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Multimedia Games’ First Quarter Revenue Rises 21.6% To $34.8 Million; Reports Diluted EPS Of $0.21 Inclusive Of $0.07 Per Diluted Share Benefit From Non-Recurring Items

These forward-looking statements reflect the current views, models, and assumptions of Multimedia Games, and are subject to various risks and uncertainties that cannot be predicted or qualified and could cause actual results in Multimedia Games' performance to differ materially from those expressed or implied by such forward looking statements. These risks and uncertainties include, but are not limited to, the ability of Multimedia Games to maintain strategic alliances, unit placements or installations, grow revenue, garner new market share, secure new licenses in new jurisdictions, successfully develop or place proprietary product, comply with regulations, or have its games approved by relevant jurisdictions. Other important risks and uncertainties that may affect the Company's business are detailed from time to time in the "Certain Risks" and "Risk Factors" sections of Multimedia Games' Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, and elsewhere in Multimedia Games' filings with the Securities and Exchange Commission. All forward-looking statements made herein are qualified by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. Readers are cautioned that all forward-looking statements speak only to the facts and circumstances present as of the date of this press release. Multimedia Games expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

- financial tables follow -

CONDENSED CONSOLIDATED BALANCE SHEETS

As of December 31, 2011 and September 30, 2011

(In thousands, except share and per-share amounts)

(Unaudited)

 
  December 31,   September 30,

ASSETS

2011 2011
CURRENT ASSETS:
Cash and cash equivalents $ 53,745 $ 46,710

Accounts receivable, net of allowance for doubtful accounts  of $473 and $400, respectively

15,360 16,004
Inventory 8,968 7,291
Prepaid expenses and other 3,936 5,300
Current portion of notes receivable, net 14,397 14,280
Federal and state income tax receivable   1,204     142  
Total current assets 97,610 89,727
Property and equipment and leased gaming equipment, net 46,313 47,399
Long-term portion of notes receivable, net 7,885 10,449
Intangible assets, net 27,006 28,395

Value added tax receivable, net of allowance of $787 and $817,  respectively

2,878 2,787
Other assets   2,398     2,471  
Total assets $ 184,090   $ 181,228  
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt $ 3,700 $ 3,700
Accounts payable and accrued liabilities 22,170 25,855
Deferred revenue   1,518     1,131  
Total current liabilities 27,388 30,686
Long-term debt, less current portion 32,375 33,300
Other long-term liabilities 657 679
Deferred revenue, less current portion   369     661  
Total liabilities   60,789     65,326  
Stockholders’ equity:
Preferred stock:

Series A, $0.01 par value, 1,800,000 shares authorized,no shares issued and outstanding

Series B, $0.01 par value, 200,000 shares authorized,no shares issued and outstanding

Common stock, $0.01 par value, 75,000,000 shares authorized,  35,210,640 and 34,559,522 shares issued, and 27,090,362  and 26,832,065, shares outstanding, respectively

352 346
Additional paid-in capital 98,709 95,063

Treasury stock, 8,120,278 and 7,727,457 common shares at cost,  respectively

(62,048 ) (60,164 )
Retained earnings 86,891 81,109
Accumulated other comprehensive loss, net   (603 )   (452 )
Total stockholders’ equity   123,301     115,902  
Total liabilities and stockholders’ equity $ 184,090   $ 181,228  
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended December 31, 2011 and 2010

(In thousands, except per-share amounts)

(Unaudited)

 
  Three Months Ended

December 31,

2011   2010
REVENUES:
Gaming operations $ 24,901 $ 21,995
Gaming equipment and system sales 9,593 6,085
Other   301     527  
Total revenues   34,795     28,607  
 
OPERATING COSTS AND EXPENSES:
Cost of gaming operations revenue (1) 2,015 1,938
Cost of equipment and system sales 4,158 3,248
Selling, general and administrative expenses 11,503 11,380
Research and development 3,634 3,196
Amortization and depreciation   9,690     9,988  
Total operating costs and expenses   31,000     29,750  
Operating income (loss) 3,795 (1,143 )
 
