Shuffle Master reports higher profit in quarter

LAS VEGAS, Nevada -- Las Vegas-based casino supplier Shuffle Master Inc. today said its second quarter profit rose, even as it made hefty severance payments and struggling casinos purchased fewer card-shuffling devices.

The company earned $4.577 million, or 9 cents per share in the quarter ended April 30 vs. $3.048 million, or 9 cents, in the 2008 quarter. Per-share earnings remained steady as more shares were outstanding in the 2009 quarter.

Revenue of $45.3 million fell from $49 million. The company said it sold 672 shufflers in the 2009 quarter vs. 743 in the 2008 quarter. But its base of leased units rose from 5,354 in 2008 to 5,565 in 2009.

"Shuffle Master had a decent second quarter given the magnitude of the economic climate. We remain focused on maintaining the discipline and rigor necessary to create long-term shareholder value, and we are taking aggressive steps to work with our customers to maximize their floor potential during this challenging time," Chief Executive Tim Parrott said in a statement.

Shuffle Master said lease and service revenue rose 7 percent year-over-year to a record $20.5 million, or 45 percent of revenue.

The company said earnings were affected by a charge of 5 cents per share, or $4.4 million, for severance costs related to the retirement of former Chief Executive Mark Yoseloff and the departure of another senior executive.

During the quarter, the company purchased 99.9 percent of the remaining $30.3 million on its outstanding contingent convertible senior notes and in May satisfied the remaining $8,000 of the notes.

Net debt totaled $100.7 million compared to $119.8 million as of Oct. 31, 2008.

"We are very pleased by the progress we have made to date on our cost saving initiatives as well as our strong balance sheet and healthy liquidity," said Coreen Sawdon, acting chief financial officer. "With almost $15 million in cash, the complete elimination of the convertible notes on our balance sheet and the consistent reduction of debt every quarter, Shuffle Master is well-positioned to weather the recession. Furthermore, we will continue to take the steps necessary to scale our cost structure."

On March 17, Shuffle Master and Elixir Gaming Technologies Inc. announced a deal in which Shuffle Master bought intellectual property related to Elixir Gaming's card shuffling and card deck checking equipment and the companies settled patent infringement litigation between them.

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