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Alliance Gaming Reports 35% Increase in Fiscal Year 2004 EPS of $1.00 From Continuing Operations, Excluding the Gain on Sale of Discontinued Operations and Refinancing Charge Fourth Quarter Revenues Improved 41% to $162.8 Million and EPS From Continuing Operations Improved 5% to $0.30 LAS VEGAS, Aug. 10 /PRNewswire-FirstCall/ -- Alliance Gaming Corporation (NYSE:AGI) today announced earnings for its fourth fiscal quarter ending June 30, 2004. Fourth quarter income from continuing operations totaled $15.3 million, or $0.30 per diluted share, on revenues of $162.8 million. For the comparable prior year quarter ended June 30, 2003, the income from continuing operations totaled $14.1 million or $0.28 per diluted share, on revenues of $115.7 million. Consolidated results for the June 30, 2004 quarter include: * Revenues from continuing operations of $162.8 million, an increase of 41% from the $115.7 million in the prior year quarter. * Operating income from continuing operations of $27.1 million, unchanged from the $27.1 million in the prior year quarter. * EBITDA from continuing operations of $38.1 million, an increase of 16% from the $32.8 million in the prior year quarter. * Net income from continuing operations totaled $0.30 per diluted share, an increase of 5% from the $0.28 in the prior year quarter. Consolidated results for the June 2004 fiscal year include: * Revenues from continuing operations of $488.9 million, an increase of 27% from the $386.4 million in the prior year. * Operating income from continuing operations of $98.7 million, an increase of 16% from the $85.0 million in the prior year. * Including the refinancing charge ($12.3 million or $0.15 per diluted share) income from continuing operations totaled $0.85 per diluted share, compared to the prior year of $0.74 per diluted share. Excluding the effect of the refinancing charge, income from continuing operations totaled $1.00 per diluted share, or an increase of 35% compared to the prior year. * Total net income, including the refinancing charge and the gain on sale of discontinued operations ($23.5 million or $0.46 per diluted share), totaled $1.65 per diluted share, compared to $0.39 in the prior year which included a loss on sale of Bally Wulff of $25.4 million, or $0.51 per diluted share. Earnings before interest, taxes, depreciation, amortization and before refinancing charge (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 June 30, 2004, cash and cash equivalents totaled $172.7 million, which included approximately $2.1 million held for operational purposes in vaults, cages and change banks and $18.1 million held in jackpot reserve accounts. * Cash received from the sale of the Rail City Casino and the Nevada Route Operations, totaled approximately $138 million. * For the quarter ended June 30, 2004, consolidated capital expenditures for our continuing operations, including costs to produce proprietary games, totaled $17.4 million compared to $8.9 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. Other financial highlights: * Net interest expense for continuing operations for the current quarter totaled $3.4 million compared to $6.1 million in the prior year period. Net interest expense allocated to the discontinued operations totaled $1.2 million for the current quarter. The Company currently has $70 million outstanding on its $125 million revolving credit facility, unchanged from March 31, 2004. Guidance for Fiscal Year 2005 The Company is revising its Fiscal Year 2005 earnings guidance to be approximately flat to Fiscal Year 2004 results from continuing operations, as a result of changes in current market conditions and uncertainty surrounding the gaming initiatives in emerging jurisdictions. The Company also believes that the earnings will be weighted approximately 25% in the first half of the fiscal year, with particular softness in the first quarter. The Company will hold its conference call on Tuesday August 10, 2004 at 10 a.m. Pacific Time (1 p.m. Eastern Time). Participants may access the call by dialing (719) 457-2693 and using participant passcode 658076. 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 46%, Operating Income Increases 2% The following chart summarizes the financial information for the Bally Gaming and Systems business unit (dollars in millions): Three Months Ended Twelve Months Ended June 30 June 30 2004 2003 2004 2003 Revenues Game sales $91.7 $57.3 $233.1 $188.3 System sales 32.5 31.6 124.3 91.5 Gaming operations 25.6 14.0 79.2 55.6 Total revenues $149.8 $102.9 $436.6 $335.4 Gross Margin % 57% 57% 59% 57% Operating Income $27.4 $26.9 $96.0 $82.9 EBITDA $37.3 $31.5 $123.3 $98.9 EBITDA Margin 25% 31% 28% 29% New gaming devices sold 6,405 5,650 20,350 19,635 Game monitoring units sold 14,465 10,400 46,430 35,500 GMU installed base 279,000 240,000 Casino management systems installed base 219 194 System managed TITO games 83,500 28,000 Recurring