Alliance Gaming lays off 80, to post fourth-quarter loss

David Strow

Tuesday, Jan. 4, 2000 | 11:05 a.m.

Debt-laden Alliance Gaming Corp. announced layoffs and cutbacks Monday, moves it says will result in more than $8 million in annual savings.

The Las Vegas company said the restructuring affects Bally Gaming and Systems, its slot machine subsidiary, as well as its corporate office and its German subsidiary.

Eighty of the firm's 2,300 employees were laid off. Most of the layoffs were in Las Vegas.

"I am concerned about the company's inconsistent financial performance over past two years," said Robert Miodunski, the company's chief operating officer. "I am firmly committed to return the company to improved operating profitability and growth which will start in the second half of our fiscal year."

The layoffs will cause Alliance to take a $1.5 million restructuring charge to cover severance costs in the quarter ending Dec. 31. Alliance said it expected to report a loss of 70 cents per share for the quarter; earnings will be officially announced in February.

"All we can do is take their statements at face value," said Dave Ehlers, chairman of Las Vegas Investment Advisors. "It looks like they are addressing the issues and moving forward to protect shareholder value."

Alliance had warned changes were coming in November, when it announced plans to sell off various "non-core assets." Among the assets being examined for sale included the company's casinos and its United Coin slot route operations in Nevada and Louisiana. It said the sales were necessary to help reduce its debt load, which exceeded $330 million.

The Nov. 4 release also announced the resignation of Chief Executive Morry Goldstein. Goldstein later said he left the company because of a disagreement over the future course of Alliance operations, saying he believed in continued growth.

Since that release, Alliance's share price has fallen dramatically, from $8.13 on Nov. 3 to as low as $2.44 on Dec. 21. Monday's announcement gave Alliance a small boost, as shares rose 10 percent to $3.

Alliance said its sales efforts are continuing.

"Given all of the uncertainty after our last press release, our share price has dropped dramatically and we believe undeservedly," Miodunsky said. "By having greater focus and accountability throughout our operations, we will enhance our ability to succeed and provide our shareholders with greater value."

The primary reorganization announced Monday was the realignment of Bally into three distinct product lines, focused on the sale of traditional reel slots, video slots and slot computer systems, each headed by an individual manager. Alliance said this structure will enable it to "ensure a steady and predictable continuing introduction of new games in the future."

Cutbacks have also begun at Bally Wulff, Alliance's long-struggling German subsidiary. Alliance said the managing director of this division has left the company, and has been replaced temporarily by company Chief Financial Officer Scott Schweinfurth. A replacement is expected within three months.

"They were obviously blindsided by Bally Wulff in Germany," Ehlers said.

In addition to layoff charges, the company said it will absorb $500,000 in charges -- 5 cents per share -- as a result of a restructuring of its bank credit agreements. The restructuring allowed the company to proceed with the sale of assets.

However, these charges will be offset by a one-time gain of $1 million, or 10 cents per share, related to the release of its option to operate gaming machines at a Kansas dog racing track. This track is currently closed.

The company blamed the expected quarterly loss -- estimated at 60 cents per share before one-time charges -- on decreased machine sales and system revenues. Revenues are expected to reach $5 million for the quarter.

However, Alliance said cash flow improved at its slot route operations and German operations over the September quarter. Casino revenues declined because of construction work at Alliance's Rainbow Casino in Vicksburg, Miss., a project that was completed in late November.