Multimedia Games buys Sigma;
boosts Class III

Feb 1, 2005 7:02 AM

Multimedia Games Inc. (MGAM), primarily known as a supplier of Class II machines to Native American casinos, expanded its potential in the Class III industry by acquiring Sigma Game Inc. of Las Vegas.

In an all-cash transaction for an undisclosed amount, Multimedia Games acquired substantially all of Sigma’s intellectual property, including patents, trademarks and games themes, as well as at least 350 gaming machines and the related molds and tooling equipment.

The company said it plans to deploy the machines it has acquired to Class III tribal and commercial casinos in various jurisdictions.

Subject to regulatory approvals, Multimedia also secured the right to acquire the corporate stock of Sigma, the privately-held company that has gaming licenses in a number of gaming jurisdictions including both Nevada and New Jersey.

Commenting on the acquisition, Multimedia President and CEO Clifton Lind remarked, "Sigma has a number of intellectual property patents that we believe will complement our existing technology and help us to further diversify our sources of revenue as we target Native American Class III and the traditional commercial casino gaming market opportunities."

The announcement came following the company’s release of its operating results for the fiscal first quarter that ended on Dec. 31, 2004.

Although the quarterly results were consistent with previously provided financial guidance, it fell below analysts’ expectations, thus resulting in the share price falling to a level that challenged the company’s 52-week low. At the end of trading on Friday, the shares were priced at $8.70.

Revenues for the period rose from $34.5 million to $39.2 million but net income dropped to $5 million or $0.17 per share compared to last year’s $7.3 million or $0.24 a share.

The drop in earnings, the company explained, resulted from the company’s reclassification of its income statement to reflect a change in the gross basis method it used to account for and collect all revenues associated with its prize payouts. However, the company entered into revenue arrangements with its tribal customers that required the classification change.

Booming prices

Reports from Wynn Las Vegas (WYNN) relative to its advance booking prices for the resort that is scheduled to open on April 28 have resulted in a number of increases in earnings being projected by gaming analysts.

The analysts are now predicting that a standard room in the 2,700-room resort between its opening and Nov. 26 will average $271 per day, up from previous estimates of $235 per day.

On the basis of these early bookings, analysts are estimating that the increase could result in the property earning, before such items as taxes, interest, depreciation and amortization (often called EBITDA), of as much as $4 million more than previously estimated

A consensus of analysts has WYNN’s earnings at $0.45 a share following its opening.

Gaming to expand

While many states are concerned about expanding the amount of gambling that is now permitted, such thoughts have not hindered moves in Oregon.

According to a vote taken last week, the Oregon Lottery Commission is moving forward with the plan to add slot machines and video poker terminals in bars and taverns throughout the state.

The commissioners actually were acting in accordance with a directive from Gov. Ted Kulongoski who ordered that the lottery develop a plan to raise $60 million for the state police highway patrol budget.

Operators of bars and taverns will decide for themselves whether to install the machines. They will receive 28% of the gaming revenue profits although that percentage could be reduced to 25.6%.

A museum albatross?

A dozen years ago, R.D. Hubbard, former chairman and CEO of Pinnacle Entertainment Inc. (PNK), and his wife, Joan Dale Hubbard opened a museum on the site of their Ruidoso Downs racetrack in New Mexico.

Now the couple wants to give the museum to the state, an arrangement that has found favor with Gov. Bill Richardson.

But not everyone agrees.

The expense to maintain the museum, that features cowboy and Old West artifacts, runs about $1.3 million annually but the admissions only reach the $500,000 level of revenue. In order to accept the gift, New Mexico must pass a law that budgets $800,000 annually to maintain the property.

A former state museum official says it’s not worth it since the Hubbard museum is an "old albatross" and that Hubbard is just trying to palm it off on the state.

Dover’s earnings

During the month of December 2004, Dover Downs Gaming & Entertainment Inc. (DDE) changed the way its slots customers could use their accumulated awards points and because of it had to change the way it expensed these items.

As a result, without pro-forma adjustments, the company’s net earnings for the fourth quarter were $2.5 million or $0.10 per diluted share, compared with $4 million or $0.15 per diluted share in the fourth quarter of 2003.

When the pro-forma adjustments are made, earnings for the period were $0.15 per share compared to the previous year’s pro-forma earnings of $0.12 per share.

The company noted that the level of play was increasing and that the performance of Club customers was improving at an even greater rate.

The company also operated the Dover Downs Hotel and Conference Center. During the last quarter, occupancy of the hotel was at a 93% level, slightly below the total yearly occupancy level of 95%.

New appointments

Elisabeth Carrette, whose late husband, Francois, was chairman of Gaming Partners International Corporation (GPIC), has been named by the company to replace her husband on the board of directors.

The company said the appointment became effective on Jan. 27 after it was determined that her appointment was subject to regulatory approvals but that no pre-approvals would be required from the gaming authorities.

It was noted that Mrs. Carrette has also replaced her husband as the president of the supervisory board of Holding Wilson, S.A., which is the majority stockholder of GPIC.

Harrah’s Entertainment Inc. (HET) has named long-time employee Patrick Dennehy as senior vice president and general manager of Horseshoe Bossier City Hotel and Casino in Bossier City, La.

He will now leave his post as general manager of Harrah’s Cherokee Casino Hotel in North Carolina.

Dennehy joined Harrah’s 22 years ago and has served in executive positions in Illinois, Lake Tahoe, Nev., and New Orleans.

Paget L. Alves has joined GTECH Holdings Corporation (GTK) board of directors. He is president of Strategic Markets, a business unit of Sprint Business Solutions division.

MGM MIRAGE Inc. (MGG) has hired Bruce J. Gebhardt, a retired FBI agent, to oversee security at its hotel-casinos throughout the world.

THE INSIDER: Boyd Gaming Corporation (BYD) has declared a quarterly cash dividend of $0.085 per share to be paid on March 1 to shareholders of record on Feb. 11.

The Mohegan Tribal Gaming Authority has completed its purchase of the 400-acre Pocono Downs harness racing track in Wilkes-Barre, Pa., for $280 million from Penn National Gaming Inc. (PENN).

Analysts at KeyBanc Capital Markets have upgraded their rating of Isle of Capri Casinos Inc. (ISLE) to "aggressive buy"? from "buy."

Indian tribes who operate casinos in Arizona contributed $9.9 million from their casino revenue to various state programs during the last fiscal quarter.

Multimedia Games Inc. (MGAM) has been selected to provide electronic systems to the Israel National Lottery.

Kentucky State Tom Buford, a Republican, and his Democratic counterpart, Sen. David Boswell, have indicated that despite efforts by Churchill Downs Inc. (CHDN) the likelihood of racetrack slots in Kentucky is almost non-existent for calendar 2005.

Intralot of Greece and Ladbroke, the gaming division of Hilton Group of Britain, have established a global strategic alliance to cooperate on projects involving state lottery privatizations.

Ground was broken last week on the Silver Slipper Gambling Hall and Saloon in Bay State Louis, Miss.

The Maine Bureau of Alcohol and Lottery Operations has extended its lottery services contract with Scientific Games Corp. (SGMS). The extension is for four year.

Argosy Gaming Company (AGY) will announce its fourth quarter and year-end operating results on Feb. 9 at 7 a.m. PDT.