GameTech takes hit on goodwill, damages in lawsuit loss
When GameTech International took a $6.6 million hit to its earnings as the result of impairment of goodwill, the company’s executive team viewed the step as a necessary dose of bad-tasting medicine.
The Reno-based manufacturer of electronic bingo gear last week said the $6.6 million goodwill charge was a significant piece of its loss of nearly $10 million for the quarter ended Oct.
Another big piece came from the company’s decision to set aside $3.6 million to cover a November jury verdict in a case brought by a former distributor of GameTech’s gear.
The company’s financial reports for the last fiscal year were delayed several weeks while its auditors completed the analysis that led to the write-offs of the intangible assets.
Essentially, the decision is this: Some of the intangible assets carried on GameTech’s books as goodwill as the result of acquisitions aren’t going to produce the revenues the company expected.
Thus, they’re written off.
GameTech also took an $813,000 hit during the year for employee severance payments.
John Furman, the company’s president and chief executive officer, said he supported the decision to swallow the impairment charges in one gulp so GameTech can move forward.
On an operating basis, GameTech reported that revenues during the fiscal
year ended Oct.
31 fell to $51.5 million from $52.3 million a year earlier.
Stripping out the goodwill charge and the reserve for the legal judgment, GameTech would have posted net earnings of $271,000 for the year.
That would have compared with net of $1.2 million a year earlier.
Furman said he’s cautiously optimistic about GameTech’s prospects.He noted that the company’s introduction of new products will accelerate during 2005, and he said GameTech is looking for strategic relationships.
The company’s stock, which trades on the NASDAQ system, was quoted last week at $4.05 a share.
It’s ranged from $3.46 to $6.05 within the last year.
About 24 percent of the GameTech’s stock is held by institutions; 37 percent is owned by company insiders.
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