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WMS Reports Fiscal 2013 First Quarter Revenue Of $159 Million And EPS Of $0.17 Per Diluted Share

The Company routinely reviews its guidance and may update it from time to time based on changes in the market and its operations.

WMS Industries is hosting a conference call and webcast at 4:30 PM ET today, Thursday, November 1, 2012. The conference call numbers are 212/231-2905 or 415/226-5355. To access the live call on the Internet, log on to www.wms.com (select “Investor Relations”). Following its completion, a replay of the call can be accessed for thirty days on the Internet via www.wms.com.

About WMS

WMS serves the gaming industry worldwide by designing, manufacturing and marketing games, video and mechanical reel-spinning gaming machines, video lottery terminals and in gaming operations, which consists of the placement of leased participation gaming machines in legal gaming venues. The Company also develops and markets digital gaming content, products, services and end-to-end solutions that address global online wagering and play-for-fun social, casual and mobile gaming opportunities. WMS is proactively addressing the next stage of casino gaming floor evolution with its WAGE-NET networked gaming solution, a suite of systems technologies and applications designed to increase customers’ revenue generating capabilities and operational efficiency. More information on WMS can be found at www.wms.com or visit the Company on Facebook®, Twitter® or YouTube®.

G2E is a registered trademark of the American Gaming Association and Reed Elsevier Inc. Used with permission.

This press release contains forward-looking statements concerning our future business performance, strategy, outlook, plans, products and liquidity, including, but not limited to, the statements set forth under the caption “Fiscal Year 2013 Outlook.” Forward-looking statements may be typically identified by such words as “may,” “will,” “should,” “expect,” “anticipate,” “plan,” “likely,” “believe,” “estimate,” “project,” and “intend,” among others. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from the expectations expressed in the forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are reasonable, any or all of our forward-looking statements may prove to be incorrect. Consequently, no forward-looking statements may be guaranteed. We undertake no obligation to update such forward looking statements, all of which are made only as of this date, November 1, 2012. Factors that could cause our actual results to differ from expectations include (1) delay or refusal by regulators to approve our new gaming platforms, cabinet designs, game themes and related hardware and software; (2) changes in regulations or regulatory interpretations that may adversely affect existing product placements or future placements; (3) an inability to introduce in a timely manner new games and gaming machines that achieve and maintain market acceptance; (4) a decrease in the desire of casino customers to upgrade gaming machines or allot floor space to leased or participation games, resulting in reduced demand for our products; (5) a reduction in capital spending or interruption in payments by casino customers associated with business weakness or economic uncertainty that adversely affects our customers' ability to make purchases or pay; (6) a greater-than-expected demand for operating leases by customers over outright product sales or sales financing leases that shift revenue recognition from a single period to the term of such operating leases; (7) future costs to restructure our business and other charges that may be higher than currently estimated, including additional charges related to actions at a later time not presently contemplated; (8) ability to realize in full, or part, the anticipated savings and expense reductions from restructuring and lower staffing; (9) adverse affects on product development, innovation and the ability to retain and attract key personnel following the restructuring and reorganization actions taken in fiscal 2011 and 2012; (10) a reduction in play levels of our participation games by casino patrons, whether due to economic conditions or increased placements of competitive product; (11) inability of suppliers of key components to timely meet our requirements to fulfill customer orders; (12) increased pricing or promotional competitive activity that adversely affects our average selling price or product revenues; (13) a failure to obtain and maintain our gaming licenses and regulatory approvals; (14) failure of customers or players to adapt to the new technologies that we introduce in new product concepts; (15) a software anomaly or fraudulent manipulation of our gaming machines and software; (16) a failure to obtain the right to use or an inability to adapt to rapid development of new technologies; (17) an infringement claim seeking to restrict our use of material technologies; (18) risks of doing business in international markets, including political and economic instability, terrorist activity, changes in importation and repatriation regulations such as currently experienced in Argentina, and foreign currency fluctuations; and (19) the unfavorable outcome of any legal proceedings in which we may be involved from time to time. These factors and other factors that could cause actual results to differ from expectations are more fully described under “Item 1. Business”, “Item 1A. Risk Factors” and “Legal Proceedings” in our Annual Report on Form 10-K for the year ended June 30, 2012, and our more recent reports filed with the U.S. Securities and Exchange Commission.
WMS INDUSTRIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions of U.S. dollars and millions of shares, except per share amounts)
(unaudited)
 

