Shfl Entertainment, Inc. (MM) (SHFL)

BYI has completed the acquisition of SHFL.

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SHFL Shareholders Approve Merger Agreement With Bally Technologies

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SHFL Schedules Special Shareholder Meeting for November 19, 2013 to Vote on Approval and Adoption of the Merger

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SHFL - SHFL entertainment Installs its SHFL Fusion Hybrid e-Tables at Resorts World Manila

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SHFL entertainment, Inc. Reports Revenue Of $73.5 Million In Third Quarter, Up 16% Year-Over-Year
PR NewswirePress Release: SHFL entertainment, Inc. – 20 hours

LAS VEGAS, Sept. 6, 2013 /PRNewswire/ -- SHFL entertainment, Inc. (NASDAQ Global Select Market: SHFL) ("SHFL" or the "Company") today announced its results for the Third Quarter ended July 31, 2013.

(Logo: http://photos.prnewswire.com/prnh/20121008/LA88315LOGO)

Third Quarter 2013 Financial Highlights
•Total revenue grew 16% to $73.5 million primarily due to a 79% year-over-year increase in Electronic Table Systems ("ETS") revenue. The Electronic Gaming Machine ("EGM"), Utility and Proprietary Table Games ("PTG") businesses also contributed to overall growth in the quarter.
•Recurring revenue increased to $31.4 million, a 5% year-over-year increase. The $1.1 million increase in PTG recurring revenue contributed to 68% of the overall increase in recurring revenue.
•Adjusted for one-time expenses of $3.6 million, or $0.05 per share, related to entering into a definitive agreement and plan of merger (the "Merger Agreement") with Bally Technologies, Inc. ("Bally"), non-GAAP earnings per share ("EPS") were $0.16 in the third quarter. Diluted earnings per share ("EPS") decreased $0.07 year-over-year to $0.11.
•Net income declined $4.0 million year-over-year to $6.4 million. Adjusted for one-time expenses related to the Merger Agreement with Bally, net income was $9.5 million in the third quarter.
•Gross margin decreased 80 basis points year-over-year to 62%, due to the mix of segment performance, primarily driven by increased revenue in the ETS segment. Gross margin was also impacted by an increase in headcount of the Company's service team that has expanded to service the growing product footprint globally. To a lesser extent, gross margin was affected this quarter by increased depreciation on old Table Master units in the ETS segment.
•Selling, general and administrative ("SG&A") expenses increased $8.3 million compared to the prior year period. Approximately $3.6 million of the increase was due to expenses related to the Merger Agreement with Bally. Also contributing to the increase were: $1.6 million in higher payroll and related expenses arising from increased headcount across various departments and higher stock based compensation and medical costs; a $1.1 million increase in costs associated with the establishment of the iGaming product management and sales teams and, to a lesser extent, litigation costs incurred to protect the Company's valuable intellectual property from online infringement; and $1.1 million split evenly between the Company's expanded participation in tradeshows to support new market growth and litigation expenses related primarily to the Company's ETS segment.
•Research and Development ("R&D") expenses increased $2.4 million year-over-year due to an increase in headcount and product approval expenses related to several initiatives across all product segments. Approximately $0.7 million of the increase was due to expansion of the iGaming department and platform development for the Company's online game content. Other initiatives included the creation of new EGM titles for the Equinox cabinet, development of next-generation Utility products, strengthening the Company's current PTG progressive offerings, and enhancements to next-generation ETS products including Table Master Fusion, SHFL FUSION Hybrid, and SHFL FUSION Virtual.
•Operating margin decreased year-over-year to 12% due to increased operating expenses discussed above. Adjusted for one-time expenses related to the Merger Agreement with Bally, operating margin was 16% in the quarter.
•Adjusted EBITDA declined 3% year-over-year to $20.5 million due to the previously mentioned increase in operating expenses, slightly offset by the increase in total Company revenue.
•Free Cash Flow ("FCF")1, a non-GAAP financial measure, was down 57% year-over-year to $5.1 million. FCF was impacted by an increase of $6.3 million in capital expenditures related to the construction of the Company's new consolidated facility in Las Vegas. The decline in FCF was slightly offset by a $0.7 million decrease year-over-year in cash paid for taxes.

Third Quarter 2013 Business Segment Highlights

Utility
•Utility recurring revenue grew to $14.1 million compared to $13.7 million in the prior year period. The 3% increase was due primarily to a rise in the shuffler average lease price as customers continued to upgrade to newer shuffler models. New shuffler lease placements, in particular the MD3, also contributed to the increase.
•Total Utility revenue grew 5% year-over-year to $25.6 million. Shuffler sales increased 11% over the prior period driven by sales of approximately 270 MD3 shufflers in Asia and, to a lesser extent, sales in Australia and the U.S.
•Total shufflers on lease increased year-over-year to 8,287. Incremental MD3 placements and, to a lesser extent, iDeal and one2six placements drove increases in the lease installed base in the quarter.
•Gross margin fell 210 basis points year-over-year to 61% due mainly to the previously mentioned increase in headcount of the Company's service team to support shuffler growth in new table games markets in the U.S. and expansion into Asia.
•Total MD3 shufflers installed grew 1,896 units year-over-year to 3,277. Placements were driven by sales in Asia in addition to an increase in incremental lease placements over the prior year period. Approximately 45% of MD3 shufflers are currently on lease.

Proprietary Table Games2
•PTG recurring revenue increased 9% year-over-year to $13.4 million. Increased lease placements in premium table games (Ultimate Texas Hold'em, Mississippi Stud), side bets (6 Card Bonus, King's Bounty, House Money), and progressives (Ultimate Texas Hold'em Progressive, Three Card Poker Progressive) contributed to recurring revenue growth.
•Total PTG revenue increased 7% year-over-year to $13.8 million driven primarily by strong lease placements.
•Gross margin remained relatively flat year-over-year at 82%.
•Total progressive units installed grew 10% year-over-year to 1,258, driven by installations of Ultimate Texas Hold'em Progressive and Three Card Poker Progressive.

Electronic Table Systems
•Total ETS revenue grew 79% year-over-year to $10.8 million driven by increased sales of SHFL FUSION Hybrid in Asia and New Zealand, and sales of SHFL FUSION Virtual in Australia.
•ETS recurring revenue stayed relatively flat at $3.6 million compared to the prior year period. The removal of Table Master units in Maryland was offset by increased placements of SHFL FUSION Hybrid in New York and, to a lesser extent, greater i-Table recurring revenue.
•ETS gross margin increased to 46% compared to 34% in the prior year period. The previously discussed increase in total sales revenue, partially offset by increased depreciation of old Table Master units, drove the increase.

Electronic Gaming Machines
•Total EGM revenue grew 16% year-over-year to $23.2 million. The increase was driven primarily by greater placements in Asia over the prior year period and, to a lesser extent, higher average sales prices. Adjusted for foreign exchange, EGM revenue grew to $23.8 million in the quarter.
•Gross margin remained relatively flat year-over-year at 60%.
•There were 1,116 EGM units sold in the quarter compared to 1,021 in the year-ago quarter. The increase was due to approximately 250 placements into Asia in the quarter, driven by sales of the Duo Fu Duo Cai progressive jackpot link.

