WMS Industries Inc. (NYSE:WMS) today reported revenue of $162.2
million and net income of $16.1 million, or $0.29 per diluted
share, for its fiscal 2012 second quarter ended December 31, 2011.
The results include a benefit of $2.1 million pre-tax, or $0.02 per
diluted share, from settlement of litigation. These results showed
sequential growth over the September 2011 quarter in which the
Company reported revenues of $155.6 million and diluted earnings
per share of $0.07, inclusive of $0.17 of charges. In the December
2010 quarter, revenue was $199.9 million and net income was $27.0
million, or $0.46 per diluted share, including a $0.02 per diluted
share benefit due to the retroactive reinstatement of the U.S.
Federal Research and Development tax credit.
Recent Highlights:
- Initial jurisdictional approvals
received for more than 20 new for-sale games between October 1,
2011 and December 31, 2011, with approximately two-thirds of these
games featuring new, distinct math models.
- First jurisdictional approval received
in the December quarter for new Epic MONOPOLY™ participation game,
along with several game refresh themes for existing installed
participation products and additional jurisdictional approvals for
THE WIZARD OF OZ™ Journey to Oz™, MONOPOLY Party Train®,
BATTLESHIP™, Leprechaun’s Gold® and Pirate Battle® games.
- WMS’ networked gaming products
installed on approximately 900 gaming machines at more than 50
casino properties in North America, Europe, Asia, Africa and Latin
America, including previously approved Portal applications –
Jackpot Explosion®, Piggy Bankin® and Peng-Wins® – and the Remote
Configuration and Download functionality of the WAGE-NET® networked
gaming system.
- Reached agreement with a major
multi-site casino operator to replace 1,500 Bluebird® gaming
machines with Bluebird2 and Bluebird xD™ units by calendar 2012
year end, along with a commitment to increase WMS’ installed base
of participation gaming machines.
- Surpassed 800,000 unique log-in users
for Player’s Life® Web Services in January 2012.
“Reflecting the quarterly sequential improvements in unit
shipments, revenues, diluted EPS and cash flow from operations, and
the ongoing improvements in the pace of jurisdictional approvals
for our newest products, we believe the inflection point in our
operating and financial performance is now behind us,” said Brian
R. Gamache, Chairman and Chief Executive Officer. “Since the second
half of fiscal 2011, we have acted decisively to realign our
product plans to address near-term customer needs and revenue
opportunities, redirect resources to support the commercialization
of new products and right-size the organization to match current
operating conditions to position WMS for a return to growth. As a
result, we are now capturing revenue opportunities and attaining
operating margin benefits from our realignment, restructuring and
cost containment actions.”
“We expect quarterly sequential improvements in revenues and
operating margin to accelerate in the second half of fiscal 2012,
as the return to a more ratable schedule for the development and
ongoing commercialization of innovative new products continues, as
we realize the benefit of increased demand from new casino
openings, and as we maintain our disciplined focus on improving
operational execution and cost containment,” Gamache continued.
“These improvements are expected to drive year-over-year growth in
both total revenue and operating margin in the second half of
fiscal 2012. We believe the continued improvements and operational
progress will lead to an even stronger year in fiscal 2013 for
WMS.”
“We are encouraged by recent customer acceptance of our new,
innovative products, as evidenced by the Company’s new large
contract with a major multi-site customer that increases our share
of their casino slot floors in the United States, while creating a
refresh cycle that will ensure their gaming floor remains appealing
and highly productive,” Gamache added. “Additionally, momentum for
the commercialization of our forward-thinking network gaming system
continues to gain traction with more than 50 casinos around the
world now running our networked gaming solutions on their slot
floors.
“We believe that our talented workforce, Culture of Innovation
and portfolio of intellectual properties strongly position WMS to
capture a meaningful share of the long-term growth opportunities in
our industry in the coming years,” concluded Gamache.
