UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-4281
ALLIANCE GAMING CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 88-0104066
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6601 S. Bermuda Rd.
Las Vegas, Nevada 89119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (702) 270-7600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
The number of shares of Common Stock, $0.10 par value, outstanding as of April
30, 1998 according to the records of the registrant's registrar and transfer
agent was 32,120,308.
<PAGE>
ALLIANCE GAMING CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 1998
I N D E X
PART I. FINANCIAL INFORMATION Page
Item 1. Unaudited Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of
June 30, 1997 and March 31, 1998 3
Unaudited Condensed Consolidated Statements of Operations
for the three months ended March 31, 1997 and 1998 4
Unaudited Condensed Consolidated Statements of Operations
for the nine months ended March 31, 1997 and 1998 5
Unaudited Condensed Consolidated Statements of Stockholders'
Equity (Net Capital Deficiency) for the nine months ended
March 31, 1998 6
Unaudited Condensed Consolidated Statements of Cash Flows
for the nine months ended March 31, 1997 and 1998 7
Notes to Unaudited Condensed Consolidated Financial Statements 8
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations 22
PART II. OTHER INFORMATION
Item 1.Legal Proceedings 32
Item 6.Exhibits and reports on Form 8-K 32
SIGNATURES 33
<PAGE>
PART 1
ALLIANCE GAMING CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In 000's, except share data)
June 30, Mar. 31,
1997 1998
ASSETS
Current assets:
Cash and cash equivalents $ 28,924 $ 28,658
Accounts and notes receivable, net of allowance for
doubtful accounts of $21,929 and $13,164 87,701 82,418
Inventories, net of reserves of $8,856 and $8,092 37,329 39,536
Other current assets 9,627 8,661
-------- --------
Total current assets 163,581 159,273
-------- --------
Long-term notes receivable, net of allowance for doubtful
accounts of $1,972 and $1,288 8,981 8,952
Leased equipment, net of accumulated depreciation of
$3,377 and $4,116 7,902 7,722
Property, plant and equipment, net of accumulated
depreciation of $39,695 and $45,963 74,647 75,567
Excess of costs over net assets of acquired businesses,
net of accumulated amortization of $1,723 and $2,808 62,098 59,890
Intangible assets, net of accumulated amortization of
$9,626 and $12,102 18,231 19,989
Other assets, net 16,576 15,175
Total assets $352,016 $346,568
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable $ 14,270 $ 12,012
Accrued liabilities 37,392 28,569
Current maturities of long-term debt 1,124 2,310
------ -------
Total current liabilities 52,786 42,891
Term loan facilities - 138,150
Senior Subordinated Notes due 2007, net of unamortized
discount of $767 - 149,233
Senior Secured Notes, net of unamortized discount 151,224 -
Other long-term debt, less current maturities 21,491 27,893
Other liabilities 12,433 13,449
-------- -------
Total liabilities 237,934 371,616
-------- --------
Minority interest 1,546 2,039
Series B Special Stock, $.10 par value, $100 liquidation
value; 754,198 shares issued and outstanding at
June 30, 1997, net of discount 58,981 -
Commitments and contingencies
Stockholders' equity (net capital deficiency):
Special Stock, 10,000,000 shares authorized:
Series E, $100 liquidation value; 123,689 shares
and 133,479 shares issued and outstanding 12,368 13,348
Common Stock, $.10 par value; 175,000,000 shares
authorized; 31,852,000 shares and 32,086,000 shares
issued and outstanding 3,185 3,208
Additional paid-in capital 138,590 122,858
Cumulative translation adjustment (11,719) (16,181)
Accumulated deficit (88,869) (150,320)
-------- --------
Total stockholders' equity (net capital deficiency) 53,555 (27,087)
Total liabilities and stockholders' equity
(net capital deficiency) $352,016 $346,568
======== ========
See notes to unaudited condensed consolidated financial statements.
<PAGE>
ALLIANCE GAMING CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In 000's, except share data)
Three Months Ended March 31,
1997 1998
Revenues:
Gaming equipment and systems $23,712 $21,538
Wall machines and amusement games 32,168 28,340
Route operations 32,858 37,054
Casino operations 12,953 15,294
------- -------
101,691 102,226
Costs and expenses:
Cost of gaming equipment and systems 15,373 13,046
Cost of wall machines and amusement games 18,182 16,102
Cost of route operations 24,684 28,761
Cost of casino operations 5,496 6,385
Selling, general and administrative 23,870 23,428
Depreciation and amortization 5,204 6,516
------ ------
92,809 94,238
Operating income 8,882 7,988
Other income (expense):
Interest income 297 184
Interest expense (6,159) (7,464)
Rainbow royalty (1,205) ---
Minority interest (317) (489)
Other, net (4) 293
-------- ------
Income before income taxes 1,494 512
Income tax provision 933 1,243
----- ------
Net income (loss) 561 (731)
Special Stock dividends 2,981 384
------ -----
Net loss applicable to common shares $(2,420) $(1,115)
======== ========
Basic loss per share $ (0.08) $ (0.03)
======== ========
Diluted loss per share $ (0.08) $ (0.03)
======== ========
Weighted average common shares outstanding 31,837 32,042
Weighted average common and common share equivalents
outstanding 31,837 32,042
See notes to unaudited condensed consolidated financial statements.
<PAGE>
ALLIANCE GAMING CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In 000's, except share data)
Nine Months Ended March 31,
1997 1998
Revenues:
Gaming equipment and systems $100,890 $76,160
Wall machines and amusement games 100,866 77,132
Route operations 93,441 109,749
Casino operations 38,110 43,870
------- --------
333,307 306,911
Costs and expenses:
Cost of gaming equipment and systems 63,664 44,615
Cost of wall machines and amusement games 53,600 42,835
Cost of route operations 70,222 84,584
Cost of casino operations 16,414 18,916
Selling, general and administrative 80,617 74,304
Depreciation and amortization 16,343 17,328
Unusual items 700 (2,545)
------- -------
301,560 280,037
Operating income 31,747 26,874
Other income (expense):
Interest income 1,331 625
Interest expense (18,038) (21,030)
Rainbow royalty (3,481) (587)
Rainbow Royalty Buyout --- (19,000)
Minority interest (743) (1,325)
Other, net 48 345
------- ------
Income (loss) before income taxes 10,864 (14,098)
Income tax provision 5,523 2,163
------ -------
Income (loss) before extraordinary item 5,341 (16,261)
Extraordinary loss, without tax benefit (note 2) --- 42,033
------ ------
Net income (loss) 5,341 (58,294)
Special Stock dividends (note 2) 8,261 3,157
Premium on repurchase/redemption of Series B Special Stock 710 16,553
------ -------
Net loss applicable to common shares $(3,630) $(78,004)
======== =========
Basic loss per share:
Loss before extraordinary item $(0.11) $(1.12)
Extraordinary loss - (1.32)
----- -----
Net loss $(0.11) $(2.44)
======= =======
Diluted loss per share:
Loss before extraordinary item $(0.11) $(1.12)
Extraordinary loss - (1.32)
------ -----
Net loss $(0.11) $(2.44)
======= =======
Weighted average common shares outstanding 31,814 31,956
Weighted average common and common share equivalents
outstanding 31,814 31,956
See notes to unaudited condensed consolidated financial statements.
<PAGE>
ALLIANCE GAMING CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY)
Nine Months Ended March 31, 1998
(In 000's)
<TABLE>
<CAPTION>
Total
Stock-
holders'
Series E Additional Cumulative Equity (Net
Common Stock Special Stock Paid-in Accum. Translation Capital
Shares Dollars Shares Dollars Capital Deficit Adjustment Deficiency)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1997 31,852 $3,185 123 $ 12,368 $138,590 $(88,869) $(11,719) $ 53,555
Net loss ............................ - - - - - (58,294) - (58,294)
Shares issued upon exercise of
options ........................... 214 21 - - 708 - - 729
Special Stock dividends ............. - - 11 1,095 - (3,157) - (2,062)
Conversion of Series E Special
Stock to common stock ............. 20 2 - (115) 113 - - -
Special Stock redemption premium .... - - - - (16,553) - - (16,553)
Foreign currency translation
adjustment ........................ - - - - - - (4,462) (4,462)
-------- -------- -------- -------- -------- -------- -------- --------
Balances at March 31, 1998 32,086 $3,208 134 $13,348 $122,858 $(150,320) $(16,181) $(27,087)
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
ALLIANCE GAMING CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In 000's)
Nine Months Ended March 31,
1997 1998
Cash flows from operating activities:
Net income (loss) $ 5,341 $(58,294)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 16,343 17,328
Amortization of debt discounts 729 31
Extraordinary item - 42,033
Write down of other assets 1,306 2,307
Loss on sale of assets 1,986 35
Provision for losses on (recovery of) receivables 6,539 (7,330)
Other (2,656) 1,305
Net change in operating assets and liabilities:
Accounts and notes receivable 3,029 12,627
Inventories (13,806) (6,171)
Other current assets (4,206) (1,528)
Accounts payable (4,705) (2,258)
Accrued liabilities 1,090 (8,250)
Net cash provided by (used in) operating
activities 10,990 (8,165)
Cash flows from investing activities:
Additions to property, plant and equipment (8,844) (10,231)
Proceeds from disposal of property and equipment 1,887 304
Other (2,371) (1,862)
------ ------
Net cash used in investing activities (9,328) (11,789)
Cash flows from financing activities:
Refinancing fees and expenses - (32,752)
Capitalized debt issue costs - (11,456)
Proceeds from issuance of long-term debt 41 303,734
Reduction of long-term debt (5,725) (178,834)
Net change in lines of credit (9,495) 16,191
Repurchase/redemption of Series B Special Stock (3,877) (77,568)
Proceeds from exercise of stock options 139 729
------- ------
Net cash provided by (used in) financing activities (18,917) 20,044
Effect of exchange rate changes on cash (228) (356)
Cash and cash equivalents:
Decrease for period (17,483) (266)
Balance, beginning of period 48,057 28,924
------- -------
Balance, end of period $ 30,574 $28,658
======== =======
See notes to unaudited condensed consolidated financial statements.
<PAGE>
ALLIANCE GAMING CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial
statements reflect all adjustments, consisting of normal recurring
adjustments, which management believes are necessary to present fairly the
financial position, results of operations and cash flows of Alliance Gaming
Corporation ("Alliance" or the "Company") for the respective periods
presented. The results of operations for an interim period are not
necessarily indicative of the results which may be expected for any other
interim period or for the year as a whole. The accompanying unaudited
interim condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes in the
Company's annual report on Form 10-K as amended for the year ended June 30,
1997. All intercompany accounts and transactions have been eliminated in
consolidation.
The accompanying condensed consolidated financial statements at June 30,
1997 were derived from the audited consolidated financial statements, but do
not include all disclosures required under generally accepted accounting
principles. Certain reclassifications have been made to prior period
financial statements to conform with current period presentation.
