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Alliance Gaming Reports Record Quarterly Results

Results for the March 2002 quarter include:

-- Record consolidated revenues of $154.8 million, an increase of 12% from the $138.5 million in the prior year quarter. Contributing to this increase was a 39% increase in revenues at the Bally Gaming and Systems business unit.

-- Record consolidated EBITDA of $32.8 million, an increase of 41% from the $23.2 million in the prior year quarter. This increase was led by a 115% increase in EBITDA at Bally Gaming and Systems.

-- Record consolidated operating income grew 53% to $24.7 million compared to $16.1 million in the prior year quarter.

-- The Company now has net positive shareholders' equity (book value) for the first time since the acquisition of Bally Gaming International, Inc. in 1996.

Fiscal Year 2002 Updated Guidance

-- For the fiscal year ended June 30, 2002, before the effect of a potential one-time tax benefit, the Company expects to report earnings in the range of $1.00 to $1.03 per diluted share based on 48 million weighted average shares outstanding for the year (or $2.00 to $2.06 pre-split). These earnings do not reflect any Federal income taxes as the earnings were offset against net operating loss (NOL) carry forwards. Revenues are expected to exceed $590 million and EBITDA is expected to exceed $108 million.

-- At June 30, 2002, the Company expects to record a one-time tax benefit in the range of $32 million to $36 million, or $0.64 to $0.72 per share. This non-cash item would result from a reduction of previously recorded valuation reserves against net deferred tax assets, primarily NOLs, which would be realizable as a result of the Company's current and projected levels of taxable income.

Fiscal Year 2003 Guidance

-- For fiscal 2003, the Company expects earnings per share of at least $0.82 on 50 million shares outstanding, reflecting the impact of Federal income tax expense after several years of generating NOL carry forwards. The fiscal 2003 guidance reflects an increase in earnings per share compared to $0.66 to $0.68 (or $1.00 to $1.03 pretax) in fiscal 2002 as if such earnings reflected Federal income tax expense.

Consolidated net interest expense for the current quarter totaled $6.5 million compared to $8.4 million in the prior year period, resulting from substantially lower interest rates on the Company's term loan facility.

The Company recorded an income tax provision of $0.9 million in the current quarter compared to $0.1 million in the prior year quarter. The current quarter tax provision represents primarily estimated state income taxes and a $0.5 million provision for German income taxes. Federal taxable income for the period has been completely offset against net operating loss (NOL) carry-forwards.

As of March 31, 2002, the Company had $49.0 million of cash and cash equivalents, of which approximately $23.7 million was held for operational purposes vaults, cages and change banks and $7.7 million was held in restricted jackpot reserve accounts.

For the current quarter, consolidated capital expenditures, including costs for proprietary games, totaled $10.6 million and compared to $6.7 million for the prior year period. The increase was primarily driven by the continued deployment of wide-area progressive games. Additionally, the Company paid approximately $8.5 million, net of cash received, for the acquisition of ACSC.

Effective July 1, 2001, the Company elected to adopt the provisions of Statement of Financial Accounting Standards No. 142, ``Goodwill and Other Intangible Assets'', whereby amortization of goodwill ceased, increasing earnings per share for the quarter by less than $0.01.

Bally Gaming and Systems business unit reported a 39% increase in revenues over the prior year's quarter. Revenues from sales of gaming devices increased 3% over the prior year's quarter primarily as a result of a 12% increase in the number of units sold and a slightly lower average selling price. Bally Systems revenues increased 72% over the prior year quarter primarily as a result of continued strength in new system installations and higher levels of recurring hardware and software support revenues resulting from the larger base of installed systems.

Gaming Operations revenues increased 112% over the prior year's quarter as a result of a 41% increase in the installed base of wide-area progressive (WAP) and daily-fee games deployed, which now total 2,440 and 1,300, respectively. During the quarter we deployed an additional 470 WAP and daily-fee games, led by the installation of 270 Popeye units.

The Bally Gaming and Systems EBITDA improved 115% to $16.4 million, which is a new record for this business unit, compared to $7.7 million in the comparative prior year period. This increase resulted from the above mentioned improvements in revenues and margins driven by the larger proportion of high margin gaming operations revenues.

On March 19, 2002, the Company completed the acquisition of Advance Casino Systems Corporation (ACSC), a provider of hotel and casino management systems, which is included in the reported results for Bally Gaming and Systems.

Route Operations Revenues Increase 3%, EBITDA Increases 22%:

For the Nevada route operations, EBITDA increased $1.4 million, or 25%, compared to the prior year quarter. Net win per day per gaming machine increased 1% to $70.50 in the current quarter compared to $70.20 in the prior year quarter, and the average number of gaming machines deployed increased 1% over the prior year quarter. At March 31, 2002, the Gamblers Bonus product was available at 390 locations and was installed in over 3,980 gaming machines or 48% of the Nevada route's total installed base of gaming machines.

The decrease in revenues at VSI is due primarily to a 10% decrease in net win per day per gaming machine to $63.40 from $70.30 in the prior year quarter offset by a 7% increase in the number of units deployed which resulted from the opening of one new OTB with 70 games. The addition of the one new location helped VSI reverse several quarters of year-over-year declines in EBITDA, however this market remains very competitive given the number of truck stop casinos in the metro New Orleans area.

Casino Operations Reports 6% Decrease in Revenues, 14% Decrease in EBITDA:

The Casino Operations business unit reported a 6% decrease in revenues and 14% decrease in EBITDA. Rainbow Casino reported an 8% decrease in revenues and 17% decrease in EBITDA. This declined is a result of the significant competitive pressure we face in a market which is growing at less than its historical norm. We intend to aggressively gain an increase in market share in this market through a combination of enhanced marketing programs and certain improvements to the facility. Rail City reported a 2% increase in revenues and EBITDA grew by 3%, driven by an increase in slot win of 4%.

Wall Machines and Amusement Games Reports Flat Revenues, 13% Increase in EBITDA:

Wall Machines and Amusement Games business unit revenues were flat as a result of a 37% decrease in new units sold offset by 12% increase in the average selling price and a 20% increase in revenues from leased games. The conversion to the Euro currency has now been completed, and the sale of Euro dominated games and conversion kits had a positive impact on the current quarter. Consistent with the current quarter, we believe it is likely that customers will continue to migrate to leasing games versus the purchase of machines, which should further grow our base of recurring rental revenues.

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