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Alliance Gaming Reports Third Quarter EPS Up 33% to $0.24 From Continuing Operations Reaffirms Fiscal Year 2004 and 2005 Guidance LAS VEGAS, April 21 /PRNewswire-FirstCall/ -- Alliance Gaming Corporation today announced earnings for its third fiscal quarter ending March 31, 2004. Third quarter income from continuing operations totaled $12.2 million, or $0.24 per diluted share, on revenues of $116.2 million. For the comparable quarter ended March 31, 2003, the Company reported income from continuing operations of $8.9 million or $0.18 per diluted share, on revenues of $96.2 million. The results for the current quarter include Sierra Design Group (SDG) since the date of its acquisition on March 2, 2004. Consolidated results for the March 31, 2004 quarter include: * Revenues from continuing operations of $116.2 million, an increase of 21% from the $96.2 million in the prior year quarter. * Operating income from continuing operations of $22.2 million, an increase of 9% from the $20.4 million in the prior year quarter. * EBITDA from continuing operations of $30.3 million, an increase of 17% from the $25.9 million in the prior year quarter. * Net income from continuing operations totaled $0.24 per diluted share, an increase of 33% from the $0.18 in the prior year quarter. * Total net income, including discontinued operations, of $0.27 per diluted share, compared to $0.25 in the prior year quarter. Earnings before interest, taxes, depreciation, amortization and before the $12.3 million refinancing charge incurred in the September 2003 quarter (EBITDA), and EPS excluding the refinancing charge, are not Generally Accepted Accounting Principles (GAAP) measurements. EBITDA may not be comparable to similarly titled measures reported by other companies. A reconciliation of EBITDA to income from continuing operations and a reconciliation of EPS excluding the refinancing charge to GAAP EPS are attached to this press release. Cash and Capital Expenditures: * As of March 31, 2004, cash and cash equivalents for our continuing operations totaled $32.5 million, which included approximately $2.1 million held for operational purposes in vaults, cages and change banks and $16.8 million held in jackpot reserve accounts. These amounts exclude cash and cash equivalents of the discontinued operations, which are included in assets held for sale. * For the quarter ended March 31, 2004, consolidated capital expenditures for our continuing operations, including costs to produce proprietary games, totaled $16.2 million compared to $22.3 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. We also incurred $5.0 million for capital expenditures for our discontinued operations. Other financial highlights: * During the quarter the Company completed the acquisition of SDG. Consideration consisted of approximately $28 million in cash, 662,000 shares of AGI common stock and the assumption of approximately $80 million of debt (including $72 million of loans payable to Alliance which now becomes inter-company debt), plus transaction fees and expenses, resulting in total initial consideration of $124 million. Additional contingent consideration of up to $95.6 million may become payable, in equal portions of cash and stock, over the next three fiscal years upon the SDG business unit achieving certain significant revenue and EBITDA targets. * During the quarter the Company also completed the acquisition of MindPlay, a leading developer of advanced table game technologies, and the England-based Crown Gaming which is a cornerstone in our newly formed Bally Gaming and Systems UK Limited subsidiary. * Net interest expense for the current quarter totaled $2.8 million compared to $6.2 million in the prior year period. The current period includes interest income on loans to SDG in the pre-acquisition period, totaling $1.5 million. The Company currently has $70.0 million outstanding on its $125 million revolving credit facility, unchanged from December 31, 2003. During the quarter the Company amended its bank credit agreement to reduce the Term Loan margin rate by 25 basis points, to LIBOR + 2.5%. * The continuing operations tax rate of 34% for the quarter and 36% for the year-to-date period reflects the realization of research and development tax credits and a reconciliation of certain deferred tax