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United States

Securities and Exchange Commission

Washington, D.C.  20549

 

FORM 10-Q

 


 

(Mark One)

 

ý                                 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended July 31, 2002

 

OR

 

o                                 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from            to           

 

 

Commission file number: 0-20820

 

SHUFFLE MASTER, INC.

(Exact name of registrant as specified in its charter)

 

Minnesota

 

41-1448495

(State or Other Jurisdiction
of Incorporation or Organization)

 

(IRS Employer Identification No.)

 

 

 

 

 

 

1106 Palms Airport Drive

 

NV

 

89119

(Address of Principal Executive Offices)

 

(State)

 

(Zip Code)

 

 

Registrant’s Telephone Number, Including Area Code:                                              (702) 897-7150

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes  ý                                   No  o

 

As of August 31, 2002, there were 17,468,465 shares of the Company’s $.01 par value common stock outstanding.

 

 

 



Part I – Financial Information

Item 1. Financial Statements

 

Shuffle Master, Inc.

Consolidated Balance Sheets

(In thousands)

 

 

 

(Unaudited)

 

 

 

 

 

July 31,

 

October 31,

 

 

 

2002

 

2001

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

3,176

 

$

3,082

 

Investments

 

16,228

 

15,621

 

Accounts receivable, net

 

6,905

 

5,419

 

Current portion of note receivable from related party

 

 

17

 

Inventories

 

5,563

 

6,210

 

Prepaid income taxes

 

5,302

 

 

Deferred income taxes

 

473

 

323

 

Other current assets

 

695

 

451

 

Total current assets

 

38,342

 

31,123

 

Systems and equipment leased and held for lease, net

 

7,212

 

8,646

 

Property and equipment, net

 

2,322

 

2,367

 

Intangible assets, net

 

4,833

 

5,487

 

Goodwill

 

3,664

 

3,258

 

Non-current deferred income taxes

 

1,388

 

984

 

Long-term note receivable from related party

 

 

300

 

Other assets

 

500

 

234

 

Total assets

 

$

58,261

 

$

52,399

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

6,295

 

$

5,681

 

Accrued liabilities

 

2,127

 

2,424

 

Obligation to related party

 

 

97

 

Customer deposits and unearned revenue

 

1,840

 

2,120

 

Income taxes payable

 

 

1,511

 

Total current liabilities

 

10,262

 

11,833

 

 

 

 

 

 

 

Contingencies

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common stock, $0.01 par value; 67,500 shares authorized; 17,468 and 17,609 shares issued and outstanding

 

175

 

176

 

Additional paid-in capital

 

4,043

 

6,211

 

Retained earnings

 

43,781

 

34,179

 

Total shareholders’ equity

 

47,999

 

40,566

 

Total liabilities and shareholders’ equity

 

$

58,261

 

$

52,399

 

 

 

See notes to unaudited consolidated financial statements

 

2



 

Shuffle Master, Inc.

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share amounts)

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

 

July 31,

 

July 31,

 

 

 

2002

 

2001

 

2002

 

2001

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

Shuffler lease

 

$

4,055

 

$

4,063

 

$

12,064

 

$

12,015

 

Shuffler sales and service

 

3,617

 

2,794

 

9,081

 

9,646

 

Table royalties

 

4,908

 

3,897

 

13,335

 

11,042

 

Table sales

 

558

 

 

582

 

73

 

Slot royalties

 

1,641

 

1,766

 

4,970

 

2,860

 

Slot sales

 

341

 

 

372

 

189

 

Other

 

19

 

64

 

77

 

317

 

Total revenue

 

15,139

 

12,584

 

40,481

 

36,142

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of revenue

 

3,922

 

3,230

 

10,310

 

9,623

 

Selling, general and administrative

 

3,674

 

3,381

 

10,866

 

9,275

 

Research and development

 

1,707

 

1,384

 

5,119

 

4,316

 

Total costs and expenses

 

9,303

 

7,995

 

26,295

 

23,214

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

5,836

 

4,589

 

14,186

 

12,928

 

Interest income, net

 

155

 

195

 

473

 

493

 

Income before income taxes

 

5,991

 

4,784

 

14,659

 

13,421

 

Provision for income taxes

 

2,067

 

1,566

 

5,057

 

4,631

 

Net income

 

$

3,924

 

$

3,218

 

$

9,602

 

$

8,790

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share, basic

 

$

0.22

 

$

0.18

 

$

0.54

 

$

0.52

 

Earnings per common share, diluted

 

$

0.22

 

$

0.17

 

$

0.52

 

$

0.48

 

Weighted average common shares, basic

 

17,797

 

17,687

 

17,787

 

17,021

 

Weighted average common shares, diluted

 

18,209

 

18,939

 

18,469

 

18,474

 

 

 

See notes to unaudited consolidated financial statements

 

3



 

Shuffle Master, Inc.

Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

 

 

Nine Months Ended

 

 

 

July 31,

 

 

 

2002

 

2001

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

9,602

 

$

8,790

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

5,568

 

4,102

 

Provision for bad debts

 

50

 

25

 

Provision for inventory obsolescence

 

542

 

500

 

Deferred income taxes

 

(554

)

209

 

Stock options issued for services

 

42

 

92

 

Changes in operating assets and liabilities

 

 

 

 

 

Accounts receivable

 

(1,536

)

(279

)

Inventories

 

105

 

(624

)

Other current assets

 

(244

)

(1,941

)

Accounts payable and accrued liabilities

 

317

 

1,605

 

Customer deposits and unearned revenue

 

(280

)

823

 

Income taxes payable

 

(577

)

(238

)

Net cash provided by operating activities

 

13,035

 

13,064

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of investments

 

(23,310

)

(14,832

)

Proceeds from sale and maturities of investments

 

22,703

 

4,331

 

Payments for products leased and held for lease

 

(2,331

)

(3,081

)

Purchases of property and equipment

 

(589

)

(473

)

Purchases of intangible assets

 

(898

)

(362

)

Acquisition of business, net of cash acquired

 

 

(4,015

)

Collection of note receivable from related party

 

317

 

 

Other

 

(289

)

(200

)

