP, one with a two-year performance period (2021 - 2022) and one with a
three-year performance period (2021 - 2023). The target PSU award values take into account the extraordinary
circumstance of awarding two cycles in one year and are within the maximum program limits indicated in the
proposed Remuneration Policy. The maximums reflects their respective target PSU multiplied by the maximum
payout under the LTIP, 145%.
Marco Sala’s co-investment award is granted once every three years and is expected to be granted in 2021. The
value approximates 172,500 performance-based options multiplied by a $16.94 share price divided by three; plus
172,500 PSUs multiplied by a $16.94 share price. The estimated number of performance-based options and PSUs
awarded is consistent with the options and shares awarded under the 2018 co-investment plan. The estimated
share price is based on the Company’s December 31, 2020 closing share price.
Marco Sala’s share price appreciation reflects the maximum PSU value plus the co-investment award multiplied by
50%. Max Chiara’s share price appreciation reflects a 50% increase to his maximum PSU value.
Approval
This Directors’ Remuneration Report, including both the Remuneration Report and the Remuneration Policy, has
been approved by the Directors on March 11, 2021 and signed on its behalf on March 16, 2021.
Signed on behalf of the Directors by:
Gianmario Tondato Da Ruos
Chairperson of the Compensation Committee
Annual Report and Accounts 2020 Page | 75
3. DIRECTORS’ REPORT
The Directors present their report and the audited financial statements for the Parent and the Company for the period
from January 1, 2020 to December 31, 2020.
The Strategic Report sets out those matters required to be disclosed in the Directors’ Report which are considered to
be of strategic importance:
Likely future developments of the Company (see “BUSINESS MODEL” and “STRATEGY”)
Research and development (see “RESEARCH AND DEVELOPMENT (R&D)”)
Employee: Inclusion and diversity (see “CORPORATE SOCIAL RESPONSIBILITY”)
Employee: Communication and Engagement (see “CORPORATE SOCIAL RESPONSIBILITY”)
Engagement with suppliers, customers and others (see “SECTION 172 STATEMENT”)
•
•
•
•
•
• Greenhouse gas emissions and energy consumption (see “CORPORATE SOCIAL RESPONSIBILITY”)
The Directors’ Report should be read in conjunction with the Strategic Report, the Directors’ Remuneration Report
and other sections of this Annual Report and Accounts, all of which are incorporated into this Directors’ Report by
reference.
General information
The Parent is a public company limited by shares,
incorporated in the United Kingdom and is registered
in England and Wales with registered number
09127533. The address of the Parent's registered
office is 2nd Floor Marble Arch House, 66 Seymour
Street, London, England, W1H 5BT.
Dividends
There are no recommended dividend payments for
approval by shareholders for the period January 1,
2020 to December 31, 2020.
The Company paid dividends of $40.9 million to
shareholders and $136.4 million to non-controlling
shareholders for the year ended December 31, 2020.
reporting of these contributions and such contributions
are permissible under the relevant countries' laws.
It is the Company's policy not to make political
donations or incur political expenditure outside the
U.S. or Canada.
Other than as set forth above, neither the Parent nor
any of its subsidiaries for the year ended December
31, 2020:
• Made any donations to a registered political
party or other political or any independent
election candidate or organization
in or
outside the E.U.; or
Incurred any political expenditure in or outside
the E.U.
•
Related party transactions
Internal controls are in place to ensure that any
related party transactions are carried out on an arm’s
length basis and are disclosed
financial
statements. Accordingly, related party transactions are
set out in Note 25, Related Party Transactions to the
Consolidated Financial Statements and form part of
this Directors’ Report.
the
in
Political donations and political
expenditure
During
the year ended December 31, 2020
subsidiaries of the Parent made various forms of
(where permissible),
contributions
charitable
dues,
membership
sponsorships) to entities in the U.S. that have political,
charitable, social welfare, trade and business sector
affiliations and missions. Some of these organizations
and entities have affiliations with government officials.
These contributions totaled $1.7 million in the U.S.
The Company has fully complied with jurisdictional
(i.e. political
donations,
Financial risk management objectives and
policies
The Company's activities expose it to a variety of
market risks including interest rate risk and foreign
currency exchange rate risk. The Company's overall
the
strategy
risk management
unpredictability of financial markets and seeks to
minimize potential adverse effects on its performance
through ongoing operational and finance activities.
The Company monitors and manages its exposure to
such risks both centrally and at the local level, as
appropriate, as part of its overall risk management
program with the objective of seeking to reduce the
potential adverse effects of such risks on its results of
operations and financial position.
focuses
on
Depending upon the risk assessment, the Company
instruments,
uses selected derivative hedging
including principally interest rate swaps and foreign
currency
the purposes of
managing interest rate risk and currency risks arising
from its operations and sources of financing. The
forward contracts,
for
Annual Report and Accounts 2020 Page | 76
Company's policy is not to enter into such contracts
for speculative purposes.
to
financial
foreign currency exchange
risk
relating
Further disclosures
management objectives and policies, as well as
disclosures relating to exposure to interest rate risk
and
risk, are
described in Note 10, Financial Risk Management to
the Consolidated Financial Statements. The
Company's accounting policies regarding derivatives
and hedging are described in Note 2, Summary of
Significant Accounting Policies to the Consolidated
Financial Statements.
rate
Branches
As the Company is a global business, there are
activities operated through many jurisdictions. In
2020, the Company was active in over 100 countries
and had 29 branches.
Share capital
The issued share capital of the Parent as of March 11,
2021 is $20,485,861 and £50,000, consisting of
204,856,564 ordinary shares of $0.10 each,
204,856,564 special voting shares of $0.000001 each,
and 50,000 sterling non-voting shares of £1 each.
The special voting shares carry 0.9995 votes each
(compared to 1 vote for each ordinary share) and are
held at all times by a nominee appointed by the
Parent. Shareholders who maintain their ownership of
ordinary shares continuously for at least three years
are eligible to elect to direct the voting rights in
respect of one special voting share per ordinary share
held for such period, provided that such shareholders
meet certain conditions set out in the Parent's Loyalty
Plan (details of which are available at www.IGT.com).
Once those conditions have been met and that eligible
shareholder has successfully elected to participate in
the Loyalty Plan, that shareholder will have the voting
power of the equivalent of 1.9995 votes for each
ordinary share held. The special voting shares and
ordinary shares will be treated as if they are a single
class of shares and not divided into separate classes
for voting purposes. Further details of the special
voting shares and the rights attaching to them are set
out in the Parent's articles of association.
to a
The Directors were authorized, at the 2020 AGM, to
allot ordinary shares in the capital of the Company up
to a maximum nominal amount of $6,824,827.70 and
up
further maximum nominal amount of
$6,824,827.70 where the allotment is in connection
with an offer by way of a rights issue, in each case
representing approximately one third of the nominal
value of the ordinary shares in issue on May 14, 2020,
for a period expiring at the end of the next AGM (or if
sooner, September 24, 2021). The Directors are
requesting a new authority for the Parent to allot
ordinary shares in the capital of the Company at the
forthcoming AGM
Investment
Association Share Capital Management Guidelines.
line with
the
in
The Parent currently has the authority to purchase a
maximum of 10% of the aggregate issued ordinary
shares in the Parent as of May 14, 2020. This
authority will expire at the end of the next AGM (or if
sooner, on December 24, 2021). The Parent did not
purchase any of its own share capital during the year
ended December 31, 2020. The Directors are
requesting a new authority at the forthcoming AGM in
line with the Investment Association Share Capital
Management Guidelines.
Directors and their interests
The Directors of the Parent for the year ended
December 31, 2020 are set out below:
(Chairperson),
James McCann
(Chief Executive Officer), Lorenzo
Marco Sala
Pellicioli
(Vice
Chairperson and Lead Independent Director), Beatrice
Bassey, Max Chiara (Executive Vice President and
Chief Financial Officer), Alberto Dessy, Marco Drago,
Heather McGregor, Samantha Ravich, Vincent
Sadusky and Gianmario Tondato Da Ruos.
Paget Alves was previously a director of the Parent
whose term of office ended on June 25, 2020.
As stated in the Company’s Corporate Governance
Guidelines, directors should be selected such that the
Board represents a diversity of background and
experience. Three of our eleven directors are women.
The Directors have interests in the Parent’s ordinary
shares, namely share based plans, detailed in the
Directors’ Remuneration Report set out in Section 2 of
this Annual Report and Accounts.
Directors’ indemnities
In accordance with the Parent's articles of association
and to the extent permitted by law, the Directors and
officers of the Company shall be indemnified out of
the assets of the Parent in respect of liability incurred
as a result of their office.
In addition, the Parent maintained a directors’ and
officers’ liability insurance policy throughout the year
to cover against certain legal liabilities and costs for
Annual Report and Accounts 2020 Page | 77
Director Tenure470-4 years5 years andover claims incurred in respect of any act or omission in the
execution of their duties.
Board practices and governance
The Directors are responsible for the management of
the Company’s business, for which purpose they may
exercise all of the powers of the Parent whether
relating to the management of the business or not.
The Board is comprised of (i) seven independent
directors
the Vice
including James F. McCann,
Chairperson of the Board and Lead Independent
Director, and (ii) four non-independent directors -
Marco Sala (CEO), Max Chiara (CFO), Lorenzo
Pellicioli (the Board’s Chairperson), and Marco Drago.
Messrs. Pellicioli and Drago are the chief executive
officer and chairperson of the board, respectively, of
De Agostini S.p.A.,
controlling
shareholder.
the Parent's
The Board has the following committees: (1) an Audit
Committee,
(2) a Nominating and Corporate
Governance Committee, and (3) a Compensation
Committee. The membership of each committee
meets the independence and eligibility requirements
of the New York Stock Exchange and applicable law.
The members of each committee are appointed by
and serve at the discretion of the Board until such
member’s successor is duly elected and qualified or
until such member’s earlier resignation or removal.
The chairperson of each committee is appointed by
the Board.
Audit Committee
The Audit Committee is responsible for, among other
things, assisting the Board's oversight of:
integrity of
the Parent’s
•
•
•
•
•
financial
legal and
The
statements;
The Parent’s compliance with
regulatory requirements;
The independent registered public accounting
firm’s qualifications and independence;
The performance of the Parent’s internal audit
function and independent registered public
accounting firm; and
The Parent’s internal controls over financial
reporting and systems of disclosure controls
and procedures.
The Audit Committee pre-approves engagements of
registered public
independent
the Company’s
before
approval
engaging
accounting firm to audit the Company’s consolidated
financial statements. The Audit Committee has a
policy requiring management to obtain the Audit
the
Committee’s
Company’s independent registered public accounting
firm to provide any other audit or permitted non-audit
services to the Company. Pursuant to this policy,
which is designed to ensure that such engagements
do not impair the independence of the Company’s
independent registered public accounting firm, the
Audit Committee
if
appropriate, specific audit and non-audit services in
the categories audit services, tax services, audit-
related services, and any other services that may be
performed by the Company’s independent registered
public accounting firm.
reviews and pre-approves,
the
financial
As of March 11, 2021, the Audit Committee consists of
Vincent L. Sadusky (chairperson), Alberto Dessy, and
Heather J. McGregor. Each member of the Audit
Committee must meet
literacy
requirement, as such qualification is interpreted by the
Board in its business judgment, or must become
financially literate within a reasonable period of time
after his or her appointment to the Audit Committee. In
addition, at least one member of the Audit Committee
must
financial
management expertise, as the Board interprets such
qualification in its business judgment.
accounting
related
have
or
Compensation Committee
The purpose of the Compensation Committee is to
discharge the responsibilities of the Board relating to
the Parent’s executives and
compensation of
directors.
is
responsible for, among other things:
The Compensation Committee
•
•
•
•
on
goals
approving
and
relevant
advising management
recommendations
Reviewing management
and
broad
compensation policies such as salary ranges,
deferred compensation, incentive programs,
pension, and executive stock plans;
and
Reviewing
the
CEO’s
to
objectives
compensation,
the CEO’s
evaluating
performance in light of those goals and
objectives,
the CEO’s
compensation level based on this evaluation;
Reviewing
compensation; and
Creating, modifying, amending, terminating,
and monitoring compliance with share
ownership guidelines
for executives and
directors.
recommending
director
setting
and
and
As of March 11, 2021, the Compensation Committee
consists of Gianmario Tondato da Ruos (chairperson),
Alberto Dessy, and Samantha Ravich.
Annual Report and Accounts 2020 Page | 78
Director Independence74IndependentNon-Indepedent Nominating and Corporate Governance
Committee
The Nominating
Committee is responsible for, among other things:
and Corporate Governance
•
•
•
Recommending to the Board, consistent with
criteria approved by the Board, the names of
qualified persons to be nominated for election or
re-election as directors and the membership
and chairperson of each Board committee;
Reviewing and reassessing from time to time
the Company’s Corporate Governance
Guidelines and recommending any changes to
the Board;
the
Determining,
independence of each director under
the
independence requirements of the NYSE and
any other regulatory requirements and report
such findings to the Board; and
annually,
least
at
and
program
to diversity and
• Overseeing management's corporate social
due
responsibility
consideration
inclusion,
sustainability, environmental and social matters
that
the
environment or the communities in which the
Company operates.
the Company,
impact
giving
could
As of March 11, 2021, the Nominating and Corporate
Governance Committee consists of James McCann
(chairperson), Beatrice Bassey and Samantha Ravich.
The charters for each of the Audit Committee, the
Compensation Committee and the Nominating and
Corporate Governance Committee are available at
www.igt.com.
Board and committee meetings and
attendance
There are at least five scheduled meetings for the
Board and each committee each year (six for the Audit
Committee), and additional meetings are called as
necessary. The attendance at Board and committee
meetings during 2020 is shown below, expressed as
the number of meetings attended out of the number
that each Director was eligible to attend. Where a
Director is unable to attend a Board or committee
meeting, copies of all papers are still received in
advance. The Chairpersons of the Board and each
committee, as well as the Lead Independent Director,
are available
individual consultation between
meetings and to provide briefing on any relevant
outcomes from a Board or committee meeting should
a Director be unable to attend. Executive sessions for
all Directors or committee members (as the case may
be) with no management in attendance, as well as
Independent Director sessions, are regularly held at
the end of each meeting to, among other things,
summarize the outcome of the meeting and plan
actions for the next one, which can be easily shared
with absent participants.
for
Board and committee attendance in 2020
Number of meetings held
Board
9
Audit
Committee
11
Compensation
Committee
6
Nominating and
Corporate
Governance
Committee
6
Directors
Beatrice Bassey1
Max Chiara2
Alberto Dessy3
Marco Drago
James McCann
Heather McGregor
Lorenzo Pellicioli
Samantha Ravich4
Vincent Sadusky
Marco Sala
Gianmario Tondato Da Ruos
Former Directors who served for part of that year
Paget Alves5
6/7
7/7
9/9
7/9
9/9
9/9
9/9
9/9
9/9
9/9
9/9
5/6
-
-
5/5
-
-
11/11
-
-
11/11
-
-
6/6
-
-
6/6
-
-
-
-
2/2
-
-
6/6
4/4
3/3
-
3/3
-
6/6
-
-
6/6
-
-
-
-
(1) Beatrice Bassey joined the Board and the Nominating and Corporate Governance Committee on March 20, 2020 and June 25, 2020, respectively.
(2) Max Chiara joined the Board on April 14, 2020.
(3) Alberto Dessy joined the Audit Committee and stepped down from the Nominating and Corporate Governance Committee on 25 June 2020.
(4) Samantha Ravich was appointed to the Compensation Committee on June 25, 2020.
(5) Paget Alves did not stand for re-election to the Board at the 2020 AGM and his term ended on June 25, 2020.
Annual Report and Accounts 2020 Page | 79
Board and committee evaluation
The effectiveness of the Board is vital to the success
of the Company. The Board undertakes a rigorous
self-evaluation process each year to assess how it, its
committees and each of the individual directors is
performing. The evaluation is undertaken by way of an
internal questionnaire, supported by discussions with
and Corporate Governance
the Nominating
Committee, the Independent Directors and the full
Board. Any
the
questionnaire or subsequent discussions are followed
up on by the Board or relevant committee.
items of note
that result
from
The Board and committee self-evaluation for 2020
revealed that the Board is generally satisfied with
the size and
individual director performance,
composition of the Board, Board’s culture and ethics,
the number and type of committees to assist with
performance of the Board’s obligations, and the
amount of information noting also improvement as
regards to timing of delivery of Board materials, and
access to management for its decision-making. The
Directors are also satisfied that the Board received
from management adequate information and early-
warning signals of issues that may adversely affect
key outcomes, targets or financial performance of the
Company as a result of the COVID-19 pandemic,
noting a general though still ongoing improvement
from
in crisis
management. More than half of the Board considered
that challenges arising from the pandemic remain
amongst the Board’s top priorities for the upcoming
year.
the Board’s
last year
role
in
Whilst there is general but not absolute satisfaction
surrounding director succession, Directors have
expressed the need to improve Board and key
executives succession and selection process, and to
improve the CEO’s performance evaluation process.
The Directors are generally satisfied with the annual
evaluation process and
raised
following the annual directors’ evaluation conducted in
2019 were adequately addressed.
issues
that
the
Statement of corporate governance
arrangements
The Parent is a U.K. public limited company that has
its ordinary shares listed on the New York Stock
Exchange
("NYSE"). The Parent's articles of
association provide that, for as long as its ordinary
shares are listed on the NYSE, the Parent shall
comply with all NYSE corporate governance
standards set forth in Section 3 of the NYSE Listed
Company Manual applicable
to non-controlled
domestic U.S. issuers, regardless of whether the
Parent is a foreign private issuer.
reflect
this end,
To
the Corporate
the Board adopted
Governance Guidelines (a copy of which is available
at www.IGT.com) which
the Board’s
commitment to monitor the effectiveness of policy and
decision making both at the Board and management
level, with a view to enhancing shareholder value over
the long-term. In this regard, the Board periodically
reviews its size and composition ensuring that a
majority of the Directors shall be independent, and the
Nominating and Corporate Governance Committee
reviewed each Director’s character and integrity prior
to appointment and in connection with re-nomination
the Corporate Governance
decisions. While
Guidelines do not cover each and every issue that
may surface, the Board is of the view that the
Guidelines set the proper tone for the operation of the
Board and will assist the Board in fulfilling its
obligations to the diverse group of owners and other
stakeholders of the Company. The Nominating and
Corporate Governance Committee
the
Guidelines from time to time to ensure that they
remain suitable for the needs of the Company and in
accordance with applicable law and regulations.
reviews
The Parent also voluntarily applies a selected number
of provisions of the U.K. Corporate Governance Code
which (i) are not inconsistent with the above said
NYSE corporate governance standards, and (ii) would
generally be expected by the market to be voluntarily
applied by a company like the Parent. For example, all
Directors (other than the CEO whose appointment as
a director of the Parent is normally renewed for a
three-year term) are subject to annual re-election by
shareholders, and each committee of the Board is
composed of independent non-executive directors.
Going concern
The current activities of the Company and those
factors likely to affect its future development, together
with a description of
financial position, are
its
described in the Strategic Report. Principal risks and
uncertainties affecting the Company are described in
the Principal Risks and Uncertainties section of the
Strategic Report. Critical accounting estimates
affecting the carrying values of assets and liabilities of
the Company are discussed in Note 2, Summary of
Significant Accounting Policies to the Consolidated
Financial Statements.
Having reviewed management's forecasted operating
results, forecasted cash flows, forecasted net debt,
and forecasted funds available on the Revolving
Credit Facilities, the Directors have a reasonable
the Company has adequate
expectation
resources to continue in operational existence for the
foreseeable future and therefore will be well placed to
manage its business risks successfully.
that
Annual Report and Accounts 2020 Page | 80
explain the Parent's and the Company’s transactions
and disclose with reasonable accuracy the financial
position of the Parent and the Company at any time
financial
to ensure
and enable
statements comply with the Act.
them
that
the
responsible
The Directors are also
the
maintenance and integrity of the Parent’s website.
Legislation in the U.K. governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
for
The auditor and disclosure of information
to the auditor
In accordance with section 418 of the Act, each of the
Directors confirms that:
•
•
information of which
So far as such Director is aware, there is no
relevant audit
the
Company’s auditor is unaware; and
Such Director has taken all the steps that he
or she ought to have taken as a director in
order to make him or her aware of any
relevant audit information, and to establish
that the Company’s auditor is aware of that
information.
Independent auditor
The auditor, PricewaterhouseCoopers LLP, has
indicated its willingness to continue in office and a
resolution concerning
its re-appointment will be
proposed at the forthcoming AGM. There are no
significant post-balance sheet events.
Approval
This Directors’ Report has been approved by the
Directors on March 11, 2021 and signed on its behalf
on March 16, 2021.
Signed on behalf of the Directors by:
Marco Sala
Chief Executive Officer
Accordingly, the Directors consider it appropriate to
the going concern basis of
continue
accounting
financial statements
contained in this Annual Report and Accounts.
in preparing
to adopt
the
Subsequent events
There are no important events affecting the Company
which have occurred since December 31, 2020.
Statement of Directors’ responsibilities
the
for preparing
The Directors are responsible
Strategic Report, Directors’ Report, the Directors'
Remuneration Report and the financial statements in
accordance with applicable law and regulations.
(the "Act") and
in conformity with
The Companies Act 2006
its
associated regulations require directors to prepare
financial statements for each financial year. Under the
Act, the Directors have prepared the consolidated
financial statements in accordance with international
accounting standards
the
requirements of the Companies Act 2006 and the
Parent financial statements in accordance with the
U.K. Generally Accepted Accounting Practice (U.K.
Accounting Standards, comprising FRS 101 “Reduced
Disclosure Framework”, and applicable law). Under
the Act, the Directors must not approve the financial
statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Parent
and the Company and of the profit or loss of the
Parent and the Company for that period. In preparing
these financial statements, the Directors are required
to:
•
•
applicable
Select suitable accounting policies and then
apply them consistently;
international
State whether
accounting standards in conformity with the
requirements of the Companies Act 2006
have been
the consolidated
financial statements and U.K. Accounting
Standards, comprising FRS 101, has been
followed for the Parent financial statements,
subject to any material departures disclosed
and explained in the financial statements;
• Make judgments and accounting estimates
followed
for
•
that are reasonable and prudent; and
Prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the Parent and the Company
will continue in business.
The Directors are also responsible for safeguarding
the assets of the Parent and the Company and hence
for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
Annual Report and Accounts 2020 Page | 81
4. INDEPENDENT AUDITORS’ REPORT
Independent auditors’ report to the
members of International Game Technology
PLC
Report on the audit of the financial statements
Opinion
In our opinion:
•
•
•
•
International Game Technology PLC’s group financial statements and parent financial statements (the “financial statements”)
give a true and fair view of the state of the group’s and of the parent’s affairs as at 31 December 2020 and of the group’s loss
and cash flows for the year then ended;
the group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
the parent financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and
applicable law); and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which
comprise: the Consolidated Balance Sheet as at 31 December 2020; the Parent Balance Sheet as at 31 December 2020; the
Consolidated Statement of Operations, the Consolidated Statement of Comprehensive Loss, the Consolidated Statement of
Cash Flows, the Consolidated Statement of Shareholders' Equity, and the Parent Statement of Shareholders' Equity for the year
then ended; and the notes to the financial statements, which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Annual Report and Accounts 2020 Page | 82
Our audit approach
Overview
Audit scope
• We conducted full scope audit work over three components in which the group has significant operations (Rome, Italy and
Reno, Nevada and Providence, Rhode Island, USA) and a full scope audit of the parent.
In addition, we performed procedures on specific balances at six non-significant components.
•
• During the year, the group engagement team had virtual meetings with the significant components in Italy and the USA.
Key audit matters
•
•
Identifying and evaluating the contractual terms and conditions of revenue transactions (group)
Testing management’s goodwill impairment assessments prior to the reorganisation of the group for the North America
Gaming and Interactive (‘NAGI’) and International cash generating units and the Global Gaming cash generating unit as at 31
December 2020 (group)
• Evaluating the allocation of goodwill to discontinued operations (group)
• Assessing management’s consideration of the impact of COVID-19 (group and parent)
Materiality
• Overall group materiality: $30 million based on approximately 0.97% of total revenue (2019: $35 million based on
approximately 2.1% of adjusted EBITDA).
• Overall parent materiality: $78 million based on approximately 0.87% of total liabilities (2019: $70 million based on
approximately 0.8% of total liabilities).
• Performance materiality: $22.5 million (group) and $58.5 million (parent).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements.
Capability of the audit in detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined in the Auditors’ responsibilities for the audit of the financial statements section, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and
regulations related to gaming laws, tax regulations and bribery and anti-corruption legislation, and we considered the extent to
which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations
that have a direct impact on the preparation of the financial statements such as the Companies Act 2006. We evaluated
management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override
of controls), and determined that the principal risks were related to posting inappropriate journal entries to manipulate financial
results and potential management bias in the selection and application of significant accounting judgements and estimates. The
group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit
procedures in response to such risks in their work. Audit procedures performed by the group engagement team and/or
component auditors included:
• Evaluation and testing of the operating effectiveness of management’s controls designed to prevent and detect irregularities.
• Discussions with the Vice President of Internal Audit, the Senior Vice President and Chief Accounting Officer, the Vice
President and Corporate Controller, the Senior Vice President of Chief Compliance and Risk Management Officer and
General Counsel, including consideration of known or suspected instances of non-compliance with laws and regulations and
fraud.
• Assessment of matters reported on the group’s whistleblowing helpline and the results of management’s investigation of such
matters.
• Challenging assumptions made by management in the selection and application of significant accounting judgments and
estimates, in particular in relation to testing management’s goodwill impairment assessments prior to the reorganisation of the
group for the North America Gaming and Interactive (‘NAGI’) and International cash generating units and the Global Gaming
cash generating unit as at 31 December 2020 and evaluating the allocation of goodwill to discontinued operations (see
related key audit matters below).
Identifying and testing the validity of journal entries, in particular any journal entries posted with unusual account
combinations, journals posted by senior management and consolidation journals.
•
Annual Report and Accounts 2020 Page | 83
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements.
Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through
collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or
not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we
make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Evaluating the allocation of goodwill to discontinued operations is a new key audit matter this year. Otherwise, the key audit
matters below are consistent with last year.
Key audit matter
Identifying and evaluating the contractual terms and
conditions of revenue transactions (group)
As described in Note 4 to the consolidated financial
statements, the group generated service and product
revenues of $2,640 million and $476 million, respectively,
for the year ended 31 December 2020.
The group’s revenue transactions include contracts with
customers that consist of a combination of services and
products that are accounted for as one or more distinct
performance obligations. Management applies judgment in
identifying and evaluating contractual terms and conditions
that impact the identification of performance obligations and
the associated pattern of revenue recognition.
We considered this a key audit matter given the level of
complexity and judgment involved in understanding the
revenue affecting terms and conditions in the group’s
revenue contracts. Under IFRS 15, Revenue from Contracts
with Customers, the identification of different performance
obligations, and the allocation of arrangement consideration
to each of those obligations in a contract, can require
significant management judgment.
How our audit addressed the key audit matter
Our procedures included the following:
•
•
•
•
Assessing whether the revenue recognised on these
contracts was in line with IFRS 15 by performing a
combination of controls testing and substantive
procedures.
Assessing the controls in place over revenue
recognition, including controls related to the identification
and evaluation of contractual terms and conditions
impacting the identification of performance obligations
and the pattern of revenue recognition.
Testing the completeness and accuracy of the
contractual terms and conditions identified in contracts
with customers.
Testing a sample of revenue recognised on contracts
and orders by validation against source documentation
and assessing compliance with the provisions of IFRS
15.
Based on the procedures performed, we noted no material issues
from our work.
Annual Report and Accounts 2020 Page | 84
Key audit matter
Testing management’s goodwill impairment assessments
prior to the reorganisation of the group for the North
America Gaming and Interactive (‘NAGI’) and International
cash generating units and the Global Gaming cash
generating unit as at 31 December 2020 (group)
As described in Notes 2 and 14 to the consolidated financial
statements, the group’s consolidated goodwill balance was
$4,827 million as of 31 December 2020. During the first
quarter of 2020, management determined there was an
interim goodwill impairment triggering event caused by
COVID-19. As a result of the identified triggering event, the
group recorded a $296 million impairment loss, of which
$193 million and $103 million was recorded within the
former International and North America Gaming and
Interactive (“NAGI”) cash generating units, respectively.
From 1 July 2020, the group adopted a new organization
structure. This resulted in a change of the group's cash
generating units and management has allocated goodwill to
the new cash generating units using a relative fair market
value approach. The goodwill allocated to the Global
Gaming and Global Lottery cash generating units was
$2,169 million and $3,072 million, respectively.
We considered this a key audit matter given the sensitivity
of the impairment tests for the NAGI and International cash
generating units and the Global Gaming cash generating
unit to changes in estimates that were subject to a high
degree of estimation uncertainty.
Evaluating the allocation of goodwill to discontinued
operations (group)
As described in Notes 2 and 3 to the consolidated financial
statements, during the fourth quarter of 2020, the group
announced that its wholly-owned subsidiary, Lottomatica
Holding S.r.l, had entered into a definitive agreement to sell
one hundred percent of the share capital of Lottomatica
Videolot Rete S.p.A. and Lottomatica Scommesse S.r.l., the
members of the group which conduct its Italian business-to-
consumer (“B2C”) gaming machine, sports betting, and
digital gaming businesses, to Gamenet Group S.p.A.
Management determined that the sale met the criteria to be
reported as a discontinued operation and, as a result, the
Italian Gaming B2C historical financial results are reflected
in the group's consolidated financial statements as a
discontinued operation, and assets and liabilities were
retrospectively reclassified as assets and liabilities held for
sale for all periods presented.
The group’s assets held for sale were $820 million as of 31
December 2020, including $511 million of goodwill allocated
to discontinued operations using a relative fair value
approach. Prior to the allocation to discontinued operations,
this goodwill was included within the Global Gaming cash
generating unit.
We considered this a key audit matter given the sensitivity
of the goodwill allocation to changes in estimates that were
subject to a high degree of estimation uncertainty.
How our audit addressed the key audit matter
Our procedures included the following:
•
•
•
•
•
Evaluating the appropriateness of management’s
identification of the group’s cash generating units.
Assessing the business processes and controls related
to the impairment assessments of goodwill.
Assessing the suitability of the impairment model and
understanding management's process and judgements
utilised for developing estimates and assumptions.
Performing a retrospective review of the prior period
estimates by comparing to actual results in the current
period and agreeing the current year cash flow
assumptions to current year actual results.
Using PwC valuation specialists to review significant
assumptions, which included forecast revenues, forecast
operating profits, terminal growth rates and weighted-
average costs of capital, and the valuation report from
management’s expert.
Obtaining corroborating evidence to support significant
assumptions and changes in the cash flow projections.
Considering any contrary evidence to the assumptions
used.
Performing a sensitivity analysis based on reasonably
possible outcomes.
Checking the mathematical accuracy of the calculations.
Based on the procedures performed, we noted no material issues
from our work.
•
•
•
•
Our procedures included the following:
•
•
•
Assessing the business processes and controls related
to management’s goodwill allocation to discontinued
operations, including controls over the valuation of the
group’s Global Gaming cash generating unit.
