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!

Gaming News

 

Alliance Gaming Returns To Profitability In Q4

16 August 2000

LAS VEGAS, Nevada –(Press Release) -- Aug. 16, 2000 -- Alliance Gaming Corporation (Nasdaq: ALLY) today announced results for the quarter and fiscal year ended June 30, 2000.

For the fourth quarter, the Company reported net income of $0.8 million or $0.08 per diluted share, compared to net income of $0.16 per diluted share in the prior year quarter.

Included in the June 2000 quarter results is a non-cash charge of $1.2 million, or $0.12 per share, for additional write-downs of assets at one of its foreign sales offices, and a special charge of $0.5 million, or $0.05 per share, for additional tax reserves at Bally Wulff.

The June 2000 results reflect a substantial turnaround from the March 2000 quarter in which the Company reported a net loss of $9.1 million, or ($0.89) per share.

Operating results for the June 2000 quarter include:

-- Consolidated revenues of $128.8 million for the quarter, down less than 1% from the $129.8 million in the prior year quarter. Substantial revenue growth was reported at both the Route Operations and Casino Operations business units, but revenues declined at both Bally Gaming and Systems and Bally Wulff business units, compared to the prior year quarter. However, Bally Gaming and Systems revenues increased by 50% compared to the March 2000 quarter as a result of substantial increases in games sales and systems revenues.

-- Consolidated EBITDA of $15.9 million for the quarter, down 8% from the $17.3 million in the prior year quarter. Substantial growth in EBITDA was reported in the current quarter compared to the prior year quarter for the Casino Operations business unit as well as a 21% decrease in Corporate overhead expenses, with declines in EBITDA occurring in the Route Operations, Bally Gaming and Systems and Bally Wulff business units.

However, EBITDA increased 39% from the $11.4 million reported in the March 2000 quarter, reflecting substantial improvements in both the Bally Gaming and Systems and Bally Wulff business units.

-- Consolidated operating income totaled $9.0 million for the quarter, down 19% from the $11.1 million in the prior year quarter. Operating income increased 96% from $4.6 million in the March 2000 quarter, primarily due to the improved results at Bally Gaming and Systems and Bally Wulff business units.

-- The current quarter results include a charge totaling $0.5 million for German taxes, primarily resulting from increases in reserves for open tax years currently under audit by the tax authorities.

-- The current quarterly results for Bally Gaming and Systems include a non-cash charge totaling $1.2 million resulting from additional write-downs of receivables and inventory at its South African subsidiary which is in the process of being closed.

Management believes that this will be the final write-down of assets for subsidiaries being closed.

For the year ended June 30, 2000 revenues totaled $478.1 million, a 4% increase over fiscal year 1999, with all business units except Bally Wulff reporting year over year increases. EBITDA for the current year totaled $51.7 million ($47.6 million after unusual items), representing a 7% increase over the $48.4 million for the prior year period.

Year-over-year EBITDA growth was reported at both Casino Operations and Bally Gaming and Systems, with Route Operations reporting a slight decline primarily as a result of increased game rental expenses, and Bally Wulff reporting a 65% decline.

For the year ended June 30, 2000 the Company reported a net loss applicable to common shares of $15.0 million or $1.47 per share (including special items totaling $5.6 million, or $0.56 per share), compared to a net loss of $10.5 million or $1.09 per share for the prior year.

                                               EBITDA Summary

                                 Three Months Ended         Year Ended
                                      June 30,               June 30,
                                   2000       1999       2000        1999
                                            (Dollars in Millions)

    Bally Gaming and Systems       $5.0       $7.6      $12.4        $9.8

    Route Operations                6.2        6.6       24.5        24.9

    Casino Operations               6.7        5.5       26.0        21.7

    Bally Wulff                     1.9        2.5        3.6        10.2

    Corporate office expense       (3.9)      (4.9)     (14.8)      (18.2)

    EBITDA before unusual items    15.9       17.3       51.7        48.4

    Unusual items, net (a)           --         --       (4.1)         --

    Alliance total EBITDA         $15.9      $17.3      $47.6       $48.4

    (a) Includes $1.9 million in inventory write-downs for Australia recorded
        in Cost of Sales, see Summary Consolidated Statement of Operations
        attached hereto.

