Writedowns, rising costs hit quarter’s profit for GameTech
GameTech International of Reno barely posted a profit during the quarter ended April 30 as it boosted spending on research and development and posted an increase in administrative costs as well.
The credit markets didn’t help either, as the publicly held company recorded a $285,000 impairment charge associated with some auction-rate securities it holds as an investment.
For the quarter, the maker of electronic bingo systems and other gaming equipment reported a profit of $113,000 on revenues of $13.9 million. A year earlier, GameTech earned $1.2 million on revenues of $13.4 million.
The company said its bingo business was down, but it managed to stay even with last year’s revenues through the sales generated by its Summit Amusement & Distributing Ltd. subsidiary, a Montana-based manufacturer of video lottery equipment.
On the expense side of the ledger, the company said its R&D expenses were up by $557,000 from a year ago, and its general and administrative expenses were up by $466,00.
The quarter’s earnings also were hit by GameTech executives’ decision to write down the value of about $2.9 million in auction-rate securities in the company portfolio.
Auction-rate securities are bonds in which the interest rate is re-reset in an auction every 7, 28 or 35 days.
The securities, which were marketed as alternatives to cash, historically paid a little higher rates than money
market funds, but the auctions began to fail earlier this year as a result of the national credit crunch.
GameTech said the auction-rate securities in its portfolio continue to pay agreed-upon interest. The company said it has $6.5 million in cash and cash equivalents on its books cash that’s separate from the auction-rate securities and it believes the cash is enough to fund its operations and debt service.
And Jay Meilstrup, its president and chief executive officer, said GameTech continues to look for “strategic opportunities, if and when they arise.”
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