Net cash used in investing activities

 

(4,397

)

(18,632

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Repurchases of common stock

 

(11,554

)

(2,162

)

Proceeds from issuances of common stock

 

3,060

 

8,854

 

Payments on obligation to related party

 

(50

)

(291

)

Net cash provided (used) by financing activities

 

(8,544

)

6,401

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

94

 

833

 

Cash and cash equivalents, beginning of period

 

3,082

 

2,810

 

Cash and cash equivalents, end of period

 

$

3,176

 

$

3,643

 

 

 

 

 

 

 

Non-cash transaction:

 

 

 

 

 

Payment of obligation to related party with common stock

 

$

47

 

$

141

 

Additional paid-in capital from stock option income tax benefit

 

$

6,236

 

$

 

Cash paid for:

 

 

 

 

 

Income taxes

 

$

6,188

 

$

4,546

 

Interest

 

$

 

$

9

 

 

 

See notes to unaudited consolidated financial statements

 

4



Shuffle Master, Inc.

Notes to Unaudited Consolidated Financial Statements

 

 

1.              Interim Financial Statements

 

The consolidated financial statements of Shuffle Master, Inc. (the “Company”) as of July 31, 2002, and for the quarter and nine months ended July 31, 2002 and 2001, are unaudited, but, in the opinion of management, include all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of the financial results for the interim periods.  The results of operations for the quarter and nine months ended July 31, 2002 are not necessarily indicative of the results to be expected for the year ending October 31, 2002.  These interim statements should be read in conjunction with audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended October 31, 2001.

 

Effective November 1, 2001, the Company realigned the reporting of its operating segments to reflect a change in the chief decision maker’s focus toward the increase in business activity related to the development, manufacture and marketing of slot products, including the Company’s new operating system.  The Company now operates in three reportable segments: Shufflers, Table Games and Slot Products.  Previously, the segments were Gaming Equipment, which included shuffler products, and Gaming Products, which included table games, slot games and operating system activities.  Certain items of prior year revenue, expenses, assets and capital expenditures have been reclassified to conform to the current segment reporting.  These reclassifications had no effect on the consolidated operating results for all periods presented.

Certain prior period amounts have been reclassified to conform to the fiscal year 2002 presentation.

 

2.              Inventories

 

Inventories are comprised of the following (in thousands):

 

 

July 31,

 

October 31,

 

 

 

2002

 

2001

 

 

 

 

 

 

 

Raw materials and component parts

 

$

3,341

 

$

4,260

 

Work-in-process

 

756

 

527

 

Finished goods

 

1,466

 

1,423

 

 

 

$

5,563

 

$

6,210

 

 

3.              Systems and Equipment Leased and Held for Lease, Net

 

Systems and equipment leased and held for lease are comprised of the following (in thousands):

 

 

 

July 31,

 

October 31,

 

 

 

2002

 

2001

 

 

 

 

 

 

 

Shufflers

 

$

9,103

 

$

8,765

 

Table Games

 

2,445

 

2,379

 

Slot Products

 

7,524

 

6,225

 

 

 

19,072

 

17,369

 

Less: accumulated depreciation

 

(11,860

)

(8,723

)

 

 

$

7,212

 

$

8,646

 

 

 

5



 

4.              Intangible Assets and Goodwill

 

On November 1, 2001, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” which established new accounting and reporting requirements for goodwill and other intangible assets.  Under this statement, goodwill and intangible assets with indefinite lives are no longer subject to amortization, but are tested for impairment at least annually.   SFAS No. 142 requires the completion of a transitional impairment test within six months of the date of adoption.  The Company has completed its initial assessment of impairment and determined that recorded goodwill was not impaired.  In conjunction with adopting SFAS No. 142, the Company also reassessed its previously recognized identifiable intangible assets and determined that their useful lives and their classifications were appropriate.

 

Intangible Assets:  All of the Company’s recorded intangible assets are subject to amortization.  Amortization expense was $393,000 and $254,000 for the quarters ended July 31, 2002 and 2001, respectively, and $1,146,000 and $911,000 for the nine months ended July 31, 2002 and 2001, respectively.  Intangible assets are comprised of the following (in thousands):

 

 

 

July 31,

 

October 31,

 

 

 

2002

 

2001

 

 

 

 

 

 

 

Purchased table games

 

$

3,400

 

$

3,400

 

Less: accumulated amortization

 

(1,058

)

(803

)

 

 

2,342

 

2,597

 

 

 

 

 

 

 

Patents and licenses

 

2,949

 

2,510

 

Less: accumulated amoritization

 

(992

)

(660

)

 

 

1,957

 

1,850

 

 

 

 

 

 

 

Purchased slot games

 

3,370

 

3,370

 

Less: accumulated amortization

 

(2,836

)

(2,330

)

 

 

534

 

1,040

 

 

 

 

 

 

 

Intangible assets, net

 

$

4,833

 

$

5,487

 

 

Goodwill:  In April 2001, the Company acquired the QuickDraw® shuffler product line, certain assets, liabilities and stock of a group of Australian companies for $4,127,000, subject to adjustment to acquired distributor liabilities and other contingencies.  In the third quarter of fiscal year 2002, the Company recorded an adjustment to increase estimated amounts payable to the seller by $406,000 and recorded a corresponding increase to goodwill.  Goodwill is an asset of the Shufflers segment.

 

Changes in the carrying amount of goodwill for the nine months ended July 31, 2002, are as follows (in thousands):

 

Balance, October 31, 2001

 

$

3,258

 

Acquisition price adjustment

 

406

 

Balance, July 31, 2002

 

$

3,664

 

 

Goodwill amortization was $67,000 for the quarter and nine months ended July 31, 2001.  Pro forma net income, reflecting the elimination of goodwill amortization and the related income tax effect, for the quarter and nine months ended July 31, 2001 was $3,262,000 and $8,834,000, respectively.  The elimination of goodwill amortization and the related income tax effect has no impact on the previously reported amounts for basic and diluted earnings per share.

 

 

6



 

5.              Common Stock and Stock Options

 

During the nine month periods ended July 31, 2002 and 2001, the Company repurchased 681,000 and 130,000 shares of its common stock at total costs of $11,554,000 and $2,162,000, respectively.

