Wells-Gardner Reports Third Quarter Financial Results: Financial News

Wells-Gardner Reports Third Quarter Financial Results
Wednesday November 5, 2008 4:05 pm ET

CHICAGO, IL--(MARKET WIRE)--Nov 5, 2008 -- Wells-Gardner Electronics Corporation (AMEX:WGA - News) announced sales of $11.3 million and a net loss of ($184,000) or ($0.02) per share for the third quarter ending September 30, 2008. This compares with sales of $14.5 million and net earnings of $34,000 in the same period in the prior year. The prior year third quarter included joint venture income $96,000 from the Company's Malaysian joint venture, which was closed in July 2007 and other income of $70,000 from accounts receivable foreign exchange gains.

For the nine months ending September 30, 2008, sales were $40.7 million and net earnings were $185,000 or $0.02 per share compared to sales of $45.6 million and net earnings of $516,000 or $0.05 per share in the first nine months 2007. The prior year period included other income of $278,000 made up of $314,000 from non recurring accounts receivable foreign exchange gains offset by $36,000 less joint venture income.

"The most important fact is that Wells Gardner remained profitable through the third quarter 2008 in this extremely difficult gaming market environment," said Anthony Spier, Wells-Gardner's Chairman and Chief Executive Officer. "Excluding non recurring gains and losses, the nine months 2008 earnings of $185,000 were only $53,000 less than in the same period in 2007 in spite of the sales reduction of 10.7% or $4.9 million. This is a commendable financial performance in this extraordinarily difficult economic climate. The nine month sales decline led to margins declining by $1.6 million. This was offset by a reduction in operating expenses of $1.3 million or 18 percent due to very tight expense control and a reduction in interest expense of $237,000 due to lower borrowings and reduced interest rates. The sales decline of 10.7% is reflective of the difficult economic environment which was wide spread.

"Also excluding non recurring gains and losses, the third quarter 2008 loss of ($184,000) was only $52,000 less than the earnings in the third quarter 2007 in spite of the sales reduction of 22.0% or $3.2 million. This commendable performance was due to a reduction in the quarter of both operating expenses of around $620,000 or 26% and interest expense of around $90,000.

"The Company received its first order for 32" LCDs for the amusement markets in the fourth quarter and expects to ship the products by year end.

"The balance sheet at September 30, 2008 remained strong with borrowings of $6.9 million, which was a reduction of $1.4 million from the borrowings of $8.3 million at September 30, 2007. This contributed to the company's reduction in interest expense, along with favorable interest rates. The Company was in compliance with all bank covenants."

Outlook

"The fourth quarter 2008 earnings are expected to be a considerable improvement over the loss of ($321,000) or ($0.03) per share reported in the 2007 fourth quarter and that reported for the third quarter 2008 in this press release. 2008 sales are expected to be $52 to $54 million due to the difficult economic environment, but this will be offset by reduced operating expenses and interest expense. The Company expects to be profitable for all of 2008."

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 the majority of its LCDs and CRT 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 Las Vegas, Nevada, Egg Harbor Township, New Jersey, Miami, Florida and McCook, Illinois. AGE also sells refurbished gaming machines on a global basis as well as installs and services some brands of 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, 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, 2008

                             Three Months Ended       Nine Months Ended
                                September 30,           September 30,
                           -----------------------  ----------------------
                               2008        2007        2008        2007
                           -----------  ----------  ----------  ----------
Net sales                  $11,283,000  14,524,000  40,724,000  45,633,000
Cost of sales                9,597,000  12,080,000  34,265,000  37,622,000
                           -----------  ----------  ----------  ----------
Gross margin                 1,686,000   2,444,000   6,459,000   8,011,000
Engineering, selling &
 administrative expenses     1,785,000   2,401,000   5,964,000   7,255,000
                           -----------  ----------  ----------  ----------
Operating earnings             (99,000)     43,000     495,000     756,000
Interest expense                88,000     177,000     288,000     525,000
Investment in Joint
 Venture                        (2,000)    (98,000)     (3,000)     33,000
Other (income) expense,
 net                            (1,000)    (71,000)          -    (314,000)
Income Tax                           -       1,000      25,000      (4,000)
                           -----------  ----------  ----------  ----------
Net earnings               $  (184,000) $   34,000  $  185,000  $  516,000
                           ===========  ==========  ==========  ==========

Earnings per share:
Basic earnings per share   $     (0.02) $     0.00  $     0.02  $     0.05
Diluted earnings per share $     (0.02) $     0.00  $     0.02  $     0.05

Basic average common
 shares outstanding         10,348,965  10,332,153  10,350,049  10,309,464
Diluted average common
 shares outstanding         10,348,965  10,357,108  10,351,044  10,353,069