Shuffle Master, Inc. Reports Second Quarter Results.LAS VEGAS Las Vegas (läs vā`gəs), city (1990 pop. 258,295), seat of Clark co., S Nev.; inc. 1911. It is the largest city in Nevada and the center of one of the fastest-growing urban areas in the United States. -- Shuffle Master, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on National Market: SHFL SHFL Schuylkill Haven Free Library (Schuylkill Haven, PA) ) today announced its results from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the second quarter and six months ended April 30, 2006. Second Quarter Financial Results Excluding FAS 123R and Stargames in-process research & development ("IPR&D") write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. : --Revenue increased 60% to a record $43.3 million. --Pre-tax income from operations increased 25% to $13.3 million. --Income from continuing operations increased 6% to $7.4 million and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of increased 11% to $0.21. --EBITDA increased 32% to $17.6 million. Including FAS 123R and Stargames IPR&D write-off: --Pre-tax loss from operations of ($7.1) million (includes $19.1 million one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. write-off of Stargames IPR&D). --Loss from continuing operations of ($12.6) million (includes $19.1 million one-time write-off of Stargames IPR&D) and a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. loss per share of ($0.37) (includes $0.55 diluted loss per share related to the one-time write-off of Stargames IPR&D). Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. Financial Results Excluding FAS 123R and Stargames IPR&D write-off: --Revenue increased 46% to $76.6 million. --Pre-tax income from operations increased 27% to $26.1 million. --Income from continuing operations increased 18% to $15.5 million and diluted earnings per share increased 26% to $0.44. --EBITDA increased 31% to $33.6 million. Including FAS 123R and Stargames IPR&D write-off: --Pre-tax income from operations of $4.4 million (includes $19.1 million one-time write-off of Stargames IPR&D). --Loss from continuing operations of ($5.4) million (includes $19.1 million one-time write-off of Stargames IPR&D) and a diluted loss per share of ($0.16) (includes $0.55 diluted loss per share related to the one-time write-off of Stargames IPR&D). Earnings-per-share results for the quarter, although in-line In-line Used in the context of general equities. (1) An order or market in a specific security within the inside market; 2) any announcement (earnings) that adheres closely to Wall Street analysts' expectations. with the Company's previous guidance, which excluded the adoption of FAS 123R and any contribution from Stargames, were, nonetheless, negatively impacted by several factors, including: --The consolidation of Stargames results, whose net contribution to after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. earnings was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. a $0.03 loss. This result was comprised of $0.02 of operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. , offset by $0.03 of interest and $0.01 of one-time loan origination The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. costs in connection with the acquisition financing and $0.01 of purchase price amortization. The Company has now paid down $25.0 million of the original $115.0 million loan used to acquire Stargames, which should reduce interest costs in subsequent quarters. --An increase in the Company's diluted shares under its currently outstanding convertible debt as a result of the substantial increase in the company's share price. --IP related legal fees, which, although clearly in the Company's long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. interests, adversely affected short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. results. Mark L. Yoseloff, Chairman and Chief Executive Officer commented, "We are pleased with our second quarter performance, in particular with the quality and size of our revenue growth. Revenue was driven by outstanding sales results in all categories, including our newly-acquired Stargames products. Having closed the acquisition during the quarter, we are now ideally positioned in the fastest growing gaming region in the world, the Pacific Rim Pacific Rim, term used to describe the nations bordering the Pacific Ocean and the island countries situated in it. In the post–World War II era, the Pacific Rim has become an increasingly important and interconnected economic region. , with an expanded product portfolio that targets the entire casino casino or cassino (both: kəsē`nō). 1 Card game played with a full deck by two to four players. Its origins are obscure though it probably traces back to the Italian game of Scopa. floor. In addition, Shuffle Master now possesses the critical first-mover advantage First-mover advantage is the advantage gained by the initial occupant of a market segment. This advantage may stem from the fact that the first entrant can gain control of resources that followers may not be able to match. in the multi-player, electronic-wagering format that provides increased profits for casinos A list of casinos. Antigua and Barbuda
