<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, 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) 961-1111
----------------------------
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: 24,126,300 shares of common
stock, $.50 par value, were outstanding at January 31, 1996 after deducting
54,312 shares held as treasury shares.
<PAGE>
WMS INDUSTRIES INC.
-------------
INDEX
<TABLE>
<CAPTION>
PAGE NO
-------
<S> <C>
PART I. FINANCIAL INFORMATION:
- -------
ITEM 1. Financial Statements:
------- Condensed Consolidated Statements of Income -
Three and six months ended December 31, 1995 and 1994....... 2
Condensed Consolidated Balance Sheets -
December 31, 1995 and June 30, 1995......................... 3-4
Condensed Consolidated Statements of Cash Flows -
Three and six months ended December 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 6.(a) Exhibits.................................................... 13
----------
SIGNATURE ............................................................ 14
</TABLE>
<PAGE>
WMS INDUSTRIES INC.
-------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
--------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Net sales - amusement games............................................... $113,216 $ 93,767 $197,456 $160,653
Management fees - Williams Hospitality.................................... 3,136 3,343 5,280 5,609
Condado Plaza hotel/casino:
Casino.................................................................. 6,210 6,828 11,137 13,148
Casino promotional allowances........................................... (2,153) (1,836) (3,973) (3,118)
Rooms................................................................... 6,341 6,389 11,507 11,365
Food and beverage....................................................... 3,203 3,262 5,475 5,720
Other................................................................... 715 806 1,430 1,569
-------- -------- -------- --------
14,316 15,449 25,576 28,684
-------- -------- -------- --------
Total revenues.............................................................. 130,668 112,559 228,312 194,946
Costs and expenses:
Cost of sales (excluding depreciation) - amusement games.................. 82,088 75,494 146,109 129,001
Williams Hospitality operating expenses (excluding depreciation).......... 887 1,206 1,954 2,466
Condado Plaza operating expenses (excluding depreciation):
Casino.................................................................. 2,816 3,593 5,718 7,191
Rooms................................................................... 2,183 2,268 4,278 4,562
Food and beverage....................................................... 2,655 2,713 4,938 5,132
Other................................................................... 1,363 1,553 2,615 3,456
-------- -------- -------- --------
9,017 10,127 17,549 20,341
Selling and administrative................................................ 19,264 10,269 35,864 22,664
Depreciation and amortization............................................. 2,808 2,857 5,949 5,570
Equity in loss of nonconsolidated affiliates.............................. 1,510 1,806 3,597 3,880
-------- -------- -------- --------
Total costs and expenses.................................................... 115,574 101,759 211,022 183,922
-------- -------- -------- --------
Income from operations...................................................... 15,094 10,800 17,290 11,024
Interest and other income................................................... 1,191 1,413 2,699 2,763
Interest expense............................................................ (1,749) (1,847) (3,546) (3,759)
-------- -------- -------- --------
Income before tax provision and minority interests.......................... 14,536 10,366 16,443 10,028
Provision for income taxes.................................................. (4,747) (3,474) (6,088) (3,939)
Minority interests in income................................................ (896) (790) (1,194) (1,060)
-------- -------- -------- --------
Net income.................................................................. $ 8,893 $ 6,102 $ 9,161 $ 5,029
======== ======== ======== ========
Net income per share of common stock........................................ $ 0.37 $ 0.25 $ 0.38 $ 0.21
======== ======== ======== ========
Shares used in calculating per share amounts................................ 24,120 24,098 24,115 24,098
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
WMS INDUSTRIES INC.
-------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
1995 1995
-------------- ----------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents......................................... $ 75,052 $ 45,964
Short-term investments............................................ - 47,863
Receivables, net of $5,491 and $1,914 allowance................... 89,650 57,919
Receivables from nonconsolidated affiliates....................... 4,025 3,376
Inventories, at lower of cost (Fifo) or market:
Raw materials and work in progress............................... 39,366 36,667
Finished goods................................................... 6,471 5,221
-------- --------
45,837 41,888
Other current assets.............................................. 6,045 6,218
-------- --------
Total current assets............................................. 220,609 203,228
Investments in, receivables and advances to
nonconsolidated affiliates........................................ 23,750 26,320
Investment in marketable equity securities......................... 23,687 23,187
Property, plant and equipment...................................... 140,010 133,564
Less: accumulated depreciation..................................... (57,283) (52,370)
-------- --------
82,727 81,194
Excess of purchase cost over amount assigned to net assets
acquired, net of accumulated amortization of $4,288 and $3,740.... 19,561 20,109
Other assets....................................................... 32,984 32,028
-------- --------
$403,318 $386,066
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
WMS INDUSTRIES INC.