 

The Board of Directors periodically authorizes the Company to repurchase shares of its common stock.   At August 31, 2002, the Company had aggregate remaining authorizations of up to $7,300,000 to repurchase its common stock within specified price limits.

 

For the nine months ended July 31, 2002, the Company’s stock options activity and weighted average exercise prices were as follows (shares in thousands): 

 

 

 

 

Exercise

 

 

 

Shares

 

Price

 

 

 

 

 

 

 

Outstanding, October 31, 2001

 

1,831

 

$

8.60

 

Granted

 

199

 

16.94

 

Exercised

 

(528

)

5.81

 

Forfeited

 

(8

)

13.25

 

Outstanding, July 31, 2002

 

1,494

 

10.67

 

 

6.              Income Taxes

 

In the fiscal year 2002 third quarter, the Company recorded a $6,236 income tax benefit related to deductions available to the Company from employee stock option exercises.  The tax benefit, which increased prepaid income taxes and additional paid-in capital by equal amounts, had no affect on the Company’s provision for income taxes.

 

7.              Earnings per Share

 

The following table reconciles basic earnings per share to diluted earnings per share (in thousands, except per share amounts):

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

 

July 31,

 

July 31,

 

 

 

2002

 

2001

 

2002

 

2001

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

3,924

 

$

3,218

 

$

9,602

 

$

8,790

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

17,797

 

17,663

 

17,787

 

16,997

 

Shares to be issued under asset purchase

 

 

24

 

 

24

 

Weighted average common shares, basic

 

17,797

 

17,687

 

17,787

 

17,021

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

Weighted average common shares, basic

 

17,797

 

17,687

 

17,787

 

17,021

 

Dilutive impact of options outstanding

 

412

 

1,252

 

682

 

1,453

 

Weighted average common shares, diluted

 

18,209

 

18,939

 

18,469

 

18,474

 

 

 

 

 

 

 

 

 

 

 

Earnings per share, basic

 

$

0.22

 

$

0.18

 

$

0.54

 

$

0.52

 

Earnings per share, diluted

 

$

0.22

 

$

0.17

 

$

0.52

 

$

0.48

 

 

 

7



 

8.              Operating Segment Reporting

 

The Company reports in three operating segments which are determined by product lines: Shufflers, Table Games and Slot Products.  Each segment’s activities include the design, development, acquisition, manufacture, marketing, distribution, installation and servicing of its product lines.  The Shufflers segment comprises the Company’s proprietary shuffler product line that includes single-deck and multi-deck shufflers.  The Table Games segment comprises the Company’s line of proprietary table games including Three Card Poker®, Let It Ride Bonus®, and Let It Ride® basic.  The Slot Products segment comprises Company-developed and cooperatively-developed slot games and retrofit kits, as well as the Company’s proprietary operating system.  For purposes of computing segment operating income, the Company allocates certain operating expenses using an activity-based allocation methodology and other direct measurements of operating activity.  Corporate assets are comprised primarily of cash and cash equivalents, investments, property and equipment, and prepaid and deferred income taxes.

 

 

 

Quarter Ended

 

Nine Months Ended

 

(In thousands)

 

July 31,

 

July 31,

 

 

 

2002

 

2001

 

2002

 

2001

 

Revenue:

 

 

 

 

 

 

 

 

 

Shufflers

 

$

7,672

 

$

6,857

 

$

21,145

 

$

21,661

 

Table Games

 

5,466

 

3,897

 

13,917

 

11,115

 

Slot Products

 

1,982

 

1,766

 

5,342

 

3,049

 

Corporate

 

19

 

64

 

77

 

317

 

 

 

$

15,139

 

$

12,584

 

$

40,481

 

$

36,142

 

Operating Income:

 

 

 

 

 

 

 

 

 

Shufflers

 

$

4,133

 

$

3,602

 

$

11,321

 

$

12,182

 

Table Games

 

4,521

 

3,282

 

11,670

 

9,299

 

Slot Products

 

(530

)

(44

)

(1,979

)

(2,445

)

Corporate

 

(2,288

)

(2,251

)

(6,826

)

(6,108

)

 

 

$

5,836

 

$

4,589

 

$

14,186

 

$

12,928

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

Shufflers

 

$

512

 

$

559

 

$

1,646

 

$

1,626

 

Table Games

 

157

 

165

 

477

 

521

 

Slot Products

 

984

 

520

 

2,787

 

1,334

 

Corporate

 

229

 

216

 

658

 

621

 

 

 

$

1,882

 

$

1,460

 

$

5,568

 

$

4,102

 

Capital expenditures:

 

 

 

 

 

 

 

 

 

Shufflers

 

$

806

 

$

325

 

$

1,233

 

$

533

 

Table Games

 

45

 

39

 

74

 

152

 

Slot Products

 

245

 

1,306

 

1,922

 

2,758

 

Corporate

 

149

 

136

 

589

 

473

 

 

 

$

1,245

 

$

1,806

 

$

3,818

 

$

3,916

 

Assets, end of period:

 

 

 

 

 

 

 

 

 

Shufflers

 

$

12,898

 

 

 

 

 

 

 

Table Games

 

5,888

 

 

 

 

 

 

 

Slot Products

 

9,391

 

 

 

 

 

 

 

Corporate

 

30,084

 

 

 

 

 

 

 

 

 

$

58,261

 

 

 

 

 

 

 

 

 

8



 

9.              Contingencies

 

In April 2001, the Company was sued by Innovative Gaming Corporation of America, a Minnesota corporation (“IGCA”).  The suit was filed in the Second Judicial District Court of the State of Nevada, in Washoe County, Nevada.  The defendants are the Company and Joseph J. Lahti, the Company’s former Chairman.  The complaint alleges breach of contract, negligence, misrepresentation and related theories of liability, all relating to a confidentiality agreement with respect to what IGCA claims to be its intellectual property.  The complaint seeks an unspecified amount of damages. The Company has answered the complaint by denying any liability and raising various affirmative defenses.  The Company completely denies IGCA’s claims and believes it will prevail in the lawsuit.

