LAS VEGAS, Oct. 21 /PRNewswire-FirstCall/ -- Alliance Gaming Corporation
(NYSE: AGI) today announced its results for its first fiscal quarter ending
September 30, 2004. First quarter loss from continuing operations totaled
$(6.4) million, or $(0.13) per diluted share, on revenues of $116.9 million.
For the comparable prior year quarter ended September 30, 2003, the Company
reported income from continuing operations of $1.8 million or $0.04 per
diluted share (or $0.19 excluding the refinancing charge), on revenues of
$101.2 million.
Consolidated results for the September 30, 2004 quarter include:
* Revenues from continuing operations of $116.9 million, an increase of
16% from the $101.2 million in the prior year quarter.
* Operating loss from continuing operations of $(6.4) million, compared
to operating income of $21.9 million in the prior year quarter.
* EBITDA from continuing operations of $4.4 million, compared to Adjusted
EBITDA of $28.0 million in the prior year quarter.
* A restructuring charge of $1.4 million (or $0.02 per share, net of tax)
reflecting the reduction in work-force which occurred during the
current quarter.
* An inventory write down of $3.0 million (or $0.04 per share, net of
tax) for recently discontinued legacy video products and used games,
and $1.0 million (or $0.01 per share, net of tax) for increased bad
debt reserves for one significant customer account.
Adjusted earnings before interest, taxes, depreciation, amortization and
before refinancing charge (Adjusted EBITDA), and Adjusted EPS excluding
refinancing charge, are not Generally Accepted Accounting Principles (GAAP)
measurements. Adjusted EBITDA may not be comparable to similarly titled
measures reported by other companies. A reconciliation of Adjusted EBITDA to
income from continuing operations and a reconciliation of Adjusted EPS
excluding the refinancing charge to GAAP EPS are attached to this press
release.
Cash and Capital Expenditures:
* As of September 30, 2004, cash and cash equivalents totaled
$43.2 million, which included approximately $1.9 million held for
operational purposes in vaults, cages and change banks and
$14.4 million held in jackpot reserve accounts.
* During the September 2004 quarter the Company utilized the proceeds
from the sale of United Coin and Rail City to reduce its term loan by
$31.6 million, and repaid the revolving credit finance by $70 million
to zero.
* For the quarter ended September 30, 2004, consolidated capital
expenditures for our continuing operations, including costs to produce
proprietary games, totaled $11.4 million compared to $6.7 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.
* Net interest expense for continuing operations for the current quarter
totaled $3.5 million compared to $5.7 million in the prior year period.
Guidance:
The Company has undertaken an extensive review of its operations and a
strategic planning process in order to take advantage of current and emerging
market opportunities to drive long-term shareholder value. Given the extent
of those actions, and the inherent uncertainty relating to the Company's
recent changes, the Company is no longer providing guidance for fiscal year
2005; however, based on expected business trends and conditions, the Company
is cautiously optimistic that it will return to profitability for the second
half of fiscal year 2005.
The Company will hold its conference call on Thursday, October 21, 2004 at
7 a.m. Pacific Time (10 a.m. Eastern Time). Participants may access the call
by dialing (312) 461-9296 and using participant passcode 966541. The Company
will also broadcast the conference call over the Internet. Interested parties
are asked to log on to the call at http://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 18%
The following chart summarizes the financial information for the Bally
Gaming and Systems business unit (dollars in millions):
Three Months Ended
September 30,
2004 2003
Revenues:
Game sales $51.5 $42.8
Gaming operations 33.2 15.7
System sales 19.4 30.0
Total revenues 104.1 88.5
Gross margin 53.2 55.2
Selling, general and administrative 36.2 23.0
Research and development 11.8 6.0
Depreciation and amortization 9.7 4.8
Operating Income (loss) $(4.5) $21.4
EBITDA $5.2 $26.2
EBITDA Margin 5% 30%
Summary operating statistics:
Gross margin %:
Games 25% 46%
Gaming operations 73% 75%
Systems 82% 80%
New gaming devices sold 2,740 3,330
OEM units sold 1,920 1,865
New unit ASP (excluding OEM) $10,394 $8,433
Systems revenue detail (in millions):
Hardware and software sales $8.7 $22.1
Maintenance and service revenues 10.7 7.9
Total systems revenues $19.4 $30.0
GMU installed base 281,000 239,000
Casino management systems
installed base 221 197
System managed TITO games 97,800 34,000
Recurring revenue game data: As of June 30th:
Installed base: 2004 2003
WAP games 1,726 1,910
Daily fee games 7,985 2,483
Total 9,711 4,393
Centrally determined link count 17,995 --
As of September 30th:
Installed base: 2004 2003
WAP games 1,825 1,985
Daily-fee games 8,259 2,995
Total 10,084 4,980
Centrally determined link count 17,193 --
Revenues from game sales increased 20% over the prior year's quarter
resulting from a 10% decrease in new unit sales offset by an increase in the
average new-unit selling price to $10,394 (excluding 1,920 OEM games). The
increase in the average selling price includes the positive impact from the
sale of 122 Monte Carlo and other premium-priced branded products.
