Scientific Games prospers
from ticket sales

Mar 1, 2005 9:02 AM

Benefiting from strong instant lottery ticket sales, Scientific Games Corporation (SGMS) reported increased revenues for the fourth quarter of 2004 and also for the entire year.

For the quarter that ended on Dec. 31, 2004, the company had revenues of $182.6 million compared to the previous year’s $176.8 million. Net income was $4.4 million or $0.05 per diluted share compared to net income before non-cash preferred stock dividend of $15 million or $0.17 per diluted share in the fourth quarter of 2003. Non-cash preferred stock dividend in 2003 was $2 million.

For the year, revenues increased to $725.5 million from the previous year’s $560.9 million, a jump of 29%. Net income before preferred stock dividend was $65.7 million o $0.72 per diluted share. In the previous year, net income before non-cash preferred stock dividend was $52.1 million or $0.59 per share. The preferred stock dividend in 2003 was $7.7 million and $4.7 million 2004.

The preferred stock dividend was eliminated when the holders converted the preferred stock into common stock in August 2004.

The company also showed a 33% rise in EBITDA (earnings before interest, taxes, depreciation and amortization) in 2004, going from $157 million to $209 million.

Lorne Weil, company chairman and CEO, called the quarter an "exciting one" as it saw the conclusion of a "debt refinancing that enabled us to virtually eliminate our 12½% senior subordinated notes, converted most of our floating rate debt into fixed rate instruments and increased our credit facilities by $300 million."

Weil added, "Instant ticket revenues continued to be extraordinarily strong in the quarter, especially among our cooperative services customers. We won a new instant lottery contract for the Louisiana Lottery, the extension of our Iowa online lottery contract, as well as a new video lottery monitoring and control agreement for Maine." He said the combined value of these activities represented at least $22.3 million revenues.

As for 2005, he said, it appeared from indications that sales would continue to be robust both at home and abroad.

Magna Entertainment

Racetrack ownership hasn’t been very profitable for the four years that Magna Entertainment Corp. (MECA) has been in business.

For calendar year 2004, the company posted a loss of $95.6 million, its third consecutive year of losses. In 2002, the company reported a loss of $14.3 million and last year reported a loss of $105 million.

Revenue for 2004 reached $731 million, topping the previous year’s $708 million. Diluted loss per share was $0.89 while the previous year the loss per share was $0.98.

Jim McAlpine, president of the company, called year the year a "challenging" one.

"While we have made strides toward our long-term goals and strategic vision in 2004, we incurred significant costs related to the pursuit of alternative gaming and regulatory reform and investments in strategic initiatives, including in-home distribution of racing via television and the Internet, Magna Racino, and our international wagering business, the benefits of which will only be realized in the future."

He called the company a "classic example of a young company with ambitious goals for future growth. However, he admitted that "We recognize that we cannot continue to strain our limited current resources with costs related to initiates providing no significant current revenue."

Aristocrat Leisure

The Australian company, Aristocrat Leisure Ltd., considered the world’s second largest slot machine maker, returned to profitability in 2004, primarily due to surging sales of gaming devices in the U.S.

During fiscal year 2004, the company posted a net profit of $174.7 million (Australian) against a loss of $106 million in 2003. The experience surpassed the company’s guidance of between $150 million and $170 million.

The company reported that sales in Las Vegas and Atlantic City contributed 32% of the company’s earnings in 2004. A year earlier, those sales represented just 4%.

As for 2005, the company said that January accounts "show an improvement on those of the prior year and the outlook across our businesses generally remains positive."