CasinoCityTimes.com

Gurus
News
Newsletter
Search News Subscribe
Stay informed with the
NEW Casino City Times newsletter!
Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter!
Related Links

Gaming News

 

Alliance Gaming Reports Loss

1 February 2005

LAS VEGAS – (PRESS RELEASE) -- Alliance Gaming Corporation (NYSE: AGI) today announced its results for its second fiscal quarter ending December 31, 2004. Second quarter net loss from continuing operations totaled $(7.5) million, or $(0.15) per diluted share, which includes a write-down of certain inventory and other assets and a bank amendment charge, together totaling $11.7 million (or $0.14 per share, net of tax). Revenues for the quarter totaled $113.7 million. For the comparable prior year quarter ended December 31, 2003, the Company reported income from continuing operations of $14.2 million or $0.28 per diluted share on revenues of $108.6 million.

Consolidated results for the December 31, 2004 quarter include:

* Revenues from continuing operations of $113.7 million, an increase of 4.7% from $108.6 million in the prior year quarter.

* Operating loss from continuing operations of $(7.7) million, compared to operating income of $27.5 million in the prior year quarter.

* EBITDA from continuing operations of $16.0 million, compared to EBITDA of $34.0 million in the prior year quarter.

* Inventory and other asset write-downs of $11.1 million for certain discontinued products, used gaming devices and related ancillary assets, which has been included in cost of goods sold.

Earnings before interest, taxes, depreciation, amortization, refinancing charges, severance charge, stock-based compensation and inventory and asset write-downs (EBITDA) is not Generally Accepted Accounting Principles (GAAP) measurement. EBITDA may not be comparable to similarly titled measure reported by other companies. A reconciliation of EBITDA to GAAP net income (loss) from continuing operations is attached to this press release.

"We are on track with our new product and operational initiatives," said Richard Haddrill, President and CEO, "we are further building on our portfolio of leading technologies by putting the right strategy, people and processes in place to ensure a successful long-term future" he added.

Liquidity and Capital Expenditures:

* Cash flows from operations, as defined under GAAP, totaled $7.3 million for the quarter ended December 31, 2004, and $(8.2) million for the six months ended December 31, 2004.

* As of December 31, 2004, cash and cash equivalents totaled $28.0 million, which included approximately $2.7 million held for operational purposes in vaults, cages and change banks and $10.4 million held in jackpot reserve accounts.

* In December 2004, the Company agreed to a $40.0 million buy-out of the contingent consideration portion of the purchase price paid for Sierra Design Group. The Company made a one-time $12.0 million cash payment, and delivered a $28.0 million unsecured promissory note, payable over five years with interest at LIBOR +2%. The additional purchase consideration was recorded as goodwill on the balance sheet.

* In December 2004, the Company amended its senior loan agreement. The amendment provides for an increase in the maximum allowable leverage ratio (currently 4.25x), a reduction in the revolver from $125 million to $75 million which is currently unborrowed, an increase in the term loan interest rate to LIBOR + 3.00%. The fee incurred for the amendment totaled approximately $1.0 million, which has been capitalized and will be amortized over the life of the amended loan agreement, and the Company recorded a pre-tax charge of $0.6 million to write-off a portion of the previously deferred financing costs. The Company is in compliance with the bank covenants.

* For the quarter ended December 31, 2004, consolidated capital expenditures, including costs to produce proprietary games, totaled $12.3 million, compared to $13.2 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.

* Net interest expense for continuing operations for the current quarter totaled $3.4 million compared to $3.8 million in the prior year period due to lower borrowings outstanding during the current period.

* During the current quarter the Company completed the sale of its interest in the Louisiana route subsidiary (VSI), and received approximately $2.0 million in cash, resulting in a gain of $0.8 million which is included in discontinued operations.

Exclusive of unusual charges, the Company expects to return to profitability in both the third and fourth quarters of fiscal year 2005.

The Company will hold its conference call on Tuesday, February 1, 2005 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). Participants may access the call by dialing (913) 981-5542 and using participant passcode 312742. 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

Revenues from game sales decreased 7.0% over the prior year's quarter resulting from a 28.4% decrease in new unit sales offset by an 18% increase in the average new-unit selling price to $10,682 (excluding OEM games). The increase in the average selling price reflects the sale of higher priced Class II and centrally determined games.

Game sales gross margin decreased to 9.0% from 46.9% in the prior year quarter primarily resulting from an $11.1 million inventory write-down on discontinued products used gaming devices and ancillary assets. The gross margin for the current quarter excluding this charge was 33.0%.

Gaming Operations revenues increased 91.5% to $30.6 million compared to the prior year's quarter. The gross placements for all WAP and daily-fee games totaled 1,480 units; returns totaled 1,050 units, resulting in a net increase of 430 units of installed base games on a sequential basis as of December 31, 2004 compared to September 30, 2004. The casino-owned central determination link count increased 532 units primarily due to unit placements in Oklahoma and Washington. Gaming operations gross margin increased to 80.3% from 71.4% in the prior year quarter as a result of a higher mix of daily fee and decline in the frequency of WAP jackpots awarded during the current quarter.

Bally Systems revenues decreased 21.3% from the prior year quarter and increased 25% on a sequential basis compared to the quarter ended September 30, 2004. The recurring hardware and software maintenance revenues continued to increase due to the larger installed base of game monitoring units and eTicket sites, which currently stands at 281,000 and in 220 casinos world-wide managing 109,000 TITO games. Bally Systems gross margin increased to 77.9% compared to 74.3% in the prior year period reflecting the higher proportion of high margin software maintenance and services revenues.

Selling, general and administrative costs increased to $33.2 million compared to $15.5 million in the prior year quarter. This increase reflects the inclusion of Class II and centrally determined gaming operations. Selling, general and administrative costs decreased on a sequential basis compared to the September 30, 2004 quarter by approximately $3.0 million or 8.4%. The recurring expenses have been reduced in the quarter ended December 31, 2004 in the areas of consulting, legal, and payroll partially as a result of the staff reductions which occurred late in the quarter ended September 30, 2004. Additional staff reductions in the March 2005 quarter are intended to further this expense reduction effort.

Research and development expenses increased 9.7% to $10.4 million compared to the prior year quarter. Research and development costs declined on a sequential basis compared to the September 30, 2004 quarter by $1.4 million as a result of the consolidation of certain development projects.

Depreciation and amortization expense increased to $10.9 million compared to $5.4 million. This increase reflects the higher base of WAP and daily-fee games and the amortization of the purchased intangible assets. On a sequential basis depreciation and amortization increased $1.2 million for the current quarter compared to the quarter ended September 30, 2004 due to the increased base of installed daily-fee games.

Casino Operations

Rainbow Casino reported revenues and operating income increases of 4% and 7%, respectively compared to the prior year quarter. EBITDA increased 9% to $4.9 million and the EBITDA margin increased 200 basis points to 38.2%. When compared to the total Vicksburg gaming market, Rainbow's gaming revenues grew 5.3% over the same period in the previous year while the overall market gained 4.9%. For the period, slot revenue grew 2.5% and slot win per day grew 1% to $143 per day, while table game revenues increased 13.2% and table win per day also grew 13.2% to $872, as compared to prior year quarter. Table game revenue grew twice the rate of the market partially as a result of Rainbow installing the Mindplay table management systems early in the quarter, utilizing its player management tools.

Discontinued Operations

During the current quarter the Company completed the sale of its interest in VSI, and received approximately $2.0 million in cash. The Company recorded a gain of $0.8 million on the sale which is included in discontinued operations on the statement of operations.

< Gaming News