assets and liabilities to the 2003 tax return. Earnings Guidance * The Company is reaffirming its fiscal year 2004 earnings guidance for continuing operations of $1.04 per diluted share (excluding the refinancing charge of $0.15 per diluted share). The comparative EPS for the prior fiscal year 2003 was $0.74. * The Company is also reaffirming its fiscal year 2005 earnings guidance of at least $1.40 per diluted share, representing an increase of 35% compared to fiscal year 2004. The Company will hold its conference call on Wednesday, April 21, 2004 at 10 a.m. PDT (1 p.m. EDT). Participants may access the call by dialing (719) 457-2625. The Company will also broadcast the conference call over the Internet. Interested parties are asked to log on to the call at http://www.alliancegaming.com/ using the Investor Relations tab 10 minutes prior to the start of the call. ****** Supplemental Business Unit Detail Bally Gaming and Systems Quarterly Revenues Increase 24%, Operating Income Increases 5% The following chart summarizes the financial information for the Bally Gaming and Systems business unit (Dollars in millions): Three Months Ended Nine Months Ended March 31 March 31 2004 2003 2004 2003 Revenues Game sales $49.2 $46.7 $141.5 $131.0 System sales 31.1 21.6 91.8 59.9 Gaming operations 21.7 14.0 53.5 41.6 Total revenues $102.0 $82.3 $286.8 $232.5 Gross Margin % 59% 58% 60% 57% Operating Income $20.1 $19.1 $68.7 $56.0 EBITDA $27.2 $23.4 $86.0 $67.4 EBITDA Margin 27% 28% 30% 29% New gaming devices sold 4,150 4,550 13,940 13,980 Game monitoring units sold 9,660 10,075 31,960 25,100 GMU installed base 265,000 225,000 Casino management systems installed base 213 185 System managed TITO games 63,600 14,700 End of period installed base of: WAP games 1,670 1,720 Daily-fee games 5,780 2,330 Centrally determined games 15,170 -- Bally Gaming and Systems business unit reported a 24% increase in revenues over the prior year's quarter. Revenues from sales of gaming devices increased 5% over the prior year's quarter primarily as a result of a 9% decrease in new game sales, which was more than offset by an increase in the average new-unit selling price to $9,560 (excluding 250 OEM games). A total of 1,250 units to be delivered in the March 2004 quarter were delayed until the June quarter at the request of three customers, due primarily to the delay in the completion of their new or expanded gaming facilities being constructed, creating a larger backlog going into June quarter. The increase in the average selling price includes the positive impact from the sale of 60 Monte Carlo premium-priced units as well as other premium-priced branded products. Included in the Bally Gaming and Systems revenue discussed above is the revenue contribution from SDG, which totaled $15.2 million for the 29 days of March 2004. SDG's revenues included the sale of 590 devices in the Washington and Rhode Island markets, as well as recurring revenues from their daily-fee games discussed below. Bally Systems revenues increased 44% over the prior year quarter with a 4% decrease in game monitoring units shipped, offset by a continued increase in the average selling price per unit, increased sales of software licenses for eTICKET(TM), the industry's leading single-wire TITO solution that is currently operating in 76 casinos, as well as sales of its bonusing and promotions software. Bally Systems recurring hardware and software revenues increased to $5.3 million, resulting from the larger installed base of game monitoring units, which currently stands at 265,000 units in 213 casinos world-wide. Gaming Operations revenues increased 55% compared to the prior year's quarter. This increase was driven by increases in the daily-fee games deployed during the quarter led by the installation of a combined 1,710 video lottery terminals for the three racino properties that opened in New York during the quarter (820 Bally units, 890 SDG units). In addition to the New York placements, the gross placements for all other daily fee games totaled 1,630 units, and there were 890 units returned resulting in a 740 net increase in the installed base of games on a sequential basis as of March 31, 2004 compared to December 31, 2003. The base of recurring fee games now includes those from SDG, consisting of 10,700 in Washington and 4,200 Class II / central determination games