fast - acting or moving or capable of acting or moving quickly; "fast film"; "on the fast track in school"; "set a fast pace"; "a fast car" , more exciting playing experience. All-in-all, we have never been better positioned for sustained, long-term growth." Recent announcements included: --On April 11, 2006, the Company and its Australian-based subsidiary, Stargames Limited ("Stargames"), entered into a gaming technology alliance with Melco International Development Limited ("Melco") and its Macau-based subsidiary, Elixir elixir /elix·ir/ (e-lik´ser) a clear, sweetened, alcohol-containing, usually hydroalcoholic liquid containing flavoring substances and sometimes active medicinal ingredients. e·lix·ir n. Group Limited ("Elixir"), to distribute localized Translated into the spoken language of the country. See localization. gaming technologies for legalized gaming jurisdictions in Asia. Under and subject to the terms of the Asia Representative Agreement (the "Agreement"), Elixir is granted the exclusive distribution rights for the Company's and Stargames' complete Utility and Entertainment product lines in certain Asian countries Noun 1. Asian country - any one of the nations occupying the Asian continent Asian nation country, land, state - the territory occupied by a nation; "he returned to the land of his birth"; "he visited several European countries" . The Agreement is for a term of 20 years. The Agreement also provides that the parties will negotiate separate agreements with respect to (i) a joint research and development center for the development of electronic gaming machine See video game console. and multi-terminal gaming machine content specifically for the Asian market; and (ii) a manufacturing agreement whereby Elixir will open a manufacturing plant in Asia and Stargames will transfer the manufacturing of its electronic game products to Elixir. Both the development and manufacturing agreements are subject to further due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. requirements and any applicable regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. review and approvals. --On May 16, 2006, the Company announced that it entered into an exclusive licensing and distribution agreement with Image Fidelity Fidelity is a notion that at its most abstract level implies a truthful connection to a source or sources. Its original meaning dealt with loyalty and attentiveness to one's duty to a lord or a king, in a broader sense than the related concept of fealty. , LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control for its proprietary table games image processing image processing Set of computational techniques for analyzing, enhancing, compressing, and reconstructing images. Its main components are importing, in which an image is captured through scanning or digital photography; analysis and manipulation of the image, accomplished software. Pursuant to the terms of the agreement, the Company will incorporate Image Fidelity's object recognition technology into its Intelligent Table System products and will be responsible for marketing and distributing the integrated application throughout the global gaming industry for an extended term. Purchase Accounting for Stargames The Company has made a preliminary allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of the purchase price for the Stargames acquisition to the underlying assets acquired and liabilities assumed based on an estimate of the fair value determined by management with the assistance of independent valuation specialists. The purchase price allocation is preliminary and may be adjusted for up to one year after the acquisition. Additionally, in the second quarter, as required under US GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). (accounting for business combinations), the portion of the purchase price allocated to IPR&D of $19.1 million was immediately expensed. This amount represents the in-process research and development related to a development project that has been initiated and achieved material progress, but has not yet resulted in a technologically feasible (algorithm) feasible - A description of an algorithm that takes polynomial time (that is, for a problem set of size N, the resources required to solve the problem can be expressed as some polynomial involving N). product. Utility Products Revenue from Utility Products totaled a record $23.6 million in the second quarter, an increase of 36% from $17.4 million in the comparable prior year quarter due to record shuffler shuf·fle v. shuf·fled, shuf·fling, shuf·fles v.tr. 1. To slide (the feet) along the floor or ground while walking. 