2. DEBT AND LINES OF CREDIT
As discussed in detail below, substantially all of the Company's
indebtedness shown below at June 30, 1997 was repaid as part of the
Refinancing (as defined below). Long-term debt at June 30, 1997, prior to
the Refinancing and at March 31, 1998, after the Refinancing, consists of
the following:
June 30, Mar. 31,
1997 1998
(in 000's)
10% Senior Subordinated Notes due 2007, net of
unamortized discount of $767,000 $ - $149,233
Tranche B Term Loan - 74,625
Tranche C Term Loan - 39,800
Delayed Draw Term Facility - 25,000
Revolving Credit Facility - 25,764
12 7/8% Senior Secured Notes due 2003, net of
unamortized discount of $2,776,000 151,224 -
Bally Wulff revolving lines of credit 9,611 -
Hospitality Franchise Systems note payable,
secured by the assets of the Rainbow Casino 6,569 -
7.5% Convertible subordinated debentures due 2003,
unsecured 1,642 -
Other, secured by related equipment 4,793 3,164
------- ------
173,839 317,586
Less current maturities 1,124 2,310
------ ------
Long-term debt, less current maturities $172,715 $315,276
======== ========
In August 1997 the Company effected a series of related transactions (as
described below, the "Refinancing"). The Refinancing consisted of the
private placement of $150.0 million of Senior Subordinated Notes and the
closing of $230.0 million of bank financing. The bank financing provides for
(i) term loans in the aggregate amount of up to $140.0 million, comprised of
a $75.0 million tranche with a 7 1/2-year term (the "Tranche B Term Loan"),
a $40.0 million tranche with an 8-year term (the "Tranche C Term Loan"), and
a $25.0 million tranche with a 7 1/2-year term (the "Delayed Draw Term
Facility" and together with the Tranche B Term Loan and the Tranche C Term
Loan, the "Term Loan Facilities"); and (ii) a $90.0 million revolving credit
facility (the "Revolving Credit Facility") with a 6-year term. Each of these
credit facilities are variable rate borrowings in accordance with a credit
grid. The interest rates at the highest level of the credit grid and
maturity dates are as follows:
Initial Maturity
Rate Date
Tranche B Term Loan LIBOR + 2.75% January 31, 2005
Tranche C Term Loan LIBOR + 3.00% July 31, 2005
Delayed Draw Term Facility LIBOR + 2.75% January 31, 2005
Revolving Credit Facility LIBOR + 2.25% July 31, 2003
The Revolving Credit Facility also allows for German Deutschemark borrowings
at the Eurodeutschemark rate plus 2.25% (or 5.8% at March 31, 1998).
As part of the Refinancing, the Company used the proceeds of the Senior
Subordinated Note offering, together with borrowings under the Revolving
Credit Facility, the Term Loan Facilities and cash on hand to fund (a) the
repurchase at a premium of substantially all of the Company's 12 7/8% Senior
Secured Notes plus accrued interest to August 8, 1997 totaling $181.6
million, (b) the redemption at liquidation value of all of the Company's
Series B Special Stock on September 8, 1997 totaling $77.6 million, (c) the
purchase from HFS Gaming Corporation of the right to receive royalty
payments based on revenues of the Rainbow Casino for $19.0 million (the
"Rainbow Royalty Buyout"), (d) the repayment of related debt owed to an HFS
affiliate, National Gaming Mississippi, Inc., on August 12, 1997 totaling
$7.3 million, (e) repayment of amounts outstanding under the domestic and
foreign revolving lines of credit and (f) the payment of transaction fees
and expenses totaling $16.6 million. At March 31, 1998, borrowings under the
$90.0 million Revolving Credit Facility totaled $25.8 million, of which
$15.0 million were German Deutschemark borrowings. Based on the terms of the
Revolving Credit Facility, the Company would have been able to borrow an
additional $40.1 million as of March 31, 1998. The borrowing base for the
revolving credit facility includes eligible receivables and inventory (as
defined). Additionally, in July 1997 the Company redeemed the remaining
balance of the 7 1/2% Convertible Debentures at a price of 104%, or a total
of $1.7 million.
The bank facility is guaranteed by each domestic subsidiary of the U.S.
Borrower and German Subsidiaries (both as defined), other than the entity
which holds the Company's interest in its Louisiana operations and other
non-material subsidiaries (as defined), and secured by both a U.S. and
German Pledge Agreement (both as defined). The bank facility contains a
number of maintenance covenants and it and the indenture have other
significant covenants that, among other things, restrict the ability of the
Company and certain of its subsidiaries to dispose of assets, incur
additional indebtedness and issue preferred stock, pay dividends or make
other distributions, enter into certain acquisitions, repurchase equity
interests (as defined) or subordinated indebtedness, issue or sell equity
interests of the Company's subsidiaries (as defined), engage in mergers or
acquisitions, or engage in certain transactions with subsidiaries and
affiliates, and that otherwise restrict corporate activities.
The Senior Subordinated Notes bear interest at 10%, are due in 2007, and are
general unsecured obligations of the Company, ranking subordinate in right
of payment to all Senior Debt (as defined) of the Company, including
indebtedness under the new credit facility. The Senior Subordinated Notes
will be fully and unconditionally guaranteed on a joint and several senior
subordinated basis by all existing and future domestic Restricted
Subsidiaries (as defined) of the Company, subject to certain exceptions
including the partially-owned entities through which its Mississippi casino
and Louisiana route operations are conducted. The Subsidiary Guarantees (as
defined) are general unsecured obligations of the Guarantors, ranking
subordinate in right of payment to all Senior Debt of the Guarantors. The
Company will be able to designate other current or future subsidiaries as
Unrestricted Subsidiaries (as defined) under certain circumstances.
Unrestricted Subsidiaries will not be required to issue a Subsidiary
Guarantee and will not be subject to many of the restrictive covenants set
forth in the Indenture pursuant to which the Senior Subordinated Notes were
issued. The Indenture for the Company's Senior Subordinated Notes contains
various covenants, including limitations on incurrence of additional
indebtedness, on restricted payments and on dividend and payment
restrictions on subsidiaries. The Senior Subordinated Notes may not be
redeemed for the first five years. Upon the occurrence of a Change of
Control (as defined), the holders of the Senior Subordinated Notes will have
the right to require the Company to purchase their notes at a price equal to
101% of the aggregate principal amount thereof, plus accrued and unpaid
interest to the date of purchase.
3. REFINANCING CHARGES
As a result of the Refinancing described above, the Company recorded an
extraordinary loss of $42.0 million consisting of the $27.7 million premium
paid to repurchase the Senior Secured Notes, the payment of related
transaction fees and expenses, and the charge-off of the unamortized debt
discount and deferred financing fees. There was no tax benefit recognized
for the extraordinary item as a valuation allowance was recorded to fully
reserve the net operating losses created.
The Company also recorded a $19.0 million charge for the cost of the Rainbow
Royalty Buyout. Additionally, the Company recorded a $16.5 million charge to
equity and a corresponding increase in the net loss applicable to common
shares for the difference between the carrying value and the liquidation
value of the Series B Special Stock, all of which was redeemed on September
8, 1997 at the liquidation price of $100 per share, plus accrued dividends.
4. INCOME TAXES
The Company's effective tax rate for the three and nine months ended March
31, 1997 and 1998 differs from the statutory rate of 35% due to state income
taxes and the impact of taxes applicable to earnings of Bally Wulff. In
addition, earnings at the Company's domestic subsidiaries cannot be fully
offset by the utilization of net operating loss carryforwards.
5. SUPPLEMENTAL CASH FLOW INFORMATION
The following supplemental information is related to the unaudited condensed
consolidated statements of cash flows. For the nine months ended March 31,
1997 and 1998, the Company recorded the following significant non-cash
items:
Nine months ended March 31,
1997 1998
(In 000's)
Reclassify other assets to property, plant and
equipment $ 1,572 $ 249
Reclassify excess costs over net assets of acquired
business to property, plant and equipment 1,436 -
Dividends for Series E and Series B Special Stock 8,261 3,157
Reclassify inventory to property, plant and equipment 10,086 3,964
Translation rate adjustments 6,774 4,106
6. LEGAL PROCEEDINGS
In the action filed on December 2, 1996, the Company was named as a
defendant in an action brought by Canpartners Investments IV and Cerberus
Partners, pending in federal district court for the Southern District of New
York. The Company entered into certain loan commitment letters with the
plaintiffs in August 1995, contemplating that the plaintiffs would lend
approximately $30.0 million to partially fund the Company's then pending
hostile tender offer for Bally Gaming International, Inc. (BGII). The
Company entered into a merger agreement with BGII in October 1995 and did
not use funds provided by the plaintiffs to fund the acquisition of BGII in
June 1996. On October 27, 1997, the court granted in part the Company's
motion to dismiss the Canyon/Cerebus complaint. The claims for breach of the
duty of good faith and fair dealing, seeking damages in excess of $12.0
million, and fraudulent concealment have been dismissed in their entirety,
without prejudice to plaintiffs' right to replead. The claim for
indemnification has been dismissed to the extent plaintiffs seek
reimbursement of costs and fees relating to the litigation, but remains to
the extent they seek reimbursement of expenses in connection with
negotiation of the commitment letter and loan documents. The court left
intact the plaintiffs' claim for breach of contract; however, the Company
believes it has strong defenses to the plaintiffs' claim and intends to
vigorously defend the action.
On September 25, 1995, BGII was named as a defendant in a class action
lawsuit filed in Federal District Court in Nevada, by Larry Schreirer on
behalf of himself and all others similarly situated. The plaintiffs filed
suit against BGII and approximately 45 other defendants. Each defendant is
involved in the gaming business as either a gaming machine manufacturer,
distributor, or casino operator. The class action lawsuit arises out of
alleged fraudulent marketing and operation of casino video poker machines
and electronic slot machines. The plaintiffs allege that the defendants'
actions constitute violations of the Racketeer Influenced and Corrupt
Organizations Act (RICO) and give rise to claims of common law fraud and
unjust enrichment. The plaintiffs are seeking monetary damages in excess of
$1.0 billion, and are asking that any damage awards be trebled under
applicable Federal law. In December 1997, the judge dismissed the
defendants' motion to dismiss all claims in the litigation. Management
believes the plaintiffs' lawsuit to be without merit. The Company intends to
vigorously pursue all legal defenses available to it.
The Company is also a party to various lawsuits relating to routine matters
incidental to its business. Management does not believe that the outcome of
such litigation, including the matters above, in the aggregate, will have a
material adverse effect on the Company.
7. UNUSUAL ITEMS
In December 1997 the Company, Alpha Hospitality and General Electric Credit
Corporation settled a dispute concerning certain customer notes receivable
on which the Company had certain recourse obligations. The Company
contributed $2.5 million to the final settlement with the holder of the
notes, and reversed $6.0 million of reserves previously established for
these recourse obligations. In addition, as part of the settlement the
Company became the sole owner of approximately 566,000 shares of Alpha
Hospitality common stock which trades on the NASDAQ Small Cap market.
Pursuant to the limitations provided for in the settlement agreement, the
Company has sold approximately 115,000 shares of Alpha Hospitality through
March 31, 1998.
As a result of settling a dispute over the exclusive use of certain
technologies and changes in gaming regulations, the Company evaluated the
cash flow of certain of its technology assets, in accordance with the
provisions of Financial Accounting Standards Board Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
be Disposed of," and determined certain items met the definition of having
become impaired. The Company recorded write-downs totaling $2.8 million for
these items, which amount is included in unusual items.
Additionally, during the quarter ended December 31, 1997 the Company accrued
$0.7 million for the present value of contractual payments due to a former
member of the board of directors who was not re-elected to the board at the
December 1997 annual shareholders meeting.
During the quarter ended September 30, 1996, the Company incurred unusual
charges of $0.7 million related primarily to separation costs of Alliance
personnel subsequent to the acquisition of Bally Gaming International, Inc.
8. STOCKHOLDER RIGHTS PLAN
In February 1998, the Company's Board of Directors adopted a Stockholder
Rights Plan ("Plan"). The Plan is designed to preserve the long-term value
of the shareholders' investment in the Company. Pursuant to the Plan, each
shareholder received a distribution of one Right for each share of the
Company's outstanding Common Stock, which were distributed to shareholders
of record on March 12, 1998 that will expire ten years thereafter. Each
Right entitles the holder to purchase one one-hundredth (1/100) of a share
of a new series of participating preferred stock for $25. Initially the
Rights are represented by the Company's Common Stock certificates and are
not exercisable. The Rights become exercisable only after a person or group
acquires beneficial ownership of 10% or more of the Company's Common Stock
(or 15% if the acquirer is an institutional investor) or publicly announces
its intention to commence a tender offer that would result in that
beneficial ownership level. Under certain circumstances involving a buyer's
acquisition of 10% of the Company's Common Stock (or 15% in the case of an
institutional investor), all Rights holders except the buyer will be
entitled to purchase Common Stock at half price. If the Company is acquired
through a merger, after such an acquisition, all Rights holders except the
buyer will be entitled to purchase stock in the buyer at half price. The
Company may redeem the rights at $0.001 at any time before a buyer acquires
10% (or 15% in the case of an institutional investor) of the Company's
Common Stock.
