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, 1997
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 Number 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)
(773) 252-8220
(Registrant's telephone number, including area code)
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 April 30, 1997, 4,078,776 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, 1997
PART I - FINANCIAL INFORMATION
Item 1.
Index to Financial Statements:
Condensed Statements of Earnings
- Three Months Ended March 31, 1997 & 1996 (Unaudited)
Condensed Balance Sheets
- March 31, 1997 (Unaudited) & December 31, 1996 (Audited)
Condensed Statements of Cash Flows
- Three Months Ended March 31, 1997 & 1996 (Unaudited)
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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<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
WELLS-GARDNER ELECTRONICS CORPORATION
Condensed Statements of Earnings
(Unaudited)
Three Months Ended March 31,
1997 1996
<S> <C> <C>
Net sales $ 10,105,000 $ 10,429,000
Cost of sales 8,761,000 8,875,000
Engineering, selling &
administrative expenses 1,247,000 1,286,000
Other (income) expense, net (12,000) 3,000
Total costs 9,996,000 10,164,000
Earnings before income taxes 109,000 265,000
Income taxes --- ---
Net earnings $ 109,000 $ 265,000
Earnings per share:
Net earnings per share $ 0.03 $ 0.07
Weighted average common shares
outstanding 4,069,922 4,052,676
See accompanying notes to the unaudited condensed financial statements.
</TABLE>
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<TABLE>
WELLS-GARDNER ELECTRONICS CORPORATION
Condensed Balance Sheets
(Unaudited) (Audited)
March 31, December 31,
1997 1996
<S> <C> <C> <C> <C>
Assets:
Cash & cash equivalents $ 53,000 $ 57,000
Accounts receivable (net) 5,287,000 3,896,000
Inventory:
Raw materials 4,751,000 4,670,000
Work in progress 1,607,000 598,000
Finished goods 1,420,000 7,778,000 2,076,000 7,344,000
Prepaids & other current assets 597,000 450,000
Total current assets 13,715,000 11,747,000
Property, plant & equipment, net 2,385,000 2,378,000
Total assets $ 16,100,000 $ 14,125,000
Liabilities:
Accounts payable $ 3,064,000 $ 1,763,000
Accrued expenses 758,000 968,000
Total current liabilities 3,822,000 2,731,000
Long-term note payable 2,000,000 1,300,000
Total liabilities 5,822,000 4,031,000
Shareholders' Equity:
Common stock-authorized 25,000,000
shares, $1.00 par value; 4,078,776
shares issued as of March 31, 1997
& 4,068,426 shares issued as of
December 31, 1996 4,079,000 4,068,000
Additional paid in capital 1,178,000 1,158,000
Retained earnings 5,267,000 5,158,000
Unearned compensation (246,000) (290,000)
Total shareholders' equity 10,278,000 10,094,000
Total liabilities &
shareholders' equity $ 16,100,000 $ 14,125,000
See accompanying notes to the unaudited condensed financial
statements.
</TABLE>
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<TABLE>
WELLS-GARDNER ELECTRONICS CORPORATION
Condensed Statements of Cash Flows
(Unaudited)
Three Months Ended March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 109,000 $ 265,000
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 97,000 109,000
Amortization of unearned compensation 44,000 ---
Changes in current assets & liabilities:
Accounts receivable (1,391,000) (2,169,000)
Inventory (434,000) 790,000
Prepaid expenses & other current assets (147,000) 64,000
Accounts payable 1,301,000 1,325,000
Accrued expenses (210,000) (215,000)
Net cash provided by (used in) operating activities (631,000) 169,000
Cash used in investing activities:
Additions to property, plant & equipment (104,000) (41,000)
Net cash used in investing activities (104,000) (41,000)
Cash provided by (used in) financing activities:
Note payable 700,000 (1,125,000)
Proceeds from stock options exercised 31,000 ---
Net cash provided by (used in) financing activities 731,000 (1,125,000)
Net increase (decrease) in cash & cash equivalents (4,000) (997,000)
Cash & cash equivalents at beginning of period 57,000 1,117,000
Cash & cash equivalents at end of period $ 53,000 $ 120,000
Supplemental cash flow disclosure:
Interest paid $ 38,000 $ 67,000
Taxes paid $ --- $ ---
See accompanying notes to the unaudited 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. These condensed financial statements should be
read in conjunction with the audited financial statements and notes
thereto included in the Company's 1996 Annual Report to shareholders.
The results of operations for the quarter ended March 31, 1997 are not
necessarily indicative of the operating results for the full year.
