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 COUNCIL BLUFFS, Iowa, Nov. 18 /PRNewswire/ -- Stuart Entertainment Inc. (NASDAQ: STUA), today reported lower earnings for the third quarter of 1993 compared to earnings reported in the like quarter in 1992. The decline in third quarter earnings was primarily attributed to lower sales, to continuing research and development expenses related to the development of electronic gaming products and to other increases in selling, general and administrative (SG&A) expenses.
 Leonard A. Stuart, chairman and chief executive officer, stated that he remains "very optimistic about prospects for the company's core Bingo business despite a recent softness in sales."
 Stuart said that the company had received a substantial contract for its electronic gaming equipment from the Potawatomi Bingo Casino of Milwaukee, Wis., one of the largest Indian gaming establishments in North America. He added that in the year ahead he believes the company could realize "considerable sales and earnings from its new line of electronic gaming equipment and its recent entry into the Bingo market in the United Kingdom."
 During the third quarter ended Sept. 30, 1993, Stuart Entertainment earned net income of $195,000, or 6 cents per share, on sales of $12,925,000. This compares with net income of $269,000, or 8 cents per share, on sales of $13,478,000 during the like period of the previous year.
 In the nine months ended Sept. 30, 1993, the company earned net income of $1,193,000, or 34 cents per share, on sales of $40,751,000. This compares with net income of $1,454,000, or 42 cents per share, on sales of $39,161,000 during the like period of the prior year.
 Discussions Concerning Possible Acquisition
 Stuart announced that the company has engaged in preliminary discussions with Bingo Press & Specialty Ltd., a Canadian company doing business under the name Bazaar & Novelty ("Bazaar"), concerning a possible transaction wherein the company would acquire Bazaar. Stuart owns a majority of the stock of Bazaar, which is privately owned. The company has also engaged in preliminary discussions with investment banking firms concerning potential financing of the possible business combination.
 Bazaar is the leading manufacturer and distributor of Bingo equipment and supplies in Canada. Bazaar has approximately 450 employees and operates from four major installations in Ontario, British Columbia, Manitoba and the Maritime Provinces, as well as a number of smaller retail branches.
 Operating Results
 Stuart noted that Stuart Entertainment "continues to face stiff competition in the Bingo paper market and anticipates that this trend will continue in the foreseeable future." Stuart stated that this competition has resulted in slight declines in sales prices and unit sales of certain Bingo paper products during the third quarter. Stuart added that the company is optimistic about growth in the sales of break- open tickets, ink products and of electronic products, such as flashboards and blowers, which are traditionaly used in Bingo halls. Stuart stated that the optimism is due, in part, to the introduction in the fourth quarter of a number of new products in these lines.
 Earnings continue to be impacted by significant research and development costs and marketing expenses relating to the new electronic gaming equipment product line as well as by expenses incurred during the third quarter in initiating operations in England. During the third quarter and nine-month periods, these SG&A expenses impacted earnings by approximately 6 cents and 17 cents, respectively.
 Stuart reported that SG&A expenses during the third quarter declined compared to SG&A expenses recorded in the previous three quarters. Stuart attributed the decrease to the implementation during the third quarter of a number of measures designed to reduce manufacturing and SG&A expenses. He also noted that the company plans to initiate a number of additional measures in the fourth quarter. The company has focused on labor force reductions, new equipment installations and a renegotiation of a number of agreements and contracts for the purchase of raw materials and services.
 Electronic Gaming Equipment
 During the third quarter, Video King Gaming Systems Inc., a wholly owned subsidiary of the company, completed, at its own expense, all modifications and enhancements to the electronic gaming systems shipped to the Manitoba Lotteries Foundation during the second quarter. Player response to this state-of-the-art system has been very favorable.
 Stuart stated that while sales of the company's new electronic gaming products were minimal in the third quarter of 1993, a number of orders have been placed for products that are scheduled for shipment during the fourth quarter of 1993 and the first quarter of 1994. Among the orders is the contract with the Potawatomi Bingo Casino.
 Stuart added, "We recently began aggressively marketing our new electronic gaming products and have been very encouraged by initial customer response. We remain very optimistic that this product line will become a major contributor to the future growth and profitability of our company."
 Entry Into British Market
 Stuart reported that significant progress had been made in introducing a major portion of the company's Bingo product line into the British market. As previously announced, Stuart Entertainment and Bazaar have entered into an agreement with Mitre Printing Co. Ltd., a major manufacturer of Bingo paper in England, to jointly provide Mitre Printing with special technology for printing presses which have been installed in England. Under terms of the agreement, the company and Bazaar will be jointly responsible for the marketing of Bingo paper from these presses. Mitre Printing began printing Bingo paper during the third quarter of 1993 and the first sales of Bingo paper were recorded in October.
 Mitre Printing is a subsidiary of Gala Leisure Ltd., which is the operator of approximately 150 commercial Bingo clubs in the United Kingdom.
 Stuart noted that the company and Bazaar have also jointly introduced a number of other products marketed in North America into the English market. He added that "the reception to these new products, which include specialty Bingo papers, ink products and break-open tickets, has exceeded expectations." Stuart concluded by stating that "the penetration of the English market will be gradual and not accomplished overnight, but initial results give a strong indication that sales to the extensive British and European Bingo and gaming markets could be significant."
 Change in Accounting Principle
 During the first quarter of 1993, the company recognized an income tax benefit of $187,000, which equates to 5 cents per share, in recording the cumulative effect relating to prior years activity of adopting Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes."
 Stuart Entertainment manufactures and distributes a broad line of fund-raising products associated primarily with the Bingo, electronic gaming and lottery industries.
 Condensed Consolidated Summary of Income
 Three Months Ended Nine Months Ended
 Sept. 30, Sept. 30,
 1993 1992 1993 1992
 Net sales $12,925,000 $13,478,000 $40,751,000 $39,161,000
 Net income $195,000 $269,000 $1,193,000 $1,454,000
 Earnings per share $.06 $.08 $.34 $.42
 Average shares
 outstanding 3,518,000 3,512,000 3,525,000 3,502,000
 Condensed Consolidated Balance Sheets
 Dec. 31, Sept. 30,
 1993 1992
 Current assets $19,831,000 $17,271,000
 Property, plant & equipment, net 11,328,000 11,607,000
 Other assets 5,098,000 4,886,000
 Total $36,257,000 $33,764,000
 Liabilities and stockholders' equity
 Current liabilities $15,072,000 $13,811,000
 Long-term debt (less current portion) 4,075,000 4,748,000
 Other liabilities 1,593,000 1,037,000
 Stockholders' equity 15,517,000 14,168,000
 Total $36,257,000 $33,764,000
 Unaudited and subject to year-end adjustments.
 -0- 11/18/93
 /CONTACT: Richard H. Ellison of Stuart Entertainment, 303-795-2625/

CO: Stuart Entertainment Inc. ST: Iowa IN: ENT SU: ERN

MC -- DV001 -- 6011 11/18/93 12:06 EST
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Publication:PR Newswire
Date:Nov 18, 1993

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