primarily in Oklahoma and Florida, and 200 Raining Diamonds games. The fees capitalized for regulatory approvals totaled $4.0 million year- to-date. Of these amounts incurred, the Company capitalized a total of $1.6 million during the March 2004 quarter, and amortization expense for these costs totaled $0.3 million for the quarter. No such costs were capitalized in the prior year. Casino Operations Rainbow Casino Quarterly Revenues Increase 3%, Operating Income Increases 6% The following chart summarizes the financial information for the Rainbow Casino in Vicksburg, Mississippi (Dollars in millions): Three Months Ended Nine Months Ended March 31, March 31, 2004 2003 2004 2003 Rainbow Casino Revenues $14.3 $13.9 $39.3 $38.2 Operating Income 5.2 4.8 13.0 11.4 EBITDA 5.8 5.4 15.0 13.0 EBITDA Margin 41% 39% 38% 34% Average Number of Gaming Devices 930 950 930 940 Avg. Number of Table Games 12 16 12 16 Rainbow Casino reported a 3% increase in revenue compared to the prior year quarter, and represents the fifth consecutive quarter of revenue growth following the remodeling project completed last year. Rainbow's EBITDA increased 8% to $5.8 million compared to the prior year quarter. Discontinued Casino Operations The following information is provided for the Rail City Casino in Sparks Nevada, which is classified as discontinued operations (Dollars in millions): Three Months Ended Nine Months Ended March 31, March 31, 2004 2003 2004 2003 Rail City Casino Revenues $6.0 $5.5 $17.2 $15.8 Operating Income 2.0 1.3 4.7 3.6 EBITDA 2.0 1.7 5.3 4.5 EBITDA Margin 34% 30% 31% 28% Average Number of Gaming Devices 580 560 580 550 Avg. Number of Table Games 6 8 7 8 On December 8, 2003 the Company announced that it had entered into an agreement for the sale of its Rail City Casino for approximately $38 million. The sale is expected to close in May 2004. Accordingly the results of operations for Rail City have been reclassified as discontinued operations in both the current and prior year periods. Discontinued Route Operations The following information is provided for the Company's Nevada Route and Louisiana Route operations, which are classified as discontinued operations (Dollars in millions): Three Months Ended Nine Months Ended March 31, March 31, 2004 2003 2004 2003 Revenues Nevada $58.0 $50.9 $162.4 $151.7 Louisiana 4.8 3.9 12.7 11.2 Total revenues $62.8 $54.8 $175.1 $162.9 Operating Income (a) Nevada $5.8 $1.0 $16.6 $5.2 Louisiana 0.9 0.6 2.1 1.5 Total operating income $6.7 $1.6 $18.7 $6.7 EBITDA Nevada $5.8 $4.8 $16.6 $15.5 Louisiana 0.9 0.6 2.1 1.6 Total EBITDA $6.7 $5.4 $18.7 $17.1 Average Number of Gaming Devices Nevada 8,360 7,985 8,205 8,155 Louisiana 760 725 740 715 Total Gaming Devices 9,120 8,710 8,945 8,870 For the Nevada route operations, revenue increased 14% and EBITDA increased 21% compared to prior year quarter. The average number of games deployed increased 5% over the prior year quarter and the average net win per day per gaming machine increased to $74 from $69. The increase in revenues at VSI is due to an increase in net win per day per gaming machine to $71.10 from $60.50 and the number of units deployed increased by 5% compared to the prior year quarter. The sale of both the Nevada Route and VSI are scheduled to occur before the end of the 2004 fiscal year. (a) The results of the Nevada Route and Louisiana Route operations for the quarter ended March 31, 2003 reflect depreciation and amortization expense. In accordance with generally accepted accounting principles, depreciation and amortization for these discontinued operations ceased as of July 1, 2003 as a result of their designation as assets held for sale. Had depreciation and amortization expense been recorded for the current period, operating income for the discontinued operations would have decreased by $3.6 million for the current quarter. * * * * * The disclosures herein include statements that are "forward looking" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended, and are subject to the safe harbor created thereby. Such forward looking information involves important risks and uncertainties that could significantly affect results in the future and, accordingly, such results may differ from those expressed in any forward looking statements made by or on behalf of the Company. Future operating results may be adversely affected as a