<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1995
----------------------
Commission file number 1-8300
------
WMS INDUSTRIES INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-2814522
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
3401 North California Ave., Chicago, IL 60618
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (312) 961-1000
--------------
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by X 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 24,106,300 shares of common
stock, $.50 par value, were outstanding at April 30, 1995 after deducting 59,312
shares held as treasury shares.
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
____________
INDEX
PAGE NO
-------
PART I. FINANCIAL INFORMATION:
- -------
<TABLE>
<CAPTION>
<S> <C>
ITEM 1. Financial Statements:
------- Condensed Consolidated Statements of Income -
Three and nine months Ended March 31, 1995 and 1994........ 2
Condensed Consolidated Balance Sheets -
March 31, 1995 and June 30, 1994........................... 3-4
Condensed Consolidated Statements of Cash Flows -
Nine months Ended March 31, 1995 and 1994.................. 5
Notes to Condensed Consolidated Financial Statements....... 6-7
ITEM 2. Management's Discussion and Analysis of Financial Condition
------- and Results of Operations.................................. 8-12
PART II. OTHER INFORMATION:
- --------
ITEM 4. Submission of Matters to a Vote of Security-Holders........ 13
-------
ITEM 6.(a) Exhibits................................................... 14
----------
SIGNATURE................................................................ 15
</TABLE>
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
-------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------ -------------------
1995 1994 1995 1994
------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Net sales - amusement games........................................ $72,715 $ 81,926 $233,368 $212,427
Management fees - Williams Hospitality............................. 4,615 6,080 10,224 9,387
Condado Plaza hotel/casino:
Casino............................................................ 6,058 8,441 19,206 23,634
Casino promotional allowances..................................... (2,193) (2,451) (5,311) (6,249)
Rooms............................................................. 8,303 8,510 19,668 20,159
Food and beverage................................................. 3,123 2,937 8,843 8,895
Other............................................................. 835 1,005 2,404 2,662
------- -------- -------- --------
16,126 18,442 44,810 49,101
------- -------- -------- --------
Total revenues...................................................... 93,456 106,448 288,402 270,915
COSTS AND EXPENSES:
Cost of sales (excluding depreciation) - amusement games.......... 51,321 57,068 180,322 160,501
Williams Hospitality operating expenses (excluding depreciation).. 1,549 3,200 4,015 4,331
Condado Plaza operating expenses (excluding depreciation):
Casino........................................................... 3,554 3,836 10,745 10,942
Rooms............................................................ 2,358 2,396 6,920 6,748
Food and beverage................................................ 2,869 2,535 8,001 7,590
Other............................................................ 1,572 1,451 5,028 4,542
------- -------- -------- --------
10,353 10,218 30,694 29,822
Selling and administrative......................................... 10,758 9,336 33,422 24,520
Depreciation and amortization...................................... 3,049 2,277 8,619 6,678
Equity in loss of nonconsolidated affiliates....................... 2,392 1,165 6,272 2,540
------- -------- -------- --------
Total costs and expenses............................................ 79,422 83,264 263,344 228,392
------- -------- -------- --------
Income from operations.............................................. 14,034 23,184 25,058 42,523
Interest and other income........................................... 1,753 991 4,516 3,501
Interest expense.................................................... (2,035) (1,911) (5,794) (5,536)
------- -------- -------- --------
Income before tax provision and minority interests.................. 13,752 22,264 23,780 40,488
Provision for income taxes.......................................... (4,609) (6,460) (8,548) (12,060)
Minority interests in income........................................ (1,116) (1,576) (2,176) (3,641)
------- -------- -------- --------
Net income.......................................................... $ 8,027 $ 14,228 $ 13,056 $ 24,787
======= ======== ======== ========
Net income per share of common stock................................ $ .33 $ .59 $ .54 $ 1.03
======= ======== ======== ========
Shares used in calculating per share amounts........................ 24,103 24,095 24,100 23,988
======= ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
_____________
CONDENSED CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
--------- --------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents............................................. $ 23,248 $ 34,239
Short-term investments................................................ 74,849 62,900
Receivables, net of $1,960 and $1,255 allowance....................... 59,549 55,926
Receivables from nonconsolidated affiliates........................... 3,834 4,877
Inventories, at lower of cost (Fifo) or market:
Raw materials and work in progress.................................. 31,991 21,199
