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Shuffle Master Q4 profit grows

Jan 15, 2008 6:25 AM

Shuffle Master Inc. (SHFL) reported a major turnaround during the fourth fiscal quarter that ended on Oct. 31, 2007, but it wasn’t enough to generate a lot of buying interest among investors.

When the quarterly report was given last week, the shares of SHFL jumped by 11% to $10.09 but in later trading the share price dropped before ending on Friday at $8.57 per share.

Revenue for the period rose 13% to $51.7 million from the $45.6 million reported for the 2006 quarter while earnings jumped to $8.2 million or $0.23 per share compared to last year’s $3.2 million or $0.09 per share.

Dr. Mark Yoseloff, chairman and CEO, who is cooperating with the company’s search to find his successor, called 2007 a transitional year and said he believed "the hardest times are behind us."

The company’s operational decline began a couple of years ago with the purchase of an Australian slots manufacturer called Stargames. Shuffle Master had difficulty absorbing the new manufacturer into its operation and last year ran into problems in Macau when the machines malfunctioned.

And in the fourth fiscal quarter, shortly after the company announced it had acquired the table division of Progressive Gaming International Inc. (PGIC), the company revealed that its chief financial officer, Richard Baldwin, had resigned and that Yoseloff had advised the board of directors that he felt he had taken the company just as far as he could and that it should seek a replacement.

Yoseloff’s contract runs until October and it is not certain that the head-hunter firm hired to seek a replacement will find a replacement of Yoseloff’s quality. If it does, the company indicated Yoseloff, whose expertise has been in the development of new casino games, will stay on as an advisor.

Including in the PGIC acquisition were such well-known names as Caribbean Stud and Texas Hold ”˜Em Bonus poker. These additions provided Shuffle Master with the top five revenue generating titles in the non-traditional table game market.

Although analysts had estimated the company would earn $0.10 a share during the fourth quarter, some were negative as to the company’s current status.

In a research note, Bill Lerner of Deutsche Bank downgraded his rating on SHFL saying the company’s business model may be slow to develop, thus affecting future earnings.

Regardless of where analysts feelings lie, Shuffle Master is continuing its goal of stretching its impact on casinos worldwide.

On Jan. 22, the company’s European subsidiary CARD will present a wide range of products at this year’s International Casino Exhibition to be held in London, England. In addition to its regular list of items, such as its automatic card shufflers, table games and roulette chip sorters, the company also will display its latest single deck specialty shuffler, several new progressive table games and multiple Electronic Table Systems.