9. UNAUDITED CONSOLIDATING FINANCIAL STATEMENTS
The following unaudited consolidating financial statements are presented to
provide certain financial information regarding guaranteeing and
non-guaranteeing subsidiaries in relation to the Company's Senior
Subordinated Notes which were issued in the Refinancing transaction
completed in August 1997 (see note 2). The financial information presented
includes Alliance Gaming Corporation (the "Parent") and its wholly-owned
guaranteeing subsidiaries (together the "Parent and Guaranteeing
Subsidiaries"), and the non-guaranteeing subsidiaries Video Services, Inc.,
United Gaming Rainbow, BGI Australia Pty. Limited, Bally Gaming de Puerto
Rico, Inc., and Alliance Automaten GmbH & Co. KG (the subsidiary that holds
the Company's German interests) (together the "Non-Guaranteeing
Subsidiaries"). The notes to consolidating financial statements should be
read in conjunction with these consolidating financial statements.
<PAGE>
ALLIANCE GAMING CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING BALANCE SHEETS
June 30, 1997
(In 000's)
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Elimina- and
Subsidiaries Subsidiaries tions Subsidiaries
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,462 $ 12,462 $ $ 28,924
Accounts and notes receivable, net 31,799 57,207 (1,305) 87,701
Inventories, net 19,231 18,778 (680) 37,329
Other current assets 6,695 2,932 9,627
------ ------ ------ -------
Total current assets 74,187 91,379 (1,985) 163,581
------ ------ ------ -------
Long-term notes receivable, net 96,271 1,501 (88,791) 8,981
Leased equipment, net 7,902 7,902
Property, plant and equipment, net 41,836 32,811 74,647
Excess of costs over net assets of
acquired businesses, net 41,185 21,031 (118) 62,098
Intangible assets, net 17,979 252 18,231
Investment in subsidiaries 100,478 (100,478)
Other assets, net 22,310 (5,758) 24 16,576
-------- ------- ------- -------
$394,246 $149,118 $(191,348) $352,016
======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,936 $ 4,262 $ 72 $ 14,270
Accrued liabilities 21,129 16,727 (464) 37,392
Current maturities of long-term debt 585 1,348 (809) 1,124
----- ----- ------ ------
Total current liabilities 31,650 22,337 (1,201) 52,786
------ ------ ------- ------
Senior Secured Notes due 2003, net 151,224 151,224
Other long-term debt, less current
maturities 87,924 22,676 (89,109) 21,491
Other liabilities 9,366 3,500 (433) 12,433
------- ------ ------- -------
Total liabilities 280,164 48,513 (90,743) 237,934
------- ------ ------- -------
Minority interest 1,546 1,546
Series B Special Stock 58,981 58,981
Stockholders' equity:
Common Stock 3,185 17,832 (17,832) 3,185
Series E Special Stock 12,368 12,368
Additional paid-in capital 138,590 68,699 (68,699) 138,590
Cumulative translation adjustment (11,719) (11,880) 11,880 (11,719)
Retained earnings (accumulated
deficit) (88,869) 25,954 (25,954) (88,869)
------ ------ ------- -------
Total stockholders' equity 53,555 100,605 (100,605) 53,555
-------- -------- -------- -------
$394,246 $149,118 $(191,348) $352,016
======== ======== ========= ========
</TABLE>
See accompanying unaudited note.
<PAGE>
CONSOLIDATING BALANCE SHEETS
March 31, 1998
(In 000's)
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Elimina- and
Subsidiaries Subsidiaries tions Subsidiaries
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $10,548 $18,110 $ $28,658
Accounts and notes receivable, net 32,643 54,378 (4,603) 82,418
Inventories, net 25,205 14,828 (497) 39,536
Other current assets 5,344 3,317 8,661
------ ------ ------ ------
Total current assets 73,740 90,633 (5,100) 159,273
------- ------- ------ -------
Long-term notes receivable, net 83,719 1,685 (76,452) 8,952
Leased equipment, net 7,722 7,722
Property, plant and equipment, net 43,111 32,456 75,567
Excess of costs over net assets of
acquired businesses, net 40,209 19,681 59,890
Intangible assets, net 19,538 451 19,989
Investment in subsidiaries 99,339 (99,339)
Other assets, net 31,141 (6,563) (9,403) 15,175
------- ------- ------- -------
$390,797 $146,065 $(190,294) $346,568
======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable $ 8,943 $ 3,069 $ $12,012
Accrued liabilities 17,771 12,549 (1,751) 28,569
Current maturities of long-term debt 1,817 3,016 (2,523) 2,310
------ ------ ------ ------
Total current liabilities 28,531 18,634 (4,274) 42,891
------- ------- ------ -------
Term loan facilities 138,150 138,150
Senior Subordinated Notes due 2007,
net 149,233 149,233
Other long-term debt, less current
maturities 89,860 24,292 (86,259) 27,893
Other liabilities 10,071 3,742 (364) 13,449
------ ------ ------ ------
Total liabilities 415,845 46,668 (90,897) 371,616
------- ------ ------- -------
Minority interest 2,039 2,039
Stockholders' equity (net capital
deficiency):
Common Stock 3,208 17,832 (17,832) 3,208
Series E Special Stock 13,348 13,348
Additional paid-in capital 122,858 68,700 (68,700) 122,858
Cumulative translation adjustment (16,181) (16,342) 16,342 (16,181)
Retained earnings (accumulated
deficit) (150,320) 29,207 (29,207) (150,320)
-------- ------- ------- --------
Total stockholders' equity (net
capital deficiency) (27,087) 99,397 (99,397) (27,087)
------- ------ -------- -------
$390,797 $146,065 $(190,294) $346,568
======== ======== ========= ========
</TABLE>
See accompanying unaudited note.
<PAGE>
CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1997
(In 000's)
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Elimina- and
Subsidiaries Subsidiaries tions Subsidiaries
Revenues:
<S> <C> <C> <C> <C>
Gaming equipment and systems $20,692 $ 4,238 $(1,218) $23,712
Wall machines and amusement games 32,225 (57) 32,168
Route operations 27,759 5,099 32,858
Casino operations 2,835 10,118 12,953
------- ------ ------ -------
51,286 51,680 (1,275) 101,691
------- ------- ------ -------
Costs and expenses:
Cost of gaming equipment and systems 13,448 3,648 (1,723) 15,373
Cost of wall machines and amusement
games 18,182 18,182
Cost of route operations 21,436 3,248 24,684
Cost of casino operations 1,868 3,628 5,496
Selling, general and administrative 12,226 11,701 (57) 23,870
Depreciation and amortization 3,239 1,965 5,204
------ ------ ------ -------
52,217 42,372 (1,780) 92,809
------- ------- ------ -------
Operating income (931) 9,308 505 8,882
Earnings in consolidated subsidiaries 6,911 (6,911)
Other income (expense):
Interest income 314 85 (102) 297
Interest expense (5,268) (993) 102 (6,159)
Rainbow royalty (1,205) (1,205)
Minority interest (317) (317)
Other, net 9 (13) (4)
----- ------- ------ ------
Income before income taxes 718 7,182 (6,406) 1,494
Income tax provision 157 776 933
------ ------ ------ ------
Net income 561 6,406 (6,406) 561
Special Stock dividends 2,981 2,981
------ ------ ----- ------
Net income (loss) applicable to
common shares $(2,420) $ 6,406 $(6,406) $(2,420)
======= ======= ======= =======
</TABLE>
See accompanying unaudited note.
<PAGE>
CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1998
(In 000's)
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Elimina- and
Subsidiaries Subsidiaries tions Subsidiaries
<S> <C> <C> <C> <C>
Revenues:
Gaming equipment and systems $19,582 $ 3,601 $(1,645) $21,538
Wall machines and amusement games 28,443 (103) 28,340
Route operations 31,445 5,609 37,054
Casino operations 3,251 12,043 15,294
------- ------- ------ -------
54,278 49,696 (1,748) 102,226
------- ------- ------ -------
Costs and expenses:
Cost of gaming equipment and systems 11,996 2,695 (1,645) 13,046
Cost of wall machines and amusement
games 16,205 (103) 16,102
Cost of route operations 25,162 3,599 28,761
Cost of casino operations 1,937 4,448 6,385
Selling, general and administrative 13,949 9,479 23,428
Depreciation and amortization 4,247 2,269 6,516
------ ------ ------ ------
57,291 38,695 (1,748) 94,238
------- ------- ------ -------
Operating income (loss) (3,013) 11,001 7,988
Earnings in consolidated subsidiaries 7,532 (7,532)
Other income (expense):
Interest income 290 102 (208) 184
Interest expense (7,173) (499) 208 (7,464)
Rainbow royalty 1,411 (1,411)
Minority interest (489) (489)
Other, net 410 (117) 293
----- ----- ----- -----
Income (loss) before income taxes (1,032) 9,076 (7,532) 512
Income tax provision (301) 1,544 1,243
------ ----- ------ -----
Net income (loss) (731) 7,532 (7,532) (731)
Special Stock dividends 384 384
----- ------ ----- -----
Net income (loss) applicable to
common shares $(1,115) $7,532 $(7,532) $(1,115)
======= ====== ======= =======
</TABLE>
See accompanying unaudited note.
<PAGE>
CONSOLIDATING STATEMENTS OF OPERATIONS
Nine Months Ended March 31, 1997
(In 000's)
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Elimina- and
Subsidiaries Subsidiaries tions Subsidiaries
<S> <C> <C> <C> <C>
Revenues:
Gaming equipment and systems $ 95,613 $ 9,824 $(4,547) $100,890
Wall machines and amusement games 100,923 (57) 100,866
Route operations 79,508 13,933 93,441
Casino operations 8,882 29,228 38,110
------- ------- ------ -------
184,003 153,908 (4,604) 333,307
------- ------- ------ -------
Costs and expenses:
Cost of gaming equipment and systems 59,712 8,199 (4,247) 63,664
Cost of wall machines and amusement
games 53,600 53,600
Cost of route operations 61,289 8,933 70,222
Cost of casino operations 5,651 10,763 16,414
Selling, general and administrative 43,469 37,205 (57) 80,617
Depreciation and amortization 9,827 6,516 16,343
Unusual items 700 700
------- ------- ------ -------
180,648 125,216 (4,304) 301,560
------- ------- ------ -------
Operating income 3,355 28,692 (300) 31,747
Earnings in consolidated subsidiaries 16,979 (16,979)
Other income (expense):
Interest income 1,398 256 (323) 1,331
Interest expense (15,844) (2,517) 323 (18,038)
Rainbow royalty (3,481) (3,481)
Minority interest (743) (743)
Other, net (68) 116 48
------ ----- ------ ------
Income before income taxes 5,077 23,066 (17,279) 10,864
Income tax provision (264) 5,787 5,523
------ ------ ------- ------
Net income 5,341 17,279 (17,279) 5,341
Special Stock dividends 8,261 8,261
Premium on repurchase of Series B
Special Stock 710 710
Net income (loss) applicable to
common shares $(3,630) $17,279 $(17,279) $(3,630)
======= ======= ======== =======
</TABLE>
See accompanying unaudited note.