 

In March 2002, the Company filed a patent infringement lawsuit against VendingData Corporation, d/b/a Casinovations, and related entities.  The suit was filed in the Federal District Court for the Southern District of Nevada, in Las Vegas, Nevada.  The complaint alleges that the defendants have infringed one of Shuffle Master’s patents, and seeks an unspecified amount of damages and a permanent injunction against the defendants’ infringing conduct.  The Company amended the complaint in July 2002 to include infringement of a second Shuffle Master patent.  The defendants have denied liability, raised numerous affirmative defenses, and also filed a counterclaim alleging, among other causes of action, breach of a confidentiality agreement and patent invalidity.  The counterclaim seeks an unspecified amount of damages. The Company completely denies each of the claims contained in defendants’ counterclaim, and believes it will prevail in its infringement action, including with respect to defendants’ counterclaim.

 

In the ordinary course of conducting its business, the Company has been and may be involved in litigation, administrative proceedings and regulatory government investigations.  The Company believes that the final disposition of these matters will not have a material adverse effect on its financial position, results of operations or liquidity.

 

10.       Related Party Transaction

 

As of October 31, 2001, the Company had a note receivable from Joseph Lahti, then Chairman of the Board, in the amount of $316,936.  The note was repaid in full including accrued interest during fiscal year 2002.

 

11.       Subsequent Acquisition

 

In August 2002, the Company acquired the Blackjack Survey Voice product line, a patent related to automated table bet recognition, and certain other assets of Casino Software and Services LLC.   Blackjack Survey Voice allows evaluation of individual blackjack play using casino surveillance techniques.   Although the purchase price is not material to the consolidated financial statements, the Company plans to use the patented technology to develop its next-generation table and shuffler products.

 

 

9



 

12.       Recently Issued or Adopted Accounting Standards

 

In June 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” which addresses financial accounting and reporting.  A fundamental conclusion reached by the FASB in this statement is that an entity’s commitment to a plan, by itself, does not create a present obligation to others that meets the definition of a liability.  Accordingly, SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.  SFAS No. 146 also establishes that fair value is the objective for initial measurement of the liability.  The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged.  The Company has determined that SFAS No. 146 will not have a material impact on its financial position and results of operations.

 

On November 1, 2001, the Company adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”  SFAS No. 144 addresses significant issues relating to the implementation of SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of,” and develops a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale, whether such assets are or are not deemed to be a business. SFAS No. 144 also modifies the accounting and disclosure rules for discontinued operations. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements.

 

 

10



 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

 

RESULTS OF OPERATIONS

(Thousands of Dollars)

 

The following table sets forth selected financial percentages derived from the Company’s unaudited consolidated financial statements:

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

 

July 31,

 

July 31,

 

 

 

2002

 

2001

 

2002

 

2001

 

 

 

 

 

 

 

 

 

 

 

Revenue by segment:

 

 

 

 

 

 

 

 

 

Shufflers

 

50.7

%

54.5

%

52.2

%

59.9

%

Table Games

 

36.1

%

31.0

%

34.3

%

30.8

%

Slot Products

 

13.1

%

14.0

%

13.2

%

8.4

%

Other

 

0.1

%

0.5

%

0.3

%

0.9

%

Total revenue

 

100.0

%

100.0

%

100.0

%

100.0

%

Cost of revenue

 

25.9

%

25.6

%

25.5

%

26.6

%

Gross margin

 

74.1

%

74.4

%

74.5

%

73.4

%

Selling, general and administrative

 

24.3

%

26.9

%

26.8

%

25.7

%

Research and development

 

11.3

%

11.0

%

12.7

%

11.9

%

Income from operations

 

38.5

%

36.5

%

35.0

%

35.8

%

Interest income, net

 

1.1

%

1.5

%

1.2

%

1.3

%

Income before income taxes

 

39.6

%

38.0

%

36.2

%

37.1

%

Provision for income taxes

 

13.7

%

12.4

%

12.5

%

12.8

%

Net income

 

25.9

%

25.6

%

23.7

%

24.3

%

 

REVENUE:

 

Total revenue for the quarter and nine months ended July 31, 2002, was $15,139 and $40,481, respectively, compared to $12,584 and $36,142 for the same periods in fiscal year 2001.   The increase in revenue includes contributions from each of the Company’s operating segments.

 

Shufflers segment

 

 

July 31,

 

Increase

 

Percentage

 

 

 

2002

 

2001

 

(Decrease)

 

Change

 

 

 

 

 

 

 

 

 

 

 

Shuffler lease revenue

 

 

 

 

 

 

 

 

 

Quarter ended

 

$

 4,055

 

$

 4,063

 

$

 (8

)

(0.2

%)

Nine months ended

 

$

 12,064

 

$

 12,015

 

$

 49

 

0.4

%

 

 

 

 

 

 

 

 

 

 

Shufflers under lease (units)

 

 

 

 

 

 

 

 

 

Beginning of quarter

 

 

 

 

 

 

 

 

 

Single-deck shufflers

 

1,919

 

1,829

 

90

 

4.9

%

Multi-deck shufflers

 

1,135

 

1,187

 

(52

)

(4.4

%)

Total

 

3,054

 

3,016

 

38

 

1.3

%

 

 

 

 

 

 

 

 

 

 

End of quarter

 

 

 

 

 

 

 

 

 

Single-deck shufflers

 

2,017

 

1,930

 

87

 

4.5

%

Multi-deck shufflers

 

1,209

 

1,151

 

58

 

5.0

%

Total

 

3,226

 

3,081

 

145

 

4.7

%

 

 

 

 

 

 

 

 

 

 

Unit increase during quarter

 

172

 

65

 

 

 

 

 

Percentage change during quarter

 

5.6

%

2.2

%

 

 

 

 

 

 

11



 

Shuffler lease revenue for the quarter and nine months ended July 31, 2002 is consistent with the corresponding prior year periods.  However, shuffler units under lease at July 31, 2002 increased 145 units from a year ago.   The revenue increase from the greater unit volume was offset by lower average lease rates.  During the fiscal year 2002 third quarter, the shuffler installed lease base increased 172 units, comprised of the net placement of 102 ACE®, 39 KingÔ, and 46 multi-deck batch shufflers, offset by the conversion of 15 leased units to sold units.

