<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 December 31, 1994
------------------------------------------------
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: 24,103,300 shares of common
stock, $.50 par value, were outstanding at January 27, 1995 after deducting
62,312 shares held as treasury shares.
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
____________
INDEX
<TABLE>
<CAPTION>
PAGE NO
-------
PART I. FINANCIAL INFORMATION:
- - - -------
<C> <S> <C>
ITEM 1. Financial Statements:
------- Condensed Consolidated Statements of Income -
Three and six months Ended December 31, 1994 and 1993........ 1
Condensed Consolidated Balance Sheets -
December 31, 1994 and June 30, 1994.......................... 2-3
Condensed Consolidated Statements of Cash Flows -
Six months Ended December 31, 1994 and 1993.................. 4
Notes to Condensed Consolidated Financial Statements......... 5-6
ITEM 2. Management's Discussion and Analysis of Financial Condition
------- and Results of Operations................................... 7-11
PART II. OTHER INFORMATION:
- - - --------
ITEM 6.(A) Exhibits..................................................... 12
----------
SIGNATURE ............................................................. 13
</TABLE>
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
_____________
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three months ended Six months ended
December 31, December 31,
------------ ------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Net sales - amusement games........................................ $ 93,767 $ 82,171 $160,653 $130,501
Management fees - Williams Hospitality............................. 3,343 2,117 5,609 3,307
Condado Plaza hotel/casino:
Casino............................................................ 6,828 8,192 13,148 15,193
Casino promotional allowances..................................... (1,836) (2,097) (3,118) (3,798)
Rooms............................................................. 6,389 6,563 11,365 11,649
Food and beverage................................................. 3,262 3,485 5,720 5,958
Other............................................................. 806 842 1,569 1,657
-------- -------- -------- --------
15,449 16,985 28,684 30,659
-------- -------- -------- --------
Total revenues....................................................... 112,559 101,273 194,946 164,467
COSTS AND EXPENSES:
Cost of sales (excluding depreciation) - amusement games.......... 75,494 62,116 129,001 103,433
Williams Hospitality operating expenses (excluding depreciation).. 1,206 712 2,466 1,131
Condado Plaza operating expenses (excluding depreciation):
Casino......................................................... 3,593 3,768 7,191 7,106
Rooms.......................................................... 2,268 2,210 4,562 4,352
Food and beverage.............................................. 2,713 2,721 5,132 5,055
Other.......................................................... 1,553 1,543 3,456 3,091
-------- -------- -------- --------
10,127 10,242 20,341 19,604
Selling and administrative........................................ 10,269 7,948 22,664 15,184
Depreciation and amortization..................................... 2,857 2,230 5,570 4,401
Equity in loss of nonconsolidated affiliates...................... 1,806 509 3,880 1,375
-------- -------- -------- --------
Total costs and expenses............................................. 101,759 83,757 183,922 145,128
-------- -------- -------- --------
Income from operations............................................... 10,800 17,516 11,024 19,339
Interest and other income............................................ 1,413 1,192 2,763 2,510
Interest expense..................................................... (1,847) (1,895) (3,759) (3,625)
-------- -------- -------- --------
Income before tax provision and minority interests................... 10,366 16,813 10,028 18,224
Provision for income taxes........................................... (3,474) (5,124) (3,939) (5,600)
Minority interests in income......................................... (790) (1,585) (1,060) (2,065)
-------- -------- -------- --------
Net income........................................................... $ 6,102 $ 10,104 $ 5,029 $ 10,559
======== ======== ======== ========
Net income per share of common stock................................. $ .25 $ .42 $ .21 $ .44
======== ======== ======== ========
Shares used in calculating per share amounts......................... 24,098 24,039 24,098 23,932
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
_____________
CONDENSED CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
December 31, June 30,
1994 1994
------------ --------
(Unaudited)
ASSETS
- - - ------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................................. $ 23,337 $ 34,239
Short-term investments................................................ 69,300 62,900
Receivables, net of $4,198 and $1,255 allowance....................... 69,328 55,926
Receivables from nonconsolidated affiliates........................... 4,124 4,877
Inventories, at lower of cost (Fifo) or market:
Raw materials and work in progress................................. 33,063 21,199
Finished goods..................................................... 7,049 6,430
-------- --------
40,112 27,629
Deferred income taxes................................................. 660 553
Other current assets.................................................. 4,333 5,222
-------- --------
Total current assets................................................ 211,194 191,346
Investments in, receivables and advances to nonconsolidated affiliates.. 26,430 26,490
Investment in marketable equity securities.............................. 20,312 15,500
Property, plant and equipment........................................... 121,502 113,785
Less accumulated depreciation........................................... (47,463) (43,088)
------- -------
74,039 70,697
Excess of purchase cost over amount assigned to net assets
acquired, net of accumulated amortization of $3,161
and $2,644............................................................. 20,588 19,578
Other assets............................................................ 21,693 19,530
-------- --------
$374,256 $343,141
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
_____________
CONDENSED CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
December 31, June 30,
1994 1994
------------ --------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
- - - ------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable............................................ $ 41,475 $ 23,336
Accrued compensation and related benefits................... 5,378 7,686
Accrued income taxes........................................ 3,245 -
