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Shuffle Master, Inc. Reports Record Results

LAS VEGAS -- (PRESS RELEASE) -- Shuffle Master, Inc. (NASDAQ National Market: SHFL) today announced its operating results for the fourth quarter and fiscal year ended October 31, 2004.

Fourth Quarter 2004

-Diluted earnings per share from continuing operations increased 29% to $0.27

-Revenue increased 48% to $25.9 million

-Income from operations increased 33% to $10.6 million

-Net cash provided by operating activities increased 85% to $8.3 million

-EBITDA from continuing operations increased 42% to $12.8 million

Fiscal Year 2004

-Diluted earnings per share from continuing operations increased 34% to $0.91

-Revenue increased 45% to $84.8 million

-Income from operations increased 35% to $36.2 million

-Net cash provided by operating activities increased 29% to $26.6 million

-EBITDA from continuing operations increased 37% to $42.0 million

Additional fiscal 2004 accomplishments included:

-In January 2004, Shuffle Master sold substantially all of its slot product operations and assets, including all rights, copyrights and related intellectual property associated with its proprietary Linux-based operating system to International Game Technology.

-In February 2004, Shuffle Master purchased certain assets of BET Technology, Inc. ("BTI") and announced its intent to purchase Casinos Austria Research and Development GmbH ("CARD") located in Vienna, Austria. The BTI acquisition included the underlying patents and trademarks for several proprietary table games including Fortune Pai Gow Poker®, Casino War® and Royal Match 21(TM). The BTI acquisition added approximately 1,100 games to the Company's installed base of proprietary table games.

-In March 2004, the Company announced a three-for-two split of its common stock. The additional shares were issued on April 16, 2004 to holders of record on April 5, 2004.

-In April 2004, Shuffle Master completed a private placement of $150.0 million in aggregate principal amount of 1.25% Contingent Convertible Senior Notes due 2024. The Company used approximately $58.0 million of the net proceeds to simultaneously repurchase shares of its common stock and $30.8 million to finance the cash portion of the CARD acquisition.

-In May 2004, the Company announced the completion of the CARD acquisition. CARD develops, manufactures and supplies innovative casino products throughout the world. The CARD acquisition provides the Company with both an international headquarters and a direct international sales presence. In addition, the acquisition added CARD's product portfolio consisting of the one2six® continuous shuffler and the Easy Chipper(TM), a next generation chip sorting device.

Mark L. Yoseloff, Chairman and Chief Executive Officer commented, "It is extremely gratifying to reflect upon our many accomplishments in fiscal 2004. In addition to setting a number of important new financial records, we set the stage for continued growth by further diversifying our product portfolio organically and through acquisitions.

We also cost-effectively established a direct international sales presence through the CARD acquisition, which better positions us to capitalize on new and expanding global gaming markets. In sum, we believe that fiscal 2004 fortified our leading market share position and increased our ability to deliver a strong value proposition to our customers."

Utility Products

Fourth Quarter 2004

Revenue from Utility Products totaled $15.4 million in the current quarter, an increase of 56% from $9.9 million in the comparable prior year quarter. Utility Products lease revenue of $5.1 million for the current quarter increased 11% from $4.6 million in the prior year. Utility Products sales and service revenue totaled $10.3 million during the current quarter, an increase of 95% from $5.3 million in the prior year.

Fiscal Year 2004

For the current fiscal year, Utility Products revenue increased 39% to $45.9 million versus $33.1 million in the same prior year period. Utility Products lease revenue of $19.4 million for the current year increased 10% from $17.6 million in the prior year. Utility Products sales and service revenue totaled $26.5 million during the current year, an increase of 71% from $15.5 million in the comparable prior year period.

The quarter-over-quarter and year-over-year increases in Utility Products lease revenue reflect the greater number of shuffler units on lease. The quarter-over-quarter and year-over-year increases in Utility Products sales and service revenue resulted primarily from the CARD acquistion in May 2004 and related sales of the one2six shuffler, as well as strong demand for our Deck Mate® shuffler.

Entertainment Products

Fourth Quarter 2004

For the current quarter, revenue from Entertainment Products increased 37% to $10.4 million versus $7.6 million in the same prior year period. Entertainment Products lease and royalty revenue of $6.2 million for the current quarter increased 18% from $5.3 million in the prior year. Entertainment Products sales and service revenue totaled $4.2 million during the current quarter, an increase of 79% from $2.4 million in the prior year.

Fiscal Year 2004

For the current fiscal year, Entertainment Products revenue totaled $38.7 million, an increase of 54% versus $25.2 million in the comparable prior year period. Entertainment Products lease and royalty revenue of $23.7 million for the current year increased 13% from $21.0 million in the prior year. Entertainment Products sales and service revenue totaled $15.0 million during the current year, an increase of 264% from $4.1 million in the prior year.

The quarter-over-quarter and year-over-year increases in Entertainment Products lease and royalty revenue reflect the growth in our installed base of leased proprietary table games, primarily due to the units acquired from BTI in February 2004, as well as increatsed placements of our latest table game offerings. The quarter-over-quarter and year-over-year increases in Entertainment Products sales and service revenue resulted from increased lifetime license sales.

Balance Sheet, Cash Flows & Capital Deployment

Cash, cash equivalents, and investments totaled $47.0 million at October 31, 2004, compared to $10.4 million at October 31, 2003. The increase is primarily related to the net proceeds from the convertible debt offering in April 2004, proceeds from the slot assets sale in January 2004 and to a lesser extent, an increase in operating cash flows. For the year, net cash provided by operating activities of $26.6 million increased 29% over $20.6 million in the comparable prior year period. EBITDA from continuing operations totaled $42.0 million in fiscal 2004, an increase of 37% over $30.7 million in the prior year. During the fourth quarter, Shuffle Master repurchased 25,000 of its shares for approximately $912,000 at an average price of approximately $36.48 per share. During fiscal 2004, Shuffle Master repurchased 3.2 million shares for approximately $100.0 million at an average price of approximately $31.25, including those shares repurchased in connection with the April 2004 convertible debt offering mentioned above. As of October 31, 2004, the remaining share repurchase authorization under the Company's stock repurchase program totaled $17.5 million.

Capital deployment initiatives for fiscal 2004 included share repurchases totaling $100.0 million and acquisitions totaling $67.2 million in cash and stock.

Yoseloff concluded, "With $47.0 million in cash and investments and our strong balance sheet, we are well positioned to execute our long-term strategic plans. Also, the addition of prudent leverage via our convertible debt issuance increased the product and geographic diversification of our earnings and cash flows. That said, we will continue to effectively manage our balance sheet and continue with our history of capital deployment through a combination of acquisitions of intellectual property and technology, as well as our ongoing commitment to our share repurchase program."

Current Outlook

Consistent with our previous guidance, management is targeting year-over-year growth of 25%-30% in diluted earnings per share for both the first quarter and full fiscal year 2005, or a range of $0.21 - $0.23 and $1.14 - $1.18, respectively, excluding the effect of the three-for-two stock split announced today. Shuffle Master, Inc. is a gaming supply company specializing in providing its casino customers Utility Products, including automatic card shufflers, intelligent table systems, and roulette chip sorters, to improve their profitability, productivity and security, and Entertainment Products, including proprietary table games and Table Master(TM) games to expand their gaming entertainment content. 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.shufflemaster.com.

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