WEB NEWS Comments & Business Outlook
Fourth Quarter 2013 Results
Net sales for full year 2013 increased 13.3 percent to $57.9 million compared to $51.1 million in 2012.
The company reported EPS of $0.01 compared to EPS of $0.03 for the same quarter last year.
Anthony Spier, chairman and chief executive officer of Wells-Gardner, said, "Revenue for the year of $57.9 million was in line with our prior guidance. We posted record VLT sales in the fourth quarter of $6.4 million compared to $4.4 million in the fourth quarter of 2012. VLT sales for the quarter were positively impacted by delivering orders that were delayed in the previous quarter. Demand for VLT units continued to be strong throughout the entire year despite the delay of orders in the third quarter. We also experienced growth of three percent in our parts business to the gaming industry in 2013. The increase in revenue drove a significantly improved bottom-line result, with net income for the full year increasing 297 percent to $651,000, or $0.06 per diluted share, versus net income of $164,000, or $0.01 per diluted share, in 2012. We are very pleased with the financial results of 2013."
"Overall, our base business continued to be challenging throughout 2013," continued Mr. Spier. "Our expectation going forward is that the marketplace will continue to remain highly competitive in 2014 and beyond. Although we did experience increased parts sales, we believe that is an indicator that a full scale replacement cycle has not yet commenced at existing casinos and gaming establishments throughout the U.S. The need to refresh the gaming experience throughout the industry is important to keep its customers coming back. When the replacement cycle does pick up, Wells-Gardner is well positioned to benefit.
"We continue to run the company conservatively with a focus on managing expenses, prudently managing bank debt, and operating our business from internally generated cash flow. Engineering, sales and administrative expenses for full year 2013 of $8.6 million were equivalent to $8.7 million in 2012. For the year we generated positive cash flow of approximately $1.8 million. Bank debt now stands at $1.6 million down from $3.7 million at the end of 2012."
During the fourth quarter the Company announced that its wholly-owned subsidiary, American Gaming & Electronics (AG&E) and FutureLogic, Inc. entered into a Sales Representative and Distribution Agreement through December 31 2015.
On December 4, 2013 the Board of Directors of Wells-Gardner Electronics Corporation authorized management to explore strategic alternatives. The Company has retained El Segundo, California-based Innovation Capital as its financial advisor to conduct a thorough review of the Company`s business and assets and to provide recommendations for consideration by the Wells-Gardner Board of Directors. There can be no assurance that this evaluation process will result in any transaction. Management will report the results of the strategic review at the conclusion of the process.
Business Outlook
Based on its best estimates and information available at this time, management believes full year 2014 net sales will be in a range between $53 million and $57 million, compared to $57.9 million in full year 2013, with the first quarter of 2014 expected to be the most challenging quarter of the year. We expect that demand for VLT units in 2014 will be comparable to that of full year 2013.
Comments & Business Outlook
Third Quarter 2013 Financial Results
Net sales increased 4 percent to $12.2 million compared to $11.7 million in the third quarter of 2012
Net loss for the third quarter was ($40,000), or $(0.00) per diluted share, significantly improved from a net loss of ($235,000), or $(0.02) per diluted share, in the third quarter of 2012. For the nine months net income was $541,000, or $0.05 per diluted share, versus a net loss of ($159,000), or $(0.01) per diluted share in the nine months 2012.
Anthony Spier, chairman and chief executive officer of Wells-Gardner, said, "While VLT revenue for the third quarter of 2013 increased 69 percent versus the third quarter of 2012, consolidated revenue for the quarter came in below our expectations. A VLT product update was introduced by our strategic partner in September and consequently impacted sales during the quarter as customers delayed purchases until the introduction of the updated product. We expect that fourth quarter revenue will benefit as a number of sales that were expected in the third quarter shift into the fourth quarter. In light of the circumstances we are pleased with a breakeven quarter and expect a better result in the fourth quarter."
Mr. Spier continued, "During the quarter, we participated in the Global Gaming Expo (G2E) and this resulted in a great deal of interest in our new button-deck technology. Also, several customers have expressed an interest to determine whether our button-deck product is a good fit for their hardware. We are also working in conjunction with a current client to jointly develop a custom button-deck solution to improve the functionality of their products. We are very early in the development process, but are encouraged with the progress to this point."
"As has been the case throughout 2013, our base business continued to be challenged during the third quarter," continued Mr. Spier. "It remains a very competitive market place. We have yet to see a strong indication that the replacement cycle at existing casinos and gaming establishments throughout the U.S. is set to commence. As I have indicated in previous quarters, we know that the need to refresh the gaming experience is vitally important to keep consumers coming back to their favorite gaming venues. What we don't yet know is when this long delayed replacement cycle will commence. However, when it does, we are well positioned to benefit."
"We continue to run the company conservatively with a unceasing focus on managing expenses, paying down debt, and operating our business from internally generated cash flow. For the quarter we generated positive cash flow of approximately $1.1 million and $3.1 million for the nine months. Bank debt now stands at $72,000 down from $2.2 million in the comparable quarter last year. Engineering, sales and administrative expenses for the quarter decreased 13 percent as cost control initiatives begin to gain traction," Mr. Spier concluded.
Outlook increase in a range of 12 percent to 14 percent, or between $57 million and $58 million, compared to $51.1 million in full year 2012, with an increase in net earnings versus 2012.
Comments & Business Outlook
First Quarter 2013 Financial Results;
Net sales increased 46 percent to $18.0 million compared to $12.3 million in the first quarter of 2012.
Net income for the quarter increased 172 percent to $549,000, or $0.05 per share, compared to $202,000, or $0.02 per share, in last year`s first quarter.
Anthony Spier, chairman and chief executive officer of Wells-Gardner, said, "The results of the first quarter of 2013 are very solid. We are pleased with a 46 percent increase in net sales and more than doubling net income. VGT sales in the state of Illinois accounted for the substantial increase in net sales during the first quarter. Going forward, the total market in Illinois is estimated to be in the range of $450 million to $550 million over the next four years and represents a large opportunity for Wells-Gardner. Given our extensive industry experience, we are well positioned to capture and maintain market share in the 20+ percent range as the state of Illinois expands its program. As other states consider initiating VGT programs in the coming years, we expect to participate in several of these opportunities. We are off to a good start in 2013."
"At the end of the just concluded quarter we have VGT orders in our backlog totaling approximately $22 million," said Mr. Spier. "Our expectation is that this backlog will be converted to shipped orders throughout Illinois by the end of the second quarter of 2014, as jurisdictional approvals of bars and other liquor establishments in the state are issued."
Mr. Spier concluded, "The financial foundation of the Company remains strong as we continue to operate our business from internally generated cash flow. Long-term debt at the end of the first quarter was $1.5 million, down from $3.7 million on December 31, 2012. We maintain very manageable inventory levels and are dedicated to continuing tight fiscal controls going forward."
Outlook