Other accrued liabilities................................... 15,222 9,780
Notes payable............................................... 2,000 2,000
Current maturities of long-term debt........................ 4,588 4,553
-------- --------
Total current liabilities.................................. 71,908 47,355
Long-term debt, less current maturities........................ 85,906 88,256
Deferred income taxes.......................................... 3,006 3,006
Other noncurrent liabilities................................... 6,769 6,665
Minority interests............................................. 15,296 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.................................. 81,721 81,666
Retained earnings........................................... 105,189 100,160
-------- --------
198,993 193,906
Treasury stock, at cost (62,312 shares)..................... (176) (176)
Unrealized loss on noncurrent marketable equity securities.. (7,446) (12,258)
-------- --------
Total stockholders' equity................................. 191,371 181,472
-------- --------
$374,256 $343,141
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
____________
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
Six months ended
December 31,
------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income........................................... $ 5,029 $ 10,559
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization...................... 5,570 4,401
Receivables provision.............................. 3,764 865
Equity in loss of nonconsolidated affiliates....... 3,880 1,375
Minority interests................................. 1,060 2,065
Deferred income taxes.............................. (107) -
Tax benefit from exercise of common stock options.. 21 2,475
Increase (decrease) resulting from changes
in operating assets and liabilities, net.......... (8,926) (10,562)
-------- --------
Net cash provided by operating activities............ 10,291 11,178
INVESTING ACTIVITIES:
Purchase of property, plant and equipment............ (7,476) (13,010)
Purchase of additional shares of subsidiaries........ (3,925) (184)
Net change in short-term investments................. (6,400) 19,750
Purchase of noncurrent marketable equity securities.. - (27,758)
Other................................................ (1,114) (5,047)
-------- --------
Net cash (used) by investing activities.............. (18,915) (26,249)
FINANCING ACTIVITIES:
Payment of long-term debt............................ (2,315) (2,335)
Proceeds from long-term debt and notes payable....... - 4,735
Cash received on exercise of common stock options.... 37 10,209
-------- --------
Net cash (used) provided by financing activities..... (2,278) 12,609
-------- --------
Decrease in cash and cash equivalents................ (10,902) (2,462)
Cash and cash equivalents at beginning of period..... 34,239 37,929
-------- --------
Cash and cash equivalents at end of period........... $ 23,337 $ 35,467
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<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 six month period ended December 31,
1994 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 six
months ended December 31, 1994 and December 31, 1993. 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
December 31, 1994 the Company's 23.3% indirect interest in the results of
operations of the El Conquistador for the months of July through September of
1994 and the six months ended December 31, 1994 includes operations for the
months of April through September of 1994.
5
<PAGE>
FORM 10Q
WMS INDUSTRIES INC.
_____________
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The summarized statement of operations information of PSJA, which is 50% owned
by the Company, is as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
--------------------- --------------------
1994 1993 1994 1993
--------- ---------- --------- ---------
(Thousands)
<S> <C> <C> <C> <C>
Revenues............ $ 14,756 $ 15,256 $ 25,228 $ 26,655
Costs and expenses.. (14,181) (16,275) (26,755) (29,405)
-------- -------- -------- --------
Net income (loss)... $ 575 $ (1,019) $ (1,527) $ (2,750)
-------- -------- -------- --------
</TABLE>
The summarized statement of operations information of WKA EL Con Associates, in
which the Company has a 46.5% partnership interest, is as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, 1994 December 31, 1994
------------------- ------------------
(Thousands)
<S> <C> <C>
Costs and expenses................................. $ (108) $ (211)
Equity in 50% of the El Conquistador net loss for
July through September 1994 and April through (5,215) (7,972)
September 1994....................................
Equity in net income of Las Casitas................ 824 1,486
------- -------
Net loss........................................... $(4,499) $(6,697)
------- -------
</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:
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, 1994 September 30, 1994
------------------- -------------------
(Thousands)
<S> <C> <C>
Revenues............ $ 13,908 $ 36,527
Costs and expenses.. (24,337) (52,470)
-------- --------
Net loss............ $(10,429) $(15,943)
-------- --------
</TABLE>
The El Conquistador opened in November 1993 and the above three and six months
included continued start-up expenses, which is typical of new properties.
6
<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 six
months ended December 31, 1994 resulted in net cash used of $10,902,000 as
compared with net cash used of $2,462,000 during the six months ended December
31, 1993. See condensed consolidated statements of cash flows on page 4.
Operating activities provided cash of $10,291,000 during the six months ended
December 31, 1994 compared with $11,178,000 for the six months ended December
31, 1993.
Investing cash flows used for the purchase of property, plant and equipment
during the six months ended December 31, 1994 were $7,476,000 as compared with
$13,010,000 during the six months ended December 31, 1993. The asset additions
were primarily for the amusement games business. During the six months ended
December 31, 1994 the Company used $3,925,000 for the purchase of additional
shares of subsidiaries compared to $184,000 in 1993. Investing cash flows used
for the net purchase of short-term investments was $6,400,000 in 1994 compared
to cash used of $8,008,000 for the net purchase of short-term investments and
noncurrent marketable equity securities in 1993.
Cash used by financing activities was $2,278,000 for the six months ended
December 31, 1994 compared with cash provided of $12,609,000 for the same period
last year. During the six months ended December 31, 1994, there was $37,000
received on exercise of stock options compared to $10,209,000 during the same
period in 1993.
