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LAS VEGAS, Nevada -- Shuffle Master proclaimed itself financially healthy Wednesday, more than three months after an internal accounting error caused an earnings restatement in the previous quarter.
The Las Vegas-based gaming equipment supplier said it had a net income of $3.4 million, or 10 cents per share for its second quarter ended April 30, reversing a net loss of $12.7 million, or 37 cents per share, a year earlier.
Analysts polled by Thomson Financial forecast Shuffle Master would earn 13 cents in the quarter.
Revenue rose 3 percent to $44.6 million from $43.3 million.
The company had been troubled by the earnings restatement and challenges over the past year in integrating Australian slot machine maker Stargames. Shuffle Master paid $108 million for the business in February 2006. During the quarter, the company said Stargames contributed $13.9 million of the total revenues.
Shuffle Master announced earnings in the shadow of pending legal matters.
Since last week, at least five different class action lawsuits have been filed against Shuffle Master. The lawsuits claim the company violated federal securities laws when it was forced to restate earnings in March.
The company said it made an error in booking proceeds from an intercompany inventory transfer, but the announcement caused the company's shares to lose almost 8 percent of their value in one day.
Law firms specializing in class action cases from New Orleans, Los Angeles, New York, Baltimore and Hartford, Conn., filed complaints against Shuffle Master, claiming the company inflated profits.
Gaming analysts weren't too concerned about the lawsuits.
"Anytime you see a dip in the stock, there is always a risk that a class action lawsuit will take place," Deutsche Bank gaming analyst Bill Lerner said. "The reality of this situation is that Shuffle Master made an error, corrected it and the auditors signed off on it. There was nothing to suggest any fraud.
"The lawsuits have to be taken seriously but none really seem to have any teeth." He added. "The unfortunate thing is Shuffle Master will have to waste money defending itself."
Before the earnings announcement, gaming analysts thought Shuffle Master was headed toward recovery. The company had previously announced sales of its electronic blackjack table games into several American markets including Delaware, where the machines are used in conjunction with the state's lottery.
Morgan Joseph gaming analyst Adam Steinberg thought Shuffle Master, while fixing its financial problems, could still be a buyout target.
"We are intrigued by the company's dominance in the shuffler business, intellectual property, and free cash flow generation, which could be attractive to other equipment manufacturers or private equity," Steinberg said.
Shuffle Master shares rose $1.16, or 6.29 percent, Wednesday to close at $19.61 on the Nasdaq National Market.
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Shuffle Master shakes off restatement, reverses loss is republished from Online.CasinoCity.com.