2. To move (something) from one place to another; transfer or shift. sales. Utility Products lease revenue increased 4% over last year due to an increase in third generation shuffler products on lease, including the Deck (1) The part of a magnetic tape unit that holds and moves the tape reels. The term may refer to any equipment that serves as a physical framework for electronic or mechanical devices. See rack. See also DEC. Mate(R), one2six(TM) and MD2(R). Utility Products lease revenue and leased units remained consistent with our expectations and the prior sequential One after the other in some consecutive order such as by name or number. quarter. The Company is continuing with the conversion of second generation ACE(R) shufflers in anticipation The performance of an act or obligation before it is legally due. In patent law, the publication of the existence of an invention that has already been patented or has a patent pending, of introducing the next generation specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. table game shuffler, a strategy that has proven to be successful in the past. Utility Products sales and service revenue increased to a record $17.5 million or a 52% increase over the prior year period. These increases are primarily attributed to strong sales of our third generation shufflers, most notably the MD2 which totaled approximately $5.1 million, in addition to strong replacement demand. During the quarter, 14% of worldwide shuffler sales and 22% of domestic shuffler sales represented replacements of older generation shufflers. As anticipated, partially offsetting these increases were lower chipper chipper Drug slang An occasional user of illicit drugs. See Recreational drug use Tobacco A popular term for a person who smokes < 5 cigarettes/day, who may be resistant to nicotine dependence or addiction, and often born to non-smoking parents. sales in the current quarter compared to last year, as well as the prior sequential quarter. The decrease primarily resulted from the completion of our previously announced 125 chipper order from Genting Highlands Genting Highlands (Malay: Tanah Tinggi Genting) (1700m above sea level ) is a mountain peak within the Titiwangsa Mountains on the border between the states of Pahang and Selangor of Malaysia and is home to a famous in Malaysia Malaysia (məlā`zhə), independent federation (2005 est. pop. 23,953,000), 128,430 sq mi (332,633 sq km), Southeast Asia. The official capital and by far the largest city is Kuala Lumpur; Putrajaya is the adminstrative capital. . Entertainment Products During the second quarter, revenue from Entertainment Products increased 102% to $19.7 million versus $9.7 million in the same prior year period, primarily due to the $10.7 million contribution from the Stargames acquisition, offset by a decrease in lifetime license sales. Entertainment Products lease and royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced. revenue increased 5% compared to the prior year quarter. The current quarter was favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacted by additional lease placements of the Company's electronic table platform, Table Master(TM), as well as additional lease placements of its live table games, most notably Four Card Poker Four card poker is a relatively new casino card game similar to three card poker, invented by Roger Snow and owned by ShuffleMaster.[1] The player makes an ante bet and may also make an aces-up bet. (R), Fortune Pai Gow Poker Pai Gow poker (or Double-hand poker) is an Americanized version of Pai Gow, in that it is played with playing cards using poker hand rankings, while Pai Gow is played with Chinese dominoes. (R), Dragon dragon, mythical beast usually represented as a huge, winged, fire-breathing reptile. For centuries the dragon has been prominent in the folklore of many peoples; thus, its physical characteristics vary greatly and include combinations of numerous animals. Bonus(R) and Ultimate Texas Hold'em(R). Additionally, the second quarter benefited from the increased monthly lease rate for Three Card Poker Three card poker (trademark name) or tricard poker is a poker-based game that is played in casinos. It actually consists of two separate games, pairplus and ante-and-play. The players can choose to play either or both of the games. (R) which was effective January January: see month. 