The Condado Plaza has a $2,000,000 bank line of credit available which was
fully utilized at December 31, 1994. Condado Plaza debt agreements provide
that any advances or 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 December 31, 1994,
there were no borrowings from this line of credit but there were outstanding
letters of credit totaling $4,456,000. 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. Specific financing of this building
is presently being considered.
7
<PAGE>
FORM 10Q
RESULTS OF OPERATIONS
- - - ---------------------
The following summarizes the Condensed Consolidated Statements of Operations
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 Six months ended
December 31, December 31,
-------------------- --------------------
1994 1993 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Amusement games...................................... $ 93,767 $ 82,171 $160,653 $130,501
Condado Plaza........................................ 15,449 16,985 28,684 30,659
Williams Hospitality................................. 4,534 3,365 7,736 5,340
Intersegment revenues elimination - management fees.. (1,191) (1,248) (2,127) (2,033)
-------- -------- -------- --------
Total revenues...................................... $112,559 $101,273 $194,946 $164,467
======== ======== ======== ========
SEGMENT OPERATING PROFIT (LOSS):
Amusement games...................................... $ 10,754 $ 15,505 $ 14,516 $ 17,760
Condado Plaza........................................ 588 1,894 (872) 2,122
Williams Hospitality................................. 2,582 2,107 3,721 3,311
-------- -------- -------- --------
Total segment operating profit...................... 13,924 19,506 17,365 23,193
Equity in loss of nonconsolidated affiliates......... (1,806) (509) (3,880) (1,375)
General corporate expenses........................... (1,318) (1,481) (2,461) (2,479)
-------- -------- -------- --------
Income from operations............................... 10,800 17,516 11,024 19,339
Interest and other income............................ 1,413 1,192 2,763 2,510
Interest expense..................................... (1,847) (1,895) (3,759) (3,625)
-------- -------- -------- --------
Income before tax provision and minority interests... $ 10,366 $ 16,813 $ 10,028 $ 18,224
======== ======== ======== ========
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1994 COMPARED WITH
THREE MONTHS ENDED DECEMBER 31, 1993
Consolidated revenues increased from $101,273,000 in the quarter ended December
31, 1993 to $112,559,000 in the quarter ended December 31, 1994. Revenues of
the amusement games business increased 14% to $93,767,000 in the quarter ended
December 31, 1994. Amusement games revenues increased from licensing the
distribution of video games for use on multipurpose home computers and sales of
video game cartridges into the home video game market (home video software
creator and publisher Tradewest was acquired in April 1994). Coin operated
amusement games revenues was approximately the same as the December 31, 1993
quarter because a 25% decrease in pinball sales, caused by a soft market, was
offset by increased coin operated video game sales.
Gross profit (excluding depreciation) of the amusement games business decreased
in the quarter ended December 31, 1994 to $18,273,000 (19.5% of amusement games
business revenues) compared with $20,055,000 (24.4% of such revenues) in the
quarter ended December 31, 1993. Excluding the $8,100,000 increase in gross
profit from the licensing of the distribution of video games for home
computers, gross profit from the amusement game business would have been
$10,173,000. This decrease was primarily due to reduced gross profit resulting
from the decline in pinball sales; $2,613,000 in royalties payable to the
external developer of one coin operated video game sold during the quarter; and
the home video game business operated at a ($1,521,000) loss at the gross profit
level in the December 31, 1994 quarter because the home video games that were
developed by Tradewest prior to its acquisition by the Company, and sold in the
last six months, did not sell through at the retail level during the Christmas
season and a $2,100,000 provision for sales price adjustments was made. In
addition, a planned increase of $2,310,000 in research and development expense
to $6,413,000 in the quarter ended December 31, 1994 from $4,103,000 in the
prior year quarter 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.
8
<PAGE>
FORM 10Q
Operating profit of the amusement games business on a segment basis decreased
to $10,754,000 in the quarter ended December 31, 1994 from $15,505,000 in the
quarter ended December 31, 1993. 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 $1,825,000 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, and $402,000 higher
selling and administrative expense for gaming products. Depreciation expense of
the home video game business was $339,000.
Condado Plaza revenues were $15,449,000 in the quarter ended December 31, 1994
compared to $16,985,000 in the quarter ended December 31, 1993. Hotel revenues
were below the prior year quarter due primarily to a lower occupancy and room
rate and casino net revenue decreased due to a lower table drop and win
percentage.
The Condado Plaza's profit before selling and administrative expense (excluding
depreciation) decreased to $5,322,000 (34.4% of the Condado Plaza revenues) in
the quarter ended December 31, 1994 from $6,743,000 (39.7% of the Condado Plaza
revenues) in the quarter ended December 31, 1993. The decrease was due to lower
revenues as explained above.
The Condado Plaza on a segment basis had operating profit of $588,000 for the
December 31, 1994 quarter compared with $1,894,000 in the quarter ended December
31, 1993. The decrease was primarily due to decreased revenues as explained
above.
Williams Hospitality revenues (before intersegment elimination) increased to
$4,534,000 in the quarter ended December 31, 1994 from $3,365,000 in the quarter
ended December 31, 1993. This increase was primarily from increased fees for
certain centralized services provided to the Company's affiliated hotel/casino
properties. The $475,000 increase in segment basis operating profit in the
December 31, 1994 quarter in comparison to the 1993 quarter is from higher
management fee revenue from El Conquistador that opened in November 1993.