Game sales gross margin declined to 25% from 46% in the prior year quarter
resulting from lower margin international sales, lower margins on video games,
as well as a $3.6 million inventory obsolescence charge, which included
$3.0 million for slow moving recently discontinued legacy video products and
used games.
Bally Systems revenues decreased 35% from the prior year quarter.
Revenues declined primarily in the area of hardware sales which reflects the
fact that there were no new property openings during the current quarter. The
recurring hardware and software maintenance revenues continued to increase due
to the larger installed base of game monitoring units, which currently stands
at 281,000 units in 221 casinos world-wide. Bally Systems gross margin was
82% compared to 80% in the prior year period.
Gaming Operations revenues increased 111% to $33.2 million compared to the
prior year's quarter. The gross placements for all WAP and daily fee games
totaled 2,405 units, and there were 2,032 units returned resulting in a 373
net increase in the installed base of games on a sequential basis as of
September 30, 2004 compared to June 30, 2004. The casino-owned central
determination link count declined 802 units primarily due to the temporary
closure of one Washington casino facility which will be replaced by a new
facility in the upcoming quarter. Gaming operations gross margin was 73%
compared to 75% in the prior year quarter, reflecting a slightly higher
frequency of WAP jackpots awarded during the current quarter.
Selling, general and administrative costs, increased 57% over the prior
year. This increase reflects the inclusion of SDG in the current period, as
well as higher patent and litigation costs. Bad debt expense totaled $2.7
million during the quarter resulting primarily from a $1.0 million reserve for
a specific customer account that became delinquent during the period. During
the quarter the Company completed a reduction in force and recorded a charge
of $1.4 million related to severance benefits.
Research and development costs increased 97%, reflecting the inclusion of
SDG and the continued game and system platform development as well as game
content development for traditional and non-traditional gaming markets.
Casino Operations
Rainbow Casino Quarterly Revenues Flat to the Prior Year
The following chart summarizes the financial information for the Rainbow
Casino in Vicksburg, Mississippi (Dollars in millions):
Three Months Ended
September 30,
2004 2003
Rainbow Casino
Revenues $12.8 $12.8
Operating Income 3.8 4.0
EBITDA 4.6 4.7
EBITDA Margin 36% 37%
Average Number of Gaming Devices 930 905
Avg. Number of Table Games 12 12
Rainbow Casino reported revenues which were flat to the prior year
quarter. EBITDA was down $0.1 million and depreciation increased $0.1 million
resulting in slightly lower operating income compared to the prior year
quarter.
Discontinued Operations
United Coin Machine Co. (Nevada Route Operations)
A recent Federal District Court jury rendered a verdict in a patent
infringement case filed by Action Gaming, Inc. and International Game
Technology, Inc. The jury awarded the plaintiffs $7.4 million in damages
related to a single optional feature offered in certain multi-handed poker
games provided by United Coin Machine Co. The verdict is subject to various
post-trial motions after entry of judgment, which in turn is subject to
appeal.
The charge for the jury award, $4.7 million net of tax, has been recorded
in the discontinued operations of United Coin. The cost of the litigation is
included in continuing operations.
Video Services Inc.
On October 15, 2004, the Company sold its interest in Video Services, Inc.
to Churchill Downs Inc. The net proceeds to Alliance totaled approximately
$2.0 million. No significant gain or loss on disposition is expected.
* * * * *
The disclosures herein include statements that are "forward looking"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Act of 1934, as amended, and are subject to
the safe harbor created thereby. Such forward looking information involves
important risks and uncertainties that could significantly affect results in
the future and, accordingly, such results may differ from those expressed in
any forward looking statements made by or on behalf of the Company. Future
operating results may be adversely affected as a result of a number of factors
including the impact of competition, uncertainties concerning such matters as
the Company's ability to service debt, product development, customer
financing, sales to non-traditional gaming markets, foreign operations,
dependence on key personnel, strict regulation by gaming authorities, the
outcome of pending litigation matters including the pending securities class
actions, gaming taxes and value added taxes, and other factors described in
the Company's filings with the Securities and Exchange Commission, including
but not limited to the Company's most recent reports on Form 10-K and 10-Q.