 

 

 

July 31,

 

Increase

 

Percentage

 

 

 

2002

 

2001

 

(Decrease)

 

Change

 

 

 

 

 

 

 

 

 

 

 

Shuffler sales and service revenue

 

 

 

 

 

 

 

 

 

Quarter ended

 

$

 3,617

 

$

 2,794

 

$

 823

 

29.5

%

Nine months ended

 

$

 9,081

 

$

 9,646

 

$

 (565

)

(5.9

%)

 

 

 

 

 

 

 

 

 

 

Shufflers sold (units)

 

 

 

 

 

 

 

 

 

Quarter ended

 

 

 

 

 

 

 

 

 

Single-deck shufflers

 

177

 

134

 

43

 

32.1

%

Multi-deck shufflers

 

204

 

116

 

88

 

75.9

%

Total units

 

381

 

250

 

131

 

52.4

%

Average unit price (dollars)

 

$

 8,169

 

$

 9,789

 

$

 (1,620

)

(16.5

%)

Nine months ended

 

 

 

 

 

 

 

 

 

Single-deck shufflers

 

398

 

391

 

7

 

1.8

%

Multi-deck shufflers

 

467

 

482

 

(15

)

(3.1

%)

Total units

 

865

 

873

 

(8

)

(0.9

%)

Average unit price (dollars)

 

$

 9,055

 

$

 9,917

 

$

 (862

)

(8.7

%)

 

Shuffler unit sales for the fiscal year 2002 third quarter increased 131 units or 52% compared to the corresponding quarter last year.  On a sequential quarter basis, shuffler units sold during the fiscal year 2002 third quarter reflect an increase of 51 units, or 13%, compared to total shuffler units sold of 322 for the fiscal year 2002 second quarter.   The increase in sold units reflects strong foreign sales activity.  However, foreign sales transactions generally have lower units prices.  Thus, the average unit price per shuffler sold during the fiscal 2002 third quarter has declined.

 

Table Games segment

 

 

July 31,

 

Increase

 

Percentage

 

 

 

2002

 

2001

 

(Decrease)

 

Change

 

 

 

 

 

 

 

 

 

 

 

Table royalties

 

 

 

 

 

 

 

 

 

Quarter ended

 

$

 4,908

 

$

 3,897

 

$

 1,011

 

25.9

%

Nine months ended

 

$

 13,335

 

$

 11,042

 

$

 2,293

 

20.8

%

 

 

 

 

 

 

 

 

 

 

Table sales

 

 

 

 

 

 

 

 

 

Quarter ended

 

$

 558

 

$

 —

 

$

 558

 

 

Nine months ended

 

$

 582

 

$

 73

 

$

 509

 

697.3

%

 

 

12



 

 

 

July 31,

 

Increase

 

Percentage

 

 

 

2002

 

2001

 

(Decrease)

 

Change

 

 

 

 

 

 

 

 

 

 

 

Table games installed (royalty units)

 

 

 

 

 

 

 

 

 

Beginning of quarter

 

 

 

 

 

 

 

 

 

Three Card Poker®

 

694

 

426

 

268

 

62.9

%

Let It Ride Bonus®

 

546

 

513

 

33

 

6.4

%

Let It Ride® basic

 

119

 

184

 

(65

)

(35.3

%)

Other

 

15

 

24

 

(9

)

(37.5

%)

Total

 

1,374

 

1,147

 

227

 

19.8

%

 

 

 

 

 

 

 

 

 

 

End of quarter

 

 

 

 

 

 

 

 

 

Three Card Poker®

 

776

 

500

 

276

 

55.2

%

Let It Ride Bonus®

 

574

 

540

 

34

 

6.3

%

Let It Ride® basic

 

100

 

160

 

(60

)

(37.5

%)

Other

 

26

 

25

 

1

 

4.0

%

Total

 

1,476

 

1,225

 

251

 

20.5

%

Unit increase during quarter

 

102

 

78

 

 

 

 

 

Percentage change during quarter

 

7.4

%

6.8

%

 

 

 

 

 

The increase in table royalty revenue for the quarter and nine months ended July 31, 2002 compared to the prior year periods was primarily due to the net placement of Three Card PokerÒ tables.   Additionally, in April 2002, the Company increased the list price for the Three Card Poker® table game by approximately 50%.  The increase in Let It Ride Bonus® tables includes conversions from the basic table.

 

Table sales for the quarter and nine months ended July 31, 2002, is comprised primarily of foreign sales of progressive table systems.

 

Slot Products segment

 

 

July 31,

 

Increase

 

Percentage

 

 

 

2002

 

2001

 

(Decrease)

 

Change

 

 

 

 

 

 

 

 

 

 

 

Slot royalties

 

 

 

 

 

 

 

 

 

Quarter ended

 

$

 1,641

 

$

 1,766

 

$

 (125

)

(7.1

%)

Nine months ended

 

$

 4,970

 

$

 2,860

 

$

 2,110

 

73.8

%

 

 

 

 

 

 

 

 

 

 

Slot sales

 

 

 

 

 

 

 

 

 

Quarter ended

 

$

 341

 

$

 —

 

$

 341

 

 

Nine months ended

 

$

 372

 

$

 189

 

$

 183

 

96.8

%

 

 

 

 

 

 

 

 

 

 

Slot games installed (royalty units)

 

 

 

 

 

 

 

 

 

Beginning of quarter

 

 

 

 

 

 

 

 

 

Cooperative slot games

 

549

 

218

 

331

 

151.8

%

Company slot games

 

208

 

291

 

(83

)

(28.5

%)

Total

 

757

 

509

 

248

 

48.7

%

 

 

 

 

 

 

 

 

 

 

End of quarter

 

 

 

 

 

 

 

 

 

Cooperative slot games

 

529

 

269

 

260

 

96.7

%

Company slot games

 

194

 

242

 

(48

)

(19.8

%)

Total

 

723

 

511

 

212

 

41.5

%

 

 

 

 

 

 

 

 

 

 

Unit increase (decrease) during quarter

 

(34

)

2

 

 

 

 

 

Percentage change during quarter

 

(4.5

%)

0.4

%

 

 

 

 

 

 

13



Slot royalties for the fiscal year 2002 third quarter decreased compared to the prior fiscal year third quarter.  However, the prior year quarter included $1,000 in revenue related to provisions of the Company’s fiscal 2000 slot games agreements with International Game Technology (“IGT Agreements”).  The agreements prescribed minimum profits due to the Company based on product rollout schedules. Slot royalties for the nine months ended July 31, 2002, includes $215 of revenue recorded in the fiscal year 2002 first quarter related to the IGT Agreements.

