Friday, April 29, 2005 | 10:54 a.m.
Alliance Gaming Corp. on Thursday reported an 8 percent increase in revenue in its fiscal third quarter and showed a profit before a series of charges, delighting analysts.
The Las Vegas-based gaming equipment manufacturer, the No. 2 slot-machine maker in the country, reported earnings of $3.6 million, 7 cents a share, excluding the charges. A survey of 15 analysts by Thomson Financial had forecast earnings per share of 4 cents.
After the charges, Alliance showed a net loss of $6.9 million, 14 cents a share, on revenue of $125.4 million for the quarter ended March 31. That compares with net income of $13.8 million, 27 cents a share, on revenue of $116.2 million in the same period a year earlier.
"I am very pleased with our overall business progress for the quarter," said Richard Haddrill, president and chief executive, in a conference call following the release of earnings on Thursday. "Our earnings per share continue to be encouraging."
Haddrill said the company's tracking-system business continues to strengthen and a platform conversion for its video games that began in October and had a major product rollout that began earlier this month is progressing.
The $13.7 million in charges taken include a pair of write-downs on obsolete equipment in inventory, a restructuring charge and a tax charge. The write-downs include $7.9 million for slow-moving legacy products and $3.6 million on intellectual property assets, $2.2 million in financial restructuring and $1.4 million in tax charges related to the relocation of the company's German distribution operations.
The various charges had a 20-cent impact on earnings per share and swung the profit to a loss.
Haddrill said while he wouldn't rule out additional future charges, he doesn't anticipate any for the company's June quarter.
The bulk of Alliance's revenue is from gaming equipment and systems, which totaled $111.7 million for the quarter, compared with $102 million the same quarter a year ago. The company's Mississippi casino operation had a flat quarter, contributing $13.7 million in revenue compared with $14.3 million a year ago.
For the quarter, the company sold 3,966 gaming devices compared with 3,893 in 2004's third quarter. The average sales price climbed from $9,816 to $10,136 quarter over quarter.
Alliance, which offers the QuarterMillions, Playboy and Blazing 7's series of games under its Bally Gaming and Systems subsidiary had a slight increase in its research and development costs related primarily to the Alpha video platform rollout.
But Haddrill said the company is "continuing to sharpen the saw on cost structure" and said the company's quality and customer satisfaction initiatives are on track.
He added that the only guidance he would give for the fourth quarter is that he expects the company to continue to be profitable. He said he expects a "slight positive uptick" as a result of gaming industry megamergers involving MGM Mirage's acquisition of Mandalay Resort Group and the pending acquisition of Caesars Entertainment Inc. by Harrah's Entertainment Inc.
Both Caesars and Harrah's are Alliance customers.
"Market conditions continue to be weak and the competition is tough, but in summary, we're making good progress," Haddrill said.
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