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Rod Smith

 

Alliance Gaming Disappoints Wall Street

22 Apr 2004

By Rod Smith

LAS VEGAS -- Alliance Gaming Corp. disappointed Wall Street Wednesday when it announced earnings for the quarter ending March 31 well below its earlier guidance and analyst projections.

Deutsche Bank analyst Marc Falcone called the performance a "tough miss" caused by sluggish slot machine sales.

Alliance Chief Financial Officer Bob Saxton, however, said in a conference call with analysts that the shortfall was caused by a one-time delay in customers' requests in delivering 1,250 slot machines.

He said it would be unfair to name the five companies involved, but that they included some of the biggest names in the gaming industry, including a Detroit property, some Class II markets and an American Indian property.

Saxton also said in the case of the largest order involved in the shortfall, the slots have been paid for, but have not been shipped. Alliance only books revenue when shipments have been made.

Merrill Lynch warned in an investor advisory that although this "miss" was offset by system sales and gaming operations, the weakness on the actual number of units sold was "distressing and likely pressures the stock."

Shares in Alliance tumbled 11 percent on very heavy trading Wednesday, closing at $27.47, down $3.38 on 6.2 million shares trading, nearly 10 times normal trading volume.

Alliance posted net income of $13.8 million in its third quarter of 2004, up 8 percent from $12.8 million in the same period a year earlier.

It also reported reported earnings of 24 cents per share from continuing operations, 3 cents below Wall Street estimates and 4 cents under the Deutsche Bank estimate.

Cash flow for the period was $30.3 million, a 17 percent increase from $25.9 million in the previous year's quarter.

Revenues rose to $116.2 million, up 21 percent from $96.2 million in the quarter ending March 31, 2003.

Despite sales difficulties in the quarter, Alliance reaffirmed $1.04 earnings-per-share guidance for 2004, suggesting fourth-quarter earnings of 32 cents per share.

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