Further detail and analysis of the Company's financial results for the third quarter ended July 31, 2013, is included in its Form 10-Q, which the Company intends to file with the Securities and Exchange Commission today, September 6, 2013. No conference call will be held. On July 15, 2013, SHFL entered into a definitive agreement and plan of merger with Bally (BYI), pursuant to which Bally has agreed to acquire the Company at a per share price of $23.25 in cash for total consideration of approximately $1.3 billion subject to the satisfaction of the conditions set forth therein.

About SHFL entertainment, Inc.
SHFL entertainment, Inc. is a leading global gaming supplier committed to making gaming more fun for players and more profitable for operators through product innovation, and superior quality and service. The Company operates in legalized gaming markets across the globe and provides state-of-the-art, value-add products in five distinct categories: Utility products, which include automatic card shufflers and roulette chip sorters; Proprietary Table Games, which includes live games, side bets and progressives; Electronic Table Systems, which include various e-Table game configurations; Electronic Gaming Machines, which include video slot machines; and newly introduced iGaming, which features online versions of SHFL entertainment, Inc.'s table games, social gaming and mobile applications. The Company is included in the S&P SmallCap 600 Index. Information about the Company and its products can be found on the Internet at www.shfl.com, or on Facebook and Twitter.

Forward-Looking Statements
This release contains forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements included in this release other than statements that are purely historical are forward-looking statements. Forward-looking statements in this press release include without limitation: (1) the Company's belief that its innovation will continue to drive competition; (2) the Company's intention to continue to execute against our strategic initiatives; (3) the Company's belief that EPS, Adjusted EBITDA and FCF are useful, widely referenced performance measures in the Company's industry and the Company's belief that references to them are helpful to investors; (4) the Company's estimates of diluted EPS, Adjusted EBITDA and FCF and the assumptions upon which they are based; (5) the Company's belief that investing in its intellectual property is an important use of cash; (6) the Company's ability to develop products that achieve commercial success in the very competitive marketplace in which the Company operates; and (7) the fact that the Company competes in a single industry and is dependent on the success of its customers and the risks that impact the Company's customers, including a change in demand for gaming, a downturn in general worldwide economic conditions, or the gaming industry may adversely impact the Company or its results of operations. The Company's beliefs, expectations, forecasts, objectives, anticipations, intentions and strategies regarding the future, including without limitation those concerning expected operating results, revenues and earnings are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by the forward-looking statements, including but not limited to: (1) unexpected changes in demand for or increased competition with the Company's products; (2) unexpected factors that limit or eliminate the Company's ability to implement its strategic plan or undertake or complete any of its growth initiatives; (3) inaccuracies in the Company's assumptions as to the financial measures that investors use or the manner in which such financial measures may be used by such investors; (4) reduced demand for or increased competition with the Company's products that affects its EPS and Adjusted EBITDA; (5) unexpected changes to the Company's balance sheet or cash flows that would impede the Company's ability to pursue protection and pursuit of its intellectual property; (6) the Company's inability to accurately gauge the commercial appeal of its products; (7) unexpected changes in the market and economic conditions and reduced demand for or increased competition with the Company's products; (8) the risk that the conditions to the closing of the merger are not satisfied (including a failure of the shareholders of SHFL to approve, on a timely basis or otherwise, the merger and the risk that regulatory approvals required for the merger are not obtained, on a timely basis or otherwise, or are obtained subject to conditions that are not anticipated); (9) litigation relating to the merger; (10) uncertainties as to the timing of the consummation of the merger and the ability of each of SHFL and Bally to consummate the merger; (11) risks that the proposed transaction disrupts the current plans and operations of SHFL; (12) the ability of SHFL to retain and hire key personnel; (13) competitive responses to the proposed merger; (14) unexpected costs, charges or expenses resulting from the merger; (15) the failure by Bally to obtain the necessary debt financing arrangements set forth in the commitment letter received in connection with the merger; (16) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger; and (17) legislative, regulatory and economic developments. Additional information on 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, quarterly reports on Form 10-Q and its latest annual report on Form 10-K, and are based on information available to the Company on the date hereof. The Company does not intend, and assumes no obligation, to update any forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this press release.

1 Free Cash Flow is Adjusted EBITDA less capital expenditures and cash paid for taxes.

2 As of FY 2013, revenues from the iGaming segment are being reported separately from the Proprietary Table Games segment. Please see page 13 for more details.





SHFL ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)







Three Months Ended


Nine Months Ended





July 31,


July 31,





2013


2012


2013


2012


Revenue:











Product leases and royalties

$ 29,349


$ 27,830


$ 87,941


$ 80,730



Product sales and service

44,185


35,556


121,791


104,763




Total revenue

73,534


63,386


209,732


185,493


Costs and expenses:










Cost of leases and royalties

10,484


9,475


30,938


27,853



Cost of sales and service

17,272


13,889


45,050


39,308




Gross profit

45,778


40,022


133,744


118,332



Selling, general and administrative

27,257


19,007


71,169


55,991



Research and development

10,052


7,622


27,400


23,074




Total costs and expenses

65,065


49,993


174,557


146,226













Income from operations

8,469


13,393


35,175


39,267













Other income (expense):










Interest income

209


116


551


429



Interest expense

(266)


(367)


(789)


(1,222)



Other, net

228


180


498


209




Total other income (expense)

171


(71)


260


(584)


Income before income taxes

8,640


13,322


35,435


38,683


Income tax provision

2,231


2,898


10,122


10,875


Net income

$ 6,409


$ 10,424


$ 25,313


$ 27,808













Basic earnings per share:

$ 0.11


$ 0.19


$ 0.44


$ 0.50


Diluted earnings per share:

$ 0.11


$ 0.18


$ 0.44


$ 0.49













Weighted average shares outstanding:










Basic

57,117


56,284


56,927


55,700



Diluted

57,789


57,029


57,623


56,445






SHFL ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)







July 31,


October 31,





2013


2012







ASSETS





Current assets:






Cash and cash equivalents

$41,819


$24,160



Accounts receivable, net of allowance for bad debts of $391 and $491

39,332


45,708



Investment in sales-type leases and notes receivable, net of allowance






for bad debts of $42 and $8

9,366


9,287



Inventories

31,335


21,906



Prepaid income taxes

10,879


4,053



Deferred income taxes

3,782


4,622



Other current assets

7,467


6,901




Total current assets

143,980


116,637


Investment in sales-type leases and notes receivable, net of current portion

8,772


6,310


Products leased and held for lease, net

32,275


34,639


Property and equipment, net

30,217


17,417


Intangible assets, net

54,861


62,836


Goodwill

85,435


84,950


Deferred income taxes

3,173


5,183


Other assets

2,510


3,079


Total assets

$361,223


$331,051









LIABILITIES AND SHAREHOLDERS' EQUITY



Current liabilities:






Accounts payable

$13,386


$6,702



Accrued liabilities and other current liabilities

21,337


22,402



Deferred income taxes

16


16



Customer deposits

3,714


3,383



Income tax payable

3,738


4,179



Deferred revenue

4,595


4,799



Current portion of long-term debt

530


-




Total current liabilities

47,316


41,481


Long-term debt

1,296


1,303


Other long-term liabilities

1,690


2,004


Deferred income taxes

2,528


1,493




Total liabilities

52,830


46,281


Commitments and contingencies





Shareholders' equity:






Common stock, $0.01 par value; 151,368 shares authorized;







56,612 and 55,973 shares issued and outstanding

566


560



Additional paid-in capital

144,728


135,758



Retained earnings

144,757


119,444



Accumulated other comprehensive income

18,342


29,008




Total shareholders' equity

308,393


284,770


Total liabilities and shareholders' equity

$361,223


$331,051








SHFL ENTERTAINMENT, INC.