 

The increase of 212 royalty units in the total installed slot base at July 31, 2002 compared to July 31, 2001 reflects the net placement of The Three StoogesÒ, Honeymooners® and Let’s Make A DealÒ cooperative slot games under the IGT Agreements.  During the fiscal year 2002 third quarter, the total installed royalty units declined 34 units, reflecting continuing resistance to participation pricing by some casino operators.

 

Slot sales for the quarter and nine months ended July 31, 2002 represent initial sales of new products that received regulatory approval in certain jurisdictions in July 2002.  The products include the Company’s slot machine operating system, slot machine upgrade kit, and its HollywoodTM and Spider-Man® game titles.  Upgrade kits allow customers to convert certain of their existing slot machines to run the Company’s operating system and games.

 

Other revenue

Other revenue decreased to $77 for the nine months ended July 31, 2002 compared to $317 for the same period in the prior year due to the termination of the Company’s joint marketing agreement with TCS America, Inc. in January 2001.

GROSS MARGIN:

 

Gross margin for the fiscal year 2002 third quarter was 74.1% as a percentage of revenue, compared to 74.4% for the prior fiscal year third quarter and 74.5% for the nine months ended July 31, 2002, compared to 73.4% for the same period in the prior fiscal year.   The comparison of fiscal year 2002 periods to corresponding prior year periods reflects several factors.  Gross margins have been positively impacted in fiscal year 2002 by better absorption of indirect cost of sales due to increased production levels. Negative gross margin impacts include the aforementioned fiscal year 2001 third quarter revenue of $1,000 under the IGT Agreements which did not recur in the comparable subsequent periods and a greater volume of foreign shuffler sales in fiscal year 2002.  Foreign shuffler sales generally have lower gross margins than domestic sales.

OPERATING EXPENSES:

Selling, general and administrative expenses (“SG&A”) increased by $293, or 8.7%, to $3,674 for the current fiscal year third quarter and by $1,591, or 17.2%, to $10,866 for the nine months ended July 31, 2002, compared to the same periods in the prior fiscal year.  On a fiscal 2002 year-to-date basis, the increase is due primarily to the inclusion of SG&A expenses of the Company’s Australian subsidiary, which was acquired in April 2001, and higher legal and health care costs during the first half of the 2002 fiscal year.  As a percentage of revenue, SG&A for the fiscal year 2002 third quarter decreased to 24.3% from 26.9% for the comparable prior year quarter.

Research and development expenses increased by $323, or 23.3%, over the prior fiscal year fiscal third quarter to $1,707, and $803, or 18.6%, to $5,119 for the nine months ended July 31, 2002.  These increases resulted from activities to support next generation shufflers and new game and slot operating system development, including $516 for the current fiscal year nine month period in development expenses incurred under the IGT Agreements.  As a percentage of revenue, research and development expenses for the fiscal year 2002 third quarter increased to 11.3% from 11.0% for the comparable prior year quarter.

 

 

14



INTEREST INCOME, NET:

 

Interest income, net, was $155 for the third quarter of fiscal year 2002 compared to $195 for the third quarter of the prior fiscal year.  Cash and investments increased to $19,404 at July 31, 2002 from $18,458 at July 31, 2001. This increase in interest-bearing cash and investments was due primarily to cash flow from operations offset by capital expenditures for property, equipment and intangible assets and cash used to repurchase Company stock. The decrease in interest income reflects lower average interest rates earned on cash and investment balances.

 

INCOME TAXES:

 

The Company recorded income tax expense at an effective rate of 34.5% for the quarter and nine months ended July 31, 2002, compared to an effective tax rate of 32.7% and 34.5% for the quarter and nine months ended July 31, 2001.  The lower effective tax rate for the fiscal year 2001 third quarter included the cumulative impact of reducing the annual effective tax rate for fiscal year 2001 to reflect a shift in the Company’s taxable income to more favorable tax jurisdictions and the tax benefit received on foreign sales activities.

 

In the fiscal year 2002 third quarter, the Company recorded a $6,236 income tax benefit related to deductions available to the Company from employee stock option exercises.  The tax benefit, which increased prepaid income taxes and additional paid-in capital by equal amounts, had no affect on the Company’s provision for income taxes.  The resulting prepaid income taxes balance of $5,302 will reduce estimated cash income tax payments in future quarters.

 

EARNINGS PER SHARE:

 

The Company earned $0.22 per diluted share for the fiscal year 2002 third quarter, compared to $0.17 per diluted share for the third quarter of the prior fiscal year. Diluted weighted average shares outstanding decreased to 18,209,000 for the fiscal year 2002 third quarter from 18,939,000 for the third quarter of fiscal year 2001.  The decrease in diluted weighted average shares outstanding reflects the repurchase of 1,240,000 shares offset by the exercise of 631,000 stock options during the twelve month period ended July 31, 2002.  Additionally, the dilutive impact of common stock options outstanding on weighted average shares decreased by 840,000 shares to 412,000 shares for the quarter ended July 31, 2002, from 1,252,000 shares for the quarter ended July 31, 2001.  The decrease in the dilutive effect is a result of the exercise of stock options during the twelve months ended July 31, 2002, which decreased the number and dilutive impact of common stock options that could be exercised.