The equity in loss of nonconsolidated affiliates was ($1,806,000) in the
quarter ended December 31, 1994 as compared with equity in loss of
nonconsolidated affiliate (the El San Juan) of ($509,000) in the quarter ended
December 31, 1993. The change was primarily due to the Company's equity in net
loss from the newly opened El Conquistador Hotel and Casino that was
($2,094,000) in the quarter ended December 31, 1994. 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 $288,000 in the quarter ended December 31, 1994 compared to
equity in loss of ($509,000) in the prior year quarter. The El San Juan's
improvement resulted primarily 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 December 31, 1994 net income was $6,102,000, $.25 per share,
in comparison to $10,104,000, $.42 per share, in the quarter ended December 31,
1993. Net income for the quarter ended December 31, 1994 includes $5,184,000,
$.22 per share, relating to licensing the distribution of video games for use on
multipurpose home computers mentioned above. The decreased net income is
primarily from lower operating results of the amusement game business as
described above, which includes a net loss of ($.13) per share from the home
video cartridge business, and from the hotel/casino business operating at a net
loss of ($77,000) in the December 31, 1994 quarter in comparison to net income
of $1,130,000, $.05 per share, in the prior year second 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.
SIX MONTHS ENDED DECEMBER 31, 1994 COMPARED WITH
SIX MONTHS ENDED DECEMBER 31, 1993
Consolidated revenues increased from $164,467,000 in the six months ended
December 31, 1993 to $194,946,000 in the six months ended December 31, 1994.
Revenues of the amusement games business increased 23.1% to $160,653,000 in the
six months ended December 31, 1994. 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 licensing the distribution of video games for use on
multipurpose home computers. Coin operated amusement
9
<PAGE>
FORM 10Q
games revenues decreased approximately 4% in the six months ended December 31,
1994 compared to the December 31, 1993 period. This decrease was due to a 25%
decrease in pinball sales largely offset by increased coin operated video game
sales and increased video lottery terminal unit sales.
Gross profit (excluding depreciation) of the amusement games business increased
in the six months ended December 31, 1994 to $31,652,000 (19.7% of amusement
games business revenues) compared with $27,068,000 (20.7% of such revenues) in
the six months ended December 31, 1993. Excluding the $8,100,000 increase in
gross profit from the licensing of the distribution of video games for home
computers, gross profit from the amusement game business would have been
$23,552,000. This decrease was due to royalties payable to the external
developer of one coin operated video game sold during the six month period and
reduced gross profit resulting from the decline in pinball sales. In addition,
a planned increase of $4,675,000 in research and development expense to
$12,772,000 in the six months ended December 31, 1994 from $8,097,000 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. In addition, gross profit was increased by $5,564,000 for home video
cartridge sales but not to the extent 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 a $2,100,000
provision for sales price adjustments was made in the period.
Operating profit of the amusement games business on a segment basis decreased
to $14,516,000 in the six months ended December 31, 1994 from $17,760,000 in the
six months ended December 31, 1993. This was primarily due to the increase in
gross profit as discussed above being more than offset by increased selling and
administrative and depreciation expenses. The increase in selling and
administrative expense of the amusement games business was primarily caused by
$817,000 of higher selling and administration expense for gaming products and
$6,145,000 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
six months ended December 31, 1994 as noted above. Depreciation expense of the
home video game business was $621,000.
Condado Plaza revenues were $28,684,000 in the six months ended December 31,
1994 compared to $30,659,000 in the six months ended December 31, 1993. Hotel
revenues were slightly below the prior year six month period due primarily to a
lower occupancy rate and casino net revenue decreased due to a lower table drop.
The Condado Plaza's profit before selling and administrative expense (excluding
depreciation) decreased to $8,343,000 (29.1% of the Condado Plaza revenues) in
the six months ended December 31, 1994 from $11,055,000 (36.1% of the Condado
Plaza revenues) in the six months ended December 31, 1993. 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 ($872,000) for
the six months ended December 31, 1994 compared with a profit of $2,122,000 in
the six months ended December 31, 1993. 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, primarily from
higher insurance cost.
Williams Hospitality revenues (before intersegment elimination) increased to
$7,736,000 in the six months ended December 31, 1994 from $5,340,000 in the six
months ended December 31, 1993. This increase was primarily from increased fees
for certain centralized services provided to the Company's affiliated
hotel/casino properties.
The equity in loss of nonconsolidated affiliates was ($3,880,000) in the six
months ended December 31, 1994 as compared with equity in loss of
nonconsolidated affiliate (the El San Juan) of ($1,375,000) in the six months
ended December 31, 1993. The increased loss was primarily due to the Company's
equity in net loss from the newly opened El Conquistador Hotel and Casino that
was ($3,117,000) in the six months ended December 31, 1994 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 ($763,000) in the six months ended December 31, 1994 compared to equity in
loss of ($1,375,000) in the prior year six month period. The El San Juan's
improvement resulted from decreased operating expenses resulting from cost
reduction activities.