Testing management’s process for developing an
estimate of the relative fair values of the group’s cash
generating units.
Using PwC valuation specialists to review significant
assumptions, which included forecast revenues, forecast
operating profits, terminal growth rates and weighted-
average costs of capital, and the valuation report from
management’s expert.
Obtaining corroborating evidence to support significant
assumptions and changes in the cash flow projections.
Considering any contrary evidence to the assumptions
used.
Performing a sensitivity analysis based on reasonably
possible outcomes.
Checking the mathematical accuracy of the calculations.
Based on the procedures performed, we noted no material issues
from our work.
•
•
•
•
Annual Report and Accounts 2020 Page | 85
How our audit addressed the key audit matter
Our procedures included the following:
•
•
•
•
•
•
Reviewing management’s assessment of the impact of
the COVID-19 pandemic.
Considering the adequacy of the disclosures in the
Annual Report, particularly in the Strategic Report.
Assessing the risk of impairment as documented in the
key audit matter entitled “Testing management’s goodwill
impairment assessments prior to the reorganisation of
the group for the North America Gaming and Interactive
(‘NAGI’) and International cash generating units and the
Global Gaming cash generating unit as at 31 December
2020 (group)”.
Testing the recoverability of the parent’s investments in
subsidiaries.
Performing procedures to assess any control
implications arising from the change in management’s
ways of working.
Increasing the oversight of our component teams, using
video conferencing and remote workpaper reviews to
satisfy ourselves as to the sufficiency of audit work
performed.
Based on the procedures performed, we noted no material issues
from our work.
Key audit matter
Assessing management’s consideration of the impact of
COVID-19 (group and parent)
The directors have considered the impact of COVID-19 on
the group’s operations and mitigations to the risks identified.
As part of the mitigation process, management has obtained
a waiver on all debt covenants tied to adjusted EBITDA
metrics through to the third quarter of fiscal 2021 (as
disclosed in note 17 of the consolidated financial
statements).
As with regards to the financial statements, we consider the
key estimate impacted by COVID-19 to be the group’s
goodwill impairment assessment, as discussed in the key
audit matter entitled ‘Testing management’s goodwill
impairment assessments prior to the reorganisation of the
group for the North America Gaming and Interactive
(‘NAGI’) and International cash generating units and the
Global Gaming cash generating unit as at 31 December
2020’.
As described in note 3 of the parent financial statements,
the parent’s investment in subsidiaries is $4,786 million as
of 31 December 2020. Any adverse performance by the
group companies due to Covid-19 could impact the
recoverability of this investment.
In addition, management’s way of working, including the
operation of controls, has been impacted by COVID-19 as a
result of a large number of employees working remotely and
using technology enabled working practices. For example,
this has meant virtual review meetings and electronic review
processes (in place of hardcopy reviews).
As a result of the adverse impact on the group and the
parent, we have determined management's consideration of
COVID-19 to be a key audit matter.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the group and the parent, the accounting processes and controls, and
the industry in which they operate.
The group has its corporate headquarters in London, England, and operating headquarters in Rome, Italy and Reno, Nevada
and Providence, Rhode Island, USA. The worldwide engagement team is aligned to IGT PLC’s geographical organization and
broadly mirrors the group’s management structure.
As the group’s corporate headquarters are based in London, the group engagement team is also based in London and supported
by component teams in Rome, Italy and Boston, Massachusetts, USA.
Where work was performed by teams outside of the UK, we determined the level of independent involvement needed at those
local operations to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our
opinion on the consolidated financial statements as a whole. We issued formal, written instructions to the teams outside the UK
setting out the work to be performed by each of them and maintained regular communication throughout the audit cycle. These
interactions included participating in the planning and clearance meetings with our teams in Rome and Boston, holding regular
video and conference calls, as well as reviewing work papers and assessing matters reported.
We performed certain specified audit procedures across six non-significant components to gain sufficient audit coverage over
certain balances in the consolidated financial statements. The balances covered at each individual component varied based on
their size but consisted of some or all of the following: service revenue, product revenue, cost of services, cost of sales, accounts
receivable, other assets, deferred revenue, accounts payable and systems and equipment.
Annual Report and Accounts 2020 Page | 86
In total, the audit work performed accounted for approximately 89% of consolidated net revenue and approximately 90% of
consolidated total assets. At the group level, we also carried out other risk assessment procedures on the components not
covered by the procedures described above. The group engagement team also performed audit procedures over the
consolidation.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall
materiality
How we
determined it
Rationale for
benchmark
applied
Financial statements - group
$30 million (2019: $35 million).
Financial statements - parent
$78 million (2019: $70 million).
Approximately 0.97% of total revenue
(2019: Approximately 2.1% of earnings before interest,
tax, depreciation and amortisation (EBITDA); adjusted
to remove the impact of impairment losses and foreign
exchange gains and losses).
We consider adjusted EBITDA and revenue to be the
key metrics used by analysts, investors and other key
stakeholders for assessing the group’s performance. In
May 2020, the group obtained a waiver on all debt
covenants tied to adjusted EBITDA through Q3 2021.
As a result, we consider the revenue benchmark to
have more significance for 2020.
Approximately 0.87% of total liabilities
(2019: Approximately 0.8% of total liabilities).
We consider total liabilities to be one of the principal
considerations for the members of International Game
Technology PLC in assessing the parent’s financial
position.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The
range of materiality allocated across components was between $3.5 million and $28.5 million (with $8 million being used for the
parent for the purpose of the group audit). Certain components were audited to a local statutory audit materiality that was also
less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of
our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in
determining sample sizes. Our performance materiality was 75% of overall materiality, amounting to $22.5 million for the group
financial statements and $58.5 million for the parent financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was
appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above $2.5 million
(group audit) (2019: $2.5 million) and $3.5 million (parent audit) (2019: $3.5 million) as well as misstatements below those
amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group's and the parent ’s ability to continue to adopt the going concern basis
of accounting included:
•
•
•
•
•
•
assessing the business processes and controls related to the going concern assessment, including the suitability of the
model used and the selection of estimates and assumptions;
agreeing the underlying cash flow projections to approved forecasts;
evaluating the key assumptions and estimates within the forecasts;
considering liquidity and available financial resources;
assessing whether the stress testing performed appropriately considered the principal risks facing the business;
evaluating the feasibility of mitigating actions identified in the stress testing scenarios; and
Annual Report and Accounts 2020 Page | 87
•
reviewing debt agreements and assessing the group's ability to comply with the financial covenants associated with its
various debt facilities.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group's and the parent’s ability to continue as a going concern for a
period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group's and
the parent 's ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in
this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement,
we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report based on these
responsibilities.
With respect to the Strategic Report and Directors' Report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic Report and Directors' Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and
Directors' Report for the year ended 31 December 2020 is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and parent and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic Report and Directors' Report.
Directors’ Remuneration
In our opinion, the part of the Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of the Directors’ responsibilities, the directors are responsible for the preparation of the
financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The
directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or the parent or to cease operations, or have no realistic alternative but to
do so.
Annual Report and Accounts 2020 Page | 88
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations.
We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit
sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
•
adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received
from branches not visited by us; or
certain disclosures of directors’ remuneration specified by law are not made; or
the company financial statements and the part of the Remuneration Report to be audited are not in agreement with the
accounting records and returns.
•
•
We have no exceptions to report arising from this responsibility.
Gregory Briggs (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Watford
16 March 2021
Annual Report and Accounts 2020 Page | 89
5. FINANCIAL STATEMENTS
INTERNATIONAL GAME TECHNOLOGY PLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet at December 31, 2020 and 2019.....................................................................
Consolidated Statement of Operations for the years ended December 31, 2020 and 2019..........................
Consolidated Statement of Comprehensive Loss for the years ended December 31, 2020 and 2019.........
Consolidated Statement of Cash Flows for the years ended December 31, 2020 and 2019........................
Consolidated Statement of Shareholders' Equity for the years ended December 31, 2020 and 2019..........
Notes to the Consolidated Financial Statements...........................................................................................
91
92
93
94
96
97
Annual Report and Accounts 2020 Page | 90
International Game Technology PLC
Consolidated Balance Sheet
($ thousands)
Notes
2020
2019
December 31,
Assets
Current assets:
Cash and cash equivalents
Restricted cash and cash equivalents
Trade and other receivables, net
Inventories
Other current assets
Assets held for sale
Total current assets
Systems, equipment and other assets related to contracts, net
Property, plant and equipment, net
Right-of-use assets
Goodwill
Intangible assets, net
Other non-current assets
Assets held for sale
Total non-current assets
Total assets
Liabilities and shareholders' equity
Current liabilities:
Accounts payable
Current portion of long-term debt
Short-term borrowings
Other current liabilities
Liabilities held for sale
Total current liabilities
Long-term debt, less current portion
Deferred income taxes
Lease liabilities
Other non-current liabilities
Liabilities held for sale
Total non-current liabilities
Total liabilities
Shareholders’ equity
Share capital
Share premium
Retained deficit
Other reserves
Total IGT PLC’s shareholders’ equity
Non-controlling interests
Total shareholders’ equity
Total liabilities and shareholders’ equity
5
6
7
3
11
11
12
14
15
7
3
17
17
16
3
17
18
12
16
3
20
907,015
127,245
846,128
169,207
479,550
825,797
3,354,942
1,068,121
132,168
304,189
4,826,949
1,572,446
1,740,127
—
9,644,000
12,998,942
1,054,043
392,672
480
1,023,163
248,413
2,718,771
7,869,268
322,780
289,572
573,719
—
9,055,339
11,774,110
654,628
140,004
875,263
161,790
507,510
205,577
2,544,772
1,205,592
146,847
324,358
5,030,027
1,743,954
1,892,049
753,904
11,096,731
13,641,503
978,076
462,155
3,193
920,210
184,124
2,547,758
7,600,169
386,451
304,247
598,736
29,454
8,919,057
11,466,815
20,485
2,870,541
20,443
2,879,625
(2,472,914)
(1,497,003)
279,878
697,990
526,842
1,224,832
12,998,942
231,866
1,634,931
539,757
2,174,688
13,641,503
The accompanying notes are an integral part of these consolidated financial statements.
The consolidated financial statements were approved by the Board of Directors on March 11, 2021 and signed on its behalf on March 16, 2021
by:
Marco Sala
Chief Executive Officer
Company registration number: 09127533
Annual Report and Accounts 2020 Page | 91
International Game Technology PLC
Consolidated Statement of Operations
($ and shares in thousands, except per share amounts)
Service revenue
Product sales
Total revenue
Cost of services
Cost of product sales
Selling, general and administrative
Research and development
Restructuring
Goodwill impairment
Other operating expense
Other operating income
Total operating expenses
Operating (loss) income
Interest expense, net
Foreign exchange (loss) gain, net
Other expense
Other income
Total non-operating expenses
(Loss) income from continuing operations before provision for income taxes
Provision for income taxes
Loss from continuing operations
Income from discontinued operations, net of tax
Net (loss) income
Less: Net income attributable to non-controlling interests from continuing
operations
Less: Net (loss) income attributable to non-controlling interest from discontinued
operations
Net loss attributable to IGT PLC
Net loss from continuing operations attributable to IGT PLC per common
share - basic and diluted
Net loss attributable to IGT PLC per common share - basic and diluted
Weighted-average shares - basic and diluted
Notes
4, 22
4, 22
4, 22
For the year ended December 31,
2020
2019
2,639,585
3,099,216
475,898
930,889
3,115,483
4,030,105
1,629,569
1,773,179
345,478
695,594
190,362
45,045
296,000
4,282
—
557,670
838,880
265,815
24,855
57,000
6,582
(27,694)
3,206,330
3,496,287
(90,847)
533,818
(429,162)
(433,057)
(309,689)
39,911
(120,491)
(116,305)
4,775
38,051
(854,567)
(471,400)
(945,414)
21,733
62,418
131,636
(967,147)
(69,218)
36,084
(931,063)
112,259
43,041
6,373
48,233
(4,760)
(932,676)
4,539
(9,731)
(4.76)
(4.56)
(0.57)
(0.05)
204,725
204,373
13
14
11
22
17
18
18
3
3
24
24
24
The accompanying notes are an integral part of these consolidated financial statements.
Annual Report and Accounts 2020 Page | 92
International Game Technology PLC
Consolidated Statement of Comprehensive Loss
($ thousands)
Net (loss) income
Foreign currency translation adjustments, net of tax
Unrealized loss on hedges, net of tax
Unrealized (loss) gain on other, net of tax
Other comprehensive income (loss), net of tax
Comprehensive (loss) income
Less: Comprehensive income attributable to non-controlling interests
For the year ended December 31,
Notes
2020
2019
20
20
20
20
(931,063)
43,041
108,274
(11,859)
(537)
(270)
(1,451)
3,059
107,467
(10,251)
(823,596)
61,068
32,790
36,866
Comprehensive loss attributable to IGT PLC
(4,076)
(1) All items in other comprehensive income (loss), net of tax will be reclassified subsequently to profit or loss when specific conditions are met,
with the exception of unrealized loss on defined benefit plans of $0.2 million and $1.0 million for the years ended December 31, 2020 and 2019,
respectively, which is included in unrealized gain on other, net of tax
(884,664)
The accompanying notes are an integral part of these consolidated financial statements.
Annual Report and Accounts 2020 Page | 93
International Game Technology PLC
Consolidated Statement of Cash Flows
($ thousands)
Cash flows from operating activities
Net (loss) income
Less: Income from discontinued operations, net of tax
Adjustments to reconcile net (loss) income from continuing operations to net cash provided
by operating activities from continuing operations:
Depreciation
Foreign exchange loss (gain), net
Goodwill impairment
Amortization of upfront license fees
Amortization
Redeemable non-controlling interest
Loss on extinguishment of debt
Debt issuance cost amortization
Gain on sale of assets
Stock-based compensation
Deferred income taxes
Other non-cash costs, net
Changes in operating assets and liabilities, excluding the effects of dispositions and
acquisitions:
Trade and other receivables
Inventories
Accounts payable
Other assets and liabilities
Net cash provided by operating activities from continuing operations
Net cash provided by operating activities from discontinued operations
Net cash provided by operating activities
Cash flows from investing activities
Capital expenditures
Proceeds from sale of assets
Other
Net cash used in investing activities from continuing operations
Net cash used in investing activities from discontinued operations
Net cash used in investing activities
Cash flows from financing activities
Principal payments on long-term debt
Payments in connection with the extinguishment of debt
Debt issuance costs paid
Net payments of short-term borrowings
Net receipts from (payments of) financial liabilities
Proceeds from long-term debt
Dividends paid
Dividends paid - non-controlling interests
Return of capital - non-controlling interests
Capital increase - non-controlling interests
Other
Net cash used in financing activities
Net increase in cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Less: Cash and cash equivalents of discontinued operations
Cash and cash equivalents at the end of the period of continuing operations
For the year ended December 31,
Notes
2020
2019
(931,063)
36,084
43,041
112,259
14
23
423,093
309,689
296,000
212,113
201,694
71,876
38,766
19,175
(80)
(8,315)
(84,119)
(2,410)
73,578
16,628
14,363
53,043
667,947
277,843
945,790
(254,689)
9,251
17,604
(227,834)
(35,284)
(263,118)
(988,379)
(25,000)
(21,584)
(7,135)
67,138
750,000
(40,887)
(136,389)
(32,309)
8,112
(66,292)
(492,725)
189,947
61,188
662,934
914,069
7,054
907,015
455,347
(39,911)
57,000
207,379
219,186
99,362
11,964
22,854
(64,714)
25,270
(61,540)
19,146
(49,267)
84,472
22,818
38,194
978,342
191,898
1,170,240
(377,248)
123,855
11,189
(242,204)
(64,648)
(306,852)
(1,264,647)
(8,689)
(25,930)
(32,067)
(34,324)
1,397,025
(163,503)
(136,655)
(98,788)
1,499
(67,033)
(433,112)
430,276
(18,011)
250,669
662,934
8,306
654,628
Annual Report and Accounts 2020 Page | 94
International Game Technology PLC
Consolidated Statement of Cash Flows
($ thousands)
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest
Income taxes
Non-cash investing and financing activities:
Capital expenditures
The accompanying notes are an integral part of these consolidated financial statements.
For the year ended December 31,
2020
2019
(430,780)
(89,006)
(421,339)
(196,831)
(24,152)
(34,878)
Annual Report and Accounts 2020 Page | 95
International Game Technology PLC
Consolidated Statement of Shareholders’ Equity
($ thousands)
Share
Capital
Share
Premium
Retained
Deficit
Other Reserves
(Note 20)
Total
IGT PLC
Equity
Non-
Controlling
Interests
(Note 21)
Total
Equity
Balance at December 31, 2018
20,421
2,856,487
(1,330,669)
226,211
1,772,450
607,135
2,379,585
Net (loss) income
Other comprehensive income
(loss), net of tax
Total comprehensive (loss)
income
Stock-based compensation
(Note 23)
Capital increase
Tax benefit on stock-based
compensation
Shares issued under stock award
plans
Return of capital
Dividends paid
Other
—
—
—
—
—
—
22
—
—
—
—
—
—
25,270
—
(519)
(1,613)
—
—
—
(9,731)
—
(9,731)
52,772
43,041
—
5,655
5,655
(15,906)
(10,251)
(9,731)
5,655
(4,076)
36,866
32,790
—
—
—
—
—
(163,503)
6,900
—
—
—
—
—
—
—
25,270
—
—
1,499
25,270
1,499
(519)
—
(519)
(1,591)
—
(163,503)
6,900
—
(45,339)
(62,522)
2,118
(1,591)
(45,339)
(226,025)
9,018
Balance at December 31, 2019
20,443
2,879,625
(1,497,003)
231,866
1,634,931
539,757
2,174,688
Net (loss) income
Other comprehensive income, net
of tax
Total comprehensive (loss)
income
Capital increase
Tax benefit on stock-based
compensation
Shares issued under stock award
plans
Stock-based compensation
(Note 23)
Return of capital
Dividends paid
Other
—
—
—
—
—
42
—
—
—
—
—
—
—
—
78
(1,237)
(8,315)
—
—
390
(932,676)
—
(932,676)
1,613
(931,063)
—
48,012
48,012
59,455
107,467
(932,676)
48,012
(884,664)
61,068
(823,596)
—
—
—
—
—
(40,887)
(2,348)
—
—
—
—
—
—
—
—
78
(1,195)
(8,315)
—
(40,887)
(1,958)
8,414
8,414
—
—
—
(22,944)
(59,976)
523
78
(1,195)
(8,315)
(22,944)
(100,863)
(1,435)
Balance at December 31, 2020
20,485
2,870,541
(2,472,914)
279,878
697,990
526,842
1,224,832
The accompanying notes are an integral part of these consolidated financial statements.
Annual Report and Accounts 2020 Page | 96
International Game Technology PLC
Notes to the Consolidated Financial Statements
1. Description of Business
International Game Technology PLC (the “Parent”), together with its consolidated subsidiaries (collectively referred
to as “IGT PLC,” the “Company,” “we,” “our,” or “us”), is a global leader in gaming that delivers entertaining and
responsible gaming experiences for players across all channels and regulated segments, from gaming machines
and lotteries to sports betting and digital. We operate and provide an integrated portfolio of innovative gaming
technology products and services, including: lottery management services, online and instant lottery systems,
gaming systems, instant ticket printing, electronic gaming machines, sports betting, digital gaming, and commercial
services. We have a local presence and relationships with governments and regulators in more than 100 countries
around the world.
We are majority owned by De Agostini S.p.A. (“De Agostini”), a century-old publishing, media, and financial services
company that is incorporated in Italy. Our remaining shares not held by De Agostini are publicly held. De Agostini is
the smallest group to consolidate these financial statements and is majority owned by B&D Holding S.p.A. (“B&D”)
which is incorporated in Italy and the largest group to consolidate these financial statements. B&D is wholly owned
by the Boroli and Drago families.
2. Summary of Significant Accounting Policies
The principal accounting policies adopted are set out below and have been consistently applied to all years
presented, unless otherwise noted.
Basis of Preparation
The accompanying consolidated financial statements and notes of the Company, prepared for statutory purposes,
have been prepared on a going concern basis and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 (“IFRS”).
The consolidated financial statements have been prepared on a historical cost basis unless otherwise stated. The
consolidated financial statements are stated in thousands of U.S. dollars (except share, per share, and employee
headcount data) unless otherwise indicated. We have reclassified certain prior period amounts to align with the
current period presentation. All references to “U.S. dollars,” “U.S. dollar” and “$” refer to the currency of the United
States of America. All references to “euro” and “€” refer to the currency introduced at the start of the third stage of
the European Economic and Monetary Union pursuant to the Treaty on the Functioning of the European Union, as
amended.
During the fourth quarter of fiscal 2020, the Company announced that its wholly-owned subsidiary, Lottomatica, had
entered into a definitive agreement to sell one hundred percent of the share capital of Lottomatica Videolot Rete
S.p.A. and Lottomatica Scommesse S.r.l., the members of the IGT group which conduct its Italian B2C gaming
machine, sports betting, and digital gaming businesses, to Gamenet Group S.p.A The Company’s Italian Gaming
B2C business met the criteria to be reported as a discontinued operation and, as a result, the Italian Gaming B2C
historical financial results are reflected in the Company's consolidated financial statements as a discontinued
operation, and assets and liabilities were retrospectively reclassified as assets and liabilities held for sale for all
periods presented. Refer to Note 3 - Discontinued Operations and Assets Held for Sale for further information.
Going Concern
The Directors have considered the impact of COVID-19 on the Company’s operations (including the effects of any
governmental or regulatory response to the pandemic), and mitigations to these risks. Overall, the impact of these
items would heighten certain risks, such as the execution of the Company’s commercial strategies. The Company is
continuously monitoring, and mitigating where possible, impacts of these risks. Additionally, the Company has a
wide diversity of customers and suppliers across different geographic areas. The Directors believe that, overall, the
Company is well placed to manage its business risks successfully.
The Company’s cash flows generated from operating activities together with cash flows generated from financing
activities have historically been sufficient to meet the Company's liquidity requirements; however, the Company
Annual Report and Accounts 2020 Page | 97
implemented robust business continuity plans with cost reduction and capital spending avoidance initiatives in
anticipation of the impact on liquidity arising from COVID-19.
The Company believes its ability to generate cash from operations to reinvest in its business, primarily due to the
long-term nature of its contracts, is one of its fundamental financial strengths. Combined with funds currently
available and committed borrowing capacity, the Company expects to have sufficient liquidity to meet its financial
obligations and working capital requirements in the ordinary course of business for at least the next 12 months from
the date of issuance of these consolidated financial statements and the ability to maintain compliance with
covenants under our borrowing facilities over the same period. Consequently, the Directors believe that the
Company is well placed to manage its business risks successfully. Accordingly, we continue to adopt the going
concern basis in preparing these consolidated financial statements.
Principles of Consolidation
The consolidated financial statements include the accounts of the Parent and our majority-owned or controlled
subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. Earnings or losses
attributable to non-controlling interests in a subsidiary are included in net (loss) income in the consolidated
statement of operations.
Investments in which we have the ability to exercise significant influence, but do not control, and with respect to
which we are not the primary beneficiary, are accounted for using the equity method of accounting. Equity
investments in which we have no ability to exercise significant influence that do not have a readily determinable fair
value and do not have a Net Asset Value per share are measured at cost, less impairment, which approximates fair
value. Equity method investments are included within other non-current assets on the consolidated balance sheet.
Recasting of Certain Prior Period Information
On July 1, 2020, we adopted a new organizational structure focused on two business segments: Global Lottery and
Global Gaming, along with a streamlined corporate support function. During the third quarter of 2020, our chief
operating decision maker, who is also our Chief Executive Officer, requested changes in the information that he
regularly reviews for purposes of allocating resources and assessing performance. As a result, we report our
financial performance based on our new business segments described in Note 22 – Segment Information. We have
recast our historically presented comparative segment information to conform to the way we internally manage and
monitor segment performance as of the third quarter of 2020. This realignment of our operating segments has a
pervasive impact on the presentation of our comparative period data. This change primarily impacted Note 4 -
Revenue Recognition, Note 5 - Trade and Other Receivables, net, Note 7 - Other Assets, Note 13 - Restructuring,
Note 14 - Goodwill, and Note 22 – Segment Information, with no impact on consolidated revenue, net income, or
cash flows.
Assets and Liabilities Held for Sale
The Company classifies assets and liabilities (disposal groups) to be sold as held for sale in the period in which all
of the following criteria are met: management, having the authority to approve the action, commits to a plan to sell
the disposal group; the disposal group is available for immediate sale in its present condition subject to terms
customary for sales of such disposal groups; an active program to locate a buyer and other actions required to
complete the plan to sell the disposal group have been initiated; the sale of the disposal group is probable, and
transfer of the disposal group is expected to qualify for recognition as a completed sale within one year; the disposal
group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and actions
required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the
plan will be withdrawn.
The Company initially measures a disposal group that is classified as held for sale at the lower of its carrying value
or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the
held for sale criteria are met. Conversely, gains are not recognized on the sale of a disposal group until the date of
sale. The Company assesses the fair value of a disposal group, less any costs to sell, each reporting period it
remains classified as held for sale and reports any subsequent changes as an adjustment to the carrying value of
the disposal group, as long as the new carrying value does not exceed the carrying value of the disposal group at
the time it was initially classified as held for sale.
Annual Report and Accounts 2020 Page | 98
Upon determining that a disposal group meets the criteria to be classified as held for sale, the Company reports the
assets and liabilities of the disposal group, if material, in the line items assets held for sale and liabilities held for
sale in the consolidated statements of financial position in each period presented. Refer to Note 3 - Discontinued
Operations and Assets Held for Sale, for further information.
Critical Estimates, Judgments, and Assumptions
The preparation of financial statements in conformity with IFRS requires management to make estimates,
judgments, and assumptions that affect the reported amounts of assets, liabilities, equity, revenues and expenses,
and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates,
judgments, and methodologies. We base our estimates on historical experience and on various other assumptions
that we believe are reasonable, the results of which form the basis for making judgments about the carrying values
of assets, liabilities, and equity, and the amount of revenues and expenses. These estimates, judgments, and
assumptions are used for, but not limited to, revenue recognition, allowance for credit losses, evaluation of long-
lived assets for impairment, legal and other contingencies, and income taxes. Detailed information about each of
these estimates, judgments, and assumptions is included in their respective notes, together with information about
the basis of calculation for each affected line item in the financial statements.
The full extent to which the outbreak of a new strain of coronavirus, COVID-19 (“COVID-19”), will directly or
indirectly impact our business, results of operations, and financial condition, including sales, expenses, reserves
and allowances, manufacturing, research and development costs, and employee-related amounts, will depend on
future developments that are highly uncertain, including as a result of new information that may emerge concerning
COVID-19 and the actions taken to contain it or treat it, as well as the economic impact on local, regional, national,
and international customers and markets. We have made estimates of the impact of COVID-19 within our financial
statements and there may be changes to those estimates in future periods. Actual results may differ from these
estimates.
Given the anticipated continued impact of COVID-19 and the resulting extended economic slowdown, we have
revised our forecast, evaluated our liquidity position, and evaluated our ability to comply with the amended financial
covenants in our debt agreements as of the date of issuance of these consolidated financial statements. Based on
the revised forecast, management believes that our financial position, forecasted net cash provided by operations,
available cash and cash equivalents at December 31, 2020, and borrowing capacity under our amended Revolving
Credit Facilities due July 2024 as described in Note 17 - Debt, will be sufficient to fund our current obligations,
capital spending, debt service requirements, and working capital requirements over at least the next twelve months.
The accounting policy descriptions set out the areas where judgments and estimates need exercising, the most
significant of which include the following Key Judgments (♣) and Significant Estimates (♦):
• Revenue Recognition, refer to accounting policy, page 100 (♣)
• Goodwill, refer to accounting policy, page 106 (♦) and Note 14, page 129 and 130 (♦)
•
Income Taxes, refer to accounting policy, page 109 (♣) and Note 18, page 143 (♣)
• Discontinued Operations and Held for Sale Assets, refer to Note 3, page 111 (♣), (♦)
Revenue Recognition
We account for a contract with a customer when:
i. we have written approval;
the contract is committed;
ii.
the rights of the parties, including payment terms, are identified;
iii.
the contract has commercial substance; and
iv.
collectability of consideration is probable.
v.
A performance obligation is a promise in a contract with a customer to transfer products or services that are
distinct. If we enter into two or more contracts at or near the same time, the contracts may be combined and
accounted for as one contract, in which case we determine whether the services or products in the combined
contract are distinct. A service or product that is promised to a customer is distinct if both of the following criteria are
met:
Annual Report and Accounts 2020 Page | 99
•
The customer can benefit from the service or product either on its own or together with other resources that
are readily available to the customer; and
• Our promise to transfer the service or product to the customer is separately identifiable from other promises
in the contract.
(♣) Revenue is recognized when (or as) control of a promised service or product transfers to a customer, in an
amount that reflects the consideration (which represents the transaction price) to which we expect to be entitled in
exchange for transferring that service or product. If the consideration promised in a contract includes a variable
amount, we estimate the amount to which we expect to be entitled using either the expected value or most likely
amount method. Our contracts may include terms that could cause variability in the consideration, including, for
example, rebates, volume discounts, service-level penalties, and performance bonuses or other forms of contingent
revenue.
(♣) The Company often enters into contracts with customers that consist of a combination of services and products
that are accounted for as one or more distinct performance obligations. Management applies judgment in identifying
and evaluating the contractual terms and conditions that impact the identification of performance obligations and the
pattern of revenue recognition.
Our standard payment terms dictate that payment is due upon receipt of invoice, payable within 30 days. Invoices
are generally issued as control transfers and/or as services are rendered. Additionally, in determining the
transaction price, we adjust the promised amount of consideration for the effects of the time value of money if the
payment terms are not standard and the timing of payments agreed to by the parties to the contract provide the
customer or the Company with a significant benefit of financing, in which case the contract contains a significant
financing component. Most arrangements that contain a significant financing component include explicit financing
terms.
We may include subcontractor services or third-party vendor services or products in certain arrangements. In these
arrangements, revenue from sales of third-party vendor services or products are recorded net of costs when we are
acting as an agent between the customer and the vendor, and gross when we are the principal for the transaction.
To determine whether we are an agent or principal, we consider whether we obtain control of the services or
products before they are transferred to the customer. In making this evaluation, several factors are considered, most
notably whether we have primary responsibility for fulfillment to the customer, as well as inventory risk and pricing
discretion.
Service Revenue
Service revenue is derived from the following sources:
• Operating and Facilities Management Contracts;
• Gaming terminal services; and
System, software and other.
•
Operating and Facilities Management Contracts
Our revenue from operating contracts is derived primarily from long-term exclusive operating licenses in Italy. Under
operating contracts, we manage all the activities along the lottery value chain including collecting wagers, paying
out prizes, managing all accounting and other back-office functions, running advertising and promotions, operating
data transmission networks and processing centers, training staff, providing retailers with assistance, and supplying
materials for the game. In most cases, the arrangement is accounted for as a single performance obligation
composed of a series of distinct services that are substantially the same and have the same pattern of transfer (i.e.,
distinct days of service).