SUPPLEMENTAL DATA

(Unaudited, in thousands)





Three Months Ended


Nine Months Ended



July 31,


July 31,



2013


2012


2013


2012











Cash Flow Data:


















Cash provided by operating activities

$ 16,467


$ 15,264


$ 34,720


$ 35,868











Cash used in investing activities:









Payments for products leased and held for lease

$ (4,162)


$ (4,521)


$ (10,785)


$ (11,227)


Purchases of property and equipment

(7,356)


(1,612)


(13,727)


(5,852)


Purchases of intangible assets

(1,668)


(230)


(1,807)


(4,333)


Acquisition of business

-


-


(1,590)


(5,500)


Proceeds from sale of leased assets

1,145


611


6,285


1,640


Proceeds from sale of assets

-


-


-


-


Other

(74)


(236)


(549)


(690)



$(12,115)


$ (5,988)


$ (22,173)


$ (25,962)











Cash provided by (used in) financing activities

$ (3,317)


$ (4,740)


$ 5,285


$ (5,435)











Free cash flow (2)

$ 5,129


$ 11,859


$ 23,769


$ 31,506











Reconciliation of net income to Adjusted EBITDA:


















Net income

$ 6,409


$ 10,424


$ 25,313


$ 27,808


Other expense (income)

(171)


71


(260)


584


Share-based compensation

1,656


1,014


4,543


3,063


Income tax provision

2,231


2,898


10,122


10,875


Depreciation and amortization

6,784


6,260


20,440


18,657


Ongame acquisition expenses

-


500


-


2,152


Expenses related to Merger Agreement with Bally

3,610


-


4,010


-











Adjusted EBITDA (1)

$ 20,519


$ 21,167


$ 64,168


$ 63,139






1.

Adjusted EBITDA is earnings before other expense (income), provision for income taxes, depreciation and amortization expense, Ongame acquisition expenses, expenses related to the Merger Agreement with Bally, and share-based compensation. Adjusted EBITDA is presented exclusively as a supplemental disclosure because management believes that it is a useful performance measure and is widely used to measure performance, and as a basis for valuation, within the Company's industry. Adjusted EBITDA is not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure for comparison. Management uses Adjusted EBITDA as a measure of the operating performance and to compare the operating performance with those of its competitors. The Company also presents Adjusted EBITDA because it is used by some investors as a way to measure a company's ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming equipment suppliers have historically reported Adjusted EBITDA as a supplement to financial measures in accordance with U.S. generally accepted accounting principles ("GAAP"). Adjusted EBITDA should not be considered as an alternative to operating income (loss), as an indicator of the Company's performance, as an alternate to cash flows from operating activities, as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income (loss), Adjusted EBITDA does not include depreciation and amortization or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. The Company compensates for these limitations by using Adjusted EBITDA as only one of several comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include operating income (loss), net income (loss), cash flows from operations and cash flow data. The Company has significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in Adjusted EBITDA.


2.

Free cash flow is Adjusted EBITDA less capital expenditures and cash paid for taxes.






SHFL ENTERTAINMENT, INC.

BUSINESS SEGMENT DATA

(Unaudited, in thousands)












Three Months Ended


Nine Months Ended





July 31,


July 31,





2013


2012


2013


2012









Utility:










Revenue

$ 25,644


$ 24,382


$ 81,445


$ 68,988



Gross profit

15,529


15,285


51,663


42,622



Gross margin

60.6%


62.7%


63.4%


61.8%













Proprietary Table Games:










Revenue

$ 13,839


$ 12,989


$ 40,670


$ 36,300



Gross profit

11,338


10,629


33,352


29,671



Gross margin

81.9%


81.8%


82.0%


81.7%













Electronic Table Systems:










Revenue

$ 10,822


$ 6,053


$ 25,040


$ 21,183



Gross profit

4,943


2,055


10,396


8,868



Gross margin

45.7%


34.0%


41.5%


41.9%













Electronic Gaming Machines:










Revenue

$ 23,167


$ 19,957


$ 62,229


$ 56,699



Gross profit

13,956


12,048


38,043


34,848



Gross margin

60.2%


60.4%


61.1%


61.5%













iGaming:










Revenue

$ 62


$ 5


$ 348


$ 2,323



Gross profit

12


5


290


2,323



Gross margin

19.4%


100.0%


83.3%


100.0%













Total:










Revenue

$ 73,534


$ 63,386


$209,732


$185,493



Gross profit

45,778


40,022


133,744


118,332



Gross margin

62.3%


63.1%


63.8%


63.8%













Adjusted EBITDA

$ 20,519


$ 21,167


$ 64,168


$ 63,139




as a percentage of total revenue

27.9%


33.4%


30.6%


34.0%













Income from operations

$ 8,469


$ 13,393


$ 35,175


$ 39,267




as a percentage of total revenue

11.5%


21.1%


16.8%


21.2%

LAS VEGAS, Aug. 19, 2013 /PRNewswire/ -- SHFL entertainment, Inc. (NASDAQ Global Select Market: SHFL) ("SHFL" or the "Company") announced today that it will release its fiscal 2013 third quarter results after the market closes on Friday, September 6, 2013. No conference call will be held. On July 16, 2013, SHFL entertainment announced that it had entered into a definitive agreement and plan of merger with Bally Technologies, Inc. ( BYI) ("Bally"), pursuant to which Bally has agreed to acquire the Company at a per share price of $23.25 in cash for total consideration of approximately $1.3 billion subject to the satisfaction of the conditions set forth therein.

(Logo: http://photos.prnewswire.com/prnh/20121008/LA88315LOGO)

About SHFL entertainment, Inc.
SHFL entertainment, Inc. is a leading global gaming supplier committed to making gaming more fun for players and more profitable for operators through product innovation, and superior quality and service. The Company operates in legalized gaming markets across the globe and provides state-of-the-art, value-add products in five distinct categories: Utility products, which include automatic card shufflers and roulette chip sorters; Proprietary Table Games, which includes live games, side bets and progressives; Electronic Table Systems, which include various e-Table game configurations; Electronic Gaming Machines, which include video slot machines; and newly introduced iGaming, which features online versions of SHFL entertainment's table games, social gaming, and mobile applications. The Company is included in the S&P SmallCap 600 Index. Information about the Company and its products can be found on the Internet at www.shfl.com, or on Facebook and Twitter.

Forward Looking Statements
This release may contain forward-looking statements 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 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. The Company's beliefs, expectations, forecasts, objectives, anticipations, intentions and strategies regarding the future, including without limitation those concerning expected operating results, revenues and earnings are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by the forward-looking statements, including but not limited to: changes in the market and economic conditions and reduced demand for or increased competition with SHFL's brands or changes in the Company's strategic initiatives of objectives; the Company's inability to accurately gauge the commercial appeal of its brands; increased infringement on SHFL's intellectual property or proprietary brands; the impact of the Company's previously announced proposed merger with Bally Technologies, Inc. on its business, operations and customer relationships; unanticipated changes in the laws, rules or regulations governing gaming and the regulation of gaming in all markets. Additional information on 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, quarterly reports on Form 10-Q and its latest annual report on Form 10-K.