1, 2006. Slightly offsetting the increase in lease and royalty revenue was the conversion of Let It Ride(R) and Three Card Poker units to lifetime license sales, albeit at a lesser rate than experienced in recent quarters. Entertainment Products sales and service revenue increased 266% to $13.2 million compared to last year primarily resulting from the Stargames revenue contribution noted above, partially offset by a decline in lifetime license sales. Operating Expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. Operating expenses for the second quarter totaled $16.6 million compared to $10.0 million in the prior year quarter. The increase in operating expenses was primarily due to approximately $4.8 million in Stargames operating expenses, including approximately $700,000 in Stargames intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. amortization. Additionally, the Company recognized share-based compensation expense of approximately $1.2 million in the second quarter, which includes $419,000 for restricted stock compensation expense compared to $161,000 for the prior year quarter. Further detail of the Company's share-based compensation is included under the Supplemental Data section. Other Expense Other expense for the second quarter totaled $2.3 million compared to $141,000 in other income in the prior year quarter. During the quarter, other expense was primarily impacted by $1.7 million of interest expense related to Stargames acquisition financing. Additionally, one-time loan origination costs of approximately $400,000 in connection with the acquisition financing were incurred in the quarter. In January 2006, the Company entered into a credit agreement with Deutsche Bank Deutsche Bank AG (IPA: /'dɔɪ.tʃə/[1]) (ISIN: DE0005140008, NYSE: DB) (English: German Bank in the amount of $115.0 million in order to finance the acquisition of Stargames. The outstanding balance under this credit agreement was $100.0 million as of April 30, 2006. Balance Sheet, Cash Flows & Capital Deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. Cash, cash equivalents, and investments totaled $33.9 million at April 30, 2006 compared to $34.1 million at October October: see month. 31, 2005. Net cash provided by operating activities totaled $2.7 million during the second quarter, compared to $13.7 million in the same prior year period. Capital deployment initiatives during the second quarter totaled approximately $1.0 million. Additionally, during the quarter the Company made a $15.0 million payment towards the Stargames debt and subsequent to quarter end, made an additional $10.0 million payment. The outstanding balance under this credit agreement was $90.0 million as of June June: see month. 8, 2006. The Company did not have any common share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. during the second quarter and as of June 8, 2006, approximately $8.8 million remains outstanding under the Company's existing board authorizations. Current Outlook Consistent with previous earnings guidance, management continues to target approximately 25% in quarter-over-quarter fiscal 2006 diluted earnings per share. Further, we are maintaining our guidance of $1.02 - $1.05 for fiscal 2006. Note that the Company's earnings guidance excludes the adoption of FAS 123R and any cost or contribution from the Stargames acquisition. Further detail and analysis of the Company's financial results for the second quarter ended April 30, 2006, will be included in its Quarterly Report on Form 10-Q Form 10-Q See 10-Q. , which is expected to be filed no later than June 14, 2006, with the Securities and Exchange Commission. Shuffle Master, Inc. is a gaming supply company specializing in providing its casino customers Utility Products, including automatic card shufflers, roulette roulette (r  lĕt`), game of chance popular in gambling casinos, and in a simplified form elsewhere. In gambling houses the roulette wheel is set in an oblong table. chip sorters and intelligent table system
modules, to improve their profitability, productivity and security, and
Entertainment Products, including live proprietary table games,
electronic multi-player table game platforms, live table game
tournaments and wireless gaming solutions to expand their gaming
entertainment content. The Company is included in the S&P Smallcap
600 Index. Information about the Company and its products can be found
on the Internet InternetPublicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at www.shufflemaster.com. This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that are based on management's current beliefs and expectations about future events, as well as on assumptions made by and information available to management. The Company considers such statements to be made under the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. created by the federal securities laws to which it is subject, and assumes no obligation to update or supplement such statements. Forward-looking statements reflect and are subject to risks and uncertainties that could cause actual results to differ materially from expectations. Risk factors that could cause actual results to differ materially from expectations include, but are not limited to, the following: changes in the level of consumer or commercial acceptance of the Company's existing products and new products as introduced; increased competition from existing and new products for floor space in casinos; acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. deceleration deceleration /de·cel·er·a·tion/ (de-sel?er-a´shun) decrease in rate or speed. early deceleration of various product development, promotion and distribution schedules; product performance