Under operating contracts, we typically satisfy the performance obligation and recognize revenue over time because
the customer simultaneously receives and consumes the benefits provided as we perform the services. The amount
of consideration to which we are typically entitled is variable based on a percentage of sales. Revenue is typically
recognized in the amount that we have the right to invoice the customer as this corresponds directly with the value
to the customer of our performance completed to date. In arrangements where we are performing services on
behalf of the government and the government is considered our customer, revenue is recognized net of prize
Annual Report and Accounts 2020 Page | 100
payments, taxes, retailer commissions, and remittances to state authorities. Under operating contracts, we are
generally required to pay an upfront license fee. Refer to the Upfront License Fee policy below for further details.
Our revenue from facilities management contracts (“FMC”) is generated by assembling, installing, and operating the
online lottery system and related point-of-sale equipment. Under a typical FMC, we maintain ownership of the
technology and are responsible for capital investments throughout the duration of the contract. FMCs typically
include a wide range of support services that are provided throughout the contract and are part of the integrated
solution that the customer has contracted to obtain. In most cases, the arrangement is accounted for as a single
performance obligation composed of a series of distinct services that are substantially the same and that have the
same pattern of transfer. Under FMCs, we typically satisfy the performance obligation and recognize revenue over
time because the customer simultaneously receives and consumes the benefits provided as we perform the
services. The amount of transaction price to which we are entitled is typically variable based on a percentage of
sales, although under certain of its agreements, the Company receives fees based on a fixed fee arrangement.
Revenue is typically recognized in the amount that we have the right to invoice the customer, as this corresponds
directly with the value to the customer of our completed performance.
Gaming terminal services
Our revenue from gaming terminal services is generated by providing customers with proprietary land-based
gaming systems and equipment under a variety of recurring revenue or lease arrangements, including a percentage
of amounts wagered, a percentage of net win, or a fixed daily/monthly fee.
Included in gaming terminal services are wide area progressive (“WAP”) systems. WAP systems consist of linked
slot machines located in multiple casino properties, connected to a central computer system. WAP systems include
a Company-sponsored progressive jackpot that increases with every wager until a player wins the top award
combination. Casinos with WAP machines pay a percentage of amounts wagered for services related to the design,
assembly, installation, operation, maintenance, and marketing of the WAP systems, as well as funding and
administration of Company-sponsored progressive jackpots. A portion of the total fee collected is allocated to the
WAP jackpot. Since the jackpot is a payment to the customer, the portion allocated to the jackpot is classified as a
reduction of revenue.
In some arrangements, there is a single performance obligation composed of a series of distinct services that are
substantially the same and that have the same pattern of transfer (i.e., distinct days of service). The amount of
transaction price to which we are entitled typically is variable based on a percentage of wagers. This results in
revenue recognition that corresponds with the value to the customer for the services transferred in the amount that
we have the right to invoice. In other arrangements where the end customer is the player, we record revenue net of
prize payouts once the wagering outcome has been determined.
Systems, software, and other – Global Lottery
Our lottery contracts generally include other services, including telephone support, software maintenance, hardware
maintenance, and the right to receive unspecified upgrades or enhancements on a when-and-if-available basis, and
other professional services including software development. Fees earned for other services are generally
recognized as service revenue in the period the service is performed (i.e., over the support period).
We also develop technology to enable lotteries to offer commercial services over their existing lottery infrastructure
or over standalone networks separate from the lottery. Leveraging our distribution network and secure transaction
processing, we offer high-volume processing of commercial transactions including: prepaid cellular telephone
recharges, bill payments, e-vouchers and retail-based programs, electronic tax payments, stamp duty services,
prepaid card recharges, and money transfers. These services are primarily offered outside of North America. In
most cases, these arrangements are considered to be short in duration. The amount of transaction price that we are
typically entitled to is variable based on the number of transactions processed. Revenue is typically recognized in
the amount that we have the right to invoice the customer as this corresponds directly with the value to the
customer of our completed performance.
Systems, software, and other – Global Gaming
We also generate revenue from other services, including video central system monitoring, system support, licensing
of IP, and sports betting.
Annual Report and Accounts 2020 Page | 101
Our contracts generally include other services, including telephone support, software maintenance, content
licensing, royalty fees, hardware maintenance, and the right to receive unspecified updates or enhancements on a
when-and-if-available basis, and other professional services. Fees earned for other services are generally
recognized as service revenue in the period the service is performed (i.e., over the support period).
We provide sports betting technology and services to commercial and tribal operators and lotteries in regulated
markets, primarily in the U.S.
In the service contracts to our U.S. licensed sports book operators, we provide the sports betting platform and a
variety of services including installation, configuration and integration services. For customers who want to have an
outsourcing model, we also offer trading services with the inclusion of odds setting and risk management. Under
these contracts, we generally record a percentage of net sports revenue over the contractual term.
Product Sales
Product sales are derived from the following sources:
Lottery products
•
• Gaming terminals
• Gaming other
Lottery products
Lottery product revenue primarily includes the sale of lottery equipment, lottery systems and printed products.
Our revenue from the sale of lottery systems and equipment typically includes multiple performance obligations,
where we assemble, sell, deliver, and install a turnkey system (inclusive of point-of-sale terminals, if applicable) or
deliver equipment and license the computer software for a fixed price, and the customer subsequently operates the
system or equipment. Our credit terms are predominantly short-term in nature. We also grant extended payment
terms under contracts where the sale is typically secured by the related equipment sold. Revenue from the sale of
lottery systems and equipment is recognized based upon the contractual terms of each arrangement. These
arrangements generally include customer acceptance provisions and general rights to terminate the contract if we
are in breach of the contract or at the convenience of the customer. In these arrangements, the performance
obligation is satisfied over time if the customer controls the asset as it is created (i.e., when the asset is built at the
customer site) or if our performance does not create an asset with an alternative use and we have an enforceable
right to payment plus a reasonable profit for performance completed to date. If revenue is not recognized over time,
it is generally recognized upon transfer of physical possession of the goods or the satisfaction of customer
acceptance provisions. If the transaction includes multiple performance obligations, it is accounted for under
arrangements with multiple performance obligations, discussed below.
Our other lottery product sales are primarily derived from the production and sales of instant ticket games under
multi-year contracts. In these arrangements, the performance obligation is generally satisfied at a point in time (i.e.,
upon transfer of control of the game tickets to the customer) based on the contractual terms of each arrangement.
Gaming terminals
Our revenue from the sale or sales-type lease of gaming terminals includes embedded game content, machine
related equipment, licensing and royalty fees, and component parts. Our credit terms are predominantly short-term
in nature. We also grant extended payment terms under contracts where the sale is typically secured by the related
equipment sold. Revenue from the sale of gaming machines is recognized based upon the contractual terms of
each arrangement, but predominantly upon transfer of physical possession of the goods or the lapse of customer
acceptance provisions. If the sale of gaming machines includes multiple performance obligations, these
arrangements are accounted for under arrangements with multiple performance obligations, discussed below.
Annual Report and Accounts 2020 Page | 102
Gaming other
Other gaming product revenue is primarily comprised of gaming system sales, content licensing, software sales,
non-machine related equipment and component parts (including game themes and electronic conversion kits). Our
revenue from the sale of gaming systems typically includes multiple performance obligations, where we sell, deliver,
and install a turnkey system or deliver equipment and license the computer software for a fixed price, and the
customer subsequently operates the system. These arrangements generally include customer acceptance
provisions and general rights to terminate the contract if we are in breach of the contract. Such arrangements
include hardware, software, and professional services. In these arrangements, the performance obligation is
generally satisfied upon transfer of physical possession of the goods or the satisfaction of customer acceptance
provisions.
Arrangements with Multiple Performance Obligations
(♣) We often enter into contracts that consist of a combination of services and products based on the needs of our
customers, which may include post-contract support for the software and a contract for post-warranty maintenance
service for the hardware. These contracts consist of multiple services and products, whereby the hardware and
software may be delivered in one period and the software support and hardware maintenance services are
delivered over time.
To the extent that a service or product in an arrangement with multiple performance obligations is subject to other
specific accounting guidance, that service or product is accounted for in accordance with such specific guidance.
For all other distinct services and products in these arrangements, the arrangement transaction price is allocated to
each performance obligation on a relative standalone selling price basis or another method that depicts the amount
of consideration to which we expect to be entitled in exchange for transferring the promised services or products. If
the services and products are not distinct, we determine an appropriate measure of progress based on the nature of
our overall promise for the single performance obligation.
To the extent we grant the customer the option to acquire additional services or products in one of these
arrangements, we account for the option as a distinct performance obligation in the contract only if the option
provides a material right to the customer that it would not receive without entering into the contract (i.e., a significant
discount incremental to the range of discounts typically given for the service or product), in which case the customer
in effect pays in advance for the option to purchase future services or products. We allocate a portion of the
transaction price to the material right and recognize revenue when those future services or products are transferred
or when the option expires.
Standalone Selling Price
(♣) We allocate the transaction price to each performance obligation on a relative standalone selling price (“SSP”)
basis. The SSP is the price at which we would sell a promised service or product separately to a customer. In some
instances, we are able to establish SSP based on the observable prices of services or products sold separately in
comparable circumstances to a similar customer. We typically establish an SSP range for our services and products
that are reassessed on a periodic basis or when facts and circumstances change.
In other instances, we may not be able to establish an SSP range based on observable prices, and we estimate the
SSP by considering multiple factors including, but not limited to, overall market conditions, including geographic or
regional specific factors, competitive positioning, competitor actions, internal costs, profit objectives, and pricing
practices. Estimating SSP is a formal process that includes review and approval by management.
Contract Costs
Certain eligible, non-recurring costs incurred in the initial phases of service contracts are deferred and amortized
ratably over the expected period of benefit, which includes anticipated contract renewals or extensions. Recurring
operating costs in these contracts are recognized as incurred.
Practical Expedients and Exemptions
We report revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and
concurrent with specific revenue-producing transactions.
Annual Report and Accounts 2020 Page | 103
We generally expense sales commissions when incurred because the amortization period would have been one
year or less. These costs are recorded within selling, general and administrative expenses in our consolidated
statement of operations. For certain of our long-term contracts, we capitalize and amortize incremental costs of
obtaining a contract (e.g., sales commissions) on a straight-line basis over the expected customer relationship
period if we expect to recover those costs.
We do not account for significant financing components if the period between when we transfer the promised
service or product to the customer and when the customer pays for that service or product will be one year or less.
We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length
of one year or less, (ii) performance obligations for which we recognize revenue at the amount that we have the
right to invoice for services performed, (iii) contracts for which variable consideration is accounted for in accordance
with sales-based or usage-based royalty guidance, and (iv) wholly unperformed contracts.
Contract Assets and Liabilities
Contract assets arise from contracts when revenue is recognized over time and the amount of revenue recognized
exceeds the amount billed to the customer. These amounts are included in contract assets until the right to payment
is no longer conditional on events other than the passage of time. Contract liabilities include deferred revenue,
advance payments, and billings in excess of revenue recognized.
Stock-Based Compensation
Stock-based compensation represents the cost related to stock-based awards granted to directors and employees.
Stock-based compensation cost is measured at the grant date or modification date, based on the estimated fair
value of the award and recognized as expense, net of estimated forfeitures, over the vesting period(s). For awards
subject to cliff vesting, compensation cost is recognized by way of a straight-line method over the award’s expected
vesting period. For awards subject to graded vesting, compensation cost is recognized by way of an accelerated
attribution method over the entire awards’ expected vesting periods.
Advertising
Advertising costs are expensed as incurred. Advertising expense was $25.0 million and $34.2 million for the years
ended December 31, 2020 and 2019, respectively.
Research and Development Costs
Research and development costs (“R&D”), which include salaries and benefits, stock-based compensation,
consultants’ fees, facilities-related costs, material costs, depreciation, and travel, are expensed as incurred, as the
criteria to capitalize development costs have not been met.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of highly liquid investments purchased with an original maturity of
three months or less at the date of acquisition, such as bank deposits, money market funds, and interest bearing
bank accounts with insignificant interest rate risk. The fair value of cash and cash equivalents approximates the
carrying amount.
Restricted Cash and Cash Equivalents
We are required by gaming regulation to maintain sufficient reserves in restricted cash accounts to be used for the
purpose of funding payments to WAP jackpot winners. These restricted cash balances are based primarily on the
jackpot meters displayed to slot players, or for previously won jackpots, and vary by jurisdiction. Under our Italian
Lotto contract, we deposit wagers, net of prizes paid and retailer commissions retained by the retailer at point of
sale, into bank accounts, the use of which is restricted based on the contract with our customer. Restricted cash is
also maintained for interactive digital player deposits, collections on factored and serviced receivables not yet paid
through to the third-party owner, and for customer funds received in relation to the provision of our commercial
services. These amounts are restricted based on the contracts with our customers or local regulations.
Annual Report and Accounts 2020 Page | 104
Allowance for Credit Losses
We maintain an allowance for expected credit losses on receivables measured as the difference between the cash
flows due in accordance with the contract and the cash flows we expect to receive. The allowance is regularly
reviewed by considering factors such as the creditworthiness of our customers, historical experience, aging of
receivables, and current market and economic conditions, as well as management’s expectations of future
conditions when appropriate. The allowance is deducted from the amortized cost basis of the receivable to present
the net amount expected to be collected.
We estimate expected credit losses on receivables on a collective (pool) basis when similar risk characteristics
exist. Trade and other receivables and customer financing receivables represent the initial pools which are
segregated further by business segment, geography, internal risk rating, and aging. The risk of loss is assessed
over the contractual life of the receivables and we adjust historical loss rates for current and future conditions based
on qualitative considerations. The expected loss rate for each receivable pool is applied to the aggregate receivable
balance to determine the allowance requirement.
We assess the probability of default on receivables at initial recognition and then whether there has been a
significant increase in credit risk on an ongoing basis. Receivables are written off against the allowance when there
is no reasonable expectation of recovery, for example where all legal avenues for collection of amounts due have
been exhausted, the receivable (or relevant portion) is written off.
We determine delinquency based on the contractual payment terms. An account may be considered delinquent if
there are unpaid balances remaining on the account the day after the contractual due date.
For amounts due from certain government customers in the Global Lottery business segment, we have not
established an allowance as we have no expectation of loss based on a long history of no credit losses and the
explicit guarantee of a sovereign entity.
Inventories
Inventories are stated at the lower of cost (applying the first in, first out method) and net realizable value.
Allowances are made for defective, obsolete, or excess inventory.
Systems, Equipment and Other Assets Related to Contracts, Net and Property, Plant and Equipment, Net
We have two categories of fixed assets: systems, equipment and other assets related to contracts (“Systems &
Equipment”); and property, plant and equipment (“PPE”).
Systems & Equipment are assets that primarily support our operating contracts, FMCs, and WAP systems
(collectively, the “Contracts”) and are principally composed of lottery and gaming assets. PPE are assets we use
internally, not associated with Contracts, primarily related to production and assembly, selling, general and
administration, and R&D.
Systems & Equipment and PPE are stated at cost, net of accumulated depreciation and accumulated impairment
loss, if any. Depreciation commences when the asset is placed in service and is recognized on a straight-line basis
over the estimated useful lives of the assets. Repair and maintenance costs are expensed as incurred, whereas
major improvements that increase asset values and extend useful lives are capitalized.
Annual Report and Accounts 2020 Page | 105
The estimated useful lives for Systems & Equipment depends on the type of asset. Lottery assets (such as
terminals, mainframe computers, communications equipment, and software development costs) have estimated
useful lives that generally do not exceed 10 years and commercial gaming machines have estimated useful lives of
three to five years.
The estimated useful lives for PPE are 40 years for buildings and five to 10 years for furniture and equipment.
Leasehold improvements are amortized over the shorter of the lease term or estimated useful life.
Systems & Equipment and PPE are tested for impairment whenever events or changes in circumstances indicate
the carrying amount of those assets may not be recoverable. If the recoverable amount of an asset is estimated to
be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount.
The Company calculates its recoverable amount as its fair value less costs to dispose.
Goodwill
The assets and liabilities of acquired businesses are recorded under the acquisition method of accounting at their
estimated fair values at the date of acquisition. Goodwill represents costs in excess of fair values assigned to the
underlying identifiable net assets of acquired businesses, and is stated at cost less accumulated impairment losses.
Effective July 1, 2020 the Company adopted a new organizational structure focused on two business segments,
Global Lottery and Global Gaming, along with a streamlined corporate support function. This resulted in a change in
our operating segments and cash-generating units. Prior to this change, we had four cash-generating units: North
America Gaming and Interactive, North America Lottery, International, and Italy.
Goodwill has been allocated to and is tested for impairment at the cash-generating unit level, which is the same
level as our operating segments. We evaluate our cash-generating units annually and if necessary, reassign
goodwill using a relative fair value approach. As of December 31, 2020 we have identified two cash-generating units
- Global Lottery and Global Gaming.
(♦) Goodwill is tested for impairment annually, in the fourth quarter, or whenever events or changes in
circumstances indicate the carrying amount may not be recoverable. We either first perform a qualitative
assessment to determine whether it is more likely than not that the recoverable value of goodwill is less than its
carrying amount and whether the quantitative analysis is necessary, or elect to perform a quantitative one-step
process. The goodwill impairment test compares the recoverable value of a cash-generating unit with its carrying
amount and an impairment loss is recognized for the amount by which the carrying amount exceeds the cash-
generating unit’s recoverable value. In performing the goodwill impairment test, we estimate the recoverable value
of the cash-generating units using an income approach based on projected discounted cash flows.
Other Intangible Assets
Other intangible assets, which include indefinite-lived and definite-lived intangible assets, are stated at cost, less
accumulated amortization and accumulated impairment losses.
Indefinite-lived intangible assets are composed of trademarks for which there is no foreseeable limit of the period
over which they are expected to generate net cash inflows. Definite-lived intangible assets, which are primarily
composed of customer relationships and computer software and game library, are capitalized and amortized on a
straight-line basis over their estimated economic lives. Amortization of software-related intangibles is included in
cost of services and cost of product sales and amortization of other intangible assets is included in selling, general
and administrative expenses in the consolidated statement of operations.
Annual Report and Accounts 2020 Page | 106
Estimated useful lives are determined considering the period the assets are expected to contribute to future cash
flows. The estimated economic lives of our definite-lived intangible assets are as follows:
Category
Trademarks
Developed technologies
Customer relationships
Computer software and game library
Licenses
Other
Estimated
economic life
1 - 20 years
2 - 15 years
2 - 20 years
3 - 14 years
3 - 23 years
4 - 17 years
Indefinite-lived intangible assets other than goodwill are tested for impairment annually, in the fourth quarter, or
whenever events or changes in circumstances indicate the carrying amount may not be recoverable. We perform a
quantitative analysis that compares the recoverable value of indefinite-lived intangible assets to their carrying
amount and an impairment loss is recognized when the carrying amount exceeds the recoverable value. More detail
surrounding intangible assets is discussed in Note 15 - Intangible Assets, net.
Capitalized Software Development Costs
Costs incurred in the development of our externally-sold software products are expensed as incurred, except certain
software development costs eligible for capitalization. Software development costs incurred subsequent to
establishing technological feasibility and through the general release of the software products are capitalized.
Capitalized costs are amortized over the products’ estimated economic life to cost of product sales in the
consolidated statement of operations.
Costs incurred during the application development phase of software for services provided to customers are
capitalized as internal-use software and amortized over the useful life to cost of services. Costs incurred during the
application of software for internal use are capitalized and amortized over the useful life to selling, general and
administrative expenses in the consolidated statement of operations.
Upfront License Fees
We periodically make long-term investments in contracts with customers and obtain licenses to supply products and
services to the customers. As consideration, we pay license fees, which are classified as other non-current assets in
the consolidated balance sheet. We recognize the amortization of the license fees as a reduction of service revenue
over the estimated economic life of the license term. This method reflects the pattern in which economic benefits
are expected to be realized. The recoverability of each payment is subject to significant estimates about future
revenues related to the contracts’ future cash flows. We evaluate these assets for impairment and update
amortization rates on an agreement by agreement basis. The assets are reviewed for impairment whenever events
or changes in circumstances indicate their carrying amount may not be recoverable. In periods in which payments
are made to the customer, we classify the payment as a cash outflow from operating activities in the consolidated
statement of cash flows.
Jackpot Accounting
We incur costs to fund jackpots and accrue jackpot liabilities with every wager on devices connected to a WAP
system. Jackpot liabilities are estimated based on the size of the jackpot, the number of WAP units in service,
variations and volume of play, and interest rate movements. Jackpots are generally payable to winners immediately,
in the case of instant wins, or in equal annual installments over 20 to 26 years. Winners may elect to receive a lump
sum payment for the present value of the jackpot discounted at applicable interest rates in lieu of periodic annual
installments.
Jackpot liabilities are composed of payments due to previous winners, and amounts due to future winners of
jackpots not yet won. Liabilities due to previous winners for periodic payments are carried at the accreted cost of a
qualifying U.S. government or agency annuity investment that may be purchased at the time of the jackpot win. If
the periodic liability is not initially funded with an annuity investment, it is discounted and accreted using the risk-free
rate at the time of the jackpot win.
Annual Report and Accounts 2020 Page | 107
Liabilities due to future winners are recorded at the present value of the estimated amount of jackpots not yet won.
We estimate the present value of these liabilities using current market rates, weighted with historical lump sum
payout election ratios. Based on the most recent historical patterns, approximately 85% of winners will elect the
lump sum payment option. The current portion of these liabilities are estimated based on historical experience with
winner payment elections, in conjunction with the theoretical projected number of jackpots.
Legal and Other Contingencies
Loss contingency provisions arising from a legal proceeding or claim are recorded for probable and estimable
losses at the best estimate of a loss when there is a range of possible outcomes, or when a best estimate cannot be
made, at the midpoint of the range when any point in a continuous range is as likely as any other, the determination
of which requires significant judgment. If it is reasonably possible but not probable that a liability has been incurred,
or if the amount of a probable loss cannot be reasonably estimated, the amount or range of estimated loss is
disclosed, if material. We evaluate our provisions for legal contingencies at least quarterly and, as appropriate,
establish new provisions or adjust existing provisions to reflect the facts and circumstances known to us at the time,
including information regarding negotiations, settlements, rulings, and other relevant events and developments, the
advice of counsel, and the assumptions and judgment of management. Legal costs are expensed as incurred.
Fair Value Measurements
We account for certain financial assets and liabilities at fair value. Financial assets and liabilities are categorized,
based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives
the highest priority to the use of observable inputs and the lowest priority to the use of unobservable inputs. When
inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value
measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
These levels are as follows:
•
•
•
Level 1 - inputs are based upon unadjusted quoted prices for identical instruments in active markets.
Level 2 - inputs are based upon quoted prices for similar instruments in active markets, quoted prices for
identical or similar instruments in markets that are not active, and model-based valuation techniques for
which all significant inputs are observable in the market or can be corroborated by observable market data
for substantially the full term of the instruments.
Level 3 - inputs are unobservable and typically reflect management’s estimates of assumptions that market
participants would use in pricing the asset or liability.
Derivative Financial Instruments
We use derivative financial instruments for the management of foreign currency risks and interest rate risks. We do
not enter into derivatives for speculative purposes. Derivatives are recognized as either assets or liabilities in the
consolidated balance sheet at fair value. All derivatives are recorded gross, except netting of foreign exchange
contracts and counterparty netting of interest receivable and payable related to interest rate swaps, as applicable.
The accounting for changes in the fair value of a derivative depends on the nature of the hedge and the hedge
effectiveness. Derivative gains and losses are reported in the consolidated statement of cash flows consistent with
the classification of the cash flows from the underlying hedged items.
For derivative instruments designated as cash flow hedges, gains and losses are recorded in other comprehensive
income (loss) and are subsequently reclassified when the hedged item affects earnings. At that time, the amount is
reclassified from other comprehensive income (loss) to the same income statement line as the earnings effect of the
hedged item.
For derivative instruments designated as fair value hedges, changes in fair value are recorded in interest income
(expense) and are offset by changes in the fair value of the underlying debt instrument due to changes in the
benchmark interest rate. In the event the derivative instruments are subsequently de-designated as hedges, the
change in fair value is recognized in interest expense, net in the consolidated statement of operations with no
corresponding offset to debt.
For derivative instruments designated as net investment hedges, the spot portion of the derivative gain or loss is
reported in foreign currency translation within other comprehensive income (loss) to offset any gains or losses on
Annual Report and Accounts 2020 Page | 108
translation of the net investment in the subsidiary. All other components of the derivative fair value will be reported in
income, as either interest income or interest expense, on an amortized basis.
Derivative instruments not designated as hedges are recognized in the consolidated balance sheet at fair value with
the changes in fair value recorded in foreign exchange (loss) gain, net in the consolidated statement of operations.
Leases
We determine whether a contract is or contains a lease at inception. As a lessee, we recognize right-of-use (“ROU”)
assets and lease liabilities on the lease commencement date based on the present value of lease payments over
the lease term. ROU assets also include any upfront lease payments or initial direct costs and are adjusted for lease
incentives received.
We consider renewal and termination options, including whether they are reasonably certain to be exercised, in
determining the lease term and establishing the ROU assets and lease liabilities. ROU assets and lease liabilities
are calculated using our incremental borrowing rate, which is based on the lease currency and length of the lease,
unless the implicit rate is determinable.
Most of our lease contracts contain both lease and non-lease components. As a lessee, we combine lease and non-
lease components into a single lease component for all classes of underlying assets except certain communication
equipment. For certain communication equipment, we allocate the consideration between lease and non-lease
components based on relative standalone price.
Variable lease payments are generally expensed as incurred except for certain rent payments that depend on an
index, which are included in lease payments using the index rate in effect as of the lease commencement date.
When the lease payments are adjusted for changes in the index, we will remeasure the ROU asset and lease
liability.
Short-term leases, which are leases with an initial term of 12 months or less with no purchase options, are not
recognized on the balance sheet. The rental payments are recognized as lease expense on a straight-line basis
over the lease term.
Certain of our long-term lottery and commercial gaming service arrangements include leases for equipment installed
at customer locations. As the lessor, we evaluate whether the leases are classified as finance or operating leases
and recognize revenue based on that evaluation. Finance leases are recognized as product sale revenue while
operating leases are recognized as service revenue.
Income Taxes
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have
been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on
the difference between the tax basis of assets and liabilities and their reported amounts using the enacted tax rates
in effect for the year in which the differences are expected to reverse. Tax credits are generally recognized as
reductions of income tax provisions in the year in which the credits arise. The measurement of deferred tax assets
is not recorded if, based upon available evidence, it is more likely than not that some or all of the deferred tax
assets will not be realized. The effect of a change in income tax rates is recognized as income or expense in the
period that includes the enacted or substantively enacted date.
(♣) Accounting for uncertainty in income taxes recognized in the consolidated financial statements is in accordance
with accounting authoritative guidance, which prescribes a two-step process to determine the amount of tax benefit
to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon
external examination. If the tax position is deemed “more likely than not” to be sustained, the tax position is then
assessed to determine the amount of the benefit to recognize in the consolidated financial statements. The amount
of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being
realized upon ultimate settlement.
We recognize interest and penalties related to unrecognized tax benefits on the provision for taxes line of the
consolidated statement of operations. Accrued interest and penalties are included on the related tax liability line in
the consolidated balance sheet.
Annual Report and Accounts 2020 Page | 109
We use the period cost method for global intangible low-taxed income (“GILTI”) provisions and therefore have not
recorded deferred taxes for basis differences expected to reverse in future periods.
Foreign Currency Translation
The financial statements of subsidiaries with functional currencies other than the U.S. dollar are translated into U.S.
dollars, with the resulting translation adjustments recorded as a component of other reserves within shareholders’
equity. Assets and liabilities are translated into U.S. dollars using the exchange rates in effect at the balance sheet
date, while income and expense items are translated using the average exchange rates during the period.
New Accounting Standards - Recently Adopted
In May 2020, the International Accounting Standards Board ("IASB") issued an amendment to International
Financial Reporting Standard 16 Leases ("IFRS 16"), COVID-19-Related Rent Concessions. As a result of
COVID-19, rent concessions may have been granted to lessees and could take various forms such as, payment
holidays, rent waivers or deferrals of lease payments. The amendment provides an optional practical expedient for
lessees from assessing whether eligible COVID-19 related rent concessions are lease modifications, and account
for them as if they were not lease modifications. The amendment is effective for periods beginning on or after June
1, 2020 with earlier application permitted. We elected to apply this expedient to not reassess whether a COVID-19
rent concession is a lease modification as of January 1, 2020, and the election did not result in a material impact on
our consolidated financial statements.
In September 2019, the IASB issued Interest Rate Benchmark Reform, Amendments to IFRS 9 Financial
Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments:
Disclosures (the “Phase 1” amendments). Interest rate benchmarks including London Interbank Offered Rate
(“LIBOR”), the Euro Interbank Offered Rate (“EURIBOR”), and certain other Interbank Offered Rates (“IBOR”s) are
being reformed. The Phase 1 amendments provide temporary relief from applying specific hedge accounting
requirements to hedging relationships directly affected by IBOR reform. The Phase 1 amendments are mandatory
and effective January 1, 2020. The application of the amendments did not have a material impact to our derivative
instruments in our consolidated financial statements.
All other standards or amendments to standards that have been issued by the IASB and are effective from January
1, 2020 onwards are not applicable nor had a significant effect on the consolidated financial statements.
New Accounting Standards - Not Yet Adopted
In August 2020, the IASB issued Interest Rate Benchmark Reform—Phase 2, which amends IFRS 9 Financial
Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments:
Disclosures, IFRS 4 Insurance Contracts and IFRS 16 Leases (the “Phase 2” amendments). The Phase 2
amendments focused on relief when an existing interest rate is replaced with an alternative interest rate. The Phase
2 amendments are effective January 1, 2021 with earlier application permitted. We will not early adopt and do not
expect the Phase 2 amendments to have a material impact upon adoption.
We do not currently expect that any other recently issued accounting guidance will have a significant effect on the
consolidated financial statements.
3. Discontinued Operations and Assets Held for Sale
On December 7, 2020, the Parent announced that its wholly-owned subsidiary, Lottomatica, had entered into a
definitive agreement to sell one hundred percent of the share capital of Lottomatica Videolot Rete S.p.A. and
Lottomatica Scommesse S.r.l., the members of the IGT group which conduct its Italian B2C gaming machine, sports
betting, and digital gaming businesses, to Gamenet Group S.p.A. for a sale price of €950 million. The businesses to
be sold are within the Company’s Global Gaming segment. The Company will receive €725 million at closing,
€100 million on December 31, 2021, and €125 million on September 30, 2022. The sale price is subject to certain
adjustments specified in the agreement. Closing of the transaction is subject to Italian regulatory approvals and
specified representations, warranties, covenants and conditions customary in agreements of this kind and scope.
The Company expects the transaction to close in the first half of 2021.
Annual Report and Accounts 2020 Page | 110
Aligning with our segment reorganization, the sale represents a strategic shift to reframe and simplify the priorities
of our Global Gaming segment to focus on its core competencies as a B2B product and service provider. The
Company determined that the sale met the criteria to be classified as a discontinued operation and, as a result, its
historical financial results are reflected in the Company's consolidated financial statements as a discontinued
operation, and assets and liabilities were classified as assets and liabilities held for sale. The Company did not
allocate any general corporate overhead to discontinued operations.
