UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1996
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
incorporation or organization) (IRS Employer Identification No.)
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 August 7, 1996, 4,065,376 shares of the Common Stock, $1.00
par value of the registrant were outstanding.
<PAGE>
WELLS-GARDNER ELECTRONICS CORPORATION
FORM 10-Q
For Quarter Ended June 30, 1996
PART I - FINANCIAL INFORMATION
Item 1.
Condensed Statements of Earnings (Unaudited)
- Three Months Ended June 30, 1996 & 1995
Condensed Statements of Earnings (Unaudited)
- Six Months Ended June 30, 1996 & 1995
Condensed Balance Sheets
- June 30, 1996 (Unaudited) & December 31, 1995 (Audited)
Condensed Statements of Cash Flows (Unaudited)
- Six Months Ended June 30, 1996 & 1995
Notes to the Condensed Financial Statements
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
Item 4.
Submission of Matters to a Vote of Security Holders
Item 6.
Exhibits and Reports on Form 8-K
SIGNATURE
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<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
WELLS-GARDNER ELECTRONICS CORPORATION
Condensed Statements of Earnings
(Unaudited)
Three Months Ended June 30,
1996 1995
<S> <C> <C>
Net sales $ 9,158,000 $ 7,783,000
Cost of sales 7,747,000 6,502,000
Engineering, selling & 1,253,000 1,127,000
administrative expenses
Other expense, net 7,000 5,000
Total costs 9,007,000 7,634,000
Earnings before income taxes 151,000 149,000
Income taxes --- ---
Net earnings $ 151,000 $ 149,000
Earnings per share:
Net earnings per share $ 0.04 $ 0.04
Weighted average common & common
equivalent shares outstanding 4,181,156 3,982,844
See accompanying notes to the condensed financial statements.
</TABLE>
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<TABLE>
WELLS-GARDNER ELECTRONICS CORPORATION
Condensed Statements of Earnings
(Unaudited)
Six Months Ended June 30,
1996 1995
<S> <C> <C>
Net sales $19,587,000 $13,940,000 $
Cost of sales 16,622,000 11,863,000
Engineering, selling &
administrative expenses 2,539,000 2,147,000
Other expense, net 10,000 36,000
(Gain) on sale of fixed asset --- (403,000)
Total costs 19,171,000 13,643,000
Earnings before income taxes 416,000 297,000
Income taxes -- --
Net earnings $ 416,000 $ 297,000
Earnings per share:
Net earnings per share $ 0.10 $ 0.08
Weighted average common & common
equivalent shares outstanding 4,151,867 3,982,449
See accompanying notes to the condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
WELLS-GARDNER ELECTRONICS CORPORATION
Condensed Balance Sheets
(Unaudited) (Audited)
June 30, December 31,
1996 1995
<S> <C> <C> <C> <C>
Assets:
Cash & cash equivalents $ 219,000 $ 1,117,000
Accounts receivable (net) 6,407,000 3,540,000
Income tax receivable 60,000 62,000
Inventory:
Raw materials 3,856,000 5,562,000
Work in progress 233,000 435,000
Finished goods 2,958,000 7,047,000 2,933,000 8,930,000
Prepaids & other
current assets 253,000 375,000
Total current assets 13,986,000 14,024,000
Property, plant & equipment, net 2,464,000 2,546,000
Total assets $ 16,450,000 $ 16,570,000
Liabilities:
Accounts payable $ 3,174,000 $ 3,077,000
Accrued expenses 507,000 734,000
Total current liabilities 3,681,000 3,811,000
Long-term note payable 2,700,000 3,125,000
Total liabilities 6,381,000 6,936,000
Shareholders' Equity:
Common stock-authorized
25,000,000 shares, $1.00 par
value; 4,065,376 shares issued
as of June 30, 1996 & 4,052,676
shares issued as of December 31,
1995 4,065,000 4,053,000
Additional paid in capital 1,151,000 1,097,000
Retained earnings 5,171,000 4,755,000
Unearned compensation (318,000) (271,000)
Total shareholders' equity 10,069,000 9,634,000
Total liabilities & $
shareholders' equity $ 16,450,000 $ 16,570,000
See accompanying notes to the condensed financial statements.
</TABLE>
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<TABLE>
WELLS-GARDNER ELECTRONICS CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
1996 1995
<S> <C> <C>
Cash flows from operating
activities:
Net earnings $ 416,000 $ 297,000
Adjustments to reconcile net
earnings to cash provided by
operating activities:
Depreciation & amortization 221,000 235,000
Gain on sale of fixed asset --- (401,000)
Amortization of unearned
compensation (47,000) 46,000
Changes in current assets &
liabilities:
Accounts receivable (2,867,000) 859,000
Income Taxes 2,000 ---
Inventory 1,883,000 (375,000)
Prepaid expenses & other assets 122,000 165,000
Accounts payable 97,000 755,000
Accrued expenses (227,000) (1,143,000)
Net cash provided by (used in)
operating activities (400,000) 438,000
Cash flows from investing activities:
Additions to property,
plant & equipment (139,000) (185,000)
Proceeds from sale of fixed assets --- 601,000
Net cash provided by (used in)
investing activities (139,000) 416,000
Cash flows from financing activities:
Repayment of note payable (425,000) (325,000)
Stock options exercised 66,000 77,000
Net cash used in financing activities (359,000) (248,000)
Net increase (decrease) in cash &
cash equivalents (898,000) 606,000
Cash & cash equivalents at beginning
of period 1,117,000 57,000
Cash & cash equivalents at end of
period $ 219,000 $ 663,000
Supplemental cash flow disclosure:
Interest paid $ 122,000 $ 53,000
Taxes paid $ --- $ ---
See accompanying notes to the condensed financial statements.