issues; higher than expected manufacturing, service, selling, legal, administrative, product development, promotion and/or distribution costs distribution costs distribute npl → Vertriebskosten pl ; changes in the Company's business systems or in technologies affecting the Company's products or operations; reliance on strategic relationships with distributors and technology and manufacturing vendors; current and/or future litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , claims and costs or an adverse judicial finding; tax matters including changes in tax legislation or assessments by taxing authorities; acquisitions or divestitures by the Company or its competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. of various product lines or businesses and, in particular, integration of businesses that the Company may acquire; changes to the Company's intellectual property portfolio, such as the issuance of new patents, new intellectual property licenses, loss of licenses, claims of infringement The encroachment, breach, or violation of a right, law, regulation, or contract. The term is most frequently used in reference to the invasion of rights secured by Copyright, patent, or trademark. or invalidity in·va·lid 1 n. One who is incapacitated by a chronic illness or disability. adj. 1. Incapacitated by illness or injury. 2. Of, relating to, or intended for invalids. tr.v. of patents; regulatory and jurisdictional issues (e.g., technical requirements and changes, delays in obtaining necessary approvals, or changes in a jurisdiction's regulatory scheme or approach, etc.) involving the Company and its products specifically or the gaming industry in general; general and casino industry economic conditions; the financial health of the Company's casino and distributor customers, suppliers and distributors, both nationally and internationally; the Company's ability to meet its debt service obligations, and to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. its indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. , including the Company's senior convertible notes and its bridge loan, which will depend on its future performance and other conditions or events and will be subject to many factors that are beyond the Company's control; various risks related to the Company's customers' operations in countries outside the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , including currency fluctuation Fluctuation A price or interest rate change. risks, which could increase the volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the of the Company's results from such operations; and the Company's ability to successfully and economically ec·o·nom·i·cal adj. 1. Prudent and thrifty in management; not wasteful or extravagant. See Synonyms at sparing. 2. Intended to save money, as by efficient operation or elimination of unnecessary features; economic: integrate the operations of any acquired companies, such as Stargames. Additional information on these and other risk factors that could potentially affect the Company's financial results may be found in documents filed by the Company with the Securities and Exchange Commission, including the Company's current reports on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. , quarterly reports on Form 10-Q and annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. . Shuffle Master, Inc. will hold a conference call on June 8, 2006 at 2:00 PM Pacific Time to discuss the results of operations for the second quarter ended April 30, 2006. The dial-in number for the call is (201) 689-8359; request "Shuffle Master's mas·ter's n. A master's degree. Second Quarter Fiscal 2006 Conference Call." The call will also be webcast by CCBN CCBN Central Coast Bancorp CCBN Charles County Business Network and can be accessed at Shuffle Master's web site www.shufflemaster.com. Immediately following the call and through June 15, 2006, a playback Playback could mean:
SHUFFLE MASTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
Three Months Six Months
Ended Ended
April 30, April 30,
----------------- -----------------
2006 2005 2006 2005
--------- ------- -------- --------
Revenue:
Utility products leases $6,084 $5,873 $12,094 $11,185
Utility products sales and
service 17,531 11,511 33,406 19,560
Entertainment products leases
and royalties 6,475 6,143 12,730 12,291
Entertainment products sales
and service 13,177 3,599 18,345 9,411
Other 36 2 45 51
--------- ------- -------- --------
Total revenue 43,303 27,128 76,620 52,498
--------- ------- -------- --------
Costs and expenses:
Cost of leases and royalties 2,742 2,257 5,559 4,604
Cost of sales and service 11,712 4,449 18,816 8,031
Selling, general and
administrative 13,363 7,895 23,360 15,779
Research and development 3,239 2,105 5,200 3,974
In-process research and
development 19,145 - 19,145 -
--------- ------- -------- --------
Total costs and expenses 50,201 16,706 72,080 32,388
--------- ------- -------- --------