Summarized financial information for discontinued operations is shown below:
($ thousands)
Total revenue
Operating income (1)
Income from discontinued operations before provision for income taxes
Provision for income taxes
Income from discontinued operations, net of tax
Less: Net (loss) income attributable to non-controlling interests from
discontinued operations
Income from discontinued operations attributable to IGT PLC
Foreign currency translation adjustments
Other comprehensive income from discontinued operations attributable to IGT
PLC
For the year ended December 31,
2020
2019
413,841
752,319
52,138
42,810
6,726
36,084
(4,760)
40,844
48,205
158,665
154,106
41,847
112,259
4,539
107,720
(9,290)
89,049
98,430
(1) Includes depreciation and amortization of $101.7 million and $106.9 million for the years ended 2020 and 2019, respectively
Net cash used in financing activities from discontinued operations was $7.0 million and $7.8 million for the years
ended December 31, 2020 and 2019, respectively.
The Company expects to have continuing involvement with the businesses via a transition services agreement
(“TSA”). As part of the expected TSA, the Company will provide various telecommunications, information
technology, and back-office services for which the Company will receive compensation. These services generally
expire after no more than three years.
(♣) The following represents the major classes of assets and liabilities held for sale as part of our discontinued
operations:
($ thousands)
Assets:
Trade and other receivables, net
Other current assets
Systems, equipment and other assets related to contracts, net
Goodwill
Intangible assets, net
Other non-current assets
Assets held for sale
Liabilities:
Accounts payable
Other current liabilities
Other non-current liabilities
Liabilities held for sale
December 31,
2020
2019
62,110
55,011
86,230
511,371
54,711
50,947
820,380
62,691
163,031
22,691
248,413
130,864
74,713
102,347
511,371
86,388
53,798
959,481
61,889
122,236
29,455
213,580
(♦) The Company allocated $511.4 million of goodwill to discontinued operations using a relative fair value
approach. Prior to the allocation to discontinued operations, the goodwill was included within our Global Gaming
segment.
Annual Report and Accounts 2020 Page | 111
The cumulative foreign currency translation adjustments losses in other comprehensive income in relation to the
discontinued operations were $16.1 million and $64.3 million as of December 31, 2020 and 2019, respectively.
In addition to the sale of certain entities in our Global Gaming segment classified as discontinued operations as
described above, we have other disposal groups that meet the requirements to be classified as held for sale in our
consolidated balance sheet at December 31, 2020.
The following represents total assets and liabilities held for sale classified between the current and non-current
categories:
($ thousands)
Assets:
Current assets held for sale - discontinued operations
Current assets held for sale - other
Total current assets held for sale
Total non-current assets held for sale
Assets held for sale
Liabilities:
Total current liabilities held for sale
Total non-current liabilities held for sale
Liabilities held for sale
4. Revenue Recognition
Disaggregation of Revenue
December 31,
2020
2019
820,380
5,417
825,797
—
825,797
248,413
—
248,413
205,577
—
205,577
753,904
959,481
184,124
29,454
213,578
The following tables summarize revenue disaggregated by business segment and the source of the revenue for the
years ended December 31, 2020 and 2019:
($ thousands)
Operating and facilities management contracts
Gaming terminal services
Systems, software, and other
Service revenue
Lottery products
Gaming terminals
Gaming other
Product sales
Total revenue
For the year ended December 31, 2020
Global
Global
Lottery
Gaming
1,742,235
—
298,736
2,040,971
—
297,418
301,196
598,614
1,742,235
297,418
599,932
2,639,585
Total
121,346
—
—
121,346
2,162,317
—
205,289
149,263
354,552
953,166
121,346
205,289
149,263
475,898
3,115,483
Annual Report and Accounts 2020 Page | 112
($ thousands)
Operating and facilities management contracts
Gaming terminal services
Systems, software, and other
Service revenue
Lottery products
Gaming terminals
Gaming other
Product sales
Total revenue
Contract Balances
For the year ended December 31, 2019
Global
Global
Gaming
Lottery
1,929,121
—
252,200
2,181,321
—
567,849
350,046
917,895
1,929,121
567,849
602,246
3,099,216
Total
109,884
—
—
109,884
2,291,205
—
581,017
239,988
821,005
1,738,900
109,884
581,017
239,988
930,889
4,030,105
Information about receivables, contract assets, and contract liabilities is as follows:
($ thousands)
Receivables, net
Contract assets:
Current
Non-current
Contract liabilities:
Current
Non-current
December 31,
2020
December 31,
2019
846,128
875,263
Balance Sheet Classification
Trade and other receivables,
net
53,491
75,000
128,491
47,499 Other current assets
76,188 Other non-current assets
123,687
(108,707)
(62,175)
(170,882)
(66,749) Other current liabilities
(65,855) Other non-current liabilities
(132,604)
The amount of revenue recognized during the year ended December 31, 2020 that was included in the contract
liabilities balance at December 31, 2019 was $54.9 million. The amount of revenue recognized during the year
ended December 31, 2019 that was included in the contract liabilities balance at December 31, 2018 was $50.7
million.
Transaction Price Allocated to Remaining Performance Obligations
At December 31, 2020, the transaction price allocated to unsatisfied performance obligations for contracts expected
to be greater than one year, or performance obligations for which we do not have a right to consideration from the
customer in the amount that corresponds to the value to the customer for our performance completed to date,
variable consideration which is not accounted for in accordance with the sales-based or usage-based royalties
guidance, or contracts which are not wholly unperformed, is approximately $867.8 million. Of this amount, we
expect to recognize as revenue approximately 20% within the next 12 months, approximately 30% between 13 and
36 months, approximately 26% between 37 and 60 months, and the remaining balance through December 31,
2031.
Annual Report and Accounts 2020 Page | 113
5. Trade and Other Receivables, net
Trade and other receivables are recorded at amortized cost, net of allowance for credit losses, and represent a
contractual right to receive money on demand or on fixed or determinable dates that are typically short-term with
payment due within 90 days or less.
($ thousands)
Trade and other receivables, gross
Allowance for credit losses
Trade and other receivables, net
The following table presents the activity in the allowance for credit losses:
($ thousands)
Balance at beginning of year
(Provisions) recoveries, net
Amounts written off as uncollectible
Foreign currency translation
Other
Balance at end of year
December 31,
2020
2019
861,772
897,329
(15,644)
(22,066)
846,128
875,263
December 31,
2020
(22,066)
(6,096)
9,660
(551)
3,409
(15,644)
2019
(29,407)
3,480
3,405
162
294
(22,066)
We enter into various factoring agreements with third-party financial institutions to sell certain of our trade
receivables. We factored trade receivables of $1,531.6 million and $2,629.4 million during the years ended
December 31, 2020 and 2019, respectively, under these factoring arrangements, which reduced trade receivables.
The cash received from these arrangements is reflected as cash provided by operating activities in the consolidated
statement of cash flows. In certain of these factoring arrangements, for ease of administration, we will collect
customer payments related to the factored trade receivables, which we then remit to the financial institutions. At
December 31, 2020 and 2019, we had $110.1 million and $50.2 million, respectively, that was collected on behalf of
the financial institutions and recorded as other current liabilities in the consolidated balance sheet. The net cash
flows relating to these collections are reported as financing activities in the consolidated statement of cash flows.
The following table presents an analysis of our past due trade and other receivables, gross of allowance for credit
losses:
($ thousands)
Current
Past due
6.
Inventories
($ thousands)
Raw materials
Work in progress
Finished goods
Inventories, gross
Obsolescence reserve
Inventories, net
For the year ended
December 31, 2020
For the year ended
December 31, 2019
$
732,327
129,445
861,772
%
85.0 %
15.0 %
100.0 %
$
779,135
118,194
897,329
%
86.8 %
13.2 %
100.0 %
December 31,
2020
2019
86,089
23,211
102,674
211,974
86,877
11,663
96,895
195,435
(42,767)
(33,645)
169,207
161,790
Annual Report and Accounts 2020 Page | 114
The following table presents the activity in the obsolescence reserve:
($ thousands)
Balance at beginning of year
Provisions, net
Amounts written off
Foreign currency translation
Other
Balance at end of year
December 31,
2020
(33,645)
(33,554)
23,535
(2,041)
2,938
(42,767)
2019
(39,885)
(28,970)
23,375
(130)
11,965
(33,645)
The cost of inventories related to product sales that were recognized as an expense during 2020 and 2019 was
$254.4 million and $472.5 million, respectively.
7. Other Assets
Other Current Assets
($ thousands)
Customer financing receivables, net
Contract assets
Value-added tax receivable
Income taxes receivable
Prepaid expenses
Other receivables
Prepaid royalties
Other
Other Non-Current Assets
($ thousands)
Upfront license fees, net:
Italian Scratch & Win
Italian Lotto
New Jersey
Indiana
Customer financing receivables, net
Contract assets
Deferred income taxes
Debt issuance costs
Prepaid royalties
Other
Notes
4
December 31,
2020
231,873
53,491
46,466
45,203
39,439
11,209
8,701
43,168
479,550
2019
226,979
47,499
51,405
56,857
41,366
10,673
24,999
47,732
507,510
Notes
2020
2019
December 31,
845,336
525,017
74,449
10,458
1,455,260
873,756
578,408
83,209
11,853
1,547,226
83,638
75,000
33,117
14,322
13,987
64,803
122,124
76,188
27,108
20,464
25,092
73,847
1,740,127
1,892,049
4
18
17
Annual Report and Accounts 2020 Page | 115
Upfront License Fees
The upfront license fees are being amortized on a straight-line basis as follows:
Upfront License Fee
Italian Scratch & Win
Italian Lotto
New Jersey
Indiana
License Term
9 years
9 years
15 years, 9 months
15 years
Amortization Start Date
October 2019
December 2016
October 2013
July 2013
Yeonama Holdings Co. Limited (“Yeonama”)
In May 2019, we sold our ownership interest in Yeonama, an investment previously included within other non-
current assets on the consolidated balance sheet. The sale resulted in a pre-tax gain of €26.1 million ($29.1
million at the May 31, 2019 exchange rate).
Customer Financing Receivables
Customers' payment terms for customer financing receivables are confirmed with a written financing contract, lease
contract, or promissory note and a security agreement is typically signed by the parties granting the Company a
security interest in the related products sold or leased. Customer financing interest income is recognized based on
market rates prevailing at issuance.
Customer financing receivables are recorded at amortized cost, net of any allowance for credit losses, and are
classified in the consolidated balance sheet as follows:
($ thousands)
Customer financing receivables, gross
Allowance for credit losses
Customer financing receivables, net
($ thousands)
Customer financing receivables, gross
Allowance for credit losses
Customer financing receivables, net
Current
Assets
December 31, 2020
Non-Current
Assets
274,650
(42,777)
231,873
90,780
(7,142)
83,638
Current
Assets
December 31, 2019
Non-Current
Assets
255,221
(28,242)
226,979
125,542
(3,418)
122,124
Total
365,430
(49,919)
315,511
Total
380,763
(31,660)
349,103
The following table presents the activity in the allowance for credit losses:
($ thousands)
Balance at beginning of year
Provisions, net
Amounts written off as uncollectible
Foreign currency translation
Other
Balance at end of year
December 31,
2020
(31,660)
(37,191)
23,525
1,820
(6,413)
2019
(29,209)
(2,477)
11
15
—
(49,919)
(31,660)
Annual Report and Accounts 2020 Page | 116
The Company’s customer financing receivable portfolio is composed of customers within the Global Gaming
business segment. We internally assess the credit quality of customer financing receivables using a number of
factors, including, but not limited to, credit scores obtained from external providers, trade references, bank
references, and historical experience. Risk profiles differ based on customer location and are pooled as North
America, Latin America and the Caribbean (“LAC”), Europe, Middle East and Africa (“EMEA”), and Asia Pacific
(“APAC”).
During 2020, $23.5 million of customer financing receivables, primarily within LAC, were written off as uncollectible
due to the impacts of COVID-19. Additionally, due to the duration of the COVID-19 induced shutdowns in LAC and
potential future impacts on our customers caused by COVID-19, we increased our allowance for credit losses during
the year ended December 31, 2020. At December 31, 2020 the Company had $43.3 million of credit loss
allowances associated with the LAC customer financing receivables.
The past due balances, which represent installments that are one day or more past their contractual due date, of
customer financing receivables at amortized cost and the geography credit quality indicator at December 31, 2020
and 2019 are as follows:
($ thousands)
Past due
Short-term portion not yet due
Long-term portion not yet due
($ thousands)
Past due
Short-term portion not yet due
Long-term portion not yet due
North America
6,062
37,728
30,960
74,750
North America
4,522
63,529
12,380
80,431
December 31, 2020
EMEA
LAC
106,011
67,634
31,562
205,207
12,585
32,488
26,558
71,631
APAC
3,839
8,303
1,700
13,842
Total
128,497
146,153
90,780
365,430
December 31, 2019
EMEA
LAC
APAC
Total
47,729
97,965
87,879
233,573
13,266
26,045
23,454
62,765
188
1,977
1,829
3,994
65,705
189,516
125,542
380,763
Annual Report and Accounts 2020 Page | 117
8. Fair Value Measurements
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
Our significant financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2020
and 2019 are as follows:
Balance Sheet Location
Level 1
Level 2
Level 3
Total
Fair
Value
December 31, 2020
Other current and other non-current
assets
Other non-current assets
Other current and other non-current
liabilities
—
10,738
6,026
—
—
—
10,738
6,026
—
10,113
—
10,113
December 31, 2019
Balance Sheet Location
Level 1
Level 2
Level 3
Total
Fair
Value
Other current and other non-current
assets
Other non-current assets
Other current and other non-current
liabilities
—
7,769
8,317
—
—
—
8,317
7,769
—
6,425
—
6,425
($ thousands)
Assets:
Derivative assets
Equity investments
Liabilities:
Derivative liabilities
($ thousands)
Assets:
Derivative assets
Equity investments
Liabilities:
Derivative liabilities
Valuation Techniques
Derivative assets and liabilities classified as Level 2 were derived from quoted market prices for similar instruments
or by discounting the future cash flows with adjustments for credit risk as appropriate. All significant inputs were
derived from or corroborated by observable market data including current forward exchange rates and LIBOR rates,
among others.
At December 31, 2020 and 2019, the carrying amounts for cash and cash equivalents, restricted cash, trade and
other receivables, other current assets, accounts payable, and other current liabilities approximated their estimated
fair values because of their short-term nature.
Financial Assets Measured at Fair Value on a Nonrecurring Basis
Our assessment of goodwill for impairment includes various inputs, including forecasted revenue, forecasted
operating profits, terminal growth rates, and weighted-average costs of capital. The projected cash flows used in
calculating the fair value of our cash-generating units, using the income approach, considered historical and
estimated future results and general economic and market conditions, as well as the impact of planned business
and operational strategies. As a result, as of December 31, 2019, the Company classified the former International
cash-generating unit measured at fair value on a nonrecurring basis within Level 3 of the fair value hierarchy.
Annual Report and Accounts 2020 Page | 118
Financial Assets and Liabilities Not Carried at Fair Value
The carrying amounts and fair value hierarchy classification of our significant financial assets and liabilities not
carried at fair value as of December 31, 2020 and 2019 are as follows:
($ thousands)
Assets:
Customer financing receivables,
net
Equity investments
Liabilities:
Jackpot liabilities
Debt (1)
($ thousands)
Assets:
Customer financing receivables,
net
Equity investments
Liabilities:
Jackpot liabilities
Debt (1)
Carrying
Amount
315,511
12,375
218,943
8,242,898
Carrying
Amount
349,103
11,482
234,771
8,062,816
(1) Debt excludes short-term borrowings and swap adjustments
December 31, 2020
Level 1
Level 2
Level 3
Total Fair
Value
—
—
—
—
—
—
312,690
12,375
312,690
12,375
—
8,701,509
210,516
—
210,516
8,701,509
December 31, 2019
Level 1
Level 2
Level 3
Total Fair
Value
—
—
—
—
—
—
349,686
11,482
349,686
11,482
—
8,589,939
230,307
—
230,307
8,589,939
Level 3 equity investments are measured at cost, less impairment, plus or minus changes resulting from observable
price changes, which approximates fair value.
9. Derivative Financial Instruments
We use selected derivative hedging instruments, principally foreign currency forward contracts and interest rate
swaps, for the purpose of managing currency risks and interest rate risk arising from our operations and sources of
financing.
Cash Flow Hedges
The notional amount of foreign currency forward contracts, designated as cash flow hedges, outstanding at
December 31, 2020 and 2019 were $61.5 million and $56.8 million, respectively. The amount recorded within other
comprehensive income (loss) at December 31, 2020 is expected to impact the consolidated statement of operations
in 2021.
Fair Value Hedges
In September 2015, we executed $625.0 million notional amount of interest rate swaps that effectively convert
$625.0 million of the 6.25% Senior Secured U.S. Dollar Notes from fixed interest rate debt to variable rate debt. The
terms of the swap require periodic net settlement payments and expire in February 2022. In August 2020,
$200.0 million notional amount of the interest rate swaps were terminated early. At December 31, 2020, the
remaining notional amount of $425.0 million in interest rate swaps were no longer designated as hedging
Annual Report and Accounts 2020 Page | 119
relationships and the fair value of the swaps is recognized in interest expense on the consolidated statement of
operations with no corresponding offset to debt.
Net Investment Hedges
In October 2018, we executed $200.0 million notional amount of cross-currency swaps that are a hedge of foreign
exchange risk associated with a net investment in foreign operations. The terms of the swap require periodic net
settlement payments and a final notional exchange will occur on settlement. The swaps expire in August 2021. In
March 2020, $100.0 million notional amount in cross-currency swaps were early terminated and the remaining
notional amount at December 31, 2020 was $100.0 million.
Derivatives Not Designated as Hedging Instruments
The notional amount of foreign currency forward contracts, not designated as hedging instruments, outstanding at
December 31, 2020 and 2019 was $295.4 million and $550.0 million, respectively.
Refer to Note 20, Shareholders’ Equity - Other Reserves for further information.
10. Financial Risk Management
Our activities expose us to a variety of market risks including interest rate risk and foreign currency exchange rate
risk. Our overall risk management strategy focuses on the unpredictability of financial markets and seeks to
minimize potential adverse effects on our performance through ongoing operational and finance activities. We
monitor and manage our exposure to such risks both centrally and at the local level, as appropriate, as part of our
overall risk management program with the objective of seeking to reduce the potential adverse effects of such risks
on our results of operations and financial position.
Depending upon the risk assessment, we use selected derivative hedging instruments, including principally interest
rate swaps and foreign currency forward contracts, for the purposes of managing interest rate risk and currency
risks arising from our operations and sources of financing. Our policy is not to enter into such contracts for
speculative purposes. Our accounting policies and disclosures regarding derivatives are set out in Note 2, Summary
of Significant Accounting Policies, and Note 9, Derivative Financial Instruments.
The following section provides qualitative and quantitative disclosures on the effects that these risks may have. The
quantitative data reported below does not have any predictive value and does not reflect the complexity of the
markets or reactions which may result from any changes that are assumed to have taken place.
Interest Rate Risk
Indebtedness
Our exposure to changes in market interest rates relates primarily to our cash and financial liabilities which bear
floating interest rates. Our policy is to manage interest cost using a mix of fixed and variable rate debt. We have
historically used various techniques to mitigate the risks associated with future changes in interest rates, including
entering into interest rate swap and treasury rate lock agreements.
At December 31, 2020 and 2019, approximately 23% and 24% of our debt portfolio was exposed to interest rate
fluctuations, respectively. Our exposure to floating rates of interest primarily relates to the Euro Term Loan Facility
due January 2023 and Revolving Credit Facilities due July 2024. At December 31, 2019, we held $625.0 million
(notional amount) in interest rate swaps that effectively convert $625.0 million of the 6.250% Senior Secured U.S.
Dollar Notes due February 2022 from fixed interest rate debt to variable rate debt. At December 31, 2020, we held
$425.0 million (notional amount) in interest rate swaps that were no longer designated as hedging relationships and
the fair value of the swaps is recognized in interest expense with no corresponding offset to debt.
A hypothetical 10 basis points increase in interest rates for 2020 and 2019, with all other variables held constant,
would have resulted in lower income from continuing operations before provision for income taxes of approximately
$1.9 million and $2.0 million, respectively.
Annual Report and Accounts 2020 Page | 120
Costs to Fund Jackpot Liabilities
Fluctuations in prime, treasury, and agency rates due to changes in market and other economic conditions directly
impact our cost to fund jackpots and corresponding gaming operating income. If interest rates decline, jackpot cost
increases and operating income decreases. We estimate a hypothetical decline of one percentage point in
applicable interest rates would have reduced operating income by approximately $7.3 million and $5.6 million in
2020 and 2019, respectively. We do not manage this exposure with derivative financial instruments.
Foreign Currency Exchange Rate Risk
We operate on an international basis across a number of geographical locations. We are exposed to (i)
transactional foreign exchange risk when an entity enters into transactions in a currency other than its functional
currency, and (ii) translation foreign exchange risk which arises when we translate the financial statements of our
foreign entities into U.S. dollars for the preparation of the consolidated financial statements.
Transactional Risk
Our subsidiaries generally execute their operating activities in their respective functional currencies. In
circumstances where we enter into transactions in a currency other than the functional currency of the relevant
entity, we seek to minimize our exposure by (i) sharing risk with our customers (for example, in limited
circumstances, but whenever possible, we negotiate clauses into our contracts that allows for price adjustments
should a material change in foreign exchange rates occur), (ii) creating a natural hedge by netting receipts and
payments, (iii) utilizing foreign currency borrowings, and (iv) where applicable, by entering into foreign currency
forward and option contracts.
The principal foreign currency to which we are exposed is the euro. A hypothetical 10% decrease in the U.S. dollar
to euro exchange rate, with all other variables held constant, would have resulted in lower income from continuing
operations before provision for income taxes of approximately $363.3 million and $331.2 million for 2020 and 2019,
respectively.
From time to time, we enter into foreign currency forward and option contracts to reduce the exposure associated
with certain firm commitments, variable service revenues, and certain assets and liabilities denominated in foreign
currencies. These contracts generally have average maturities of 12 months or less, and are regularly renewed to
provide continuing coverage throughout the year. It is our policy to negotiate the terms of the hedge derivatives to
match the terms of the hedged item to maximize hedge effectiveness.
At December 31, 2020, we had forward contracts for the sale of approximately $169.6 million of foreign currency
(primarily South African rand, Canadian dollars, Australian dollars, and British pounds) and the purchase of
approximately $187.3 million of foreign currency (primarily euro and Polish zlotys).
At December 31, 2019, we had forward contracts for the sale of approximately $187.6 million of foreign currency
(primarily Colombian peso, Canadian dollars, South African rand, and Australian dollars) and the purchase of
approximately $419.2 million of foreign currency (primarily euro and Canadian dollars).
Translation Risk
Certain of our subsidiaries are located in countries that are outside of the United States, in particular the Eurozone.
As our reporting currency is the U.S. dollar, the income statements of those entities are converted into U.S. dollars
using the average exchange rate for the period, and while revenues and costs are unchanged in local currency,
changes in exchange rates may lead to effects on the converted balances of revenues, costs and the result in U.S.
dollars. The monetary assets and liabilities of consolidated entities that have a reporting currency other than the
U.S. dollar are translated into U.S. dollars at the period-end foreign exchange rate. The effects of these changes in
foreign exchange rates are recognized directly in the consolidated statement of shareholders' equity within other
reserves.
Our foreign currency exposure primarily arises from changes between the U.S. dollar and the euro. A hypothetical
10% decrease in the U.S. dollar to euro exchange rate, with all other variables held constant, would have reduced
equity by $118.3 million and $120.4 million for 2020 and 2019, respectively.
Annual Report and Accounts 2020 Page | 121
Capital Management
The primary goal of our capital management strategy is to ensure strong credit ratings and healthy financial ratios in
order to support our business while maximizing corporate value and reducing our financial risks. We consider all
equity and debt to be managed capital of the Company.
We manage our capital structure and make adjustments based on long-term strategy decisions in light of changes
in economic conditions. Additionally, we seek to preserve an optimal weighted average cost of capital and maintain
sufficient financial flexibility to pursue growth opportunities.
Our capital structure is as follows:
($ thousands, except ratios)
Total Debt (Note 17)
Less: Cash and cash equivalents
Less: Debt issuance costs - Revolving Credit Facilities due July 2024 (Note 7)
Total Net Debt
Total Equity
Net Debt to Equity Ratio
December 31,
2020
2019
8,262,420
8,065,517
907,015
14,322
654,628
20,464
7,341,083
7,390,425
1,224,832
2,174,688
6.0x
3.4x
Annual Report and Accounts 2020 Page | 122
11. Systems, Equipment and Other Assets Related to Contracts, net and Property, Plant and Equipment, net
Systems & Equipment, net consists of the following:
($ thousands)
Net book value
Land
Buildings
Terminals and
Systems
Furniture and
Equipment
Construction
in Progress
Total
Balance at December 31, 2018
297
Additions
Depreciation
Impairment
Disposals
Foreign currency translation
Transfers
Other
Balance at December 31, 2019
Additions
Depreciation
Disposals
Foreign currency translation
Transfers
Other
Balance at December 31, 2020
Balance at December 31, 2019
Cost
Accumulated depreciation
Net book value
Balance at December 31, 2020
Cost
Accumulated depreciation
Net book value
—
—
—
—
—
—
—
297
—
—
(297)
—
—
—
—
297
—
297
—
—
—
6,383
1,138
—
—
—
1,941
(9,462)
—
—
291
(560)
—
361
778
—
870
748
(748)
—
1,188,092
28,938
(342,028)
(432)
(66,844)
26,723
278,219
(407)
1,112,261
29,115
(311,965)
(5,422)
24,397
101,246
—
949,632
44,739
2,402
(11,765)
—
(678)
5,745
5,110
(1,859)
43,694
2,130
(12,620)
(225)
511
7,337
210
41,037
67,266
155,587
—
—
(137)
6,208
(179,384)
(200)
49,340
141,774
—
(593)
4,359
(118,298)
—
1,306,777
188,065
(353,793)
(432)
(67,659)
40,617
94,483
(2,466)
1,205,592
173,310
(325,145)
(6,537)
29,628
(8,937)
210
76,582
1,068,121
2,610,417
(1,498,156)
1,112,261
138,591
(94,897)
43,694
49,340
2,799,393
—
(1,593,801)
49,340
1,205,592
2,257
2,614,869
(1,387)
(1,665,237)
870
949,632
150,419
(109,382)
41,037
76,582
2,844,127
—
(1,776,006)
76,582
1,068,121
Gain on Sale of Assets to Distributor
During 2019, we entered into a long-term strategic agreement with a distributor in Oklahoma that included the sale
of used, non-premium equipment, which was previously included within Systems & Equipment, net within the
consolidated balance sheet. This sale resulted in a gain of $27.7 million which is classified in other operating
income on the consolidated statement of operations for the year ended December 31, 2019.
Annual Report and Accounts 2020 Page | 123
PPE, net consists of the following:
($ thousands)
Net book value
Land
Buildings
Furniture and
Equipment
Construction in
Progress
Total
Balance at December 31, 2018
2,462
21,765
Additions
Depreciation
Impairment
Disposals
Foreign currency translation
Transfers
Other
Balance at December 31, 2019
Additions
Depreciation
Impairment
Disposals
Foreign currency translation
Transfers
Other
Balance at December 31, 2020
Balance at December 31, 2019
Cost
Accumulated depreciation
Net book value
Balance at December 31, 2020
Cost
Accumulated depreciation
Net book value
12. Leases
Lessee
—
—
—
(143)
(2)
—
—
2,317
—
—
—
(1,438)
85
—
—
964
2,317
—
2,317
964
—
964
14
—
—
(7,967)
(800)
7,856
225
21,093
1,642
(1,455)
(896)
(3,979)
716
—
—
17,121
70,473
(49,380)
21,093
68,847
(51,726)
17,121
117,535
4,275
(32,448)
—
(2,722)
2,207
19,338
(372)
107,813
3,582
(28,481)
—
(417)
907
15,676
18
99,098
244,109
(136,296)
107,813
262,501
(163,403)
99,098
12,777
32,685
—
(562)
—
(1)
(29,275)
—
15,624
19,238
—
—
—
(226)
(19,651)
—
14,985
15,624
—
15,624
14,985
—
14,985
154,539
36,974
(32,448)
(562)
(10,832)
1,404
(2,081)
(147)
146,847
24,462
(29,936)
(896)
(5,834)
1,482
(3,975)
18
132,168
332,523
(185,676)
146,847
347,297
(215,129)
132,168
We have leases for real estate (warehouses, office space, data centers), vehicles, communication equipment, and
other equipment. Many of our real estate leases include one or more options to renew, while some include
termination options. Certain vehicle and equipment leases include residual value guarantees and options to
purchase the leased asset. Many of our real estate leases include variable payments for maintenance, real estate
taxes, and insurance that are determined based on the actual costs incurred by the landlord.
The classification of our leases in the consolidated balance sheet is as follows:
($ thousands)
Assets:
ROU asset, net (1)
Total lease assets
Liabilities:
Lease liability, current
Lease liability, non-current
Balance Sheet Classification
Right-of-use assets
December 31,
2020
2019
304,189
304,189
324,358
324,358
Other current liabilities
Lease liabilities
58,516
289,572
55,451
304,247
Total lease liabilities
359,698
(1) ROU assets are recorded net of accumulated amortization of $38.2 million and $65.9 million at December 31, 2020 and December 31, 2019,
respectively
348,088
Annual Report and Accounts 2020 Page | 124
ROU asset, net, by class of underlying assets is as follows:
($ thousands)
Real estate
Vehicles
Other equipment
Total ROU asset, net
Components of expense related to leases are as follows:
($ thousands)
Real estate
Vehicles
Other equipment
Total depreciation expense
Interest expense
Variable lease costs (1)
(1) Variable lease costs include immaterial amounts related to short-term leases and sublease income
Maturities of lease liabilities at December 31, 2020 are as follows ($ thousands):
Year
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
December 31,
2020
December 31,
2019
272,356
17,610
14,223
304,189
285,102
21,966
17,290
324,358
For the year ended December 31,
2020
2019
51,461
10,831
5,720
68,012
23,007
20,879
52,338
10,603
6,313
69,254
24,313
23,582
Total (1)
79,767
66,686
58,136
46,103
39,845
173,347
463,884
(115,796)
348,088
(1) The maturities above exclude leases that have not yet commenced and such leases are not material in the aggregate
Cash flow information and non-cash activity related to leases is as follows:
($ thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows
Finance cash flows
For the year ended December 31
2020
2019
23,007
60,650
24,313
58,367
Non-cash activity:
ROU assets obtained in exchange for lease obligations (net of early
terminations)
41,711
21,845
Annual Report and Accounts 2020 Page | 125
Lessor
We have various arrangements for lottery and commercial gaming equipment under which we are the lessor. These
leases generally meet the criteria for operating lease classification. Lease income for operating leases is included
within service revenue, while lease income for sales type leases is included predominately within product sales, in
the consolidated statement of operations. Total lease income was approximately 9% of total revenue for each of the
years ended December 31, 2020 and 2019.
13. Restructuring
During 2020, we initiated three restructuring plans as described below and during 2019, we expanded existing
restructuring plans initiated in the prior year. As of December 31, 2019 these plans were substantially completed.