------------
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
1995 1995
-------------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable.............................................. $ 25,319 $ 33,922
Accrued compensation and related benefits..................... 5,019 5,859
Income taxes payable.......................................... 8,398 5,328
Deferred income taxes......................................... 645 1,819
Other accrued liabilities..................................... 26,177 11,154
Notes Payable................................................. 2,000 2,000
Current maturities of long-term debt.......................... 2,923 3,813
---------- ----------
Total current liabilities.................................... 70,481 63,895
Long-term debt, less current maturities........................ 82,914 84,428
Deferred income taxes.......................................... 4,705 4,088
Other noncurrent liabilities................................... 9,232 8,721
Minority interests............................................. 17,556 16,363
Stockholders' equity:
Preferred stock (5,000,000 shares authorized, none issued).... - -
Common stock (24,180,612 and 24,165,612 shares issued)........ 12,090 12,083
Additional paid-in capital.................................... 82,036 81,851
Retained earnings............................................. 128,528 119,367
---------- ----------
222,654 213,301
Treasury stock, at cost (54,312 and 56,312 shares)............ (153) (159)
Unrealized loss on noncurrent marketable equity securities.... (4,071) (4,571)
---------- ----------
Total stockholders' equity................................... 218,430 208,571
---------- ----------
$403,318 $386,066
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
WMS INDUSTRIES INC.
_____________
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
Six months ended
December 31,
------------------
1995 1994
-------- --------
Operating activities:
Net income............................................... $ 9,161 $ 5,029
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization......................... 5,949 5,570
Receivables provision................................. 4,982 3,764
Undistributed loss of nonconsolidated affiliates...... 3,597 3,880
Minority interests.................................... 1,194 1,060
Deferred income taxes................................. (557) (107)
Tax benefit from exercise of common stock options..... 124 21
Decrease resulting from changes in operating assets
and liabilities, net................................. (34,689) (8,926)
-------- --------
Net cash provided (used) by operating activities......... (10,239) 10,291
Investing activities:
Purchase of property, plant and equipment................ (6,464) (7,476)
Purchase of additional shares of subsidiaries............ -- (3,925)
Net change in short-term investments..................... 47,863 (6,400)
Other.................................................... 304 (1,114)
-------- --------
Net cash provided (used) by investing activities......... 41,703 (18,915)
Financing activities:
Payment of long-term debt................................ (2,404) (2,315)
Cash received on exercise of common stock options........ 28 37
-------- --------
Net cash used by financing activities.................... (2,376) (2,278)
-------- --------
Increase (decrease) in cash and cash equivalents......... 29,088 (10,902)
Cash and cash equivalents at beginning of period......... 45,964 34,239
-------- --------
Cash and cash equivalents at end of period............... $ 75,052 $ 23,337
======== ========
See notes to condensed consolidated financial statements.
5
<PAGE>
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, 1995 are not necessarily indicative of the
results that may be expected for the fiscal year ending June 30, 1996. 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, 1995.
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, 1995 and 1994. The El Conquistador Hotel & Casino
("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, 1995 and 1994 the Company's 23.3%
indirect interest in the results of operations of the El Conquistador for
the three months ended September 30, 1995 and 1994 and the six months ended
December 31, 1995 and 1994 includes operations of the El Conquistador for
the six months ended September 30, 1995 and 1994.
