GameTech earnings hurt by legal, R&D

GameTech International needs to take care of its future, but its present suffers as a result.

The Reno-based maker of electronic bingo equipment said last week that investments in its future legal investments as well as research and development dragged down its most recent earnings and probably will continue to do so for a while.

The higher legal and research costs are more than chewing up healthy gains in the company's top line.

For the quarter ended April 30, GameTech said its revenues were up 10 percent from year-earlier figures and totaled $13 million.

In the first half of its fiscal year, revenues were $26.5 million compared with $24 million.

The company's net, however, fell to $226,000 for the quarter compared with $1.1 million a year earlier.

And for the first six months, its earnings were $748,000 compared with $2 million a year ago.

Clarence Thiesen, the company's chief executive officer, said that part of the earnings decline is the result of greater investments in research.

GameTech boosted its development spending by $327,000 in the most recent quarter as it stepped up the number of engineers designing new products.

A bigger hit, however, came from the legal fees the company is encountering as it battles with a former distributor in Texas as well as a former customer in Mississippi of International Gaming Systems, which GameTech acquired in November.

Those legal costs, Thiesen said, are a big reason that GameTech's administrative costs were up by nearly $1 million in the last quarter.

In a press release announcing the company's earnings, Thiesen cautioned that the company's profits are likely to remain under siege because of the legal and development expenses.

But he said the higher costs are necessary to protect GameTech's markets over the longterm.

Shareholders weren't convinced, at least initially.Within minutes after trading began on the morning after the company reported its earnings, the stock was down more than 16 percent.

The company said its installed base of bingo player units rose about 3 percent in the most recent quarter.