Equity method investment loss (156) - (156) -
Income (loss) from operations (7,054) 10,422 4,384 20,110
Other income (expense) (2,337) 141 (2,827) (194)
----------------- -------- --------
Income (loss) from continuing
operations before tax (9,391) 10,563 1,557 19,916
Provision for income taxes 3,241 3,734 6,971 7,008
----------------- -------- --------
Income (loss) from continuing
operations (12,632) 6,829 (5,414) 12,908
Discontinued operations, net of
tax (88) 16 47 59
--------- ------- -------- --------
Net income (loss) $(12,720) $6,845 $(5,367) $12,967
========= ======= ======== ========
Basic earnings (loss) per share:
Continuing operations $(0.37) $0.19 $(0.16) $0.37
Discontinued operations - - - -
--------- ------- -------- --------
Net income (loss) $(0.37) $0.19 $(0.16) $0.37
========= ======= ======== ========
Diluted earnings (loss) per
share:
Continuing operations $(0.37) $0.19 $(0.16) $0.35
Discontinued operations - - - -
--------- ------- -------- --------
Net income (loss) $(0.37) $0.19 $(0.16) $0.35
========= ======= ======== ========
Weighted average shares
outstanding:
Basic 34,555 35,301 34,522 35,116
Diluted 34,555 36,816 34,522 36,831
SHUFFLE MASTER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
April 30, October 31,
2006 2005
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents $22,147 $13,279
Investments 11,778 20,809
Accounts receivable, net 32,275 17,865
Investment in sales-type leases and
notes receivable, net 8,730 8,219
Inventories, net 20,751 9,428
Prepaid income taxes 5,402 -
Deferred income taxes 3,062 1,837
Other current assets 7,925 3,255
----------- ------------
Total current assets 112,070 74,692
Investment in sales-type leases and notes
receivable, net 10,837 11,136
Products leased and held for lease, net 9,876 9,163
Property and equipment, net 8,888 4,144
Deferred income taxes 3,003 2,400
Intangible assets, net 81,311 48,477
Goodwill 84,401 36,017
Other assets 9,727 7,088
----------- ------------
Total assets $320,113 $193,117
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $8,620 $3,540
Accrued liabilities 9,287 6,547
Customer deposits and unearned revenue 5,973 3,518
Income taxes payable - 371
Note payable and current portion of
long-term liabilities 110,244 3,082
----------- ------------
Total current liabilities 134,124 17,058
Long-term liabilities, net of current
portion 162,533 162,659
Deferred income taxes 64 -
----------- ------------
Total liabilities 296,721 179,717
----------- ------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value; 507
shares authorized; none outstanding - -
Common stock, $0.01 par value; 151,875
shares authorized; 35,077 and 34,527
shares issued and outstanding 351 345
Additional paid-in capital 4,944 -
Deferred compensation - (5,788)
Retained earnings 11,931 17,298
Accumulated other comprehensive income 6,166 1,545
----------- ------------
Total shareholders' equity 23,392 13,400
----------- ------------
Total liabilities and shareholders' equity $320,113 $193,117
=========== ============
SHUFFLE MASTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Three Months Six Months
Ended Ended
April 30, April 30,
------------------ ------------------
2006 2005 2006 2005
--------- -------- --------- --------
Cash flows from operating
activities:
Net income (loss) $(12,720) $6,845 $(5,367) $12,967
Depreciation and
amortization 4,913 2,981 8,500 5,757
Share-based compensation 1,235 221 2,546 305
IPR&D 19,145 - 19,145 -
Other operating activities (9,883) 3,682 (12,386) 134
--------- -------- --------- --------
Net cash provided
by operating
activities 2,690 13,729 12,438 19,163
--------- -------- --------- --------
Cash flows from investing
activities:
Net changes in investments 1,373 (127) 6,028 (305)
Restricted cash - business
acquisition 91,291 - - -
Payments for products
leased and held for lease (1,818) (1,966) (3,884) (3,621)
Acquisition of Stargames,
net of cash acquired (93,481) - (114,337) -
Other investing activities (614) (765) (380) (7,598)
--------- -------- --------- --------
Net cash used by
investing
activities (3,249) (2,858) (112,573) (11,524)
--------- -------- --------- --------
Cash flows from financing
activities:
Proceeds from acquisition
financing, net of issue
costs - - 114,719 -
Repurchases of common
stock - (10,906) - (15,256)
Proceeds from issuances of
common stock, net 3,943 1,410 5,710 4,835
Payment of long-term
liabilities (15,534) (358) (18,402) (1,736)
Other financing activities 6,838 - 7,456 -
--------- -------- --------- --------
Net cash provided
(used) by
financing
activities (4,753) (9,854) 109,483 (12,157)
--------- -------- --------- --------
Effect of exchange rate changes
on cash (361) - (480) -
Net increase (decrease) in cash
and cash equivalents (5,673) 1,017 8,868 (4,518)
Cash and cash equivalents,
beginning of period 27,820 15,045 13,279 20,580
--------- -------- --------- --------
Cash and cash equivalents, end
of period $22,147 $16,062 $22,147 $16,062
========= ======== ========= ========
SHUFFLE MASTER, INC.