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 Six months ended
December 31, December 31,
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues............ $ 13,617 $ 14,756 $ 22,848 $ 25,228
Costs and expenses.. (13,095) (14,181) (25,026) (26,755)
-------- -------- -------- --------
Net income (loss)... $ 522 $ 575 ($2,178) ($1,527)
======== ======== ======== ========
</TABLE>
6
<PAGE>
The summarized statement of operations information of WKA EL Con
Associates, in which the Company has a 46.5% partnership interest, is as
follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Costs and expenses.................................. ($ 42) ($108) ($117) ($211)
Equity in 50% of the El Conquistador net loss for
the three and six months ended September 30,
1995 and 1994..................................... (3,962) (5,215) (5,585) (7,972)
Equity in net income of Las Casitas................. 198 824 313 1,486
------- ------- ------- -------
Net loss............................................ ($3,806) ($4,499) ($5,389) ($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 (in thousands):
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
---------------------- ----------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues............................................ $ 13,709 $ 13,908 $ 37,838 $ 36,527
Costs and expenses.................................. (21,632) (24,337) (49,007) (52,470)
--------- --------- --------- ---------
Net loss............................................ ($ 7,923) ($10,429) ($11,169) ($15,943)
========= ========= ========= =========
</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 EVENTS
On October 18, 1995, Bally Gaming International, Inc. (Bally Gaming)
reported the unilateral termination of the June 21, 1995 Agreement and
Plan of Merger (Agreement) with the Company and that it had entered
into a merger agreement with Alliance Gaming Corporation. The Company
does not intend to contest Bally Gaming and Alliance's decision to
merge. On October 23, 1995, the Company commenced a lawsuit against
Bally Gaming for its failure to pay $4.8 million in termination fees
due the Company under the terms of the Agreement and for additional
damages.
At December 31, 1995, the Company had incurred approximately $2.2 million
in acquisition costs from the proposed merger, included as noncurrent other
assets in the Balance Sheet at December 31, 1995, which will be offset
against the termination fees when received.
7
<PAGE>
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, 1995 resulted in net cash provided of
$29,088,000 as compared with net cash used of $10,902,000 during the six
months ended December 31, 1994. See condensed consolidated statements of
cash flows on page 5.
Operating activities used cash of $10,239,000 during the six months ended
December 31, 1995 compared with cash provided of $10,291,000 for the six
months ended December 31, 1994. This change results from the use of cash
since June 30, 1995 for operating assets and liabilities, net, primarily
for an increase in receivables from higher sales of home video games in the
fiscal 1996 period. The increase in receivables was partially offset by an
increase in accrued liabilities of the home video games business.
Investing cash flows used for the purchase of property, plant and equipment
during the six months ended December 31, 1995 were $6,464,000 as compared
with $7,476,000 during the six months ended December 31, 1994. The asset
additions were primarily for the amusement games business. Investing cash
flows provided by the net sale of short-term investments were $47,863,000
in the 1995 period compared to $6,400,000 used for the net purchase of
short-term investments in the 1994 period.
Cash used by financing activities for the payment of long-term debt was
$2,404,000 for the six months ended December 31, 1995 compared with cash
used of $2,315,000 for the same period last year.
The Condado Plaza has a $2,000,000 bank line of credit available which was
fully utilized at December 31, 1995 and the El San Juan has a $1,000,000
bank line of credit available of which $800,000 was borrowed at December
31, 1995. Condado Plaza and El San Juan long-term debt agreements provide
that advances, dividends and other payments to the owners are to be based
on defined levels of cash flow from the respective hotel/casino. 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, 1995, there were no borrowings from this line of credit but
there were outstanding letters of credit totaling $5,769,000. 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 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.