10
<PAGE>
FORM 10Q
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 six months ended December 31, 1994 net income was $5,029,000, $.21 per
share, in comparison to $10,559,000, $.44 per share, in the six months ended
December 31, 1993. Net income for the six months ended December 31, 1994
includes $5,184,000, $.22 per share, relating to licensing the distribution of
video games for use on multipurpose home computers mentioned above. The
decreased net income is primarily from lower operating results of the amusement
game business as described above, which includes a net loss of ($.11) per share
from the home video cartridge business, and the hotel/casino business operating
at a net loss of ($2,967,000), ($.12) per share, in the six months ended
December 31, 1994 in comparison to net income of $560,000, $.02 per share, in
the prior year six 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.
11
<PAGE>
FORM 10Q
PART II
OTHER INFORMATION
ITEM 6.(A) EXHIBITS
- - - -------------------
Amended and Restated Employment Agreement dates October 27, 1994, between
Registrant and Louis J. Nicastro.
Exhibit 27 - Financial Data Schedule
II-1
<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: February 7, 1995 By: /S/ Harold H. Bach, Jr.
----------------------------
Harold H. Bach, Jr.
Vice President-Finance
Principal Financial and
Chief Accounting Officer
II-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 23,337
<SECURITIES> 69,300
<RECEIVABLES> 73,526
<ALLOWANCES> 1,221
<INVENTORY> 40,112
<CURRENT-ASSETS> 211,194
<PP&E> 121,502
<DEPRECIATION> 47,463
<TOTAL-ASSETS> 374,256
<CURRENT-LIABILITIES> 71,908
<BONDS> 85,906
<COMMON> 12,083
0
0
<OTHER-SE> 179,288
<TOTAL-LIABILITY-AND-EQUITY> 374,256
<SALES> 160,653
<TOTAL-REVENUES> 194,946
<CGS> 129,001
<TOTAL-COSTS> 151,808
<OTHER-EXPENSES> 5,570
<LOSS-PROVISION> 900
<INTEREST-EXPENSE> 3,759
<INCOME-PRETAX> 10,028
<INCOME-TAX> 3,939
<INCOME-CONTINUING> 5,029
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,029
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
<PAGE>
Item 6.(a) Exhibits
1994 AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT dated October 27, 1994, by and between WMS INDUSTRIES INC.,
a Delaware corporation ("WMS"), with offices at 3401 North California Avenue,
Chicago, Illinois 60618 and LOUIS J. NICASTRO ("Nicastro"), residing at Cleft
Road, Mill Neck, New York 11765.
W I T N E S S E T H :
-------------------
WHEREAS, Nicastro is at present the Chairman of the Board and Co-Chief
Executive Officer of WMS and has been performing services for WMS pursuant to
the terms of an Amended and Restated Employment Agreement between Nicastro and
WMS, dated as of September 1, 1991 (the "Old Agreement"); and
WHEREAS, WMS desires to retain the services of Nicastro beyond the
term of the Old Agreement; and WMS and Nicastro mutually desire to amend and
restate the Old Agreement, pursuant to this Agreement, which will supersede the
Old Agreement and shall constitute the complete agreement of the parties with
respect to and set forth all of the terms of the employment of Nicastro as
Chairman of the Board and Co-Chief Executive Officer of WMS.
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements hereinafter set forth, the parties hereto agree as follows:
1. WMS hereby employs Nicastro, and Nicastro agrees to be employed by
WMS pursuant hereto, to perform the duties of the Chairman of the Board and Co-
Chief Executive Officer of WMS, subject to the control and direction of the
Board of Directors of WMS. Except with the consent of Nicastro, the principal
place from which he shall perform his duties shall not be located elsewhere than
in New York City, New York or its environs.
<PAGE>
2. The term of Nicastro's employment hereunder shall commence on the
date hereof and terminate on July 31, 1999 (the "Original Term"). Upon the
expiration of the Original Term, Nicastro's employment with WMS shall thereafter
continue from year to year (the "Extended Term"); provided, however, that
Nicastro's services hereunder may be terminated by either party, effective upon
expiration of the Original Term or the Extended Term upon written notice from
the terminating party to the other party dated and received at least six (6)
months prior to the respective expiration date, and provided further, in the
event of the "total disability" of Nicastro (as hereinafter defined), any right
of WMS to terminate Nicastro's services shall be subject to the provisions of
Paragraph 7 of this Agreement.
3. (a) As full compensation for his services hereunder, WMS shall
pay to Nicastro in respect of each year of his employment hereunder, a base
salary at the rate of $682,500 per annum, payable in equal semi-monthly
installments, or such greater amount as the Board of Directors of WMS shall from
time to time determine.
(b) In addition to other compensation hereunder, Nicastro shall be
entitled to participate in and receive the benefits of all pension and
retirement plans and bonuses, group health, life insurance and hospital, medical
and dental plans, and all other employee benefits and perquisites, including,
without limitation, vacations (not less than four weeks per annum) generally
available to senior executive employees of WMS.
