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Alliance Gaming Starts Season With Strong Numbers

12 April 2001

by Richard N. Velotta

LAS VEGAS, Nevada –April 12, 2001 --Increased revenue in several divisions and reduced corporate expenses resulted in record quarterly earnings for Alliance Gaming Corp. of Las Vegas -- the first big local gambling industry company to report earnings for the January-March quarter.

The company, which has 2,300 employees worldwide, reported earnings of $6.8 million, 63 cents a share, on revenues of $139.6 million for the company's third quarter ending March 31. By comparison, the company reported a loss of $9.1 million, 89 cents a share, on revenues of $117.5 million for the same quarter a year earlier.

Alliance stock was up $2.02 to $21.02 on this morning's earnings news.

Alliance designs and manufactures gaming machines and computerized monitoring systems, owns and manages a series of progressive jackpot games, owns and operates two casinos and is a supplier of wall-mounted machines in the international market.

Alliance today also upgraded its earnings outlook for the year to $2.12 per diluted share. It was the third earnings upgrade in just over a month. In early March, the company increased its earnings estimate from $1.75 to $1.80 and in late March, the company upped the estimate to $2.

"They've built momentum and are establishing a good track record," said Marc Falcone, a gaming analyst with Bear Stearns, New York.

Falcone said he was not only impressed with the double-digit percentage revenue growth reported by three business units within Alliance, but also the company's reduction in corporate expenses for the quarter from $3.5 million to $2.7 million.

"I think it shows that (Robert) Miodunski (president and chief operating officer) and (Robert) Saxton (chief financial officer) are very focused in their strategy," Falcone said.

The company's Bally Gaming and Systems unit, which reported the sale of more than 2,700 machines in the quarter, reported a 59 percent increase in revenues, from $26 million to $41.4 million, over the prior year's quarter. About 2,160 of those machines were sold to Indian casinos, riverboats and other domestic markets, while 280 went to Nevada and Atlantic City properties. Those sales didn't include much of the company's new wide-area progressive game based on the Blondie comic-strip character, introduced late in the quarter.

Revenues increased 10 percent, from $19.4 million to $21.3 million, for the company's two casinos, the Rainbow Casino in Vicksburg, Miss., and the Rail City Casino in Sparks.

Revenues also picked up by 10 percent, from $18.7 million to $20.5 million, for the company's Wall Machines and Amusement Games unit, which reported an increase in units sold in Germany.

Slot route operations yielded revenue of $56.4 million in the March quarter, up from $53.5 million in the same quarter last year.

Falcone said the outlook for Alliance is good with the recent announcement of the company's partnership with Microsoft Corp. to use its Windows XP Embedded Rapid Development Program. The system, which will enhance graphics, audio and bonus-screen capabilities on video slot machines, was introduced in February.

"This will be a significant improvement over existing slot machines," Falcone said. "The quality of the graphics and the sound will be much higher. It's almost like watching a real movie."

The formal announcement of the partnership with Microsoft was made by Alliance Wednesday. The company plans to install the new operating system on its Bally Gaming and Systems Evolution Series machines later this year.

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