Fiscal 2012 Second Quarter Financial Review
The following table summarizes key components related to revenue
generation for the three and six months ended December 31, 2011 and
2010 (dollars in millions, except unit, per unit and per day
data):
Three Months Ended
December 31,
Six Months Ended
December 31,
Product Sales Revenues: 2011
2010 2011
2010 New unit sales revenues $ 79.1 $ 104.9 $ 144.0 $
193.0 Other product sales revenues 18.4 22.3
40.6 45.4 Total product sales
revenues $ 97.5 $ 127.2 $ 184.6 $ 238.4
New units shipped and recognized as product sales revenue
4,846 6,310 8,764 11,648 Average sales price per new unit $ 16,325
$ 16,620 $ 16,440 $ 16,567 Gross profit on product sales
revenues (1) $ 48.8 $ 64.1 $ 93.1 $ 118.2 Gross margin on product
sales revenues (1) 50.1 % 50.4 % 50.4 % 49.6 %
Gaming Operations
Revenues: Participation revenues $ 58.4 $ 69.4 $ 121.7 $ 142.3
Other gaming operations revenues 6.3 3.3
11.5 6.7 Total gaming operations
revenues $ 64.7 $ 72.7 $ 133.2 $ 149.0
Installed participation units at period
end, with
lease payments based on: Percentage of coin-in 3,582 3,755 3,582
3,755 Percentage of net win 2,673 3,282 2,673 3,282 Daily lease
rate (2) 3,027 3,137 3,027
3,137 Total installed participation units at
period end 9,282 10,174 9,282
10,174 Average installed participation
units 9,376 10,147 9,488 10,263 Average revenue per day per
participation unit $ 67.62 $ 74.39 $ 69.72 $ 75.38 Gross
profit on gaming operations revenues (1) $ 50.3 $ 57.1 $ 104.5 $
118.9 Gross margin on gaming operations revenues (1) 77.7 % 78.5 %
78.5 % 79.8 %
Total revenues $ 162.2
$ 199.9 $ 317.8
$ 387.4 Total gross profit (1) $
99.1 $ 121.2 $
197.6 $ 237.1 Total gross
margin (1) 61.1 % 60.6
% 62.2 % 61.2 %
(1) As used herein, gross profit and gross margin do not
include depreciation, amortization and distribution expenses. (2)
Includes only participation game theme units. Does not include
units with product sales game themes placed under fixed-term, daily
fee operating leases.
Total product sales revenues for the December 2011 quarter were
$97.5 million compared to $127.2 million in the year-ago period and
increased $10.4 million, or 12%, on a quarterly sequential basis.
Global new unit shipments totaled 5,803 new gaming machines in the
December quarter, of which WMS recognized revenue on 4,846 units,
including 2,759 units in the U.S. and Canada. New replacement units
totaled approximately 2,200 units in the U.S. and Canada, a
600-unit quarterly sequential increase, but were below a year ago.
Gaming machine sales for new casino openings and expansions in the
U.S. and Canada were approximately 600 units, not including 957
additional new units for new casino openings and expansions that
were shipped at the customers’ request, but not recognized as
revenue in the December 2011 quarter.
WMS shipped 2,087 units to international customers, or 43% of
total global unit shipments, compared with 2,389 units, or 38% of
total global unit shipments, in the year-ago period, primarily
reflecting a decline in shipments to customers in Mexico and
Australia. The average sales price for new units of $16,325 was
lower than the year-ago period, reflecting the competitive
marketplace and a lower mix of premium games. WMS’ Bluebird xD
units represented 34% of total global new unit shipments and
mechanical reel products were 13% of new unit sales in the December
2011 quarter.
Other product sales revenue declined $3.9 million year over year
to $18.4 million, reflecting lower revenue from sales of used
gaming machines, partially offset by higher conversion kit revenue.
Approximately 1,600 used gaming machines were sold in the December
2011 quarter, at lower average selling prices, compared with
approximately 3,100 used units in the prior-year quarter. Revenue
was recognized on approximately 5,000 conversion kits in the
December 2011 quarter compared to approximately 2,000 conversion
kits a year ago.
Gaming operations revenues were $64.7 million in the December
2011 quarter compared to $72.7 million in the year-ago period. The
average installed participation base for the December 2011 quarter
was 9,376 units compared to an average installed base of 10,147
units in the year-ago period. The ending installed base of 9,282
gaming machines at December 31, 2011, compares with 9,592 units at
September 30, 2011, and 10,174 units at December 31, 2010. Average
revenue per day was $67.62 compared to $74.39 in the year-ago
period. The year-over-year declines in the average and period-end
installed base and average revenue per day primarily reflect the
previously noted impact from delays in approvals of new
participation products that have recently eased. The 6% quarterly
sequential decline in average daily revenue from $71.70 in the
September 2011 quarter mostly reflects normal seasonal influences
during the December quarter.
