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Gaming Guru

Liz Benston

Mikohn Narrows Loss in Second Quarter

3 August 2004

Losses at slot machine maker Mikohn Gaming Corp. narrowed in the second quarter and executives said the company will either break even or make a profit for the first time in years this quarter.

Executives attributed some of the growth to the rollout of recently approved "coinless" slot machine technology that accepts and dispenses tickets instead of coins. Casinos had ordered fewer slot machines prior to approval of the systems because they wanted the newest technology, officials said. The coinless system is expected to drive future sales of new machines such as the company's Garfield-theme slot as well as other titles using licensed characters and brands, they said.

"The message here is that the trend is truly beginning to be our friend," Mikohn Chief Financial Officer Michael Sicuro said.

The company, which has restructured over the past year, reported a loss of $948,000 or 4 cents per share compared with a loss of $2.4 million or 18 cents per share in the prior year's quarter. Analysts expected a loss of 6 cents per share in the second quarter.

The company is expected to break even or report a profit of half a million dollars -- a projection that comes one quarter earlier than officials or analysts expected, executives said.

The company spent less than a million more on corporate expenses in the second quarter compared with a year ago. Part of the money went to new staff and resources in several departments such as sales, marketing and compliance as well as a new marketing campaign, officials said.

In addition to new licensed slot machines, Mikohn continues to roll out a table game player tracking system that won a recent contract at the Hard Rock hotel-casino. Such systems are only just beginning to catch on in Las Vegas, officials said.

Also today, the company introduced a new version of the popular Texas Hold 'Em poker game that allows players to make side bets. Mikohn already makes several table games including many versions of blackjack as well as pai gow poker, Caribbean stud poker and a variation of three card poker called Tre' Card Poker.

Revenue fell 7 percent to $23.3 million primarily because of lower license fees from slot and table games that were partially offset by higher systems and product sales.

Cash flow -- generally defined as earnings before interest, taxes and other expenses -- was $6.8 million compared with $6.9 million last year. Cash flow is expected to double in the third quarter compared to a year ago, executives said.

Slot and table game revenue dropped 33 percent to $7.6 million because of a decrease in slot contracts under daily license fee arrangements. Sales of slots and tables rose 7 percent to $11.2 million. Systems revenue rose 40 percent to $4.5 million.

Upcoming slot machines this year and next include Odie's Revenge, California Girls, Tito Puente and Celia Cruz slots, Battleship and Head's Up Poker. Odie is a character in the Garfield lineup, California Girls is the first of several Beach Boys themes on the way and Battleship is based on the board game.

Mikohn shares rose 19 cents or about 4.2 percent to $4.71 in early trading today.