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SHFL - SHFL entertainment to Provide Its Proprietary Table Games to Mobile Gaming Platform Provider oneLIVE inc.

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Bally Technologies, Inc. to Acquire SHFL Entertainment, Inc.

Combination Will Create a World-Class Gaming Organization With the Industry's Most Diversified Suite of Innovative Products and Successful Brands

PR NewswirePress Release: SHFL entertainment, Inc. – Tue, Jul 16, 2013 8:00 AM EDT..

LAS VEGAS, July 16, 2013 /PRNewswire/ -- SHFL entertainment, Inc. (NASDAQ Global Select Market: SHFL) ("SHFL" or the "Company") today announced that it has entered into a definitive agreement and plan of merger with Bally Technologies, Inc. (BYI) ("Bally"), pursuant to which Bally has agreed to acquire the Company at a per share price of $23.25 in cash for total consideration of approximately $1.3 billion. This consideration represents a premium of 37% over the average closing price of SHFL common stock for the 90 days ended July 15, 2013 and a premium of 24% over the closing price of SHFL common stock on July 15, 2013.

(Logo: http://photos.prnewswire.com/prnh/20121008/LA88315LOGO)

The transaction, which was unanimously approved by both the SHFL and Bally Boards of Directors, combines two best-in-class, highly complementary and customer-centric gaming technology companies with a shared focus on innovation.

"We believe that now is the right time to join forces with Bally as there is a unique opportunity to combine each other's many strengths, particularly our talented teams who have been the key drivers of success for each organization. It also represents an opportunity for our shareholders to receive a significant premium for their shares," said Gavin Isaacs, SHFL's Chief Executive Officer. "Like SHFL, Bally focuses on creating both entertaining player experiences through high-performing content and state-of-the-art technological solutions to increase productivity on the casino floor. United, we become a larger, stronger organization that we believe will best position the company for future growth. Equally important, we share a common vision to build the industry's leading supplier based on delivering superior products, solutions and services to customers around the world."

"Both Bally and SHFL have long histories of proven innovation, excellent customer service and successfully anticipating and adapting to changes within our industry, which makes bringing our two companies together a great strategic fit," said Ramesh Srinivasan, Bally's President and Chief Executive Officer. "The transformational acquisition of SHFL – which joins two high-caliber, talented and creative teams – will further enhance our ability to deliver future growth and serve our customers. SHFL's intellectual property, renowned brands and industry-leading suite of diverse, high-performance products will enable us to offer an unparalleled offering of gaming products and services, which – when combined with our content, technology, operational capabilities and respective geographic footprints – will provide the most comprehensive product portfolio offered around the world."

Additional Transaction Details

Bally will acquire all of the outstanding shares of SHFL for a per share price of $23.25 in cash, representing a total enterprise value of approximately $1.3 billion, including debt of $8 million and cash of $41 million as of April 30, 2013.

The transaction is subject to approval by SHFL's shareholders, required regulatory and other approvals and customary closing conditions. The transaction is expected to close no later than June 15, 2014. Bally has obtained committed financing to complete the acquisition and the transaction is not subject to a financing contingency.

Conference Call and Webcast

Bally is hosting a conference call and webcast today for its investors at 8:30 a.m. EDT (5:30 a.m. PDT). The conference call dial-in number is 1-866-843-0890 or 1-412-317-9250 (International); passcode 1154979. The webcast can be accessed by visiting BallyTech.com and selecting "Investor Relations." Interested parties should initiate the call and webcast process at least five minutes prior to the beginning of the presentation. Gavin Isaacs also will be participating in the conference call.

Financial and Legal Advisory

Macquarie Capital served as SHFL's exclusive financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel to SHFL.

Goldman, Sachs & Co. and Groton Partners served as financial advisors and Gibson, Dunn & Crutcher LLP served as the legal advisor to Bally. Wells Fargo Bank, JPMorgan Chase Bank, N.A., Bank of America Merrill Lynch, Goldman Sachs Bank USA and Union Bank, N.A. provided the committed financing for the transaction.

About SHFL entertainment, Inc.

SHFL entertainment, Inc. is a leading global gaming supplier committed to making gaming more fun for players and more profitable for operators through product innovation, and superior quality and service. The Company operates in legalized gaming markets across the globe and provides state-of-the-art, value-add products in five distinct categories: Utility products, which include automatic card shufflers and roulette chip sorters; Proprietary Table Games, which includes live games, side bets and progressives; Electronic Table Systems, which include various e-Table game configurations; Electronic Gaming Machines, which include video slot machines; and newly introduced iGaming, which features online versions of SHFL's table games, social gaming, and mobile applications. The Company is included in the S&P SmallCap 600 Index. Information about the Company and its products can be found on the Internet at www.SHFL.com, or on Facebook and Twitter.

Forward Looking Statements

This communication may contain forward-looking statements. Forward-looking statements may be typically identified by such words as "may," "will," "should," "expect," "anticipate," "plan," "likely," "believe," "estimate," "project," "intend," and other similar expressions among others. These forward-looking statements are subject to known and unknown risks and uncertainties that could cause our actual results to differ materially from the expectations expressed in the forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are reasonable, any or all of our forward-looking statements may prove to be incorrect. Consequently, no forward-looking statements may be guaranteed and there can be no assurance that the actual results or developments anticipated by such forward looking statements will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, SHFL entertainment, Inc. (the "Company") or its business or operations. Factors which could cause our actual results to differ from those projected or contemplated in any such forward-looking statements include, but are not limited to, the following factors: (1) the risk that the conditions to the closing of the merger are not satisfied (including a failure of the shareholders of the Company to approve, on a timely basis or otherwise, the merger and the risk that regulatory approvals required for the merger are not obtained, on a timely basis or otherwise, or are obtained subject to conditions that are not anticipated); (2) litigation relating to the merger; (3) uncertainties as to the timing of the consummation of the merger and the ability of each of the Company and Bally Technologies, Inc. ("Bally") to consummate the merger; (4) risks that the proposed transaction disrupts the current plans and operations of the Company; (5) the ability of the Company to retain and hire key personnel; (6) competitive responses to the proposed merger; (7) unexpected costs, charges or expenses resulting from the merger; (8) the failure by Bally to obtain the necessary debt financing arrangements set forth in the commitment letter received in connection with the merger; (9) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger; and (10) legislative, regulatory and economic developments. The foregoing review of important factors that could cause actual events to differ from expectations should not be construed as exhaustive and should be read in conjunction with statements that are included herein and elsewhere, including the risk factors included in the Company's most recent Annual Report on Form 10-K for the year ended October 31, 2012, and our more recent reports filed with the U.S. Securities and Exchange Commission (the "SEC"). The Company can give no assurance that the conditions to the Merger will be satisfied. Except as required by applicable law, the Company undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

Additional Information and Where to Find It

This communication is being made in respect of the proposed transaction involving the Company and Bally. The proposed transaction will be submitted to the shareholders of the Company for their consideration. In connection with the proposed transaction, the Company will prepare a proxy statement to be filed with the SEC. The Company and Bally also plan to file with the SEC other documents regarding the proposed transaction. THE COMPANY'S SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT REGARDING THE PROPOSED TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. When completed, a definitive proxy statement and a form of proxy will be mailed to the shareholders of the Company. The Company's shareholders will be able to obtain, without charge, a copy of the proxy statement (when available) and other relevant documents filed with the SEC from the SEC's website at http://www.sec.gov. The Company's shareholders will also be able to obtain, without charge, a copy of the proxy statement and other relevant documents (when available) by going to the Company's Investor Relations website page at http://ir.shfl.com or by contacting Investor Relations by mail to SHFL entertainment, Inc., Attn: Investor Relations, 1106 Palms Airport Drive, Las Vegas, NV 89119, or by phone at (702) 897-7150.

