SOURCE: Wells-Gardner Electronics Corp.

Wells-Gardner Electronics Corp.

May 05, 2010 08:30 ET

Wells-Gardner Reports First Quarter 2010 Earnings

CHICAGO, IL--(Marketwire - May 5, 2010) -  Wells-Gardner Electronics Corporation (NYSE Amex: WGA) announced sales of $11.6 million and net earnings of $105,000 or $0.01 per share for the first quarter ending March 31, 2010. The results include approximately $124,000 in operating expenses related to the Illinois Video Lottery business, which is not expected to begin generating revenue until the final quarter of 2010. This compares with sales of $11.6 million and net earnings of $103,000 or $0.01 per share, which included a non-recurring tax charge of $95,000 in the same period in the prior year.

"We are pleased with these net earnings in the first quarter 2010 in this difficult market environment," said Anthony Spier, Wells-Gardner's Chairman and Chief Executive Officer. "This is a significant improvement from our original expectation of a range between a small loss and break-even. Excluding the two unusual items, first quarter earnings would have increased by 16 percent on a comparative basis. The earnings performance was affected by two positive trends. Firstly margins increased to 18.5% from 18.0% in the same period in the prior year due to moving more production to China and higher unit volume. Secondly interest expense was reduced by $16,000 or 28 percent due to lower inventory. Offsetting these items, operating expenses increased by $173,000, which included $124,000 due to the preparation for the Video Lottery business and $49,000 due to higher professional and other fees."

"The Company plans to participate in the Illinois Video Lottery business as a distributor through American Gaming & Electronics, a wholly owned subsidiary, and has already filed its application for an Illinois distributor's license. As we have stated before, our investment in engineering and research & development was not reduced as management regards this as essential to the future prospects of the Company and as we recently reported, we have strengthened our engineering team."

"We continue to concentrate on developing new technology and new products. The Company is working with several major gaming manufacturers on developing 3D products using the patented 2D/3D switchable technology for which we have the global rights for both the gaming and amusement markets through 2015."

"The balance sheet at March 31, 2010 continues to be a sign of strength in year over year comparisons," said James Brace, Executive Vice President and CFO. "Borrowings of $3.6 million represent a reduction of $600,000 from the borrowings of $4.2 million at March 31, 2009. The Company's debt/equity ratio remains low and is now under 24 per cent compared to 30 percent at the same period in the prior year. The Company was in compliance with all bank covenants."

Outlook
2010 is expected to be a challenging year for the gaming industry and for Wells Gardner. Due to the delay in the start of VLT sales and lower average monitor selling prices on slightly higher unit volumes, the Company has lowered expected 2010 sales to be between $55 million and $60 million. The Company is anticipating VLT revenue will begin in the fourth quarter 2010, but it is important to note that the start of VLT sales is dependent on the actions by both the Illinois legislature and the Illinois Gaming Board. Two of our customers have indicated that they may order fewer units in the second half of the year, which we anticipate may be offset by increased unit sales to another major customer. Management is cautiously optimistic as the Company has developed several new products including 3D products, inverted video products, and 26", 32", 37", 42", 47" and 55" LCDs for the signage market that are expected to generate additional revenue.

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 most of its LCDs 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, Hammonton, New Jersey, Miami, Florida and McCook, Illinois. AGE is planning to enter in 2010 the Illinois Video Lottery market as a distributor. AGE also sells refurbished gaming machines on a global basis.

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, 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. For additional investor information, please contact Jim Brace - Wells-Gardner at (708) 290-2120 or Alan Woinski - Gaming USA Corporation at (201) 599-8484.

WELLS-GARDNER ELECTRONICS CORPORATION      
Condensed Consolidated Statements of Earnings (unaudited)
Three Months Ended March 31, 2010 and 2009      
           
    Three Months Ended March 31,
    2010     2009
Net sales $ 11,576,000   $ 11,604,000
Cost of sales   9,434,000     9,521,000
Gross margin   2,142,000     2,083,000
Engineering, selling & administrative expenses   1,992,000     1,819,000
Operating Earnings (Loss)   150,000     264,000
Interest expense   42,000     58,000
Investment in Joint Venture   -     -
Other (income) expense, net   -     93,000
Income Tax expense   3,000     10,000
Net Earnings (Loss) $ 105,000   $ 103,000
           
Earnings per share:          
Basic earnings per share $ 0.01   $ 0.01
Diluted earnings per share $ 0.01   $ 0.01
           
Basic average common shares outstanding   10,964,692     10,925,579
Diluted average common shares outstanding   10,974,721     10,925,579

Contact Information

  • For additional investor information, please contact
    Jim Brace
    Wells-Gardner
    (708) 290-2120
    Alan Woinski
    Gaming USA Corporation
    (201) 599-8484