4. During the term of this Agreement and so long as payments are
being made to Nicastro, his wife Elaine or any other person or persons pursuant
to Paragraph 6 hereof, WMS shall reimburse Nicastro, or Elaine if she shall
survive him, for all medical and dental expenses incurred by him and Elaine to
the extent such expenses are not otherwise reimbursed by
2
<PAGE>
insurance provided by WMS. WMS shall also reimburse Nicastro for all expenses
incurred by him in connection with the business of WMS including, but not
limited to, such items as entertainment, traveling, hotel, gifts and similar
items as shall be deemed necessary and commensurate with his position as
Chairman of the Board and Co-Chief Executive Officer of WMS. Nicastro will
present receipts or vouchers for any requested reimbursements in accordance with
WMS's normal policy and will comply with any appropriate procedures established
by WMS to provide for payment or withholding of income or other taxes as may be
required by law to be paid or withheld in connection with any such
reimbursements.
5. Nicastro agrees that, throughout the period in which he is
required to perform services hereunder, he will devote his attention, knowledge
and skills faithfully, diligently and to the best of his ability in furtherance
of the business of WMS and businesses in which WMS has an interest, and in full
performance of the duties assigned to him hereunder, subject, at all times, to
the direction and control of the Board of Directors of WMS, and he shall not,
throughout such period, enter into the service of, or be employed in any
capacity or for any purpose whatsoever by any person, firm or corporation other
than WMS and businesses in which WMS has an interest, except as permitted below,
if such other services or employment would interfere with the performance of his
duties hereunder. Nothing contained in this Paragraph 5 shall be deemed to
prohibit Nicastro from (i) investing his assets or funds, so long as the
business of any such entity in which he shall make his investments shall not be
in direct competition with that of WMS, except that Nicastro may invest in a
corporate entity in competition with WMS if such corporation's stock is listed
for trading on a national stock exchange or traded in the over-the-counter
market and Nicastro's holdings therein represent less
3
<PAGE>
than 5% of the outstanding stock thereof; or (ii) acting as a director, trustee,
officer, or upon a committee of any other firm, trust or corporation where such
positions do not unreasonably interfere with the services to be rendered by
Nicastro hereunder. WMS acknowledges that Nicastro may continue to perform
services for businesses in which WMS had an interest at the time his services
commenced even after WMS's interest terminates, so long as such services do not
unreasonably interfere with the services to be rendered by Nicastro hereunder.
6. (a) Upon the death of Nicastro at any time, whether during his
employment by WMS or after his "Retirement Date" (as hereinafter defined), for a
period of fifteen (15) years after the date of Nicastro's death, WMS shall pay
death benefits to his wife Elaine or to such other person or persons as he
shall, at his option, from time to time designate by written instrument
delivered to WMS, each subsequent designation to be deemed to revoke all prior
designations or, if his wife Elaine shall predecease him and no such designation
is made, to his estate, in an annual amount equal to (i) one-half ( 1/2) of the
aggregate annual base salary payable to Nicastro as of his date of death if such
death occurs during his employment by WMS, or (ii) the retirement benefit
payable under Paragraph 6(b), if such death occurs after the Retirement Date,
but in no event less than $341,250 per annum, payable in equal monthly payments
commencing on the first day of the first month following the date of death.
(b) On the first day of the first month following his Retirement Date
and on the first day of each month thereafter until his death, WMS shall pay to
Nicastro in equal monthly payments, an annual retirement benefit in an amount
equal to one-half ( 1/2) of the aggregate annual base salary payable to Nicastro
as of the Retirement Date, but in no event less than $341,250 per annum.
4
<PAGE>
(c) Nicastro's Retirement Date shall be July 31, 1999, or such earlier
date as Nicastro's employment may terminate under Paragraphs 7 or 9 of this
Agreement.
(d) The medical and dental benefits provided by Paragraph 4 and the
death benefits provided by Paragraph 6 hereof shall be payable notwithstanding
the termination of Nicastro's employment by WMS for any reason or the
resignation of Nicastro at any time after the date hereof.
(e) The retirement benefits provided in Paragraph 6 hereof which have
not heretofore been vested shall vest ratably over the period October 27, 1994
through July 31, 1999 (or such earlier date as Nicastro's employment may
terminate under Paragraphs 7 or 9 of this Agreement) and such vested amounts
shall be payable notwithstanding the termination of Nicastro's employment by WMS
for any reason or the resignation of Nicastro at any time after the date hereof,
provided, that Nicastro is not in material breach of the provisions hereof.
7. Nicastro shall receive full compensation for any period of illness
or incapacity during the term of his employment hereunder. Notwithstanding the
foregoing, if such illness or incapacity shall have disabled Nicastro from
performing his duties hereunder for a period of more than six (6) consecutive
months (hereinafter referred to as "total disability"), WMS shall thereafter
have the right to terminate Nicastro's employment under this Agreement upon
giving at least thirty (30) days' written notice of its intention to do so. If
Nicastro shall resume his duties within thirty (30) days following the receipt
of such notice and shall perform such duties on a regular basis for two (2)
consecutive months thereafter, this Agreement and Nicastro's employment
hereunder shall continue in full force and WMS's notice of intention to
terminate shall have no further force or validity. In the event that WMS shall
give such notice of
5
<PAGE>
termination and Nicastro shall not timely resume his duties hereunder,
Nicastro's employment under this Agreement shall terminate on the date set forth
in the notice but all other applicable terms of this Agreement, including, among
other things, the obligation of WMS to pay medical and dental benefits under
Paragraph 4 above and death and retirement benefits under Paragraph 6 above,
shall remain in full force and effect.