<PAGE>
CONSOLIDATING STATEMENTS OF OPERATIONS
Nine Months Ended March 31, 1998
(In 000's)
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Elimina- and
Subsidiaries Subsidiaries tions Subsidiaries
<S> <C> <C> <C> <C>
Revenues:
Gaming equipment and systems $72,716 $ 8,641 $(5,197) $76,160
Wall machines and amusement games 77,235 (103) 77,132
Route operations 94,160 15,589 109,749
Casino operations 9,979 33,891 43,870
------ ------- ------ -------
176,855 135,356 (5,300) 306,911
------- ------- ------ -------
Costs and expenses:
Cost of gaming equipment and systems 43,544 6,326 (5,255) 44,615
Cost of wall machines and amusement
games 42,938 (103) 42,835
Cost of route operations 74,538 10,046 84,584
Cost of casino operations 6,104 12,812 18,916
Selling, general and administrative 42,576 31,728 74,304
Depreciation and amortization 10,632 6,696 17,328
Unusual items (2,545) (2,545)
------- ------- ------ -------
174,849 110,546 (5,358) 280,037
------- ------- ------ -------
Operating income 2,006 24,810 58 26,874
Earnings in consolidated subsidiaries 16,717 (16,717)
Other income (expense):
Interest income 922 309 (606) 625
Interest expense (20,241) (1,395) 606 (21,030)
Rainbow royalty 3,387 (3,974) (587)
Rainbow royalty buyout (19,000) (19,000)
Minority interest (1,325) (1,325)
Other, net 441 (96) 345
------ ----- ------ ------
Income (loss) before income taxes (17,093) 19,654 (16,659) (14,098)
Income tax provision (benefit) (832) 2,995 2,163
------ ------ ------- -------
Net income (loss) before
extraordinary item (16,261) 16,659 (16,659) (16,261)
Extraordinary loss, without tax
benefit (42,033) (42,033)
Net income (loss) (58,294) 16,659 (16,659) (58,294)
Special Stock dividends 3,157 3,157
Premium on repurchase of Series B
Special Stock 16,553 16,553
------ ------ ------ ------
Net income (loss) applicable to
common shares $(78,004) $16,659 $(16,659) $(78,004)
======== ======= ======== ========
</TABLE>
See accompanying unaudited note.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 1997
(In 000's)
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Elimina- and
Subsidiaries Subsidiaries tions Subsidiaries
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net cash provided by (used in)
operating activities: $(2,733) $13,532 $ 191 $10,990
------ ------- ----- -------
Cash flows from investing activities:
Additions to property and equipment (6,103) (2,741) (8,844)
Proceeds from disposal of property
and equipment 69 1,818 1,887
Other (2,251) (120) (2,371)
Net cash used in investing activities (8,285) (1,043) (9,328)
------ ------ ----- ------
Cash flows from financing activities:
Proceeds from long-term debt 41 41
Reduction of long-term debt (889) (4,645) (191) (5,725)
Net change in lines of credit (7,525) (1,970) (9,495)
Repurchase of Series B Special Stock (3,877) (3,877)
Dividends received (paid) 1,211 (1,211)
Issuance of common stock upon exercise
of stock options 139 139
------ ----- ----- ------
Net cash used in financing activities (10,900) (7,826) (191) (18,917)
Effect of exchange rate changes on cash (228) (228)
Cash and cash equivalents:
Increase (decrease) for period (21,918) 4,435 (17,483)
Balance, beginning of period 36,954 11,103 48,057
------ ------ ----- -------
Balance, end of period $15,036 $15,538 $ $30,574
======= ======= ===== =======
</TABLE>
See accompanying unaudited note.
<PAGE>
CONSOLIDATING STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 1998
(In 000's)
<TABLE>
<CAPTION>
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Elimina- and
Subsidiaries Subsidiaries tions Subsidiaries
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net cash provided by (used in)
operating activities $(25,429) $18,794 $(1,530) $(8,165)
------- ------ ------ ------
Cash flows from investing activities:
Additions to property and equipment (7,520) (2,711) (10,231)
Proceeds from disposal of property
and equipment 205 99 304
Other (1,656) (206) (1,862)
------ ----- ----- ------
Net cash used in investing activities (8,971) (2,818) (11,789)
------ ------ ----- ------
Cash flows from financing activities:
Refinancing fees and expenses (32,752) (32,752)
Capitalized new debt issue costs (11,456) (11,456)
Proceeds from long-term debt 303,734 303,734
Reduction of long-term debt (178,459) (1,905) 1,530 (178,834)
Net change in lines of credit 10,852 5,339 16,191
Redemption of Series B Special Stock (77,568) (77,568)
Proceeds from exercise of stock options 729 729
Dividends received (paid) 13,406 (13,406)
------ ------- ----- ------
Net cash provided by (used in)
financing activities 28,486 (9,972) 1,530 20,044
------ ------ ----- ------
Effect of exchange rate changes on cash (356) (356)
Cash and cash equivalents:
Increase (decrease) for period (5,914) 5,648 (266)
Balance, beginning of period 16,462 12,462 28,924
------ ------- ----- ------
Balance, end of period $10,548 $18,110 $ $28,658
======= ======= ===== =======
</TABLE>
See accompanying unaudited note.
<PAGE>
Debt and Lines of Credit
Long-term debt and lines of credit at March 31, 1998 consist of the following :
Alliance
Gaming
Parent and Non- Corporation
Guaranteeing Guaranteeing Elimina- and
Subsidiaries Subsidiaries tions Subsidiaries
(in 000's)
10% Senior Subordinated Notes due
2007, net of unamortized discount $149,233 $ $ $149,233
Tranche B Term Loan 74,625 74,625
Tranche C Term Loan 39,800 39,800
Delayed Draw Term Facility 25,000 25,000
Revolving Credit Facility 10,814 14,950 25,764
Intercompany notes payable 78,930 9,852 (88,782) -
Other 658 2,506 3,164
------- ------ -------- -------
379,060 27,308 (88,782) 317,586
Less current maturities 1,817 3,016 (2,523) 2,310
------- ------ -------- -------
Long-term debt, less current
maturities $377,243 $24,292 $(86,259) $315,276
======== ======= ======== ========
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
In August 1997 the Company completed a series of related transactions as
described below ("the Refinancing") which consisted of the private placement of
$150.0 million of Senior Subordinated Notes and the closing of $230.0 million of
bank financing. The bank financing provides for (i) term loans in the aggregate
amount of up to $140.0 million, comprised of a $75.0 million tranche with a 7
1/2-year term (the "Tranche B Term Loan"), a $40.0 million tranche with an
8-year term (the "Tranche C Term Loan"), and a $25.0 million tranche with a 7
1/2-year term (the "Delayed Draw Term Facility" and together with the Tranche B
Term Loan and the Tranche C Term Loan, the "Term Loan Facilities"); and (ii) a
$90.0 million revolving credit facility with a 6-year term (the "Revolving
Credit Facility").
As part of the Refinancing, the Company used the proceeds of the Senior
Subordinated Note offering, together with borrowings under the Revolving Credit
Facility, the Term Loan Facilities and cash on hand, to fund (a) the repurchase
at a premium of substantially all of the Company's 12 7/8% Senior Secured Notes,
plus accrued interest to August 8, 1997 totaling $181.6 million, (b) the
redemption at liquidation value of all of the Company's Series B Special Stock
on September 8, 1997 totaling $77.6 million, (c) the purchase from HFS Gaming
Corporation of the right to receive royalty payments based on revenues of the
Rainbow Casino and the purchase of related debt owed to an HFS affiliate,
National Gaming Mississippi, Inc., on August 12, 1997 totaling $26.3 million and
(d) the payment of transaction fees and expenses totaling $16.6 million.
Additionally, in July 1997 the Company redeemed the remaining balance of its 7
1/2% Convertible Debentures at a price of 104%, or a total of $1.7 million.
At March 31, 1998, borrowings under the $90.0 million Revolving Credit Facility
totaled $25.8 million and the Company would have been able to borrow, net of
credit line restrictions, an additional $40.1 million. The borrowing base for
the revolving credit facility consists of eligible receivables and inventory, as
defined in the credit agreement.
At March 31, 1998, the Company actually had $28.7 million in cash and cash
equivalents and $40.1 million in additional availability on its revolving line
of credit. In addition, the Company had working capital of approximately $116.4
million, an increase of approximately $5.6 million from June 30, 1997 which is
explained below. Consolidated cash and cash equivalents at March 31, 1998
includes approximately $12.6 million of cash which is utilized in Casino and
Route Operations which is held in vaults, cages or change banks, which amount
has increased due to the growth in locations serviced by the Route Operations
business unit.
Management believes that cash flow from operating activities, cash and cash
equivalents held and the new $90.0 million Revolving Credit Facility will
provide the Company with sufficient capital resources and liquidity. At March
31, 1998, the Company did not have any significant commitments for capital
expenditures.
Working Capital
During the nine months ended March 31, 1998, working capital increased $5.6
million to $116.4 million. The primary fluctuations contributing to the increase
in working capital were: (i) reductions in accounts payable and accrued
liabilities of $11.1 million, (ii) an increase in accounts receivable resulting
from the reversal of the provision for doubtful receivables related to the Alpha
Hospitality obligation discussed below, and (iii) an increase in inventory of
$2.2 million, partially offset by decreases in accounts receivable due to cash
collections and the impact of foreign exchange fluctuations between the dollar
and the deutschemark.
Cash Flow
During the nine months ended March 31, 1998, the Company used cash for operating
activities of $8.2 million primarily related to cash payments for inventory,
accounts payable and accrued liabilities, partially offset by cash collected
from accounts receivable.
During the nine months ended March 31, 1998 the Company used cash from investing
activities of $11.8 million primarily related to capital expenditures.
During the nine months ended March 31, 1998, $20.0 million was provided by
financing activities from the issuance of the Senior Subordinated Notes and the
new credit facility, and was used to repurchase the Senior Secured Notes, redeem
the Series B Special Stock, fund the Rainbow Royalty Buyout and pay related fees
and expenses.
- --------------
The following is a summary of EBITDA by business unit:
Three Months Nine Months
Ending March 31, Ending March 31,
1997 1998 1997 1998
(In $000's)
EBITDA by Business Unit:
Gaming Equipment and Systems $ 1,304 $ (539) $ 13,075 $5,387
Wall Machines and Amusement Games 6,177 6,598 21,085 14,409
Route Operations 5,766 6,364 15,527 18,746
Casino Operations 4,362 5,724 13,098 14,938
Corporate Administrative Expenses (3,523) (3,643) (13,995) (11,823)
Unusual Items - - (700) 2,545
------ ------ ------ -----
EBITDA $14,086 $14,504 $48,090 $44,202
====== ====== ====== ======
The Company believes that the above analysis of EBITDA is a useful adjunct to
net income, cash flow and other GAAP measurements. However, this information
should not be construed as an alternative to net income or any other GAAP
measure of performance as an indicator of the Company's performance or to
GAAP-defined cash flows generated by operating, investing and financing
activities as an indicator of cash flows or a measure of liquidity.
The new credit facility is guaranteed by each domestic subsidiary of the U.S.
Borrower and German Subsidiaries (both as defined), other than the entity which
holds the Company's interest in its Louisiana operations and other non-material
subsidiaries (as defined), and is secured by both a U.S. and German Pledge
Agreement (both as defined). The new credit facility contains a number of
maintenance covenants and it and the indenture have other significant covenants
that, among other things, restrict the ability of the Company and certain of its
subsidiaries to dispose of assets, incur additional indebtedness and issue
preferred stock, pay dividends or make other distributions, enter into certain
acquisitions, repurchase equity interests (as defined) or subordinated
indebtedness, issue or sell equity interests of the Company's subsidiaries (as
defined), engage in mergers or acquisitions, or engage in certain transactions
with subsidiaries and affiliates, and that otherwise restrict corporate
activities. The Company believes it is in compliance with the debt covenants in
both the credit agreement and the indenture.
