Bally Technologies, Inc. (BYI)

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Bally Technologies, Inc. (BYI)

F4Q2011 Earnings Call

August 11, 2011 4:30 p.m. ET


Richard Haddrill - Chief Executive Officer

Neil Davidson - Chief Financial Officer

Ramesh Srinivasan - President and Chief Operating Officer


Joe Greff - JPMorgan

Steven Wieczynski - Stifel Nicolaus

David Katz - Jefferies & Co.

Mark Strawn - Morgan Stanley

Dennis Forst - KeyBanc

Todd Eilers - Roth Capital Partners



Good day, ladies and gentlemen, and welcome to the Fourth Quarter and Full Fiscal Year 2011 Bally Technologies, Incorporated Earnings Conference Call. My name is Stacey and I will be your conference coordinator for today’s call. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session at the end of the conference. (Operator Instructions) At this time, I would like to turn the call over to Mr. Richard Haddrill, Chief Executive Officer. Please proceed.

Richard Haddrill

Thank you, Stacey, and welcome everyone to Bally Technologies fourth quarter and full fiscal year 2011 earnings call. While our overall industry experienced another difficult year, our customers’ businesses are now improving and I am pleased with our work here at Bally this year. This quarter each major revenue category increased over the prior year with gaming operations and systems setting all time records. This year we successfully released ALPHA 2, we commercialized iVIEW DM, we purchased $475 million of our stock and continued our excellent product innovation and key new market penetration initiatives.

For our fiscal 2011 in gaming operations we got off to a great start with the successful launch of Cash Spin, and during the year we had several more successful launches with Vegas Hits and Cash Wizard and most recently the introduction of our new wide-area progressive line up. These and other exciting new game ops products combined with a strong end of year revenue run rate, position us very well for the future in this important segment.

Overall, our product innovations this past year were outstanding. We released the Pro Curve, the first of its kind gaming device with a curved LCD display. All of our ALPHA 2 cabinets are equipped with the iDECK, another first for the industry. We continue to develop exciting player centric applications for iVIEW network and now we have acquired MacroView, the leader in mobile gaming applications.

While opportunities on our systems business had been frustratingly slow to convert to revenue, we are now confident more than ever in the long-term outlook for this segment. In the past few months we have announced several large wins that we have been anticipating for some time now. And we closed the year with all time record quarterly revenue for systems overall, as well as for maintenance.

So for today’s call, Neil Davidson will cover our overall financial results, Ramesh will discuss the operating highlights and then I will have some closing comments and provide some guidance for the future. We will then open it up for questions. Neil, over to you.

Neil Davidson

Thank you, Dick. First let me review or safe harbor language. Today’s call and simultaneous webcast contain forward-looking statements about Bally and our future business. These forward-looking statements are based on currently available information. Actual results could differ materially from those anticipated in the forward-looking statements and reported results should not be considered an indication of future performance. We do not intend and undertake no obligation to update our forward-looking statements, including forecast of future performance, the potential for growth of existing markets or the opening of new markets for our products, as well as future prospects and proposed new products.

More information on risks and uncertainties that may affect our business and financial results or may cause us not to achieve our forecast are included in our Annual Report on Form 10-K for the year ended June 30, 2010, and other public filings we have made with the Securities and Exchange Commission. The forward-looking statements made on this call and webcast, the archived version of the webcast, and any transcripts of this call, speak only as of this date August 11, 2011. Today’s call and webcast may include non-GAAP financial measures within the meaning of Regulation G. A reconciliation of all such non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in today’s press release.

Today we reported our financial results for the quarter and for the year ended June 30, 2011. I want to remind everyone that during the quarter we completed a tender offer for the purchase of approximately 10 million shares of our common stock and we refinanced our credit facility. We were pleased that we were able to obtain very favorable financing terms allowing for, amongst other things, a decrease in our pricing grid by 125 basis points on comparable leverage levels.

We closed the year with a leverage ratio slightly above two turns which prices our debt at 175 basis points plus LIBOR. During the quarter, we fixed the interest rate on the entire term loan of our new facility through its maturity at approximately 2.07%. For the foreseeable future we anticipate continuing to allow the rate on the revolver which amounted to approximately $219 million as of June 30, 2011 to flow with LIBOR.

As a result of refinancing our debt, we recorded a loss on the extinguishment of debt of approximately $2.7 million net of tax, or $0.05 per diluted share in the current quarter. After adding back the $0.05 loss for debt extinguishment, diluted earnings per share from continuing operations was $0.56 for the quarter and $1.87 for the full year. When factoring out the tender offer and the debt extinguishment costs, our annual diluted earnings per share were in line with the guidance provided on our last earnings conference call.

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