 

Three Months Ended September 30,
REVENUES: 2012   2011
 
Product sales $ 88.0 $ 87.1
Gaming operations   71.1     68.5  
Total revenues 159.1 155.6
 
COSTS AND EXPENSES:
Cost of product sales (1) 41.3 42.8
Cost of gaming operations (1) 15.2 14.3
Research and development 27.6 24.4
Selling and administrative 34.4 38.3
Depreciation and amortization (1) 28.0 22.6
Impairment and restructuring charges       9.7  
Total costs and expenses   146.5     152.1  
 
OPERATING INCOME 12.6 3.5
Interest expense (0.7 ) (0.4 )
Interest income and other income and expense, net   2.4     2.7  
Income before income taxes 14.3 5.8
Provision for income taxes   5.0     2.0  
NET INCOME $ 9.3   $ 3.8  
 

Earnings per share:
Basic $ 0.17   $ 0.07  
Diluted $ 0.17   $ 0.07  
Weighted-average common shares:
Basic common stock outstanding   54.5     56.2  
Diluted common stock and common stock equivalents   54.7     56.6  
 

1) Cost of product sales and cost of gaming operations exclude the following amounts ofdepreciation and amortization, which are included in the depreciation and amortization line item:
 
Cost of product sales $ 2.0 $ 1.4
Cost of gaming operations $ 17.6 $ 14.1
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions of U.S. dollars)
(unaudited)
 
Three Months Ended
September 30,
2012   2011
 
Net income $ 9.3 $ 3.8
Foreign currency translation adjustment, net of taxes   2.9   (3.1 )
Total comprehensive income $ 12.2 $ 0.7  
 
WMS INDUSTRIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions of U.S. dollars and millions of shares)
   
September 30, June 30,
ASSETS 2012 2012
CURRENT ASSETS: (unaudited) (audited)
Cash and cash equivalents $ 54.9 $ 62.3
Restricted cash and cash equivalents   14.2     13.8  
Total cash, cash equivalents and restricted cash 69.1 76.1
Accounts and notes receivable, net of allowances of $7.2 and $6.9, respectively 284.4 282.8
Inventories 52.5 53.3
Other current assets   48.3     40.1  
Total current assets 454.3 452.3
 
NON-CURRENT ASSETS:
Long-term notes receivable, net 103.4 122.3

Gaming operations equipment, net of accumulated depreciation and amortization of $237.7 and $227.1, respectively
125.7 115.7

Property, plant and equipment, net of accumulated depreciation and amortization of $150.6 and $142.0, respectively
232.7 226.7
Intangible assets, net 176.9 178.9
Deferred income tax assets 40.0 39.3
Other assets, net   18.7     18.9  
Total non-current assets   697.4     701.8  
TOTAL ASSETS $ 1,151.7   $ 1,154.1  
 

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 66.9 $ 84.8
Accrued compensation and related benefits 8.8 9.5
Other accrued liabilities   54.6     76.5  
Total current liabilities 130.3 170.8
 
NON-CURRENT LIABILITIES:
Long-term debt 85.0 60.0

Deferred income tax liabilities
22.7 22.7
Other non-current liabilities   25.0     23.3  
Total non-current liabilities 132.7 106.0
Commitments, contingencies and indemnifications
 
STOCKHOLDERS’ EQUITY:
Preferred stock (5.0 shares authorized, none issued)
Common stock (200.0 shares authorized and 59.7 shares issued) 29.8 29.8
Additional paid-in capital 444.0 443.5
Treasury stock, at cost (5.1 and 4.9 shares, respectively) (145.4 ) (144.1 )
Retained earnings 564.2 554.9
Accumulated other comprehensive income (loss)   (3.9 )   (6.8 )
Total stockholders’ equity   888.7     877.3  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,151.7   $ 1,154.1  
 
WMS INDUSTRIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of U.S. dollars)
(unaudited)
 
Three Months Ended
September 30,
2012   2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9.3 $ 3.8

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation 23.0 19.3
Amortization of intangible and other non-current assets 9.0 6.6
Share-based compensation 4.4 2.6
Other non-cash items 1.5 8.1
Deferred income tax benefit (0.7 ) (0.9 )
Change in operating assets and liabilities   (25.5 )   (26.4 )
Net cash provided by operating activities 21.0 13.1
 