OTHER INCOME (EXPENSE):
Interest income 453 793
Interest expense (372 ) (835 )
Other income (expense)   919     (89 )
Income (loss) before income taxes 4,795 (1,274 )
Income tax benefit (expense)   987     (100 )
Net income (loss) $ 5,782   $ (1,374 )
 
Basic earnings (loss) per common share $ 0.21   $ (0.05 )
 
Diluted earnings (loss) per common share $ 0.21   $ (0.05 )
 
Shares used in earnings (loss) per common share:
 
Basic 27,265,844 27,649,184
 
Diluted 28,108,576 27,649,184
 

(1)

 

Cost of revenues exclude depreciation and amortization of gaming equipment, content license rights and other depreciable assets, which are included separately in the amortization and depreciation line item.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended December 31, 2011 and 2010

   
2011 2010
CASH FLOWS FROM OPERATING ACTIVITIES: (In thousands)
Net income (loss) $ 5,782 $ (1,374 )

Adjustments to reconcile net income (loss) to cash  provided by operating activities:

Amortization and depreciation 9,690 9,988
Accretion of contract rights 1,896 1,740
Share-based compensation 554 489
Other non-cash items 447 41
Interest income from imputed interest (418 ) (686 )
Changes in operating assets and liabilities   (4,028 )   2,575  
 
NET CASH PROVIDED BY OPERATING ACTIVITIES   13,923     12,773  
 
CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisitions of property and equipment  and leased gaming equipment

(9,189 ) (9,264 )
Transfer of leased gaming equipment to inventory 1,177 122
Acquisition of intangible assets (1,404 ) (789 )
Repayments under development agreements   2,361     3,542  
 
NET CASH USED IN INVESTING ACTIVITIES   (7,055 )   (6,389 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from exercise of stock options,  warrants and related tax benefit

3,098 575
Principal payments of long-term debt (925 ) (187 )
Purchase of treasury stock   (1,884 )   (2,030 )

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

  289     (1,642 )

EFFECT OF EXCHANGE RATES ON CASH ANDCASH EQUIVALENTS

  (122 )   (338 )
Net increase in cash and cash equivalents 7,035 4,404
Cash and cash equivalents, beginning of period   46,710     21,792  
Cash and cash equivalents, end of period $ 53,745   $ 26,196  
 

Reconciliation of U.S. GAAP Net income (loss) to EBITDA:

EBITDA is defined as earnings (loss) before net interest expense, taxes, amortization, depreciation, and accretion of contract rights. Although EBITDA is not a measure of performance calculated in accordance with generally accepted accounting principles (“GAAP”), Multimedia Games believes the use of the non-GAAP financial measure EBITDA enhances an overall understanding of Multimedia Games’ past financial performance, and provides useful information to the investor because of its historical use by Multimedia Games as a performance measure, and the use of EBITDA by other companies in the gaming equipment sector as a measure of performance. However, investors should not consider this measure in isolation or as a substitute for net income (loss), operating income (loss), or any other measure for determining Multimedia Games’ operating performance that is calculated in accordance with GAAP. In addition, because EBITDA is not calculated in accordance with GAAP, it may not necessarily be comparable to similarly titled measures employed by other companies. A reconciliation of EBITDA to the most comparable GAAP financial measure, net income (loss), follows:

Reconciliation of U.S. GAAP Net income (loss) to EBITDA:

 
 

For the Three Months Ended December 31,

2011   2010
(in thousands)
Net income (loss) $ 5,782 $ (1,374 )
Add back:
Amortization and depreciation 9,690 9,988
Accretion of contract rights 1,896 1,740
Interest expense (income), net (81 ) 42
Income tax expense (benefit)   (987 )   100  
EBITDA $ 16,300   $ 10,496  




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