xcluding the impairment charge related to the Alabama charitable bingo assets, diluted EPS was us$ 0.52 and us$ 1.63 for the three and nine months ended March 31, respectively Besides, Gaming equipment gross margin improved to a thrird quarter record of 51% from 45% last year.
“We are pleased with the progress of our strategic initiatives during the quarter, including international expansion, balance sheet management, systems leadership, new product initiatives, and the announced sale of Rainbow Casino, said Richard M. Haddrill, the company‘s CEO. “We believe that our recent launch of a series of premium participation games and our upcoming release of ALPHA 2 will allow us to capitalize on the spending upturn we expect to see in the coming year.”
“Our balance sheet strength continues to improve as we further reduced our debt by us$ 9 million, repurchased us$ 13 million of our common stock, and increased cash by us$ 11 million during the quarter,” added Robert C. Caller, Chief Financial Officer. “We are also pleased with our recent bank amendment, which raised us$ 75 million in incremental undrawn revolver capacity and reduced pricing on our existing term and revolver by 50 basis points. We believe this transaction was the first reduction in pricing to an existing bank facility in the U.S. gaming industry since the credit crisis began in 2008.”
The firm recently announced it had reached a definitive agreement to sell the Rainbow Casino to Isle of Capri Casinos. Results from Rainbow are included in discontinued operations for all periods presented. For the three and nine months periods ended March 31, 2010, revenues were us$ 10 million and us$ 28 million and Diluted EPS were us$ 0.03 and us$ 0.08, respectively. The company expects to close the transaction on or about June 30, 2010.
The legality of charitable bingo gaming in Alabama is under challenge by the state‘s governor. Legislation to put the legality question to a public referendum in Alabama failed to pass in the recently concluded legislative session. There are also several lawsuits pending before the state‘s Supreme Court which could negatively affect charitable gaming in Alabama. Several of the charitable bingo properties voluntarily ceased operations during the quarter pending resolution of the matter, while two others continue to operate.
As a result of these recent actions, the company concluded that it is unlikely that gaming will continue in its present form, thereby impacting the recoverability of the associated assets. As such, the firm recorded an impairment charge of us$ 11.4 million during the quarter ended March 31, 2010, which included the impairment of us$ 5.5 million in notes and accounts receivable and us$ 5.9 million in long-lived assets.
Selling, general and administrative expenses increased to 28 % of total revenues as compared with 26 % last year as a result of lower revenues. Research and development expenses increased to 11 % of total revenues as compared with 10 % last year.
Nine months ended March 31, 2010 compared with nine months ended March 31, 2009
Diluted EPS decreased to us$ 1.42 from us$ 1.54 last year. Nine months ended March 31, 2010 Diluted EPS reflects an impairment charge of us$ 0.13 per share related to Alabama.
Adjusted EBITDA decreased slightly to us$ 210 million from us$ 212 million in the prior period.
Operating margin decreased to 23 % from 24 % last year. Excluding the impairment charge, operating margin increased to 25 % in the current period. Total revenues decreased to us$ 583 million as compared with us$ 648 million last year. SG&A expenses increased to 26 % of total revenues as compared with 25 % last year as a result of lower revenues. R&D expenses increased to 10 % of total revenues as compared with 9 % last year.
During the quarter, the company repurchased more than 322,000 shares of its common stock for approximately us$ 13 million. During the first nine months of fiscal 2010, the firm repurchased over 1,100,000 shares of its common stock for approximately us$ 44 million. This month, the company‘s Board of Directors also authorized a new us$ 150 million share-repurchase program.
Under the company‘s amended credit agreement effective April 9, 2010, the company has unlimited capacity to repurchase its common stock or make other restricted payments as long as its gross leverage ratio remains below 1.0. At March 31, 2010, the company‘s leverage ratio was 0.6.
“We now have orders in process for nearly 1,000 Cash Spins, which won “Best Slot Product‘ at G2E,” said Gavin Isaacs, the company‘s Chief Operating Officer. “We have begun shipping Cash Spin, and expect 500 units to be placed by June 30, 2010. Early results for Cash Spin are outstanding, and recently placed Hot Shot Progressive Cash WheelTM, Fireball and our DualVision two-player cabinet are also easily outperforming floor averages. Our pipeline for gaming operations products has never been stronger, which will help us grow our installed base of premium gaming operations machines over the next 24 months. Finally, we are very excited about the upcoming launch of our new ALPHA 2 technology this summer.”
“Our systems business continues to lead the industry through new and enhanced technology products that help our customers reduce cost, protect invested capital, and deliver more powerful player experiences,”, said Ramesh Srinivasan, the firm’s Executive Vice President – Systems. “While the extent of no-decisions and delayed decisions continue to be higher than normal, our pipeline and win/loss ratio have never been better. iVIEW DM is rapidly gaining strong interest in the industry. We expect to continue to grow our market share as evidenced by the recent Isle of Capri enterprise-wide contract announced earlier this month.”
Revenues decreased to us$ 69 million as compared with us$ 70 million last year. New gaming device sales increased to 4,571 units as compared with 4,368 units last year, driven by increased international units sold but offset by fewer new openings and expansions during the period. New unit sales to international customers were an all-time record 2,122 units, or 46 % of total new-unit shipments as compared with 1,609 units last year.
In systems, revenues declined to us$ 52 million as compared with us$ 57 million last year, primarily as a result in the reduction of the number of installations during the period which was partially offset by higher maintenance revenues. Gross margin increased to 75 % from 71 % last year, primarily as a result of the change in mix of products sold and a reduction in hardware costs. Maintenance revenues increased to a quarterly record us$ 15 million as compared with us$ 13 million last year.
Revenues decreased to us$ 210 million as compared with us$ 279 million last year. New gaming device sales decreased to 13,504 units as compared with 17,065 units last year, primarily as a result of the continued sluggish North America replacement market and fewer new openings and expansions during the period. New unit sales to international customers were 5,295 units, or 39 % of total new-unit shipments as compared with 4,218 units last year.