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to gaming operations equipment (25.6 ) (22.1 )
Additions to property, plant and equipment (20.3 ) (15.9 )
Payments to acquire or license intangible and other non-current assets   (2.8 )   (4.7 )
Net cash used in investing activities (48.7 ) (42.7 )
 
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under revolving credit facility make this first line 38.0 35.0
Repayments of borrowings under revolving credit facility make this first line (13.0 )
Purchases of treasury stock (5.0 ) (27.5 )
Cash received from exercise of stock options and employee stock purchase plan   0.6     0.7  
Net cash provided by financing activities 20.6 8.2
Effect of exchange rates on cash and cash equivalents   (0.3 )   (1.0 )
 
DECREASE IN CASH AND CASH EQUIVALENTS (7.4 ) (22.4 )
CASH AND CASH EQUIVALENTS, beginning of period   62.3     90.7  
CASH AND CASH EQUIVALENTS, end of period $ 54.9   $ 68.3  
 
WMS INDUSTRIES INC.
Supplemental Data – Earnings per Share
(in millions of U.S. dollars and millions of shares, except per share amounts)
(unaudited)
 
Three Months Ended
September 30,
2012   2011
 
Net income $ 9.3 $ 3.8
 
Basic weighted average common shares outstanding 54.5 56.2
Dilutive effect of stock options 0.1 0.3
Dilutive effect of restricted common stock and warrants   0.1   0.1

Diluted weighted average common stock and common stock equivalents
  54.7   56.6
 
Basic earnings per share of common stock $ 0.17 $ 0.07
Diluted earnings per share of common stock and common stock equivalents $ 0.17 $ 0.07
 
Supplemental Data – Reconciliation of Net Income to Adjusted EBITDA
(in millions of U.S. dollars)
(unaudited)
 

Three Months Ended September 30,
2012   2011
 
Net income $ 9.3   $ 3.8  
 
Net income $ 9.3 $ 3.8
Depreciation 23.0 19.3
Amortization of intangible and other non-current assets 9.0 6.6
Provision for income taxes 5.0 2.0
Interest expense 0.7 0.4
Share-based compensation 4.4 2.6
Other non-cash items   1.5     8.1  
Adjusted EBITDA $ 52.9   $ 42.8  
Adjusted EBITDA margin   33.2 %   27.5 %
 

Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, share-based compensation and other non-cash items, including non-cash impairment and restructuring charges) and adjusted EBITDA margin are supplemental non-GAAP financial metrics used by our management and commonly used by industry analysts to evaluate our financial performance. Adjusted EBITDA and adjusted EBITDA margin provide additional useful information to investors regarding our ability to service debt and are commonly used financial analysis metrics for measuring and comparing gaming companies in areas of liquidity, operating performance, valuation and leverage. Adjusted EBITDA and adjusted EBITDA margin should not be construed as an alternative to operating income (as an indicator of our operating performance) or net cash provided by operating activities (as a measure of liquidity) as determined in accordance with U.S. generally accepted accounting principles. All companies do not calculate adjusted EBITDA and adjusted EBITDA margin in necessarily the same manner, and WMS’ presentation may not be comparable to those presented by other companies.
WMS INDUSTRIES INC.
Supplemental Data – Items Impacting Comparability: Charges
(in millions of U.S. dollars, except per share amounts)
(unaudited)
     

Three Months Ended September 30, 2012

Three Months Ended September 30, 2011

DESCRIPTION OF CHARGES

Pre-tax amounts
 

Per diluted share

Pre-tax amounts
 

Per diluted share
IMPAIRMENT AND RESTRUCTURING CHARGES
Non-cash Charges
Impairment of property, plant and equipment $ 0.6 $ 0.01
 
Cash Charges
Restructuring charges   9.1   0.11
 
Total Impairment and Restructuring Charges 9.7 0.12
 
OTHER CHARGES

Non-cash charges to write-down Mexican customer receivables (recorded in selling and administrative expenses)
  4.3   0.05
 

TOTAL IMPAIRMENT, RESTRUCTURING AND OTHER CHARGES
$ 14.0 $ 0.17
 

We did not record any impairment, restructuring or other charges in the three months ended September 30, 2012.

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