Gaming News

Acres Gaming Results Up

LAS VEGAS – (Press Release) -- Acres Gaming Incorporated (Nasdaq: AGAM), the leader in Bonusing technology for the gaming industry, today announced financial results for its fourth quarter and fiscal year ended June 30, 2003.

Net income for the quarter was $7.1 million, or $0.64 per diluted share, compared to net income of $3.0 million, or $.29 per diluted share in the same quarter of fiscal 2002. Net income for the fiscal year ended June 30, 2003 totaled $17.1 million, or $1.59 per diluted share, compared to net income of $3.9 million, or $.38 per diluted share for the prior fiscal year.

Revenues for the quarter ended June 30, 2003 were $20.0 million, compared to $9.3 million in the same quarter of fiscal 2002. Revenues for the fiscal year ended June 30, 2003 were $47.1 million, compared to $26.4 million in the prior fiscal year. Revenue included patent licenses fees of $8.6 million in the quarter- and $8.7 million in the year-ended June 30, 2003, compared to $36,000 in the quarter- and $1.3 million in the year-ended June 30, 2002.

Gross profit margin was 82 percent in the fourth quarter versus 66 percent in the same quarter of fiscal 2002. For the fiscal year ended June 30, 2003, gross profit margin was 73.3 percent versus 58.1 percent for fiscal 2002. Gross profit margin excluding patent licenses fees was 68.3 percent in the quarter and 67.2 percent in the year ended June 30, 2003, compared to 66.1 percent in the quarter and 55.9 percent in the year ended June 30, 2002. The increase in gross profit margin was primarily attributable to software sales and patent license fees which carry a higher gross profit margin than hardware sales and which made up a greater percentage of revenue in the quarter and year-ended June 30, 2003 than in the fourth quarter and year-ended June 30, 2002.

Net operating expenses were $4.9 million in the quarter and $16.5 million in the year ended June 30, 2003, compared to $2.9 million in the quarter and $11.4 million in the year ended June 30, 2002. R & D expenses for the fourth quarter of fiscal 2003 were 45% higher than the same quarter of fiscal 2002, and Sales and Marketing expenses for the fourth quarter of fiscal 2003 were 47% higher than those for the same quarter of fiscal 2002. General and administrative expenses for the fourth quarter of fiscal 2003 increased $1.3 million due primarily to higher legal and other professional expenses of $595,000, higher salary and benefit expenses of $110,000, bonus accruals of $211,000 and an increase in the provision for doubtful accounts of $289,000.

At June 30, 2003, Acres had $24.1 million in cash and equivalents, compared to $7.3 million at June 30, 2002. During the fourth quarter of fiscal 2003, Acres paid the outstanding principal balance of its note payable due to International Game Technology (IGT), and the holders of Acres 6% convertible subordinated debentures converted the remaining principal balance of the debentures into shares of Acres common stock. Accordingly, Acres had no short- or long-term debt outstanding at June 30, 2003.

Acres' order backlog at June 30, 2003 was $19.0 million, including deferred revenue of $6.0 million, compared to $20.0 million, including deferred revenue of $4.4 million, at June 30, 2002. Backlog, however, may not be a meaningful indicator of future revenues. Acres' revenues fluctuate significantly based on the timing of the delivery of any large order.

On June 29, 2003, IGT and Acres executed a definitive agreement pursuant to which Acres will merge with a subsidiary of IGT. Under the terms of the agreement, IGT will pay $11.50 per share in an all cash transaction, representing an aggregate purchase price of approximately $130 million on a fully diluted share basis. The merger is subject to the approval of Acres' stockholders, various regulatory approvals and other conditions. The companies anticipate that the transaction will be completed in the fourth calendar quarter of 2003. Acres' Board of Directors has set September 12, 2003, as the date for a special meeting of its stockholders to vote on the merger.

Acres is a software development company serving the worldwide gaming industry. Acres provides bonusing and cashless gaming products as well as a full suite of integrated casino management systems via its Acres Bonusing, Acres Cashless, and Acres Advantage product lines. Acres' patented technology enables casino operators to increase patron loyalty by differentiating their properties in an increasingly competitive environment. Acres' products provide the tools that increase player enjoyment and satisfaction while improving operational efficiency and property profitability.

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