Customer Financing
In December 1997 the Company, Alpha Hospitality and General Electric Credit
Corporation settled certain customer notes receivable on which the Company had
certain recourse obligations. The Company contributed $2.5 million to the final
settlement with the holder of the notes, and reversed $6.0 million of reserves
previously established for these recourse obligations. In addition, as part of
the settlement the Company became the sole owner of approximately 566,000 shares
of Alpha Hospitality common stock which trades on the NASDAQ Small Cap market.
The Company intends to sell this stock within the limitations provided for in
the settlement agreement.
Bally Wulff provides customer financing for approximately 14% of its sales and
also provides lease financing to its customers. Lease terms range from six
months to 43 month terms.
Year 2000
The Company is continuing to actively address the Year 2000 compliance issue.
The Year 2000 compliance issue, which is common to most businesses, mainly
concerns the inability of information systems, primarily computer software
programs, to properly recognize and process date-sensitive information on and
beyond January 1, 2000. The costs incurred in this effort will be expensed as
incurred, unless new software is purchased that will be capitalized in
accordance with the Company's policy. The Company does not believe that such
costs will be material to the Company's results of operations, liquidity or
consolidated financial position.
<PAGE>
Results of Operations:
Three Months Ended March 31, 1997 and 1998
General
The Company operates through four business units: (i) gaming equipment and
systems, (ii) wall machines and amusement games (consisting of the manufacture
and distribution of wall-mounted gaming machines and distribution of other
recreational and amusement machines), (iii) route operations and (iv) casino
operations.
The following tables set forth the combined revenues and operating income (loss)
for the three months ended March 31, 1997 and 1998:
1997 1998
(In 000's)
Revenues:
Gaming Equipment and Systems $23,712 $21,538
Wall Machines and Amusement Games 32,168 28,340
Route Operations 32,858 37,054
Casino Operations 12,953 15,294
------- -------
Total revenues $101,691 $102,226
======= =======
Operating income (loss):
Gaming Equipment and Systems $ 35 $(2,504)
Wall Machines and Amusement Games 4,814 5,246
Route Operations 3,942 4,309
Casino Operations 3,872 5,203
Corporate Administrative Expenses (3,781) (4,266)
Total operating income $ 8,882 $ 7,988
====== ======
Gaming Equipment and Systems
For the quarter ended March 31, 1998, the Gaming Equipment and Systems business
unit reported revenues of $21.5 million, a decrease of 9%, compared to revenues
of $23.7 million in the prior year quarter. Bally Gaming reported shipments of
new gaming machines of approximately 1,900, a decrease of 39% compared to
shipments of approximately 3,100 in the prior year quarter. By market segment,
Bally Gaming's shipments of new gaming machines for the quarter consisted of
approximately 350 units to the Nevada and Atlantic City markets, 1,300 units to
international markets and 250 units to riverboats, Native American and other
domestic markets. Management believes the industry-wide decrease in number of
units shipped resulted primarily from lower replacement demand from existing
casinos as casino operators await regulatory approval of new products that
gaming manufacturers displayed at the World Gaming Congress in October 1997.
Bally Gaming reported revenues from the sale of new gaming machines of $9.8
million, a decrease of 19% compared to $12.2 million in the prior year quarter
due to lower unit volume, partially offset by a 3% increase in the average
selling price of new gaming machines. In addition, Systems reported sales of
$6.1 million, a 65% increase compared to revenues of $3.7 million in the prior
year quarter.
Gross margin for the quarter ended March 31, 1998 was 39 percent compared to 35
percent in the prior year quarter. The increase was due principally to a greater
proportion of higher margin System revenues and a higher average selling price
of new gaming machines. Operating results were lower due to decreased revenues,
higher research and development costs and higher depreciation expense, partially
offset by improved gross margins and a lower provision for doubtful receivables.
Wall Machines and Amusement Games
For the quarter ended March 31, 1998, the Wall Machines and Amusement Games
business unit reported revenues of $28.3 million, a decrease of 12% compared to
revenues of $32.2 million in the prior year quarter. The currency translation
impact of the fluctuation of the German mark versus the U.S. dollar reduced
revenues by $2.8 million during the 1998 quarter. The revenue decline resulted
primarily from a 15% decrease in unit shipments of new wall machines, partially
offset by a 10% increase in amusement game distribution revenues and a 16%
increase in leased wall machine revenues.
Wall Machines and Amusement Games continued to expand its leasing program
whereby wall machines are leased to customers pursuant to operating leases which
provide Wall Machines and Amusement Games with a stream of revenues and cash
flow over the life of the leases, which range from six months to three and one
half years. At March 31, 1998, a total of 5,900 machines were out on lease
versus 4,400 at March 31, 1997.
Gross margin remained relatively flat at 43% between with a decrease in margin
on new wall machine sales due to lower sales unit volumes being offset by the
increase in higher margin lease revenues and a change in the mix of product to
higher margin products. Operating income of $5.2 million increased by 9%, due
primarily to lower selling, general and administrative expenses resulting from
no trade show taking place in the current year quarter and a lower provision for
doubtful receivables, partially offset by lower revenues.
Route Operations
For the quarter ended March 31, 1998, the Route Operations business unit
reported revenues of $37.1 million, an increase of 13% compared to revenues of
$32.9 million in the prior year quarter. Revenues for the Nevada route
operations increased 13% as net win per gaming machine per day increased to
$55.00 from $53.70 in the prior year quarter, while the average number of gaming
machines increased to 6,310 from 5,690 in the prior year quarter primarily
resulting from the additional machines added as a result of taking over
operations of the Westronics route and the Scolari's locations. The improvement
in net win per gaming machine per day in Nevada resulted primarily from the
continuing favorable impact of Gamblers Bonus, a cardless slot player's club and
player tracking system. Gamblers Bonus is currently installed in approximately
2,000 gaming machines at over 180 locations or 31% of the installed base of
gaming machines. Revenues for the Louisiana operations increased 10% as net win
per gaming machine per day increased to $79.20 from $74.30 in the prior year
quarter and the average number of gaming machines increased to 780 from 760 in
the prior year quarter
For the quarter ended March 31, 1998, Route Operations cost of revenues
increased 16% to $28.8 million, and as a percentage of revenues increased to 78%
from 75% in the prior year quarter. Nevada route operations cost of revenues
increased 17% to $25.2 million, and as a percentage of revenues increased to 80%
from 77% in the prior year quarter. The increase is due to higher direct costs,
primarily increased health insurance costs and costs associated with the
Scolari's and Westronics acquisitions and lower margins on several contract
renewals resulting from increased competitive pressures. Louisiana route
operations cost of revenues increased 11% to $3.6 million, and as a percentage
of revenues remained relatively flat at 64% between periods, as costs increased
proportionately with revenues. The Route Operations business unit reported
operating income of $4.3 million, a 9% increase compared to operating income of
$3.9 million in the prior year quarter. The increase was due primarily to the
increase in revenues and a lower provision for doubtful receivables, partially
offset by the increase in operating costs as a percentage of revenues.
Casino Operations
For the quarter ended March 31, 1998, the Casino Operations business unit
reported revenues of $15.3 million, an increase of 18% compared to revenues of
$13.0 million in the prior year quarter. This increase reflects a 19% increase
at the Rainbow Casino and a 15% increase at the Rail City Casino. The
improvement at the Rainbow Casino was attributable to the continuing success of
its direct marketing campaigns with an 8% increase in net win per day and an
increase in the average number of gaming machines. Revenues for the Rail City
Casino improved as a result of enhanced marketing efforts including the
introduction of the Rail City Players Club and a 25% increase in the net win per
gaming machine per day resulting from the replacement of 20% of older gaming
machines with new gaming machines during the December 1997 quarter.
For the quarter ended March 31, 1998, the cost of revenues for Casino Operations
increased 16% to $6.4 million compared to $5.5 million in the prior year
quarter, but as a percentage of revenues remained relatively flat at 42%. The
Casino Operations business unit reported operating income of $5.2 million, an
increase of 34% compared to operating income of $3.9 million in the prior year
quarter. The increase in operating income resulted from the aforementioned
increase in revenues and the improvements in operating costs as a percentage of
revenues and selling, general and administrative expenses as a percentage of
revenues.
Consolidated
Total revenues for the quarter ended March 31, 1998 were $102.2 million, an
increase of less than 1% compared to revenues of $101.7 million in the prior
year quarter. The increase is primarily due to the aforementioned increases in
revenues at the Route Operations and Casino Operations business units, partially
offset by decreases in revenues at Gaming Equipment and Systems and Wall
Machines and Amusement Games business units and the impact of foreign exchange
rate fluctuations.
Cost of revenues for the quarter ended March 31, 1998, were $64.3 million, an
increase of less than one 1% compared to costs of $63.7 million in the prior
year quarter. Cost of revenues as a percentage of total revenues remained
relatively flat at 63% between quarters as the improvements at the Casino
Operations and Gaming Equipment and Systems business units were offset by an
increase at the Route Operations business unit.
Selling, general and administrative expenses for the quarter ended March 31,
1998 were approximately $23.4 million, a decrease of 2% compared to expenses of
$23.9 million for the prior year quarter. This decrease is due primarily to a
decrease in expenses at the Wall Machines and Amusement Games business unit and
a decrease in the provision for doubtful receivables, partially offset by an
increase in expenses at the Gaming Equipment and Systems business unit and an
increase in corporate administrative expenses.
Depreciation and amortization for the quarter ended March 31, 1998 was $6.5
million, a 25% increase compared to depreciation and amortization of $5.2
million in the prior year quarter, due primarily to the increase in amortization
of deferred financing costs and increased depreciation related to the growth in
the number of gaming machines in the leasing program at the Gaming Equipment and
Systems and Wall Machines and Amusement Games business units.
Net Interest Expense and Income Taxes
Net interest expense in the quarter ended March 31, 1998 increased to $7.3
million compared to net interest expense of $5.9 million in the prior year
quarter. The increase is primarily due to a higher level of debt resulting from
the Company's new 10% Senior Subordinated Notes due 2007 and the term loan
facilities which replaced substantially all of the Company's 12 7/8% Senior
Secured Notes and the 15% Series B Special Stock as part of the refinancing of
the Company's capital structure completed in September 1997, resulting in
substantially lower overall fixed charges.
The Company recorded an income tax provision of $1.2 million in the quarter
ended March 31, 1998 compared to an income tax provision of $0.9 million in the
prior year quarter. The current quarter provision is primarily due to income
taxes for the Wall Machines and Amusement Games business unit and state income
taxes.
Nine Months Ended March 31, 1997 and 1998
General
The following tables set forth the combined revenues and operating income for
the nine months ended March 31, 1997 and 1998:
1997 1998
(In 000's)
Revenues:
Gaming Equipment and Systems $ 100,890 $76,160
Wall Machines and Amusement Games 100,866 77,132
Route Operations 93,441 109,749
Casino Operations 38,110 43,870
-------- -------
Total revenues $333,307 $306,911
======== ========
Operating income:
Gaming Equipment and Systems $ 9,086 $ 1,021
Wall Machines and Amusement Games 16,336 10,113
Route Operations 10,224 12,752
Casino Operations 11,648 13,403
Corporate Administrative Expenses (14,847) (12,960)
------- ---------
Subtotal 32,447 24,329
Unusual items (700) 2,545
------- ------
Total operating income $31,747 $26,874
======= =======
Gaming Equipment and Systems
For the nine months ended March 31, 1998, the Gaming Equipment and Systems
business unit reported revenues of $76.2 million, a decrease of 24% compared to
revenues of $100.9 million in the prior year period. Bally Gaming reported
shipments of new gaming machines of approximately 9,500, a decrease of 30%
compared to shipments of approximately 13,500 in the prior year period. By
market segment, Bally Gaming's shipments of new gaming machines for the period
consisted of approximately 2,800 units to the Nevada and Atlantic City markets,
4,300 units to international markets and 2,400 units to riverboats, Native
American and other domestic markets. The decrease in number of units shipped
resulted primarily from fewer new casino openings and lower replacement demand
from existing casinos. Bally Gaming reported revenues from the sale of new
gaming machines of $47.8 million, a decrease of 29% compared to $66.9 million in
the prior year period due to lower unit volume and a 3% decrease in average
selling price of new gaming machines. Systems reported sales of $14.9 million, a
10% decrease compared to revenues of $16.6 million in the prior year period.