result of a number of factors enumerated in the Company's public reports and prospectuses such as the impact of competition, uncertainties concerning such matters as the Company's ability to service debt, product development, customer financing, sales to non- traditional gaming markets, foreign operations, dependence on key personnel, strict regulation by gaming authorities, gaming taxes and value added taxes, and other risk factors listed from time to time in the Company's SEC reports, including but not limited to the most recent reports on Form 10-K and 10-Q. Alliance Gaming Corporation is a diversified gaming company headquartered in Las Vegas, Nevada. The Company is engaged in the design, manufacture, operation and distribution of advanced gaming devices and systems worldwide and is currently the nation's largest gaming machine route operator and operates two casinos. Additional information about the Company can be found on the Alliance Gaming web site at: http://www.alliancegaming.com/. The accompanying unaudited condensed consolidated financial statements include comparative information for the quarter and nine-month periods ended March 31, 2003, which have been reclassified to conform to the current presentation which includes the results of Bally Wulff, Rail City Casino, the Nevada Route and Louisiana Route operations as discontinued operations. Investor and Media Contact: Robert L. Saxton of Alliance Gaming, +1-702-270-7600. ALLIANCE GAMING CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In 000's, except per share amounts) Three Months Ended March 31, 2004 2003 (a) Revenues: Gaming equipment and systems $101,977 $82,341 Casino operations 14,262 13,891 116,239 96,232 Costs and expenses: Cost of gaming equipment and systems 41,378 34,249 Cost of casino operations 5,324 5,531 Selling, general and administrative 30,198 24,930 Research and development costs 9,059 5,592 Depreciation and amortization 8,128 5,527 94,087 75,829 Operating income 22,152 20,403 Other income (expense): Interest Income 1,817 54 Interest expense (4,590) (6,269) Minority interest (722) (729) Other, net (182) 121 Income from continuing operations before income taxes 18,475 13,580 Income tax expense 6,234 4,653 Income from continuing operations 12,241 8,927 Discontinued operations: Income from discontinued operations of wall machines and amusement games unit, net -- 2,178 Income (loss) from discontinued operations of Nevada Route, net (274) 425 Income from discontinued operations of Louisiana Route, net 586 381 Income from discontinued operations of Rail City Casino, net 1,281 869 Income from discontinued operations 1,593 3,853 Net income $13,834 $12,780 Diluted earnings per share Continuing operations $0.24 $0.18 Discontinued operations 0.03 0.07 Total $0.27 $0.25 Weighted average common and common share equivalents outstanding 51,449 50,162 Notes: (a) The results for the period ended March 31, 2003 have been reclassified to report the results of the Rail City Casino as discontinued operations. ALLIANCE GAMING CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In 000's, except per share amounts) Nine Months Ended March 31, 2004 2003 (a) Revenues: Gaming equipment and systems $286,764 $232,507 Casino operations 39,329 38,158 326,093 270,665 Costs and expenses: Cost of gaming equipment and systems 113,395 100,170 Cost of casino operations 15,211 16,051 Selling, general and administrative 80,812 67,125 Research and development costs 24,462 14,725 Depreciation and amortization 20,595 14,680 254,475 212,751 Operating income 71,618 57,914 Other income (expense): Interest income 1,943 181 Interest expense (14,188) (19,464) Minority interest (1,749) (1,483) Refinancing charge (12,293) -- Other, net (1,081) 487 Income from continuing operations before income taxes 44,250 37,635 Income tax expense 15,944 14,609 Income from continuing operations 28,306 23,026 Discontinued operations: Income from discontinued operations of wall machines and amusement games unit, net -- 1,453 Income from discontinued operations of Nevada Route, net 5,936 3,115 Income from discontinued operations of Louisiana Route, net 1,316 940 Income from discontinued operations of Rail City Casino, net 3,047 2,357 Income from discontinued operations 10,299 7,865 Net income $38,605 $30,891 Diluted earnings per share Continuing operations $0.56 $0.46 Discontinued