Finished goods...................................................... 3,894 6,430
-------- --------
35,885 27,629
Deferred income taxes................................................. - 553
Other current assets.................................................. 5,588 5,222
-------- --------
Total current assets................................................. 202,953 191,346
Investments in, receivables and advances to nonconsolidated affiliates.. 25,344 26,490
Investment in marketable equity securities.............................. 22,375 15,500
Property, plant and equipment........................................... 127,598 113,785
Less accumulated depreciation........................................... (49,822) (43,088)
-------- --------
77,776 70,697
Excess of purchase cost over amount assigned to net assets
acquired, net of accumulated amortization of $3,469
and $2,644............................................................. 20,280 19,578
Other assets............................................................ 26,629 19,530
-------- --------
$375,357 $343,141
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
_____________
CONDENSED CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
---------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable............................................ $ 30,784 $ 23,336
Accrued compensation and related benefits................... 6,116 7,686
Accrued income taxes........................................ 3,984 -
Deferred income taxes....................................... 2,483 -
Other accrued liabilities................................... 12,179 9,780
Notes payable............................................... 2,000 2,000
Current maturities of long-term debt........................ 4,142 4,553
-------- --------
Total current liabilities.................................. 61,688 47,355
Long-term debt, less current maturities....................... 84,766 88,256
Deferred income taxes......................................... 2,642 3,006
Other noncurrent liabilities.................................. 8,354 6,665
Minority interests............................................ 16,412 16,387
STOCKHOLDERS' EQUITY:
Preferred stock (5,000,000 shares authorized, none issued).. - -
Common stock (24,165,612 and 24,160,612 shares issued)...... 12,083 12,080
Additional paid-in capital.................................. 81,751 81,666
Retained earnings........................................... 113,216 100,160
-------- --------
207,050 193,906
Treasury stock, at cost (60,812 and 62,312 shares).......... (172) (176)
Unrealized loss on noncurrent marketable equity securities.. (5,383) (12,258)
-------- --------
Total stockholders' equity................................. 201,495 181,472
-------- --------
$375,357 $343,141
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
____________
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
March 31,
-------------------
1995 1994
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income................................................ $ 13,056 $ 24,787
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization........................... 8,619 6,678
Receivables provision................................... 4,394 1,465
Equity in loss of nonconsolidated affiliates............ 6,272 2,540
Minority interests...................................... 2,176 3,641
Deferred income taxes................................... 2,672 495
Tax benefit from exercise of common stock options....... 21 2,478
Increase (decrease) resulting from changes
in operating assets and liabilities, net............... (13,161) (19,247)
-------- --------
Net cash provided by operating activities................. 24,049 22,837
INVESTING ACTIVITIES:
Purchase of property, plant and equipment................. (13,604) (16,742)
Purchase of additional shares of subsidiaries............. (3,925) (660)
Net change in short-term investments...................... (11,949) 17,450
Purchase of noncurrent marketable equity securities....... - (27,758)
Investment in and advances to nonconsolidated affiliates.. (391) (3,850)
Other..................................................... (1,307) (5,095)
-------- --------
Net cash (used) by investing activities................... (31,176) (36,655)
FINANCING ACTIVITIES:
Payment of long-term debt................................. (3,901) (4,080)
Proceeds from long-term debt and notes payable............ - 4,735
Dividends paid to minority shareholders of subsidiary..... - (996)
Cash received on exercise of common stock options......... 37 10,209
-------- --------
Net cash (used) provided by financing activities.......... (3,864) 9,868
-------- --------
Decrease in cash and cash equivalents..................... (10,991) (3,950)
Cash and cash equivalents at beginning of period.......... 34,239 37,929
-------- --------
Cash and cash equivalents at end of period................ $ 23,248 $ 33,979
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
_____________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
--------------------
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information, the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Due to the seasonality of the Company's
businesses, operating results for the nine month period ended March 31, 1995
are not necessarily indicative of the results that may be expected for the
fiscal year ending June 30, 1995. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended June 30, 1994.