Alliance Gaming Corporation is a diversified gaming company headquartered
in Las Vegas, Nevada. The Company is engaged in the design, manufacture,
operation and distribution of advanced gaming devices and systems worldwide
and operates the Rainbow Casino in Vicksburg, Mississippi. Additional
information about the Company can be found on the Alliance Gaming web site at:
http://www.alliancegaming.com.
(Tables Follow)
ALLIANCE GAMING CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In 000's, except per share amounts)
Three Months Ended
September 30,
2004 2003(a)
Revenues:
Gaming equipment and systems $104,077 $88,468
Casino operations 12,836 12,755
116,913 101,223
Costs and expenses:
Cost of gaming equipment and systems 50,836 33,237
Cost of casino operations 4,802 5,003
Selling, general and administrative 43,655 29,065
Research and development costs 11,772 5,963
Restructuring charge 1,435 --
Depreciation and amortization 10,841 6,022
123,341 79,290
Operating income (loss) (6,428) 21,933
Other income (expense):
Interest Income 480 43
Interest expense (3,962) (5,729)
Minority interest (499) (486)
Refinancing charge -- (12,293)
Other, net 153 (354)
Income (loss) from continuing
operations before income taxes (10,256) 3,114
Income tax expense (benefit) (3,851) 1,266
Income (loss) from continuing operations (6,405) 1,848
Discontinued operations:
Income (loss) from discontinued operations
of Nevada Route, net (4,701) 3,132
Income from discontinued operations of
Louisiana Route, net 310 310
Income from discontinued operations of
Rail City Casino, net -- 738
Income (loss) from discontinued operations (4,391) 4,180
Net income (loss) $(10,796) $6,028
Diluted earnings (loss) per share
Continuing operations $(0.13) $0.04
Discontinued operations (0.08) 0.08
Total $(0.21) $0.12
Weighted average common and common
share equivalents outstanding 51,218 50,687
Notes:
(a) The prior period results have been reclassified to report the results
of the Rail City Casino as discontinued operations.
ALLIANCE GAMING CORPORATION
SUMMARY UNAUDITED BALANCE SHEETS
(In 000's)
September 30, June 30,
2004 2004
ASSETS
Current assets:
Cash and cash equivalents $43,229 $ 172,726
Accounts and notes receivable,
net of allowance for doubtful accounts
of $12,441 and $9,722 110,083 129,779
Inventories, net of reserves of
$7,086 and $4,914 81,466 61,135
Deferred tax assets, net 20,053 20,054
Other current assets 22,264 12,420
Total current assets 277,095 396,114
Short-term investments (restricted) 4,676 2,528
Long-term receivables, net of allowance
for doubtful accounts of $12 and $12 21,340 12,518
Lease receivables 8,308 5,614
Leased gaming equipment, net of accumulated
depreciation of $36,081 and $31,105 47,138 46,634
Property, plant and equipment, net of
accumulated deprecation and amortization
of $27,371 and $23,127 76,694 75,838
Goodwill, net 136,781 136,989
Intangible assets, net of accumulated
amortization of $14,532 and $12,489 61,990 63,623
Assets of discontinued operations held for sale 4,432 4,442
Other assets, net 6,365 6,354
Total assets $644,819 $750,654
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $46,654 $37,515
Income taxes payable 420 7,233
Accrued liabilities 61,487 51,469
Jackpot liabilities 9,447 12,075
Current maturities of long-term debt 4,662 5,866
Liabilities of discontinued operations held for
sale 1,229 4,337
Total current liabilities 123,899 118,495
Long-term debt, net 321,195 423,089
Deferred tax liabilities 850 849
Other liabilities 7,029 6,092
Minority interest 1,298 1,326
Total liabilities 454,271 549,851
Total stockholders' equity 190,548 200,803
Total liabilities and
stockholders' equity $644,819 $750,654
ALLIANCE GAMING CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In 000's)
Three Months Ended
September 30,
2004 2003
Cash flows from operating activities of
continuing operations:
Net income (loss) $(10,796) $6,028
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities of
continuing operations:
(Income) loss from discontinued operations 4,391 (4,180)
Depreciation and amortization 10,841 6,022
Refinancing charge -- 12,293
Deferred income taxes 2 1,277
Provision for losses on receivables 2,717 933
Inventory obsolescence 3,582 40
Other (2,227) (1,574)
Change in operating assets and liabilities,
net of effects of business acquired:
Accounts and notes receivable 5,604 (5,581)
Inventories (22,596) (5,347)
Other current assets (9,594) (480)
Accounts payable 9,139 2,616
Accrued liabilities and jackpot liabilities (6,587) (8,290)
Net cash provided by (used in) operating