In order to enhance comparability, the following Business Unit results are presented exclusive of Unusual Items.

Bally Gaming and Systems Revenues and EBITDA Lower than Prior Year, Higher than March 2000 Quarter

The following chart summarizes the financial information for the Bally Gaming and Systems business unit:

                                   Three Months Ended          Year Ended
                                        June 30,                June 30,
                                   2000         1999        2000       1999
                                           (Dollars in Millions)

    Revenues
      Game sales                  $20.2        $30.2       $74.2      $94.7
      System sales                 12.1         13.5        40.2       31.4
      Gaming operations             6.5          1.3        20.8        1.7
        Total revenues             38.8         45.0       135.2      127.8
    EBITDA                        $ 5.0        $ 7.6       $12.4      $ 9.8
    EBITDA Margin                    13%          17%          9%         8%
    Operating Income              $ 2.9        $ 6.4       $(0.7)     $ 5.8
    Approximate Number of New
     Gaming Machines Sold         2,500        3,900       8,700     12,300

Bally Gaming and Systems business unit reported a 14% decrease in revenues over the prior year quarter. Revenues for sales of gaming devices were down over the prior year primarily as a result of the lower number of units sold, offset by an 8% increase in the average new unit selling price.

Systems revenues remained strong, down just 10% from the prior year record quarter. Systems continues to benefit from consolidation within the casino operators which has caused displacement of competitor systems and new systems installations in California.

Gaming Operations revenues increased 390% over the prior year quarter. The increase in Gaming Operations revenues was a result of the increase in number of progressive games deployed, which now totals 960 units, and an increase in the number of daily-fee games, which now total 1,740.

These unit amounts do not include the full deployment of progressive games in Atlantic City nor any units deployed in California.

The gross margin for Bally Gaming and Systems remained constant at 45%, which reflects the lower new unit sales volume, offset by the higher margins from Gaming Operations. Exclusive of the non-cash charges for the South African subsidiary, the gross margin for the current quarter was 48%.

In comparison to the March 2000 quarter, the June 2000 quarter showed improvements for all the key financial measures for Bally Gaming and Systems. Compared to the March 2000 quarter, new gaming units sold increased 113%, revenues increased 50%, EBITDA increased 604% and operating income increased by 331%.

The current quarter shipments for Bally Gaming included approximately 470 units to the Nevada and Atlantic City markets, 470 units to international markets and 1,560 units to Native American casinos, riverboats and other domestic markets.

Route Operations Revenues increase 16%, EBITDA declines 7%

The following chart summarizes the combined financial information for the Nevada route operations and the Louisiana-based Video Services, Inc. (VSI) operations:

                                  Three Months Ended          Year Ended
                                       June 30,                June 30,
                                  2000          1999        2000       1999
                                            (Dollars in Millions)

    Revenues
      Nevada                     $50.1         $41.7      $183.3     $154.2
      Louisiana                    4.6           5.4        19.2       21.7
        Total revenues            54.7          47.1       202.5      175.9
    EBITDA
      Nevada                       5.2           5.5        20.4       20.0
      Louisiana                    1.0           1.1         4.1        4.9
        Total EBITDA               6.2           6.6        24.5       24.9
    EBITDA Margin
      Nevada                        10%           13%         11%        13%
      Louisiana                     22%           22%         22%        23%
    Operating Income              $3.9          $4.4       $15.2      $14.6
    Average Number of Gaming
     Machines                    8,760         8,250       8,500      8,050

The Route Operations business unit reported a 16% increase in revenues over the prior year quarter. The revenue improvement was due to a 20% increase in the Nevada route operations revenues, resulting from increases in win per day per gaming machine and an increase in the number of average number of gaming machines deployed, partially offset by a 15% decrease in revenues at VSI.

For the Nevada route operations, net win per day per gaming machine increased 12% to $67.40 in the current quarter compared to $60.40 in the prior year quarter. The average number of gaming machines deployed also increased 7% over the prior year quarter. At June 30, 2000 the Gamblers Bonus product is available at approximately 350 locations and is installed in over 3,500 gaming machines or 43% of the Nevada route's total installed base of gaming machines.

