Second Quarter Sales increased by 18 percent over First Quarter Sales
CHICAGO, Aug. 3 /PRNewswire-FirstCall/ -- Wells-Gardner Electronics Corporation (AMEX:WGA) announced sales for the second quarter ending June 30, 2006 were $18.3 million, a 5% decline from $19.4 million from the same quarter 2005. Second quarter net earnings were $239,000 or $0.03 per share compared to net loss of $(509,000) or $(0.06) per share in the same period the prior year. The second quarter 2005 earnings included non-recurring charges of ($289,000) or ($0.03) per share relating to the termination of an officer, the termination of the Pentranic acquisition, and inventory revaluation reserves.
Sales for the six months ending June 30, 2006 were $33.8 million, an increase of 4% over the same period in the prior year. Net earnings for the six months ending June 30, 2006 were a loss of ($231,000) or ($0.03) per share compared to a loss of ($1.3) million or ($0.15) per share. The first half 2005 earnings included non-recurring charges of ($625,000) or ($0.07) per share relating to the termination of an officer, the termination of the Pentranic acquisition, and inventory revaluation reserves.
"The Company has returned to profitability in the second quarter, which is two quarters ahead of our guidance," said Anthony Spier, Wells Gardner's Chairman and Chief Executive Officer "Gross margins are improving rapidly and were 15.1% in the second quarter 2006 compared to 13.4% in the first quarter 2006, 10.8% in the 4th quarter 2005 and 10.8% in the same quarter in the prior year. The margin improvement was primarily due to continued improvement in LCD margins due to improved production and procurement efficiency." "Revenue growth remained impressive in the face of a soft slot market throughout the world with second quarter 2006 sales of $18.3 million, which were up 18% from first quarter 2006 sales of $15.5 million. Although the second quarter 2006 revenue declined by 5% compared to the same quarter 2005 it must be remembered that the second quarter 2005 revenue of $19.4 million was the highest quarterly sales in the modern history of the Company. This quarter's sales of $18.3 million are the second highest quarterly sales in Wells-Gardner's modern history. The Company sold approximately 1340 replacement LCDs to casinos in the second quarter 2006 compared to 1001 in the first quarter 2006 and 670 in the fourth quarter 2005. This business is expected to have continued impressive growth." "The Company met its second quarter bank covenants," said Jim Brace, Vice President and CFO. "Our bank debt has increased $1.8 million since year end 2005 due primarily to our sales growth, which increased receivables by $3.0 million. Days sales outstanding were a very respectable 40 days. As we reported in the first quarter 2006 10-Q, we have elected to adopt a change in accounting for our inventory whereby we recognize in transit LCD inventory from China as title passes to the Company at the time the goods depart the port of Hong Kong. The impact of this change added $1.7 million to our inventory as of June 30, 2006. Notwithstanding this change, inventory turnover improved to 4.4 turns at the end of the second quarter compared to 3.6 turns at the end of the first quarter 2006." Outlook "As we have noted previously, we have taken a number of steps to return to profitability," Anthony Spier noted. "We have implemented selective price increases. We have started benefiting from the new, improved and less expensive CRT board sets. We have reduced our airfreight expenses and our headcount. We continue to improve our scheduling, our production processes, and the purchasing of LCD panels and metal parts." The Company expects 2006 sales to be between $66 million and $69 million. The Company expects margins and operating income to continue to improve. Due to the uncertainty surrounding the start up of slot machine operations in Florida and Pennsylvania, the Company is not anticipating any demand growth until 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.
WELLS-GARDNER ELECTRONICS CORPORATION
Condensed Consolidated Statements of Earnings (Loss) (unaudited)
Three Months and Six Months Ended June 30, 2006 Three Months Ended June 30,
2006 2005
Net sales $18,304,000 $19,358,000
Cost of sales 15,538,000 17,270,000
Gross margin 2,766,000 2,088,000
Engineering, selling & administrative
expenses 2,381,000 2,625,000
Operating earnings (loss) 385,000 (537,000)
Interest expense 202,000 95,000
Investment in Joint Venture (56,000) (123,000)
Tax and other (income) expense, net - -
Net earnings (loss) $239,000 $(509,000) Earnings per share:
Basic earnings (loss) per share $0.03 $(0.06)
Diluted earnings (loss) per share $0.03 $(0.06) Basic average common shares
outstanding 9,169,820 9,072,013
Diluted average common shares
outstanding 9,198,412 9,072,013
Six Months Ended June 30,
2006 2005
Net sales $33,789,000 $32,532,000
Cost of sales 28,952,000 28,654,000
Gross margin 4,837,000 3,878,000
Engineering, selling & administrative
expenses 4,717,000 5,214,000
Operating earnings (loss) 120,000 (1,336,000)
Interest Expense 376,000 165,000
Investment in Joint Venture (17,000) (201,000)
Tax and other (income) expense, net (8,000) 25,000
Net loss $(231,000) $(1,325,000) Earnings per share:
Basic loss per share $(0.03) $(0.15)
Diluted loss per share $(0.03) $(0.15) Basic average common shares
outstanding 9,137,494 9,054,585
Diluted average common shares
outstanding 9,137,494 9,054,585
DATASOURCE: Wells-Gardner Electronics Corporation CONTACT: Jim Brace, Wells Gardner, +1-708-290-2120, or Alan Woinski, Gaming Venture Corp., +1-201-599-8484 Web site: http://www.wgec.com/
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