Certain prior period amounts have been restated to reflect current period
reporting.
2. SUMMARIZED INCOME STATEMENT INFORMATION OF NONCONSOLIDATED AFFILIATES
----------------------------------------------------------------------
(UNAUDITED)
-----------
The equity in loss of nonconsolidated affiliates includes the Company's 50%
interest in Posadas de San Juan Associates ("PSJA") for the three and nine
months ended March 31, 1995 and March 31, 1994. In November of 1993 the El
Conquistador Hotel & Casino began operations. The El Conquistador has a
March 31 year end, which is three months earlier than the Company's year end
of June 30 and accordingly the equity in the results of El Conquistador are
recorded by the Company with a three month lag. The equity in loss of
nonconsolidated affiliates also includes for the three months ended March 31,
1995 the Company's 23.3% indirect interest in the results of operations of
the El Conquistador for the three months ended December 31, 1994 and the nine
months ended March 31, 1995 includes the results of operations of El
Conquistador for the nine months ended December 31, 1994. The equity in loss
of nonconsolidated affiliates for the three and nine months ended March 31,
1994 includes the Company's 23.3% indirect interest in the results of
operations of the El Conquistador for the months of November and December
1993.
The summarized statement of operations information of PSJA, which is 50%
owned by the Company, is as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues................. $ 15,414 $ 17,134 $ 40,642 $ 43,789
Costs and expenses....... (14,559) (15,855) (41,314) (45,260)
-------- -------- -------- --------
Net income (loss)........ $ 855 $ 1,279 ($ 672) ($1,471)
======== ======== ======== ========
</TABLE>
6
<PAGE>
FORM 10Q
The summarized statement of operations information of WKA EL Con Associates, in
which the Company has a 46.5 % partnership interest, is as follows (in
thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
---------------------- -------------------
1995 1994 1995 1994
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Costs and expenses................................... ($124) ($127) ($335) ($127)
Equity in 50% of the El Conquistador net loss for
the three months ended December 31, 1994; nine
months ended December 31, 1994 and months of
November and December 1993.......................... (5,996) (3,749) (13,968) (3,749)
Equity in net income of Las Casitas.................. 63 - 1,549 -
------- ------- -------- -------
Net loss............................................. ($6,057) ($3,876) ($12,754) ($3,876)
======= ======= ======== =======
</TABLE>
The summarized statement of operations information of El Conquistador
Partnership L.P., in which WKA EL Con Associates has a 50% partnership interest,
is as follows (in thousands):
<TABLE>
<CAPTION>
Three and two Nine and two
months ended months ended
December 31, December 31,
-------------------- --------------------
1994 1993 1994 1993
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Revenues............ $ 17,329 $ 6,988 $ 53,856 $ 6,988
Costs and expenses.. (29,322) (14,486) (81,792) (14,486)
--------- -------- --------- --------
Net loss............ ($11,993) ($7,498) ($27,936) ($7,498)
========= ======== ========= ========
</TABLE>
The El Conquistador opened in November 1993 and the above periods include
continued start-up expenses which is typical of new properties.
3. SUBSEQUENT EVENT
----------------
On April 18, 1995 the Company reached an agreement in principle to acquire
Bally Gaming International, Inc. Bally Gaming is engaged in the design,
manufacture, and sale of electronic gaming machines and systems through
subsidiaries in Nevada, New Jersey, and Germany. The preliminary
agreement calls for Bally Gaming shareholders to receive .6 shares of
common stock of WMS for each outstanding share of common stock of Bally
Gaming. The transaction is subject to the completion of due diligence,
negotiation and execution of a definitive agreement, the approvals of the
Board of Directors and stockholders of both companies and regulatory
approvals.
