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Entertainment Gaming Asia Reports Third Quarter 2012 Results And Provides Market Update

Entertainment Gaming Asia Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
     

Three-Month Periods Ended September 30,

Nine-Month Periods Ended September 30,

(amounts in thousands, except per share data) 2012   2011 2012 2011
Revenues:  
Gaming, gross $ 4,480 $ 4,379 $ 14,634 $ 13,097
Less: Promotional allowances        
Gaming, net 4,480 4,379 14,634 13,097
Other products 3,371   2,113   7,904   6,348  
Total revenues 7,851 6,492 22,538 19,445
 
Operating costs and expenses:
Cost of gaming:
Gaming equipment depreciation 1,228 1,253 3,516 3,641
Casino contract amortization 617 616 1,847 1,841
Other gaming related intangibles amortization 63 189
Other operating costs 1,051 240 2,526 809
Cost of other products 3,101 1,922 7,359 5,584
Selling, general and administrative expenses 1,491 1,492 4,712 3,860
Stock-based compensation expenses 123 215 675 1,237
(Gain)/loss on dispositions (2 ) (31 ) 152
Impairment of assets 42 114
Product development expenses 87 89 273 302
Depreciation and amortization 77   27   168   86  
Total operating costs and expenses 7,878   5,854   21,348   17,512  
 
(Loss)/income from operations (27 ) 638 1,190 1,933
 
Other income/(expense):
Interest expense and finance fees (20 ) (105 ) (109 ) (305 )
Interest income 4 20 32 61
Foreign currency gains/(losses) 55 (42 ) 269 (66 )
Other income 65   65   241   192  
Total other income/(expense) 104   (62 ) 433   (118 )
 
Income before income tax 77 576 1,623 1,815
 
Income tax (expense)/benefit (34 ) 71   (124 ) (169 )
 
Net income $ 43   $ 647   $ 1,499   $ 1,646  
 
Basic and diluted earnings per share $

 

$ 0.02 $ 0.05 $ 0.06
 
Weighted average common shares outstanding
Basic 29,926 29,688 29,915 29,350
Diluted 31,129 29,982 30,793 29,631

Other comprehensive income, net of tax

Foreign currency translation adjustments 87   (214 ) 167   (64 )
Comprehensive income $ 130 $ 433 $ 1,666 $ 1,582

Less: Comprehensive income attributable to non controlling interest

 

       
Comprehensive income attributable to EGT stockholders

$

130   $ 433  

$

1,666   $ 1,582  
 

Entertainment Gaming Asia Inc.
Consolidated Balance Sheets
 

September 30, 2012

December 31, 2011

(amounts in thousands, except per share data) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 10,630 $ 12,759
Accounts receivable, net 2,360 2,691
Other receivables 189 114
Inventories 2,123 1,894
Prepaid expenses and other current assets 719 841
Total current assets 16,021 18,299
 
Gaming equipment, net 7,160 8,889
Casino contracts 8,575 10,340
Property and equipment, net 5,101 2,558
Goodwill 357 357
Intangible assets, net 1,273 1,227
Contract amendment fees 369 450
Deferred tax assets 93 91
Prepaids, deposits and other assets 3,145 1,893
Total assets $ 42,094 $ 44,104
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,568 $ 1,316
Amount due to a related party 14
Accrued expenses 1,998 2,228
Income tax payable 31 68
Notes payable to a related party 1,582 6,211
Capital lease obligations 322
Customer deposits and other current liabilities 706 357
Total current liabilities 5,885 10,516
 
Other liabilities 1,087 869
Deferred tax liability 208 207
Total liabilities 7,180 11,592
 
Stockholders’ equity:
Common stock, $.001 par value, 75,000,000 shares authorized; 29,937,162 and 29,709,848 shares issued and outstanding, respectively 30 30
Additional paid-in-capital 32,016 31,280
Accumulated other comprehensive income 726 559
Retained earnings since January 1, 2011 ($386.1 million accumulated deficit eliminated upon quasi-reorganization) 2,141 642
Total EGT stockholders’ equity 34,913 32,511
Non-controlling interest 1 1
Total EGT stockholders’ equity 34,914 32,512
Total liabilities and stockholders’ equity $ 42,094 $ 44,104
 

Entertainment Gaming Asia Inc.
Adjusted EBITDA
(Unaudited)
 

Three-Month Periods Ended September 30,

Nine-Month Periods Ended September 30,

(amounts in thousands) 2012   2011   2012   2011
Net income – GAAP basis $ 43 $ 647 $ 1,499 $ 1,646
Interest expense and finance fees 20 105 109 305
Interest income (4 ) (20 ) (32 ) (61 )
Income tax expense/(benefit) 34 (71 ) 124 169
Depreciation and amortization 2,052 1,958 5,884 5,737
Stock-based compensation expenses 123 215 675 1,237
Impairment of assets 42 114
(Gain)/loss on dispositions (2 )   (31 ) 152  
EBITDA, as adjusted $ 2,308   $ 2,834   $ 8,342   $ 9,185  

Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, stock-based compensation, and other non-cash operating income and expenses. Adjusted EBITDA is presented exclusively as a supplemental disclosure because management believes that it is widely used to measure the performance, and as a basis for valuation, of gaming companies. Management uses Adjusted EBITDA as a measure of the operating performance of its segments and to compare the operating performance of its operations with those of its competitors. The Company also presents Adjusted EBITDA because it is used by some investors as a way to measure a company’s ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming companies have historically reported EBITDA as a supplement to financial measures in accordance with generally accepted accounting principles in the United States (“GAAP”). Adjusted EBITDA should not be considered as an alternative to operating income/(loss) as an indicator of the Company’s performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income/(loss), Adjusted EBITDA does not include depreciation or interest expense and, therefore, does not reflect current or future capital expenditures or the cost of capital. The Company compensates for these limitations by using Adjusted EBITDA as only one of several comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include operating income, net income/(loss), cash flows from operations and cash flow data. The Company has significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in Adjusted EBITDA. Entertainment Gaming Asia’s calculation of Adjusted EBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited.

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