UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended JUNE 30, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
____________
Commission File No. 1-8250
WELLS-GARDNER ELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
ILLINOIS 36-1944630
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2701 NORTH KILDARE AVENUE, CHICAGO, ILLINOIS 60639
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 312/252-8220
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
As of June 30, 1995, 3,983,511 shares of the Common Stock, $1.00 par
value of the registrant were outstanding.
WELLS-GARDNER ELECTRONICS CORPORATION
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1995
PART I - FINANCIAL INFORMATION
Item 1. Page
Index to Financial Statements
Statement of Operations - Quarter
Statement of Operations - Year to Date
Balance Sheet
Statement of Cash Flows<PAGE>
Notes to the Condensed Financial Statements
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 4.
Submission of Matters to a Vote of Security Holders
PART II - OTHER INFORMATION
Item 5.
Other Information
Item 6.
Exhibits and Reports on Form 8-K
SIGNATURE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
WELLS-GARDNER ELECTRONICS CORPORATION
Statement of Operations
(Unaudited)
Quarter Ended June 30,
1995 1994
Net sales $ 7,783,000 $ 8,597,000
Cost of sales 6,907,000 7,898,000
Selling & administrative expenses 722,000 885,000
Special charges --- 439,000
Other (income) expense, net 5,000 26,000
Total costs 7,634,000 9,248,000
Earnings (loss) before income taxes 149,000 (651,000)
Income taxes (benefit) --- ---
Net earnings (loss) $ 149,000 $ (651,000)
Earnings (loss) per share:
Net earnings (loss) per share $ 0.04 $ (0.17)
Weighted average common & common
equivalent shares outstanding 3,982,844 3,859,942
See accompanying notes to condensed financial statements.<PAGE>
WELLS-GARDNER ELECTRONICS CORPORATION
Statement of Operations
(Unaudited)
Six Months Ended June 30,
1995 1994
Net sales $ 13,940,000 $ 16,219,000
Cost of sales 12,611,000 15,202,000
Selling & administrative expenses 1,399,000 1,711,000
Special charges --- 1,201,000
Other expense, net 36,000 21,000
Gain on sale of fixed asset (403,000) --
Total costs 13,643,000 18,135,000
Earnings (loss) before income taxes 297,000 (1,916,000)
Income taxes (benefit) --- ---
Net earnings (loss) $ 297,000 $(1,916,000)
Earnings (loss) per share:
Net earnings (loss) per share $ 0.08 $ (0.50)
Weighted average common & common
equivalent shares outstanding 3,982,449 3,859,942
See accompanying notes to condensed financial statements.
WELLS-GARDNER ELECTRONICS CORPORATION
Balance Sheet
Unaudited Audited
June 30, December 31,
1995 1994
Assets:
Cash & short-term
investments $ 663,000 $ 57,000
Accounts receivable (net) 5,246,000 6,105,000
Recoverable income taxes 329,000 329,000
Inventories:
Raw materials 3,758,000 3,239,000
Work in progress 391,000 435,000
Finished goods 2,057,000 6,206,000 2,157,000 5,831,000
Other current assets 246,000 491,000
Total current assets 12,690,000 12,813,000
Property, plant &
equipment, net 2,687,000 2,806,000
Total assets $15,377,000 $ 15,619,000
Liabilities:
Notes payable $ 1,600,000 $ 1,925,000
Accounts payable 2,678,000 1,923,000
Accrued expenses 312,000 1,404,000
Total current liabilities 4,590,000 5,252,000
Total liabilities 4,590,000 5,252,000
Shareholders' Equity:
Common stock-authorized
25,000,000 shares, $1.00
par value; issued 3,983,511
shares as of June 30, 1995
& 3,957,736 shares as of
December 31, 1994 3,984,000 3,958,000
Additional paid in capital 1,010,000 959,000
Retained earnings 6,111,000 5,814,000
Unearned compensation (318,000) (364,000)
Total shareholders' equity 10,787,000 10,367,000
Total liabilities &
shareholders' equity $15,377,000 $ 15,619,000
See accompanying notes to condensed financial statements.
WELLS-GARDNER ELECTRONICS CORPORATION
Statement of Cash Flows
(Unaudited)
Six Months Ended June 30,
1995 1994
Cash flows from operating activities:
Net earnings (loss) $ 297,000 $ (1,916,000)
Adjustments to reconcile net earnings
(loss) to cash provided by operating
activities:
Depreciation & amortization 235,000 212,000
Gain on sale of fixed asset (401,000) ---
Amortization of unearned compensation 46,000 29,000
Changes in current assets & liabilities:
Accounts receivable 859,000 580,000
Inventories (375,000) 215,000
Prepaid expenses & other assets 165,000 258,000
Accounts payable 755,000 736,000
Accrued expenses (1,143,000) 852,000
Net cash provided by operating activities 438,000 966,000
Cash flows from investing activities:
Additions to property, plant & equipment (185,000) (549,000)
Proceeds from sale of fixed asset 601,000 ---
Net cash provided by (used for) investing
activities 416,000 (549,000)
Cash flows from financing activities:
Proceeds from notes payable (325,000) (450,000)
Stock options exercised 77,000 ---
Net cash used for financing activities (248,000) (450,000)<PAGE>
Net increase in cash & short-term investments 606,000 (33,000)
Cash & short-term investments at beginning
of period 57,000 94,000
Cash & short-term investments at end of
period $ 663,000 $ 61,000
Supplemental cash flow disclosure:
Interest paid $ 53,000 $ 44,000
Taxes paid $ --- $ ---
See accompanying notes to condensed financial statements.