Participants in Solicitation

The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company's shareholders with respect to the meeting of shareholders that will be held to consider the proposed Merger. Information about the Company's directors and executive officers and their ownership of the Company's common stock is set forth in the proxy statement for the Company's 2013 Annual Meeting of Shareholders, which was filed with the SEC on February 1, 2013. Shareholders may obtain additional information regarding the interests of the Company and its directors and executive officers in the proposed Merger, which may be different than those of the Company's shareholders generally, by reading the proxy statement and other relevant documents regarding the proposed Merger, when it becomes available. You may obtain free copies of this document as described in the preceding paragraph.

Bally Technologies To Acquire SHFL Entertainment Inc.

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SHFL - Bally Technologies, Inc. to Acquire SHFL Entertainment, Inc.

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SHFL - SHFL entertainment Installs Linked Progressives Across 35 Casinos in the United Kingdom

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SHFL entertainment's iGaming Products Go Live on GameAccount Network

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..

SHFL Entertainment, Inc. Reports Record Revenue Of $77.4 Million In Second Quarter, Up 17% Year-Over-Year

SHFL Also Achieves Record Net Income of $11.8 Million and Record Adjusted EBITDA of $25.4 Million

PR NewswirePress Release: SHFL entertainment – 11 minutes ago...
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LAS VEGAS, June 4, 2013 /PRNewswire/ -- SHFL entertainment, Inc. (NASDAQ Global Select Market: SHFL) ("SHFL" or the "Company") today announced its results for the second quarter ended April 30, 2013.

(Logo: http://photos.prnewswire.com/prnh/20121008/LA88315LOGO)

"Our record second quarter results reflect a continuation of the strong worldwide demand for our innovative products, particularly in Australia and Asia," said Gavin Isaacs, SHFL's Chief Executive Officer. "What's more, we achieved 17% year-over-year growth against a strong comparable quarter last year that included over $2 million in sales from new openings. The MD3 card shuffler helped fuel this quarter's growth with record placements of 520 units, its strongest performance to date. Our slot machine, shuffler, and specialty table games businesses continued to gain momentum, with each segment reporting record revenue in the quarter. Given the 22% increase in net profit that we announced today, we strongly believe that consistent execution against our strategic initiatives is the right blueprint for building long-term, sustainable value for our shareholders."

Second Quarter 2013 Financial Highlights
•Total revenue grew to a record $77.4 million, representing a 17% increase from the prior year period. The Utility, Electronic Gaming Machine ("EGM"), and Proprietary Table Games ("PTG") businesses all saw double-digit growth over the same period last year.
•Recurring revenue grew 8% year-over-year to $31.2 million. A $1.2 million increase in PTG recurring revenue accounted for over half of recurring revenue growth.
•Net income increased 22% year-over-year to a record $11.8 million.
•Compared to the prior year quarter, diluted earnings per share ("EPS") increased 24% to $0.21. Excluding adjustments for expenses related to the terminated Ongame acquisition in last year's comparable quarter, EPS grew 5%.
•Gross margin, driven by an increase in Utility, EGM, and PTG revenue, grew 40 basis points year-over-year to 65%.
•Operating margin was relatively flat year-over-year at 22%.
•Selling, general and administrative ("SG&A") expenses grew to approximately $23.9 million, up $4.1 million year-over-year. The increase primarily relates to the following: $1.5 million in compensation and related expenses, driven by growth related to headcount increases as well as increased medical costs; $0.5 million was due to greater sales and profit-driven compensation expenses as a result of more revenue during the current quarter; $1.3 million was due to legal expenses, driven largely by costs associated with protecting and defending the Company's valuable intellectual property; $0.5 million was due to expanding the Company's iGaming sales team and offices; $0.4 million was related to advertising and tradeshow expenses. Slightly offsetting SG&A expenses were corporate development and due diligence expenses, which relate to the Company's evaluation of strategic M&A, and were $0.6 million less in the current quarter than the year-ago quarter; the prior year period included expenses from the terminated Ongame acquisition.
•Research & Development ("R&D") expenses increased $1.2 million year-over-year to $9.1 million. The increased costs were evenly divided between the hiring of additional iGaming personnel and compliance expenses for new content releases and territory expansion related to the EGM segment.
•Adjusted EBITDA grew 7% year-over-year to a record $25.4 million.
•Free Cash Flow ("FCF")1, a non-GAAP financial measure, was down $3.1 million year-over-year to $8.6 million. FCF was impacted by an approximately $2.3 million increase in cash taxes paid due to increased profitability in the U.S. and Australia, in addition to an increase of $2.5 million in capital expenditures, largely attributable to the Company's construction of a new consolidated facility in Las Vegas.

"Our diverse businesses continue to deliver solid financial results," said Linster Fox, SHFL's Chief Financial Officer. "We are confident that keeping our IP-rich businesses well-capitalized has been, and will continue to be, our most important use of cash. However, given our balance sheet's current strong position, we will continue to look at the best way to manage a balance between investing in our business and capital allocation for potential M&A, stock repurchases, and dividends."

Second Quarter 2013 Business Segment Highlights

Utility
•Utility recurring revenue grew 3% year-over-year to $13.7 million, primarily driven by MD3 card shuffler lease placements in the U.S.
•Total Utility revenue increased 22% over the prior year period to $30.5 million. Growth was driven by sales of the MD3 shuffler in Asia as well as the sale of previously leased i-Deal shufflers to a large casino customer in the U.S.
•Total shufflers on lease declined by 28 units year-over-year to 8,073. The decrease was driven by the sale of previously leased i-Deal shufflers to a large casino customer in the U.S. and slightly offset by new shuffler lease placements.
•Gross margin grew 120 basis points year-over-year to 66%, driven by the sale of previously leased i-Deal shufflers to a large casino customer in the U.S., in addition to shuffler sales in Asia and the U.S.
•Total MD3 units installed totaled 2,734, representing an increase of 1,781 units year-over-year. 520 of those units were placed in the second quarter. Approximately 50% of all MD3 units are currently on lease.

Proprietary Table Games2
•PTG recurring revenue increased 11% year-over-year to $13.0 million. Increased lease placements in all PTG categories - premium table games (Ultimate Texas Hold'em, Mississippi Stud), side bets (6 Card Bonus, Fire Bet), and progressives (Ultimate Texas Hold'em Progressive, Three Card Poker Progressive) – contributed to recurring revenue growth.
•Total PTG revenue increased 18% year-over-year to $14.0 million driven by strong lease placements and increased sales revenue.
•Gross margin increased 20 basis points to 82% due to the increase in total revenues.
•Total progressive units installed grew 12% year-over-year to 1,245, driven by installations of Ultimate Texas Hold'em Progressive and Three Card Poker Progressive.

