Alliance posts strong numbers for quarter

David Strow

Thursday, April 11, 2002 | 11:10 a.m.

Alliance Gaming Corp. got the gaming industry's winter quarter earnings season off to a strong start Wednesday, as the Las Vegas company reported a 133 percent increase in net income for the quarter ended March 31.

Alliance posted net income of $15.9 million, or 32 cents per share for its fiscal third quarter, up from net income of $6.8 million, or 16 cents per share in the year-ago quarter. Analysts had been estimating the company would earn 30 cents per share.

Revenues rose 12 percent to $154.8 million, while cash flow increased 41 percent to $32.8 million.

Investors, however, had apparently been expecting more from the company. This morning Alliance stock fell 80 cents to $14, a drop of more than 5 percent.

As has been the case in previous quarters, the strongest growth came from Alliance's Bally Gaming and Systems slot machine unit, which saw cash flow increase 113 percent to $16.4 million. Bally's aggressive rollout of participation slot machines was the primary contributor to this gain, as gaming operations revenue rose 112 percent. The company said it now has 2,440 participation slot machines installed in casinos, up from 1,300 a year ago. However, this is up by just 40 machines from Dec. 31.

Bally's casino systems business also showed a healthy increase, with revenues up 72 percent. Slot machine sale revenue rose just 3 percent, as declining prices offset a 12 percent gain in unit sales.

Alliance's slot route operations were the second-largest gainer, posting $7.6 million in cash flow, up 23 percent. Alliance's Louisiana slot route showed no growth, but cash flow from its Nevada slot route was up 26 percent to $6.8 million.

Alliance said net win per slot per day rose 1 percent in Nevada, while the number of gaming machines deployed also increased 1 percent.

Casino operations were the one dark spot in the company's earnings, as cash flow from its two casinos dropped 14 percent to $7 million. Rainbow Casino in Vicksburg, Miss., reported a 14 percent decline in cash flow, while cash flow at the Rail City Casino in Sparks was flat.

The company blamed the poor Vicksburg results on "the significant competitive pressure we face in a market which is growing at less than the historical norm."

Alliance's German amusement machines business, Bally Wulff, reported a 13 percent increase in cash flow, to $4.5 million. The number of units sold fell 37 percent, but selling prices increased, and the company posted a 20 percent increase in revenue from leased machines.

Alliance reported it expects to earn between $1 and $1.03 per share for the fiscal year ending June 30, with revenues exceeding $590 million and cash flow of more than $108 million. These earnings will not include any federal income tax, as the company has accumulated operating loss credits from previous years.

Alliance will realize the last of these operating credits in the quarter ending June 30, which is the fourth quarter of its fiscal year. It will record a one-time non-cash tax benefit of $32 million to $36 million from realizing these credits in a single quarter. Starting in the next fiscal year, the company will once again begin paying federal income tax.

Separately, Alliance Chief Executive Bob Miodunski reported selling roughly $2.4 million in company stock, the fourth major sale by Miodunski this year.

Miodunski filed a form with the Securities and Exchange Commission indicating he had sold 74,000 shares of stock for prices ranging from $32.30 to $32.97 per share, Dow Jones reported. The form didn't indicate whether Miodunski acquired the shares through the exercise of stock options. The sale occurred March 7; Alliance's stock split 2-for-1 Monday.

Since the beginning of the year, Miodunski has sold 206,000 shares of pre-split stock for about $6.3 million. In 2001, Alliance's stock rose by more than 560 percent.