revenue game data: As of March 31st: Installed base: 2004 2003 WAP games 1,670 1,720 Daily fee games 6,670 2,330 Total 8,340 4,050 Centrally determined games 14,405 -- As of June 30th: Installed base: 2004 2003 WAP games 1,725 1,910 Daily-fee games 7,985 2,485 Total 9,710 4,395 Centrally determined games 17,995 -- Bally Gaming and Systems business unit reported a 46% increase in revenues over the prior year's quarter. Revenues from game sales increased 60% over the prior year's quarter primarily as a result of a 13% increase in new unit sales and an increase in the average new-unit selling price to $10,580 (excluding 1,050 OEM games), and the sale of used Class II games, as discussed further below. The increase in the average selling price includes the positive impact from the sale of 120 Monte Carlo style premium-priced units and other premium-priced branded products. SDG revenue contribution totaled $46.3 million and included $16.8 million from the sale of 1,100 games primarily in Washington and Rhode Island, $12.4 million from the sale of substantially all of its leased games in Florida (or $7.0 million in gross margin), and $8.2 million from its base of recurring revenues games. Bally Systems revenues increased 3% from the prior year quarter driven by a 39% increase in game monitoring units shipped, a continued increase in the average selling price per unit, an increase in sales of software licenses for eTICKET(TM), the industry's leading single-wire TITO solution that is currently operating in 92 casinos, as well as sales of its bonusing and promotions software. Bally Systems recurring hardware and software revenues increased to $5.5 million, resulting from the larger installed base of game monitoring units, which currently stands at 279,000 units in 219 casinos world-wide. Gaming Operations revenues increased 84% to $25.6 million compared to the prior year's quarter. This increase was driven by increases in the daily-fee games deployed during the quarter including the installation of a combined 900 video lottery terminals at Montcello Raceway in New York on June 30, 2004. In addition to the New York placements, the gross placements for all other WAP and daily fee games totaled 5,460 units, and there were 1,400 units returned resulting in a 4,060 net increase in the installed base of games on a sequential basis as of June 30, 2004 compared to March 31, 2004. Regulatory approval costs capitalized totaled $0.7 million during the June 2004 quarter and amortization expense for these costs totaled $0.4 million. Casino Operations Rainbow Casino Quarterly Revenues and Operating Income Show Marginal Increase Over The Prior Year Period The following chart summarizes the financial information for the Rainbow Casino in Vicksburg, Mississippi (Dollars in millions): Three Months Ended Twelve Months Ended June 30, June 30, 2004 2003 2004 2003 Rainbow Casino Revenues $13.0 $12.8 $52.3 $50.9 Operating Income 4.0 3.9 16.9 15.3 EBITDA 4.7 4.5 19.7 17.5 EBITDA Margin 36% 35% 38% 34% Average Number of Gaming Devices 930 930 930 930 Avg. Number of Table Games 12 16 12 15 Rainbow Casino reported a 1.5% increase in revenue, representing the sixth consecutive quarter of revenue growth following the remodeling project completed last year. The revenue growth was driven by a 2% increase in slot win per day and a 50% increase in table game win per day per unit. EBITDA grew 4% primarily resulting from the revenue growth discussed above combined with a 2.5% reduction in compensation costs and a 4% decrease in complementary expenses. Discontinued Operations Rail City Casino On May 1, 2004, the Company sold the Rail City Casino to The Sands Regent. The sale proceeds totaled $37.9 million, resulting in an pre-tax gain of $23.1 million or $14.3 million net of deferred taxes. United Coin Machine Co. (Nevada Route Operations) On June 30, 2004 the Company sold its Nevada Route Operations to Century Gaming. The sale proceeds totaled approximately $100 million and the assumption of approximately $5.0 million of debt, and resulted in an pre-tax gain of $15.3 million, or $9.1 million after deferred taxes. Video Services Inc. The sale of Video Services Inc. was not consummated pursuant to the previously announced sale agreement by June 30, 2004 and the agreement was cancelled. Alliance Gaming intends to continue its efforts to divest this subsidiary, and as such will continue to carry the asset as a discontinued operation. Bally Wulff Bally Wulff was sold to an investor group in July 2003. In June 2004, the Company was notified by the buyer of a claim made against the Company pursuant to an indemnity provision contained in the sale agreement. The Company has paid the claim totaling $1.7 million, which is included in discontinued operations. Additionally, the Company accrued $0.5 million for potential tax assessments related to the pre-sale period, which the Company expects to be resolved by September 2004. 