Restructuring expense incurred under these plans was previously included in corporate support expenses, which
were not allocated to the business segments. In conjunction with the Company’s segment reorganization as
disclosed in Note 22 – Segment Information, restructuring expenses are now included in the business segments
carrying out the restructuring activity.
2020 Segment Reorganization
During the first quarter of 2020, we initiated a restructuring plan associated with our global initiative to simplify our
organizational structure and increase efficiency and effectiveness. We expect to incur approximately $17 million in
severance and related employee costs under this plan, which is expected to be substantially completed by the end
of the first quarter of 2021. We incurred $16.3 million in severance and related employee costs for the year ended
December 31, 2020, which impacted our two segments and corporate support function.
Rollforward of Restructuring Liability
The following table presents the activity in the restructuring liability under this plan for the year ended December 31,
2020:
($ thousands)
Balance at beginning of period
Restructuring expense, net
Cash payments
Other adjustments, net
Balance at end of period
2020 Global Supply Chain Optimization
Severance
and Related
Employee
Costs
—
16,310
(9,132)
544
7,722
During the first quarter of 2020, we initiated a restructuring plan to optimize our global supply chain and footprint
resulting in a significant reduction to our primary manufacturing operations. We will utilize contract manufacturers
that are worldwide experts in manufacturing and excel at sourcing and assembly activities. We intend to utilize
these third-party contract manufacturers to reduce costs and achieve efficiencies in fulfilling future demand for our
products.
Annual Report and Accounts 2020 Page | 126
We expect to incur up to $9 million in total costs under this plan, comprised of approximately $5 million in severance
and related employee costs and approximately $4 million in other costs. The plan is expected to be substantially
completed by the end of the first quarter of 2021. The following table summarizes restructuring expense for the year
ended December 31, 2020 under this plan by type of cost, primarily in the Global Gaming segment:
($ thousands)
Severance and related employee costs
5,123
Other (1)
3,576
Total
8,699
(1) This expense includes approximately $460 thousand of asset impairments. The offset for these charges is Property, plant and equipment, net
in the consolidated balance sheet at December 31, 2020
For the year
ended
December 31,
2020
Rollforward of Restructuring Liability
The following table presents the activity in the restructuring liability under this plan for the year ended December 31,
2020:
($ thousands)
Balance at beginning of period
Restructuring expense, net
Cash payments
Balance at end of period
Severance
and Related
Employee
Costs
Other Costs
Total
—
5,123
(3,630)
1,493
—
3,116
(1,916)
1,200
—
8,239
(5,546)
2,693
2020 Technology Organization Consolidation
During the second quarter of 2020, we initiated a restructuring plan to realign and consolidate operations, reduce
costs, and improve operational efficiencies within our Technology group. We expect to incur approximately
$18 million primarily in severance and related employee costs under this plan, which is expected to be substantially
completed by the end of the fourth quarter of 2021. We incurred $17.5 million in severance and related employee
costs for the year ended December 31, 2020, primarily in the Global Gaming segment.
Rollforward of Restructuring Liability
The following table presents the activity in the restructuring liability under this plan for the year ended December 31,
2020:
($ thousands)
Balance at beginning of period
Restructuring expense, net
Cash payments
Balance at end of period
Severance
and Related
Employee
Costs
—
17,499
(3,506)
13,993
Annual Report and Accounts 2020 Page | 127
Restructuring Expense
The following table summarizes consolidated restructuring expense by segment and type of cost:
($ thousands)
Global Lottery
Global Gaming
Corporate and Other
Total
($ thousands)
Global Lottery
Global Gaming
Corporate and Other
Total
14. Goodwill
For the year ended December 31, 2020
Severance
and Related
Employee
Costs
Asset
Impairment
Costs
5,399
29,936
6,068
41,403
—
460
—
460
Other
Total
—
3,216
(34)
3,182
5,399
33,612
6,034
45,045
For the year ended December 31, 2019
Severance
and Related
Employee
Costs
Asset
Impairment
Costs
2,164
3,173
1,737
7,074
—
15,500
—
15,500
Other
Total
6
(311)
2,586
2,281
2,170
18,362
4,323
24,855
As discussed in Note 22 – Segment Information, on July 1, 2020, we adopted a new organizational structure
focused on two business segments: Global Lottery and Global Gaming. This resulted in a change in our operating
segments and cash-generating units. Prior to this change, we had four cash-generating units: North America
Gaming and Interactive, North America Lottery, International, and Italy.
As a result of the change in cash-generating units, at July 1, 2020, we allocated goodwill to our new cash-
generating units using a relative fair value approach. The goodwill allocated to the new Global Lottery and Global
Gaming cash-generating units was $3,071.6 million and $2,168.7 million, respectively, and the estimated fair values
were determined to exceed the carrying values, which indicated no impairment existed. In addition, we completed
an assessment for any potential goodwill impairment for all the former cash-generating units immediately prior to the
reallocation and determined that no impairment existed.
Annual Report and Accounts 2020 Page | 128
(511,370)
5,119,816
—
—
—
(57,000)
(13,201)
(19,588)
(511,370)
5,030,027
—
—
—
—
(296,000)
(5,071)
—
97,993
Changes in the carrying amount of goodwill consist of the following:
Cash-Generating Units Prior to
July 1, 2020
Cash-Generating Units After
July 1, 2020
North America
Gaming and
Interactive
North America
Lottery
International
Italy
Global Lottery
Global Gaming
Discontinued
Operations
Total
($ thousands)
Balance at December
31, 2018
Impairment
Disposal
Foreign currency
translation
Balance at December
31, 2019
Impairment
Foreign currency
translation
1,394,867
1,221,589
1,356,848
1,657,882
—
—
—
—
—
—
(57,000)
(13,201)
—
—
(2,677)
(16,911)
1,394,867
1,221,589
1,283,970
1,640,971
(103,000)
—
—
—
(193,000)
—
(2,136)
(2,935)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Segment realignment
(1,291,867)
(1,221,589)
(1,088,834)
(1,638,036)
3,071,589
2,168,737
Foreign currency
translation
Discontinued
operations
Balance at December
31, 2020
Balance at December
31, 2019
Cost
—
—
—
—
—
—
—
—
—
—
—
—
2,153,867
1,225,682
1,641,187
1,642,656
Accumulated impairment
(759,000)
(4,093)
(357,217)
(1,685)
1,394,867
1,221,589
1,283,970
1,640,971
68,075
29,918
—
(511,370)
511,370
—
3,139,664
1,687,285
—
4,826,949
—
—
—
—
—
—
(511,370)
6,152,022
—
(1,121,995)
(511,370)
5,030,027
Balance at December
31, 2020
Cost
Goodwill Impairment
—
—
—
—
—
—
—
—
3,139,664
3,139,664
1,687,285
1,687,285
—
—
4,826,949
4,826,949
The process of evaluating potential impairments related to goodwill requires the application of significant judgment.
Goodwill is tested for impairment annually, in the fourth quarter, or whenever events or changes in circumstances
indicate the carrying amount may not be recoverable. If an event occurs that would cause revisions to the estimates
and assumptions used in analyzing the fair value of goodwill, the revision could result in a non-cash impairment loss
that could have a material impact on financial results.
The goodwill impairment test compares the recoverable value of our two cash-generating units (which are the same
as our reportable segments) with its carrying amount and an impairment loss is recognized for the amount by which
the carrying amount exceeds the cash-generating unit's recoverable value.
(♦) In performing the goodwill impairment test, we estimate the recoverable value of the cash-generating units using
an income approach based on projected discounted cash flows. The procedures we follow includes, but are not
limited to, the following:
•
•
•
•
•
•
Analysis of the conditions in, and the economic outlook for, the cash-generating units;
Analysis of general market data, including economic, governmental, and environmental factors;
Review of the history, current state, and future operations of the cash-generating units;
Analysis of financial and operating projections based on historical operating results, industry results, and
expectations;
Analysis of financial, transactional, and trading data for companies engaged in similar lines of business to
develop appropriate valuation multiples and operating comparisons; and
Calculation of our market capitalization, total invested capital, the implied market participant acquisition
premium, and supporting qualitative and quantitative analysis.
Annual Report and Accounts 2020 Page | 129
(♦) Under the income approach, the recoverable value of the cash-generating unit is determined based on the
present value of each unit's estimated future cash flows, discounted at a risk-adjusted rate. We use internal
forecasts for a five-year period to estimate future cash flows and estimate long-term future growth rates based on
internal projections of the long-term outlook for each cash-generating unit. We use discount rates that are
commensurate with the risks and uncertainty inherent in each cash-generating unit and in internally developed
forecasts. Discount rates used in the cash-generating unit valuations in 2020 were 9.60% for Global Lottery and
11.00% for Global Gaming. An increase of approximately 70 basis points in the Global Gaming cash-generating
unit’s discount rate would lead to an impairment. Discount rates used in the cash-generating unit valuations in 2019
were 9.10% North America Gaming and Interactive, 7.40% for North America Lottery, 10.60% for International, and
10.55% for Italy.
Estimating the recoverable value of cash-generating units requires management to use its judgment in making
estimates and making forecasts that are based on a number of factors including forecasted revenue, forecasted
operating profits, terminal growth rates, and weighted-average costs of capital. Actual results may differ from those
assumed in forecasts.
During the first quarter of 2020, we determined there was an interim goodwill impairment triggering event caused by
COVID-19. As a result of the identified triggering event, we estimated the fair value of each of our former cash-
generating units using an income approach based on projected discounted cash flows. Based principally on lower
forecasted revenue and operating profits caused by lower demand for our commercial gaming products, we
recorded a $296.0 million non-cash impairment loss with no income tax benefit, of which $193.0 million and $103.0
million was recorded within our former International and North America Gaming cash-generating units, respectively,
to reduce the carrying amount of the cash-generating units to fair value.
During the fourth quarter of 2019, we recorded $57.0 million in non-cash impairment loss with no income tax benefit
and reduced the carrying amount of our former International cash-generating unit to fair value. We determined there
was an impairment in the former International cash-generating unit’s goodwill due to lower forecasted cash flows
along with a higher weighted-average cost of capital.
Annual Report and Accounts 2020 Page | 130
15. Intangible Assets, net
($ thousands)
Balance at December 31, 2018
Acquisitions
Additions
Amortization
Foreign currency translation
Write-off and other
Balance at December 31, 2019
Additions
Amortization
Foreign currency translation
Write-off and other
Balance at December 31, 2020
December 31, 2019
Cost
Accumulated amortization
Accumulated impairment loss
Weighted average life (in years)
December 31, 2020
Cost
Accumulated amortization
Accumulated impairment loss
Weighted average life (in years)
Customer
relationships
Trademarks
(indefinite-
lived)
1,316,340
—
305
(127,571)
20
—
1,189,094
—
(123,237)
1,203
(1,873)
1,065,187
246,913
—
—
—
—
(1,913)
245,000
—
—
—
—
245,000
Trademarks
(definite-lived)
123,783
—
—
(14,695)
—
—
109,088
—
(14,678)
—
—
94,410
Net Book Value
Computer
software and
game library
Licenses
Developed
technologies
Other
180,778
—
23,634
(45,570)
(561)
—
158,281
17,677
(45,136)
3,661
(204)
134,279
17,183
—
2,995
(4,883)
(577)
(2,144)
12,574
6,751
(5,363)
960
(4,324)
10,598
40,905
—
—
(23,954)
—
(625)
16,326
5,543
(9,323)
—
—
12,546
8,150
7,725
433
(2,644)
(73)
—
13,591
373
(4,168)
640
(10)
10,426
Total
1,934,052
7,725
27,367
(219,317)
(1,191)
(4,682)
1,743,954
30,344
(201,905)
6,464
(6,411)
1,572,446
2,329,916
(1,092,280)
(48,542)
1,189,094
15.5
254,689
—
(9,689)
245,000
—
224,730
(76,196)
(39,446)
109,088
14.1
888,911
(723,768)
(6,862)
158,281
5.7
60,763
(48,189)
—
12,574
3.3
219,638
(203,121)
(191)
16,326
5.4
53,755
(21,012)
(19,152)
13,591
9.1
4,032,402
(2,164,566)
(123,882)
1,743,954
2,330,006
(1,214,103)
(50,716)
1,065,187
15.5
254,689
—
(9,689)
245,000
—
227,316
(91,808)
(41,098)
94,410
14.1
925,026
(783,671)
(7,076)
134,279
5.6
69,148
(58,550)
—
10,598
3.5
225,317
(212,562)
(209)
12,546
5.6
58,208
(26,957)
(20,825)
10,426
8.9
4,089,710
(2,387,651)
(129,613)
1,572,446
Annual Report and Accounts 2020 Page | 131
Trademarks with indefinite lives have been allocated to the Corporate and Other support function for impairment
testing at December 31, 2020 and 2019.
Intangible asset amortization expense of $201.9 million and $219.3 million, which includes computer software
amortization expense of $25.7 million and $29.4 million) was recorded in 2020 and 2019, respectively.
Amortization expense on intangible assets for the next five years is expected to be as follows ($ thousands):
Year
2021
2022
2023
2024
2025
Total
16. Other Liabilities
Other Current Liabilities
($ thousands)
Accrued interest payable
Current financial liabilities
Redeemable non-controlling interest
Accrued expenses
Contract liabilities
Taxes other than income taxes
Employee compensation
Income taxes payable
Jackpot liabilities
Finance lease liabilities
Other
Other Non-Current Liabilities
($ thousands)
Redeemable non-controlling interest
Jackpot liabilities
Contract liabilities
Income taxes payable
Royalties payable
Other
Amount
188,614
179,341
156,126
140,756
119,384
784,221
Notes
4
19
12
Notes
19
4
December 31,
2020
138,184
128,330
124,790
118,037
108,707
96,346
89,832
73,741
71,290
58,516
15,390
1,023,163
2019
141,485
62,806
110,999
99,700
66,749
67,309
155,962
64,721
74,670
55,451
20,358
920,210
December 31,
2020
292,237
147,654
62,175
15,594
14,091
41,968
573,719
2019
286,634
160,101
65,855
26,493
18,918
40,735
598,736
Annual Report and Accounts 2020 Page | 132
Redeemable Non-controlling Interest
In 2016, the Parent, through its subsidiary Lottomatica S.p.A. ("Lottomatica"), entered into a consortium (Lottoitalia
S.r.l. or "Lottoitalia") to bid on the Italian Gioco del Lotto service license (the "Lotto License"). Lottoitalia was
awarded management of the Lotto License for a nine-year term, and under the terms of the consortium agreement,
Lottomatica is the principal operating partner fulfilling the requirements of the Lotto License. We consolidate
Lottoitalia due to the Company's risks and rewards of the investment and Lottoitalia's need for funding to finance
planned operations.
We classify the non-controlling interest in Lottoitalia as a financial liability recorded at amortized cost. Changes in
the financial liability are recorded within other expense on the consolidated statement of operations.
In connection with the formation of Lottoitalia in 2016, Lottomatica entered into an agreement with Italian Gaming
Holding a.s. ("IGH"), one of the consortium members, which contains a deadlock put/call option in which IGH has
the right, at its discretion, to sell its interest in Lottoitalia to Lottomatica and Lottomatica has a reciprocal call right, in
the event of certain specified events as defined in the agreement. The put/call options expire 60 days following
written notice by either party following the applicable event. The strike price of the options is determined based on a
specified formula as defined in the agreement. The agreement also allows for the extension of Lottoitalia past its
fixed term of December 31, 2026 if agreed to by both, Lottomatica and IGH.
17. Debt
The Company’s long-term debt obligations consist of the following:
($ thousands)
6.250% Senior Secured U.S. Dollar Notes due February 2022
4.750% Senior Secured Euro Notes due February 2023
5.350% Senior Secured U.S. Dollar Notes due October 2023
3.500% Senior Secured Euro Notes due July 2024
6.500% Senior Secured U.S. Dollar Notes due February 2025
3.500% Senior Secured Euro Notes due June 2026
6.250% Senior Secured U.S. Dollar Notes due January 2027
2.375% Senior Secured Euro Notes due April 2028
5.250% Senior Secured U.S. Dollar Notes due January 2029
Senior Secured Notes
Euro Term Loan Facility due January 2023
Euro Revolving Credit Facility B due July 2024 (1)
U.S. Dollar Revolving Credit Facility A due July 2024 (1)
Long-term debt, less current portion
Euro Term Loan Facility due January 2023
Current portion of long-term debt
Short-term borrowings
Total debt
Principal
1,000,001
1,043,035
60,567
613,550
1,100,000
920,325
750,000
613,550
750,000
6,851,028
1,055,306
—
—
7,906,334
392,672
392,672
480
December 31, 2020
Debt
issuance
cost, net
Premium
Swap and
other
(3,039)
(4,983)
—
(3,808)
(8,359)
(6,995)
(5,845)
(5,150)
(6,875)
(45,054)
(7,439)
—
—
(52,493)
—
—
—
—
—
224
—
—
—
—
—
—
224
—
—
—
224
—
—
—
Total
1,003,822
1,038,052
60,791
609,742
1,091,641
913,330
744,155
608,400
743,125
6,813,058
6,860
—
—
—
—
—
—
—
—
6,860
8,343
—
1,056,210
—
—
15,203
—
7,869,268
—
—
—
392,672
392,672
480
8,299,486
(52,493)
224
15,203
8,262,420
(1) As of December 31, 2020, $14.3 million of debt issuance costs, net and other are presented in other non-current assets for debt instruments
with no outstanding borrowings
Annual Report and Accounts 2020 Page | 133
December 31, 2019
Debt
issuance
cost, net
Premium
Swap and
other
Total
($ thousands)
6.250% Senior Secured U.S. Dollar Notes due February 2022
4.750% Senior Secured Euro Notes due February 2023
5.350% Senior Secured U.S. Dollar Notes due October 2023
3.500% Senior Secured Euro Notes due July 2024
6.500% Senior Secured U.S. Dollar Notes due February 2025
3.500% Senior Secured Euro Notes due June 2026
6.250% Senior Secured U.S. Dollar Notes due January 2027
2.375% Senior Secured Euro Notes due April 2028
Senior Secured Notes
Euro Term Loan Facility due January 2023
Euro Revolving Credit Facility B due July 2024 (1)
U.S. Dollar Revolving Credit Facility A due July 2024 (1)
Long-term debt, less current portion
4.750% Senior Secured Euro Notes due March 2020
5.500% Senior Secured U.S. Dollar Notes due June 2020
Current portion of long-term debt
Principal
1,500,000
954,890
60,567
561,700
1,100,000
842,550
750,000
561,700
6,331,407
1,325,612
—
—
7,657,019
435,767
27,311
463,078
(8,199)
(6,508)
—
(4,369)
(10,041)
(7,445)
(6,613)
(5,297)
(48,472)
(8,223)
—
—
(56,695)
(978)
—
(978)
Short-term borrowings
3,193
—
—
—
318
—
—
—
—
—
318
—
—
—
318
—
74
74
—
(473) 1,491,328
948,382
60,885
557,331
1,089,959
835,105
743,387
556,403
(473) 6,282,780
—
—
—
—
—
—
—
—
—
1,317,389
—
—
—
(473) 7,600,169
—
(19)
434,789
27,366
(19) 462,155
—
3,193
Total debt
8,123,290
(57,673)
392
(492) 8,065,517
(1) As of December 31, 2019, $20.5 million of debt issuance costs, net are presented in other non-current assets for debt instruments with no
outstanding borrowings
The principal amount of long-term debt maturing over the next five years and thereafter as of December 31, 2020 is
as follows ($ thousands):
Year
2021
2022
2023
2024
2025
2026 and thereafter
Total principal payments
U.S. Dollar
Denominated
Euro
Denominated
—
1,000,001
60,567
—
1,100,000
1,500,000
3,660,568
392,672
392,672
1,705,669
613,550
—
1,533,875
4,638,438
Total
392,672
1,392,673
1,766,236
613,550
1,100,000
3,033,875
8,299,006
Annual Report and Accounts 2020 Page | 134
Senior Secured Notes
The key terms of our senior secured notes (the “Notes”), which are rated Ba3 and BB by Moody’s Investor Service
(“Moody’s”) and Standard & Poor’s Ratings Services (“S&P”), respectively, are as follows:
Description
6.250% Senior Secured U.S.
Dollar Notes due February 2022
4.750% Senior Secured Euro
Notes due February 2023
5.350% Senior Secured U.S.
Dollar Notes due October 2023
3.500% Senior Secured Euro
Notes due July 2024
6.500% Senior Secured U.S.
Dollar Notes due February 2025
3.500% Senior Secured Euro
Notes due June 2026
6.250% Senior Secured U.S.
Dollar Notes due January 2027
2.375% Senior Secured Euro
Notes due April 2028
5.250% Senior Secured U.S.
Dollar Notes due January 2029
Principal
(thousands)
$1,000,001
Effective
Interest Rate
6.52%
Issuer
Parent
Guarantors
*
Collateral
†
Redemption
++
€850,000
4.98%
Parent
$60,567
5.47%
IGT
€500,000
3.68%
Parent
$1,100,000
6.71%
Parent
€750,000
3.65%
Parent
$750,000
6.41%
Parent
€500,000
2.50%
Parent
$750,000
5.39%
Parent
*
**
*
*
*
*
*
*
†
††
†
†
†
†
†
†
++
+
++
++
+++
++
+++
+++
Interest
payments
Semi-annually
in arrears
Semi-annually
in arrears
Semi-annually
in arrears
Semi-annually
in arrears
Semi-annually
in arrears
Semi-annually
in arrears
Semi-annually
in arrears
Semi-annually
in arrears
Semi-annually
in arrears
*
Certain subsidiaries of the Parent.
**
The Parent and certain subsidiaries of the Parent.
†
Ownership interests of the Parent in certain of its direct subsidiaries and certain intercompany loans with
principal balances in excess of $10 million.
†† Certain intercompany loans with principal balances in excess of $10 million.
+
++
International Game Technology (“IGT”) may redeem in whole or in part at any time prior to maturity at 100% of
their principal amount together with accrued and unpaid interest and a make-whole premium. IGT may also
redeem in whole or in part at 100% of their principal amount together with accrued and unpaid interest in
connection with certain gaming regulatory events. Upon the occurrence of certain events, IGT will be required
to offer to repurchase all of the notes at a price equal to 101% of their principal amount together with accrued
and unpaid interest.
The Parent may redeem in whole or in part at any time prior to the date which is six months prior to maturity at
100% of their principal amount together with accrued and unpaid interest and a make-whole premium. After
such date, the Parent may redeem in whole or in part at 100% of their principal amount together with accrued
and unpaid interest. The Parent may also redeem in whole but not in part at 100% of their principal amount
together with accrued and unpaid interest in connection with certain tax events. Upon the occurrence of
certain events, the Parent will be required to offer to repurchase all of the notes at a price equal to 101% of
their principal amount together with accrued and unpaid interest.
+++ The Parent may redeem in whole or in part at any time prior to the first date set forth in the redemption price
schedule at 100% of their principal amount together with accrued and unpaid interest and a make-whole
premium. After such date, the Parent may redeem in whole or in part at a redemption price set forth in the
redemption price schedule in the indenture, together with accrued and unpaid interest. The Parent may also
redeem in whole but not in part at 100% of their principal amount together with accrued and unpaid interest in
connection with certain tax events. Upon the occurrence of certain events, the Parent will be required to offer
to repurchase all of the notes at a price equal to 101% of their principal amount together with accrued and
unpaid interest.
Annual Report and Accounts 2020 Page | 135
The Notes contain customary covenants and events of default. At December 31, 2020, the issuers were in
compliance with the covenants.
3.500% Senior Secured Euro Notes due June 2026
On June 20, 2019, the Parent issued €750 million of 3.500% Senior Secured Euro Notes due June 2026 (the
“3.500% Notes due 2026”) at par.
The Parent used the net proceeds from the 3.500% Notes due 2026 to repurchase €437.6 million ($497.5 million) of
the 4.125% Senior Secured Euro Notes due February 2020 (the “4.125% Notes”) and pay down $339.3 million of
the Revolving Credit Facilities due July 2024, for total consideration, excluding interest, of $845.3 million. The
Company recorded an €8.5 million ($9.6 million) loss on extinguishment of debt in connection with the repurchase,
which is classified in other (expense) income, net on the consolidated statement of operations for the year ended
December 31, 2019.
2.375% Senior Secured Euro Notes due April 2028
On September 16, 2019, the Parent issued €500 million of 2.375% Senior Secured Euro Notes due April 2028 (the
“2.375% Notes”) at par.
The Parent used the net proceeds from the 2.375% Notes to pay the €320.0 million ($350.2 million) first installment
on the Euro Term Loan Facility due January 25, 2020 on September 27, 2019 and to pay down $192.3 million of the
Revolving Credit Facilities due July 2024, for total consideration, excluding interest, of $542.5 million. The Company
recorded a €2.1 million ($2.3 million) loss on extinguishment of debt in connection with the Term Loan repayment,
which is classified in other (expense) income, net on the consolidated statement of operations for the year ended
December 31, 2019.
5.250% Senior Secured U.S. Dollar Notes due January 2029
On June 19, 2020, the Parent issued $750.0 million of 5.250% Senior Secured U.S. Dollar Notes due January 2029
(the “5.250% Notes”) at par.
The Parent used the net proceeds from the 5.250% Notes to repurchase $500.0 million of the 6.250% Senior
Secured U.S. Dollar Notes due February 2022 for total consideration, excluding interest, of $525.0 million. The
Company recorded a $23.3 million loss on extinguishment of debt in connection with the repurchase, of which a
$28.3 million loss is classified in other expense, net and an offsetting gain of $5.0 million is classified in interest
expense, net in the consolidated statement of operations for the year ended December 31, 2020.
Interest on the 5.250% Notes is payable semi-annually in arrears.
The 5.250% Notes are guaranteed by certain subsidiaries of the Parent and are secured by ownership interests of
the Parent in certain of its direct subsidiaries and certain intercompany loans with principal balances in excess of
$10.0 million.
Prior to January 15, 2024, the Parent may redeem the 5.250% Notes in whole or in part at 100% of their principal
amount together with accrued and unpaid interest and a make-whole premium. From January 15, 2024 to January
14, 2025, the Parent may redeem the 5.250% Notes in whole or in part at 102.625% of their principal amount
together with accrued and unpaid interest. From January 15, 2025 to January 14, 2026, the Parent may redeem the
5.250% Notes in whole or in part at 101.313% of their principal amount together with accrued and unpaid interest.
On or after January 15, 2026, the Parent may redeem the 5.250% Notes in whole or in part at 100% of their
principal amount together with accrued and unpaid interest. The Parent may also redeem the 5.250% Notes in
whole but not in part at 100% of their principal amount together with accrued and unpaid interest in connection with
certain tax events. Upon the occurrence of certain events, the Parent will be required to offer to repurchase all of the
5.250% Notes at a price equal to 101% of their principal amount together with accrued and unpaid interest. In
certain events of default, the 5.250% Notes outstanding may become due and payable immediately.
Annual Report and Accounts 2020 Page | 136
4.750% Senior Secured Euro Notes due March 2020
On March 5, 2020, the Parent redeemed the €387.9 million ($432.0 million) 5.500% Senior Secured Euro Notes due
March 2020 when they matured.
5.500% Senior Secured U.S. Dollar Notes due June 2020
On June 15, 2020, the Parent redeemed the $27.3 million 5.500% Senior Secured U.S. Dollar Notes due June 2020
when they matured.
Revolving Credit Facilities and Term Loan Facility
On May 7, 2020, the Company entered into an amendment to the Senior Facilities Agreement for the Revolving
Credit Facilities due July 2024 (the “RCF Agreement”), and on May 8, 2020, the Company entered into an
amendment to the Senior Facility Agreement for the Euro Term Loan Facility due January 2023 (the “TLF
Agreement”).
The amendments modified the RCF Agreement and the TLF Agreement by, among other things:
•
•
•
Providing a waiver of the covenants requiring the Company to maintain a minimum ratio of EBITDA to net
interest costs and a maximum ratio of total net debt to EBITDA from the fiscal quarter ending June 30, 2020
through the fiscal quarter ending June 30, 2021 and establishing new thresholds for these financial
covenants starting with the fiscal quarter ending September 30, 2021 as described in the amendments;
Providing that for the period commencing on January 30, 2020 and expiring on August 31, 2021 (the “Relief
Period Expiration Date”), a material adverse effect arising from the COVID-19 pandemic shall not constitute
a material adverse effect under the agreements and any cessation or suspension of business arising from
the COVID-19 pandemic shall not constitute an event of default under the agreements;
Providing that the obligation to grant security over additional collateral be waived provided that the public
debt ratings of the Company are not less than BB- or Ba3;
• Obligating the Company to maintain “Liquidity” (as defined in the amendments) of at least $500 million for
the period commencing on the date of the amendments and expiring on the Relief Period Expiration Date
(the “Relief Period”), with such financial covenant being tested quarterly or, if any monthly trading update or
quarterly compliance certificate evidences that Liquidity is less than $750 million, monthly;
•
•
•
Increasing the margin from 2.75% to 3.25% if the public debt ratings of the Company are B+ or B1 (or
lower);
Prohibiting restricted payments (including dividends and ordinary share repurchases) during the period
commencing on April 1, 2020 and expiring on June 30, 2021, and permitting restricted payments during the
period commencing on July 1, 2021 and expiring on the maturity date of the respective agreements
provided that the ratio of total net debt to EBITDA as adjusted to reflect the restricted payment is less than
specified thresholds; and
Decreasing the maximum annual amount that the Company can spend on acquisitions during the Relief
Period to $100 million.
In addition, the amendment to the RCF Agreement provided that the margin applicable to all loans under the RCF
Agreement outstanding as of April 11, 2020 was increased to 2.475%, and the amendment to the TLF Agreement
provided that the margin applicable to all loans under the TLF Agreement outstanding as of April 11, 2020 was
increased to 2.50%.
In connection with the modification, the Company recognized $10.5 million of debt issuance costs within Other
expense and upfront interest expense of $15.7 million within Interest expense, net.
Annual Report and Accounts 2020 Page | 137
Term Loan Facility
The Parent is party to a senior facility agreement (the “Term Loan Facility Agreement”) for a €1.5 billion term loan
facility maturing in January 2023 (the “Term Loan Facility”), which must be repaid in the following installments, as
detailed below:
Due Date
January 25, 2020
January 25, 2021
January 25, 2022
January 25, 2023
Amount
(€ thousands)
320,000
320,000
320,000
540,000
On September 27, 2019, the Parent repaid the first €320 million installment due January 25, 2020 (resulting in €1.2
billion principal remaining) from the proceeds of the 2.375% Notes issued on September 16, 2019.
Interest on the Term Loan Facility is payable between one and six months in arrears at rates equal to the applicable
LIBOR or EURIBOR plus a margin based on our long-term ratings by Moody’s and S&P. At December 31, 2020 and
2019, the effective interest rate on the Term Loan Facility was 2.50% and 2.05%, respectively.
The Term Loan Facility is guaranteed by certain subsidiaries of the Parent and is secured by ownership interests of
the Parent in certain of its direct subsidiaries and certain intercompany loans with principal balances in excess of
$10 million.
Upon the occurrence of certain events, the Parent may be required to prepay the Term Loan Facility in full.