8. Nicastro covenants and agrees as follows:
(a) During the period of his employment hereunder, and for a further
period of one (1) year thereafter he shall not, except as permitted in Paragraph
5 hereof, directly or indirectly own, manage, operate, join, control,
participate in, invest in, or otherwise be connected with, in any manner,
whether as an officer, director, employee, partner, investor or otherwise, or
allow his name to be used in, any business or enterprise which manufactures,
sells or offers for sale any products similar to the major lines of products
then being sold, by, or competes in any way with, WMS in any city or trade
territory in the United States (including Puerto Rico) or Canada where WMS is
directly or indirectly, through distributors or others, engaged in the operation
of its business.
(b) During the term of this Agreement and thereafter, he shall hold in
a fiduciary capacity for the benefit of WMS, all information, knowledge and data
relating to or concerned with its operations, sales, businesses and affairs,
including but not limited to, the names of customers which are or were obtained
by Nicastro during his employment by WMS; and he shall not disclose or divulge
any such information, knowledge or data to any person, firm or corporation other
than to WMS or its designees, except as may otherwise be required in connection
with the business and affairs of WMS.
6
<PAGE>
(c) After retirement, Nicastro will (to the extent that he is
physically able) continue to serve as Chairman of the Board of Directors of WMS
and as Chairman and Chief Executive Officer of Williams Hospitality Group Inc.
and will render such advisory and consulting services to WMS and its affiliated
companies as may be reasonably requested by WMS. Nicastro shall not be entitled
to additional compensation for such services unless such services require him to
devote more than four (4) business days a month.
Nicastro acknowledges that the provisions of this Paragraph 8 are
reasonable and necessary for the protection of WMS and that each provision, and
the period or periods of time, geographic areas and types and scope of
restrictions on the activities specified herein, are and are intended to be,
divisible. In the event that any provision of this Paragraph 8, including any
sentence, clause or part hereof, shall be deemed contrary to law or invalid or
unenforceable in any respect by a court of competent jurisdiction, the remaining
provisions shall not be affected, but shall, subject to the discretion of such
court, remain in full force and effect and any invalid and unenforceable
provisions shall be deemed, without further action on the part of the parties
hereto, modified, amended and limited to the extent necessary to render the same
valid and enforceable.
9. (a) Except as provided in the next succeeding subparagraph, in
the event of a breach or threatened breach by either WMS or Nicastro of any
obligations under this Agreement, the parties hereto acknowledge that WMS or
Nicastro, as the case may be, will not have an adequate remedy at law, and shall
be entitled to such equitable and injunctive relief as may be available to
restrain violations of the provisions of this Agreement. Nothing in this
subparagraph shall be construed as prohibiting the parties hereto from pursuing
any other
7
<PAGE>
remedies available for such breach or threatened breach, including the recovery
of damages for such breach or threatened breach.
(b) Notwithstanding anything contained in the preceding subparagraph
to the contrary, (A) if WMS terminates Nicastro's employment in violation of
this Agreement, and Nicastro gives the written notice to WMS provided for in
subparagraph 9 hereof; or (B) if at any time during the term of this Agreement
individuals who presently constitute the Board of Directors of WMS, or who have
been recommended for election to the Board by two-thirds of the Board consisting
of individuals who are either presently on the Board or such recommended
successors (such present directors or recommended directors being hereafter
referred to as "Acceptable Directors"), cease for any reason to constitute at
least a majority of such Board, and Nicastro gives the written notice to WMS
provided for in subparagraph 9 hereof; WMS shall pay to Nicastro within fifteen
(15) days after such termination pursuant to clause (A) hereof or termination
pursuant to clause (B) hereof, as the case may be (as severance pay and
liquidated damages, in lieu of any other rights or remedies which might
otherwise be available to him under this Agreement, and without mitigation of
any kind or amount, whether or not Nicastro shall seek or accept other
employment), a lump sum payment equal in amount to the sum of:
(i) the aggregate base salary which would have been payable to
Nicastro pursuant to subparagraph 3 of this Agreement during the remaining term
hereof (for purposes of this subparagraph 9, the rate of Nicastro's base salary
shall be deemed to be Nicastro's base salary at the highest annual rate in
effect during the one-year period immediately preceding termination); and
8
<PAGE>
(ii) ten (10) times the annual retirement benefit which would have
been payable to Nicastro pursuant to subparagraph 6 of this Agreement (for
purposes of this subparagraph 9 Nicastro's Retirement Date shall be deemed the
date of such termination if such Retirement Date has not yet actually occurred);
but in no event shall the payment pursuant to subparagraph 9 be less than three
(3) times Nicastro's base salary at the highest annual rate in effect during the
one-year period immediately preceding termination. The payment provided for in
this subparagraph 9 shall be paid in full, without discount to present value.
In addition to such lump sum payment to Nicastro, Nicastro shall have the right,
exercisable within thirty (30) days after such termination pursuant to clause
(A) or (B) of this subparagraph 9, to sell to WMS any or all options held by
Nicastro to purchase WMS common stock and options to purchase the securities of
any other company at least 20% of the voting securities of which are owned by
WMS ("Related Company") at a price per share equal to the amount by which (i)
the average closing price of the WMS common stock or the securities of such
Related Company, as the case may be, on the New York Stock Exchange (or other
applicable trading market if not listed on the New York Stock Exchange) during
the thirty-day period immediately preceding the date on which he notifies WMS of
his election to sell such options plus the fair market value per share of other
securities or assets which Nicastro would be entitled to receive upon exercise
of such options exceeds (ii) the option exercise price for each such share. All
options not yet fully exercisable shall be deemed fully exercisable for purposes
of the foregoing computation. Such payments shall be made by WMS at the time
provided in this subparagraph 9 and shall not require any further authorization
or approval of the Board of Directors of WMS.
