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Gaming Partners Income Doubled

LAS VEGAS -- (PRESS RELEASE) -- Gaming Partners International Corporation (Nasdaq:GPIC) today announced that net income for the twelve months ended December 31, 2004 increased by more than twofold from the prior year.

Net income for 2004 totaled $2.6 million, equal to $0.34 per basic and diluted share, up from $1.2 million or $0.16 per basic and diluted share in 2003. Revenues for the year increased to $44.6 million, or 23.2%, from $36.2 million in the previous fiscal year.

For the three months ended December 31, 2004, revenues were $13.2 million, compared with $10.9 million in the year-earlier quarter, representing a 21.1% increase for the fourth quarter of 2004 compared to the same quarter in 2003. Net income was $1.3 million for the fourth quarter, which was approximately the same as one year ago. On a per share basis, net income was $0.16 basic and diluted, compared to $0.18 per basic and diluted share in the corresponding quarter of 2003.

Gerard Charlier, president and chief executive officer, commented: "We are very pleased by the company's improved operating results in 2004, reflecting the success of our focused efforts to build a larger, stronger and more profitable company following our business combination.

"With respect to investments in the future, a key aspect of our strategy is the continuing development of the company's range of RFID-related products in order to meet the multidimensional aspects of various casino applications, including chip security and the enhanced ability to manage table game operations as efficiently as slots. While RFID-embedded casino chips do not provide 100% security, since they can, in theory, be duplicated, the protection of our chip tracking systems brings the casino's chip management to an unprecedented level."

The company's increase in 2004 revenues over 2003 principally results from sales of GPI's European subsidiary, GPI-SAS, to new and existing casinos in Macao in the second and fourth quarters of the year. The company's revenue increases in the second, third and fourth quarters of 2004, compared to 2003, were partially offset by lower first quarter revenues due to the variability of timing and demand related to new casino openings and expansions.

Cost of revenues decreased modestly for the year as a percent of revenues to 61.1% from 61.9% in 2003, as a result of the better absorption of fixed costs due to the higher sales volume and the improved product mix at GPI-SAS. Gross profit registered a year-over-year improvement of 26% as a result of the $8.4 million increase in revenues for the year, coupled with the decrease in costs of revenues as a percent of sales.

Operating expenses--which include product development, marketing and sales, depreciation and amortization, and general and administrative costs--rose approximately $1.2 million for the year, primarily due to higher product development, marketing and sales costs including costs associated with the name change, new catalogs and advertising, as well as the relocation of Kansas chip manufacturing operations to Las Vegas. As a percentage of total revenues, operating expenses decreased to 29.7% in 2004 from 33.3% in 2003.

Other income (expense) posted a $98,000 decrease in expense for the year, primarily as a result of reduced foreign currency translation losses, reflecting the euro's strength and the company's sales activity in foreign currencies.

In 2004, the company recorded income tax expense of $1.2 million, compared to a tax expense of $101,000 in the prior year, primarily due to taxes on foreign income. Net after tax margin for 2004 was 5.9%, up from 3.4% in 2003. The company's results for 2004 are not necessarily indicative of the results that may be expected in the future.

Charlier emphasized: "The company's liquidity and financial strength continue to show solid improvement." At year-end, cash and cash equivalents amounted to $8.0 million, up from $4.2 million at the close of 2003. Working capital was approximately $12.2 million at December 31, 2004, compared with $7.3 million one year earlier. Net cash provided by operating activities approximated $8.4 million in 2004, more than double $3.1 million in 2003.

Commenting further on product development and the company's technology and patent portfolio, Charlier said: "We first commenced making simple RFID casino chips to be read one at a time in 1990. Since that time, we have concentrated on the development of increasingly sophisticated RFID casino chips and readers, which meet all criteria required by casino managers and professional dealers. Today our company offers RFID casino chips under three brand names adapted to different casino needs and practices. The Paulson brand RFID casino chips are available in the U.S. for less than $2 each. All brands of our RFID casino chips can be read fast enough for any practical casino applications.

"As an example of our very active ongoing development activities, at the ICE gaming show held in London in early 2005, we introduced vault cabinets that are able to read several thousand RFID chips in standard trays."

The Gaming Partners' CEO also noted that the company holds "several patents for the embedding of RFID in gaming chips, as well as an exclusive license on patents, now owned by Shuffle Master, Inc., for the utilization of RFID casino chips and readers in the United States, used for tracking and accounting for RFID casino chips. We have been informed that one of our competitors is currently marketing a casino gaming chip product that claims to have an embedded microchip and by doing so has allegedly challenged the validity of the patents now owned by Shuffle Master, Inc., as they relate to this competitor. Shuffle Master, Inc., is currently investigating the possible infringement. Although we do not control Shuffle Master, Inc., and further, there can be no assurance that Shuffle Master, Inc., will be successful in any effort, we believe that they will take all reasonable actions necessary to preserve all rights and remedies with regard to these patents."

"We are enthusiastic about our company's prospects," Charlier concluded, "as we focus on our opportunities to serve the gaming industry worldwide. In particular, we look forward to bringing the benefits of GPIC's RFID-based products and expertise to improve the security and efficiency of our customers' table game operations."

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