The Term Loan Facility Agreement contains customary covenants (including maintaining a minimum ratio of EBITDA
to net interest costs and maximum ratio of total net debt to EBITDA) and events of default. At December 31, 2020,
the Parent was in compliance with the covenants.
Revolving Credit Facilities
The Parent and certain of its subsidiaries are party to a senior facilities agreement (the “RCF Agreement”) which
provides for the following multi-currency revolving credit facilities (the “Revolving Credit Facilities”):
Maximum Amount
Available (thousands)
$1,050,000
€625,000
Facility
Borrowers
Revolving Credit Facility A
Parent, IGT, and IGT Global Solutions Corporation
Revolving Credit Facility B
Parent and Lottomatica Holding S.r.l.
On July 24, 2019, the Company entered into an amendment to the Revolving Credit Facilities due July 2021. The
amendment extended the final maturity date of the Revolving Credit Facilities from July 26, 2021 to July 31, 2024
and established the minimum ratio of EBITDA to total net interest costs and the maximum ratio of total net debt to
EBITDA for the extended term of the revolving credit facilities. In addition, the amendment reduced the aggregate
revolving facilities commitments of the lenders from $1.20 billion and €725 million to $1.05 billion and €625 million
and amended the definition of “Permitted Restricted Payment” to eliminate the leverage ratio threshold condition to
the payment of dividends and other restricted payments. The amendment also allowed IGT-Europe B.V. to be added
as a borrower under Revolving Credit Facility B and modified certain other non-material provisions.
Interest on the Revolving Credit Facilities is payable between one and six months in arrears at rates equal to the
applicable LIBOR or EURIBOR plus a margin based on the Parent’s long-term ratings by Moody’s and S&P. At
December 31, 2020 and December 31, 2019, there was no balance for the Revolving Credit Facilities.
Annual Report and Accounts 2020 Page | 138
The RCF Agreement provides that the following fees, which are recorded in interest expense in the consolidated
statement of operations, are payable quarterly in arrears:
•
•
Commitment fees - payable on the aggregate undrawn and un-cancelled amount of the Revolving Credit
Facilities depending on the Parent’s long-term ratings by Moody’s and S&P. The applicable rate was
0.928% at December 31, 2020.
Utilization fees - payable on the aggregate drawn amount of the Revolving Credit Facilities at a rate ranging
from 0.15% to 0.60% dependent on the percentage of the Revolving Credit Facilities utilized. There was no
balance as of December 31, 2020.
The Revolving Credit Facilities are guaranteed by the Parent and certain of its subsidiaries and are secured by
ownership interests of the Parent in certain of its direct subsidiaries and certain intercompany loans with principal
balances in excess of $10 million.
Upon the occurrence of certain events, the borrowers may be required to repay the Revolving Credit Facilities and
the lenders may have the right to cancel their commitments.
At December 31, 2020 the available liquidity under the Revolving Credit Facilities was $1.817 billion.
The RCF Agreement contains customary covenants (including maintaining a minimum ratio of EBITDA to net
interest costs and a maximum ratio of total net debt to EBITDA) and events of default. At December 31, 2020, the
borrowers were in compliance with the covenants.
Other Credit Facilities
The Parent and certain of its subsidiaries may borrow under senior unsecured uncommitted demand credit facilities
made available by several financial institutions. At December 31, 2020 and December 31, 2019, there were no
borrowings under these facilities.
Letters of Credit
The Parent and certain of its subsidiaries may obtain letters of credit under the Revolving Credit Facilities and under
senior unsecured uncommitted demand credit facilities. The letters of credit secure various obligations, including
obligations arising under customer contracts and real estate leases. The following table summarizes the letters of
credit outstanding at December 31, 2020 and 2019 and the weighted-average annual cost of such letters of credit:
($ thousands)
December 31, 2020
December 31, 2019
Interest Expense, Net
($ thousands)
Senior Secured Notes
Term Loan Facilities
Revolving Credit Facilities
Other
Interest expense
Interest income
Interest expense, net
Letters of Credit Outstanding
Under the
Revolving
Credit
Facilities
Not under the
Revolving
Credit
Facilities
426,740
402,300
—
—
Weighted-
Average
Annual Cost
1.06 %
1.02 %
Total
426,740
402,300
For the year ended December 31,
2020
2019
(344,286)
(351,495)
(43,834)
(34,342)
(21,656)
(36,138)
(28,160)
(29,681)
(444,118)
(445,474)
14,956
12,417
(429,162)
(433,057)
Annual Report and Accounts 2020 Page | 139
18. Income Taxes
The components of (loss) income from continuing operations before provision for income taxes, determined by tax
jurisdiction, are as follows:
($ thousands)
United Kingdom
United States
Italy
Other
The provision for income taxes consists of:
($ thousands)
Current:
United Kingdom
United States
Italy
Other
Deferred:
United Kingdom
United States
Italy
Other
For the year ended December 31,
2020
(375,274)
(780,535)
156,639
53,756
(945,414)
2019
34,974
(306,772)
249,638
84,578
62,418
For the year ended December 31,
2020
2019
(819)
10,045
66,018
30,866
106,110
(4,125)
(64,233)
(323)
(15,696)
(84,377)
21,733
1,803
40,416
104,365
49,330
195,914
(151)
(61,880)
914
(3,161)
(64,278)
131,636
Income taxes paid, net of refunds, were $89.0 million and $196.8 million in 2020 and 2019, respectively.
Deferred tax related to items recognized in other comprehensive income ("OCI") during the year:
($ thousands)
Foreign currency translation
Unrealized (gain) loss on other
Unrealized loss on hedges
Deferred tax charged to OCI
December 31,
2020
2019
(217)
(10)
194
(33)
22
183
495
700
Annual Report and Accounts 2020 Page | 140
The Parent is a tax resident in the United Kingdom (the “U.K.”). A reconciliation of the provision for income taxes,
with the amount computed by applying the U.K. statutory main corporation tax rates enacted in each of the Parent’s
calendar year reporting periods to (loss) income from continuing operations before provision for income taxes is as
follows:
($ thousands)
(Loss) income from continuing operations before provision for income taxes
United Kingdom statutory tax rate
Statutory tax (benefit) expense
For the year ended December 31,
2020
(945,414)
19.00 %
(179,629)
2019
62,418
19.00 %
11,859
Change in valuation allowances
Non-deductible goodwill impairment
Non-deductible expenses
Base erosion and anti-abuse (“BEAT”) tax
Foreign tax expense, net of U.S. federal benefit
IRAP and state taxes
GILTI tax
Change in unrecognized tax benefits
Italian allowance for corporate equity
Foreign tax and statutory rate differential (1)
Tax Law Changes
Non-taxable foreign exchange gain
Non-taxable gains on investments
Other
127,955
56,240
19,232
12,926
9,754
9,275
2,517
1,295
(3,841)
(18,838)
(19,627)
—
—
4,474
21,733
507
10,830
22,111
31,340
13,585
22,946
4,575
6,637
(2,380)
3,100
—
(3,744)
(6,225)
16,495
131,636
Effective tax rate
(1) Includes the effects of foreign subsidiaries' earnings taxed at rates other than the U.K. statutory rate
(2.3) %
210.9 %
In 2020, our effective tax rate differed from the expected UK statutory rate of 19.00%, primarily due to increases in
valuation allowances on deferred tax assets, the impact of the international provisions of the Tax Act (BEAT and
GILTI), foreign rate differences,non-deductible expenses and a goodwill impairment with no associated tax benefit.
In 2019, our effective tax rate differed from the expected U.K. statutory rate of 19.00% primarily due to the impact of
the international provisions of the Tax Act (BEAT and GILTI), foreign rate differences, non-deductible expenses and
a goodwill impairment with no associated tax benefit.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES
Act”) to provide certain relief as a result of the COVID-19 outbreak. Some of the key tax-related provisions of the
CARES Act benefiting the Company include temporary five-year net operating loss carryback provisions,
modifications to the 30% limitation on the deductibility of business interest, and payroll tax deferral.
In the quarter ended September 30, 2020, the U.S. Treasury Department issued final regulations regarding Global
Intangible Low-Taxed Income (“GILTI”). The Company will elect the GILTI high tax exception as allowed by the final
regulations and will amend its 2018 and 2019 income tax returns. The benefit of the GILTI high tax exception as well
as the NOL carryback provisions provided in the CARES Act resulted in a tax benefit of $12.1 million.
Annual Report and Accounts 2020 Page | 141
The components of deferred tax assets and liabilities are as follows:
($ thousands)
Deferred tax assets:
Net operating losses
Section 163(j) interest limitation
Lease liabilities
Provisions not currently deductible for tax purposes
Jackpot timing differences
Depreciation and amortization
Inventory reserves
Other
Gross deferred tax assets
Deferred tax liabilities:
Acquired intangible assets
Depreciation and amortization
Lease right-of-use assets
Other
Total deferred tax liabilities
Net deferred income tax liability
December 31,
2020
2019
108,216
96,949
70,565
61,117
38,724
23,496
2,438
49,946
451,451
506,238
160,436
62,799
11,641
741,114
33,684
93,522
76,838
122,884
40,550
28,306
3,437
40,293
439,514
533,732
171,500
71,817
21,808
798,857
(289,663)
(359,343)
Our net deferred income taxes are recorded in the consolidated balance sheet as follows:
($ thousands)
Deferred income taxes - non-current asset
Deferred income taxes - non-current liability
Notes
7
December 31,
2020
2019
33,117
(322,780)
(289,663)
27,108
(386,451)
(359,343)
As of December 31, 2020, we had recognized deferred tax assets of $451.5 million. We also have $284.1 million of
unrecognized deferred tax assets primarily related to net operating losses. These deferred tax assets were not
recorded because the realization of these assets is not probable.
Reconciliation of deferred tax liabilities, net
($ thousands)
Balance at beginning of year
Tax expense during the period recognized in income or loss
Adoption of new accounting standards
Translation/other
Balance at end of year
Net Operating Loss Carryforwards
December 31,
2020
(359,343)
84,377
1,015
(15,712)
(289,663)
2019
(422,592)
64,278
(1,445)
416
(359,343)
We have a $410.8 gross tax loss carryforward, of which $331.2 million relates to U.S. Federal tax and $79.6 million
relates to other foreign tax jurisdictions. Carryforwards in certain tax jurisdictions begin to expire in 2031, while
others have an unlimited carryforward period. Portions of the tax loss carryforwards are subject to annual
limitations, including Section 382 of the U.S. Internal Revenue Code of 1986, as amended, for U.S. tax purposes,
and similar provisions under other countries’ laws. In addition, as of December 31, 2020, we had U.S. state tax net
operating loss carryforwards, resulting in a deferred tax asset (net of U.S. federal tax benefit) of approximately
$18.3 million. U.S. state tax net operating loss carryforwards generally expire in the years 2021 through 2040.
Annual Report and Accounts 2020 Page | 142
Additionally, at December 31, 2020 and 2019, we had gross tax loss carryforwards of $929.5 million and $703.3
million that relate primarily to the U.K. No deferred tax assets were recorded for these tax loss carryforwards as
realization is not probable.
Accounting for Uncertainty in Income Taxes
A reconciliation of the unrecognized tax benefits is as follows:
($ thousands)
Balance at beginning of year
Additions to tax positions - current year
Additions to tax positions - prior years
Reductions to tax positions - prior years
Lapses in statutes of limitations
Balance at end of year
December 31,
2020
2019
29,175
498
335
(2,259)
(525)
27,224
26,635
717
2,358
—
(535)
29,175
(♣) At December 31, 2020 and 2019, $27.2 million and $29.2 million, respectively, of the unrecognized tax benefits,
if recognized, would affect our effective tax rates.
We recognize interest expense and penalties related to income tax matters in the provision for income taxes. For
2020 and 2019, we recognized $(0.2) million and $4.7 million, respectively, in interest expense, penalties, and
inflationary adjustments. At December 31, 2020 and 2019, the gross balance of accrued interest and penalties was
$20.9 million and $21.2 million, respectively.
We file income tax returns in various jurisdictions of which the United Kingdom, United States, and Italy represent
the major tax jurisdictions. All years prior to 2017 are closed with the Internal Revenue Service. As of December 31,
2020, we are subject to income tax audits in various tax jurisdictions globally, most significantly in Mexico and Italy.
Mexico Tax Audit
Based on a 2006 tax examination, the Company’s Mexican subsidiary, GTECH Mexico S.A. de C.V., was issued an
income tax assessment of approximately Mexican peso (“MXN”) 425.0 million. The assessment relates to the denial
of a deduction for cost of goods sold and the taxation of intercompany loan proceeds. The Company has
unsuccessfully contested the two issues in the Mexican court system receiving unfavorable decisions by the
Mexican Supreme Court in June 2017 and October 2019, respectively. As of December 31, 2020, based on the
unfavorable decisions received, the Company has recorded a liability of MXN 478.5 million (approximately $24.0
million), which includes additional interest, penalties, and inflationary adjustments.
Italy Tax Audit
The Company’s Italian corporate income tax returns for the calendar years ended December 31, 2015 through
December 31, 2019 are currently under examination. On October 19, 2020, the Italian tax authorities issued a final
tax audit report for calendar year 2015 questioning the process the Company undertook to establish the interest rate
on an intercompany debt agreement (“the 2015 loan”), between Lottomatica S.r.l. (the borrower) and its parent
company, IGT PLC (the lender). Similar findings are expected for the 2015 loan for calendar years 2016 through
2019 as the intercompany debt remains outstanding and the Company applied the same interest rate. The
Company expects that Lottomatica S.r.l will receive an assessment of taxes, interest, and potentially penalties
sometime in the first half of calendar year 2021. The Company believes the interest rate applied to the
intercompany debt was calculated on an arm’s length basis consistent with established transfer pricing policies and
procedures. The Company is currently evaluating the options for responding to the October 19, 2020 tax audit
report upon receipt of the tax assessment.
Annual Report and Accounts 2020 Page | 143
19. Commitments and Contingencies
Commitments
Jackpot Commitments
Jackpot liabilities are recorded as current and non-current liabilities as follows:
($ thousands)
Current liabilities
Non-current liabilities
Future jackpot liabilities are due as follows:
($ thousands)
2021
2022
2023
2024
2025
Thereafter
Future jackpot payments due
Unamortized discounts
Total jackpot liabilities
Performance and other bonds
December 31,
2020
71,290
147,654
218,944
Total
71,143
30,955
21,091
18,514
15,679
94,313
251,695
(32,751)
218,944
Previous
Winners
Future
Winners
35,967
22,705
20,440
17,863
15,028
84,552
196,555
35,176
8,250
651
651
651
9,761
55,140
Certain contracts require us to provide a surety bond as a guarantee of performance for the benefit of customers;
bid and litigation bonds for the benefit of potential customers; and WAP bonds that are used to secure our financial
liability when a player elects to have their WAP jackpot winnings paid over an extended period of time.
These bonds give beneficiaries the right to obtain payment and/or performance from the issuer of the bond if certain
specified events occur. In the case of performance bonds, which generally have a term of one year, such events
include our failure to perform our obligations under the applicable contracts. In general, we would only be liable for
these guarantees in the event of default in our performance of our obligations under each contract, the probability of
which we believe is remote. Accordingly, no liability has been recorded as of December 31, 2020 and 2019 related
to these bonds.
Legal Proceedings
From time to time, the Parent and/or one or more of its subsidiaries are party to legal, regulatory, or administrative
proceedings regarding, among other matters, claims by and against us, and injunctions by third parties arising out of
the ordinary course of business. Licenses are also subject to legal challenges by competitors seeking to annul
awards made to the Company. The Parent and/or one or more of its subsidiaries are also, from time to time,
subjects of, or parties to, ethics and compliance inquiries and investigations related to the Company’s ongoing
operations. At December 31, 2020, provisions for litigation matters amounted to $7.9 million. With respect to
litigation and other legal proceedings where we have determined that a loss is reasonably possible but we are
unable to estimate the amount or range of reasonably possible loss in excess of amounts already accrued, no
additional amounts have been accrued, given the uncertainties of litigation and the inherent difficulty of predicting
the outcome of legal proceedings.
Annual Report and Accounts 2020 Page | 144
Texas Fun 5’s Instant Ticket Game
Five lawsuits have been filed against IGT Global Solutions Corporation (f/k/a GTECH Corporation) in Texas state
court arising out of the Fun 5’s instant ticket game sold by the Texas Lottery Commission (“TLC”) from September
14, 2014 to October 21, 2014. Plaintiffs allege each ticket’s instruction for Game 5 provided a 5x win (five times the
prize box amount) any time the “Money Bag” symbol was revealed in the “5X BOX”. However, TLC awarded a 5x
win only when (1) the “Money Bag” symbol was revealed and (2) three symbols in a pattern were revealed.
(a)
(b)
(c)
(d)
(e)
Steele, James et al. v. GTECH Corp., filed on December 9, 2014 in Travis County (No. D1GN145114).
Through intervenor actions, over 1,200 plaintiffs claim damages in excess of $500.0 million. GTECH
Corporation’s plea to the jurisdiction for dismissal based on sovereign immunity was denied. GTECH
Corporation appealed. The appellate court ordered that plaintiffs’ sole remaining claim should be
reconsidered.
Nettles, Dawn v. GTECH Corp. et al., filed on January 7, 2015 in Dallas County (No. 051501559CV).
Plaintiff claims damages in excess of $4.0 million. GTECH Corporation and the TLC won pleas to the
jurisdiction for dismissal based on sovereign immunity. Plaintiff lost her appeal and petitioned for Texas
Supreme Court review. On April 27, 2018, IGT Global Solutions Corporation petitioned for Texas Supreme
Court review and the Texas Supreme Court heard arguments on December 3, 2019 in both the Nettles and
Steele cases. On June 12, 2020, the Texas Supreme Court ruled that Plaintiffs in the Nettles and Steele
cases could proceed with their fraud allegations in the lower courts; all other claims were dismissed. The
Nettles case was dismissed on December 16, 2020 after summary judgment was awarded in favor of IGT
Global Solutions Corporation.
Guerra, Esmeralda v. GTECH Corp. et al., filed on June 10, 2016 in Hidalgo County (No. C277716B).
Plaintiff claims damages in excess of $0.5 million.
Wiggins, Mario & Kimberly v. IGT Global Solutions Corp., filed on September 15, 2016 in Travis County
(No. D1GN16004344). Plaintiffs claim damages in excess of $1.0 million.
Campos, Osvaldo Guadalupe et al. v. GTECH Corp., filed on October 20, 2016 in Travis County (No.
D1GN16005300). Plaintiffs claim damages in excess of $1.0 million.
We dispute the claims made in each of these cases and continue to defend against these lawsuits.
Disposition of Previously Disclosed Matters
Illinois State Lottery
On February 6, 2017, putative class representatives of retailers and lottery ticket purchasers alleged the Illinois
Lottery collected millions of dollars from sales of instant ticket games and wrongfully ended certain games before all
top prizes had been sold. Raqqa, Inc. et al. v. Northstar Lottery Group, LLC., was filed in Illinois state court, St. Clair
County (No. 17L51) against Northstar Lottery Group LLC, a consortium in which the Parent indirectly holds an 80%
controlling interest. The claims included tortious interference with contract, violations of Illinois Consumer Fraud and
Deceptive Practices Act, and unjust enrichment. The lawsuit was removed to the U.S. District Court for the Southern
District of Illinois. On May 9, 2018, IGT Global Solutions Corporation and Scientific Games International, Inc. were
added as defendants. The parties have settled the case for an amount that is not material to the Company's
consolidated financial statements, and the case was dismissed in September 2020.
Annual Report and Accounts 2020 Page | 145
20. Shareholders’ Equity
Shares Authorized and Outstanding
The Board of Directors of the Parent (the “Board”) is authorized to issue shares of any class in the capital of the
Parent. The authorized shares of the Parent consist of 1.850 billion ordinary shares with a $0.10 per share par
value.
Ordinary shares outstanding were as follows:
Balance at beginning of year
Shares issued under restricted stock plans
Shares issued upon exercise of stock options
Balance at end of year
Repurchases of Ordinary Shares
December 31,
2020
204,435,333
421,231
—
204,856,564
2019
204,210,731
224,602
—
204,435,333
The Parent has the authority to repurchase, subject to a maximum repurchase price, a maximum of 20,474,483
ordinary shares of the Company. This authority remains valid until December 24, 2021, unless previously revoked,
varied, or renewed at the 2021 annual general meeting.
The Parent did not repurchase any of its ordinary shares in 2020 or 2019.
Dividends
We declared a $0.20 cash dividend per share during the first quarter of 2020 and all four quarters of 2019. Future
dividends are subject to Board approval.
The RCF Agreement and TLF Agreement limit the aggregate amount of dividends and repurchases of the Parent’s
ordinary shares in each year to $300 million based on ratings by Moody’s and S&P. As discussed in Note 17 - Debt,
in May 2020, the Company entered into amendments to these agreements which include terms that prohibit
restricted payments, including dividends and ordinary share repurchases, through June 30, 2021.
For the years ended December 31, 2020 and 2019, cash dividends declared were paid by our Parent and were in
accordance with legal and compliance regulations.
Annual Report and Accounts 2020 Page | 146
Other Reserves
The following table details the changes in other reserves:
Unrealized Gain (Loss) on:
Other Reserves
Foreign
Currency
Translation
Hedges
Other
($ thousands)
Balance at December 31, 2018
Change during period
Reclassified to operations (1)
Tax effect
Other comprehensive (loss)
income
Balance at December 31, 2019
Change during period
Reclassified to operations (1)
Tax effect
Other comprehensive income
(loss)
212,078
(13,504)
1,623
22
(11,859)
200,219
107,984
507
(217)
(6,800)
237
(2,183)
495
(1,451)
(8,251)
(768)
47
184
108,274
308,493
(537)
(8,788)
Attributable
to non-
controlling
interests
Attributable
to IGT PLC
19,940
15,906
—
—
15,906
35,846
(59,455)
—
—
226,211
5,515
(560)
700
5,655
231,866
47,491
554
(33)
Total
206,271
(10,391)
(560)
700
(10,251)
196,020
106,946
554
(33)
107,467
303,487
(59,455)
(23,609)
48,012
279,878
993
2,876
—
183
3,059
4,052
(270)
—
—
(270)
Balance at December 31, 2020
(1) Foreign currency translation adjustments related to liquidated subsidiaries were reclassified into foreign exchange (loss) gain, net on the
consolidated statement of operations for the years ended December 31, 2020 and 2019. Unrealized gain (loss) on hedges were reclassified into
service revenue in the consolidated statement of operations for the years ended December 31, 2020 and, 2019, respectively
3,782
21. Non-Controlling Interests
At December 31, 2020, our material non-controlling interests ("NCIs") were as follows:
Name of subsidiary
Lotterie Nazionali S.r.l. ("LN")
Northstar New Jersey Lottery Group, LLC ("Northstar NJ") (1)
% Ownership
held by
the Company
64.00 %
82.31 %
(1) Northstar New Jersey Holding Company LLC, of which we are a 50.15% shareholder, holds the 82.31% ownership in Northstar NJ
LN holds a license to operate the Scratch & Win instant lottery game in Italy through September 2028. Northstar NJ
manages a wide range of the lottery’s day-to-day operations in the State of New Jersey, as well as provides
marketing and sales services under a license valid through June 2029.
We are the principal operating partner fulfilling the requirements under the licenses held by the NCIs. As such, we
have the power to direct the activities that significantly affect the NCIs' economic performance, along with the right
to receive benefits or the obligation to absorb losses that could potentially be significant to the NCIs. As a result, we
concluded we have control over the NCIs and they have been consolidated. Accordingly, the balance sheet and
operating activity of the NCIs are included in our consolidated financial statements and we adjust the net income
(loss) in our consolidated statement of operations to exclude the NCIs' proportionate share of results. We present
the proportionate share of NCIs as equity in the consolidated balance sheet.
Annual Report and Accounts 2020 Page | 147
Activity within NCIs were as follows:
($ thousands)
Balance at December 31, 2018
Net income
Other comprehensive loss
Total comprehensive income
Capital increase
Return of capital
Dividends paid
Other
Balance at December 31, 2019
Net income (loss)
Other comprehensive income
Total comprehensive income (loss)
Capital increase
Return of capital
Dividends paid
Other
Balance at December 31, 2020
Northstar NJ
All Other
LN
423,274
28,434
(7,594)
20,840
—
(34,424)
(25,616)
—
384,074
19,048
31,629
50,677
—
—
68,695
1,996
—
1,996
—
—
(18,786)
—
51,905
(36,917)
—
(36,917)
—
—
(28,798)
(15,558)
—
405,953
—
(570)
115,166
22,342
(8,312)
14,030
1,499
(10,915)
(18,120)
2,118
103,778
19,482
27,826
47,308
8,414
(22,944)
(15,620)
523
121,459
Total
607,135
52,772
(15,906)
36,866
1,499
(45,339)
(62,522)
2,118
539,757
1,613
59,455
61,068
8,414
(22,944)
(59,976)
523
526,842
Summarized financial information for our material NCIs is as follows:
Summarized Balance Sheets
($ thousands)
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders' equity
Total liabilities and shareholders' equity
LN
December 31,
Northstar NJ
December 31,
2020
723,692
858,197
1,581,889
2019
531,850
883,747
1,415,597
557,837
12,538
570,375
1,011,514
1,581,889
407,317
374
407,691
1,007,906
1,415,597
2020
56,893
78,128
135,021
75,274
2,427
77,701
57,320
135,021
2019
75,014
87,112
162,126
59,435
2,489
61,924
100,202
162,126
Summarized Income Statements
LN
Northstar NJ
($ thousands)
Total revenue
Total operating expenses
Operating income (loss)
Total non-operating (expenses) income
Income (loss) before benefit from income taxes
Benefit from income taxes
Net income (loss)
For the year ended December 31,
For the year ended December 31,
2020
257,331
(182,914)
74,417
(41)
74,376
(21,728)
52,648
2019
303,891
(192,760)
111,131
85
111,216
(32,317)
78,899
2020
70,445
(107,385)
(36,940)
23
(36,917)
—
(36,917)
2019
114,791
(112,795)
1,996
—
1,996
—
1,996
Annual Report and Accounts 2020 Page | 148
Summarized Cash Flow Statements
LN
Northstar NJ
($ thousands)
Net cash flows provided by operating activities
Net cash flows used in investing activities
Net cash flows used in financing activities
22. Segment Information
For the year ended December 31,
For the year ended December 31,
2020
257,534
2019
245,336
(7,532)
(136,585)
(4,498)
(241,106)
2020
2019
1,507
—
(5,820)
26,048
—
(30,581)
On July 1, 2020, we adopted a new organizational structure focused on two business segments: Global Lottery and
Global Gaming, along with a streamlined corporate support function. During the third quarter of 2020, our chief
operating decision maker requested changes in the information that he regularly reviews for purposes of allocating
resources and assessing performance. This resulted in a change in our operating segments and cash-generating
units. As a result, beginning in the third quarter of 2020, we report our financial performance based on our July 1,
2020 new business segments, and analyze revenue and operating income as measures of segment profitability. We
have recast our historically presented comparative segment information to conform to the way we internally manage
and monitor segment performance.
The Global Lottery segment has full responsibility for the worldwide traditional lottery and iLottery business,
including sales, operations, product development, technology, and support. The Global Gaming segment has full
responsibility for the worldwide gaming business, including iGaming, sports betting, sales, product management,
studios, global manufacturing, operations, and technology.
Our two business segments are supported by central corporate support functions, including a business and
strategic initiatives function, finance, people and transformation, legal, marketing and communications, corporate
public affairs, and strategy and corporate development. Certain support costs that are identifiable and that benefit
our business segments are allocated to them. Each allocation is measured differently based on the specific facts
and circumstances of the costs being allocated. Corporate support function expenses that are not allocated to the
business segments, which are principally composed of selling, general and administrative expenses, are reported
as Corporate and Other expenses, along with goodwill impairment and the depreciation and amortization of
acquired tangible and intangible assets in connection with acquired companies.
Through our two business segments, we operate and provide an integrated portfolio of innovative gaming
technology products and services including online and instant lottery systems, gaming systems, instant ticket
printing, electronic gaming machines, iLottery, sports betting, iGaming, commercial services, and lottery
management services.
Global Lottery
Our Global Lottery segment provides lottery products and services primarily to governmental organizations through
operating contracts, facilities management contracts (“FMCs”), lottery management agreements (“LMAs”), and
product sales contracts.
As part of our lottery product and services, we provide instant and draw-based lottery products, point-of-sale
machines, central processing systems, software, commercial services, instant ticket printing services, and other
related equipment and support services.
We categorize revenue from operating contracts, FMCs, and LMAs as “Operating and facilities management
contracts” and revenue from commercial services, software hosting, software maintenance, and other services not
included within operating contracts, FMCs, or LMAs as service revenue from “Systems, software, and other”.
Revenue included within “Operating and facilities management contracts” include all services required by the
contract, including iLottery and instant ticket printing.
We categorize sales or sales-type leases of lottery terminals, lottery systems, software licenses, and instant tickets
not part of “Operating and facilities management contracts” as product sales from “Lottery products”.
Annual Report and Accounts 2020 Page | 149
Global Gaming
Our Global Gaming segment provides gaming products and services including software and game content, casino
gaming management systems, video lottery terminals (“VLTs”), amusement with prize machines (“AWPs”), VLT
central systems, sports betting, iGaming, and other related equipment and support services to commercial and tribal
casino operators.
We categorize revenue from Wide Area Progressive services, and operating leases for VLTs, AWPs, and other
gaming machines as service revenue from “Gaming terminal services.” We categorize revenue from iGaming
services, sports betting, software intellectual property licenses, and systems as service revenue from “Systems,
software, and other”.
Revenue from the sale or sales-type lease of gaming machines, systems, component parts, and other
miscellaneous equipment and services are categorized as product sales from “Gaming terminals” and revenue from
systems, software, casino gaming management systems, game content, iGaming products, and spare parts as
product sales from “Gaming other”.
Segment information is as follows:
($ thousands)
Service revenue
Product sales
Total revenue
For the year ended December 31, 2020
Global
Lottery
2,040,971
121,346
2,162,317
Global
Gaming
598,614
354,552
953,166
Business
Segment
Total
2,639,585
475,898
3,115,483
Corporate
and Other
—
—
—
Total IGT
PLC
2,639,585
475,898
3,115,483
Operating income (loss)
Depreciation and amortization
Expenditures for long-lived assets
644,078
261,446
(148,679)
(201,968)
172,391
(74,877)
442,110
433,837
(223,556)
(532,957)
190,950
(2,190)
(90,847)
624,787
(225,746)
($ thousands)
Service revenue
Product sales
Total revenue
For the year ended December 31, 2019
Global
Lottery
2,181,321
109,884
2,291,205
Global
Gaming
917,895
821,005
1,738,900
Business
Segment
Total
3,099,216
930,889
4,030,105
Corporate
and Other
—
—
—
Total IGT
PLC
3,099,216
930,889
4,030,105
Operating income (loss)
Depreciation and amortization
Expenditures for long-lived assets
699,039
257,453
(167,349)
188,083
212,673
(166,932)
887,122
470,126
(334,281)
(353,304)
204,407
(8,216)
533,818
674,533
(342,497)
Annual Report and Accounts 2020 Page | 150
Geographical Information
Revenue from external customers, which is based on the geographical location of our customers, is as follows:
($ thousands)
United States
Italy
United Kingdom
Rest of Europe
All other
Total
December 31,
2020
1,666,241
895,969
63,874
209,080
280,319
3,115,483
2019
2,115,791
988,144
73,541
322,654
529,975
4,030,105
Revenue from one customer in the Global Lottery segment represented approximately 19% and 16% of
consolidated revenue in 2020 and 2019, respectively.
