Shakeup hitting big LV gaming firm

Gary Thompson

Thursday, Nov. 4, 1999 | 11:27 a.m.

Alliance Gaming Corp.'s stock price fell sharply today as the Las Vegas company posted disappointing quarterly results, said it may sell some assets and announced the resignation of its chief executive.

The stock was down $1.50, or 18.8 percent, to $6.50 a share in late-morning trading after Alliance reported earnings for the fiscal 2000 first quarter that fell far short of analysts' expectations.

Alliance said Morry Goldstein has resigned as president, chief executive officer and director of the slot maker and casino operator to join a non-gaming company. Alliance is seeking a replacement.

Alliance also said it may sell some "non-core assets," including Nevada and Louisiana slot routes and two small casinos, in an attempt to reduce bank debt and clear up investor confusion over just what Alliance Gaming is.

The company reported net income of $400,000, or 4 cents a share, for the quarter ended Sept. 30, compared with a net loss of $2.7 million in the fiscal 1999 first quarter. Revenue rose 19 percent, to $117.2 million from $98.8 million.

Gaming analysts had projected first-quarter per-share net at an average 15 cents, far higher than what Alliance attained.

"It's obvious things haven't gone as planned," said Dave Ehlers, chairman of Las Vegas Investment Advisors Inc. "Earnings were very disappointing, and that has impacted the stock."

Alliance said it has hired Credit Suisse First Boston to "explore the divestiture" of the Rainbow Casino in Vicksburg, Miss., and the Rail City Casino in Sparks, Nev., near Reno.

CS First Boston will also seek buyers for Alliance's Louisiana slot routes, while Wasserstein Perella & Co. has been hired to help sell the company's Nevada slot routes.

"Net proceeds from the divestitures will be used in part to repay the company's bank debt," Alliance said. The company has $336.3 million of debt outstanding, including $150 million of 10 percent senior subordinated notes.

Alliance said its stock price "has been adversely affected by the perceived complexity of operating in four different business sectors and by the amount of debt outstanding."

Alliance said it "believes that reducing debt and divesting non-core businesses will enable shareholders to better realize the underlying value of the company's core gaming machine and systems businesses."

"We are moving forward with the next phase of our plan designed to continue to unlock our company's embedded value for our shareholders," David Robbins, chairman, said today.

"We won't go forward with any sales unless we receive acceptable offers. Yet, given the strength of our core gaming machine and systems businesses, we have decided to move forward with the de-leveraging plan at this time."

The company's Bally Gaming & Systems division reported an 81 percent rise in revenue from the year-ago quarter due to higher slot shipments, a 17 percent gain in unit prices and an increase in the installation of revenue-participation games. Bally Gaming is the world's No. 2 slot maker behind International Game Technology of Reno.

The division's systems sales rose to $15.2 million in the quarter from $4.7 million in the year-ago period. Slot shipments rose 44 percent, to 3,000 units; 2,000 of those were made to overseas markets.

Revenue from the Nevada and Louisiana slot routes rose 15 percent, to $46.1 million, fueled by an 18 percent increase in Nevada, where net win per machine rose to $58.30 from $52.60 in the year-ago quarter.

Alliance's United Coin Machine Co. unit -- its Nevada slot route operator -- is embroiled in a legal dispute over placement of slots in supermarkets. United Coin has said it could lose up to $9 million of revenue if it isn't allowed to place slots in 19 Raley's stores.

Jackpot Enterprises of Las Vegas is fighting in court to keep its slots in those stores, which were sold to Raley's by Albertson's. The sale caused the dispute over which company would operate the slots.

Alliance's Wall Machines and Amusement Games division posted a 29 percent decline in revenue for the quarter, as unit shipments, prices and distribution revenue all fell.