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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