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Alliance Gaming Q4 Results Up

LAS VEGAS – (PRESS RELEASE) -- Alliance Gaming Corporation (NYSE: AGI) today announced earnings for its fourth fiscal quarter ending June 30, 2004. Fourth quarter income from continuing operations totaled $15.3 million, or $0.30 per diluted share, on revenues of $162.8 million. For the comparable prior year quarter ended June 30, 2003, the income from continuing operations totaled $14.1 million or $0.28 per diluted share, on revenues of $115.7 million.

Consolidated results for the June 30, 2004 quarter include:

* Revenues from continuing operations of $162.8 million, an increase of 41% from the $115.7 million in the prior year quarter.

* Operating income from continuing operations of $27.1 million, unchanged from the $27.1 million in the prior year quarter.

* EBITDA from continuing operations of $38.1 million, an increase of 16% from the $32.8 million in the prior year quarter.

* Net income from continuing operations totaled $0.30 per diluted share, an increase of 5% from the $0.28 in the prior year quarter.

Consolidated results for the June 2004 fiscal year include:

* Revenues from continuing operations of $488.9 million, an increase of 27% from the $386.4 million in the prior year.

* Operating income from continuing operations of $98.7 million, an increase of 16% from the $85.0 million in the prior year.

* Including the refinancing charge ($12.3 million or $0.15 per diluted share) income from continuing operations totaled $0.85 per diluted share, compared to the prior year of $0.74 per diluted share. Excluding the effect of the refinancing charge, income from continuing operations totaled $1.00 per diluted share, or an increase of 35% compared to the prior year.

* Total net income, including the refinancing charge and the gain on sale of discontinued operations ($23.5 million or $0.46 per diluted share), totaled $1.65 per diluted share, compared to $0.39 in the prior year which included a loss on sale of Bally Wulff of $25.4 million, or $0.51 per diluted share.

Earnings before interest, taxes, depreciation, amortization and before refinancing charge (EBITDA), and EPS excluding the refinancing charge, are not Generally Accepted Accounting Principles (GAAP) measurements. EBITDA may not be comparable to similarly titled measures reported by other companies. A reconciliation of EBITDA to income from continuing operations and a reconciliation of EPS excluding the refinancing charge to GAAP EPS are attached to this press release.

Cash and Capital Expenditures:

* As of June 30, 2004, cash and cash equivalents totaled $172.7 million, which included approximately $2.1 million held for operational purposes in vaults, cages and change banks and $18.1 million held in jackpot reserve accounts.

* Cash received from the sale of the Rail City Casino and the Nevada Route Operations, totaled approximately $138 million.

* For the quarter ended June 30, 2004, consolidated capital expenditures for our continuing operations, including costs to produce proprietary games, totaled $17.4 million compared to $8.9 million for the prior year quarter. The current period capital expenditures were driven by the continued deployment of wide-area progressive and daily-fee games.

Other financial highlights:

* Net interest expense for continuing operations for the current quarter totaled $3.4 million compared to $6.1 million in the prior year period. Net interest expense allocated to the discontinued operations totaled $1.2 million for the current quarter. The Company currently has $70 million outstanding on its $125 million revolving credit facility, unchanged from March 31, 2004.

Guidance for Fiscal Year 2005

The Company is revising its Fiscal Year 2005 earnings guidance to be approximately flat to Fiscal Year 2004 results from continuing operations, as a result of changes in current market conditions and uncertainty surrounding the gaming initiatives in emerging jurisdictions. The Company also believes that the earnings will be weighted approximately 25% in the first half of the fiscal year, with particular softness in the first quarter.

The Company will hold its conference call on Tuesday August 10, 2004 at 10 a.m. Pacific Time (1 p.m. Eastern Time). Participants may access the call by dialing (719) 457-2693 and using participant passcode 658076. The Company will also broadcast the conference call over the Internet. Interested parties are asked to log on to the call at www.alliancegaming.com using the Investor Relations tab 10 minutes prior to the start of the call.

