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 March 31, 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 (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 May 10, 1996, 4,055,176 shares of the Common Stock, $1.00 par value
of the registrant were outstanding.
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WELLS-GARDNER ELECTRONICS CORPORATION
FORM 10-Q
For Quarter Ended March 31, 1996
PART I - FINANCIAL INFORMATION
Item 1.
Index to Financial Statements:
Condensed Statements of Earnings (Unaudited)
- Three Months Ended March 31, 1996 & 1995
Condensed Balance Sheets (Unaudited)
- March 31, 1996 & December 31, 1995<PAGE>
Condensed Statements of Cash Flows (Unaudited)
- Three Months Ended March 31, 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 6.
Exhibits and Reports on Form 8-K
SIGNATURE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
WELLS-GARDNER ELECTRONICS CORPORATION
Condensed Statements of Earnings (Unaudited)
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Net sales $ 10,429,000 $ 6,157,000
Cost of sales 9,274,000 5,704,000
Selling & administrative expenses 887,000 677,000
Other expense, net 3,000 31,000
Gain on sale of fixed assets --- (403,000)
Total costs 10,164,000 6,009,000
Earnings before income taxes 265,000 148,000
Income taxes --- ---
Net earnings $ 265,000 $ 148,000
Earnings per share:
Net earnings per share $ 0.07 $ 0.04
Weighted average common &
common equivalent shares
outstanding 4,052,676 3,982,053
See accompanying notes to the condensed financial statements.
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<TABLE>
WELLS-GARDNER ELECTRONICS CORPORATION
Condensed Balance Sheets (Unaudited)
March 31, 1996 December 31, 1995
<S> <C> <C> <C> <C>
Assets:
Cash & cash equivalents $ 120,000 $ 1,117,000
Accounts receivable (net) 5,709,000 3,540,000
Income tax receivable 62,000 62,000
Inventory:
Raw materials 5,205,000 5,562,000
Work in progress 255,000 435,000
Finished goods 2,680,000 8,140,000 2,933,000 8,930,000
Prepaids & other current assets 311,000 375,000
Total current assets 14,342,000 14,024,000
Property, plant & equipment net 2,478,000 2,546,000
Total assets $ 16,820,000 $ 16,570,000
Liabilities:
Accounts payable $ 4,402,000 $ 3,077,000
Accrued expenses 519,000 734,000
Total current liabilities 4,921,000 3,811,000
Long-term note payable 2,000,000 3,125,000
Total liabilities 6,921,000 6,936,000
Shareholders' Equity:
Common stock-authorized
25,000,000 shares, $1.00 par
value; 4,052,676 shares issued
as of March 31, 1996 and as of
December 31, 1995 4,053,000 4,053,000
Additional paid in capital 1,097,000 1,097,000
Retained earnings 5,020,000 4,755,000
Unearned compensation (271,000) (271,000)
Total shareholders' equity 9,899,000 9,634,000
Total liabilities &
shareholders' equity $ 16,820,000 $ 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)
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 265,000 $ 148,000
Adjustments to reconcile net earnings
to cash provided by operating activities:
Depreciation & amortization 109,000 114,000
Gain on sale of fixed asset --- (403,000)
Amortization of unearned compensation --- 23,000
Changes in current assets & liabilities:
Accounts receivable (2,169,000) 2,379,000
Inventory 790,000 998,000
Prepaid expenses & other assets 64,000 194,000
Accounts payable 1,325,000 (798,000)
Accrued expenses (215,000) (684,000)
Net cash provided by operating activities 169,000 1,971,000
Cash flows from investing activities:
Additions to property, plant &
equipment (41,000) (140,000)
Proceeds from sale of fixed assets --- 601,000
Net cash provided by (used in)
investing activities (41,000) 461,000
Cash flows from financing activities:
Repayment of note payable (1,125,000) (1,925,000)
Stock options exercised --- 74,000
Net cash used in financing activities (1,125,000) (1,851,000)
Net increase in cash & short-term
investments (997,000) 581,000
Cash & cash equivalents at beginning
of period 1,117,000 57,000
Cash & cash equivalents at end of
period $ 120,000 $ 638,000
Supplemental cash flow disclosure:
Interest paid $ 67,000 $ 34,000
Taxes paid $ --- $ ---
See accompanying notes to the condensed financial statements.
</TABLE>
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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 (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 ended March
31, 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 three months ended March
31, 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.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
For the first quarter ended March 31, 1996, sales increased 69.4 percent to
$10,429,000 from $6,157,000 in the prior year's period. This increase was due
to higher sales to the casino, coin-operated arcade games, data display and
service segments. Gross operating profit, as a percentage of sales, increased
to 11.1 percent, or $1,155,000, compared to 7.4 percent, or $453,000, for the
same period last year. This change is attributed to the higher sales volume
in 1996. Selling and administrative expenses increased 31.0 percent to
$887,000 from $677,000 due mainly to higher sales commissions paid on the
higher sales volume. Included in the 1995 quarterly results was a $403,000 or
10 cents per share gain on the sale of fixed assets. Net earnings were
$265,000, or seven cents per share, compared to net earnings of $148,000, or
four cents per share, for the comparable 1995 quarter. 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 March 31, 1996, cash and cash equivalents decreased $997,000 from
December 31, 1995 due mainly to the release of the cash in escrow. Accounts
receivable increased $2,169,000 to $5,709,000 from $3,540,000 at December 31,
1995 due to the higher sales volume. Inventory decreased $790,000 to
$8,140,000 from $8,930,000 at year end 1995. As of March 31, 1996, long-term
notes payable was $2,000,000 compared to the balance of $3,125,000 at December
31, 1995. Accounts payable increased $1,325,000 to $4,402,000 from $3,077,000
at year end 1995 due to the Company's increased purchases based on its higher
sales volume. Accrued expenses decreased $215,000 to $519,000 from $734,000.
Working capital decreased by $792,000 since year-end 1995, to $9,421,000,
while corporate liquidity continues to be strong as evidenced by a current
ratio of 2.91 to 1.
<PAGE>
PART II - OTHER INFORMATION
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
March 31, 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: May 10, 1996 By: /s/ GEORGE B. TOMA
George B. Toma
Chief Financial Officer and Treasurer
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