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Howard Stutz

Aftermath Of Hurricane Katrina: Where Are All The Slots?

14 November 2005

BILOXI, Mississippi -- Soon after the storm surge from Hurricane Katrina subsided and casino operators could climb into their broken gaming barges to survey the damage, reality set in.

The natural disaster not only left thousands homeless and ravaged communities when it hit Aug. 29, but the 135 mph winds, rain and 30-foot waves destroyed nearly every slot machine inside 13 Gulf Coast casinos.

Now, gaming equipment manufacturers stand ready to not only help rebuild the $1.2 billion a year casino market, but also repair their own sagging revenue streams, which have been hampered the past few years by reduced sales opportunities.

The disaster's scope, however, is keeping slot makers from smiling.

"It's unfortunate that the series of events on the Gulf Coast is leading to some market opportunities, but I think all manufacturers want to do, and are willing to do, all we can to help our customers recover," Alliance Gaming Executive Vice President Mark Lipparelli said.

Aristocrat Technologies Vice President of Sales Sean Evans chose his words carefully in expressing the company's willingness to expedite the reconstruction of the Mississippi casinos.

"We have met with all our customers in the Gulf Coast to assess the damage and find out how we can work together to accommodate their most immediate needs," Evans said. "Our customers are satisfied that we can replace gaming machines under our standard lead time."

Before Hurricane Katrina hit, casinos in Biloxi, Gulfport and Bay St. Louis operated just fewer than 17,500 slot machines, and 1,500 slot machines were expected to join the mix when a new Hard Rock opened in early September, but that casino was also destroyed.

Many of the slot machines were damaged beyond repair when gaming barges broke from their moorings and floated across Highway 90, demolishing anything in their path. Large holes were torn in the barges, exposing the equipment to wind and rain.

Slot machines that survived the hurricane were inundated with sea water, which damaged the games' computer chips and microprocessors.

Some slot machines now rest at the bottom of the Gulf of Mexico.

"Many of the machines were sitting for so long in water and out in the elements, they were damaged beyond repair," said John Higgins, lead slot technician for Casino Magic in Bay St. Louis.

Higgins supervised technicians one morning as they pulled serial numbers from damaged slot machines. The machines would be turned over to Mississippi gaming authorities and then demolished.

The property, which operated about 1,200 slot machines inside its floating casino, had 400 machines stored at a warehouse on Highway 90. Water destroyed more than 90 percent of the Casino Magic machines.

How quickly the slot manufacturers can fill orders depends upon the pace of rebuilding by the gaming industry along the Mississippi Gulf Coast.

Ed Rogich, spokesman for International Game Technology, the industry's leading slot machine provider, said it's up to the casinos to determine how many games need replacing.

"It's really not in our court," Rogich said. "The casinos need to tell us how they're going to rebuild, if they're going to do temporary sites first and how quickly they plan on opening. We'll work along their time frame and we'll meet any demand they ask."

Rogich said it takes IGT anywhere from eight to 14 weeks to complete an order, depending on the size and complexity.

Despite the possibility the company might have to produce the bulk of an estimated 19,000 replacement machines, he said IGT is undaunted.

"The impact, right now, is on the customer to fix their broken properties," he said.

Lipparelli agreed, saying Alliance also takes eight weeks to fill a typical order. He said the company would expand its manufacturing capacity to rebuild the Mississippi gaming market.

"We have already been consulting with our customers and we look forward to helping them rebuild and re-establish themselves," Lipparelli said.

With Imperial Palace and Isle of Capri planning to reopen casinos in December, gaming companies have already taken orders for new games.

Isle of Capri general manager Bill Kilduff said the casino had been building a larger casino barge on Biloxi's Back Bay when Katrina hit. The existing casino and most of its 1,152 slot machines were destroyed, as was the under-construction barge.

However, Kilduff said new slot machines were already on order and will be used when Isle of Capri opens its temporary casino in the hotel's convention space. "We'll just transfer those games to the new casino," Kilduff said. "We're lucky they weren't already on the barge or we would really have been in trouble." Wall Street gaming analysts have said to investors that rebuilding the Gulf Cost was an unexpected boon to the slot manufacturers. But Rogich said IGT views the matter as a responsibility more than an opportunity; the company is restoring an important gaming market. "Our people have been helping our customers on the Gulf Coast with the salvage and disposal of their machines," Rogich said, "It's been more disposal than salvage."