The decrease in revenues at VSI is due primarily to a lower average number of gaming units deployed and a slight decrease in net win per day per gaming machine to $77.10 from $80.80 in the prior year quarter.

Route Operations EBITDA of $6.2 million and operating income of $3.9 showed decreases of 6% and 10%, respectively, over the prior year quarter, resulting primarily from increased game rental costs for the Nevada operations.

Game rental costs totaled $1.2 million in the current quarter, compared to $0.3 million in the prior year quarter.

Casino Operations Reports 19% Increase in Revenues, 20% Increase in EBITDA The following chart summarizes combined financial information for the Rainbow Casino in Vicksburg, Mississippi and the Rail City Casino in Sparks, Nevada:

                                   Three Months Ended         Year Ended
                                        June 30,               June 30,
                                    2000        1999        2000       1999
                                            (Dollars in Millions)

    Revenues
      Rainbow Casino               $14.6       $12.2       $53.8      $49.1
      Rail City Casino               4.6         3.9        17.7       14.6
        Total Revenues              19.2        16.1        71.5       63.7
    EBITDA
      Rainbow Casino                 5.6         4.9        21.3       19.0
      Rail City Casino               1.0         0.6         4.7        2.7
        Total EBITDA                 6.6         5.5        26.0       21.7
    EBITDA Margin
      Rainbow Casino                  38%         40%         40%        39%
      Rail City Casino                23%         16%         26%        18%
    Operating Income                $6.1        $4.9       $23.8      $19.3
    Average Number of Gaming
     Machines                      1,490       1,220       1,370      1,210
    Average Number of Table Games     23          21          22         21

For the quarter ended June 30, 2000, Casino Operations reported revenues increased 19% compared to the prior year quarter. Rainbow Casino revenues increased as a result of a 32% increase in the average number of gaming machines and higher table game revenue, partially offset by a 7% decrease in the net win per day per gaming device to $148. The June 2000 quarter was the first full quarter of operations after the completion of the casino expansion. Rail City Casino revenues increased due to an 8% increase in the average number of gaming machines and a 25% increase in net win per day per gaming machine to $81.

Wall Machines and Amusement Games Revenues Decline Year over Year, Reports Improvements Over March 2000 quarter

The following chart summarizes the financial results for the Wall Machines and Amusement Games business unit which is based in Germany:

                                      Three Months Ended       Year Ended
                                           June 30,             June 30,
                                        2000      1999       2000      1999
                                              (Dollars in Millions)

    Revenues                           $16.1     $21.6      $69.0     $90.8
    EBITDA                             $ 1.9     $ 2.5      $ 3.6     $10.2
    EBITDA Margin                         12%       12%         5%       11%
    Operating Income (loss)            $ 0.4     $ 0.8      $(4.2)    $ 5.3
    Approximate Number of New Wall
     Machines Sold                     2,000     2,600      8,500    10,300
    Approximate Number of New Wall
     Machines Leased                     700       700      3,200     3,500
    Installed Base of Leased Machines  5,500     5,000      5,500     5,000


For the quarter ended June 30, 2000, the Wall Machines and Amusement Games business unit reported a 26% decrease in revenues from the prior year quarter. The revenue decrease resulted from a 30% decrease in the average selling price of new wall machines, a 2% decrease in leased machine revenues, and a 65% decrease in amusement game distribution revenues. The foreign currency fluctuation between the dollar and the deutschmark decreased revenues and EBITDA by $2.1 million and $0.3 million, respectively, for the quarter ended June 30, 2000.

Wall Machines and Amusement Games deployed approximately 700 machines into its leasing program during the current quarter which was consistent with the prior year quarter. The decline in leasing revenues is a result of a slight decline in the average monthly rental rate.

Gross margin for the quarter was 39% compared to 42% in the prior year quarter. This decrease was due to the unfavorable impact of a higher volume of trade-ins on used equipment related to sales of new wall machines and a lower fixed cost absorption rate.

As a result of cost reduction efforts instituted in the March 2000 quarter, this unit has been able to stabilize EBITDA margins even in a time of lower unit demand. In comparison to the March 2000 quarter, EBITDA and operating income both increased by $2.0 million.