For the nine months ended March 31, 1998 gross profit margins improved to 41%
from 37% in the prior year period. The increase was due principally to a greater
proportion of higher margin System revenues and lower provisions for inventory
obsolescence in the current year period. Gaming Equipment and Systems reported
operating income of $1.0 million, a decrease of 89% over prior year period
results. The decrease in operating income resulted primarily from lower revenues
and higher research and development costs and depreciation and amortization
expense, partially offset by improved gross margins and a lower provision for
doubtful receivables.
Wall Machines and Amusement Games
For the nine months ended March 31, 1998, the Wall Machines and Amusement Games
business unit reported revenues of $77.1 million, a decrease of 24% compared to
revenues of $100.9 million in the prior year period. The currency translation
impact of the fluctuation of the German mark versus the U.S. dollar reduced
revenues by $11.6 million during the current year period. The revenue decrease
resulted primarily from a 22% decrease in unit shipments of new wall machines
and a 16% decrease in amusement game distribution revenues partially offset by a
41% increase in leased wall machine revenues. Management believes the general
slowdown in the German economy during the current year period has resulted in
customers acquiring only enough units to replace those units whose licenses are
expiring, and deferring purchases of other equipment.
Wall Machines and Amusement Games continued to expand its leasing program
whereby new wall machines are leased to customers pursuant to operating leases
which provide Wall Machines and Amusement Games with a stream of revenues and
cash flow over the life of the leases, which range from six months to three and
one half years. From June 30, 1997 through March 31, 1998, the total number of
wall machines that were out on lease increased by 1,529 units.
For the nine months ended March 31, 1998, gross profit margin decreased to 44%
from 47% in the prior year period. The decrease in gross margin resulted
primarily from higher fixed costs per unit due to lower sales volume and a
decrease in the average selling price of new wall machines, partially offset by
an increase in higher margin lease revenues. Wall Machines and Amusement Games
reported operating income of $10.1 million, a decrease of 38% over prior year
period results. The decrease in operating income resulted primarily from the
aforementioned decrease in revenues and lower gross margin, partially offset by
lower selling, general and administrative expenses and a lower provision for
doubtful receivables.
Route Operations
For the nine months ended March 31, 1998, the Route Operations business unit
reported revenues of $109.7 million, an increase of 18% compared to revenues of
$93.4 million in the prior year period. Nevada route operations revenues
increased 18% as net win per gaming machine per day increased to $53.60 from
$51.70 in the prior year period, while the average number of gaming machines
increased to 6,370 from 5,620 in the prior year period. The increase in the
average number of gaming machines in Nevada reflects the additional machines
added as a result of taking over operations of the Westronics route and the
Scolari's locations. The improvement in net win per gaming machine per day in
Nevada resulted primarily from the continuing favorable impact of Gamblers
Bonus, a cardless slot player's club and player tracking system. Louisiana route
operations revenues increased 12% as net win per gaming machine per day
increased to $76.10 from $72.40 in the prior year period and the average number
of gaming machines increased to 750 from 700 in the prior year period.
For the nine months ended March 31, 1998, Route Operations cost of revenues
increased 20% and, as a percentage of revenues, increased to 77% from 75% in the
prior year period. Nevada operations cost of revenues increased 22% and, as a
percentage of revenues, increased to 79% from 77% in the prior year period due
primarily to increased health insurance costs and costs associated with the
Scolari's and Westronics acquisitions, and lower margins on several contract
renewals resulting from increased competitive pressures. Louisiana route
operations cost of revenues increased 12% and as a percentage of revenues
remained relatively flat at 64% between periods as costs increased
proportionally with revenues. Route Operations reported operating income of
$12.8 million, an increase of 25% compared to operating income of $10.2 million
in the prior year quarter. The operating income improvement resulted primarily
from the aforementioned increase in revenues, an improvement in selling, general
and administrative expenses as a percentage of revenues and a decrease in the
provision for doubtful receivables, partially offset by the increase in
operating costs as a percentage of revenues and increases in depreciation and
amortization expense due to increased capital expenditures and route acquisition
costs.
Casino Operations
For the nine months ended March 31, 1998, the Casino Operations business unit
reported revenues of $43.9 million, an increase of 15% compared to revenues of
$38.1 million in the prior year period. This increase reflects a 16% increase at
the Rainbow Casino and a 12% increase at the Rail City Casino. The improvement
at the Rainbow Casino was attributable to the continuing impact of its marketing
campaigns and the addition of new gaming machines. Revenues from the Rail City
Casino improved as a result of enhanced marketing efforts and an increase in net
win per gaming machine per day resulting from the replacement of older gaming
machines with new gaming machines. Both Rainbow and Rail City experienced
increases in the average number of gaming machines deployed and in net win per
day per gaming machine.
For the nine months ended March 31, 1998, the cost of revenues for Casino
Operations increased 15% to $18.9 million compared to $16.4 million in the prior
year period but, as a percentage of revenues, remained relatively flat at 43% as
costs increased proportionately with revenues. Casino Operations reported
operating income of $13.4 million, an increase of 15% compared to operating
income of $11.6 million in the prior year period. The operating income
improvement resulted from the aforementioned increase in revenues, partially
offset by a slight increase in selling, general and administrative expenses as a
percentage of revenues primarily from increased marketing costs at both casinos.
Consolidated
Total revenues for the nine months ended March 31, 1998, were $306.9 million, a
decrease of 8% compared to revenues of $333.3 million in the prior year period.
The decrease is primarily due to the aforementioned decreases in Gaming
Equipment and Systems and Wall Machines and Amusement Games business units and
the impact of foreign exchange rate fluctuations, partially offset by increases
in revenues at the Route Operations and Casino Operations business units.
Cost of revenues for the nine months ended March 31, 1998, were $191.0 million,
a decrease of 6% compared to $203.9 million in the prior year period. Cost of
revenues as a percentage of total revenues increased slightly to 62% from 61% in
the prior year period as the improvements at the Gaming Equipment and Systems
business unit were offset by increases at the Wall Machines and Amusement Games
and Route Operations business units.
Selling, general and administrative expenses for the nine months ended March 31,
1998 were approximately $74.3 million, a decrease of 8% compared to costs of
$80.6 million for the prior year period. This decrease is due to a decrease in
corporate administrative expenses, a decrease in expenses at the Wall Machines
and Amusement Games business unit and a decrease in the provision for doubtful
receivables, partially offset by increases in expenses at the Gaming Equipment
and Systems, Route Operations and the Casino Operations business units.
Depreciation and amortization for the nine months ended March 31, 1998 was $17.3
million, a 6% increase compared to depreciation and amortization of $16.3
million in the prior year period. The increase is due primarily due to increases
in amortization of deferred financing costs and increased depreciation related
to the growth in the number of gaming machines in the leasing program at the
Gaming Equipment and Systems and the Wall Machines and Amusement Games business
units and increases in gaming machines deployed at the Route Operations business
unit.
Net Interest Expense and Income Taxes
Net interest expense in the nine months ended March 31, 1998 increased to $20.4
million compared to the net interest expense of $16.7 million in the prior year
period. The increase is due primarily to a higher level of debt resulting from
the Company's new 10% Senior Subordinated Notes due 2007 and the term loan
facilities which replaced substantially all of the Company's 12 7/8% Senior
Secured Notes and the 15% Series B Special Stock as part of the refinancing of
the Company's capital structure, completed in September 1997.
The Company recorded an income tax provision of $2.2 million in the nine months
ended March 31, 1998 compared to a provision of $5.5 million in the prior year
period. The current period provision is due primarily to income taxes for the
Wall Machines and Amusement Games business unit and state income taxes.
* * * * *
The information contained in this Form 10-Q may contain "forward-looking"
statements within the meaning of section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Act of 1933, as amended, and is
subject to the safe harbor created thereby. Such 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 herein. Future operating results may be adversely affected as
a result of a number of factors such as the Company's high leverage, its holding
company structure, its operating history and recent losses, competition, risks
of 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, uncertain effect of
National Gambling Commission, and other risks detailed from time to time in the
Company's filings with the Securities and Exchange Commission.
<PAGE>
PART II
Item 1. Legal Proceedings
See "Notes to Unaudited Condensed Consolidated Financial
Statements- 6. Legal Proceedings" for a description of certain legal
proceedings.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit
Number Description
10.80 Employment agreement, dated as of January 1, 1998 between
the Company and Robert L. Miodunski.
11 Computation of per share amounts
27.1 Financial Data Schedule
b. Reports on Form 8-K
The Company filed a report on Form 8-K on March 9, 1998
regarding the Shareholder's Rights Plan.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto authorized.
ALLIANCE GAMING CORPORATION
(Registrant)
By /s/ Morris Goldstein
President and Chief Executive Officer
(Principal Executive Officer)
By /s/ Scott D. Schweinfurth
Sr. Vice President, Chief Financial
Officer and Treasurer (Principal
Financial and Accounting Officer)
EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT dated and effective as of January 1, 1998, by and
between ALLIANCE GAMING CORPORATION, a Nevada corporation, 6601 South Bermuda
Road, Las Vegas, Nevada 89119 (the "Company"), and ROBERT L.
MIODUNSKI (the "Executive").
The parties agree as follows:
I. Employment. The Company employs the Executive, and the Executive
accepts employment by the Company, on the terms and conditions set forth in
this Agreement.
1. Term. The term of this Agreement shall begin on January 1, 1998, and, unless
terminated earlier pursuant to this Agreement, shall expire on December 31,
2000.
1. Position and Duties. The Executive shall serve as Senior Vice
President-Nevada Route Operations and President-United Coin Machine Co., and
shall report to the President and Chief Executive Officer of the Company. The
Executive shall perform the duties contemplated by such title and such other
duties, consistent with his experience and abilities, as may be assigned to the
Executive by the President and Chief Executive Officer of the Company. The
Executive shall devote his full time and efforts to the business and affairs of
the Company, use his best efforts to further the interests of the Company, and
at all times conduct himself in a manner that reflects credit on the Company. It
is contemplated that the Executive shall render services to the Company from the
Company's principal place of business; however, the parties acknowledge and
agree that the Executive may be required to travel from time to time in
fulfilling his duties hereunder.
1. Compensation.
a. Salary. The Company shall pay the Executive a base salary of $235,000 a year
in installments on the regularly recurring paydays in accordance with the
Company's practice. The Company shall also pay the Executive in a single lump
sum the difference between the amount of base salary that the Executive would
have earned at the foregoing rate for the period September 6, 1997, through
December 31, 1997, and the amount of base salary he actually did earn during
that period. Increases in the base salary shall be considered by the Company at
least annually, beginning with the completion of the first year of employment
and will be based on criteria applicable to other senior executives of the
Company, provided, however, that the award of any such increase shall be at the
sole discretion of the Company.
a. Bonuses. The Executive shall be eligible to receive a cash bonus from the
Company each year, provided, however, that the Company shall not be obligated to
pay any bonus, and the payment, if any, and amount and timing of any such bonus
shall be solely within the discretion of the Company and may be based on any
criteria the Company deems relevant.
a. Options. In addition to any options granted under previous agreements or
otherwise, the Executive shall be eligible to receive options (the "Options") to
acquire shares of the publicly-traded common stock of Alliance Gaming
Corporation, provided, however, that the Company shall not be obligated to award
any Options and the award, if any, and amount, timing, and terms of any such
Options shall be solely within the discretion of the Company and may be based on
any criteria the Company deems relevant.
a. Reimbursement of expenses. In accordance with established policies and
procedures of the Company as in effect from time to time, the Company shall pay
to or reimburse the Executive for all reasonable and actual out-of-pocket
expenses including but not limited to travel, hotel, and similar expenses,
incurred by the Executive from time to time in performing his obligations under
this Agreement.
a. Vacation. The Executive shall be entitled to annual paid vacation time,
prorated for any partial employment year, consistent with the Company's policy
applicable to its senior executives. The Executive also may accumulate and carry
forward unused vacation days from year to year consistent with Company policy.
