Alliance Gaming revenue increases on Bally slot unit

By Liz Benston (contact)

Tuesday, Aug. 5, 2003 | 11:07 a.m.

Alliance Gaming Corp. reported an increase in operating income and revenue as business in its core slot manufacturing unit rose during the fiscal fourth quarter ended June 30. But profit fell as the company wrote off a loss from the sale of its German gambling machine unit.

The company's Bally Gaming and Systems slot unit drove the increases, marking the 12th consecutive quarter of growth in slot sales and systems, Alliance Gaming Chief Executive Officer Bob Miodunski said today.

New games including a "Cash For Life" progressive jackpot machine and popular "Monte Carlo" games have helped the company increase unit sales and average sale prices in fiscal 2003 compared to the previous year, Miodunski said.

The company's latest coup -- installing Bally games to cover 30 percent of the Borgata's slot floor -- also will boost future returns, he said. The Borgata, a joint venture of Boyd Gaming Corp. and MGM MIRAGE, opened last month in Atlantic City.

The company expects to display 135 slot games at the upcoming Global Gaming Expo in Las Vegas, including 110 new machines.

Income from continuing operations in the fourth quarter rose 39 percent, to $15 million. Revenue from continuing operations jumped 40 percent, to $121.1 million.

The company also said it expects earnings from continuing operations of at least $1.10 per share on revenue of about $460 million and cash flow of about $130 million for fiscal 2004. Earnings per share would be about $1.10, a 36 percent increase from fiscal year 2003, excluding the net gain from the sale of United Coin and other one-time events.

The company received $16.5 million from the July sale of its Bally Wulff unit but still recorded a loss of $25.4 million on the sale and a loss of $2.3 million from discontinued operations.

Alliance also is in the process of selling its slot route operations in Nevada and Louisiana. The company announced the sale of the units last month as part of an effort to focus on its primary growth engine, Bally Gaming and Systems slot machines. The sale of United Coin Machine Co., one of the state's largest routes and the operator of the Gamblers Bonus slot club program in Las Vegas, is expected to be complete next year.

The company posted a loss of $11.4 million in its fiscal fourth quarter compared to a profit of $27.7 million in the year-ago quarter. On a per-share basis, the company lost 23 cents compared to earnings of 56 cents per share a year earlier.

Earnings from continuing operations -- not counting the assets for sale -- the company earned 30 cents per share in the fourth quarter compared to 9 cents in the year-earlier period. Last year's results include the assumption of federal income taxes.

Analysts had expected the company to earn 27 cents per share.

Cash flow increased 76 percent in the quarter, to $34.5 million, led by an 89 percent increase in its Bally Gaming unit.

Deutsche Bank Securities analyst Marc Falcone said the company's core slot machine business posted "solid results" with revenue and cash flow "both ahead of our expectations.

"The company continues to benefit from strong replacement demand driven by 'cashless' gaming as well as an increasing pipeline of new games," Falcone wrote in a research note to investors today.

Bally revenue increased by 49 percent, to $102.9 million. Revenue from slot machine sales increased 72 percent, to $57.3 million, primarily due to a 28 percent increase in units sold and an 11 percent increase in the average sale price of new units, to $8,400. Sales of slot machine software systems increased 52 percent, to $31.6 million, driven by a 12 percent increase in game monitoring units shipped and a 15 percent increase in the average selling price per unit and higher sales of software licenses for its cashless machine technology. So-called cashless machines can accept and dispense paper tickets instead of coins.

Revenue for United Coin Machine Co. fell 4 percent and cash flow dropped 12 percent compared to the year-ago quarter. The average number of games decreased by 7 percent but the average amount won from gamblers per machine per day increased 2 percent, to $70.80.

The company's casinos -- including the Rainbow Hotel Casino in Vicksburg, Miss., and the Rail City Casino in Sparks -- reported a 4 percent increase in revenue and a 10 percent jump in cash flow.