7
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
_______________
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
- -------------------
Cash flows from operating, investing and financing activities during the nine
months ended March 31, 1995 resulted in net cash used of $10,991,000 as compared
with net cash used of $3,950,000 during the nine months ended March 31, 1994.
See condensed consolidated statements of cash flows on page 5.
Operating activities provided cash of $24,049,000 during the nine months ended
March 31, 1995 compared with $22,837,000 for the nine months ended March 31,
1994.
Investing cash flows used for the purchase of property, plant and equipment
during the nine months ended March 31, 1995 were $13,604,000 as compared with
$16,742,000 during the nine months ended March 31, 1994. The asset additions
were primarily for the amusement games business. During the nine months ended
March 31, 1995 the Company used $3,925,000 for the purchase of additional shares
of subsidiaries compared to $660,000 in the 1994 period. Investing cash flows
used for the net purchase of short-term investments was $11,949,000 in the 1995
period compared to cash used of $10,308,000 for the net purchase of short-term
investments and noncurrent marketable equity securities in the 1994 period.
Cash used by financing activities was $3,864,000 for the nine months ended March
31, 1995 compared with cash provided of $9,868,000 for the same period last
year. During the nine months ended March 31, 1995, $37,000 was received on the
exercise of common stock options compared to $10,209,000 during the same period
in 1994.
The Condado Plaza has a $2,000,000 bank line of credit available which was fully
utilized at March 31, 1995. Condado Plaza debt agreements provide that any
advances or common stock dividend payments to shareholders must receive prior
approval by the lenders. El San Juan debt agreements have limitations on
similar type payments based on a defined level of cash flow whereas Williams
Hospitality is permitted to make advances and pay dividends in an amount
aggregating $1,800,000 per year as well as additional amounts approved by the
lender. Management believes that cash flow from hotel/casino operations will be
adequate to pay their long-term debt as it becomes due and provide for the
normal planned capital additions.
WMS Industries Inc. has an uncollateralized bank line of credit which permits it
to borrow up to $25,000,000 or permits it or U.S. operating subsidiaries to have
letters of credit up to $25,000,000 outstanding. At March 31, 1995, there were
no borrowings from this line of credit but there were outstanding letters of
credit totaling $1,167,000. Interest on the initial borrowings will be at a
short-term Eurodollar rate plus .75%. Management believes that cash flow from
operations, cash and cash equivalents, short-term investments and amounts
available under the line of credit will be adequate to fund the fluctuating
level of inventories and receivables required in the operation of the business
and provide for expansion of the business including the home video game business
and gaming devices. Planned capital additions in fiscal 1995 for amusement
games includes the construction of a new building for approximately $10,000,000
to replace a leased building.
