SOURCE: Wells-Gardner Electronics Corp.

Wells-Gardner Electronics Corp.

November 09, 2011 08:30 ET

Wells-Gardner Reports Third Quarter Earnings 2011

CHICAGO, IL--(Marketwire - Nov 9, 2011) - Wells-Gardner Electronics Corporation (NYSE Amex: WGA) announced sales for the third quarter ending September 30, 2011 were $9.8 million, a decline of 11.5 per cent from $11.0 million in the third quarter 2010. The Company reported a net loss of $(152,000) or $(0.01) per share compared to a net loss of $(176,000) or $(0.02) per share in the same period the prior year. The third quarter results included $214,000 of non-recurring charges which was made up of $89,000 relating to litigation and $125,000 of operating expenses related to the Illinois Video Gaming business, which is not expected to begin generating revenue until the third quarter 2012. Prior year results included non-recurring charges of $129,000 related to the Illinois Video Gaming business.

For the nine months ending September 30, 2011, sales were $33.7 million, a decline of 11.3 per cent from $38 million in the prior year period. Net earnings were $208,000 or $0.02 per share compared to $370,000 or $0.03 per share in the prior year nine months. The nine month 2011 earnings included non-recurring charges of $624,000, which was made up of $203,000 for two litigation cases, $391,000 of operating expenses related to the Illinois Video Gaming business and $30,000 for reorganization charges. The nine month 2010 earnings included non-recurring charges of $491,000.

"Our earnings performance in the third quarter came in as expected as we operate in a difficult slot machine manufacturing environment," said Anthony Spier, Wells-Gardner's Chairman and Chief Executive Officer. "Despite the decrease in revenue, the Illinois Video Gaming business operating expenses and the litigation expense resulted in the quarterly loss as the core business remains profitable. Margins increased slightly in the quarter to 18.0 per cent compared to 17.8 per cent in the same quarter in the prior year due to the elimination of low margin used game sales and lower royalty payments. Operating expenses declined by over $207,000 primarily due to reduced personnel costs and lower professional fees."

"The year to date sales decline of 11.3 per cent or $4.3 million was caused by a decline in sales to one of our major customers of $4.4 million due to a difficult comparison to prior year from strong Italian lottery VLT sales in 2010 as well as exiting the low margin used game business, which had sales of over $800,000 in the first nine months 2010."

"The balance sheet continues to remain strong as debt decreased to $2.5 million as of September 30, 2011 compared with $4.4 million at June 30, 2011.The Company's debt equity ratio is now 16 per cent compared to 28 per cent at June 30, 2011."

Outlook
"The Company is currently estimating that the Illinois Video Gaming Terminal business will begin in the third quarter 2012. We expect that sales for the full year 2011 will be in the range of $43 to $45 million, compared to $45.7 million in 2010, as the worldwide gaming slot machine market remains sluggish. Fourth quarter sales are expected to increase from prior year sales of $7.7 million by between 20 and 40 per cent however earnings will continue to be affected by spending for the Illinois VGT market without 2011 revenue. We expect Company sales will be in the range of $60 to $70 million in 2012 as the Illinois Video Gaming business gets started. We will continue to aggressively control costs, inventory levels and interest expenses."

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 Nevada, New Jersey, Florida and 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 Nine Months Ended September 30, 2011 and 2010
Three Months Ended
Sept 30,
Nine Months Ended
Sept 30,
2011 2010 2011 2010
Net sales $ 9,759,000 11,031,000 33,716,000 37,995,000
Cost of sales 8,000,000 9,070,000 27,356,000 31,073,000
Gross margin 1,759,000 1,961,000 6,360,000 6,922,000
Engineering, selling & administrative expenses 1,889,000 2,096,000 6,060,000 6,403,000
Operating Earnings (130,000 ) (135,000 ) 300,000 519,000
Interest expense 30,000 45,000 92,000 156,000
Other expense, net - (1,000 ) - (1,000 )
Income Tax expense (8,000 ) (3,000 ) - (6,000 )
Net Earnings $ (152,000 ) $ (176,000 ) $ 208,000 $ 370,000
Earnings per share:
Basic earnings per share $ (0.01 ) $ (0.02 ) $ 0.02 $ 0.03
Diluted earnings per share $ (0.01 ) $ (0.02 ) $ 0.02 $ 0.03
Basic average common shares outstanding 11,602,233 11,535,480 11,589,108 11,530,289
Diluted average common shares outstanding 11,608,361 11,542,984 11,595,844 11,537,891

Contact Information

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

    Alan Woinski
    Gaming USA Corporation
    (201) 599-8484