Mikohn chief disputes claims by disgruntled shareholders

Friday, May 18, 2001 | 11:11 a.m.

Mikohn Gaming Corp. of Las Vegas has charted a course of narrowing the focus of its operations and trimming expenses to become profitable.

But a group of investors says the top management of the company shouldn't be piloting that course for Mikohn, a Las Vegas-based casino supplier that specializes in the distribution of branded slot machine games like Yahtzee and Battleship.

David Thompson, chairman, president and chief executive officer of Mikohn, explained at Thursday's annual shareholders meeting how the company is recovering from 2000, a year in which it lost $22.1 million.

Mikohn's first quarter of 2001 already has shown some signs of that recovery -- the company reported earnings of $446,000, 4 cents a share, on revenues of $26.1 million for the first quarter ended March 31.

Thompson said Mikohn is focusing on its branded games and will roll out its Adventures in Trivia slot machine, based on the popular Ripley's Believe it or Not franchise, Tuesday.

Adventures in Trivia, a five-reel, nine-line, 90-coin-maximum-bet slot, offers a trivia game in its bonus play, a new feature the company is expects to be a popular draw. Players win more if they are right when they answer human-interest trivia questions and win less with the wrong answers.

Later this year, Mikohn will unveil a video slot machine based on Hasbro Inc.'s popular board game Clue.

The company also is working to increase income from its leased machines by relocating them to properties that will yield more revenue. Each machine generates an average $27 a day from existing leases, the company says.

Thompson said the branded games are the cornerstone of the company's future.

But the company since last year began implementing cost-cutting measures to improve its bottom line. He said the work force has been trimmed by attrition and consolidation companywide by about 100 jobs to under 700 and that each company division has been directed to develop its own expense reduction measures.

A pair of shareholders who addressed the meeting at the MGM Grand Conference Center Thursday had their own ideas about how the company could improve itself.

Peter Lux, a New Jersey shareholder who said he made a special trip to Las Vegas to address Thompson face to face, said he and the holders of about one-third of the company's shares have been unhappy with the way management has run the company.

In a statement during a question-and-answer session, Lux recommended that Thompson step down as president and chief executive officer. He also wants the company to hire an investment bank to develop strategies that would enhance shareholder value.

Another shareholder, Robert Skaff, Exeter, N.H., questioned the company's practice of awarding executive bonuses even when the company experienced losses last year.

Both said the company's stock performance has been an embarrassment in a time when other suppliers and game producers in the industry have had results that beat the S&P 500.

Company officials noted that Mikohn's stock has been in an upswing in recent weeks and they're confident their efforts in the last quarter have turned the stock around. At the end of December, the stock was trading at a 52-week low of $2.125 a share. It has climbed to $5.10 this week and today is at $5.07, down 3 cents from Thursday's close.

Lux and Skaff say Mikohn's Tablelink system -- a player tracking system that determines how much a player invests and wins on table games the same way slot club cards work for slot machine players -- can be a big winner for the company, but Mikohn isn't selling it properly.

Lux and Skaff are convinced Mikohn's products are top-notch and the company's middle management is doing a good job. But they feel Thompson and top executives are more concerned with their own bank accounts than with the interests of shareholders.

After the meeting, Thompson said all shareholders have a right to their opinions and the company will consider the comments by Lux and Skaff. He said many shareholders only consider the short-term performance of their stock and not the long-term interests of the company.

"For us in management, we're in it for the long term," Thompson said. "We always listen to shareholders because they've invested their hard-earned money in our company. But most of them have never run a $100 million business."

He said Mikohn is working with the Mandalay Resort Group and Harrah's Entertainment Corp. to perfect its Tablelink product. The product hasn't been a hot seller, he said, because it takes time to change the mindset of casino executives who have done things the same way for years.

Play at table games is usually tracked by pit personnel who monitor buy-ins and how much players bet in each game. Thompson said it will take time and a demonstration at a Mandalay and a Harrah's property to prove the value of the system, which keeps track of all table transactions.

"It took a long time for slot tracking systems to catch on," Thompson said. "Now, they're something that practically every casino has."