Long-lived assets, which are comprised of Systems & Equipment and PPE, are based on the geographical location
of the assets as follows:
($ thousands)
United States
Italy
United Kingdom
Rest of Europe
All other
Total
23. Stock-Based Compensation
Incentive Awards
December 31,
2020
842,005
176,341
13,871
90,646
77,426
1,200,289
2019
929,649
187,169
17,687
102,874
115,060
1,352,439
Stock-based incentive awards are provided to directors and employees under the terms of our 2015 Equity
Incentive Plan (the “Plan”) as administered by the Board. Awards available under the Plan principally include stock
options, performance share units, restricted share units or any combination thereof. The maximum number of new
shares that may be granted under the Plan is 11.5 million shares. To the extent any award is forfeited, expires,
lapses, or is settled for cash, the award is available for reissue under the Plan. We utilize authorized and unissued
shares to satisfy all shares issued under the Plan.
Stock Options
Stock options are awards that allow the employee to purchase shares of our stock at a fixed price. Stock options are
granted under the Plan at an exercise price not less than the fair market value of a share on the date of grant. No
stock options were granted in 2020 or 2019.
Stock Awards
Stock awards are principally made in the form of performance share units (“PSUs”) and restricted share units
(“RSUs”). PSUs are stock awards where the number of shares ultimately received by the employee depends on the
Company’s performance against specified targets, which may include Adjusted EBITDA, Adjusted Net Debt and
Total Shareholder Return (“TSR”) relative to the Russell Mid Cap Market Index. PSUs typically vest 50% over an
approximate three-year period and 50% over an approximate four-year period (i.e. four years to vest both tranches).
Dividend equivalents are not paid under the Plan. The fair value of each PSU is determined on the grant date or
modification date, based on the Company’s stock price, adjusted for the exclusion of dividend equivalents, and
assumes that performance targets will be achieved. Over the performance period, the number of shares of stock
that will be issued is adjusted based upon the probability of achievement of performance targets. The ultimate
Annual Report and Accounts 2020 Page | 151
number of shares issued and the related compensation cost recognized as expense is based on a comparison of
the final performance metrics to the specified targets. In 2020, no PSUs were granted.
RSUs are stock awards granted to directors that entitle the holder to shares of common stock as the award vests,
typically over a one-year period, and have a contractual term of 10 years. Dividend equivalents are not paid under
the Plan. In 2020, RSUs were also granted to employees, which will vest in approximately one- and two-year
vesting periods.
Stock Option Activity
A summary of our stock option activity and related information is as follows:
Outstanding at January 1, 2020
Granted
Exercised
Expired
Outstanding at December 31, 2020
At December 31, 2020:
Vested and expected to vest
Exercisable
Weighted-Average
Exercise
Price Per
Share ($)
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic Value
($ thousands)
20.73
—
—
20.29
21.49
15.53
15.53
2.19
1.37
1.37
352
352
Stock
Options
1,140,566
—
—
(718,066)
422,500
250,000
250,000
No stock options were exercised in 2020 and 2019.
Stock Award Activity
A summary of our stock award activity and related information is as follows:
Nonvested at January 1, 2020
Granted
Vested
Forfeited
Nonvested at December 31, 2020
Weighted-
Average
Grant Date
Fair Value ($)
19.41
—
19.26
17.78
18.17
PSUs
5,060,951
—
(474,399)
(1,229,586)
3,356,966
At December 31, 2020:
Unrecognized cost for nonvested awards
($ thousands)
Weighted-average future recognition period (in
years)
990
0.24
Weighted-
Average
Grant Date
Fair Value ($)
14.07
9.04
13.64
9.08
9.05
RSUs
130,009
2,375,141
(136,161)
(2,606)
2,366,383
17,827
1.93
The total vest-date fair value of PSUs vested was $2.7 million and $3.7 million in 2020 and 2019, respectively. The
total vest-date fair value of RSUs vested was $1.2 million and $0.9 million for 2020 and 2019, respectively.
Annual Report and Accounts 2020 Page | 152
Fair Value of Stock Awards Granted
We estimated the fair value of PSUs at the date of grant using a Monte Carlo simulation valuation model, as the
awards include a market condition. The market condition is based on the Company’s TSR relative to the Russell
Midcap Market Index.
During 2020 and 2019, we estimated the fair value of RSUs at the date of grant based on our stock price. Details of
the grants are as follows:
PSUs granted during the year
Weighted-average grant date fair value ($)
RSUs granted during the year
Weighted-average grant date fair value ($)
Stock-Based Compensation Expense
2020
—
—
2019
2,133,512
11.10
2,375,141
9.04
131,676
14.10
Total compensation cost (recovery) for our stock-based compensation plans is recorded based on the employees’
respective functions as detailed below.
($ thousands)
Cost of services
Cost of product sales
Selling, general and administrative
Research and development
Stock-based compensation expense before income taxes
Income tax (provision) benefit
Total stock-based compensation, net of tax
24. Earnings Per Share
For the year ended December 31,
2020
2019
(1,188)
(290)
(5,382)
(1,455)
(8,315)
(2,184)
(6,131)
1,920
393
20,379
2,578
25,270
5,896
19,374
The following table presents the computation of basic and diluted loss per share of common stock:
($ and shares in thousands, except per share amounts)
Numerator:
Net loss from continuing operations attributable to IGT PLC
Net income from discontinued operations attributable to IGT PLC
Net loss attributable to IGT PLC
Denominator:
Weighted-average shares - basic and diluted
Net loss from continuing operations attributable to IGT PLC per common share
- basic and diluted
Net income from discontinued operations attributable to IGT PLC per common
share - basic and diluted
Net loss attributable to IGT PLC per common share - basic and diluted
For the year ended December 31,
2020
2019
(973,520)
40,844
(932,676)
(117,451)
107,720
(9,731)
204,725
204,373
(4.76)
(0.57)
0.20
(4.56)
0.53
(0.05)
Annual Report and Accounts 2020 Page | 153
Certain stock options to purchase common shares were outstanding, but were excluded from the computation of
diluted earnings per share, because the exercise price of the options was greater than the average market price of
the common shares for the full year, and therefore, the effect would have been antidilutive.
During years when we are in a net loss position, certain outstanding stock options and unvested restricted stock
awards are excluded from the computation of diluted earnings per share because including them would have had an
antidilutive effect.
For the years ended December 31, 2020 and 2019, stock options and unvested restricted stock awards totaling 0.9
million shares and 1.2 million shares, respectively, were excluded from the computation of diluted earnings per
share because including them would have had an antidilutive effect.
25. Related Party Transactions
We engage in business transactions with certain related parties which include (i) De Agostini entities directly or
indirectly controlled by De Agostini, (ii) other entities and individuals capable of exercising control, joint control, or
significant influence over us, and (iii) our unconsolidated subsidiaries or joint ventures. Members of the Board,
executives with authority for planning, directing, and controlling the activities of the Company and such Directors’
and executives’ close family members are also considered related parties. We may make investments in such
entities, enter into transactions with such entities, or both.
De Agostini Group
We are majority-owned by De Agostini. Amounts receivable from De Agostini and subsidiaries of De Agostini (the
“De Agostini Group”) are non-interest bearing. Transactions with the De Agostini Group include payments for
support services provided and office space rented pursuant to a lease entered into prior to the formation of the
Company. In addition, certain of our Italian subsidiaries have a tax unit agreement, and in some cases, a value-
added tax agreement, with De Agostini pursuant to which De Agostini consolidates certain Italian subsidiaries of De
Agostini for the collection and payment of taxes to the Italian tax authority.
Related party transactions with the De Agostini Group are as follows:
($ thousands)
Trade receivables
Tax-related receivables
Trade payables
Tax-related payables
December 31,
2020
2019
—
—
5,096
18,706
2
2,031
3,180
17,004
Unconsolidated Subsidiaries and Joint Ventures
From time to time, we make strategic investments in publicly traded and privately held companies that develop
software, hardware, and other technologies or provide services supporting its technologies. We may also purchase
from or make sales to these organizations.
Ringmaster S.r.l. (“Ringmaster”)
We have a 50% interest in Ringmaster, an Italian joint venture, that is accounted for using the equity method of
accounting. Ringmaster provides software development services for our interactive gaming business pursuant to an
agreement dated December 7, 2011. Our investment in Ringmaster was $0.8 million and $0.7 million at December
31, 2020 and 2019, respectively.
We incurred $6.6 million and $6.1 million in expenses to Ringmaster for the years ended December 31, 2020 and
2019, respectively.
Annual Report and Accounts 2020 Page | 154
Connect Ventures One LP and Connect Ventures Two LP
We have held investments in Connect Ventures One LP and Connect Ventures Two LP (the “Connect Ventures”)
since 2011 and 2015, respectively, that are carried at cost and accounted for as equity investments. De Agostini
also holds investments in the Connect Ventures, and Nicola Drago, the son of director Marco Drago, holds a 10%
ownership interest in, and is a non-executive member of, Connect Ventures LLP, the fund that manages the
Connect Ventures. The Connect Ventures are venture capital funds that target “early stage” investment operations.
Our investment in Connect Ventures One LP was $5.1 million and $4.9 million at December 31, 2020 and 2019,
respectively. Our investment in Connect Ventures Two LP was $7.3 million and $6.2 million at December 31, 2020
and 2019, respectively.
Key Management Personnel - Officer Compensation
Key management personnel are those persons with authority and responsibility for planning, directing and
controlling the activities of the Company. In 2020 and 2019, key management personnel was composed of 14 and
10 executive officers, respectively, including our Chief Executive Officer and Chief Financial Officer. Officer
compensation for key management personnel for the years ended December 31, 2020 and 2019 is as follows:
($ thousands)
Short-term employee benefits
Stock-based compensation
Post-employment benefits
26. Employee Information
Employee Benefit Expense
($ thousands)
Wages and salaries
Social security and other benefits
Incentive compensation
Stock-based compensation
Post-employment benefits
Average Number of Employees by Segment
Global Lottery
Global Gaming
Corporate and Other
For the year ended December 31,
2020
2019
14,036
9,491
2,885
26,412
19,287
1,745
2,105
23,137
For the year ended
December 31,
2020
2019
743,269
161,292
14,923
(8,315)
19,363
754,733
203,901
103,834
25,270
21,317
930,532
1,109,055
For the year ended
December 31,
2020
2019
4,249
5,677
1,525
4,435
6,000
1,585
11,451
12,020
Annual Report and Accounts 2020 Page | 155
27. Auditors' Remuneration
PricewaterhouseCoopers LLP ("PwC U.K.") has been serving as our independent auditor since 2015.
Aggregate fees for professional services and other services rendered by PwC U.K. and its foreign entities belonging
to the PwC network in 2020 and 2019 were as follows:
($ thousands)
Audit services - Parent company and consolidated financial statements
Audit services - Subsidiaries' financial statements
Audit-related services
Tax services
All other services
For the year ended December 31,
2020
2019
9,672
1,257
357
335
112
9,525
1,565
660
1,294
147
11,733
13,191
28. The Parent's Directly and Indirectly Owned Subsidiaries
The Parent had the following subsidiaries for the year ended December 31, 2020:
Name of entity
Acres Gaming Incorporated
Anguilla Lottery and Gaming
Company Limited
Antigua Lottery Company
Limited
Atronic Australien GmbH
Beijing GTECH Computer
Technology Company Limited
Big Easy S.r.l.
BringIt, Inc.
Caribbean Lottery Services,
Inc.
CartaLis Istituto di Moneta
Elettronica S.p.A. (also known
as CartaLis IMEL S.p.A.)
CLS-GTECH Technology
(Beijing) Co., Ltd.
Consorzio Lotterie Nazionali
Cyberview International, Inc.
Data Transfer System Inc.
Address of registered office
6355 South Buffalo Drive, Las
Vegas, Nevada 89113, United
States
AXA Offshore Management Limited
The Law Building PO Box 687, The
Valley, Anguilla, British West Indies
Simon, Rogers Murdoch,
Chancellor Chambers, Island
House, Newgate Street, St. John’s,
Antigua
Weseler Strab 253, Münster,
Germany 48151
R1101-1102, 11F, Viva Plaza, No.
29 Suzhou Street, Haidian District,
Beijing 100080, China
Viale del Campo Boario, 56/d
Roma, Italy
6355 South Buffalo Drive, Las
Vegas, Nevada 89113, United
States
c/o Moore Dodson & Russell P.C.,
14A Norte Gade, Charlotte Amalie,
St. Thomas USVI 00802
Ownership
%
100
Shareholder
International Game Technology
100
100
100
100
Leeward Islands Lottery Holding
Company, Inc.
Leeward Islands Lottery Holding
Company, Inc.
International Game Technology PLC
IGT Foreign Holdings Corporation
56
Lottomatica Videolot Rete S.p.A.
100
IGT
100
Leeward Islands Lottery Holding
Company, Inc.
Via Pordenone, 8, Milano, Italy
100
Lottomatica Italia Servizi S.p.A.
2/F Block A, Raycom Info Tech
Park, 2 Kexueyuan South Road,
Zhong Guan Cun, Haidian District,
Beijing, 100190 China
Via Buonconvento, 6 Roma, Italy
6355 South Buffalo Drive, Las
Vegas, Nevada 89113, United
States
1209 Orange Street, Wilmington,
DE 19801, United States
100
CLS-GTECH Company Limited
63
100
Lottomatica Holding S.r.l.
IGT
100
IGT Global Solutions Corporation
Annual Report and Accounts 2020 Page | 156
Name of entity
DoubleDown Interactive B.V.
Dreamport do Brasil Ltda.
Dreamport Suffolk Corporation
Dreamport, Inc.
Eagle Ice AB
Estrela Instantânea Loteria Spe
S.A
Europrint Holdings Limited
GTECH (Gibraltar) Holdings
Limited f/k/a St. Enodoc
Holdings Limited
GTECH Asia Corporation
GTECH Brasil Ltda.
GTECH German Holdings
Corporation GmbH
GTECH Management P.I.
Corporation
GTECH Mexico S.A. de C.V.
Address of registered office
Galwin 2, 1046 AW Amsterdam,
Netherlands
Rua Barao do Triunfo, 88 room
1210, Brooklin Paulista, 04602-000,
Sao Paulo, Brazil
1209 Orange Street, Wilmington,
DE 19801, United States
1209 Orange Street, Wilmington,
DE 19801, United States
Gernandt & Danielson, Box 5747,
Stockholm 11487
City of Barueri, State of São Paulo,
at Calçada das Margaridas, No.
163, Room 02, Centro Comercial,
Zip Code 06453-038 in Brazil
1st Floor, Building 3 Croxley Green
Business Park, Hatters Lane,
Watford, Hertfordshire, England
WD18 8YG
23 Portland House, Glacis Road,
GX11 1AA, Gibraltar
1209 Orange Street, Wilmington,
DE 19801, United States
Rua Barao do Triunfo, 88 room
1211, Brooklin Paulista, 04602-000,
Sao Paulo, Brazil
Weseler Straß 253, Mûnster,48151,
Germany
1209 Orange Street, Wilmington,
DE 19801, United States
Av. Constituyentes 635, Colonia 16
de Septiembre,Mexico City, 11810,
Mexico
GTECH Southern Africa (Pty)
Ltd.
GTECH Ukraine
GTECH WaterPlace Park
Company, LLC
Hydragraphix LLC
Hudson Alley Software, Inc.
I.G.T. - Argentina S.A.
I.G.T. (Australia) Pty Limited
Ground Floor, Orbach Place, 261
Oxford Road, Illovo 2196, South
Africa
3-A Leiptsygska Street, Kyiv,
Ukraine
1209 Orange Street, Wilmington,
DE 19801, United States
1209 Orange Street, Wilmington,
DE 19801, United States
28 Liberty Street, New York, NY
10005
Hipolito Alferez Bouchard 4191,
Optima Park Tower, 5to piso -
Munro, Argentina
Level 5, 11 Talavera Road,
Macquarie Park, NSW 2113
Australia
Ownership
%
100
Shareholder
IGT Interactive C.V.
100
100
100
100
50
Dreamport, Inc. (>99.99%); IGT
Foreign Holdings Corporation
(<0.01%)
IGT Global Solutions Corporation
IGT Global Solutions Corporation
International Game Technology
IGT Global Services Limited
100
IGT Global Solutions Corporation
100
IGT Global Services Limited
100
100
100
100
100
100
100
100
100
100
100
IGT Global Solutions Corporation
IGT Global Solutions Corporation
(>99.99%); IGT Foreign Holdings
Corporation (<0.01%)
International Game Technology PLC
IGT Global Solutions Corporation
IGT Global Solutions Corporation
(99.700258% - 100% of Class II); IGT
Foreign Holdings Corporation
(0.343297% - 99.998% of Common);
IGT Latin America Corporation
(0.000006% - .002% of Common)
IGT Global Solutions Corporation
GTECH Asia Corporation (99%);
GTECH Management P.I. Corporation
(1%)
IGT Global Solutions Corporation
IGT Global Solutions Corporation
IGT Global Solutions Corporation
International Game Technology
(96.67%); International Game
Technology S.R.L. (3.33%)
100
International Game Technology
Annual Report and Accounts 2020 Page | 157
Name of entity
IGT
IGT - UK Group Limited
IGT (Alderney 1) Limited
IGT (Alderney 2) Limited
IGT (Alderney 4) Limited
IGT (Alderney 5) Limited
IGT (Alderney 7) Limited
IGT (Alderney) Limited
IGT (Gibraltar) Limited
IGT (Gibraltar) Solutions
Limited f/k/a GTECH (Gibraltar)
Limited
IGT (UK1) Limited
IGT (UK2) Limited
IGT (UK 3) Limited
IGT Asia - Macau, S.A.
IGT ASIA PTE. LTD.
IGT Asiatic Development
Limited
IGT Australasia Corporation f/k/
a GTECH Australasia
Corporation
IGT Austria GmbH f/k/a GTECH
Austria GmbH
IGT Canada Solutions ULC f/k/
a GTECH Canada ULC
Address of registered office
701 South Carson Street, Suite
200, Carson City, Nevada 89701,
United States
Quay West Trafford Wharf Road,
Trafford Park, Manchester, M17
1HH, United Kingdom
Inchalla, Le Val, GY93UL, Alderney,
Bristish Channel Islands
Inchalla, Le Val, GY93UL, Alderney,
Bristish Channel Islands
Inchalla, Le Val, GY93UL, Alderney,
Bristish Channel Islands
Inchalla, Le Val, GY93UL, Alderney,
Bristish Channel Islands
Inchalla, Le Val, GY93UL, Alderney,
Bristish Channel Islands
Inchalla, Le Val, GY93UL, Alderney,
Bristish Channel Islands
57 - 63 Line Wall Road, Gibraltar
23 Portland House, Glacis Road,
GX11 1AA, Gibraltar
Quay West Trafford Wharf Road,
Trafford Park, Manchester, M17
1HH, United Kingdom
Quay West Trafford Wharf Road,
Trafford Park, Manchester, M17
1HH, United Kingdom
3rd Floor, 10 Finsbury Square,
London, England EC2A 1AF.
Avenida Comercial de Macau, nos.
251A-301, AIA Tower, 21/F, Room
2101, Macau, China
1 Changi North St 1, 02-01 and
02-03, 498789, Singapore
Jayla Place, Wickhams Cay I, Road
Town, Tortola, British Virgin Islands
1209 Orange Street, Wilmington,
DE 19801, United States
Seering 13-14, 8141
Unterpremstatten, Austria
Queen's Marque, 600 - 1741 Lower
Water Street, Halifax, Nova Scotia,
Canada
IGT Colombia Ltda. f/k/a
GTECH Colombia Ltda.
Carrera 45, #108A-50, Piso 5,
Bogata, Colombia
IGT Colombia Solutions S.A.S.
IGT Commercial Services, S de
R L CV
Carrera 45, #108A-50, Piso 5,
Bogata, Colombia
Avenida Constituyentes 635, 16 de
Septiembre, Mexico City, 11810,
Mexico
Ownership
%
100
Shareholder
International Game Technology
100
International Game Technology
100
100
100
100
100
100
100
100
IGT (Alderney) Limited
IGT (Alderney) Limited
IGT (Alderney) Limited
IGT (Alderney) Limited
IGT (Alderney) Limited
IGT Interactive C.V.
IGT Interactive C.V.
GTECH (Gibraltar) Holdings Limited
100
IGT Interactive, Inc.
100
IGT – UK Group Limited
100
100
100
100
100
100
100
99.99
100
100
International Game Technology PLC
International Game Technology
(99.92%); IGT (0.04%); IGT
International Holdings 1 LLC (0.04%)
International Game Technology
International Game Technology
IGT Global Solutions Corporation
IGT Germany Gaming GmbH
International Game Technology PLC
IGT Global Services Limited
(99.998%); IGT Comunicaciones
Colombia Ltda. (0.001%); Claudia
Mendoza (0.001%)
International Game Technology PLC
IGT Global Solutions Corporation
(99.9%); IGT Foreign Holdings
Corporation (0.1%)
Annual Report and Accounts 2020 Page | 158
Name of entity
IGT Comunicaciones Colombia
Ltda. f/k/a GTECH
Comunicaciones Colombia
Ltda.
IGT Czech Republic LLC f/k/a
GTECH Czech Republic LLC
IGT Denmark Corporation f/k/a
GTECH Northern Europe
Corporation
IGT do Brasil Ltda.
IGT Dutch Interactive LLC
IGT EMEA B.V.
IGT Empowerment Trust
IGT Far East Pte Ltd f/k/a
GTECH Far East Pte Ltd
IGT Foreign Holdings
Corporation f/k/a GTECH
Foreign Holdings Corporation
Address of registered office
Carrera 45, #108A-50, Piso 5,
Bogata, Colombia
1209 Orange Street, Wilmington,
DE 19801, United States
1209 Orange Street, Wilmington,
DE 19801, United States
Avenida das Nacoes Unidas,
14171, 15° Andar, City of Sao
Paulo, Brazil
160 Greentree Drive, Suite 101,
Dover, DE 19904, United States
Galwin 2, 1046 AW Amsterdam,
Netherlands
2 Brands Hatch Close, Corner
Indianapolis St, Kyalami Business
Park, Midrand 1685, South Africa
8 Marina Boulevard, #05-02,
Marina Bay Financial Centre,
018981, Singapore
1209 Orange Street, Wilmington,
DE 19801, United States
IGT France SARL f/k/a GTECH
France SARL
IGT GAMES SAS f/k/a GTECH
SAS
19, Boulevard Malesherbes, 75008
Paris, France
Carrera 45, #108A-50, Piso 5,
Bogata, Colombia
Ownership
%
99.99
Shareholder
IGT Foreign Holdings Corporation
(>99.99%); Claudia Mendoza
(<0.01%) (Nominee share)
37
IGT Global Solutions Corporation
100
IGT Global Solutions Corporation
100
100
100
100
IGT International Treasury B.V.
(99.99%); IGT International Treasury
Holding LLC (0.01%)
IGT Interactive Holdings 2 C.V.
IGT-Europe B.V.
IGT International Treasury B.V.
(74.9%); International Game
Technology Afrida (Pty) Ltd. (25.1%)
100
IGT Global Services Limited
100
IGT Global Solutions Corporation
100
100
100
100
100
IGT Foreign Holdings Corporation
IGT Global Services Limited (80%);
IGT Comunicaciones Colombia Ltda.
(10%); IGT Foreign Holdings
Corporation (10%)
GTECH German Holdings Corporation
GmbH
IGT Global Services Limited
IGT Global Solutions Corporation
IGT Germany Gaming GmbH f/
k/a GTECH Germany GmbH
IGT Germany GmbH f/k/a
GTECH GmbH
IGT Global Services Limited f/k/
a GTECH Global Services
Corporation Limited
IGT Global Solutions
Corporation f/k/a GTECH
Corporation
IGT Hong Kong Limited
IGT India Private Limited f/k/a
GTECH India Private Limited
IGT Indiana, LLC f/k/a GTECH
Indiana, LLC
IGT Interactive C.V.
Weseler Straß 253, Mûnster,48151,
Germany
Weseler Straß 253, Mûnster,48151,
Germany
Grigori Afxentiou, 27, 6021,
Larnaca, Cyprus
1209 Orange Street, Wilmington,
DE 19801, United States
100
IGT
26th Floor, No. 8 Queen's Road
Central. Hong Kong, China
2nd Floor, NCC House, Sy. No. 64,
Madhapur, Hyderabad, Kurnool,
Telangana 500081, India
334 North Senate Avenue,
Indianapolis, IN 46204
Galwin 2, 1046 AW Amsterdam,
Netherlands
100
100
100
100
IGT Interactive Holdings 2 C.V. Galwin 2, 1046 AW, Amsterdam,
100
Netherlands
IGT Asiatic Development Limited
IGT Global Services Limited (99.99%);
IGT Far East Pte Ltd. (0.01%)
IGT Global Solutions Corporation
IGT (35.8274668%); IGT Interactive
Holdings 2 C.V. (32.5220680%);
International Game Technology
(31.6504432%); IGT Dutch Interactive
LLC (0.0000220%)
IGT Interactive, Inc. (13.831555%);
International Game Technology
(86.168444%); IGT International
Holdings 1 LLC (0.000001%)
Annual Report and Accounts 2020 Page | 159
Name of entity
IGT Interactive, Inc.
Address of registered office
160 Greentree Drive, Suite 101,
Dover, DE 19904, United States
160 Greentree Drive, Suite 101,
IGT International Holdings 1
LLC
Dover, DE 19904, United States
IGT International Treasury B.V. Galwin 2, 1046 AW, Amsterdam,
IGT International Treasury
Holding LLC
IGT Ireland Operations Limited
f/k/a GTECH Ireland Operations
Limited
IGT Italia Gaming Machines
Solutions S.r.l. f/k/a Spielo
International Italy S.r.l.
IGT Japan K.K.
IGT Juegos S.A.S.
IGT Korea Yuhan Chaekim
Hoesa a/k/a IGT Korea LLC
IGT Latin America Corporation
f/k/a GTECH Latin America
Corporation
IGT Lottery Holdings B.V.
IGT Malta Casino Holdings
Limited f/k/a GTECH Malta
Holdings Limited
IGT Malta Casino Limited f/k/a
GTECH Malta Casino Limited
IGT Malta Interactive Limited f/
k/a GTECH Malta Poker
Limited f/k/a Boss Media Malta
Poker Ltd.
IGT Mexico Lottery S. de R.L.
de C.V. f/k/a GTECH Servicios
de México, S. de R.L. de C.V.
Netherlands
1209 Orange Street, Wilmington,
DE 19801
Riverside One, Sir John
Rogerson's Quay, Dublin 2, Ireland
Viale del Campo Boario, 56/d
Roma, Italy
Oak Minami-Azabu Building 2F,
3-19-23 Minami-Azabu, Minato-ku,
Tokyo, 106-0047, Japan
Carrera 45, #108A-50, Piso 5,
Bogata, Colombia
16th, 17th Fl, Teheran-ro 134,
Gangnam-gu, Seoul, Korea
1209 Orange Street, Wilmington,
DE 19801, United States
Galwin 2, 1046 AW Amsterdam,
Netherlands
2, Belvedere Court, Triq Il- Qaliet,
St. Julians STJ 3255, Malta
2, Belvedere Court, Triq Il- Qaliet,
St. Julians STJ 3255, Malta
2, Belvedere Court, Triq Il- Qaliet,
St. Julians STJ 3255, Malta
Av. Constituyentes 635, 16 de
Septiembre, Mexico City, Mexico
11810
IGT Monaco S.A.M. f/k/a
GTECH Monaco S.A.M.
7, Rue Du Gabian, Le Gildo Pastor-
Bloc C-8 ETG-N° 22, 98000,
Monaco
IGT Peru Solutions S.A. f/ka
GTECH Peru S.A.
Av. El Derby Nro.254, Oficina 606 -
Surco, Lima – Peru
IGT Poland Sp. z.o.o. f/k/a
GTECH Poland Sp. z o.o.
IGT Slovakia Corporation f/k/a
GTECH Slovakia Corporation
IGT SOLUTIONS CHILE SpA
IGT Spain Lottery, S.LU. f/k/a
GTECH Global Lottery S.L.
AL. JEROZOLIMSKIE, nr 92,
00-807, Warsaw, Poland
1209 Orange Street, Wilmington,
DE 19801, United States
Avenida El Rosal N 5.108
Santiago, Chile 8580000
Edificio Avant BCN, Selva 12,
Planta 1, Modula A2, El Prat de
Llobregat, Barcelona 08820, Spain
Ownership
%
100
Shareholder
International Game Technology
100
100
100
100
International Game Technology
International Game Technology
IGT International Treasury B.V.
IGT Global Services Limited
100
Lottomatica Holding S.r.l.
100
IGT International Treasury B.V.
100
100
80
IGT Peru Solutions S.A. (60%); IGT
Games S.A.S. (40%)
IGT Global Services Limited
IGT Global Solutions Corporation
(80%); Computers and Controls
(Holdings) Limited (20%)
100
International Game Technology PLC
99.99
IGT Sweden Interactive AB
99.99
IGT Malta Casino Holdings Limited
99.99
IGT Malta Casino Holdings Limited
100
95
100
100
100
100
100
IGT Global Solutions Corporation
(99.9%); IGT Foreign Holdings
Corporation Holdings Corporation
(0.1%)
IGT Austria GmbH (95%); Walter
Bugno (1%), Katarzyna Szorc (1%);
Abdelhalim Stri (1%)
IGT Germany Gaming GmbH
(99.999971%); GTECH German
Holdings Corporation GmbH
(0.000029%)
IGT Global Solutions Corporation
IGT Global Solutions Corporation
International Game Technology PLC
IGT Global Services Limited
Annual Report and Accounts 2020 Page | 160
Name of entity
IGT Spain Operations, S.A. f/k/
a GTECH Spain S.A.
IGT SWEDEN AB f/k/a GTECH
Sweden AB
IGT Sweden Interactive AB f/k/a
GTECH Sweden Interactive AB
f/k/a Boss Media AB
IGT Sweden Investment AB f/k/
a GTECH Sweden Investment
AB
IGT Technology Development
(Beijing) Co. Ltd.
IGT Turkey Teknik Hizmetler Ve
Musavirlik Anonim f/k/a GTECH
Avrasya Teknik Hizmetler Ve
Musavirlik A.S.
IGT U.K. Limited f/k/a GTECH
U.K. Limited
IGT UK Games Limited f/k/a
GTECH UK Games Limited
IGT UK Interactive Holdings
Limited f/k/a GTECH Sports
Betting Solutions Limited
IGT UK Interactive Limited f/k/a
GTECH UK Interactive Limited
IGT VIA DOMINICAN
REPUBLIC, SAS f/k/a GTECH
VIA DR, SAS
IGT Worldwide Services
Corporation f/k/a GTECH
Worldwide Services
Corporation
IGT-Canada Inc.
IGT-China, Inc.
IGT-Europe B.V.