Electronic Table Systems ("ETS")
•ETS recurring revenue grew 16% to $4.3 million, compared to $3.7 million in the prior year period, due largely to increased placements of SHFL Fusion Virtual (formerly Vegas Star) on participation in New York. To a lesser extent, increases in recurring revenue from SHFL Fusion Hybrid (formerly Rapid) and i-Table also contributed to the increase.
•Total ETS revenue grew 4% year-over-year to $7.1 million driven by increased sales of SHFL Fusion Virtual in Australia.
•ETS gross profit decreased 420 basis points year-over-year to 35% due to accelerated depreciation of Table Master units on lease in advance of the new Table Master Fusion launch.

Electronic Gaming Machines
•Total EGM revenue grew 16% year-over-year to a record $25.7 million, driven primarily by strong sales in Australia and Asia.
•Gross margin remained relatively flat year-over-year at 62%.
•There were 1,192 net sold EGM units in the quarter compared to 1,044 in the year-ago quarter. The current year period included the removal of 78 older eStar units on lease, slightly offset by the addition of 36 Equinox units on lease.
•Approximately 100 units of the Duo Fu Duo Cai progressive jackpot link were sold in Macau in the quarter.

Further detail and analysis of the Company's financial results for the second quarter ended April 30, 2013, is included in its Form 10-Q, which the Company intends to file with the Securities and Exchange Commission today, June 4, 2013.

Webcast & Conference Call Information
Company executives will provide additional perspective on the Company's second quarter results during a conference call on June 4, 2013 at 2:00 pm Pacific Time. Those interested in participating in the call may do so by dialing (201) 689-8263 or toll-free (877) 407-0792 and requesting SHFL entertainment's Second Quarter 2013 Conference Call. A hardcopy of the presentation materials may be printed from the SHFL entertainment, Inc. Investor Relations website, http://ir.shfl.com, shortly before the start of the call. In conjunction with the call, a live audio webcast and a Company slide presentation highlighting second quarter performance may be accessed at http://ir.shfl.com. In order to access the live audio webcast please allow at least 15 minutes before the start of the call to visit SHFL entertainment's Investor Relations website and download/install any necessary audio/video software for the webcast. Immediately following the call and through July 4, 2013, a playback can be heard 24-hours a day by dialing (858) 384-5517 or toll-free (877) 870-5176; replay pin number 414102. Highlights from the conference call can be accessed on the Company's Investor Relations Twitter account, www.twitter.com/shfl_news.

About SHFL entertainment, Inc.
SHFL entertainment, Inc. is a leading global gaming supplier committed to making gaming more fun for players and more profitable for operators through product innovation, and superior quality and service. The Company operates in legalized gaming markets across the globe and provides state-of-the-art, value-add products in five distinct categories: Utility products, which include automatic card shufflers and roulette chip sorters; Proprietary Table Games, which includes live games, side bets and progressives; Electronic Table Systems, which include various e-Table game configurations; Electronic Gaming Machines, which include video slot machines; and newly introduced iGaming, which features online versions of SHFL entertainment's table games, social gaming, and mobile applications. The Company is included in the S&P SmallCap 600 Index. Information about the Company and its products can be found on the Internet at www.shfl.com, or on Facebook, Twitter and YouTube.

Forward Looking Statements
This release contains forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements included in this release other than statements that are purely historical are forward-looking statements. Forward-looking statements in this press release include without limitation: (a) the Company's belief that its innovation will continue to drive competition; (b) the Company's intention to continue to execute against our strategic initiatives; (c) the Company's belief that EPS, Adjusted EBITDA and FCF are useful, widely referenced performance measures in the Company's industry and the Company's belief that references to them are helpful to investors; (d) the Company's estimates of diluted EPS, Adjusted EBITDA and FCF and the assumptions upon which they are based; (e) the Company's belief that investing in its intellectual property is an important use of cash; (f) the Company's ability to develop products that achieve commercial success in the very competitive marketplace in which the Company operates; (g) the fact that the Company competes in a single industry and is dependent on the success of its customers and the risks that impact the Company's customers, including a change in demand for gaming, a downturn in general worldwide economic conditions, or the gaming industry may adversely impact the Company or its results of operations. The Company's beliefs, expectations, forecasts, objectives, anticipations, intentions and strategies regarding the future, including without limitation those concerning expected operating results, revenues and earnings are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by the forward-looking statements, including but not limited to: (a) unexpected changes in demand for or increased competition with the Company's products; (b) unexpected factors that limit or eliminate the Company's ability to implement its strategic plan or undertake or complete any of its growth initiatives; (c) inaccuracies in the Company's assumptions as to the financial measures that investors use or the manner in which such financial measures may be used by such investors; (d) reduced demand for or increased competition with the Company's products that affects its EPS and Adjusted EBITDA; (e) unexpected changes to the Company's balance sheet or cash flows that would impede the Company's ability to pursue protection and pursuit of its intellectual property; (f) the Company's inability to accurately gauge the commercial appeal of its products; and (g) unexpected changes in the market and economic conditions and reduced demand for or increased competition with the Company's products. Additional information on 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, quarterly reports on Form 10-Q and its latest annual report on Form 10-K, and are based on information available to the Company on the date hereof. The Company does not intend, and assumes no obligation, to update any forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this press release.








1

Free Cash Flow is Adjusted EBITDA less capital expenditures and cash paid for taxes.


2

As of FY 13, revenues from the iGaming segment are being reported separately from the Proprietary Table Games segment. Please see Business Segment Data table for more details.




SHFL ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)












Three Months Ended


Six Months Ended





April 30,


April 30,





2013


2012


2013


2012


Revenue:











Product leases and royalties

$ 29,240


$ 26,947


$ 58,592


$ 52,900



Product sales and service

48,174


39,107


77,606


69,207




Total revenue

77,414


66,054


136,198


122,107


Costs and expenses:










Cost of leases and royalties

10,582


9,427


20,454


18,378



Cost of sales and service

16,738


14,138


27,778


25,419




Gross profit

50,094


42,489


87,966


78,310



Selling, general and administrative

23,866


19,804


43,912


36,984



Research and development

9,101


7,925


17,348


15,452




Total costs and expenses

60,287


51,294


109,492


96,233













Income from operations

17,127


14,760


26,706


25,874













Other income (expense):










Interest income

188


174


342


313



Interest expense

(299)


(378)


(523)


(855)



Other, net

315


(146)


270


29




Total other income (expense)

204


(350)


89


(513)


Income before income taxes

17,331


14,410


26,795


25,361


Income tax provision

5,491


4,675


7,891


7,977


Net income

$ 11,840


$ 9,735


$ 18,904


$ 17,384













Basic earnings per share:

$ 0.21


$ 0.17


$ 0.33


$ 0.31


Diluted earnings per share:

$ 0.21


$ 0.17


$ 0.33


$ 0.31













Weighted average shares outstanding:










Basic

56,984


55,751


56,832


55,408



Diluted

57,721


56,653


57,541


56,154








SHFL ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)












April 30,


October 31,





2013


2012







ASSETS





Current assets:






