Alliance Gaming Inc. has delayed release of its 2005 fiscal year results for the third time, raising concerns that the company could default on credit agreements it has with its lenders.
In a conference call this morning, company executives said Alliance's failure to provide audited financial statements to its lenders could force the company to pay an additional 2 percentage points on its loans. The company has said in previous announcements that the delay in reporting could result in an impact of 30 to 50 cents a share on earnings for the fiscal year.
"Alliance could be in violation of its leverage ratio covenant, which it had previously believed was OK," said Deutsche Bank gaming analyst Marc Falcone in a note to investors this morning. "Furthermore, if Alliance is unable to complete and deliver its year-end audit and compliance certificates to its lenders by Sept. 28, (it) will also be in default under its credit agreement, however notice and cure provisions give Alliance until Nov. 4 to deliver financial statements and compliance certificates. Given these two significant issues, we would expect shares to be quite weak."
In early trading this morning, Alliance stock was down 43 cents, about 3.9 percent, to $10.47 a share on the New York Stock Exchange.
Chief Executive Richard Haddrill, in a conference call this morning, said auditors are working "day and night" to complete the company's financial reports, which are under review because of the timing of revenue recognition and as a result of the termination of a 9-month-old deal with its distributor of video poker games in the Oklahomamarket.
Alliance has taken back 600 machines as a result of that termination and the company is evaluating periods impacted.
Haddrill said the company plans to seek a 15-day extension for the filing of Securities and Exchange Commission documents, but added that even with the delay, the company may not be able to meet the new deadline. He said the company would offer another update the week of Sept. 19.
He added that the company has about $18 million in cash on hand and untapped credit reserves to handle additional interest expenses.
The financial reporting issues come at a time when Alliance also is dealing with recovery from the effects of Hurricane Katrina. The Las Vegas company owns a small casino in Vicksburg, Miss. Officials said the Rainbow Casino has reopened after being closed for four days, but play at the property is below normal levels.
Executives said they are working with their insurance carriers on recovery of lost property as well is business interruption.
Alliance has about 40 sales and service representatives and about 400 wide-area progressive slot machines and daily fee games in the area directly affected by the killer storm. Haddrill said all of the company's employees survived the storm.
In addition, the company said it had about 200 games scheduled for sale during the current quarter to other properties damaged by the hurricane.
While Alliance is dealing with those two gloomyfinancial issues, executives said they were upbeat about other developments.
The company on Thursday announced two major slot deals, including one with Las Vegas-based Boyd Gaming Corp. to supply some 5,000 slot machines to two properties, including the South Coast, scheduled to open in early 2006.
The other deal is with Magna Entertainment Corp. to place about 300 machines at its Remington Park racino in Oklahoma City, due to open in the fall. Alliance's Bally Gaming and Systems division will supply nearly half of the slot machines on the Remington Park floor.
Financial terms of both deals were not disclosed.
About 2,450 of the 5,000 slots ordered by Boyd Gaming will be placed at the South Coast with the others going to an undisclosed locals property.
The games at the Boyd properties will feature the diverse iVIEW interactive touch-screen displays as well as the new Bally Power Bonusing technology. TheiVIEW screens enable the casino to interact withplayers, either through loyalty offers, bonuses, special games and tournaments or through advertising messages flashed to players.
Alliance officials say the emergence of the technology, one of Haddrill's primary goals since he took over as chief executive about a year ago, enhances the entertainment experience for slot players.
Alliance officials also said they were upbeat about the company's array of product offerings to be presented at next week's Global Gaming Expo convention in Las Vegas.
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