SUPPLEMENTAL DATA
(Unaudited)
UNIT DATA
Three Months Six Months
Ended Ended
April 30, April 30,
--------------- ---------------
2006 2005 2006 2005
------- ------- ------- -------
Shufflers installed base (end of
period)
Lease units 4,630 4,768 4,630 4,768
------- ------- ------- -------
Sold units, inception-to-date
Beginning of period 14,580 11,583 13,780 11,151
Sold during period 1,293 777 2,250 1,335
Less trade-ins and exchanges (135) (80) (292) (206)
------- ------- ------- -------
End of period 15,738 12,280 15,738 12,280
------- ------- ------- -------
Total installed base (a) 20,368 17,048 20,368 17,048
------- ------- ------- -------
Chipper installed base (end of period)
Lease units 10 2 10 2
------- ------- ------- -------
Sold units, inception-to-date
Beginning of period 273 - 122 -
Sold during period 14 31 165 31
------- ------- ------- -------
End of period 287 31 287 31
------- ------- ------- -------
Total installed base (a) 297 33 297 33
======= ======= ======= =======
Table games installed base
(end of period)
Royalty units 2,952 2,688 2,952 2,688
------- ------- ------- -------
Sold units, inception-to-date
Beginning of period 833 563 768 365
Sold during period 31 70 96 268
------- ------- ------- -------
End of period 864 633 864 633
------- ------- ------- -------
Total installed base (a) 3,816 3,321 3,816 3,321
======= ======= ======= =======
Electronic wagering seats installed
base (end of period)
Lease seats 214 75 214 75
------- ------- ------- -------
Sold seats, inception-to-date
Beginning of period 440 100 310 75
Sold during period 530 25 660 50
Stargames installed based at
the acquisition date 17,697 - 17,697 -
------- ------- ------- -------
End of period 18,667 125 18,667 125
------- ------- ------- -------
Total installed base (a) 18,881 200 18,881 200
======= ======= ======= =======
(a) Installed Base is the sum of product units / seats under lease
or license agreements and inception-to-date sold units / seats.
Management believes that installed units is an important gauge of
segment performance because it measures historical market placements
of leased and sold units and it provides insight into potential
markets for service and next generation products. Some sold units may
no longer be in use by the Company's casino customers or may have been
replaced by other models. Accordingly, the Company does not know
precisely the number of units currently in use.
SHUFFLE MASTER, INC.