8
<PAGE>
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 Six months ended
December 31, December 31,
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Amusement games...................................... $113,216 $ 93,767 $197,456 $160,653
Condado Plaza........................................ 14,316 15,449 25,576 28,684
Williams Hospitality................................. 4,072 4,534 6,836 7,736
Intersegment revenues elimination - management fees.. (936) (1,191) (1,556) (2,127)
-------- -------- -------- --------
Total revenues..................................... $130,668 $112,559 $228,312 $194,946
======== ======== ======== ========
SEGMENT OPERATING PROFIT (LOSS):
Amusement games...................................... $ 14,006 $ 10,754 $ 19,615 $ 14,516
Condado Plaza........................................ 1,448 588 108 (872)
Williams Hospitality................................. 2,642 2,582 3,765 3,721
-------- -------- -------- --------
Total segment operating profit..................... 18,096 13,924 23,488 17,365
Equity in loss of nonconsolidated affiliates......... (1,510) (1,806) (3,597) (3,880)
General corporate expenses........................... (1,492) (1,318) (2,601) (2,461)
-------- -------- -------- --------
Income from operations............................... 15,094 10,800 17,290 11,024
Interest and other income............................ 1,191 1,413 2,699 2,763
Interest expense..................................... (1,749) (1,847) (3,546) (3,759)
-------- -------- -------- --------
Income before tax provision and minority interests... $ 14,536 $ 10,366 $ 16,443 $ 10,028
======== ======== ======== ========
</TABLE>
THREE MONTH ENDED DECEMBER 31, 1995 COMPARED WITH
THREE MONTH ENDED DECEMBER 31, 1994
Consolidated revenues increased to $130,668,000 in the quarter ended December
31, 1995 from $112,559,000 in the quarter ended December 31, 1994. Revenues of
the amusement games business increased 21% to $113,216,000 in the quarter ended
December 31, 1995. The increase in amusement games revenues results from a
significant increase in sales of home video games as compared to the prior year
quarter. Home video game sales for the quarter ended December 31, 1995
consisted primarily of shipments of Doom and Mortal Kombat 3. The increased home
video game revenues were partially offset by lower licensing income and lower
revenue from sales of coin operated games. Coin operated game sales were lower
because of a 55% decrease in pinball sales caused by a soft market and a
significant decrease in the sales of coin operated video games in the quarter
ended December 31, 1995 because of strong sales of Killer Instinct in the prior
year quarter.
Gross profit (excluding depreciation) of the amusement games business increased
in the quarter ended December 31, 1995 to $31,128,000 (27.5% of amusement games
business revenues) compared with $18,273,000 (19.5% of such revenues) in the
quarter ended December 31, 1994. Gross profit in the quarter ended December 31,
1994 included $8,100,000 from the licensing of the distribution of video games
for personal computers, without which gross profit would have been $10,173,000.
The improvement in gross profit resulted from significantly higher revenues from
home video games that have a higher gross margin than coin operated game sales
that were a smaller proportion of revenues as described above. As planned,
research and development expense increased 56% to $10,027,000 in the quarter
ended December 31, 1995 from $6,413,000 in the prior year quarter reducing gross
profit. The increased research and development expenses include expenses
associated with the Company's development of gaming products and new video
games.
9
<PAGE>
Operating profit of the amusement games business on a segment basis increased to
$14,006,000 in the quarter ended December 31, 1995 from $10,754,000 in the prior
year second quarter which included operating profit of $8,100,000 from licensing
the distribution of video games for use on personal computers. The improvement
in operating profit was primarily due to the same reasons as the increase in
gross profit noted above but reduced by higher selling and administrative and
depreciation expenses. The increase in selling and administrative expense of
the amusement games business was primarily caused by an increase of $9,073,000
of selling and administrative expense in the home video game business, primarily
advertising to support new product releases.
Condado Plaza revenues were $14,316,000 in the quarter ended December 31, 1995
compared to $15,449,000 in the quarter ended December 31, 1994. Hotel revenues
were in line with the prior year quarter while casino net revenue decreased
primarily due to a lower win percentage and higher casino promotional expenses.
The Condado Plaza's profit before selling and administrative expense (excluding
depreciation) of $5,299,000 (37.0% of the Condado Plaza revenues) in the quarter
ended December 31, 1995 was in line with the prior year quarter profit of
$5,322,000 (34.4% of the Condado Plaza revenues). The lower revenues mentioned
above were nearly offset by cost reductions in both the hotel and casino.
The Condado Plaza on a segment basis had operating income of $1,448,000 for the
December 31, 1995 quarter compared with operating income of $588,000 in the
quarter ended December 31, 1994. Operating income increased as the result of
lower administrative and depreciation expenses in comparison with the prior year
quarter.
Williams Hospitality revenues (before intersegment elimination) decreased to
$4,072,000 in the quarter ended December 31, 1995 from $4,534,000 in the quarter
ended December 31, 1994. The Williams Hospitality lower revenue is primarily
from reduced centralized services provided to the properties since certain
services are now performed at the properties.