Net interest expense for the three months ended June 30, 2000 increased to $8.6 million from $7.7 million in the prior year quarter. The increase is primarily due to a higher average amount of working capital borrowings in the current quarter and the increased interest rates on the credit facility.

The Company recorded an income tax provision of $0.5 million in the 2000 quarter compared to an income tax provision of $1.1 million in the prior year quarter. The current quarter provision is primarily a result of a special charge of $0.5 million to increase reserves for open tax years that are currently under audit by the tax authorities.

                           ALLIANCE GAMING CORPORATION
                   SUMMARY CONSOLIDATED STATEMENT OF OPERATIONS

                                                        Three Months Ended
                                                             June 30,
                                                        2000           1999

                                         (In 000's, except per share amounts)

    Revenues                                       $ 128,847      $ 129,766
    Cost of operations                                82,644         80,066

    Selling, general and administrative expenses      26,403         28,257
    Research and development costs                     3,851          4,096

    EBITDA                                            15,949         17,347

    Depreciation and amortization                      6,996          6,235

    Operating income                                   8,953         11,112

    Net interest expense                              (8,618)        (7,700)

    Minority interest and other                          974           (260)

    Net income before income taxes                     1,309          3,152

    Income tax provision                                (523)        (1,137)

    Net income                                           786          2,015

    Special stock dividends                               --           (443)

    Net income available to common shares              $ 786        $ 1,572


    Basic earnings per share                           $0.08         $ 0.16

    Diluted earnings per share                         $0.08         $ 0.16

    Weighted average common shares outstanding        10,253          9,705

    Weighted average common and common
     share equivalents outstanding                    10,478          9,706


                           ALLIANCE GAMING CORPORATION
                   SUMMARY CONSOLIDATED STATEMENT OF OPERATIONS

                                                           Year Ended
                                                            June 30,
                                                        2000           1999
                                         (In 000's, except per share amounts)

    Revenues                                       $ 478,080      $ 458,180
    Cost of operations (a)                           307,804        288,459

    Selling, general and administrative expenses     105,155        104,104
    Research and development costs                    15,318         17,190
    Unusual items, net (b)                             2,164             --

    EBITDA                                            47,639         48,427

    Depreciation and amortization                     26,788         23,104
    Operating income                                  20,851         25,323

    Net interest expense (c)                         (33,654)       (30,836)
    Minority interest and other                       (1,231)        (2,484)

    Loss before income taxes                         (14,034)        (7,997)
    Income tax provision (d)                          (1,001)          (830)

    Net loss                                         (15,035)        (8,827)
    Special stock dividends                               --         (1,697)

    Net loss applicable to common shares            $(15,035)      $(10,524)

    Basic and diluted loss per share                  $(1.47)        $(1.09)

    Weighted average common and common
     share equivalents outstanding                    10,221          9,665

    Memo:
    Special Charges of $5.6 million for the fiscal year ended June 30, 2000
    are as follows:
    (a) Includes unusual charge of $1.9 million for write-down of inventory in
        Australia in the March 2000 quarter.
    (b) Includes $6.2 million charge for restructuring costs incurred in the
        December 1999 and March 2000 quarters, net of $3.0 million gain on
        sale of certain gaming development and management rights recorded in
        the March 2000 quarter, and a $1.0 million gain on the release of an
        option the Company had to operate gaming machines at a dormant dog
        racing track in Kansas recorded in the December 1999 quarter.
    (c) Includes a total of $1.0 million in fees incurred related to
        amendments of the Company's credit agreement, incurred in the December
        1999 and March 2000 quarters.
    (d) Includes a charge of $0.5 million to increase German tax reserves.


                                  ALLIANCE GAMING CORPORATION
                                  SELECTED BALANCE SHEET DATA

                                                   As of
                                          June 30,        June 30,
                                            2000            1999
                                                 (In 000's)

    Cash and cash equivalents            $ 32,544        $ 16,930
    Working capital                       115,979         108,658
    Total assets                          347,875         356,307
    Total long term debt,
     including current maturities         345,547         318,706
    Total stockholders' deficiency        (50,794)        (30,408)

< Gaming News