2. Earnings per common share were calculated by dividing net earnings
by the weighted average number of shares of common stock outstanding.
3. Certain 1996 expenses have been reclassed to conform to the
presentation in 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
For the first quarter ended March 31, 1997, net sales decreased 3.1
percent to $10,105,000 from $10,429,000 in the prior year's period.
Gross operating profit, as a percentage of sales, decreased to 13.3
percent, or $1,344,000, compared to 14.9 percent, or $1,554,000, for
the same period last year. These decreases are attributed to external
pressures from competition. The Company is attempting to address
these pressures which include reducing costs on several high volume
products, obtaining cost concessions from its major vendors,
increasing prices on a selective basis and exiting some low margin
orders. Engineering, selling and administrative expenditures
decreased to $1,247,000 down slightly from $1,286,000 in the first
quarter of 1996. Net earnings were $109,000, or 3 cents per share,
compared to net earnings of $265,000, or 7 cents per share, for the
comparable 1996 quarter. The Company did not recognize any income tax
expense in the first quarter periods due to the utilization of its net
operating loss carryforward.
As of March 31, 1997, cash and cash equivalents decreased $4,000 to
$53,000 from $57,000 at year end 1996. On a daily basis, the Company
uses all available cash to reduce its long-term notes payable and
minimize its interest expense. Accounts receivable increased
$1,391,000 to $5,287,000 from $3,896,000 at year end 1996 due to the
higher sales volume during the first quarter of 1997. Receivable days
were averaging 48 days, up slightly from 44 at the end of 1996.
Inventory increased $434,000 to $7,778,000 from $7,344,000 at year end
1996 while the inventory turns improved to 4.51 from 4.28 at the end
of 1996. Long-Term notes payable was $2,000,000 compared to
$1,300,000 at year end 1996. This increase was attributed to funding
a higher sales volume and inventory level. Accounts payable increased
$1,301,000 to $3,064,000 from $1,763,000 at year end 1996 due to the
Company's increased purchases based on its higher sales volume during
the first quarter of 1997. Accrued expenses decreased $210,000 to
$758,000 from $968,000 at year end 1996. Working capital increased by
$877,000 since year-end 1996, to $9,893,000, while corporate liquidity
continues to be solid as evidenced by a current ratio of 3.59 to 1.
Because the Company wants to provide shareholders and potential
investors with more meaningful and useful information, this report may
contain certain forward-looking statements (as such term is defined in
the Securities Act of 1933, as amended, and the Securities Exchange
Act of 1934, as amended) that reflect the Company's current
expectations regarding the future results of operations, performance
and achievements of the Company. Such forward-looking statements are
subject to the safe harbor created by the Private Securities
Litigation Reform Act of 1995. The Company has tried, wherever
possible, to identify these forward-looking statements by using words
such as "anticipate", "believe", "estimate", "expect" and similar
expressions. These statements reflect the Company's current beliefs
and are based on information currently available to it. Accordingly,
these statements are subject to certain risks, uncertainties and
assumptions which could cause the Company's future results,
performance or achievements to differ materially from those expressed
in, or implied by, any of these statements which are more fully
described in our Securities and Exchange Commission filings. The
Company undertakes no obligation to release publicly the results of
any revisions to any such forward-looking statements that may be made
to reflect events or circumstances after the date of this Report or to
reflect the occurrence of unanticipated events.
<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, 1997.
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: April 30, 1997 By: /s/ GEORGE B. TOMA
George B. Toma CPA, CMA
Vice President of Finance,
Chief Financial Officer and
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Balance Sheet at March 31, 1997 (Unaudited) and the
Statements of Operations for the Three Months Ended March 31,
1997 (Unaudited) and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 53
<SECURITIES> 0
<RECEIVABLES> 5,287
<ALLOWANCES> 114
<INVENTORY> 7,778
<CURRENT-ASSETS> 13,715
<PP&E> 9,759
<DEPRECIATION> 7,374
<TOTAL-ASSETS> 16,100
<CURRENT-LIABILITIES> 3,822
<BONDS> 0
0
0
<COMMON> 4,079
<OTHER-SE> 6,199
<TOTAL-LIABILITY-AND-EQUITY> 16,100
<SALES> 10,105
<TOTAL-REVENUES> 10,105
<CGS> 8,761
<TOTAL-COSTS> 1,247
<OTHER-EXPENSES> (12)
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 109
<INCOME-TAX> 0
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<NET-INCOME> 109
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