operations 0.20 0.16 Total $0.76 $0.62 Weighted average common and common share equivalents outstanding 50,522 49,581 (a) The results have been reclassified to report the results of the Rail City Casino as discontinued operations. ALLIANCE GAMING CORPORATION SUMMARY UNAUDITED BALANCE SHEETS (In 000's) March 31, June 30, 2004 2003 (a) ASSETS Current assets: Cash and cash equivalents $32,506 $38,884 Accounts and short-term notes receivable, net 114,844 98,368 Inventories, net 53,236 32,102 Deferred tax assets, net 56,331 44,821 Other current assets 12,004 8,010 Total current assets 268,921 222,185 Short-term investments (restricted) 2,638 864 Long-term notes receivable and sales type leases, net 20,289 14,865 Leased equipment, net 54,983 25,792 Property, plant and equipment, net 65,542 56,894 Goodwill, net 135,128 63,040 Intangible assets, net 64,837 26,631 Assets of discontinued operations held for sale 109,340 114,314 Other assets, net 6,277 580 Total assets $727,955 $525,165 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $38,729 $22,726 Accrued liabilities 53,849 30,183 Jackpot liabilities 14,239 10,588 Current maturities of long-term debt 5,446 3,537 Liabilities of discontinued operations held for sale 24,970 16,186 Total current liabilities 137,233 83,220 Long-term debt, net 424,015 341,678 Deferred tax liabilities 6,676 3,920 Other liabilities 5,048 3,387 Minority interest 1,447 1,330 Total liabilities 574,419 433,535 Total stockholders' equity 153,536 91,630 Total liabilities and stockholders' equity $727,955 $525,165 (a) Reclassified to reflect the Rail City Casino assets and liabilities as held for sale. ALLIANCE GAMING CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In 000's) Nine Months Ended March 31, 2004 2003 Cash flows from operating activities of continuing operations: Net income $38,605 $30,891 Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: Income from discontinued operations (10,299) (7,865) Depreciation and amortization 20,595 14,680 Refinancing Charge 12,293 -- Deferred income taxes (6,257) 14,886 Provision for losses on receivables 755 1,224 Other (1,354) 1,565 Change in operating assets and liabilities: Accounts and notes receivable (8,725) (35,712) Inventories (3,080) (823) Other current assets (627) (2,791) Accounts payable 9,893 9,634 Accrued liabilities 15,407 (674) Net cash provided by operating activities of continuing operations 67,206 25,015 Cash flows from investing activities of continuing operations: Additions to property, plant and equipment (9,556) (7,462) Additions to leased gaming equipment (26,372) (14,794) Additions to other long-term assets (12,825) (2,628) Acquisitions, net of cash acquired (122,647) (3,038) Proceeds from sale of net assets of discontinued operations 16,500 -- Net cash used in investing activities of continuing operations (154,900) (27,922) Cash flows from financing activities of continuing operations: Debt issuance costs (6,954) -- Premium and consent fees paid on redemption of subordinated notes (5,399) -- Proceeds from the issuance of long-term debt 350,000 -- Net change in revolving credit facility 70,000 -- Payoff of debt from refinancing (337,625) -- Reduction of long-term debt (2,986) (3,364) Proceeds from exercise of stock options 6,623 1,961 Net cash provided by (used in) financing activities of continuing operations 73,659 (1,403) Effect of exchange rates changes on cash 100 905 Cash and cash equivalents provided by discontinued operations 7,557 8,740 Cash and cash equivalents: Increase (decrease) for the period (6,378) 5,335 Balance, beginning of period 38,884 31,800 Balance, end of period $32,506 $37,135 ALLIANCE GAMING CORPORATION Other Supplemental Information Reconciliation to GAAP EPS The following table reconciles EPS excluding the refinancing charge to GAAP EPS from continuing operations: Three Months Ended Nine Months Ended March 31 March 31 2004 2003 2004 2003 Diluted earnings per share from continuing operations, as reported $0.24 $0.18 $0.56 $0.46 Refinance charge, net of tax -- -- 0.15 -- Diluted earnings per share from continuing operations, before refinance charge $0.24 $0.18 $0.71 $0.46 Reconciliation of EBITDA to income from continuing operations The following table reconciles earnings before interest, taxes, depreciation and amortization before refinancing charge (EBITDA) for the Company's income from