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Alliance Gaming Reports Loss

28 Apr 2005

LAS VEGAS – (PRESS RELEASE) -- Alliance Gaming Corporation (NYSE: AGI) today announced its results for its third fiscal quarter ending March 31, 2005. Third quarter net loss from continuing operations totaled $(6.4) million, or $(0.13) per share, including certain charges described below totaling $(0.20) per share. Excluding these charges resulted in third quarter income from continuing operations of $3.6 million, or $0.07 per share. For the comparable prior year quarter ended March 31, 2004, the Company reported income from continuing operations of $12.2 million or $0.24 per diluted share on revenues of $116.2 million. Consolidated results for the March 31, 2005 quarter include:

* Revenues of $125.4 million, an increase of 10% on a sequential basis compared to the quarter ended December 31, 2004, and an increase of 8% from $116.2 million in the prior year quarter.

* Operating loss from continuing operations of $(2.2) million compared to an operating loss of $(7.7) million for the quarter ended December 31, 2004, compared to operating income of $22.2 million in the prior year quarter.

* EBITDA excluding certain charges, of $24.7 million, compared to $16.0 million for the quarter ended December 31, 2004, and $30.3 million in the prior year quarter.

* Pre-tax charges totaling $13.7 million including inventory obsolescence, impairment charges, restructuring charges, and a tax charge of $1.4 million (in aggregate $(0.20) per share).

Earnings before interest, taxes, depreciation, amortization, refinancing charges, restructuring charges, stock-based compensation and inventory and asset write-downs (EBITDA) is not a Generally Accepted Accounting Principles (GAAP) measurement. EBITDA may not be comparable to similarly titled measures reported by other companies. A reconciliation of EBITDA to GAAP net income (loss) from continuing operations is attached to this press release. Earnings excluding certain charges and EPS excluding certain charges are not GAAP measurements, and the reconciliation to the appropriate GAAP measurements is attached to this press release.

"I am pleased with our progress during the quarter on our key business initiatives, including our Alpha video product roll out. We tracked against our plans during the quarter, and our earnings per share, excluding charges, is encouraging," said Richard Haddrill, President and CEO.

Third Quarter Charges:

A summary of the charges incurred in March 31, 2005 quarter include:

* Inventory obsolescence charges totaling $7.9 million, or ($0.10) EPS net of tax, which is included in cost of goods sold, and includes further write-downs for slow moving legacy products.

* Impairment charges totaling $3.6 million, or ($0.04) EPS net of tax, to reflect the write-down of certain intellectual property assets, gaming devices, and other assets.

* Restructuring charges totaling $2.2 million, or ($0.03) EPS net of tax, resulting from the additional reductions in force completed during the quarter.

* Tax charge of $1.4 million, or ($0.03) EPS for the estimated potential tax liability for the relocation of the Company's German distribution operations.

Liquidity and Capital Expenditures:

* Cash flows from operations, as defined under GAAP, totaled $22.8 million for the quarter ended March 31, 2005, and $15.1 million for the nine months ended March 31, 2005.

* As of March 31, 2005, cash and cash equivalents totaled $31.4 million, which included approximately $2.0 million held for operational purposes in vaults, cages and change banks and $13.3 million held in jackpot reserve accounts.

* For the quarter ended March 31, 2005, consolidated capital expenditures, including costs to produce proprietary games, totaled $15.5 million, compared to $16.2 million for the prior year quarter. The current period capital expenditures were driven by the continued deployment of wide-area progressive and daily-fee games.

Interest expense for continuing operations for the current quarter totaled $5.1 million compared to $4.6 million in the prior year period due to higher interest rates on lower borrowings.

 
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