The equity in loss of nonconsolidated affiliates was ($1,510,000) in the quarter
ended December 31, 1995 as compared with ($1,806,000) in the quarter ended
December 31, 1994. The change included a decrease in the Company's equity in
net loss from the El Conquistador Hotel and Casino that was ($1,771,000) in the
quarter ended December 31, 1995 compared with ($2,094,000) in the December 31,
1994 quarter. 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 of $261,000 in the quarter ended
December 31, 1995 compares to equity in income of $288,000 in the prior year
quarter. The El San Juan's hotel revenues increased but the casino experienced
a 31% decline in its net revenues from both lower table play and lower win
percentage. In spite of lower casino revenues, the income level was maintained
because of reduced casino operating expenses and a lower provision for bad
debts.
Consolidated selling and administrative expense increased from the prior year
quarter primarily as a result of the increased selling and administration
expenses of the home video game business to support new product releases as
noted above.
Net income in the second quarter of fiscal 1996 was $8,893,000, $.37 per share,
in comparison to net income of $6,102,000, $.25 per share, in the fiscal 1995
second quarter which included net income of $5,184,000, $.22 per share, from
licensing the distribution of video games for use on personal computers. The
improvement in the second quarter net income compared to the prior year second
quarter was due to significantly higher home video game sales. Higher research
and development expenses, benefits of which are expected to be realized in
future periods, and lower coin operated game sales and licensing income reduced
fiscal 1996 second quarter net income in comparison to the prior year quarter.
The hotel/casino operating results improved with net income of $1,017,000, $.04
per share, in the December 31, 1995 quarter in comparison to a net loss of
($77,000) in the prior year second quarter.
10
<PAGE>
SIX MONTHS ENDED DECEMBER 31, 1995 COMPARED WITH
SIX MONTHS ENDED DECEMBER 31, 1994
Consolidated revenues increased from $194,946,000 in the six months ended
December 31, 1994 to $228,312,000 in the six months ended December 31, 1995.
Revenues of the amusement games business increased 23% to $197,456,000 in the
six months December 31, 1995. The principal reason amusement games revenues
increased was from sales of video games into the home video game market. Home
video game sales for the six months ended December 31, 1995 consisted primarily
of Doom and Mortal Kombat 3. Coin operated amusement games revenues decreased
approximately 37% in the six months ended December 31, 1995 compared to the
December 31, 1994 period. This decrease was due to a 56% decrease in pinball
sales caused by a weak market and a sizeable decrease in coin operated video
game sales when comparing to the strong product releases in the prior year
period.
Gross profit (excluding depreciation) of the amusement games business increased
in the six months ended December 31, 1995 to $51,347,000 (26.0% of amusement
games business revenues) compared with $31,652,000 (19.7% of such revenues) in
the six months ended December 31, 1994. Excluding the $8,100,000 increase in
gross profit from the licensing of the distribution of video games for personal
computers, gross profit from the amusement game business would have been
$23,552,000 in the prior year period. The improvement in gross profit resulted
from significantly higher revenues from home video games that have a higher
gross margin than coin operated game sales that were a smaller proportion of
revenues as described above. A planned increase in research and development
expense to $17,543,000 in the six months ended December 31, 1995 from
$12,772,000 in the prior year reduced gross profit. The increased research and
development expenses include expenses associated with the Company's development
of gaming products and new video games.
Operating profit of the amusement games business on a segment basis increased to
$19,615,000 in the six months ended December 31, 1995 from $14,516,000 in the
six months ended December 31, 1994. This was primarily due to the increase in
gross profit as discussed above partially offset by increased selling and
administrative and depreciation expenses. The increase in selling and
administrative expense of amusement games was primarily caused by a $12,791,000
increase in selling and administration expense for home video games. The home
video games business is expected to incur higher selling expense as a percentage
of sales than the coin operated games business due to the significant promotions
required to support product sales at the retail level. 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.
