SOURCE: Wells-Gardner Electronics Corp.

Wells-Gardner Electronics Corp.

February 16, 2011 08:30 ET

Wells-Gardner Reports Fourth Quarter and Full Year 2010 Earnings

Balance Sheet Remains Very Strong

CHICAGO, IL--(Marketwire - February 16, 2011) - Wells-Gardner Electronics Corporation (NYSE Amex: WGA) announced net sales for the fourth quarter ending December 31, 2010 were $7.7 million, a decline of 41 percent from $13.1 million for the fourth quarter 2009. The Company reported a net loss for the fourth quarter 2010 of $(180,000) or $(0.02) per share compared to net earnings of $244,000 or $0.02 per share for the same period in 2009. The fourth quarter 2010 results included $81,000 of operating expenses related to the Illinois Video Lottery business, which is not expected to generate revenue before the fourth quarter 2011.

"The revenue decrease of 41 percent in the fourth quarter was due to weak LCD sales to our slot manufacturer customers caused by seasonality and the weak global slot market along with inventory adjustments by several of our customers who had over ordered in prior quarters. On a positive note, the Company has already begun to see a return of the same customers to more normal buying patterns in the first half 2011," said Anthony Spier, Wells-Gardner's Chairman and Chief Executive Officer. "In addition, the Company has already picked up a large gaming customer in early 2011, whose sales will start in the second quarter. This customer's sales were not in the Company's 2011 sales plan. It should be noted that the fourth quarter is historically a weak one for the slot machine manufacturing industry given the slowdown in orders ahead of the rollout of new products at the annual Global Gaming Expo."

For the fiscal year ending December 31, 2010, net earnings were $190,000 or $0.02 per share compared to $1.1 million or $0.10 per share for the fiscal year 2009. The fiscal year 2010 earnings included $572,000 of non-recurring charges including $122,000 of engineering reorganization charges and $450,000 of operating expenses related to the Illinois Video Lottery business. The fiscal year 2009 earnings included non-recurring tax charges of $168,000. Sales for the fiscal year 2010 were $45.7 million, a decline of 13 percent from $52.5 million for 2009.

"As expected, our decrease in earnings in the fourth quarter was driven by the decrease in sales as well as the Illinois VLT operating expenses. We had projected lower sales in the second half of the year and higher expenses related to the Illinois Video Lottery business, which is not expected to begin generating revenue before the fourth quarter 2011. For the full year we are pleased with the profitability we achieved despite the costs related to the Illinois VLT startup and other non-recurring expenses. Margin percentages increased due to tight cost control and operating expenses declined in spite of the additional operating expenses related to the Illinois Video Lottery business during the fourth quarter."

"The balance sheet continues to strengthen with a decline of $1.6 million in debt since year end 2009 and a decline of $4.6 million in debt since year end 2008. Our total debt as of December 31, 2010 has been reduced to $565,000 compared to $2.2 million at December 31, 2009 and $5.2 million at December 31, 2008. The December 31, 2010 debt level is the lowest level of debt for the Company at year end in the past twenty years. Considering the weak global market and costs associated with the Illinois VLT market, we are pleased with the cash flow and results of our tight fiscal controls. The Company's debt equity ratio is now 4 percent compared to 14 percent at year end 2009. The Company has generated over $1.6 million of free cash flow in 2010."

"The company has amicably terminated its used game contract with Par 4 of New Jersey and has completely sold all remaining used game inventory." 

Outlook
We are projecting sales in 2011 of between $58 million and $62 million based on our projection that the Illinois Video Lottery business will begin the fourth quarter 2011. As we mentioned above, the Company has picked up a large gaming customer in early 2011. Also management is optimistic about winning two additional new major gaming customers in 2011. None of these three customers' sales are in our 2011 sales plan and would represent a significant increase in Wells Gardner's global market share. We will continue to aggressively control costs, interest expense and inventory levels ahead of the expected rebound in the slot machine replacement market and start up of new jurisdictions, and in particular the start up of the Video Lottery business in Illinois.

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 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.

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 and Twelve Months Ended December 31, 2010 and 2009  
   
             
     Three Months Ended      Twelve Months Ended  
    December 31,     December 31,  
    2010     2009     2010     2009  
Net sales   $ 7,709,000       13,100,000       45,704,000       52,526,000  
Cost of sales     6,236,000       11,028,000       37,308,000       43,378,000  
Gross margin     1,473,000       2,072,000       8,396,000       9,148,000  
Engineering, selling & administrative expenses     1,630,000       1,902,000       8,033,000       7,771,000  
Operating Earnings     (157,000 )     170,000       363,000       1,377,000  
Interest expense     28,000       42,000       184,000       213,000  
Investment in Joint Venture     -       (1,000 )             (1,000 )
Other expense, net     (4,000 )     4,000       (5,000 )     170,000  
Income Tax expense     (1,000 )     (119,000 )     (6,000 )     (102,000 )
Net Earnings   $ (180,000 )   $ 244,000     $ 190,000     $ 1,097,000  
                                 
Earnings per share:                                
Basic earnings per share   $ (0.02 )   $ 0.02     $ 0.02     $ 0.10  
Diluted earnings per share   $ (0.02 )   $ 0.02     $ 0.02     $ 0.10  
                                 
Basic average common shares outstanding     10,988,219       10,942,013       10,982,985       10,937,883  
Diluted average common shares outstanding     10,992,544       10,948,869       10,989,450       10,937,883  

Contact Information

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

    Alan Woinski
    Gaming USA Corporation
    (201) 599-8484