9
<PAGE>
In addition to the foregoing, the obligations of WMS to pay medical
and dental benefits pursuant to Paragraph 4 hereof and death benefits pursuant
to Paragraph 6 hereof shall remain in full force and effect.
(c) WMS shall be deemed to have terminated Nicastro's employment in
violation of this Agreement for all purposes hereunder, if, among other things,
without his prior written consent,
(i) Nicastro is placed in any position of lesser stature than that of
Chairman of the Board and Co-Chief Executive Officer of WMS; is assigned duties
inconsistent with such position or duties which, if performed, would result in a
significant change in the nature or scope of powers, authority, functions or
duties inherent in such position on the date hereof; is assigned performance
requirements or working conditions which are at variance with the performance
requirements and working conditions in effect on the date hereof; or is accorded
treatment on a general basis which is in derogation of his status as Chairman of
the Board and Co-Chief Executive Officer;
(ii) Nicastro ceases to serve as a member of the Board of Directors
of WMS;
(iii) WMS discontinues or reduces (from the highest level in effect
during the term of this Agreement) the amount of base salary payable to Nicastro
pursuant to this Agreement; or
(iv) WMS discontinues or reduces (from the level in effect on the date
hereof) the perquisites or fringe benefits inherent in Nicastro's position on
the date hereof;
10
<PAGE>
and Nicastro gives written notice of his election to deem such act to constitute
termination, in which event termination pursuant to this subparagraph 9 shall
be deemed to have occurred upon the date of the giving of such notice.
(d) In the event of a change in the constitution of the Board of
Directors of WMS such that it does not include a majority of Acceptable
Directors as provided in clause (B) of subparagraph 9 hereof, and in the
further event that at any time thereafter, Nicastro gives written notice of the
election to terminate this Agreement, termination pursuant to this subparagraph
9 shall be deemed to have occurred upon the date of the giving of such notice.
(e) Notwithstanding the foregoing provisions of this Paragraph 9, in
the event of termination of Nicastro's employment pursuant to clause (B) of
subparagraph 9 hereof, the following provisions shall apply:
(i) The maximum payment to be made to Nicastro pursuant to
subparagraph 9 hereof shall be equal to the lesser of (A) the amount which
would be payable to Nicastro pursuant to said subparagraph 9 in the absence of
this subparagraph 9, or (B) 2.99 times the average annual compensation paid by
WMS to Nicastro which was includible in Nicastro's gross income for the five (5)
most recent taxable years of Nicastro ending prior to the date Nicastro gives
notice of termination of his employment pursuant to subparagraph 9 hereof; and
(ii) At Nicastro's election, he may receive (A) the aggregate deferred
compensation benefits payable pursuant to subparagraph 9 hereof discounted to
"present value" as determined in accordance with Section 280(G)(d)(4) of the
Internal Revenue Code of
11
<PAGE>
1986; or (B) such deferred compensation benefits at the time otherwise payable
under Paragraph 6 hereof, without acceleration or discount to "present value."
10. This Agreement may not be assigned by Nicastro but shall inure to
the benefit of and shall be binding upon the successors and assigns of WMS.
11. All notices shall be addressed to each party thereto at its
address set forth on the first page of this Agreement or as such address may be
changed from time to time by notice in accordance with this Paragraph 11 and
shall be delivered in person or sent by mail with first class postage prepaid or
by express mail service for next day delivery or other responsible overnight
delivery service, and, if sent by mail shall be deemed to have been given and
received two (2) business days after the date of deposit in the mails and, if
sent by express mail service or overnight delivery service shall be deemed to
have been given and received on the next business day after the date of the
delivery of the notice to such service.
12. Any waiver by either WMS or Nicastro of any breach of any
provisions of this Agreement by the other party shall not operate or be
construed as a waiver of any other or subsequent breach hereof.
13. This Agreement shall be governed and construed in accordance with
the substantive laws of the State of New York applicable to agreements to be
performed entirely therein.
14. No amendment or modification of this Agreement shall be valid and
binding unless made in writing and signed by both of the parties hereto.
15. In the event that any provisions of this Agreement, including any
sentence, clause or part hereof, shall be deemed contrary to law or invalid or
unenforceable in any respect by
12
<PAGE>
a court of competent jurisdiction, the remaining provisions shall not be
affected, but shall, subject to the discretion of such court, remain in full
force and effect and any invalid and unenforceable provision shall be deemed,
without further action on the part of the parties hereto, modified, amended and
limited to the extent necessary to render the same valid and enforceable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
WMS INDUSTRIES INC.
By: /s/ Harold H. Bach
----------------------------
Harold H. Bach, Jr.
Vice President-Finance
By: /s/ William C. Bartholomay
----------------------------
William C. Bartholomay
Chairman of Compensation
Committee
/s/ Louis J. Nicastro
--------------------------
LOUIS J. NICASTRO
13
