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Alliance Gaming Reports Income Up

5 August 2003

LAS VEGAS – (Press Release)-- Alliance Gaming Corporation (NYSE: AGI) today announced earnings for its fourth fiscal quarter ending June 30, 2003. Income from continuing operations for the fourth quarter totaled $15.0 million, or $0.30 per diluted share, on revenues from continuing operations of $121.1 million. For the comparable quarter ended June 30, 2002, the Company reported income from continuing operations (before one-time tax benefit of $37 million) of $10.8 million, or $0.22 per diluted share, on revenues of $86.5 million. For the fiscal year ended June 30, 2003, income from continuing operations totaled $40.4 million or $0.81 per diluted share, compared to $30.0 million or $0.63 per diluted share for the prior year (before the one-time tax benefit). The fiscal 2002 results included no Federal income tax expense due to the utilization of net operating loss carry forwards and other tax credits. Assuming Federal income taxes had been recognized in fiscal 2002, EPS from continuing operations would have been $0.09 and $0.34 for the quarter and fiscal year ended June 30, 2002, respectively.

Discontinued operations:

As previously announced, the Company has entered into definitive agreements to divest certain non-core assets including its route operations (United Coin Machine Co. and Video Services, Inc.) and its German wall machine and amusement games business unit (Bally Wulff). In July 2003 the Company completed the sale of Bally Wulff and received $16.5 million in cash, and recorded a charge in the June 2003 quarter of $25.4 million for the final write down of the Bally Wulff assets to the sale price, which included a $12.0 million non-cash charge for the recognition of the cumulative translation losses. The sale of the route operations is expected to be completed in calendar 2004.

For purposes of financial reporting, each of these three businesses are now treated as discontinued operations, and their results are presented net of applicable income taxes below Income From Continuing Operations in the accompanying unaudited statements of operations. The net assets of these businesses are now classified as Assets Held For Sale in the accompanying unaudited balance sheets.

Consolidated results for the June 2003 quarter include:

* Revenues from continuing operations of $121.1 million, an increase of 40% from the $86.5 million in the prior year quarter, led by a 49% increase in revenues at the Bally Gaming and Systems business unit.

* Operating income from continuing operations of $28.4 million, an increase of 86% from the $15.3 million in the prior year quarter.

* Income from continuing operations of $0.30 per diluted share, an increase of 38% compared to the prior year quarter of $0.22 per diluted share (or a 232% increase if compared to the pro forma after-tax income of $0.09 per diluted share).

* Total net income (loss), including discontinued operations and the loss on the sale of Bally Wulff, totaled $(0.23) per diluted share, compared to $0.56 per diluted share in the prior year quarter.

* EBITDA of $34.5 million, an increase of 76% from the $19.6 million in the prior year quarter, led by a 89% increase at Bally Gaming and Systems.

Consolidated results for the June 2003 fiscal year include:

* Revenues from continuing operations of $407.6 million, an increase of 38% from the $296.1 million in the prior year.

* Operating income from continuing operations of $89.9 million, an increase of 57% from the $57.1 million in the prior year.

* Income from continuing operations of $0.81 per diluted share, an increase of 28% compared to the prior year of $0.63 per diluted share (or a 138% increase if compared to the pro forma after-tax income of $0.34 per diluted share).

* Total net income, including discontinued operations, totaled $0.39, compared to $1.34 in the prior year.

* EBITDA of $111.5 million, an increase of 56% from the $71.7 million in the prior year.

Cash and Capital Expenditures:

* As of June 30, 2003, cash and cash equivalents for the Company's continuing operations totaled $40.2 million, which included approximately $3.8 million held for operational purposes in vaults, cages and change banks and $14.5 million held in jackpot reserve accounts. These amounts exclude cash and cash equivalents of the discontinued operations which are now included in Assets Held For Sale.

* For the quarter ended June 30, 2003, consolidated capital expenditures, including costs to produce proprietary games, totaled $9.3 million compared to $5.2 million for the prior year quarter. The current period capital expenditures were driven by the continued deployment of wide- area progressive and daily-fee games. A total of $1.6 million was incurred for capital expenditures for our discontinued operations.

Other financial highlights:

* Consolidated net interest expense for the current quarter totaled $6.1 million compared to $6.7 million in the prior year period, resulting from lower interest rates on the Company's term loan facility.

* Since July 1, 2002, the Company has been recognizing Federal income tax expense based on 35% of pre-tax domestic income and State income taxes at a rate of approximately 2% of domestic income. The fiscal 2002 actual results include no Federal income tax expense as all domestic earnings were offset against net operating loss carry forwards, but does include a one-time tax benefit of $37.0 million for the reduction of previously recorded deferred tax valuation reserves. For fiscal 2003, the discontinued operations are presented net of applicable Federal and State income taxes and the Bally Wulff results are presented net of a tax benefit of $16.8 million from the capital loss resulting from the sale of the business.

