Weak quarterly earnings
raise investors’ ire

Sep 12, 2006 5:26 AM

Wall Street investors are unforgiving when it comes to companies failing to make their numbers. Both Shuffle Master Inc. (SHFL) and Nevada Gold and Casinos Inc. (UWN) learned that hard lesson late last week.

Shuffle Master’s share price tumbled $2.67 to $24.26 per share after reporting earnings that were 20% below analysts’ estimates. Revenues, as expected, jumped 49% to $40.7 million, primarily due to the company’s acquisition of the Australian game maker Stargames. However, it was precisely because of that acquisition that the company’s earnings were less than the $0.25 per share that was expected.

Costs associated with the Stargames acquisition, the company said, resulted in a loss of $0.07 per share. And the company added that another $0.03 per share was loss because of an accounting change.

Helping to hold up the company’s revenue stream was the revenue from Utility Products that totaled $18.6 million, an increase of 13% in the third quarter.

Mark Yoseloff, chairman and CEO, remarked that "the third quarter saw solid revenue growth across all of our business segments and a continuation of our global diversification that began two years ago.

"More importantly, however, the period was characterized by ongoing integration successes that focus on infrastructure efficiency and a global portfolio of proven products."

Among the recent developments mentioned by the company were: A multi-terminal video lottery machine contract from the Delaware State Lottery System, and the sale to International Game Technology (IGT) of its 50% ownership interest in ENPAT patents.

The company said it expects full year earnings to be in the range of $0.97 to $1.00 per share.

Following the report, the company said the directors had authorized the repurchase of up to $30 million of its common stock.

As for Nevada Gold and Casinos Inc., the company said it had major pre-opening expenses for both Tioga Downs and Vernon Downs, two New York racetracks, but that revenues from the two facilities won’t be included in its financial statements until the next quarterly report.

Revenues for the quarter that ended on July 30 decreased to $3.5 million from $3.7 million reported in the comparable quarter of a year ago.

The net loss for the first fiscal quarter of 2007 amounted to $1.8 million compared to net income of $1.8 million last year. The net loss per diluted share was $0.14 whereas last year the per share earnings were $0.13 per share.

Tom Winn, the company’s largest stockholder and chairman of the board of directors, was optimistic.

"Despite our short-term earnings challenges, we continue to feel confident that as we employ our growth and operating initiatives, both our existing project and those in the pipeline leave the company well positioned to generate solid returns over the long term," he said.

During the first quarter, the company said it had repurchased 40,800 shares of common stock in the open market at an average price of $8.90 per share.