SOURCE: Wells-Gardner Electronics Corp.

November 08, 2007 16:05 ET

Wells-Gardner Announces Third Quarter 2007 Results

Sixth Consecutive Profitable Quarter

CHICAGO, IL--(Marketwire - November 8, 2007) - Wells-Gardner Electronics Corporation (AMEX: WGA) announced sales for the third quarter ending September 30,2007 were $14.5 million down 4 percent from $15.1 million in the same quarter in the prior year. Third quarter 2007 net earnings were $34,000 or $0.003 per share compared to $326,000 or $0.035 per share in the third quarter 2006. Margins were 16.8 percent as compared with 17.7 percent in the year ago quarter. The decline in revenue and margin were primarily due to competitive pressures resulting from a continued sluggish slot machine market, partially offset by strength in the used game business and the LCD replacement kit sales as well as joint venture income of $98,000 and foreign currency gains of $71,000.

Sales for the nine months ending September 30, 2007 were $45.6 million a reduction of 7 percent compared to $48.9 million in the same period in 2006. Net earnings for the first nine months 2007 were $516,000 or $0.05 per share compared to net earnings of $95,000 or $0.01 per share in the same period in the prior year. Margins for the nine month period increased to 17.6 percent from 15.4 percent for the nine months 2006. In addition foreign currency gains added $314,000 in the nine months.

"Despite the soft global slot machine market, I am pleased to report to you that we toughed out a profit," said Anthony Spier, Wells Gardner's Chairman and Chief Executive Officer. "Two of our other businesses, which are counter-cyclical, flourished. Our used game business increased by 78 percent in the third quarter, which incidentally was a record sales quarter for this business, and is expected to have a good fourth quarter. Our LCD replacement kit sales increased by 77 percent in the third quarter in which we sold 2,122 kits compared to 1,201 kits in the third quarter 2006. We have now sold 12,000 LCD replacement kits. There does appear to be light at the end of the tunnel and 2007 is expected to go down as the low point in the cycle of slot machine sales."

Management noted that in response to the continued sluggish slot market, the Company has reduced headcount by around 11 percent in October and has taken other steps to reduce operating expenses for the rest of 2007.

Outlook

Management has reduced sales guidance to a range of $59 to $61 million in 2007 due to the soft global replacement slot market referred to above. We expect to remain profitable for the year despite what looks to be a difficult fourth quarter.

Management is optimistic about a rebound in global placements in 2008 and 2009. This industry opinion of sales growth is based on the commercialization of Server Based Gaming (SBG), which will drive the next round of the replacement cycle and the expected domestic growth in slot machine sales in California, Florida, Pennsylvania, Kansas, New York, New Jersey and Las Vegas. Also there is expected international growth in new slot machine sales in Macau, Singapore and many other countries in South East Asia, where Wells Gardner recently announced they had appointed a major distributor. The Global Gaming Expo next week in Las Vegas is expected to be the launching pad of SBG and what will be the casinos of the future.

Founded in 1925, Wells-Gardner Electronics Corporation is a distributor and manufacturer of color video monitors and other related distribution products for a variety of markets including, but not limited to, gaming machine manufacturers, casinos, coin-operated video game manufacturers and other display integrators. The Company has the majority of its LCDs and CRT monitors manufactured in Mainland China. In addition, the Company's American Gaming & Electronics, Inc. subsidiary ("AGE"), a leading parts distributor to the gaming markets, sells parts and services to over 700 casinos in North America with offices in Las Vegas, Nevada, Egg Harbor Township, New Jersey, Miami, Florida and McCook, Illinois. AGE also sells refurbished gaming machines on a global basis as well as installs and services some brands of gaming machines in casinos in North America.

This press release contains forward-looking statements within the meaning of the federal securities laws. Those statements include statements regarding the intent, belief or expectations of the Company and its management. Readers are cautioned that the forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those expressed in any forward-looking statement. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, development of competing technologies, availability of adequate credit, interruption or loss of supply from key suppliers, our ability to increase production at our Malaysian joint venture, increased competition, the regulatory process and regulatory and legislative changes affecting the gaming industry. Wells-Gardner assumes no obligation to update the information contained in this release to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

WELLS-GARDNER ELECTRONICS CORPORATION
Condensed Consolidated Statements of Earnings (unaudited)
Three Months and Nine Months Ended September 30, 2007


                        Three Months Ended           Nine Months Ended
                           September 30,               September 30,
                    ------------  ------------  ------------  ------------
                        2007          2006          2007          2006
                    ------------  ------------  ------------  ------------
Net sales           $ 14,524,000  $ 15,085,000  $ 45,633,000  $ 48,874,000
Cost of sales         12,080,000    12,421,000    37,622,000    41,374,000
                    ------------  ------------  ------------  ------------
Gross margin           2,444,000     2,664,000     8,011,000     7,500,000
Engineering,
 selling &
 administrative
 expenses              2,401,000     2,148,000     7,255,000     6,865,000
                    ------------  ------------  ------------  ------------
Operating earnings        43,000       516,000       756,000       635,000
Interest expense         177,000       207,000       525,000       583,000
Investment in joint
 venture                 (98,000)      (18,000)       33,000       (35,000)
Other (income)
 expense, net            (71,000)        1,000      (314,000)       (8,000)
Income tax expense
 (loss)                    1,000             -        (4,000)
                    ------------  ------------  ------------  ------------
Net earnings        $     34,000  $    326,000  $    516,000  $     95,000
                    ============  ============  ============  ============

Earnings per share:
Basic earnings per
 share              $      0.003  $      0.035  $       0.05  $       0.01
Diluted earnings
 per share          $      0.003  $      0.035  $       0.05  $       0.01

Basic average
 common shares
 outstanding           9,840,146     9,187,181     9,818,537     9,154,117
Diluted average
 common shares
 outstanding           9,863,912     9,226,112     9,860,066     9,187,143

Contact Information

  • For additional investor information, please contact
    Jim Brace
    Wells Gardner
    (708) 290-2120

    or

    Alan Woinski
    Gaming USA Corporation
    (201) 599-8484