Condado Plaza revenues were $25,576,000 in the six months ended December 31,
1995 compared to $28,684,000 in the six months ended December 31, 1994. Hotel
revenues were in line with the prior year period while casino net revenue
decreased primarily due to a significantly lower win percentage, notwithstanding
higher table play, and higher casino promotional expenses.
The Condado Plaza's profit before selling and administrative expense (excluding
depreciation) decreased to $8,027,000 (31.3% of the Condado Plaza revenues) in
the six months ended December 31, 1995 from $8,343,000 (29.1% of the Condado
Plaza revenues) in the six months ended December 31, 1994. The decrease was due
to lower revenues as mentioned above nearly offset by lower expenses due to cost
reductions in both the hotel and casino.
The Condado Plaza on a segment basis had operating income of $108,000 for the
six months ended December 31, 1995 compared with an operating loss of ($872,000)
in the six months ended December 31, 1994. The improved results reflect lower
administrative and depreciation expenses in the current six month period.
Williams Hospitality revenues (before intersegment elimination) decreased to
$6,836,000 in the six months ended December 31, 1995 from $7,736,000 in the six
months ended December 31, 1994. The lower revenues at Williams Hospitality are
primarily from reduced centralized services provided to the properties since
certain services are now performed at the properties.
11
<PAGE>
The equity in loss of nonconsolidated affiliates was ($3,597,000) in the six
months ended December 31, 1995 as compared with ($3,880,000) in the six months
ended December 31, 1994. The decreased loss was primarily due to the Company's
equity in net loss from the El Conquistador Hotel and Casino that was
($2,508,000) in the six months ended December 31, 1995 compared to equity in
loss of ($3,117,000) in the prior year period. 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 by 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 ($1,089,000) in the six months ended December 31, 1995 compared to equity in
loss of ($763,000) in the prior year six month period. The El San Juan's hotel
revenues increased in the current six month period but the casino experienced a
36% decline in its net revenues from both lower table play and lower win
percentage. Lower casino revenues were partially offset by lower casino
operating expenses and a lower provision for bad debts.
Consolidated selling and administrative expense increased primarily as a result
of increased selling and administrative expenses of the home game business to
support new product releases as noted above.
The six months ended December 31, 1995 net income was $9,161,000, $.38 per
share, in comparison to $5,029,000, $.21 per share, in the six months ended
December 31, 1994. Net income for the prior year period included $5,184,000,
$.22 per share, related to licensing the distribution of video games for use on
personal computers mentioned above. The improvement in net income over the
prior year six month period was from significantly higher home video game sales.
Higher research and development expenses, benefits of which are expected to be
realized in future periods, and lower coin operated game sales and licensing
income reduced net income in the six months ended December 31, 1995 in
comparison to the prior year six month period. The hotel/casino business
improved over prior year with a net loss of ($1,706,000), ($.07) per share, in
the six months ended December 31, 1995 in comparison to a net loss of
($2,967,000), ($.12) per share, in the prior year six month period.
12
<PAGE>
PART II
OTHER INFORMATION
ITEM 6.(A) EXHIBITS
Exhibit 27 - Financial Data Schedule
13
<PAGE>
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 2, 1996 By: /S/ Harold H. Bach, Jr.
----------------------------
Harold H. Bach, Jr.
Vice President-Finance
Principal Financial and
Chief Accounting Officer
14
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 75,052
<SECURITIES> 0
<RECEIVABLES> 95,141
<ALLOWANCES> 1,539
<INVENTORY> 45,837
<CURRENT-ASSETS> 220,609
<PP&E> 140,010
<DEPRECIATION> 57,283
<TOTAL-ASSETS> 403,318
<CURRENT-LIABILITIES> 70,481
<BONDS> 85,837
<COMMON> 12,090
0
0
<OTHER-SE> 206,340
<TOTAL-LIABILITY-AND-EQUITY> 403,318
<SALES> 197,456
<TOTAL-REVENUES> 228,312
<CGS> 146,109
<TOTAL-COSTS> 165,612
<OTHER-EXPENSES> 5,949
<LOSS-PROVISION> 4,982
<INTEREST-EXPENSE> 3,546
<INCOME-PRETAX> 16,443
<INCOME-TAX> 6,088
<INCOME-CONTINUING> 9,161
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,161
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
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