This excerpt taken from the SHFL 8-K filed Jun 13, 2007.
Given the detailed and extensive nature of our forecasting process, we believe that these long-term projections are achievable. At the same time, however, in order to maximize profitability and create value over time, we continue to work on our shorter-term Stargames integration issues.
First, the cost structure at Stargames and the debt we incurred to buy the business has challenged our ability to bring dollars to the bottom line in recent quarters. In addition, some Stargames product categories carry lower gross margins. On the cost side over the last three months, we have made progress analyzing the business and identifying where we can trim expenses, but it will take some time to implement a strategy and realize the benefits to our P&L.
Turning to Stargames products, the lowest margin business in the Stargames portfolio is their electronic game machine or slot machine business. The future growth potential of this category will depend on our ability to produce an ongoing stream of successful titles and due to this hit-driven nature, we are viewing our prospects positively, but modestly at this time.