The Executive shall also be entitled to reasonable periods of sick leave with
compensation and all paid holidays given by the Company to its senior executive
officers.
a. Other benefits. The Executive shall be entitled to other employment benefits,
including but not limited to life insurance, medical and hospitalization,
disability, and retirement benefits, consistent with the benefits provided to
other senior executives of the Company.
a. No Reduction. There shall be no material reduction or diminution of the
benefits provided in this section during the term of this Agreement unless (i)
the Executive consents, (ii) an equitable arrangement (embodied in a substitute
or alternative benefit or plan) is made with respect to such benefit or plan, or
(iii) the reduction is part of a program of across-the-board benefit reductions
similarly affecting the senior executive officers of the Company.
1. Termination.
a. Disability. If the Executive, because of illness or incapacity, fails to
discharge his duties under this Agreement for six or more consecutive months or
for noncontinuous periods aggregating to twenty-two weeks in any twelve-month
period, the Company may terminate this Agreement on thirty days' notice,
whereupon the obligations of the Company and the rights of the Executive under
this Agreement shall terminate, except that:
i. The Company shall pay the Executive's salary on a pro-rata basis through the
date of termination, offset by any benefits payable to the Executive under any
disability insurance policy paid for by the Company; and
i. One-half of any unvested Options shall vest and become exercisable by the
Executive's estate for two years after the date of the Executive's death; and
i. The Executive shall have the right, at the Executive's expense, to the
assignment of any and all insurance policies or health protection plans in
accordance with the terms and conditions of those plans.
a. Death. In the event of the Executive's death, this Agreement shall terminate
as of the date of his death, in which case the obligations of the Company and
the rights of the Executive under this Agreement shall terminate except that:
i. The Company shall continue to pay the Executive's salary for six months after
the date of death, offset by any benefits payable to the Executive or the
Executive's estate under any life insurance policy paid for by the Company; and
i. The Company shall reimburse the Executive's estate for all expenses
incurred and reimbursable under section ; and
i. One-half of any unvested Options shall vest and become exercisable by the
Executive's estate for two years after the date of the Executive's death.
a. Termination by Company for Cause.
i. The Company may terminate this Agreement for cause at any time immediately on
notice to the Executive, in which case the Company's obligations and the
Executive's rights under this Agreement shall terminate. For purposes of this
provision, the term "cause" includes, but is not limited to:
(1) The Executive's insubordination, fraud, disloyalty, dishonesty, willful
misconduct, or gross negligence in the performance of the Executive's duties
under this Agreement, including willful failure to perform such duties as may
properly be assigned to the Executive under this Agreement.
(1) The Executive's material breach of any provision of this Agreement.
(1) The Executive's failure to qualify (or having so qualified being thereafter
disqualified) under any suitability or licensing requirement of any jurisdiction
or regulatory authority to which the Executive may be subject by reason of his
position with the Company and its affiliates or subsidiaries.
(1) The Executive's commission of a crime against the Company or violation of
any law, order, rule, or regulation pertaining to the Company's business.
(1) The Executive's inability (other than because of death or disability under
sections and ) to perform the job functions and responsibilities assigned in
accordance with standards established, whether or not in writing, from time to
time by the Company, in its sole discretion.
(1) The Company obtains from any source information with respect to the
Executive or this Agreement that would, in the opinion of the Company,
jeopardize the gaming licenses, permits, or status of the Company or any of its
subsidiaries or affiliates with any gaming commission, board, or similar
regulatory or law enforcement authority.
i. Any termination by the Company for cause shall not be in limitation of any
other right or remedy the Company may have under this Agreement or otherwise.
a. Termination by Company without cause. The Company may terminate this
Agreement at any time without cause (as defined in paragraph ), whereupon the
Company's obligations and the Executive's rights under this Agreement shall
terminate, except that:
i. The Company shall continue to pay the Executive's salary and furnish the
benefits described in paragraph for twelve months after the date of termination,
offset by any compensation and benefits received by the Executive from other
employment during that period; and
i. One-half of any unvested Options shall vest and become exercisable by the
Executive for two years after the date of termination.
a. Termination by Executive with cause. If the Executive resigns with cause, the
Company's obligations and the Executive's rights under this Agreement shall
terminate, except that:
i. The Company shall continue to pay the Executive's salary and furnish the
benefits described in paragraph for twelve months after the date of termination,
offset by any compensation and benefits received by the Executive from other
employment during that period; and
i. One-half of any unvested Options shall vest and become exercisable by the
Executive for two years after the date of termination.
As used in this provision, "cause" is limited to the Company's
failure to cure either of the following within thirty days after
demand by the Executive: (i) the Company's failure to pay any
portion of the base salary within thirty days after it is due, and
(ii) the assignment to the Executive of duties materially
inconsistent with the duties and position set forth in this
Agreement.
a. Termination by Executive without cause. If the Executive resigns without
cause (as defined in paragraph ), this Agreement shall terminate as of the date
of his resignation, and the Company's obligations and the Executive's rights
under this Agreement shall terminate.
a. Survival of restrictive covenants. Notwithstanding the expiration or
termination of this Agreement for any reason, the Executive's covenants in
section and his obligations under that section shall survive the termination of
this Agreement as set forth in that section.
1. Restrictive covenants.
a. Covenant not to compete.
i. During the term of this Agreement and for twelve months after its termination
for any reason (other than its expiration at the end of is term pursuant to
paragraph , except as otherwise provided in paragraph ), the Executive will not,
directly or indirectly, whether as employee, owner, partner, agent, employee,
officer, consultant, advisor, stockholder (except as the beneficial owner of not
more than 5 percent of the outstanding shares of a corporation, any of the
capital stock of which is listed on any national or regional securities exchange
or quoted in the daily listing of over-the-counter market securities and, in
each case, in which the Executive does not undertake any management or
operational or advisory role) or in any other capacity, for the Executive's own
account or for the benefit of any person or entity, establish, engage, or be
connected with any person or entity that is at the time engaged in a business
then in competition with the business of the Company (which, for purposes of
this paragraph, shall include any of the Company's subsidiaries or affiliates)
in any area where the Company is doing business at the time of termination. The
Company and the Executive acknowledge and agree that the Company's market is
unlimited geographically and that the scope and duration of the covenant in this
paragraph are reasonable and fair; however, if a court of competent jurisdiction
determines that this covenant is overbroad or unenforceable in any respect, the
Company and the Executive acknowledge and agree that the covenant shall be
enforced to the greatest extent any such court deems appropriate, and such court
may modify this covenant to that extent.
i. At the expiration of this Agreement at the end of its term under paragraph ,
the Company may, in its sole and absolute discretion, continue to pay the
Executive the base salary set forth in paragraph and the other benefits set
forth in paragraph , in which case, and for so long as the Company continues to
do so, the Executive shall be bound by the covenant set forth in paragraph .
a. Covenant not to solicit customers, employees, or consultants. Executive shall
not, directly or indirectly, during the term of this Agreement and for twelve
months after its expiration or termination for any reason, (i) solicit the trade
or patronage of any of the customers or prospective customers of the Company
(which, for purposes of this paragraph, shall include any of the Company's
subsidiaries or affiliates) or of anyone who has heretofore traded or dealt with
the Company, regardless of the location of such customers or prospective
customers of the Company with respect to any technologies, services, products,
trade secrets, or other matters in which the Company is active, or (ii) aid or
endeavor to solicit or induce any other employee or consultant of the Company to
leave the Company to accept employment of any kind with any other person or
entity.
a. Confidential Information and Non-Disparagement.
i. In accordance with NRS 600A.010 et seq. (the so-called Uniform Trade Secrets
Act), the Executive shall hold in a fiduciary capacity for the benefit of the
Company and its stockholders all secret, confidential, and proprietary
information, knowledge, and data relating to the Company (and any of its
subsidiaries or affiliates), obtained by the Executive during or by reason of
the Executive's employment by the Company. During the term of this Agreement and
after its expiration or termination for any reason, the Executive shall not,
without the prior written consent of the Company or except as may be required by
law, communicate or divulge any such information, knowledge, or data to any
person or entity other than the Company (or as applicable its subsidiaries or
affiliates) and those designated by them that would result in any
misappropriation under and as defined in such Act, except that, while employed
by the Company, in furtherance of the business and for the benefit of the
Company, the Executive may provide confidential information as appropriate to
attorneys, accountants, financial institutions, and other persons or entities
engaged in business with the Company from time to time.
i. Each party agrees that, after the expiration or termination of this Agreement
for any reason, neither shall, publicly or privately, disparage or make any
statements (written or oral) that could impugn the integrity, acumen (business
or otherwise), ethics, or business practices of the other (including, in the
case of the Company, its affiliates and subsidiaries), except, in each case, to
the extent (but solely to the extent) necessary (i) in any judicial or
arbitration action to enforce the provisions of this Agreement, or (ii) in
connection with any judicial or administrative proceeding to the extent required
by applicable law.
a. Standstill. During the term of this Agreement and for twelve months after its
expiration or termination for any reason, the Executive shall not, singly or
with any other person, directly or indirectly:
i. Propose, enter into, agree to enter into, or encourage any other person to
propose, enter into, or agree to enter into (i) any form of business
combination, acquisition, or other transaction relating to the Company or any of
its subsidiaries or affiliates, or (ii) any form of restructuring,
recapitalization, or similar transaction with respect to the Company or any of
its subsidiaries or affiliates; or
i. Acquire, or offer, propose, or agree to acquire, by tender offer, purchase,
or otherwise, any voting securities of the Company or of its subsidiaries or
affiliates, except through the exercise of options or warrants beneficially
owned as of the date of this Agreement; or
i. Make or in any way participate in any solicitation of proxies or written
consents with respect to voting securities of the Company or any of its
affiliates or subsidiaries (it being understood that the mere execution of a
proxy or written consent for his own securities beneficially owned shall not be
treated as constituting participation in such a solicitation); or
i. Become a participant in any election contest with respect to the Company or a
nominee to or member of its board of directors or the board of directors of any
affiliate or subsidiary of the Company or any of its affiliates or subsidiaries;
or
i. Seek to influence any person with respect to the voting or disposition
of any voting securities of the Company or any of its affiliates or
subsidiaries; or
i. Demand a copy of the list of stockholders or other books and records
of the Company or any of its subsidiaries or affiliates; or
i. Participate in or encourage the formation of any partnership, syndicate, or
other group that owns or seeks or offers to acquire beneficial ownership of any
voting securities of the Company or any of its affiliates or subsidiaries or
that seeks to affect control of the Company or any of its affiliates or
subsidiaries or for the purpose of circumventing any provision of this
Agreement; or
i. Propose or support any director or slate of directors for nomination,
appointment, or election to the board of directors of the Company or any of its
affiliates or subsidiaries (it being understood that the mere execution of a
proxy or written shareholder consent for his own securities beneficially owned
shall not be treated as constituting such support); or
i. Otherwise act to seek or to offer to control or influence, in any
manner, the management, the board of directors, or the policies of the
Company or any of its affiliates or subsidiaries; or
i. Seek to amend or change this provision.
a. The Executive acknowledges that the Company will suffer irreparable injury,
not readily susceptible of valuation in monetary damages, if the Executive
breaches any of his obligations under this section. Accordingly, the Executive
agrees that the Company will be entitled, at the Company's option, to injunctive
relief against any breach or prospective breach by the Executive of the
Executive's obligations under this section in any federal or state court of
competent jurisdiction sitting in the State of Nevada, in addition to monetary
damages and any other remedies available at law or in equity. The Executive
hereby submits to the jurisdiction of such courts for the purposes of any
actions or proceedings instituted by the Company to obtain such injunctive
relief, and agrees that process may be served on the Executive by registered
mail, addressed to the last address of the Executive known to the Company, or in
any other manner authorized by law.
a. Material Inducements. The restrictive covenants and other provisions in this
section are material inducements to the Company entering into and performing
this Agreement. Accordingly, in the event of any breach of the provisions of
this section by the Executive, in addition to all other remedies at law or in
equity possessed by the Company, (i) the Company shall have the right to
terminate and not pay any amounts payable to the Executive under this Agreement,
(ii) all Options that are unexercised shall be immediately forfeited and
returned to the Company, and (iii) the Executive shall immediately account to
the Company and return to the Company an amount in cash equal to all profits or
benefits obtained or realized by the Executive by virtue of the ownership or
disposition of the Options.
