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Howard Stutz

Bally Technologies to Restate Earnings

15 August 2006

LAS VEGAS, Nevada -- Las Vegas-based slot maker Bally Technologies announced Monday it has completed a lengthy review of its financial reporting from the past few years and will have to restate its fiscal earnings for 2003 through 2005.

The 16-month-process, in which Bally needed to adjust revenue and operating income associated with various sales transactions between different quarterly reporting periods over a three-year period, has put a damper on the company in the eyes of investors.

Bally Technologies, formerly known as Alliance Gaming, needed help from outside consultants to look at the slot sales and move the recognition of those profits into the correct time frames.

Bally Technologies said it would file restated earnings and results with the Securities and Exchange Commission by the end of September for the past three years. The company still needs to report earnings for the 2006 fiscal year, which ended June 30.

"We are sensitive to investors' lack of information due to these delays in filing and are working diligently to remedy this situation," Bally Technologies Chief Financial Officer Robert Caller said in a statement. "We will provide additional information as to the expected filing dates after we complete the restatement."

The review has played havoc with shares of Bally Technologies, which has traded as low as $9.78 and as high as $18.41 in the past year on the New York Stock Exchange.

Shares of Bally closed at $15.10, down 85 cents, or 4.13 percent, Monday.

One gaming analyst said the news did not cause him to change his opinion that investors should simply hold onto what shares of Bally stock they own.

Stifel, Nicolaus Capital Markets analyst Steven Wieczynski said in a note to investors that he believes the company remains a takeover target.

"We would not be accumulating shares at this level as the stock has increased 19 percent since the beginning of the year, even with all of their accounting problems," Wieczynski said. "We continue to believe that Bally remains a take-out candidate as their systems business could be valuable to another gaming manufacturer."

Bally Technologies Chief Executive Officer Richard Haddrill, in an effort to give investors a brief look at what the 2006 earnings might look like, said the company achieved its product development and growth objectives through slot machine sales and the company's gaming systems business.

"However, we did not achieve our profitability objectives," Haddrill said, citing lower gross margins on game sales related to pricing and manufacturing costs of new slot machine platforms.

Haddrill said high legal and accounting costs associated with ongoing litigation and restatement activities and increased interest costs also impacted 2006 earnings.

"We enter fiscal 2007 with strong product momentum and expect both our gross margins to improve and our legal and accounting costs to return to more normal levels as the year progresses," Haddrill said.

Bally Technologies said it sold 15,000 new slot machines during the 2006 fiscal year. The company also said it had 600 machines nationally where it shares in the gaming revenues with casinos. It said 750 more are on back order.,

In Mexico, Bally Technologies operates an installed base of 1,800 bingo games with additional orders pending.