IGT-Íslandi ehf. (IGT-Iceland
plc)
IGT-Latvia SIA
IGT-Mexicana de Juegos, S. de
R.L. de C.V.
IGT-UK Gaming Limited
Address of registered office
Edificio Avant, Parque de Negocios
Mas Blau, Calle Selva 12, planta
1a, Modulo A2, El Prat de
Llobregat, 08820, Barcelona, Spain
Hälsingegatan 40 12tr, 113 43
Stockholm, Sweden
Honnorsgatan 2, Vaxjo 35053,
Sweden
Honnorsgatan 2, Vaxjo 35053,
Sweden
11F, Viva Plaza, No. 29 Suzhou
Street, Haidian District, Beijing
100080, P.R. China
Nasuh Akar Mahallesi. Turkocagi
cad. 1400. sok. No: 34/2, Balgat,
Ankara, Turkey
1st Floor Building, 3 Croxley Green
Business Park, Hatters Lane,
Watford, WD18 8YG, United
Kingdom
1 Bridgewater Place Water Lane,
Leeds, West Yorkshire LS11 5QR
3rd Floor 10 Finsbury Square,
London, EC2A 1AF, United
Kingdom
3rd Floor 10 Finsbury Square,
London, EC2A 1AF, United
Kingdom
Avenida Estrella Sadhala, Esquina
Bartolome Colon, Edificio Hache,
Primer Piso, Santiago, Dominican
Republic
1209 Orange Street, Wilmington,
DE 19801, United States
600-1134 Grande Allee O, bureau
600, Quebec (Quebec) G1S1E5,
Canada
160 Greentree Drive, Suite 101,
Dover, DE 19904, United States
Galwin 2, 1046 AW Amsterdam,
Netherlands
Sigtuni 3800, Selfoss, Iceland
Krisjana Valdemara Street 33-19.
Riga, Latvia
Andres Bello 45 Piso 14, Col.
Polanco, Chapultepec, Deleg.
Miguel Hidalgo, D.F.C.P. 11560,
Mexico
Quay West, Trafford Wharf Road,
Trafford Park, Manchester, M17
1HH, United Kingdom
Ownership
%
100
Shareholder
IGT Spain Lottery S.L.U.
100
100
IGT Global Services Limited
IGT-Europe B.V.
100
IGT Sweden Interactive AB
100
IGT Hong Kong Limited
100
IGT Global Solutions Corporation
100
IGT Global Solutions Corporation
100
100
IGT Sweden Interactive AB
International Game Technology PLC
100
IGT UK Interactive Holdings Limited
100
IGT Global Services Limited
(99.9666%); IGT Ireland Operations
Limited (0.0333%)
100
IGT Global Solutions Corporation
100
International Game Technology
100
100
100
100
100
International Game Technology
International Game Technology
International Game Technology
International Game Technology
IGT (99.99%); International Game
Technology (0.01%)
100
IGT – UK Group Limited
Annual Report and Accounts 2020 Page | 161
Name of entity
IMA S.r.l.
Innoka Oy
International Game Technology
International Game Technology
(NZ) Limited
International Gaming
Technology Brasil Servicos de
Dados Ltda
International Game Technology
España, S.L.
International Game Technology
S.R.L.
International Game Technology
Services Limited
International Game Technology-
Africa (Pty) Ltd.
LB Participacões E Loterias
Ltda.
LB Produtos Lotéricos E
Licenciamentos Ltda.
Leeward Islands Lottery
Holding Company, Inc.
Lotterie Nazionali S.r.l.
Lottery Equipment Company
LOTTOITALIA S.r.l.
Lottomatica Giochi e
Partecipazioni S.r.l.
Lottomatica Holding S.r.l.
Address of registered office
Viale del Campo Boario, 56/d
Roma, Italy
Aku Korhosen tie 4, 00440 Helsinki,
Finland
701 South Carson Strret, Suite 200,
Carson City, Nevada 89701
Birchwood Park, Unit 4, 483 Hutt
Road, Lower Hutt, New Zeland
Calcada Das Margaridas, 163, Sala
02, Barueri, Sao Paulo, 06453-038,
Brazil
Pza de Pablo Ruiz Picasso 1, Torre
Picasso, 5, 28020 Madrid
Av. Pardo y Aliaga No. 695, Oficina
11, distrito de San Isidro, provincia
y departamento de Lima
27 Grigori, 6021, Larnaca, Cyprus
2 Brands Hatch Close, Corner
Indianapolis St, Kyalami Business
Park, Midrand 1685, South Africa
Calcada das Margaridas No. 163
Sala 02, CV 1237 Centro
Comercial de Alphaville, Barueri
Sao Paulo Brazil 06453-038
Calcada das Margaridas No. 163
Sala 02, CV 1237 Centro
Comercial de Alphaville, Barueri
Sao Paulo Brazil 06453-038
C18, The Sands Complex, Bay
Road, Basseterre, St. Christopher,
St. Kitts
Viale del Campo Boario, 56/d
Roma, Italy
c/o Shevchenko, Didkovskiy and
Parnters LLC, 2-A Kostyantynivska
Street, 5th Floor, Kyiv, Ukraine
Viale del Campo Boario, 56/d
Roma, Italy
Viale del Campo Boario, 56/d
Roma, Italy
Viale del Campo Boario, 56/d
Roma, Italy
Lottomatica Italia Servizi S.p.A. Via Pordenone, 8, Milano, Italy
Viale del Campo Boario, 56/d
Lottomatica Scommesse S.r.l.
Roma, Italy
Viale del Campo Boario, 56/d
Roma, Italy
102 Na Ranong Road, Klongtoey,
Bangkok Metropolis, Thailand
Lottomatica Videolot Rete
S.p.A.
Loxley GTECH Technology
Co., Ltd.
Northstar Lottery Group, LLC
208 South LaSalle Street, Suite
814, Chicago, IL 60601, United
States
Ownership
%
51
Shareholder
IGT EUROPE BV
81
100
100
100
100
100
100
100
100
100
IGT Global Services Limited
International Game Technology PLC
I.G.T. (Australia) Pty Limited
IGT Global Solutions Corporation
IGT-Europe B.V.
IGT (99.991%); IGT International
Holdings 1 LLC (0.009%)
International Game Technology PLC
IGT International Treasury B.V.
(74.9%); IGT Empowerment Trust
(25.1%)
Lottomatica Giochi e Partecipazioni
(>99.99%); International Game
Technology PLC (<0.01%)
LB Participacões E Loterias Ltda.
(>99.99%); International Game
Technology PLC (<0.01%)
100
IGT Global Services Limited
64
100
Lottomatica Holding S.r.l.
GTECH Asia Corporation (99.994%);
GTECH Management P.I. Corporation
(0.006%)
61.5
Lottomatica Holding S.r.l.
100
100
100
100
100
49
80
International Game Technology PLC
International Game Technology PLC
Lottomatica Holding S.r.l.
Lottomatica Holding S.r.l.
Lottomatica Holding S.r.l.
IGT Global Services Limited (10%);
IGT Global Solutions Corporation
(39%)
IGT Global Solutions Corporation
Northstar New Jersey Holding
Company, LLC
820 Bear Tavern Road, West
Trenton, NJ 08628, United States
50.15
IGT Global Solutions Corporation
Annual Report and Accounts 2020 Page | 162
Name of entity
Northstar New Jersey Lottery
Group, LLC
Northstar SupplyCo New
Jersey, LLC
Online Transaction
Technologies S.à.r.l. à Associé
Unique
Orbita Sp. z o.o.
Oy IGT Finland AB f/k/a Oy
GTECH Finland Ab
PCC Giochi e Servizi S.p.A.
Playyoo SA
Powerhouse Technologies, Inc.
Probability (Gibraltar) Limited
Prodigal Lottery Services, N.V.
Retail Display and Service
Handlers, LLC
Ringmaster S.r.l.
SB Industria E Comercio Ltda.
SED Multitel S.r.l.
Servicios Corporativos y de
Administracion, S. de R.L. de
C.V.
St. Kitts and Nevis Lottery
Company, Ltd.
Technology Risk Management
Services, Inc.
UTE LOGISTA IGT f/k/a UTE
Logista-GTECH, Law 18/1982,
No. 1
VIA TECH Servicios SpA
VLC, Inc.
Your Sales S.r.L.
ZEST GAMING MEXICO, S.A.
DE C.V.
Address of registered office
820 Bear Tavern Road, West
Trenton, NJ 08628, United States
820 Bear Tavern Road, West
Trenton, NJ 08628, United States
Twin Center West, Angle Bd
Zerktouni et Al Massira El Khadra,
Casablanca, Morocco
Aleje Jerozolimskie 92, 00-807
Warsaw, Poland
c/o Veikkaus Oy, Aku Korhosen tie
2-4, 00440 Veikkaus, Vantaa,
Finland
Viale del Campo Boario, 56/d
Roma, Italy
Via Cantonale 19, Lugano 6900,
Switzerland
6355 South Buffalo Drive, Las
Vegas, Nevada, 89113, United
States
Suite 23, Portland House Glacis
Road, GX11 1AA, Gibraltar
63A Walter J.A. Nisbeth Road,
Pondfill Philipsburg, St. Maarten
1209 Orange Street, Wilmington,
DE 19801, United States
Corso Francia, 110 - Torino, Italy
Rua Rio Pauini 30, A, Quadra F,
conjunto Manauense, Bairro Nossa
Senhora das Graças, CEP
69053-001, Cidade de Manaus,
Estado do Amazonas
Viale del Campo Boario, 56/d
Roma, Italy
Andres Bello 45 Piso 14, Col.
Polanco, Chapultepec, Deleg.
Miguel Hidalgo, D.F.C.P. 11560,
Mexico
C18, The Sands Complex, Bay
Road, Basseterre, St. Kitts
1209 Orange Street, Wilmington,
DE 19801, United States
Trigo n° 39, Polfgono Industrial
Polvoranca, Madrid, 18104 Spain
Isadora Goyenechea, 3447 Piso
19, 2215-21, Las Condes,
Santiago, Chile
6355 South Buffalo Drive, Las
Vegas, Nevada, 89113, United
States
Viale del Campo Boario, 56/d
Roma, Italy
Campos Eliseos169, Col. Polanco,
Mexico City, 11560, Mexico
Ownership
%
82.31
70
Shareholder
Northstar New Jersey Holding
Company, LLC
IGT Global Solutions Corporation
100
IGT Foreign Holdings Corporation
100
100
100
100
100
100
100
100
50
100
100
100
100
100
50
IGT Global Solutions Corporation
IGT Global Solutions Corporation
Lottomatica Holding S.r.l.
IGT UK Interactive Limited
International Game Technology
IGT UK Interactive Limited
Leeward Islands Lottery Holding
Company, Inc.
IGT Global Solutions Corporation
Lottomatica Holding S.r.l.
IGT Global Solutions Corporation
(˃99.99%); IGT Foreign Holdings
Corporation (˂0.01%)
Lottomatica Holding S.r.l.
International Game Technology
(99.97%); IGT (0.03%)
Leeward Islands Lottery Holding
Company, Inc.
IGT Global Solutions Corporation
IGT Spain Lottery S.L.U.
100
IGT Global Services Limited
100
Powerhouse Technologies, Inc.
100
100
Lottomatica Holding S.r.l.
International Game Technology PLC
(99%); IGT Spain Lottery S.L.U. (1%)
Annual Report and Accounts 2020 Page | 163
Name of entity
Joint Ventures
CLS-GTECH Company Limited PO Box 957, Offshore
Address of registered office
Telling IGT Information
Technology (Shenzhen) Co.,
Ltd.
Ringmaster S.r.l.
Incorporations Centre, Road Town,
Tortola, British Virgin Islands
503D, Tian An Chuangxin Keji
Square (Phase II) East Block, the
Interchange of Binhe Road and
Xiangmihu Road, Shatou Street,
Futian District, Shenzhen, China
Corso Francia, 110 - Torino, Italy
Ownership
%
Shareholder
50
49
IGT Global Services Limited
IGT Global Services Limited
50
Lottomatica Holding S.r.l.
Annual Report and Accounts 2020 Page | 164
FINANCIAL STATEMENTS
INTERNATIONAL GAME TECHNOLOGY PLC
INDEX TO PARENT COMPANY FINANCIAL STATEMENTS
Parent Balance Sheet at December 31, 2020 and 2019..................................................................................
Parent Statement of Shareholders' Equity for the years ended December 31, 2020 and 2019.......................
Notes to the Parent Financial Statements........................................................................................................
166
167
168
Annual Report and Accounts 2020 Page | 165
International Game Technology PLC
Parent Balance Sheet
($ thousands)
Notes
2020
2019
December 31,
6
3
4
4
4
6
124,675
76,758
12,642
5,635
219,710
766
9,300
4,786,024
7,673,136
37,401
12,506,627
12,726,337
6,713
392,672
—
103,761
247,929
55,505
806,580
7,808,477
9,133
353,402
1,763
8,172,775
8,979,355
20,485
21,002
3,566,621
138,874
3,746,982
12,726,337
289,595
476,446
97,879
11,297
875,217
1,034
10,952
4,659,174
7,435,151
39,703
12,146,014
13,021,231
1,186
434,789
—
124,082
533,834
153,245
1,247,136
7,539,284
11,173
74,406
2,835
7,627,698
8,874,834
20,443
21,002
3,960,373
144,579
4,146,397
13,021,231
Assets
Current assets:
Cash and cash equivalents
Intercompany loans receivable
Receivables from related parties
Other current assets
Total current assets
Property, plant and equipment, net
Right-of-use assets
Investments in subsidiaries
Intercompany loans receivable
Other non-current assets
Total non-current assets
Total assets
Liabilities and shareholders' equity
Current liabilities:
Accounts payable
Current portion of long-term debt
Short-term borrowings
Loans payable to related parties
Payables to related parties
Other current liabilities
Total current liabilities
Long-term debt, less current portion
Lease liabilities
Loans payable to related parties
Other non-current liabilities
Total non-current liabilities
Total liabilities
Shareholders' equity
Share capital
Share premium
Retained earnings
Other reserves
Total shareholders' equity
Total liabilities and shareholders' equity
Net (loss) income was $(344.8) million and $379.9 million for the years ended December 31, 2020 and 2019, respectively. As
permitted by section 408 of the Companies Act 2006, no statement of comprehensive income for International Game Technology
PLC is shown.
The Parent financial statements were approved by the Board of Directors on March 11, 2021 and signed on its behalf on
March 16, 2021 by:
Marco Sala
Chief Executive Officer
Company registration number: 09127533
The accompanying notes are an integral part of these Parent financial statements.
Annual Report and Accounts 2020 Page | 166
International Game Technology PLC
Parent Statement of Shareholders' Equity
($ thousands)
Balance at December 31, 2018
20,421
21,002
3,715,278
142,977
3,899,678
Share Capital
Share Premium
Retained
Earnings
Other Reserves
Total Equity
Net income
Other comprehensive income
Total comprehensive income
Dividends paid
Shares issued under stock award plans
Stock-based compensation
Non-cash investment in subsidiaries
Other
—
—
—
—
22
—
—
—
—
—
—
—
—
—
—
—
379,911
—
379,911
(163,503)
(1,603)
6,905
18,527
4,858
—
1,602
1,602
—
—
—
—
—
379,911
1,602
381,513
(163,503)
(1,581)
6,905
18,527
4,858
Balance at December 31, 2019
20,443
21,002
3,960,373
144,579
4,146,397
Net loss
Other comprehensive loss
Total comprehensive loss
Dividends paid
Shares issued under stock award plans
Stock-based compensation
Non-cash investment in subsidiaries
Balance at December 31, 2020
—
—
—
—
42
—
—
—
—
—
—
—
—
—
(344,777)
—
(344,777)
(40,887)
(1,211)
1,817
(8,694)
—
(5,705)
(5,705)
—
—
—
—
(344,777)
(5,705)
(350,482)
(40,887)
(1,169)
1,817
(8,694)
20,485
21,002
3,566,621
138,874
3,746,982
For further information related to shareholders' equity, refer to Note 20, Shareholders' Equity, in the notes to the
consolidated financial statements included herein.
The accompanying notes are an integral part of these Parent financial statements.
Annual Report and Accounts 2020 Page | 167
International Game Technology PLC
Notes to the Parent Financial Statements
1. Description of Business
The principal activities of International Game Technology PLC (the "Parent") are to make investments and provide
loans to its consolidated subsidiaries. All references to the "Company" refer to the business and operations of the
Parent and its consolidated subsidiaries.
2. Summary of Significant Accounting Policies
Basis of Preparation
The accompanying financial statements and notes of the Parent have been prepared in accordance with Financial
Reporting Standard 101 "Reduced Disclosure Framework ("FRS 101") and the Companies Act 2006 applicable to
companies reporting under FRS 101. The amendments to FRS 101 issued in March 2018 and effective immediately
have been applied. The Parent financial statements are stated in thousands of U.S. dollars unless otherwise
indicated.
In the transition from IFRS, the Company has made no measurement and recognition adjustments. In applying FRS
101, various disclosure amendments to the financial statements have been applied from Adopted IFRS disclosure
requirements. The results of the Company herein have not been impacted due to the adoption FRS 101. The
comparative information has been amended where necessary to reflect the disclosure requirements of FRS 101.
In preparing these financial statements, the Company applies the recognition, measurement, and disclosure
requirements of Adopted IFRSs, but makes amendments where necessary in order to comply with the Companies
Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions have been taken.
The accounting policies set out below have been applied consistently to all periods presented in these financial
statements. The following exemptions available under FRS 101 have been applied:
•
The following paragraphs of IAS 1 "Presentation of financial statements":
▪
▪
▪
▪
▪
▪
▪
10(d) (statement of cash flows);
16 (statement of compliance with all IFRS);
38 (comparative information requirements in respect of Paragraph 79(a)(iv) of IAS 1)
38A (requirement for minimum of two primary statements, including cash flow statements);
38B-D (additional comparative information);
111 (cash flow statement information);
134-136 (capital management disclosures);
•
•
•
•
•
•
•
IAS 7 "Statement of Cash Flows"
Paragraphs 30 and 31 of IAS 8 "Accounting policies, changes in estimates and errors" (requirement for the
disclosure of information when an entity has not applied a new IFRS that has been issued and is not yet
effective);
IFRS 7 "Financial Instruments: Disclosures";
Paragraphs 91 to 99 of IFRS 13 "Fair value measurement" (disclosure of valuation techniques and inputs used
for fair value measurement of assets and liabilities);
The requirements of IAS 24 "Related party disclosures" to disclose related party transactions entered into
between two or more members of a group;
Paragraph 17 of IAS 24 "Related party disclosures" (key management compensation); and
Paragraphs 45(b) and 46 to 52 of IFRS 2, "Share-based payment" (details of the number and weighted-
average exercise prices of stock options and stock awards, and how the fair value of stock options and stock
awards was determined).
Annual Report and Accounts 2020 Page | 168
Going Concern
The Directors have considered the impact of COVID-19 on the Company’s operations (including the effects of any
governmental or regulatory response to the pandemic), and mitigations to these risks. Overall, the impact of these
items would heighten certain risks, such as the execution of the Company’s commercial strategies. The Company is
continuously monitoring, and mitigating where possible, impacts of these risks. Additionally, the Company has a
wide diversity of customers and suppliers across different geographic areas. The Directors believe that, overall, the
Company is well placed to manage its business risks successfully.
The Company’s cash flows generated from operating activities together with cash flows generated from financing
activities have historically been sufficient to meet the Company's liquidity requirements; however, the Company
implemented robust business continuity plans with cost reduction and capital spending avoidance initiatives in
anticipation of the impact on liquidity arising from COVID-19.
The Company believes its ability to generate cash from operations to reinvest in its business, primarily due to the
long-term nature of its contracts, is one of its fundamental financial strengths. Combined with funds currently
available and committed borrowing capacity, the Company expects to have sufficient liquidity to meet its financial
obligations and working capital requirements in the ordinary course of business for at least the next 12 months from
the date of issuance of these consolidated financial statements and the ability to maintain compliance with
covenants under our borrowing facilities over the same period. Consequently, the Directors believe that the
Company is well placed to manage its business risks successfully. Accordingly, we continue to adopt the going
concern basis in preparing these Parent financial statements.
Summary of Significant Accounting Policies
The accounting policies used in the preparation of the Parent financial statements are the same as those used in
the preparation of the consolidated financial statements, in accordance with the Companies Act 2006. Refer to Note
2, Summary of Significant Accounting Policies, in the notes to the consolidated financial statements included herein.
In addition to those accounting policies, the following accounting policy for investments in subsidiaries also applies
to the Parent financial statements: Investments in subsidiaries are held at cost less accumulated impairment losses,
if any.
3. Investments in Subsidiaries
($ thousands)
International Game Technology
Lottomatica Holding S.r.l.
Other
Country of
December 31,
Incorporation
2020
2019
United States
3,673,622
3,540,901
Italy
837,355
275,047
838,825
279,448
4,786,024
4,659,174
For a complete list of the Parent's subsidiaries, refer to Note 28, The Parent's Directly and Indirectly Owned
Subsidiaries, in the notes to the consolidated financial statements included herein.
Annual Report and Accounts 2020 Page | 169
4. Debt
The principal balance of each debt obligation reconciles to the balance sheet is as follows:
($ thousands)
6.250% Senior Secured U.S. Dollar Notes due February 2022
4.750% Senior Secured Euro Notes due February 2023
3.500% Senior Secured Euro Notes due July 2024
Principal
1,000,001
1,043,035
613,550
6.500% Senior Secured U.S. Dollar Notes due February 2025
1,100,000
3.500% Senior Secured Euro Notes due June 2026
6.250% Senior Secured U.S. Dollar Notes due January 2027
2.375% Senior Secured Euro Notes due April 2028
5.250% Senior Secured U.S. Dollar Notes due January 2029
920,325
750,000
613,550
750,000
December 31, 2020
Debt
issuance
cost, net
Swap and
other
Total
(3,039)
(4,983)
(3,808)
(8,359)
(6,995)
(5,845)
(5,150)
(6,875)
6,860
1,003,822
—
—
—
—
—
—
1,038,052
609,742
1,091,641
913,330
744,155
608,400
743,125
Senior Secured Notes, long-term
6,790,461
(45,054)
6,860
6,752,267
Euro Term Loan Facility due January 2023
Euro Revolving Credit Facilities due July 2024 1
U.S. Dollar Revolving Credit Facilities due July 2024 1
Long-term debt, less current portion
1,055,306
(7,439)
8,343
1,056,210
—
—
—
—
—
—
—
—
7,845,767
(52,493)
15,203
7,808,477
Euro Term Loan Facility due January 2023
Current portion of long-term debt
392,672
392,672
—
—
—
—
392,672
392,672
Total Debt
8,238,439
(52,493)
15,203
8,201,149
(1) $12.3 million of debt issuance costs, net presented in other non-current assets
Annual Report and Accounts 2020 Page | 170
($ thousands)
Principal
December 31, 2019
Debt
issuance
cost, net
Swap
Total
6.250% Senior Secured U.S. Dollar Notes due February 2022
1,500,000
4.750% Senior Secured Euro Notes due February 2023
954,890
(8,199)
(6,508)
3.500% Senior Secured Euro Notes due July 2024
561,700
(4,369)
6.500% Senior Secured U.S. Dollar Notes due February 2025
1,100,000
(10,041)
3.500% Senior Secured Euro Notes due June 2026
842,550
(7,445)
6.250% Senior Secured U.S. Dollar Notes due January 2027
2.375% Senior Secured Euro Notes due April 2028
750,000
561,700
(6,613)
(5,297)
(473) 1,491,328
—
—
—
—
—
—
948,382
557,331
1,089,959
835,105
743,387
556,403
Senior Secured Notes, long-term
6,270,840
(48,472)
(473) 6,221,895
Euro Term Loan Facility due January 2023
Euro Revolving Credit Facilities due July 2024 1
U.S. Dollar Revolving Credit Facilities due July 2024 1
Long-term debt, less current portion
1,325,612
(8,223)
—
—
—
—
—
—
—
1,317,389
—
—
7,596,452
(56,695)
(473) 7,539,284
4.750% Senior Secured Euro Notes due March 2020
Current portion of long-term debt
435,767
435,767
(978)
(978)
—
—
434,789
434,789
Total Debt
8,032,219
(57,673)
(473) 7,974,073
(1) $17.9 million of debt issuance costs, net presented in other non-current assets
Principal payments for each debt obligation, excluding short-term borrowings, for the next five years and thereafter
are as follows: (thousands):
Year
2021
2022
2023
2024
2025
2026 and thereafter
Total principal payments
U.S. Dollar
Denominated
Euro
Denominated
Total
$
— $
392,672 $
392,672
1,000,001
—
—
392,672
1,705,669
613,550
1,392,673
1,705,669
613,550
1,100,000
—
1,100,000
1,500,000
3,033,875
$ 3,600,001 $ 4,638,438 $ 8,238,439
1,533,875
For further information related to debt, refer to Note 17, Debt, in the notes to the consolidated financial statements
included herein.
5.
Income Taxes
The provision for income taxes consists of:
($ thousands)
Current:
Withholding tax
Current tax on profit for the year
For the year ended December 31,
2020
2019
341
—
341
80
777
857
Annual Report and Accounts 2020 Page | 171
Income taxes paid, net of refunds, were $0.5 million and $3.0 million for 2020 and 2019, respectively. There were no
deferred tax assets and deferred tax liabilities at December 31, 2020 and 2019.
The Parent is a tax resident in the United Kingdom ("U.K."). A reconciliation of the provision for income taxes, with
the amount computed by applying the weighted average rate of the U.K. statutory main corporation tax rates
enacted in each of the Parent's calendar year reporting periods to income before provision for income taxes is as
follows:
($ thousands)
(Loss) income before provision for income taxes
United Kingdom statutory tax rate
Statutory tax (benefit) expense
Change in unrecognized deferred tax asset
Non-deductible debt costs
Unrealized foreign exchange
Foreign withholding taxes
Non-taxable dividend income
Earnout investment adjustment
Other
Effective tax rate
For the year ended December 31,
2020
(344,436)
2019
380,768
19.00 %
19.00 %
(65,443)
72,346
46,155
24,365
14,386
341
(20,367)
—
904
341
(584)
—
(3,744)
80
(67,187)
(95)
41
857
(0.1) %
0.2 %
The Parent's effective income tax rate was (0.1)% in 2020 compared to 0.2% in 2019. The principal drivers of the
tax rate reduction is the level of pretax income/(loss) in 2020 versus 2019.
Changes to the U.K. corporate tax rates were substantively enacted as part of Finance Bill 2015 (on October 26,
2015) and Finance Bill 2016 (on September 7, 2016). These changes, which include reductions to the main tax rate
to 17% on April 1, 2020, have been superseded by the 2020 Finance Bill with the result that the UK corporate tax
rate remains at 19% for 2020. Deferred taxes at the balance sheet date have been measured using the 19%
enacted tax rate and are reflected in these financial statements.
Net Operating Losses
At December 31, 2020 and 2019, the Parent had gross tax loss carryforwards of $638.0 million and $394.0 million,
respectively, that relate to the U.K. No deferred tax assets were recorded for these tax loss carryforwards as
realization is not probable. These tax loss carryforwards may be carried forward indefinitely notwithstanding that
they offset only 50% of taxable income (above a £5.0 million full allowance threshold) in a given year.
6. Leases
The Parent has a lease for its registered office in London that is effective from March 25, 2015 to March 25, 2025
and a lease for another location in London that is utilized entirely by a subsidiary, which is effective from January 14,
2016 to January 13, 2026. Leasehold improvements made to the Parent's registered office in London are capitalized
and depreciated from the date placed in service through March 25, 2025, in accordance with the Company's
depreciation policy.
Annual Report and Accounts 2020 Page | 172
The classification of our leases in the balance sheet are as follows:
($ thousands)
Assets
ROU asset, net (1)
Total lease assets
Liabilities
Lease liability, current
Lease liability, non-current
Total lease liabilities
Balance Sheet Classification
Right-of-use assets
Other current liabilities
Lease liabilities
December 31,
2020
December 31,
2019
9,300
9,300
10,952
10,952
2,388
9,133
11,521
2,240
11,173
13,413
(1) ROU assets are recorded net of accumulated amortization of $4.0 million and $1.9 million at December 31, 2020 and December 31, 2019,
respectively.
Maturities of lease liabilities at December 31, 2020 are as follows ($ thousands):
Year
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
7. Stock-Based Compensation
Total
2,727
2,727
2,727
2,727
1,493
—
12,401
(880)
11,521
Stock-based incentive awards are provided to directors and employees under the terms of our 2015 Equity
Incentive Plan (the "Plan") as administered by the Board. Awards available under the Plan principally include stock
options, performance share units, restricted share units or any combination thereof. The maximum number of new
shares that may be granted under the Plan is 11.5 million shares. To the extent any award is forfeited, expires,
lapses, or is settled for cash, the award is available for reissue under the Plan. We utilize authorized and unissued
shares to satisfy all shares issued under the Plan.
Stock Options
Stock options are awards that allow the employee to purchase shares of our stock at a fixed price. Stock options are
granted under the Plan at an exercise price not less than the fair market value of a share on the date of grant. In
2018, stock options were granted solely to our Chief Executive Officer, which will vest in 2021 subject to certain
performance and other criteria, and have a contractual term of approximately six years. No stock options were
granted in 2020 or 2019.
Annual Report and Accounts 2020 Page | 173
Stock Awards
Stock awards are principally made in the form of performance share units ("PSUs") and restricted share units
("RSUs"). PSUs are stock awards where the number of shares ultimately received by the employee depends on the
Company’s performance against specified targets, which may include Adjusted EBITDA, Adjusted Net Debt and
Total Shareholder Return ("TSR") relative to the Russell Mid Cap Market Index. PSUs typically vest 50% over an
approximate three-year period and 50% over an approximate four-year period. Dividend equivalents are not paid
under the Plan. The fair value of each PSU is determined on the grant date or modification date, based on the
Company’s stock price, adjusted for the exclusion of dividend equivalents, and assumes that performance targets
will be achieved. Over the performance period, the number of shares of stock that will be issued is adjusted based
upon the probability of achievement of performance targets. The ultimate number of shares issued and the related
compensation cost recognized as expense is based on a comparison of the final performance metrics to the
specified targets. In 2020, no PSUs were granted.
RSUs are stock awards granted to directors that entitle the holder to shares of common stock as the award vests,
typically over a one-year period, and have a contractual term of 10 years. Dividend equivalents are not paid under
the Plan. In 2020, RSUs were also granted to employees, which will vest in approximately one- and two-year
vesting periods.
8. Employee Information
Employee Benefit Expense
($ thousands)
Social security and other benefits
Wages and salaries
Stock-based compensation
Incentive compensation
For the year ended
December 31,
2020
2019
5,563
2,015
1,817
(420)
8,975
5,265
1,784
6,905
4,255
18,209
The Parent had 10 and eight people employed in corporate support roles as of December 31, 2020 and 2019,
respectively.
9. Auditors' Remuneration
Aggregate fees for audit services rendered by PricewaterhouseCoopers LLP were $75,000 and $75,000 for the
years ended December 31, 2020 and 2019, respectively.
Audit services consist of professional services performed in connection with the Parent's annual financial
statements.
Annual Report and Accounts 2020 Page | 174