Fiscal Year 2004 Guidance:

* For fiscal 2004, the Company expects earnings from continuing operations of at least $1.10 per diluted share on revenues of approximately $460 million and EBITDA of approximately $130 million. This fiscal year 2004 earnings guidance reflects a 36% increase in earnings per share as compared to $0.81 of earnings from continuing operations for fiscal 2003. This guidance reflects the lower interest expense associated with the anticipated refinancing transaction, but is a non-GAAP financial measure as it excludes the effects of two previously reported items which are anticipated to occur in fiscal 2004, including: 1) the net gain from the sale of the Route Operations of at least $0.60 per share, and 2) an after tax charge of approximately $0.16 per share related to the refinancing transaction including $5 million for the early extinguishment of the 10% Subordinated Notes and $7 million for the non-cash write-off of unamortized debt issue costs.

The Company will hold its conference call on Tuesday, August 5th at 10 a.m. PDT (1 p.m. EDT). Participants may access the call by dialing (719) 457-2629. The Company will also broadcast the conference call over the Internet. Interested parties are asked to log on to the call at www.alliancegaming.com using the Investor Relations tab 10 minutes prior to the start of the call.

Supplemental Business Unit Detail for Continuing Operations

Bally Gaming and Systems Quarterly Revenues Increase 49%, Operating Income Increases 98%

Bally Gaming and Systems business unit reported a 49% increase in revenues over the prior year's quarter. Revenues from sales of gaming devices increased 72% over the prior year's quarter primarily as a result of a 28% increase in the number of units sold and a 11% increase in the average new-unit selling price (excluding OEM games), to $8,400. The increase in the average selling price includes the positive impact from the sale of 92 Monte Carlo premium- priced units as well as other premium-priced branded products.

Bally Systems revenues increased 52% over the prior year quarter driven by a 12% increase in game monitoring units shipped, a 15% increase in the average selling price per unit, and increased sales of software licenses for the industry's leading single-wire TITO solution, eTICKET(TM) as well as its bonusing and promotions software. Bally Systems recurring hardware and software revenues increased to $4.7 million, or $16.9 million for the fiscal year, resulting from the larger base of installed systems.

Gaming Operations revenues decreased 6% compared to the prior year's quarter as a result of a decrease in the average revenue per unit offset by a 17% increase in the average installed base of wide-area progressive (WAP) and daily-fee games deployed, which now total 1,910 and 2,490, respectively. During the quarter we deployed an additional 1,080 WAP and daily-fee games, and had returns totaling 730 games, resulting in a net increase in the installed base of 350 games on a sequential basis as of June 30, 2003 compared to March 31, 2003. The current quarter placements included the continued roll out of the Company's latest WAP offering, "Cash for Life," which in addition to the Nevada link, was launched in both Mississippi and Native American casinos in June, and does not include units placed in Atlantic City which went live in early July.

Casino Operations Revenues Increase 4%, Operating Income Increases 7%

For the quarter, the combined casino operations business unit reported a 4% increase in revenues and a 10% increase in EBITDA. Rail City reported a 5% increase in revenues driven by a 6% increase in the average number of games and a slight increase in slot win. EBITDA at Rail City increased 17% to $1.6 million.

Rainbow Casino reported a 3% increase in revenue compared with the same quarter in fiscal 2002, and represents the second consecutive quarter of revenue growth. Rainbow's EBITDA increased 8% to $4.5 million compared to the prior year quarter.

Discontinued Operations

For the Nevada route operations, revenue decreased 4% and EBITDA decreased 12% compared to prior year quarter. The average number of games deployed decreased 7% over the prior year quarter and the average net win per day per gaming machine increased to $70.80 from $69.20. Contributing to the reduced game count were the loss of approximately 300 games which were destroyed in a fire at one large location owned by a third-party. The Company expects to recover its net investment in these games through proceeds from its insurance carrier.

The decrease in revenues at VSI is due to a decrease in net win per day per gaming machine to $58.25 from $59.95 and the number of units deployed remained constant compared to the prior year quarter.

The Bally Wulff business unit revenues decreased 14% as a result of a 19% increase in revenues from leased games offset by a 31% decrease in new units sold and a 9% decrease in average selling price.

On July 18, 2003, the Company completed a sale of Bally Wulff to a private equity fund for $16.5 million in cash. The Company recorded a charge in the quarter totaling $25.4 million for the final write down of the Bally Wulff assets to the sale price.

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