</TABLE>
<PAGE>
Notes to the Condensed Financial Statements
1. In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (consisting of normal
recurring accruals), which are necessary for a fair statement of
results for the periods presented. 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 audited financial
statements and notes thereto included in the Company's 1995 annual
report to shareholders. The results of operations for the quarter and
six months ended June 30, 1996 are not necessarily indicative of the
operating results for the full year.
2. Earnings per common and common equivalent shares were calculated by
dividing net earnings 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 gain of $403,000, or 10 cents per share, on the
sale of land and a building in the first quarter of 1995. The sale
was closed and title passed on March 30, 1995. The proceeds of
$670,000 were put into escrow in the Company's name and included in
cash and cash equivalents on the Company's December 31, 1995 balance
sheet. The funds were fully released to the Company during the first
quarter of 1996.
4. Certain expenses relating to 1995 have been reclassed to conform to
the presentation in 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
For the second quarter ended June 30, 1996, sales increased 17.7 percent
to $9,158,000 from $7,783,000 in the prior year's period. This increase
was due to higher shipments to the gaming, data display, leisure/fitness
and service segments. Gross operating profit, as a percentage of sales,
decreased to 15.4 percent, or $1,411,000, compared to 16.5 percent, or
$1,281,000, for the same period last year. This decrease is attributed
to price erosion from intense off-shore competition. Net earnings were
$151,000, or four cents per share, compared to net earnings of $149,000,
or four cents per share, for the comparable 1995 quarter. Engineering,
selling and administrative expenses increased 11.2 percent to $1,253,000
from $1,127,000 due to the increased investment in development of new
products and higher sales commissions paid on higher sales volume.
For the six months ended June 30, 1996, sales increased 40.5 percent to
$19,587,000 from $13,940,000 in the prior year's period. This increase
was due to higher sales to the gaming, data display, coin-operated arcade
games and service segments. Gross operating profit, as a percentage of
sales, increased to 15.2 percent, or $2,965,000, compared to 14.9
percent, or $2,077,000, for the same period last year. Net earnings were
$416,000, or 10 cents per share, compared to net earnings of $297,000, or
eight cents per share, for the comparable 1995 period. The 1995 results
included a $403,000 or 10 cents per share gain on the sale of fixed
asset. Engineering, selling and administrative expenses increased 18.3
percent to $2,539,000 from $2,147,000 due to the increased investment in
development of new products and applications and higher sales commissions
paid on higher sales volume. The Company did not recognize any income tax
expense in the 1996 period due to the utilization of its net operating
loss carryforward.
As of June 30, 1996, cash and cash equivalents decreased $898,000 from
December 31, 1995 due to the release of cash in escrow at year end 1995
which was used to reduce the outstanding line of credit and fund daily
operations. Accounts receivable increased $2,867,000 to $6,407,000 from
$3,540,000 due to a 40.5 percent increase in sales volume. Inventory
decreased $1,883,000 or 21.1 percent to $7,047,000 from $8,930,000 at
year end 1995 due to better management of raw materials inventory and the
Company's position to reduce its considerable backlog of orders.
As of June 30, 1996, accounts payable increased $97,000 to $3,174,000
from $3,077,000 at year end 1995. Accrued expenses decreased $227,000 to
$507,000 from $734,000 at year end 1995 due to certain accrual payouts.
Notes payable decreased $425,000 to $2,700,000 compared to $3,125,000 at
December 31, 1995. The Company has an unsecured revolving line of credit
of $7,000,000, with an interest rate at prime, from Harris Trust and
Savings Bank. Working capital increased by $92,000 since year-end 1995,
to $10,305,000, while corporate liquidity continues to be strong as
evidenced by a current ratio of 3.80 to 1.
<PAGE>
PART II - OTHER INFORMATION
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 23, 1996.
B. Set forth below is the tabulation of the votes on each nominee
for election as a director:
Withhold Broker
For Authority Nonvotes
John R. Blouin 3,189,758 238,450 6
Albert S. Wells Jr. 3,189,758 238,450 6
James J. Roberts, Jr. 3,189,358 238,850 6
Anthony Spier 3,189,124 239,084 6
William DeNicolo 3,188,958 239,250 6
Ernest R. Wish 3,188,858 239,350 6
Wayne Harris 3,188,858 239,350 6
Allan Gardner 3,188,334 239,874 6
C. Set forth below is the tabulation of the vote on approval of
the amendment of the Company's Nonemployee Director Stock Plan:
For Against Abstain Brokers Nonvotes
2,708,493 241,620 40,176 437,925
D. The proposal to amend the Company's Articles of Incorporation,
to authorize up to 500,000 shares of Preferred Stock was
withdrawn.
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, 1996.
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 7, 1996 By: /s/ GEORGE B. TOMA
George B. Toma
Chief Financial Officer and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Balance Sheets at June 30, 1996 (Unaudited) and the
Statements of Operations for the Six Months Ended June 30, 1996
(Unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
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<RECEIVABLES> 6,407
<ALLOWANCES> 121
<INVENTORY> 7,047
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<PP&E> 9,511
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<TOTAL-ASSETS> 16,450
<CURRENT-LIABILITIES> 3,681
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0
0
<COMMON> 4,065
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<TOTAL-LIABILITY-AND-EQUITY> 16,450
<SALES> 19,587
<TOTAL-REVENUES> 19,587
<CGS> 16,622
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</TABLE>
