CHICAGO, April 25 /PRNewswire-FirstCall/ -- Wells-Gardner Electronics Corporation (AMEX:WGA) announced sales for the first quarter ending March 31, 2006 were $15.5 million, an 18% increase compared to $13.2 million the first quarter 2005. First quarter net earnings were a loss of ($470,000) or ($0.05) per share compared to net loss of $(815,000) or $(0.09) per share in the same period the prior year. The first quarter 2005 earnings included non-recurring charges of ($335,000) or ($0.04) per share relating to the termination of an officer and inventory revaluation reserves.
"The first quarter results exceeded expectations in terms of revenue and were in line with expectations in terms of profitability," said Anthony Spier, Wells Gardner's Chairman and Chief Executive Officer. "Gross margins are improving and were 13.4% in the first quarter 2006 compared to 10.8% in the 4th quarter 2005 and 13.6% in the same quarter in the prior year." Revenue growth was impressive in the face of a soft gaming market throughout the world. The company sold approximately 1000 LCDs to casinos in the first quarter 2006 compared to 670 in the fourth quarter 2005. These sales were primarily to replace CRT monitors in IGT machines. This business is expected to have continued impressive growth.
Overall after taking account of 2005 non-recurring charges, the company improved operating earnings by approximately $200,000 offset by reduced joint venture earnings caused partly by the weakening of the Malaysian ringit to the US dollar and by an increase in interest expense due to higher borrowings than the same period a year ago.
Outlook "We have taken a number of steps to return to profitability," Anthony Spier noted. "We have implemented selective price increases, primarily in the amusement industry. We will start benefiting from the new and improved CRT board sets starting in the second quarter 2006. We have reduced our airfreight expenses and our headcount of our Wells Gardner division by about 16 percent since June, 2005. We are working to improve our scheduling, our production processes, and the purchasing of LCD panels and metal parts." The Company expects 2006 sales to be between $63 million and $66 million. The company expects to return to profitability in the second half 2006. Due to the uncertainty surrounding the start up of slot machine operations in Florida and Pennsylvania, the Company is not including any demand growth that will occur when these markets finally materialize.
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. During 2000, the Company formed a 50/50 joint venture named Wells-Eastern Asia Displays ("WEA") to manufacture video monitors in Malaysia. In addition, the Company acquired American Gaming & Electronics, Inc. ("AGE"), a leading parts distributor to the gaming markets, which sells parts and services to over 700 casinos in North America with offices in Las Vegas, Nevada, Egg Harbor Township, New Jersey and McCook, Illinois. AGE also sells refurbished gaming machines on a global basis as well as installs and services some brands of new 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. For additional investor information, please contact Jim Brace - Wells Gardner at (708) 290-2120 or Alan Woinski - Gaming Venture Corp., USA at (201) 599-8484.
Consolidated Condensed Statements of Operations
Three Months Ended March 31,
2006 2005
Net sales $15,485,000 $13,173,000
Cost of sales 13,414,000 11,382,000
Gross margin 2,071,000 1,791,000
Engineering, selling & administrative
expenses 2,336,000 2,589,000
Operating (loss)/earnings (265,000) (798,000)
Interest expense 174,000 70,000
Investment in Joint Venture 39,000 (78,000)
Tax and Other (income) expenses, net (8,000) 25,000
Net (loss)/earnings $(470,000) $(815,000) Earnings(loss) per share:
Basic (loss)/earnings per share $(0.05) $(0.09)
Diluted (loss)/earnings per share $(0.05) $(0.09) Basic average common shares
outstanding * 9,105,520 9,036,964
Diluted average common shares
outstanding * 9,105,520 9,036,964 * Shares outstanding have been adjusted to reflect the 5% stock dividend
declared on March 9, 2006 and paid to all shareholders of record as of
March 16, 2006. DATASOURCE: Wells-Gardner Electronics Corporation CONTACT: Jim Brace of Wells Gardner, +1-708-290-2120, or Alan Woinski of Gaming Venture Corp., USA, +1-201-599-8484 Web site: http://www.wgec.com/
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