SUPPLEMENTAL DATA
(Unaudited, in thousands)
FINANCIAL DATA
Three Months Six Months
Ended Ended
April 30, April 30,
------------------ -----------------
2006 2005 2006 2005
--------- -------- -------- --------
Reconciliation of income (loss) from
continuing operations to EBITDA:
Income (loss) from
continuing operations $(12,632) $6,829 $(5,414) $12,908
Interest expense (income),
net 1,722 (359) 1,877 (239)
Share-based compensation 1,235 221 2,546 365
IPR&D, Stargames acquisition 19,145 - 19,145 -
Provision for income taxes 3,241 3,734 6,971 7,008
Depreciation and
amortization 4,913 2,921 8,500 5,697
--------- -------- -------- --------
EBITDA from continuing
operations (b) $17,624 $13,346 $33,625 $25,739
========= ======== ======== ========
Three Months Six Months
Ended Ended
April 30, April 30,
------------------ -----------------
2006 2005 2006 2005
--------- -------- -------- --------
Share-based compensation (c):
Gross margin $16 $- $46 $-
Selling, general and
administrative 1,145 221 2,348 365
Selling, general and
administrative - restricted
stock - - - -
Research and development 74 - 152 -
--------- -------- -------- --------
Total share-based
compensation 1,235 221 2,546 365
Tax benefit (362) (81) (745) (134)
--------- -------- -------- --------
Total share-based
compensation, net of tax $873 $140 $1,801 $231
========= ======== ======== ========
(b) EBITDA (defined as income from continuing operations before
net interest, provision for income taxes, depreciation, amortization,
share-based compensation and an in-process research & development
write-off related to the acquisition of Stargames) is not a financial
measure calculated in accordance with GAAP and should not be
considered as an alternative to income from operations as a
performance measure. EBITDA is presented solely as a supplemental
disclosure because management believes it is a useful performance
measure and widely used within its industry. EBITDA is not calculated
in the same manner by all companies and, accordingly, may not be an
appropriate measure for comparison.
(c) On November 1, 2005, the Company adopted the provisions of
SFAS 123R and SAB 107, requiring the measurement and recognition of
all share-based compensation under the fair value method. The Company
implemented SFAS 123R using the modified prospective transition
method. Accordingly, for the three and six months ended April 30,
2006, the Company recognized share-based compensation expense for all
current award grants, if any, and for the unvested portion of previous
award grants based on grant date fair values. Prior to fiscal 2006,
the Company accounted for share-based awards under the APB 25
intrinsic value method, which resulted in compensation expense
recorded only for restricted share awards and the modification of
outstanding unvested options. Prior period financial statements have
not been adjusted to reflect fair value of share-based compensation
expense under SFAS 123R.
SHUFFLE MASTER, INC.
SUPPLEMENTAL DATA
(Unaudited, in thousands except per share amounts)
FINANCIAL DATA (continued)
Three Months Six Months
Ended Ended
April 30, April 30,
------------------ -----------------
2006 2005 2006 2005
--------- -------- -------- --------
Income (loss) from operations,
excluding IPR&D write-off and
FAS 123R:
Income (loss) from operations $(7,054) $10,422 $4,384 $20,110
IPR&D, Stargames acquisition 19,145 - 19,145 -
Share-based compensation 1,235 221 2,546 365
--------- -------- -------- --------
Income from operations
excluding IPR&D and FAS 123R $13,326 $10,643 $26,075 $20,475
========= ======== ======== ========
Income (loss) from continuing
operations, excluding IPR&D
write-off and FAS 123R:
Income (loss) from continuing
operations, net of tax $(12,632) $6,829 $(5,414) $12,908
IPR&D, Stargames acquisition 19,145 - 19,145 -
Share-based compensation, net
of tax 873 140 1,801 231
---------- -------- -------- -------
Income from continuing
operations excluding IPR&D
and FAS 123R $7,386 $6,969 $15,532 $13,139
========= ======== ======== ========
Reconciliation of diluted earnings (loss) per share
from continuing operations to diluted earnings
(loss) per share from continuing operations
excluding IPR&D write-off and FAS 123R:
Diluted earnings (loss) per
share from continuing
operations $(0.37) $0.19 $(0.16) $0.35
IPR&D, Stargames acquisition 0.55 - 0.55 -
Share-based compensation, net
of tax 0.03 - 0.05 -
---------- -------- -------- -------
Diluted earnings per share from
continuing operations excluding
IPR&D and FAS 123R $0.21 $0.19 $0.44 $0.35
========= ======== ======== ========
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