continuing operations (in 000's): Three Months Ended Nine Months Ended March 31 March 31 2004 2003 2004 2003 Net income from continuing operations $12,241 $8,927 $28,306 $23,026 Income taxes 6,234 4,653 15,944 14,609 Other expense, net 904 608 2,830 996 Interest expense, net 2,773 6,215 12,245 19,283 Refinancing charge -- -- 12,293 -- Operating income 22,152 20,403 71,618 57,914 Depreciation and amortization 8,128 5,527 20,595 14,680 EBITDA from continuing operations $30,280 $25,930 $92,213 $72,594 The following tables reconcile operating income by business segment to EBITDA: For the quarter ended March 31, 2004 (from continuing operations) (in 000's): Operating Depreciation Income and (Loss) Amortization EBITDA Bally Gaming and Systems $20,096 $7,115 $27,211 Rainbow Casino 5,157 690 5,847 Corporate expenses (3,101) 323 (2,778) $22,152 $8,128 $30,280 For the quarter ended March 31, 2003 (from continuing operations) (in 000's): Operating Depreciation Income and (Loss) Amortization EBITDA Bally Gaming and Systems $19,056 $4,350 $23,406 Rainbow Casino 4,843 577 5,420 Corporate expenses (3,496) 600 (2,896) $20,403 $5,527 $25,930 For the nine months ended March 31, 2004 (from continuing operations) (in 000's): Operating Depreciation Income and (Loss) Amortization EBITDA Bally Gaming and Systems $68,670 $17,332 $86,002 Rainbow Casino 12,985 2,061 15,046 Corporate expenses (10,037) 1,202 (8,835) $71,618 $20,595 $92,213 For the nine months ended March 31, 2003 (from continuing operations) (in 000's): Operating Depreciation Income and (Loss) Amortization EBITDA Bally Gaming and Systems $55,966 $11,391 $67,357 Rainbow Casino 11,388 1,603 12,991 Corporate expenses (9,440) 1,686 (7,754) $57,914 $14,680 $72,594 Reconciliation of EBITDA to income from discontinued operations Three Months Ended Nine Months Ended March 31 March 31 2004 2003 2004 2003 Net income from discontinued operations $1,593 $3,853 $10,299 $7,865 Income taxes (a) 7,023 920 11,747 3,501 Other expense, net 83 338 1,076 507 Interest expense, net 17 (236) 340 (835) Operating income 8,716 4,875 23,462 11,038 Depreciation and amortization -- 4,943 565 12,710 EBITDA from discontinued Operations $8,716 $9,818 $24,027 $23,748 (a) Includes $4.0 million adjustment for expected capital loss utilization, recorded in the March 2004 quarter. For the quarter ended March 31, 2004 (from discontinued operations) (in 000's): Depreciation Operating and Income Amortization EBITDA Route Operations $6,715 $-- $6,715 Rail City Casino 2,001 -- 2,001 $8,716 $-- $8,716 For the quarter ended March 31, 2003 (from discontinued operations) (in 000's): Depreciation Operating and Income Amortization EBITDA Route Operations $1,563 $3,817 $5,380 Wall Machines and Amusement Games 1,975 807 2,782 Rail City Casino 1,337 319 1,656 $4,875 $4,943 $9,818 For the nine months ended March 31, 2004 (from discontinued operations) (in 000's): Depreciation Operating and Income Amortization EBITDA Route Operations $18,746 $-- $18,746 Rail City Casino 4,716 565 5,281 $23,462 $565 $24,027 For the nine months ended March 31, 2003 (from discontinued operations) (in 000's): Operating Depreciation Income and (Loss) Amortization EBITDA Route Operations $6,696 $10,442 $17,138 Wall Machines and Amusement Games 714 1,441 2,155 Rail City Casino 3,628 827 4,455 $11,038 $12,710 $23,748 We believe that the analysis of EBITDA is a useful adjunct to operating income, net income, cash flows and other GAAP-based measures. However, EBITDA should not be construed as an alternative to net income (loss) or cash flows from operating, investing and financing activities determined in accordance with GAAP or as a measure of liquidity. EBITDA is a common measure of performance in the gaming industry but may not be comparable to similarly titled measures reported by other companies. We disclose EBITDA primarily because it is a performance measure used by management in evaluating the performance of our business units and is one of several performance measures used in our management incentive plan. Additionally, EBITDA is utilized as a performance measure in covenants for our bank credit agreement. DATASOURCE: Alliance Gaming Corporation CONTACT: investors and media, Robert L. Saxton of Alliance Gaming Corporation, +1-702-270-7600 Web site: http://www.alliancegaming.com/

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