1. Indemnification and Liability Insurance. If the Executive is or during the
term of this Agreement becomes a director of or holds a corporate office with
the Company:
a. Indemnification. The Company shall indemnify and hold the Executive harmless,
to the fullest extent legally permitted by Section 78.751 of the Nevada
Corporation Code (as amended and in effect from time to time) against any and
all expenses, liabilities, and losses (including without limitation, reasonable
attorneys' fees and disbursements of counsel reasonably satisfactory to the
Company), incurred or suffered by him in connection with his service as a
director or officer of the Company under this Agreement, in each case, except to
the extent of the Executive's intentional misconduct, fraud, or knowing
violation of law.
a. Insurance. The Company shall maintain, for the benefit of the Executive, a
directors' and officers' liability insurance policy insuring the Executive's
service as a director or officer or both of the Company (or any affiliate or
subsidiary of the Company) during the term of this Agreement in accordance with
its customary practices as in effect from time to time. The parties acknowledge
and agree that the policy may cover other officers and directors of the Company
in addition to the Executive.
1. Licenses and approvals. This Agreement is contingent on any necessary
approvals and licenses from any regulatory authorities having jurisdiction over
the parties or the subject matter of this Agreement. Each party shall promptly
apply to the appropriate regulatory authorities for any licenses and approvals
necessary for that party to perform under this Agreement, shall diligently
pursue its applications and pay all associated costs and fees, and shall
otherwise cooperate with any requests, inquiries, or investigations of any
regulatory authorities or law enforcement agencies in connection with the
Company, its affiliates, or this Agreement. If any license or approval necessary
for either party to perform under this Agreement is denied, suspended, or
revoked, this Agreement shall be void, provided, however, that if the denial,
suspension, or revocation affects performance of the Agreement in part only, the
parties may be mutual agreement continue to perform under this Agreement to the
extent it is unaffected by the denial, suspension, or revocation.
1. Compliance program. The parties acknowledge that Alliance Gaming Corporation,
as a company that operates and as the parent of companies that operate under
privileged licenses in a highly regulated industry, maintains a compliance
program to protect and preserve the name, reputation, integrity, and good will
of Alliance and its subsidiaries and affiliates through a thorough review and
determination of the integrity and fitness, both initially and thereafter, of
any person or company that performs work for those companies or with which those
companies are otherwise associated, and to monitor compliance with the
requirements established by gaming regulatory authorities in various
jurisdictions around the world. This Agreement and the association of the
Company and its affiliates with the Executive are contingent on the continued
approval of Alliance and its compliance committee under the Alliance compliance
program. The parties shall cooperate with Alliance and its compliance committee
as reasonably requested by Alliance or the committee and shall provide the
committee with such information as it may request. If Alliance, acting on the
recommendation of the committee, withdraws its approval of this Agreement or one
or more of the other parties, then this Agreement shall be void and neither
party shall have any rights thereunder.
1. General Provisions.
a. Arbitration. Any controversy or claim arising out of or relating to this
Agreement or its breach (except, at the option of the Company, a controversy or
claim arising out of or relating to section , which the Company may choose to be
adjudicated in a federal or state court sitting in Las Vegas, Nevada), shall be
settled by arbitration in Las Vegas, Nevada, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment on the
award rendered by the arbitrator or arbitrators may be entered in any court
having jurisdiction thereof. If any arbitration or other legal or equitable
action or proceeding is instituted to enforce any provisions of this Agreement,
the prevailing party shall be entitled to recover as costs such amounts as the
court or arbitrator may judge to be reasonable, including costs and attorneys'
fees.
a. Further assurances. Each party shall execute all documents and take all other
actions necessary to effect the provisions and purposes of this Agreement.
a. Entire agreement. This Agreement contains the entire agreement between the
parties and supersedes all other oral and written agreements previously entered
into by the parties concerning the same subject matter.
a. Modification, rescission, and assignment. This Agreement may be modified or
rescinded only with the written consent of both parties. Neither this Agreement
nor any right or interest under this Agreement shall be assignable by either
party without the written consent of the other, provided, that (i) if the
Executive dies during the term of this Agreement, the Executive's estate and his
heirs, executors, administrators, legatees, and distributees shall have the
rights and obligations as provided in this Agreement, and (ii) nothing contained
in this Agreement shall limit or restrict the Company's ability to merge or
consolidate or effect any similar transaction with any other entity,
irrespective of whether the Company is the surviving entity (including a split
up, spin off, or similar type transaction), provided that one or more of such
surviving entities continues to be bound by the provisions of this Agreement now
binding on the Company.
a. Controlling law; severability. Nevada law shall govern this Agreement and its
interpretation. If any provision is unenforceable for any reason, it shall be
deemed stricken from the Agreement but shall not otherwise affect the intention
of the parties or the remaining provisions of the Agreement.
a. Binding effect. This Agreement shall bind and inure to the benefit of each of
the parties and their respective heirs, successors, administrators, executors,
and assigns.
a. No third party benefits. This Agreement is for the benefit of the parties and
their permitted successors and assigns. The parties intend neither to confer any
benefit hereunder on any person, firm, or corporation other than the parties
hereto, nor that any such third party shall have any rights under this
Agreement.
a. Indulgence. Neither the failure nor any delay on the part of either party to
exercise any right, remedy, power, or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power, or privilege preclude any other or further exercise of the
same or of any other right, remedy, power, or privilege, nor shall any waiver of
any right, remedy, power, or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power, or privilege with respect to
any other occurrence.
a. Notices. All notices required by this Agreement must be in writing and must
be delivered, mailed, or telecopied to the addresses given above or such other
addresses as the parties may designate in writing.
a. Counterparts; facsimiles. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which, taken together,
shall constitute one and the same instrument. This Agreement may be executed and
delivered by exchange of facsimile copies showing the signatures of the parties,
and those signatures need not be affixed to the same copy. The facsimile copies
so signed will constitute originally signed copies of the same consent requiring
no further execution.
a. Captions; construction; drafting ambiguities. The captions in this Agreement
are for convenience only and shall not be used in interpreting it. In
interpreting this Agreement any change in gender or number shall be made as
appropriate to fit the context. Each party has reviewed and revised this
Agreement with independent counsel or has had the opportunity to do so. The rule
of construction that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement or of any
amendments or exhibits to this Agreement.
1. Condition precedent. This Agreement is subject to approval by the Company's
board of directors and shall be of no force and effect until that approval is
given and is evidenced by a written resolution of the board.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first set forth above.
"COMPANY" "EXECUTIVE"
Alliance Gaming Corporation
/s/ Morris Goldstein _/s/ Robert L. Miodunski
Morris Goldstein, President Robert L. Miodunski
Earnings per share computations (unaudited)
(In 000's except share data)
Three Months ended
March 31, 1998
Income Shares Per share
(Numerator)(Denominator) Amounts
Basic EPS
Loss applicable to common shares $(1,115) 32,042 $(0.03)
=======
Effect of Dilutive Securities (a)
Stock options --
Warrants --
Convertible preferred stock dividends --
------- -------
Dilutive EPS
Loss applicable to Common Shares
with assumed conversions $(1,115) 32,042 $(0.03)
======== ====== =======
Nine Months ended
March 31, 1998
Income (Loss) Shares Per share
(Numerator) (Denominator) Amounts
Loss before extraordinary item $(16,261)
Less: Preferred stock dividends
including premium on repurchase 19,710
Basic EPS
Loss before extraordinary item $(35,971) 31,956 $(1.12)
Extraordinary loss (42,033) (1.32)
------ -----
Loss applicable to common shares $(78,004)
$(2.44)
Effect of Dilutive Securities (a)
Stock options --
Warrants --
Convertible preferred stock dividends --
------- -------
Dilutive EPS
Loss applicable to common shares
with assumed conversions $(78,004) 31,956 $(2.44)
========= ====== =======
<PAGE>
cont.
Restated
Three Months ended
March 31, 1997
Income Shares Per share
(Numerator) (Denominator) Amounts
Basic EPS
Loss applicable to common shares $(2,420) 31,837 $(0.08)
=======
Effect of Dilutive Securities (a)
Stock options --
Warrants --
Convertible preferred stock dividends --
------ -------
Dilutive EPS
Loss applicable to common shares
with assumed conversions $(2,420) 31,837 $(0.08)
======== ====== =======
Restated
Nine Months ended
March 31, 1997
Income (Loss) Shares Per share
(Numerator) (Denominator) Amounts
Basic EPS
Loss applicable to common shares $(3,630) 31,814 $(0.11)
=======
Effect of Dilutive Securities (a)
Stock options --
Warrants --
Convertible preferred stock dividends --
------- ------
Dilutive EPS
Net loss applicable to common shares
with assumed conversions $(3,630) 31,814 $(0.11)
======== ====== =======
<PAGE>
cont.
(a) The following securities were not included in the computation of diluted
earnings per share because to do so would have been antidilutive for the periods
presented:
For the three months ended For the nine months ended
March 31, March 31,
1998 1997 1998 1997
---- ---- ---- ----
(in 000s)
Stock options 4,387 3,605 4,387 3,635
Warrants 2,250 2,000 2,250 2,000
----- ----- ----- -----
6,637 5,605 6,637 5,635
===== ===== ===== =====
Adjusted for application
of the treasury stock
method 2,446 1,146 1,985 2,037
===== ===== ===== =====
Under the treasury stock method, the assumed net proceeds from the exercise of
the weighted average number of common stock equivalents outstanding during
the period are assumed to be used to repurchase common stock at its average
market price during the period. Such repurchase of common stock reduces the
dilutive effect of the common stock equivalents.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information excerpted from Form 10-Q
for the quarter ended March 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1998
<CASH> 28,658
<SECURITIES> 0
<RECEIVABLES> 95,582
<ALLOWANCES> 13,164
<INVENTORY> 39,536
<CURRENT-ASSETS> 159,273
<PP&E> 133,368
<DEPRECIATION> 50,079
<TOTAL-ASSETS> 346,568
<CURRENT-LIABILITIES> 42,891
<BONDS> 0
0
13,348
<COMMON> 3,208
<OTHER-SE> (43,643)
<TOTAL-LIABILITY-AND-EQUITY> 346,568
<SALES> 153,292
<TOTAL-REVENUES> 306,911
<CGS> 87,450
<TOTAL-COSTS> 190,950
<OTHER-EXPENSES> 70,679
<LOSS-PROVISION> 1,080
<INTEREST-EXPENSE> 21,030
<INCOME-PRETAX> (14,098)
<INCOME-TAX> 2,163
<INCOME-CONTINUING> (16,261)
<DISCONTINUED> 0
<EXTRAORDINARY> (42,033)
<CHANGES> 0
<NET-INCOME> (78,004)
<EPS-PRIMARY> (2.44)
<EPS-DILUTED> (2.44)
</TABLE>