8
<PAGE>
FORM 10Q
RESULTS OF OPERATIONS
- ---------------------
The following summarizes the Condensed Consolidated Statements of Income for the
periods shown in the format presented as segment information in the notes to the
year-end consolidated financial statements (thousands of dollars):
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Amusement games...................................... $72,715 $ 81,926 $233,368 $212,427
Condado Plaza........................................ 16,126 18,442 44,810 49,101
Williams Hospitality................................. 5,904 7,453 13,640 12,793
Intersegment revenues elimination - management fees.. (1,289) (1,373) (3,416) (3,406)
------- -------- -------- --------
Total revenues...................................... $93,456 $106,448 $288,402 $270,915
======= ======== ======== ========
SEGMENT OPERATING PROFIT (LOSS):
Amusement games...................................... $13,904 $ 19,581 $ 28,420 $ 37,341
Condado Plaza........................................ 627 3,031 (245) 5,153
Williams Hospitality................................. 3,493 3,802 7,214 7,113
------- -------- -------- --------
Total segment operating profit...................... 18,024 26,414 35,389 49,607
Equity in loss of nonconsolidated affiliates......... (2,392) (1,165) (6,272) (2,540)
General corporate expenses........................... (1,598) (2,065) (4,059) (4,544)
------- -------- -------- --------
Income from operations............................... 14,034 23,184 25,058 42,523
Interest and other income............................ 1,753 991 4,516 3,501
Interest expense..................................... (2,035) (1,911) (5,794) (5,536)
------- -------- -------- --------
Income before tax provision and minority interests... $13,752 $ 22,264 $ 23,780 $ 40,488
======= ======== ======== ========
</TABLE>
THREE MONTHS ENDED MARCH 31, 1995 COMPARED WITH
THREE MONTHS ENDED MARCH 31, 1994
Consolidated revenues were $93,456,000 in the quarter ended March 31, 1995
compared to $106,448,000 in the quarter ended March 31, 1994. Revenues of the
amusement games business decreased 11% to $72,715,000 in the quarter ended
March 31, 1995. Amusement games revenues for the March 1995 quarter includes
$15,000,000 from licensing the distribution of video games for use on
multipurpose home computers and licensing certain foreign distribution of home
video games (home video software creator and publisher Tradewest was acquired in
April 1994). However, this increase was more than offset by a decrease in
revenues from a 22% decrease in pinball sales, caused by a soft market, and a
29% decrease in coin operated video game sales because no new video game was
introduced in the 1995 quarter. The March 1994 quarter includes approximately
$9,000,000 of net revenue from the Company's business arrangements with Nintendo
of America and Nintendo Co. Ltd. of Japan. Coin operated video game sales for
the third quarter of fiscal 1994 included the introduction of a new video game
and the continuing strong sales of a video game introduced in the second quarter
of fiscal 1994.
Gross profit (excluding depreciation) of the amusement games business decreased
in the quarter ended March 31, 1995 to $21,394,000 (29.4% of amusement games
business revenues) compared with $24,858,000 (30.3% of such revenues) in the
quarter ended March 31, 1994. Excluding the $13,500,000 increase in gross
profit from the licensing of the distribution of home video games, gross profit
from the amusement game business would have been $7,894,000 (13.7% of comparable
revenues) compared with $15,858,000 (21.7% of comparable revenues) of gross
profit excluding the effect of the Nintendo arrangements in the March 31, 1994
quarter. This decline in gross profit is due to the lower amusement game
equipment sales mentioned above and to a lesser extent the following. After
excluding the income from licensing the distribution of video games, the home
video game business operated at a loss in the March 31, 1995 quarter because no
new home video games were introduced and sales were insignificant. In addition,
a planned increase in research and development expense to $6,189,000 in the
quarter ended March 31, 1995 from $5,643,000 in the prior year quarter reduced
gross profit. The
9
<PAGE>
FORM 10Q
increased research and development expenses include that of the home video game
business and expenses associated with the Company's development of gaming
products and interactive networked video games, the benefits of which are
expected to be realized in future periods.
Operating profit of the amusement games business on a segment basis decreased
to $13,904,000 in the quarter ended March 31, 1995 from $19,581,000 in the
quarter ended March 31, 1994. This was primarily due to the same reasons as the
decrease in gross profit described above but further decreased by higher selling
and administrative and depreciation expenses. The increase in selling and
administrative expense of the amusement games business was primarily caused by
$1,865,000 of selling and administrative expense in the home video game
cartridge business and $383,000 higher selling and administrative expense for
gaming products. Depreciation expense of the home video game business was
$338,000.
Condado Plaza revenues were $16,126,000 in the quarter ended March 31, 1995
compared to $18,442,000 in the quarter ended March 31, 1994. Casino net revenue
decreased due to a lower table drop and lower win percentage.