Cash and cash equivalents

$40,808


$24,160



Accounts receivable, net of allowance for bad debts of $359 and $491

47,506


45,708



Investment in sales-type leases and notes receivable, net of allowance






for bad debts of $224 and $8

9,342


9,287



Inventories

28,079


21,906



Prepaid income taxes

8,806


4,053



Deferred income taxes

4,847


4,622



Other current assets

8,308


6,901




Total current assets

147,696


116,637


Investment in sales-type leases and notes receivable, net of current portion

6,499


6,310


Products leased and held for lease, net

32,235


34,639


Property and equipment, net

23,717


17,417


Intangible assets, net

58,591


62,836


Goodwill

88,156


84,950


Deferred income taxes

3,548


5,183


Other assets

2,588


3,079


Total assets

$363,030


$331,051









LIABILITIES AND SHAREHOLDERS' EQUITY



Current liabilities:






Accounts payable

$12,102


$6,702



Accrued liabilities and other current liabilities

18,098


22,402



Deferred income taxes

16


16



Customer deposits

3,206


3,383



Income tax payable

3,189


4,179



Deferred revenue

6,177


4,799



Current portion of long-term debt

530


-




Total current liabilities

43,318


41,481


Long-term debt

7,299


1,303


Other long-term liabilities

2,085


2,004


Deferred income taxes

1,998


1,493




Total liabilities

54,700


46,281


Commitments and contingencies (See Note 11)





Shareholders' equity:






Common stock, $0.01 par value; 151,368 shares authorized;







56,384 and 55,973 shares issued and outstanding

564


560



Additional paid-in capital

140,517


135,758



Retained earnings

138,348


119,444



Accumulated other comprehensive income

28,901


29,008




Total shareholders' equity

308,330


284,770


Total liabilities and shareholders' equity

$363,030


$331,051








SHFL ENTERTAINMENT, INC.

SUPPLEMENTAL DATA

(Unaudited, in thousands)









Three Months Ended


Six Months Ended



April 30,


April 30,



2013


2012


2013


2012











Cash Flow Data:


















Cash provided by operating activities

$ 5,042


$ 4,161


$ 18,253


$ 20,604











Cash used in investing activities:









Payments for products leased and held for lease

$ (3,778)


$ (2,856)


$ (6,623)


$ (6,706)


Purchases of property and equipment

(4,944)


(3,358)


(6,371)


$ (4,240)


Purchases of intangible assets

(91)


(73)


(139)


(4,103)


Acquisition of business

(1,590)


-


(1,590)


(5,500)


Proceeds from sale of leased assets

3,987


988


5,140


1,029


Proceeds from sale of assets

-


-


-


-


Other

(235)


(236)


(475)


(454)



$ (6,651)


$ (5,535)


$(10,058)


$(19,974)











Cash provided by (used in) financing activities

$ 7,766


$ (2,429)


$ 8,602


$ (695)











Free cash flow (2)

$ 8,623


$11,758


$ 18,240


$ 19,648











Reconciliation of net income to Adjusted EBITDA:


















Net income

$11,840


$ 9,735


$ 18,904


$ 17,384


Other expense (income)

(204)


350


(89)


513


Share-based compensation

1,478


1,117


2,887


2,049


Income tax provision

5,491


4,675


7,891


7,977


Depreciation and amortization

6,768


6,380


13,656


12,397


Ongame acquisition expenses

-


1,448


-


1,653











Adjusted EBITDA (1)

$25,373


$23,705


$ 43,249


$ 41,973








1.

Adjusted EBITDA is earnings before other expense (income), provision for income taxes, depreciation and amortization expense, Ongame acquisition expenses, and share-based compensation. Adjusted EBITDA is presented exclusively as a supplemental disclosure because management believes that it is a useful performance measure and is widely used to measure performance, and as a basis for valuation, within the Company's industry. Adjusted EBITDA is not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure for comparison. Management uses Adjusted EBITDA as a measure of the operating performance and to compare the operating performance with those of its competitors. The Company also presents Adjusted EBITDA because it is used by some investors as a way to measure a company's ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming equipment suppliers have historically reported Adjusted EBITDA as a supplement to financial measures in accordance with U.S. generally accepted accounting principles ("GAAP"). Adjusted EBITDA should not be considered as an alternative to operating income (loss), as an indicator of the Company's performance, as an alternate to cash flows from operating activities, as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income (loss), Adjusted EBITDA does not include depreciation and amortization or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. The Company compensates for these limitations by using Adjusted EBITDA as only one of several comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include operating income (loss), net income (loss), cash flows from operations and cash flow data. The Company has significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in Adjusted EBITDA.


2.

Free cash flow is Adjusted EBITDA less capital expenditures and cash paid for taxes.








SHFL ENTERTAINMENT, INC.

BUSINESS SEGMENT DATA

(Unaudited, in thousands)












Three Months Ended


Six Months Ended





April 30,


April 30,





2013


2012


2013


2012









Utility:










Revenue

$30,517


$24,990


$ 55,801


$ 44,606



Gross profit

20,077


16,154


36,134


27,337



Gross margin

65.8%


64.6%


64.8%


61.3%













Proprietary Table Games:










Revenue

$14,003


$11,886


$ 26,831


$ 23,311



Gross profit

11,509


9,750


22,014


19,042



Gross margin

82.2%


82.0%


82.0%


81.7%













Electronic Table Systems:










Revenue

$ 7,113


$ 6,866


$ 14,218


$ 15,130



Gross profit

2,483


2,684


5,453


6,813



Gross margin

34.9%


39.1%


38.4%


45.0%













Electronic Gaming Machines:










Revenue

$25,745


$22,244


$ 39,062


$ 36,742



Gross profit

15,994


13,833


24,087


22,800



Gross margin

62.1%


62.2%


61.7%


62.1%













iGaming:










Revenue

$ 36


$ 68


$ 286


$ 2,318



Gross profit

31


68


278


2,318



Gross margin

86.1%


100.0%


97.2%


100.0%













Total:










Revenue

$77,414


$66,054


$136,198


$122,107



Gross profit

50,094


42,489


87,966


78,310



Gross margin

64.7%


64.3%


64.6%


64.1%













Adjusted EBITDA

25,373


23,705


43,249


41,973




as a percentage of total revenue

32.8%


35.9%


31.8%


34.4%













Income from operations

$17,127


$14,760


$ 26,706


$ 25,874




as a percentage of total revenue

22.1%


22.3%


19.6%


21.2%

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SHFL entertainment Begins Rollout of Video Lottery Terminals in New York

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SHFL - Current Report Filing (8-k)

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Bob

SHFL entertainment, Inc. Reports First Quarter 2013 Results

News Link

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Bob

SHFL entertainment Acquires Content Studio ProTec Games in China

News Link

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Bob

SHFL - GameAccount Network to Offer SHFL entertainment's iGaming Products

News Link

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Bob

SHFL entertainment to Present "A Better Game" at 2013 International Casino Exhibition

News Link

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Bob

SHFL entertainment, Inc. Reports Fourth Quarter and Fiscal Year Ended 2012 Results

News Link

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Bob

SHFL entertainment to be the Exclusive Distributor of Amaya's Online Poker and Gaming Platforms in the United States

News Link

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Bob

SHFL entertainment Receives Category 2 eGambling License in Alderney

News Link

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Bob

SHFL entertainment to Announce Fourth Quarter and Fiscal Year 2012 Financial Results