WELLS-GARDNER ELECTRONICS CORPORATION
Notes to the Condensed Financial Statements
1. In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments which are necessary for a
fair statement of results for the periods indicated.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed financial statements be read in conjunction with
the financial statements and notes thereto included in the company's
1994 annual report to shareholders. The results of operations for the
quarter ended June 30, 1995 are not necessarily indicative of the
operating results for the full year.
2. Earnings (loss) per common and common equivalent shares were
calculated by dividing net earnings (loss) by the weighted average
number of shares of common stock and common stock equivalents
outstanding.
3. Included in the company's net earnings for the six months ended June
30, 1995 was a $403,000, or 10 cent per share, gain on sale of fixed
asset. Included in the company's net loss for the six months ended
June 30, 1994 was a $1,201,000, or 31 cents per share, special charge
for management reorganization.
4. The company sold land and a building in the first quarter of 1995.
The sale was closed and title passed on March 30, 1995. The proceeds
were put into escrow in the company's name. The escrow will be
released when the company completes some minor environmental clean-up
which the company expects to be completed by third quarter, 1995. The
company has fully accrued for the clean-up. The proceeds are included
in cash and short-term investments on the company's June 30, 1995
balance sheet.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
For the second quarter ended June 30, 1995, sales decreased 9.5 percent to
$7,783,000 from $8,597,000 in the prior year's period. This decrease was due
to lower shipments to the video lottery and coin-operated arcade game
segment, caused by an overall decline in the industry. Gross operating
profit, as a percentage of sales, increased to 11.3 percent, or $876,000,<PAGE>
compared to 8.1 percent, or $699,000, for the same period last year. This
increase is attributed to improved manufacturing productivity, sales of
higher-margin new products and growing refurbished monitor sales. Net
earnings were $149,000, or four cents per share, compared to a net loss of
$651,000, or 17 cents per share, for the comparable 1994 quarter. The 1994
quarter included a $439,000 or 11 cents per share special charge for
management reorganization. Selling and administrative expenses decreased 18
percent to $722,000 from $885,000 due to the lower sales volume and reduced
costs attributable to prior period cost cutting measures.
For the six months ended June 30, 1995, sales decreased 14.1 percent to
$13,940,000 from $16,219,000 in the prior year's period. Gross operating
profit, as a percentage of sales, increased to 9.5 percent, or $1,329,000,
compared to 6.3 percent, or $1,017,000, for the same period last year. Net
earnings were $297,000, or eight cents per share, compared to a net loss of
$1,916,000, or 50 cents per share, for the comparable 1994 period. The 1995
results include a $403,000 gain or 10 cents per share on sale of fixed
asset, while the 1994 results included a $1,201000 or 31 cents per share
special charge for management reorganization. Selling and administrative
expenses decreased 18 percent to $1,399,000 from $1,711,000 due to the lower
sales volume and reduced costs attributable to prior period cost cutting
measures.
As of June 30, 1995, cash and short term investments increased $606,000 from
December 31, 1994. Accounts receivable decreased $859,000 to $5,246,000 from
$6,105,000 due to lower sales volume and tighter collection policies.
Inventory increased $375,000 or 6.4 percent to $6,206,000 from $5,831,000 at
year end 1994 due to management's position to attack the company's
considerable backlog of orders.
As of June 30, 1995, notes payable was $1,600,000 compared to $1,925,000 at
December 31, 1994. The company has an unsecured revolving line of credit of
$3,500,000, with an interest rate at prime, from Harris Trust and Savings
Bank. Accounts payable increased $755,000 to $2,678,000 from $1,923,000 at
year end due mainly to the company building up its inventory level. Accrued
expenses decreased $1,092,000 to $312,000 from $1,404,000 due mainly to the
amount paid for a special charge incurred during the first quarter of 1994
relating to the company's management restructuring.. Working capital
increased by $539,000 since year-end 1994, to $8,100,000, while corporate
liquidity continues to be strong as evidenced by a current ratio of 2.76 to
1.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of stockholders of Wells-Gardner Electronics
Corporation was held on April 25, 1995.
(c) Set forth below is the tabulation of the votes on each nominee for
election as a director:
Withhold
For Authority
Albert S. Well Jr. 3,474,207 255,845
Allan Gardner 3,474,207 255,845
James J. Roberts Jr. 3,475,007 255,045
John R. Blouin 3,475,007 255,045
Anthony Spier 3,475,007 255,045
Wayne Harris 3,470,407 259,645
William DeNicolo 3,473,607 256,445
Set forth below is the tabulation of the vote on approval of the amendment
of the company's Amended and Restated Incentive Stock Plan:<PAGE>
Broker
For Against Abstain Nonvotes
2,223,885 351,148 25,920 1,129,099
PART II - OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits:
Exhibit 27 Financial Data Schedule
B. Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended June 30,
1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WELLS-GARDNER ELECTRONICS CORPORATION
Date: August 11, 1995 By: /s/ Richard L. Conquest
Richard L. Conquest
Vice President of Finance,
Chief Financial Officer,
Secretary and Treasurer <PAGE>
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<LEGEND>
This schedule contains second quarter summary financial information extracted
from Wells-Gardner Electronics Corporation 1995 second quarter Form 10-Q and is
qualified in its entirety by reference to such Form 10-Q filing.
</LEGEND>
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