SOURCE: Wells-Gardner Electronics Corp.

May 06, 2008 16:05 ET

Wells-Gardner Reports First Quarter Results

First Quarter Growth of 6.8% in Core Gaming Sales

CHICAGO, IL--(Marketwire - May 6, 2008) - Wells-Gardner Electronics Corporation (AMEX: WGA) announced sales for the first quarter ending March 31, 2008 were $14.9 million, a decline of 6.7% from $16.0 million in the same quarter 2007. First quarter net earnings were $199,000 or $0.02 per share compared to net earnings of $321,000 or $0.03 per share in the same period in the prior year.

"As I stated in our recent press release, we are pleased with the net profit in the first quarter 2008 which is a significant improvement from our original expectation of a range between a small loss and break-even," said Anthony Spier, Wells-Gardner's Chairman and Chief Executive Officer. "The sales decline was caused by a decline of $1.5 million or 39 percent in non-core amusement sales and a decline of $400,000 in used game device sales offset by growth of 6.8% in our core gaming sales. Margins decreased from a historical high of 18.7% in the 2007 first quarter to 16.4 % in the 2008 first quarter. These were offset by a reduction in operating expenses of $350,000 and a reduction in interest expense of $60,000 resulting in the better than expected earnings."

"We believe it is much more relevant to compare the first quarter 2008 results to that of the fourth quarter 2007 due to the current situation in the slot machine cycle. The first quarter 2008 sales increased 8.8% from the fourth quarter 2007 sales of $13.7 million due to an increase in core gaming sales of $1.4 million offset by a reduction in used game device sales. The net earnings of $199,000 for the first quarter 2008 compared to a fourth quarter 2007 loss of ($321,000) or ($0.03) per share. This improvement was due to a combination of higher sales and higher gross margins. The higher gross margin of 16.4% compared to fourth quarter 2007 margin of 13.6% was primarily due to continuing to move more production to Mainland China, which accounted for 70 percent of first quarter 2008 sales compared to 53 percent for fiscal 2007's sales."

Outlook

"Considering we earned as much in the first quarter 2008 as we did in Fiscal 2007, we expect the net earnings of 2008 to be better than that of 2007. Due to the unpredictability of the non-core amusement business, we are taking a more conservative approach to that line of business in our outlook. We expect to have total revenue of between $60 and $65 million in 2008. We expect gaming market growth in Pennsylvania, Florida racinos and tribal casinos, California, Indiana, Maine, Macau and maybe Kansas. We continue to be enthusiastic about our new management team operating our Used Game Device business and expect significant contributions from that business for the rest of 2008. The decline in the used game device business in the first quarter 2008 was temporary as we have already recognized more UGD revenue in the second quarter to date than we did for the entire first quarter."

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, 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 (Loss) (unaudited)
Three Months Ended March 31, 2008 and 2007


                                     Three Months Ended March 31,
                            ----------------------------------------------
                                     2008                    2007
                            ----------------------- ----------------------
Net sales                   $           14,916,000              15,980,000
Cost of sales                           12,475,000              13,012,000
                            ----------------------- ----------------------
Gross margin                             2,441,000               2,968,000
Engineering, selling &
 administrative expenses                 2,114,000               2,463,000
                            ----------------------- ----------------------
Operating earnings                         327,000                 505,000
Interest expense                           114,000                 174,000
Investment in Joint Venture                      -                 136,000
Other expense (income), net                  1,000                (112,000)
Income Tax                                  13,000                 (14,000)
                            ----------------------- ----------------------
Net earnings                $              199,000  $              321,000
                            ======================= ======================

Earnings per share:
Basic earnings (loss) per
 share                      $                 0.02  $                 0.03
Diluted earnings (loss) per
 share                      $                 0.02  $                 0.03

Basic average common shares
 outstanding                             9,852,407               9,784,046
Diluted average common
 shares outstanding                      9,852,983               9,841,752

Contact Information

  • Contacts:
    Jim Brace
    Wells Gardner
    (708) 290-2120

    Alan Woinski
    Gaming USA Corporation
    (201) 599-8484