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Howard Stutz

Bally Technologies expecting loss for fiscal year

10 November 2006

LAS VEGAS, Nevada – Bally Technologies, which has spent more than 16 months reviewing its financial reporting from the past few years, said Thursday it expects to report a net loss of between 55 cents and 65 cents a share for 2006.

The loss covers the 12-month period ended June 30.

The Las Vegas-based slot machine maker had previously restated its fiscal earnings for 2003 and 2005. Bally Technologies needed to adjust revenues and operating income associated with various sales transactions between different quarterly earnings periods.

In a statement, the company said the loss included stock compensation expense of about 17 cents per share and charges of 43 cents per share for obsolete gaming equipment. The company did not release any income figures but said it plans to file a full earnings report with the Securities and Exchange Commission by the end of the year.

Bally Technologies Chief Executive Officer Richard Haddrill said the company expects modest profitability from it operations when it reports its 2007 first-quarter earnings.

"The past year was a successful retooling year for Bally Technologies," Haddrill said. "I am pleased with the investments we made in fiscal year 2006 that, when combined with our current initiatives, position us very well for 2007 and into the future."

Meanwhile, Bally Technologies said Thursday it sold 2,300 slot machines to the Oregon State Lottery for more than $31 million. The state asked Bally and three other companies to bid on a machine replacement contract, and Bally was awarded 100 percent of the procurement.

"This contract will give us an immediate 20 percent lottery market share in Oregon and positions Bally to be a long-term partner with the Oregon Lottery as it continues to grow and prosper," Haddrill said.

In its earnings statement, Bally's Technologies said its second half of 2006 was much stronger than the first part of the year.

Of the 14,250 slot machines it sold during the year, about 8,000 were sold in the last six months of the time period. In addition, 60 percent to 65 percent of the estimated $110 million to $115 million in revenues generated by the sales of business systems came in the last half of the year.

Gaming analysts said Thursday they were seeking some more financial information before rendering a verdict on whether or not Bally Technologies has recovered from its financial troubles of the past few years that saw its stock price plummet.

"We believe the potential exists for substantial earnings per share growth over the next several years should (Bally Technologies) successfully execute on its reemergence," Deutsche Bank gaming analyst Bill Lerner said in an investors note. "Given the lack of visibility on current trends, along with several overhangs, we believe investors should stay on the sidelines until there is greater visibility."

Shares of Bally Technologies have climbed 54 percent since the beginning of the year. Gaming analyst Steven Wieczynski of Stifel, Nicolaus Capital Markets cautioned investors about buying up the company's stock.

"We continue to believe that Bally remains a takeout candidate as its systems business could be valuable to another gaming manufacturer," Wieczynski said.

Shares of Bally Technologies closed Thursday at $19.78 in trading on the New York Stock Exchange, off 12 cents, or 0.6 percent. More than 1.3 million shares were traded, three times the average daily volume.