The Condado Plaza's profit before selling and administrative expense (excluding
depreciation) decreased to $5,773,000 (35.8% of the Condado Plaza revenues) in
the quarter ended March 31, 1995 from $8,224,000 (44.6% of the Condado Plaza
revenues) in the quarter ended March 31, 1994. The decrease was due to lower
revenues as explained above.
The Condado Plaza on a segment basis had operating profit of $627,000 for the
March 31, 1995 quarter compared with $3,031,000 in the quarter ended March 31,
1994. The decrease was primarily due to decreased revenues as explained above.
Williams Hospitality revenues (before intersegment elimination) decreased to
$5,904,000 in the quarter ended March 31, 1995 from $7,453,000 in the quarter
ended March 31, 1994. This decrease was primarily from cumulative fees for
certain initial centralized services provided to the Company's affiliated
hotel/casino properties recorded in the March 31, 1994 quarter. Cumulative
expenses for a similar amount were also recorded in the March 31, 1994 quarter.
The equity in loss of nonconsolidated affiliates was ($2,392,000) in the
quarter ended March 31, 1995 as compared with ($1,165,000) in the quarter ended
March 31, 1994. The change was primarily due to an increase in the Company's
equity in net loss from the newly opened El Conquistador Hotel and Casino that
was ($2,819,000) in the quarter ended March 31, 1995 compared with ($1,804,000)
in the March 31, 1994 quarter. The March 31, 1994 quarter only had two months
of operations as the El Conquistador began operations in November 1993. Like
most resort properties El Conquistador is expected to report losses in its early
years, but the Company's 23.3% equity in the losses are expected to be partially
offset by the Company's 62% interest in the management fees earned during the
year by Williams Hospitality from El Conquistador. The 50% equity in the income
of the El San Juan was $427,000 in the quarter ended March 31, 1995 compared
with $639,000 in the prior year quarter. The El San Juan's hotel revenues were
relatively flat, but the casino experienced a 34% decline in its revenues from
lower table play. In spite of lower revenues, net income was kept relatively
stable from decreased operating expenses resulting from cost reduction
activities.
Consolidated selling and administrative expense increased primarily as a result
of the selling and administration expenses of the home video game business and
higher selling and administrative expenses for gaming products.
The quarter ended March 31, 1995 net income was $8,027,000, $.33 per share, in
comparison to $14,228,000, $.59 per share, in the quarter ended March 31, 1994.
Net income for the quarter ended March 31, 1995 includes $8,130,000, $.34 per
share, relating to licensing the distribution of video games for use on
multipurpose home computers and certain foreign distribution of home video games
mentioned above. The March 31, 1994 quarter includes net income of $5,760,000,
$.24 per share, from the business arrangements with Nintendo of America and
Nintendo Co. Ltd. of Japan. Excluding the effects of the licensing income and
the Nintendo arrangements the decreased net income is primarily from lower
operating results of the amusement game business as described above, which
includes a net lossfrom the home video cartridge business, and from the
hotel/casino business operating at a net loss of ($191,000), ($.01) per share,
in the March 31, 1995 quarter in comparison to net income of $3,007,000, $.13
per share, in the prior year third quarter. Higher research and development
expense and gaming products selling and administrative expense also decreased
net income, the benefits of which are expected to be realized in future periods.
10
<PAGE>
FORM 10Q
NINE MONTHS ENDED MARCH 31, 1995 COMPARED WITH
NINE MONTHS ENDED MARCH 31, 1994
Consolidated revenues increased from $270,915,000 in the nine months ended
March 31, 1994 to $288,402,000 in the nine months ended March 31, 1995.
