Mikohn Gaming has good, bad earnings news

Friday, April 7, 2000 | 10:44 a.m.

Mikohn Gaming Corp. of Las Vegas warned that first-quarter earnings will be below last year's levels, the result of "the current lackluster pace of product sales for the company's visual displays and electronics."

However, the Las Vegas gaming supply company said it is more optimistic about the year as a whole, saying it expects earnings per share to be "substantially higher" than the 35 cents per share it earned in 1999.

In the quarter ended March 31, 1999, Mikohn earned $911,000, or 9 cents per share, on revenues of $25.2 million. The company didn't specify what results it expects for the first quarter of 2000.

However, Mikohn said it expects earnings to strengthen considerably as the year progresses, particularly in the second half of the year. Mikohn credited two factors for its anticipated strength -- rapidly increasing sales of its "Yahtzee"-themed slot and the legalization of tribal gaming in California.

The company has now signed agreements to install 1,215 Yahtzee games, an increase of 565 units in two months. About 560 of the games have been installed, with 50 more being installed each week.

"Because of the high margins generated by these games, we estimate that on an annualized basis each additional 1,000 units ... will produce earnings per share of approximately 50 cents," said David Thompson, Mikohn's chairman and chief executive.

Calling California a "major new market for gaming operators," Thompson said California sales and the Yahtzee slot "will offset the current lackluster pace of product sales for our traditional product lines including visual displays and electronics."

Mikohn's optimistic earnings projection for 2000 sent the stock up 62 cents on Wednesday, to $7. Mikohn's first-quarter warning was issued after the market closed Wednesday; however, the stock closed Thursday unchanged from $7.

This morning, Mikohn was down 25 cents, to $6.75.

In third, separate announcement late last week, Mikohn said it was not in compliance with the terms of its long-term debt, an event that could result in $86 million in debt becoming due this year.

In forms filed with the Securities and Exchange Commission, Mikohn said it was unable to file its annual report on time, due to negotiations with its lenders. The company said it anticipates filing a report within 15 days.

Don Stevens, chief financial officer of Mikohn, said the agreements relate to minimum cash flow levels Mikohn is required to maintain by its creditors. When Mikohn recently discontinued a slot machine line, it temporarily fell below that cash flow requirement, he said. Mikohn discontinued its PM Coin slot line, taking a non-cash charge of $1.5 million.

"We didn't get (the waivers) completely done," Stevens said. "We didn't get signatures from all the banks. We should have all that done within 15 days."

Stevens said he thought there was "no (risk) whatsoever" that Mikohn's long-term debt would become callable.

In a previous announcement, Mikohn said it expects to post net income of $342,000, or 4 cents a share, for the quarter ending Dec. 31, 1999. That's down from net income of $628,000, or 6 cents a share, in the year-ago quarter. However, the company expects to post net income of $3.7 million, or 35 cents per share, for all of 1999, up from a net loss of $8 million, or 76 cents per share.