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Alliance Gaming Results Up for Q1

LAS VEGAS – (Press Release) -- Alliance Gaming Corporation (NYSE: AGI) today announced earnings for its first fiscal quarter ending September 30, 2003. First quarter income from continuing operations totaled $0.05 per diluted share, or $0.20 per diluted share excluding a $0.15 per share charge resulting from the Company's bank refinancing and early retirement of its subordinated notes. Excluding the refinancing charge, earnings increased 54% compared to the $0.13 per diluted share for the prior year quarter.

Consolidated results for the September 2003 quarter include:

-- Revenues from continuing operations of $106.6 million, an increase of 31% from the $81.3 million in the prior year quarter, led by a 39% increase in revenues at the Bally Gaming and Systems business unit.

-- Operating income from continuing operations of $23.1 million, an increase of 33% from the $17.4 million in the prior year quarter.

-- EBITDA from continuing operations of $29.4 million, an increase of 34% from the $21.9 million in the prior year quarter, led by a 42% increase at Bally Gaming and Systems.

-- Total net income including discontinued operations and the refinancing charge of $0.12 per diluted share, or $0.20 per diluted share on a continuing basis excluding the refinancing charge, an increase of 54%.

Earnings before interest, taxes, depreciation, amortization and 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.

Cash and Capital Expenditures:

-- As of September 30, 2003, cash and cash equivalents for our continuing operations totaled $44.6 million, which included approximately $3.7 million held for operational purposes in vaults, cages and change banks and $13.4 million held in jackpot reserve accounts. These amounts exclude cash and cash equivalents of the discontinued operations, which are now included in assets held for sale.

-- For the quarter ended September 30, 2003, consolidated capital expenditures for our continuing operations, including costs to produce proprietary games, totaled $7.3 million compared to $7.5 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. We also incurred $2.2 million for capital expenditures for our discontinued operations.

Other financial highlights:

-- Consolidated net interest expense for the current quarter totaled $5.7 million compared to $6.6 million in the prior year period. As we have previously reported, on September 5, 2003 we completed a refinancing transaction whereby we entered into a new senior bank facility consisting of a $275 million term loan with an initial interest rate of LIBOR plus 2.75% (currently 3.96%) and a $125 million revolving credit facility with an initial interest rate of LIBOR plus 2.50% (currently 3.71%) of which we have borrowed $70.0 million, and redemption of our $150 million 10% Subordinated Notes and our existing bank term loan of approximately $187 million.

-- We recorded a $12.3 million refinancing charge in the current quarter consisting primarily of a $5.0 million prepayment penalty for the redemption of our Subordinated Notes, a non-cash charge of $7.0 million to write off the deferred financing costs, and $0.3 million of fees and expenses. We recorded a tax benefit from these charges totaling approximately $4.8 million.

Supplemental Business Unit Detail for Continuing Operations Bally Gaming and Systems Quarterly Revenues Increase 39%, Operating Income Increases 41%

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 27% over the prior year's quarter primarily as a result of a 30% increase in the number of units sold and a 6% increase in the average new-unit selling price (excluding 1,860 OEM games), to $8,400. The increase in the average selling price includes the positive impact from the sale of 81 Monte Carlo premium-priced units as well as other premium-priced branded products.

Bally Systems revenues increased 96% over the prior year quarter driven by a 85% increase in game monitoring units shipped, a 36% increase in the average selling price per unit, and increased sales of software licenses for the industry's leading single-wire TITO solution, eTICKET(TM) as well as its bonusing and promotions software. Bally Systems recurring hardware and software revenues increased to $4.9 million, resulting from the larger base of installed systems.

Gaming Operations revenues increased 9% compared to the prior year's quarter driven by a 27% increase in the average installed base of wide-area progressive (WAP) and daily-fee games deployed, which now total 1,980 and 2,810, respectively. During the quarter we deployed an additional 1,130 WAP and daily-fee games, and had returns totaling 740 games, resulting in a net increase in the installed base of 390 games on a sequential basis as of September 30, 2003 compared to June 30, 2003. The current quarter placements included the continued roll out of the "Cash for Life" WAP game which went live in July in Atlantic City, and continued placement of daily fee games such as Playboy and the recently introduced Saturday Night Live series.

Casino Operations Revenues Increase 2%, Operating Income Increases 3%

For the quarter, the combined casino operations business unit reported a 2% increase in revenues and a 7% increase in EBITDA. Rail City reported a 5% increase in revenues driven by a 5% increase in the average number of games and a slight increase in slot win. Rainbow Casino reported a 1% increase in revenue compared to the prior year quarter, and represents the third consecutive quarter of revenue growth. Rainbow's EBITDA increased 7% to $4.7 million compared to the prior year quarter.

Discontinued Operations

For the Nevada route operations, revenue decreased 2% and EBITDA decreased 6% compared to prior year quarter. The average number of games deployed decreased 6% over the prior year quarter and the average net win per day per gaming machine increased to $68.55 from $66.60. The decrease in revenues at VSI is due to a decrease in net win per day per gaming machine to $46.85 from $56.65 and the number of units deployed remained constant compared to the prior year quarter.

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