Revenues of the amusement games business increased 9.9% to $233,368,000 in the
nine months ended March 31, 1995. The principal reason amusement games revenues
increased was from sales of video game cartridges into the home video game
market (home video software creator and publisher Tradewest was acquired in
April 1994) and $25,000,000 from licensing the distribution of home video games
for use on multipurpose home computers and licensing certain foreign
distribution of home video games. The March 31, 1994 quarter includes
approximately $9,000,000 in net revenues from the Company's business
arrangements with Nintendo of America and Nintendo Co. Ltd. of Japan. Coin
operated amusement games revenues, after excluding the Nintendo business
arrangements net revenue from the March 31, 1994 period, decreased 9% in the
nine months ended March 31, 1995 compared to the March 31, 1994 period. This
decrease was due to a 25% decrease in pinball sales, caused by a soft market,
and a 6% decrease in coin operated video game sales, no new video game was
introduced in the March 31, 1995 quarter, partially offset by increased video
lottery terminal unit sales.
Gross profit (excluding depreciation) of the amusement games business increased
in the nine months ended March 31, 1995 to $53,046,000 (22.7% of amusement games
business revenues) compared with $51,926,000 (24.4% of such revenues) in the
nine months ended March 31, 1994. Excluding the $21,600,000 increase in gross
profit resulting from the licensing of the distribution of home video games,
gross profit from the amusement game business would have been $31,446,000 (15.1%
of comparable revenues). Excluding the effects of the Nintendo arrangements,
March 31, 1994 gross profit would have been $42,926,000 (21.1% of comparable
revenues). This decrease was due to approximately $3,300,000 in royalties
payable to the external developer of one coin operated video game sold during
the nine months ended March 31, 1995 and reduced gross profit resulting from the
decline in pinball and video sales in comparison to the March 31, 1994 nine
months. In addition, a planned increase of $5,221,000 in research and
development expense to $18,961,000 in the nine months ended March 31, 1995 from
$13,740,000 in the prior year reduced gross profit. The increased research and
development expenses include that of the home video game business and expenses
associated with the Company's development of gaming products and interactive
networked video games, the benefits of which are expected to be realized in
future periods. Also, gross profit for home video cartridge sales was lower
than expected because the home video games developed by Tradewest prior to its
acquisition by the Company did not sell through at the retail level during the
Christmas season and significant sales price adjustments were made.
Operating profit of the amusement games business on a segment basis decreased
to $28,420,000 in the nine months ended March 31, 1995 from $37,341,000 in the
nine months ended March 31, 1994. This was primarily due to the decrease in
gross profit as discussed above coupled with increased selling and
administrative and depreciation expenses. The increase in selling and
administrative expense of the amusement games business was primarily caused by
$1,200,000 of higher selling and administration expense for gaming products and
$8,010,000 of selling and administrative expense in the home video game
cartridge business, which is expected to incur higher selling expense as a
percent of sales than the coin operated games business. The home video business
is expected to generate a higher gross profit as a percentage of sales to more
than offset the increased selling cost, but that did not materialize during the
nine months ended March 31, 1995 as noted above. Depreciation expense of the
home video game business was $959,000.
Condado Plaza revenues were $44,810,000 in the nine months ended March 31, 1995
compared to $49,101,000 in the nine months ended March 31, 1994. Casino net
revenue decreased due to a lower table drop and lower win percentage. Hotel
revenues were slightly below the prior year nine month period due primarily to a
lower occupancy rate.
The Condado Plaza's profit before selling and administrative expense (excluding
depreciation) decreased to $14,116,000 (31.5% of the Condado Plaza revenues) in
the nine months ended March 31, 1995 from $19,279,000 (39.3% of the Condado
Plaza revenues) in the nine months ended March 31, 1994. The decrease was due
to lower revenues as explained above and increased operating expenses including
emergency water cost required during the drought earlier in the fiscal year.
The Condado Plaza on a segment basis had an operating loss of ($245,000) for
the nine months ended March 31, 1995 compared with a profit of $5,153,000 in the
nine months ended March 31, 1994. The decrease was primarily due to the same
reason as for the decrease in profit before selling and administrative expense
but further reduced by increased administrative expense, in part from a higher
provision for doubtful receivables.