Supplemental Business Unit Detail

Bally Gaming and Systems Quarterly Revenues Increase 46%, Operating Income Increases 2%

The following chart summarizes the financial information for the Bally Gaming and Systems business unit (dollars in millions):

                                 Three Months Ended     Twelve Months Ended
                                       June 30                June 30
                                  2004        2003        2004       2003
     Revenues
      Game sales                  $91.7       $57.3      $233.1     $188.3
      System sales                 32.5        31.6       124.3       91.5
      Gaming operations            25.6        14.0        79.2       55.6
       Total revenues            $149.8      $102.9      $436.6     $335.4

     Gross Margin %                  57%         57%         59%        57%

     Operating Income             $27.4       $26.9       $96.0      $82.9

     EBITDA                       $37.3       $31.5      $123.3      $98.9

     EBITDA Margin                   25%         31%         28%        29%

     New gaming devices sold      6,405       5,650      20,350     19,635
     Game monitoring units
      sold                       14,465      10,400      46,430     35,500
     GMU installed base         279,000     240,000
     Casino management
      systems installed base        219         194
     System managed TITO
      games                      83,500      28,000

     Recurring revenue
      game data:                   As of March 31st:
      Installed base:              2004        2003
       WAP games                  1,670       1,720
       Daily fee games            6,670       2,330
         Total                    8,340       4,050
       Centrally determined
        games                    14,405          --

                                   As of June 30th:
     Installed base:               2004        2003
       WAP games                  1,725       1,910
       Daily-fee games            7,985       2,485
         Total                    9,710       4,395
       Centrally determined
        games                    17,995          --

Bally Gaming and Systems business unit reported a 46% increase in revenues over the prior year's quarter. Revenues from game sales increased 60% over the prior year's quarter primarily as a result of a 13% increase in new unit sales and an increase in the average new-unit selling price to $10,580 (excluding 1,050 OEM games), and the sale of used Class II games, as discussed further below. The increase in the average selling price includes the positive impact from the sale of 120 Monte Carlo style premium-priced units and other premium-priced branded products.

SDG revenue contribution totaled $46.3 million and included $16.8 million from the sale of 1,100 games primarily in Washington and Rhode Island, $12.4 million from the sale of substantially all of its leased games in Florida (or $7.0 million in gross margin), and $8.2 million from its base of recurring revenues games.

Bally Systems revenues increased 3% from the prior year quarter driven by a 39% increase in game monitoring units shipped, a continued increase in the average selling price per unit, an increase in sales of software licenses for eTICKET(TM), the industry's leading single-wire TITO solution that is currently operating in 92 casinos, as well as sales of its bonusing and promotions software. Bally Systems recurring hardware and software revenues increased to $5.5 million, resulting from the larger installed base of game monitoring units, which currently stands at 279,000 units in 219 casinos world-wide.

Gaming Operations revenues increased 84% to $25.6 million compared to the prior year's quarter. This increase was driven by increases in the daily-fee games deployed during the quarter including the installation of a combined 900 video lottery terminals at Montcello Raceway in New York on June 30, 2004. In addition to the New York placements, the gross placements for all other WAP and daily fee games totaled 5,460 units, and there were 1,400 units returned resulting in a 4,060 net increase in the installed base of games on a sequential basis as of June 30, 2004 compared to March 31, 2004.

Regulatory approval costs capitalized totaled $0.7 million during the June 2004 quarter and amortization expense for these costs totaled $0.4 million.

Casino Operations

Rainbow Casino Quarterly Revenues and Operating Income Show Marginal Increase Over The Prior Year Period

Rainbow Casino reported a 1.5% increase in revenue, representing the sixth consecutive quarter of revenue growth following the remodeling project completed last year. The revenue growth was driven by a 2% increase in slot win per day and a 50% increase in table game win per day per unit. EBITDA grew 4% primarily resulting from the revenue growth discussed above combined with a 2.5% reduction in compensation costs and a 4% decrease in complementary expenses.

Discontinued Operations

Rail City Casino

On May 1, 2004, the Company sold the Rail City Casino to The Sands Regent. The sale proceeds totaled $37.9 million, resulting in an pre-tax gain of $23.1 million or $14.3 million net of deferred taxes.

United Coin Machine Co. (Nevada Route Operations)

On June 30, 2004 the Company sold its Nevada Route Operations to Century Gaming. The sale proceeds totaled approximately $100 million and the assumption of approximately $5.0 million of debt, and resulted in an pre-tax gain of $15.3 million, or $9.1 million after deferred taxes.

Video Services Inc.

The sale of Video Services Inc. was not consummated pursuant to the previously announced sale agreement by June 30, 2004 and the agreement was cancelled. Alliance Gaming intends to continue its efforts to divest this subsidiary, and as such will continue to carry the asset as a discontinued operation.

Bally Wulff

Bally Wulff was sold to an investor group in July 2003. In June 2004, the Company was notified by the buyer of a claim made against the Company pursuant to an indemnity provision contained in the sale agreement. The Company has paid the claim totaling $1.7 million, which is included in discontinued operations. Additionally, the Company accrued $0.5 million for potential tax assessments related to the pre-sale period, which the Company expects to be resolved by September 2004.

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