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 including 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, the outcome of pending litigation matters including the pending securities class actions, gaming taxes and value added taxes, and other factors described in the Company's filings with the Securities and Exchange Commission, including but not limited to the Company's 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 operates the Rainbow Casino in Vicksburg, Mississippi. 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 Twelve-month periods ended June 30, 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. ALLIANCE GAMING CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In 000's, except per share amounts) Three Months Ended June 30, 2004 2003 (a) Revenues: Gaming equipment and systems $149,832 $102,929 Casino operations 12,951 12,787 162,783 115,716 Costs and expenses: Cost of gaming equipment and systems 64,191 44,182 Cost of casino operations 4,832 5,157 Selling, general and administrative 43,533 28,307 Research and development costs 12,153 5,230 Depreciation and amortization 10,970 5,782 135,679 88,658 Operating income 27,104 27,058 Other income (expense): Interest Income 310 40 Interest expense (3,746) (6,181) Minority interest (560) (526) Other, net 560 (308) Income from continuing operations before income taxes 23,668 20,083 Income tax expense 8,349 5,947 Income from continuing operations 15,319 14,136 Discontinued operations: Loss on sale of wall machines and amusement games unit (2,172) (25,358) Gain on sale of Rail City Casino, net 14,329 -- Gain on sale of Nevada Route, net 9,124 -- Income (loss) from discontinued operations of wall machines and amusement games unit, net -- (2,348) Income from discontinued operations of Nevada Route, net 8,603 944 Income from discontinued operations of Louisiana Route, net 452 348 Income from discontinued operations of Rail City Casino, net 254 911 Income (loss) from discontinued operations 30,590 (25,503) Net income (loss) $45,909 $(11,367) Diluted earnings (loss) per share Continuing operations $0.30 $0.28 Discontinued operations 0.59 (0.51) Total $0.89 $(0.23) Weighted average common and common share equivalents outstanding 51,882 50,263 Notes: (a) The results 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) Twelve Months Ended June 30, 2004 2003 (a) Revenues: Gaming equipment and systems $436,596 $335,436 Casino operations 52,280 50,945 488,876 386,381 Costs and expenses: Cost of gaming equipment and systems 177,586 144,352 Cost of casino operations 20,043 21,208 Selling, general and administrative 124,345 95,432 Research and development costs 36,615 19,955 Depreciation and amortization 31,565 20,462 390,154 301,409 Operating income 98,722 84,972 Other income (expense): Interest income 2,253 220 Interest expense (17,934) (25,644) Minority interest (2,309) (2,009) Refinancing charge (12,293) -- Other, net (521) 179 Income from continuing operations before income taxes 67,918 57,718 Income tax expense 24,293 20,556 Income from continuing operations 43,625 37,162 Discontinued operations: Loss on sale of wall machines and amusement games unit (2,172) (25,358) Gain on sale of Rail City Casino, net 14,329 -- Gain on sale of Nevada Route, net 9,124 -- Loss from discontinued operations of wall machines and amusement games unit, net -- (895) Income from discontinued operations of Nevada Route, net 14,539 4,059 Income from discontinued operations of Louisiana Route, net 1,768 1,288 Income from discontinued operations of Rail City Casino, net 3,301 3,267 Income (loss) from discontinued operations 40,889 (17,639) Net income $84,514 $19,523 Diluted earnings per share Continuing operations $0.85 $0.74 Discontinued operations 0.80 (0.35) Total $1.65 $0.39 Weighted average common and common share equivalents outstanding 51,248 50,139 (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) June 30, June 30, 2004 2003 ASSETS Current assets: Cash and cash equivalents $172,726 $38,884 Accounts and short-term notes receivable, net 129,779 98,368 Inventories, net 61,135 32,102 Deferred tax assets, net 20,054 44,821 Other current assets 12,420 8,010 Total current assets 396,114 222,185 Short-term investments (restricted) 2,528 864 Long-term notes receivable and sales type leases, net 18,132 14,865 Leased equipment, net 46,634 25,792 Property, plant and equipment, net 75,839 56,894 Goodwill, net 138,256 63,040 Intangible assets, net 63,623 26,631 Assets of discontinued operations held for sale 4,442 114,314 Other assets, net 6,353 580 Total assets $751,921 $525,165 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $37,515 $22,726 Income taxes payable 7,233 931 Accrued liabilities 51,469 31,438 Jackpot liabilities 12,075 10,588 Current maturities of long-term debt 5,866 3,537 Liabilities of discontinued operations held for sale 4,337 14,000 Total current liabilities 118,495 83,220 Long-term debt, net 423,089 341,678 Deferred tax liabilities 2,116 3,920 Other liabilities 