 

 

CRITICAL ACCOUNTING POLICIES

 

The preparation of the Company’s consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires the Company’s management to adopt accounting policies and to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses.  Management periodically evaluates its policies, estimates and assumptions related thereto, among others: revenue recognition; the amortization, depreciation, and valuation of long-lived tangible and intangible assets; inventory obsolescence and costing methods; provisions for bad debts; and contingencies.  The Company’s management bases its estimates on historical experience and expectations of the future.  Actual reported and future amounts could differ from those estimates under different conditions and assumptions.

 

Management believes that the following accounting policies and related estimates are critical to the preparation of the Company’s consolidated financial statements.

 

 

15



Revenue Recognition:

 

The Company recognizes revenue when it secures a signed customer contract or purchase order that states a fixed or determinable price, the collectability of the revenue is reasonably assured, and the goods or services have been delivered or rendered.  Product sales are generally recorded upon shipment and lease, license, and royalty revenue is recognized beginning upon the completed installation of the product.  Revenue on service contracts is recognized on a straight-line basis over the life of the contract.

 

The Slot Products segment derives a significant portion of its revenue from slot games under revenue participation agreements with casinos. The Company estimates and records unbilled participation revenue based on prior cash receipts and periodic game performance data.  Actual billings may differ from estimates due to variations in game play and down time.  Such variations are adjusted in the subsequent period when actual billing is determined.

 

Long-lived and Intangible Assets:

 

The Company has a significant investment in long-lived leased assets and property, plant and equipment.  Additionally, the Company has acquired significant patents, licenses, games, goodwill and other intellectual property. The Company evaluates the recoverability of long-lived and intangible assets by comparing the carrying value of asset groups to related estimates of undiscounted future cash flows.  An adverse change to the estimate of these undiscounted future cash flows could necessitate an impairment charge that would adversely affect operating results.  The Company estimates useful lives for its tangible and intangible assets based on historical experience, estimates of products’ commercial lives, the likelihood of technological obsolescence, and estimates of the duration of commercial viability for patents, licenses and games.  Should the actual useful life of an asset differ from the estimated useful life, future operating results could be positively or negatively affected.  The Company reviews the recoverability of its long-lived asset balances and the related estimates of useful lives at least annually.

 

Inventory Obsolescence and Costing Methods:

 

The Company values its inventory at the lower of cost or market and estimates a provision for obsolescence based on assumptions about the future demand for the Company’s products and market conditions.  If future demand and market conditions are less favorable than management’s assumptions, additional provisions for obsolete inventory could be required.  Likewise, favorable future demand could positively impact future operating results if written-off inventory is sold.

 

Provision for Bad Debts:

 

The Company maintains a provision for bad debts for estimated credit losses that result from the inability of its customers to make required payments.  The provision for bad debts is estimated based on historical experience and specific customer collection issues.  Changes in the financial condition of the Company’s customers could result in the adjustment upward or downward in the provision for bad debts, with a corresponding impact to operating results.  The Company has established credit policies and procedures for reserving or writing off specific customer accounts.  The Company closely monitors delinquent accounts and monthly evaluates the need to change the allowance for bad debts.

 

Contingencies:

 

The Company assesses its exposures to loss contingencies including legal and income tax matters and provides for an exposure if it is judged to be probable and estimable.  If the actual loss from a contingency differs from management’s estimate, operating results could be impacted.

 

 

16



LIQUIDITY AND CAPITAL RESOURCES

(Thousands of Dollars)

 

Working Capital:

 

As of July 31, 2002, the Company had cash, cash equivalents and investments totaling $19,404 compared to $18,703 at October 31, 2001.  The current ratio increased to 3.7 at July 31, 2002 from 2.6 at October 31, 2001, while working capital increased by $8,790 to $28,080 at July 31, 2002 from $19,290 at October 31, 2001.  The increase in cash, working capital, and the current ratio at July 31, 2002 resulted primarily from the Company’s cash flow from operations for the nine months ended July 31, 2002 and cash and tax benefit from stock option exercises offset by repurchases of common stock.

Cash Flows:

Cash provided by operations totaled $13,035 for the nine months ended July 31, 2002 compared to cash provided by operations of $13,064 for the comparable prior fiscal year period.  Significant items in cash flows from operating activities in the current nine month period included net income of $9,602 and non-cash charges for depreciation and amortization, provision for bad debts, provision for inventory obsolescence, and deferred taxes, all of which totaled $5,606 compared to net income of $8,790 and non-cash charges of $4,836 for the prior year period.  Changes in operating assets and liabilities included a net increase in accounts receivable and inventories totaling $1,431 reflecting the higher business volume in the third fiscal quarter of 2002 compared to the fourth quarter of fiscal year 2001.   Amounts owed to IGT under the IGT Agreements are included in accounts payable and increased to $4,654 at July 31, 2002, from $4,584 at October 31, 2001.

Investing activities for the nine months ended July 31, 2002 include the purchase of $2,331 in shufflers, table games, and slot games leased or held for lease to customers.  Financing activities for the same period include the repurchase of 681,000 shares of common stock using cash of $11,554 and the issuance of 528,000 shares of common stock for $3,060 pursuant to stock options exercised by employees and directors under the Company’s stock option plans.

Capital Resources:

The Company believes its existing cash, investments and projected cash flow from future operations will be sufficient to fund the Company’s operations, capital expenditures and new product development for the foreseeable future.  Projected cash flows from operations are based on management’s estimates of revenue and expenses and the related timing of cash receipts and disbursements.  If actual performance differs from estimated performance, projected cash flows could be positively or negatively impacted.  In addition, the Company maintains a $15 million revolving credit agreement with U.S. Bank, N.A., subject to an availability calculation, to provide quick access to funds that might be required for working capital needs related to product rollouts, product or intellectual property acquisitions and share repurchases.  The credit agreement matures in October 2003.  As of July 31, 2002, the Company had no borrowings outstanding under its revolving credit agreement.

Stock Repurchase Authorization:

 

For the nine month periods ended July 31, 2002 and 2001, the Company repurchased 681,000 and 130,000 shares of its common stock at total costs of $11,554 and $2,162, respectively.

 

The Board of Directors periodically authorizes the Company to repurchase shares of its common stock.   At August 31, 2002, the Company had aggregate remaining authorizations of up to $7,300 to repurchase its common stock within specified price limits.

