Bally Technologies reports flat second quarter

Bally Technologies said today its second-quarter earnings were relatively flat compared to a year ago. The Las Vegas-based slot machine maker reported a net income of $33.3 million in the quarter that ended Dec. 31. The figure translated into earnings per share of 58 cents.

A year ago, Bally reported net income of $33.6 million and 59 cents per share.

Bally tried to sweeten the news for investors, announcing a seven-year contract extension with the New York Lottery to provide video lottery gaming terminals at the state’s eight racetrack casinos.

Bally controls 51 percent of New York’s video lottery market, providing 6,400 machines, which are similar to slot machines but operate through a central server.

The company did not provide a figure for the contract.

During the second quarter, companywide revenues were $213.5 million, an 8.5 percent decline compared with $233.3 million in the same quarter a year ago.

Bally Chief Executive Officer Richard Haddrill told investors the company had stayed profitable despite the challenging market conditions. He said revenues declined because slot machine sales to American casinos were down.

“We see positive long-term trends for our business as a result of planned gaming expansion, the extended deferral of customer game capital expenditures, and our upcoming product launches,” Haddrill said.

As for the New York contract, Haddrill said the company, which is one of three VLT providers in the state, wants to provide machines to the Aqueduct Race Track in New York City, once the state chooses an operator.

“We look forward to building our partnership with the lottery,” Haddrill said.

Before the company announced earnings, Roth Capital Markets gaming analyst Todd Eilers said Bally systems business benefited from several placements and the company shipped slot machines during the quarter to a new casino in Alabama, Aria and a Pennsylvania racino.

“We … view Bally as the best supplier to own in the space considering its unique growth opportunity in systems combined with international expansion opportunities,” Eilers told investors.

Morgan Joseph gaming analyst Justin Sebastiano expected the slot machine maker to see a quarter-over-quarter reduction in the number of slot machines sold, but the figure reflected a “dearth of new casino openings” and the lack of casinos willing to spend money replacing older games.

However, he expects casinos will spend more in 2010 on new slot machines, which would benefit Bally.

“The company continues to make great strides on the video side of the business on both the domestic and international fronts,” Sebastiano said in a research note.

Bally’s share price took a slight hit earlier this week when Goldman Sachs gaming analyst Steven Kent downgraded the stock value of rival slot maker International Game Technology. His comments, which took a pessimistic view of regional gaming markets and IGT’s prospects, hurt the sector as a whole.

“We are increasingly concerned that regional markets will remain weak,” Kent said.

Bally, which reported earnings after the close of trading on the New York Stock Exchange, finished Wednesday at $42.60, down 63 cents or 1.46 percent.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.

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