6,092 3,387 Minority interest 1,326 1,330 Total liabilities 551,118 433,535 Total stockholders' equity 200,803 91,630 Total liabilities and stockholders' equity $751,921 $525,165 ALLIANCE GAMING CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In 000's) Twelve Months Ended June 30, 2004 2003 Cash flows from operating activities of continuing operations: Net income $84,514 $19,523 Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: Income from discontinued operations (40,889) (7,720) Depreciation and amortization 31,565 20,462 Refinancing Charge 12,293 -- Deferred income taxes 23,946 3,351 Provision for losses on receivables 2,357 1,537 Other (1,721) 355 Write off goodwill -- 38,728 Change in operating assets and liabilities: Accounts and notes receivable (22,117) (50,415) Inventories (3,693) 1,006 Other current assets (1,049) 1,320 Accounts payable 8,720 7,278 Accrued liabilities 19,702 2,723 Net cash provided by operating activities of continuing operations 113,628 38,148 Cash flows from investing activities of continuing operations: Additions to property, plant and equipment (17,785) (9,759) Additions to leased gaming equipment (35,531) (21,357) Additions to other long-term assets (14,587) (3,671) Acquisitions, net of cash acquired (123,495) (11,528) Proceeds from sale of net assets of discontinued operations 155,212 -- Net cash used in investing activities of continuing operations (36,186) (46,315) 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 (3,484) (4,735) Proceeds from exercise of stock options 7,288 2,556 Net cash provided by (used in) financing activities of continuing operations 73,826 (2,179) Effect of exchange rates changes on cash 174 286 Cash and cash equivalents (used in) provided by discontinued operations (17,600) 17,144 Cash and cash equivalents: Increase for the year 133,842 7,084 Balance, beginning of year 38,884 31,800 Balance, end of year $172,726 $38,884 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 Twelve Months Ended June 30 June 30 2004 2003 2004 2003 Diluted earnings per share from continuing operations, as reported $0.30 $0.28 $0.85 $0.74 Refinance charge, net of tax -- -- 0.15 -- Diluted earnings per share from continuing operations, before refinance charge $0.30 $0.28 $1.00 $0.74 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 Twelve Months Ended June 30 June 30 2004 2003 2004 2003 Net income from continuing operations $15,319 $14,136 $43,625 $37,162 Income taxes 8,349 5,947 24,293 20,556 Other expense, net -- 834 2,830 1,830 Interest expense, net 3,436 6,141 15,681 25,424 Refinancing charge -- -- 12,293 -- Operating income 27,104 27,058 98,722 84,972 Depreciation and amortization 10,970 5,782 31,565 20,462 EBITDA from continuing operations $38,074 $32,840 $130,287 $105,434 The following tables reconcile operating income by business segment to EBITDA: For the quarter ended June 30, 2004 (from continuing operations) (in 000's): Operating Depreciation Income and (Loss) Amortization EBITDA Bally Gaming and Systems $27,364 $9,928 $37,292 Rainbow Casino 3,957 719 4,676 Corporate expenses (4,217) 323 (3,894) $27,104 $10,970 $38,074 For the quarter ended June 30, 2003 (from continuing operations) (in 000's): Operating Depreciation Income and (Loss) Amortization EBITDA Bally Gaming and Systems $26,913 $4,611 $31,524 Rainbow Casino 3,918 571 4,489 Corporate expenses (3,773) 600 (3,173) $27,058 $5,782 $32,840 For the Twelve months ended June 30, 2004 (from continuing operations) (in 000's): Operating Depreciation Income and (Loss) Amortization EBITDA Bally Gaming and Systems $96,034 $27,260 $123,294 Rainbow Casino 16,942 2,780 19,722 Corporate expenses (14,254) 1,525 (12,729) $98,722 $31,565 $130,287 For the Twelve months ended June 30, 2003 (from continuing operations) (in 000's): Operating Depreciation Income and (Loss) Amortization EBITDA Bally Gaming and Systems $82,879 $16,002 $98,881 Rainbow Casino 15,306 2,174 17,480 Corporate expenses (13,213) 2,286 (10,927) $84,972 $20,462 $105,434 Net income excluding the refinancing charge is a non-GAAP financial measurement, and is presented as a supplemental disclosure because this is one of the performance measures used in our management incentive plans. We believe that the analysis of EBITDA, which is not a GAAP based financial measurement, is a useful adjunct to operating income, net income, cash flows and other GAAP-based measures. 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. This non-GAAP information should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States, such as operating income, net income or net cash provided by operating activities. For further information, please contact: Investor and Media, Robert L. Saxton of Alliance Gaming Corporation, +1-702-270-7600. DATASOURCE: Alliance Gaming Corporation CONTACT: Investor and Media, Robert L. Saxton of Alliance Gaming Corporation, +1-702-270-7600 Web site: http://www.alliancegaming.com/

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