Thursday, Aug. 1, 2002 | 11:09 a.m.
Debt rating agency Moody's Investors Service today placed slot machine maker Mikohn Gaming Corp.'s $105 million in senior secured notes on review for a possible downgrade.
Moody's lowered the company's senior implied rating from B3 to B2 and lowered the company's senior unsecured long-term issuer rating from Caa2 from B3. Both the senior implied and long-term issuer ratings remain on review for a possible further downgrade, Moody's said.
Further declines in the company's financial performance, leading to concerns about the company's ability to repay its debt, prompted the downgrades. Mikohn has carried a "negative" ratings outlook since October 2001.
"While Mikohn recently announced the hiring of a new president and expects that new installations will help improve operating results, the company's limited product line will continue to make the company vulnerable to product delays and customer demand," Moody's said.
Delays in new game introductions have hurt recent earnings, Moody's said.
John Garner, Mikohn's director of finance, said he expects to meet with Moody's representatives in Las Vegas over the next couple of months.
"There are things we're going to address that will make them more comfortable," Garner said. "The fact of the matter is that we've got to deliver on ... results."
Mikohn has announced several major management changes. It also expects to release a reorganization plan by early September. Tuesday, the company reported a second quarter loss of $5.8 million, or 45 cents per share, compared to net income of $1.8 million, or 16 cents per share, for the same period a year ago.
Russel McMeekin joined the company as president and chief operating officer Wednesday. The company has operated without an official president for three years, with chairman David Thompson serving as interim president. McMeekin, 36, joined Mikohn from ViaFone Inc., a privately held wireless software company based in the San Francisco Bay Area. He also served as president of e-business for Honeywell International.
Chief Financial Officer Don Stevens will retire Aug. 13. A replacement has not yet been named.
Louis Peyton, vice president of operations, and Steve Romeo, director of marketing, left the company a few weeks ago. McMeekin said the reorganization plan will address whether to replace them directly or rework the department.
Peter Boynton, formerly chairman and chief executive of Caesars World Inc., joined Mikohn's board of directors a few weeks ago. He will also serve as chairman of the company's audit committee, replacing John Campbell, who is retiring from the board.
Game delays, some due to regulatory agencies, have hurt the company, McMeekin acknowledged today. The slot manufacturing industry, as whole, is suffering from a decline in machines leased by casinos, however, he said.
"My focus here is to figure out what parts of the business can grow ... we have aspirations to do extremely well."
Analysts have blasted Mikohn management for offering overly optimistic earnings guidance to investors.
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