News Link

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Bob

SHFL entertainment Advances Interactive Initiatives: Hires Industry Pro Nick Gabriel to Oversee its New Gibraltar Office

News Link

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Bob

SHFL - SHFL entertainment to Feature "A Better Game" at the 2012 South American Gaming Suppliers Expo

News Link

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Bob

SHFL - SHFL Entertainment Joins With Joingo® To Offer Popular Online Table Games To Casino Operators Via Mobile

News Link

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Bob

SHFL - Shuffle Master will showcase new games at G2E

http://www.gamingtoday.com/casino_games/article/38185-Shuffle_Master_will_showcase_new_games_at_G2E

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Bob

SHFL - Shuffle Master Begins New Chapter As SHFL Entertainment

News Link

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Bob

SHFL - Shuffle Master to Present "A Better Game" at This Year's Global Gaming Expo

News Link

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Bob

SHFL - Here is a link to the 10-Q:

10-Q

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Bob

http://finance.yahoo.com/news/shuffle-master-inc-reports-third-200000369.html

http://finance.yahoo.com/news/shuffle-master-inc-announce-third-133000251.html

SHFL - Shuffle Master's Latest Innovations Take Center Stage At The Australasian Gaming Expo

News Link

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Bob

I spread the story on another board:

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=78366688

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Bob

Most likely explains the drop in price, just news affecting PPS I'm sure.

Thanks Smalltimetrader,

To make this more interesting, They can't own a private gaming company either. A background check on either individual would keep them and a company either of them owned from getting a gaming license in the U.S.

Another sidebar is that SHFL may have to report this to all of the various gaming boards in the U.S. where SHFL holds a gaming license. While it is public knowledge it is still embarassing.

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Bob

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22439 / August 8, 2012

SEC v. R. Brooke Dunn and Nicholas P. Howey, Civil Action No. 09-cv-2213 (D. Nev.)

SEC OBTAINS BAR AGAINST FORMER EXECUTIVE FROM SERVING AS AN OFFICER OR DIRECTOR OF A PUBLIC COMPANY DUE TO ILLEGAL INSIDER TRADING

On July 30, 2012 the Honorable Judge James C. Mahan of the United States District Court for the District of Nevada barred R. Brooke Dunn, a former executive at Shuffle Master, Inc., from serving as an officer or a director of a public company for five years. The SEC filed a Complaint against Dunn and Nicholas P. Howey on November 19, 2009 for illegal insider trading in Shuffle Master stock and options prior to an announcement of disappointing financial results by Shuffle Master. Judge Mahan ordered that the bar be imposed from the date the Complaint was filed.

The SEC’s Complaint alleged that, on February 26, 2007, after he first learned that Shuffle Master would announce disappointing preliminary financial results, Dunn called Howey and provided him with material nonpublic information relating to Shuffle Master’s anticipated announcement. Howey then immediately sold all of his previously-purchased Shuffle Master stock and calls and purchased Shuffle Master puts. The next day, after Shuffle Master announced its disappointing financial news, Howey sold all of the Shuffle Master puts he purchased the previous day, thereby profiting and avoiding losses. In the order imposing a bar, Judge Mahan found that “Mr. Dunn abused his fiduciary position, and violated his employment agreement and the company’s code of conduct by sharing confidential information with Mr. Howey.” The Court further found that “Mr. Dunn was aware that sharing information with Mr. Howey was improper but chose to ignore company policy when he divulged confidential information.”

Dunn and Howey previously settled the SEC’s lawsuit (other than the officer and director bar issue, which was submitted to the Court) by agreeing to pay a civil penalty in the amount of $181,594 each, without admitting or denying liability. Howey also agreed to pay an additional $181,594 in disgorgement plus $30,403 in prejudgment interest. Dunn and Howey both agreed to orders permanently enjoining them from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

SHFL - Shuffle Master is Granted Interactive Gaming License in Nevada

News Link

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SHFL - Stock Investors Bid Up Shares of Shuffle Master, Up 1.9%
- Market Movers via Comtex

Shuffle Master (NASDAQ:SHFL) is a company whose shares are active, trading 1.9% higher to $14.44. The S&P is currently trading 0.3% lower to 1,370 and the Dow Jones Industrial Average is trading fractionally lower to 12,926.

There is potential upside of 26.7% for shares of Shuffle Master based on a current price of $14.44 and an average consensus analyst price target of $18.30. Shuffle Master shares should encounter resistance at the 50-day moving average (MA) of $15.14 and support at its 200-day MA of $13.41.

Over the past year, Shuffle Master has traded in a range of $7.35 to $18.77 and is now at $14.44, 96% above that low. Over the past week, the 200-day moving average (MA) has gone up 0.6% while the 50-day MA has declined 1.1%.

Shuffle Master, Inc. is a gaming supply company that provides products and services to the casino industry. The Company offers card shuffling systems and other table gaming equipment, table games, and video game software.

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Financial News Network Online (FNNO) is a leading provider of digital financial news content for distribution on the web. You can count on FNNO to bring you the latest market news, earnings reports, analyst comments, economic data reports and more. Visit www.fnno.com today.

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Bob

SHFL - Shuffle Master Announces Decision Not to Proceed With Ongame Network Acquisition

News Link

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Bob

SHFL - Aristocrat, Shuffle Master, and Ongame Network Enter Into Strategic Relationship to Offer Premier Online Poker Solution

News LInk

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Bob

SHFL - Shuffle Master, Inc. Reports Second Quarter 2012 Results

News Link

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Bob

SHFL - Shuffle Master, Inc. to Announce Second Quarter 2012 Results

News Link

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Bob

SHFL - Shuffle Master, Inc. "Delivers More" At Global Gaming Expo (G2E) Asia 2012 In Macau

News Link

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Bob

SHFL - It looks like SHFL is building a good floor of support for the next move up.

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Bob

Great news Drmicrocap!

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Bob

http://finance.yahoo.com/news/shuffle-master-inc-reports-first-210000809.html

SHFL - 10-Q

10-Q

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Bob

SHFL - Trading Higher on 8.9x Above-Average Volume

Shuffle Master Trading Higher on 8.9x Above-Average Volume (SHFL)
58 minutes ago - Financial News Network Online - Unusual Volume via Comtex

Shuffle Master's stock is up 15.6% to $16.85 on heavy trading volume. Today's volume of 3.8 million shares tops the average 30-day volume of 426,000 shares. Spikes in volume can validate a breakout or signify a potential turning point.

Shuffle Master, Inc. is a gaming supply company that provides products and services to the casino industry. The Company offers card shuffling systems and other table gaming equipment, table games, and video game software.

Over the past year, Shuffle Master has traded in a range of $7.35 to $17.49 and is now at $16.85, 129% above that low. In the last five trading sessions, the 50-day moving average (MA) has climbed 1.8% while the 200-day MA has risen 0.6%.

Based on a current price of $16.85, Shuffle Master is currently 11.4% above its average consensus analyst price target of $14.94. Shuffle Master shares have support at the 50-day moving average (MA) of $13.29 and additional support at the 200-day MA of $10.55.

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Financial News Network Online (FNNO) is a leading provider of digital financial news content for distribution on the web. You can count on FNNO to bring you the latest market news, earnings reports, analyst comments, economic data reports and more. Visit www.fnno.com today.

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Bob