11
<PAGE>
FORM 10Q
Williams Hospitality revenues (before intersegment elimination) increased to
$13,640,000 in the nine months ended March 31, 1995 from $12,793,000 in the nine
months ended March 31, 1994. This increase was from El Conquistador management
fees for the entire nine month period ended March 31, 1995 while the March 31,
1994 period included only five months of management fees. Management fees from
the Condado Plaza and El San Juan were lower during the nine months ended March
31, 1995 compared to 1994 because of their reduced revenue and profits.
The equity in loss of nonconsolidated affiliates was ($6,272,000) in the nine
months ended March 31, 1995 as compared with ($2,540,000) in the nine months
ended March 31, 1994. The increased loss was primarily due to an increase in
the Company's equity in net loss from the newly opened El Conquistador Hotel and
Casino that was ($5,936,000) in the nine months ended March 31, 1995 compared
with ($1,804,000) in the nine months ended March 31, 1994, representing only two
months of operations, offset in part by improved results of the El San Juan.
Like most resort properties El Conquistador is expected to report losses in its
early years, but the Company's 23.3% equity in the losses are expected to be
partially offset by the Company's 62% interest in the management fees earned
during the year by Williams Hospitality from El Conquistador. The 50% equity in
the loss of the El San Juan was ($336,000) in the nine months ended March 31,
1995 compared to equity in loss of ($736,000) in the prior year nine month
period. In spite of an 18.7% decline in casino revenues and a small decline in
hotel revenues, the El San Juan's results improved from decreased operating
expenses resulting from cost reduction activities.
Consolidated selling and administrative expense increased primarily as a result
of the selling and administrative expenses of the home video game business and
higher selling and administrative expenses for gaming products.
The nine months ended March 31, 1995 net income was $13,056,000, $.54 per
share, in comparison to $24,787,000, $1.03 per share, in the nine months ended
March 31, 1994. Net income for the nine months ended March 31, 1995 includes
$13,314,000, $.55 per share, relating to licensing the distribution of video
games for use on multipurpose home computers and certain foreign distribution of
home video games mentioned above. The net income for the nine months ended
March 31, 1994 includes $5,760,000, $.24 per share, from the business
arrangements with Nintendo of America and Nintendo Co. Ltd. of Japan. The
decreased net income is primarily from lower operating results of the amusement
game business as described above, which includes a net loss of ($.14) per share
from the home video cartridge business, and the hotel/casino business operating
at a net loss of ($3,158,000), ($.13) per share, in the nine months ended March
31, 1995 in comparison to net income of $3,567,000, $.15 per share, in the prior
year nine month period. Higher research and development expense and gaming
products selling and administrative expense also decreased net income, the
benefits of which are expected to be realized in future periods.
12
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
----------------------------
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
- -------
The Annual Meeting of Stockholders of the Company was held on January 24,
1995. At such meeting, stockholders re-elected the Company's incumbent
directors and reappointed the Company's auditors. In addition, stockholders
voted 13,823,130 shares (62.3% of the 22,190,565 shares represented at the
meeting) in favor of approval of the 1994 Stock Option Plan; 3,035,848 shares
(13.7% of the shares represented at the meeting) voted against the approval;
269,279 (1.2% of the shares represented at the meeting) abstained from voting;
and proxies representing 5,062,308 shares (22.8% of the shares represented at
the meeting) were unmarked and not voted.
13
<PAGE>
FORM 10Q
PART II
OTHER INFORMATION
ITEM 6.(A) EXHIBITS
- -------------------
Exhibit 27 - Financial Data Schedule
14
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
_______________
SIGNATURE
- ---------
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 duly authorized.
WMS INDUSTRIES INC.
-------------------
(Registrant)
Dated: May 11, 1995 By: /S/ Harold H. Bach, Jr.
----------------------------
Harold H. Bach, Jr.
Vice President-Finance
Principal Financial and
Chief Accounting Officer
15
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<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
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