Contractual Obligations:

The Company’s significant contractual obligations consist of operating leases and have not changed materially from those disclosed in the Company’s annual report on Form 10-K for the year ended October 31, 2001.

 

 

17



FORWARD LOOKING STATEMENTS

 

This report contains forward-looking statements which are based on management’s beliefs 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.  Factors that could cause actual results to differ materially from expectations include, but are not limited to, the following:  changes in the level of consumer or commercial acceptance of the Company’s existing products and new products as introduced; competitive advances; acceleration and/or deceleration of various product development and roll out schedules; product performance issues; higher than expected manufacturing, service, selling, administrative, product development and/or roll out costs; changes in the Company’s business systems or in technologies affecting the Company’s products or operations; reliance on strategic relationships with distributors and technology vendors; current and/or unanticipated future litigation; changes to the Company’s intellectual property portfolio, such as loss of licenses, claims of infringement or invalidity of patents; regulatory and jurisdictional issues (e.g., technical requirements and changes, delays in obtaining necessary approvals, or changes in a jurisdiction’s regulatory scheme) involving the Company and its products specifically or the gaming industry in general; general and casino industry economic conditions; and the financial health of the Company’s casino and distributor customers both nationally and internationally.  Additional information on these and other 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 quarterly reports on Form 10-Q and annual report on Form 10-K.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of July 31, 2002, the Company had approximately $16.2 million in investments.  The investments are primarily in fixed income and investment grade securities.  The Company’s investment policy emphasizes return of principal and liquidity and is focused on fixed returns that limit volatility and risk of principal.  Because of the Company’s investment policies, the primary market risk associated with its portfolio is interest rate risk.

There have been no material changes in the information provided in Item 7 of the Company’s annual report on Form 10-K for the year ended October 31, 2001, which contains a complete discussion of the Company’s market risk.

 

 

18



Item 1. Legal Proceedings

 

In April 2001, the Company was sued by Innovative Gaming Corporation of America, a Minnesota corporation (“IGCA”).  The suit was filed in the Second Judicial District Court of the State of Nevada, in Washoe County, Nevada.  The defendants are the Company and Joseph J. Lahti, the Company’s former Chairman.  The complaint alleges breach of contract, negligence, misrepresentation and related theories of liability, all relating to a confidentiality agreement with respect to what IGCA claims to be its intellectual property.  The complaint seeks an unspecified amount of damages. The Company has answered the complaint by denying any liability and raising various affirmative defenses.  The Company completely denies IGCA’s claims and believes it will prevail in the lawsuit.

 

In March 2002, the Company filed a patent infringement lawsuit against VendingData Corporation, d/b/a Casinovations, and related entities.  The suit was filed in the Federal District Court for the Southern District of Nevada, in Las Vegas, Nevada.  The complaint alleges that the defendants have infringed one of Shuffle Master’s patents, and seeks an unspecified amount of damages and a permanent injunction against the defendants’ infringing conduct.  The Company amended the complaint in July 2002 to include infringement of a second Shuffle Master patent.  The defendants have denied liability, raised numerous affirmative defenses, and also filed a counterclaim alleging, among other causes of action, breach of a confidentiality agreement and patent invalidity.  The counterclaim seeks an unspecified amount of damages. The Company completely denies each of the claims contained in defendants’ counterclaim, and believes it will prevail in its infringement action, including with respect to defendants’ counterclaim.

 

In the ordinary course of conducting its business, the Company has been and may be involved in litigation, administrative proceedings and regulatory government investigations.  The Company believes that the final disposition of these matters will not have a material adverse effect on its financial position, results of operations or liquidity.

 

Item 6. Exhibits and Reports on Form 8-K

                      a).  Exhibits

3.2                                 Bylaws of Shuffle Master, Inc., as amended and restated.

10.26                     Employment Agreement, by and between Shuffle Master, Inc. and Mark Lipparelli, dated April 30, 2001.

                      b).  Reports on Form 8-K: None

 

 

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SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SHUFFLE MASTER, INC.

(Registrant)

Date:       September 12, 2002

 

 

 

 

 

/s/ Mark L. Yoseloff                                                                           

Mark L. Yoseloff

Chairman and Chief Executive Officer

 

 

 

 

 

/s/ Mark A. Lipparelli                                                           

Mark A. Lipparelli

President

 

 

 

 

 

/s/ Gerald W. Koslow                                                                                       

Gerald W. Koslow

Chief Financial Officer

(Principal Accounting Officer)

 

 

 

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CERTIFICATION

 

I, Mark L. Yoseloff, certify that:

 

1.             I have reviewed this quarterly report on Form 10-Q of Shuffle Master, Inc.;

2.                                       Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.                                       Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.                                       To my knowledge, this quarterly report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

5.                                       To my knowledge, the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Shuffle Master, Inc. as of the dates and for the periods presented,

 

 

Date:  September 12, 2002

 

/s/ Mark L. Yoseloff                                                                           

Mark L. Yoseloff

Chairman and Chief Executive Officer

 

 

21



CERTIFICATION

 

I, Mark A. Lipparelli, certify that:

 

1.             I have reviewed this quarterly report on Form 10-Q of Shuffle Master, Inc.;

2.                                       Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.                                       Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.                                       To my knowledge, this quarterly report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

5.                                       To my knowledge, the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Shuffle Master, Inc. as of the dates and for the periods presented,

 

 

Date:  September 12, 2002

 

/s/ Mark A. Lipparelli                                                                    

Mark A. Lipparelli

President

 

 

22



CERTIFICATION

 

I, Gerald W. Koslow, certify that:

 

1.             I have reviewed this quarterly report on Form 10-Q of Shuffle Master, Inc.;

2.                                       Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.                                       Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.                                       To my knowledge, this quarterly report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

5.                                       To my knowledge, the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Shuffle Master, Inc. as of the dates and for the periods presented,

 

 

 

 

 

Date:  September 12, 2002

 

 

 

 

/s/ Gerald W. Koslow                                                                                       

Gerald W. Koslow

Chief Financial Officer

(Principal Accounting Officer)

 

 

 

23