activities of continuing operations (15,524) 3,757
Cash flows from investing activities of
continuing operations:
Additions to property, plant and equipment (3,200) (1,659)
Additions to leased gaming equipment (8,192) (5,004)
Additions to other long-term assets (605) (6,431)
Proceeds from sale of net assets of
discontinued operations -- 16,500
Net cash provided by (used in) investing
activities of continuing operations (11,997) 3,406
Cash flows from financing activities of
continuing operations:
Capitalized debt issuance costs -- (5,686)
Premium paid on early redemption of debt -- (5,399)
Proceeds from the issuance of long-term debt -- 275,000
Net change in revolving credit facility -- 70,000
Payoff of debt from refinancing -- (337,625)
Payoff of debt due to sale of net assets
of discontinued operations (101,618) --
Reduction of long-term debt (1,511) (879)
Re-purchase of treasury shares (164) --
Proceeds from exercise of stock options
and warrants 873 1,460
Net cash used in financing activities
of continuing operations (102,420) (3,129)
Effect of exchange rates changes on cash 47 (21)
Cash provided by discontinued operations 397 637
Cash and cash equivalents:
Increase for the period (129,497) 4,650
Balance, beginning of period 172,726 38,884
Balance, end of period $43,229 $43,534
ALLIANCE GAMING CORPORATION
Other Supplemental Information
Reconciliation to GAAP EPS
The following table reconciles Adjusted EPS excluding the refinancing
charge to GAAP EPS from continuing operations:
Three Months Ended
September 30,
2004 2003
Diluted earnings (loss) per share
from continuing operations, as reported $(0.13) $0.04
Refinance charge, net of tax -- 0.15
Diluted earnings (loss) per share from
continuing operations, excluding
refinance charge $(0.13) $0.19
Reconciliation of Adjusted EBITDA to income (loss) from continuing
operations
The following table reconciles earnings before interest, taxes,
depreciation and amortization before refinancing charge (Adjusted EBITDA) to
the Company's income (loss) from continuing operations (in 000's):
Three Months Ended
September 30,
2004 2003
Net income (loss) from continuing
operations $(6,405) $1,848
Income taxes (3,851) 1,266
Other expense, net 346 840
Interest expense, net 3,482 5,686
Refinancing charge -- 12,293
Operating income (loss) (6,428) 21,933
Depreciation and amortization 10,841 6,022
Adjusted EBITDA from continuing
operations $4,413 $27,955
The following tables reconcile operating income by business segment to
Adjusted EBITDA:
For the quarter ended September 30, 2004 (from continuing operations) (in
000's):
Operating Depreciation
Income and
(Loss) Amortization EBITDA
Bally Gaming and Systems $(4,487) $9,729 $5,242
Rainbow Casino 3,796 789 4,585
Corporate expenses (5,737) 323 (5,414)
$(6,428) $10,841 $4,413
For the quarter ended September 30, 2003 (from continuing operations) (in
000's):
Operating Depreciation
Income and
(Loss) Amortization EBITDA
Bally Gaming and Systems $21,358 $4,828 $26,186
Rainbow Casino 4,014 688 4,702
Corporate expenses (3,439) 506 (2,933)
$21,933 $6,022 $27,955
Adjusted net income excluding the refinancing charge is a non-GAAP
financial measurement, and is presented as a supplemental disclosure because
this is one of the performance measures used in our management incentive
plans.
We believe that the analysis of Adjusted EBITDA, which is not a GAAP based
financial measurement, is a useful adjunct to operating income, net income,
cash flows and other GAAP-based measures. Adjusted EBITDA is a common measure
of performance in the gaming industry but may not be comparable to similarly
titled measures reported by other companies. We disclose Adjusted EBITDA
primarily because it is a performance measure used by management in evaluating
the performance of our business units and is one of several performance
measures used in our management incentive plan. Additionally, Adjusted EBITDA
is utilized as a performance measure in covenants for our bank credit
agreement.
This non-GAAP information should not be considered as an alternative to
any measure of performance as promulgated under accounting principles
generally accepted in the United States, such as operating income, net income
or net cash provided by operating activities.
For further information, please contact: Robert L. Saxton of Alliance
Gaming, +1-702-270-7600.
SOURCE Alliance Gaming
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Related links:
http://www.alliancegaming.com
CONTACT:
Robert L. Saxton of Alliance Gaming,
+1-702-270-7600
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