Following initial jurisdictional approvals for new participation
games near the end of the September 2011 quarter and additional
approvals subsequently received in other jurisdictions, coupled
with recent initial approvals for several new participation games,
as expected, the Company began to replace and refresh its
participation footprint in the December 2011 quarter. With the
expected commercialization of additional new participation products
in the second half of the fiscal 2012, WMS expects to achieve
sequential growth in its installed participation base and average
revenue per day in both the March and June 2012 quarters.
Other gaming operations revenue increased $3.0 million over the
year-ago period, primarily reflecting continued growth in the
online gaming business in the United Kingdom and incremental
revenue from networked gaming solutions.
Total gross profit, excluding depreciation, amortization and
distribution expense as used herein, was $99.1 million for the
December 2011 quarter compared to $121.2 million in the year-ago
period. Total gross margin was 61.1% compared to 60.6% in the
year-ago period. Product sales gross margin was 50.1% in the
December 2011 quarter, just below the 50.4% in the December 2010
quarter, reflecting a lower average selling price partially offset
by ongoing improvements to reduce costs. The gross margin benefit
from increased revenues of higher-margin conversion kit and parts
sales was partially offset by the lower margin on used gaming
machine sales. Gaming operations gross margin was 77.7% in the
December 2011 quarter compared with 78.5% in the year-ago quarter,
reflecting unfavorable jackpot expense experience and increased
costs from the networked gaming and online gaming businesses that
were launched within the last twelve months.
The following table summarizes key components of operating
expenses and operating income for the three and six months ended
December 31, 2011 and 2010 ($ in millions):
Three Months Ended Six Months Ended
December 31, December 31, Operating Expenses
2011 2010
2011 2010 Research and
development $ 23.7 $ 30.1 $ 48.1 $ 58.8 As a percentage of revenues
14.6 % 15.1 % 15.1 % 15.2 % Selling and administrative 33.2 38.1
71.5 76.4 As a percentage of revenues 20.5 % 19.1 % 22.5 % 19.7 %
Impairment and restructuring charges — — 9.7 3.8 As a percentage of
revenues — — 3.1 % 1.0 % Depreciation and amortization 21.2 16.3
43.8 32.1 As a percentage of revenues 13.1 % 8.1 %
13.8 % 8.3 %
Total operating expenses $
78.1 $ 84.5 $
173.1 $ 171.1 Operating
expenses as a percentage of revenues 48.2 %
42.3 % 54.5 % 44.2 %
Operating income $ 21.0 $
36.7 $ 24.5 $ 66.0
Operating margin 12.9 % 18.4
% 7.7 % 17.0 %
WMS continued to realize benefits in the December 2011 quarter
from previously implemented restructuring and realignment
initiatives, as well as from ongoing cost management efforts. The
Company recorded no new impairment or restructuring charges during
the December 2011 quarter. For the six months ended December 31,
2011, total research and development and selling and administrative
expenses, inclusive of the $4.3 million of incremental bad debt
expense recorded in the September quarter, were $15.6 million lower
than the comparable six-month period a year ago.
Research and development expenses in the December 2011 quarter
were $23.7 million, or $6.4 million lower on a year-over-year basis
and just below the September 2011 quarter. The decrease reflects
lower non-payroll-related expenses due to cost containment measures
coupled with savings realized from the workforce reduction
announced in August 2011. Consistent with the changes announced in
August 2011, the Company has prioritized development initiatives
aimed at improving the ratable commercialization of new products
for core businesses, focusing on near-term revenue opportunities,
as well as continuing support for emerging opportunities such as
portal applications for networked gaming, WMS’ award-winning
Player’s Life Web Services and online gaming.
Selling and administrative expenses in the December 2011 quarter
were $33.2 million, or $4.9 million lower than the year-ago period,
primarily reflecting a decline in payroll-related expenses
reflecting lower levels of staffing and lower non-payroll-related
expenses.
Depreciation and amortization expense was $21.2 million in the
December 2011 quarter compared with $16.3 million in the year-ago
quarter, primarily reflecting increased depreciation from capital
spending on gaming operations equipment as the Company continues to
transition its installed base of participation units to Bluebird2
and Bluebird xD cabinets, and amortization related to the Company’s
investment in the development of its WAGE-NET networked gaming
system and online gaming system following initial commercialization
during the June 2011 quarter and December 2010 quarter,
respectively.
Interest income and other income and expense, net was $4.2
million in the December 2011 quarter compared with $2.4 million in
the year-ago quarter, principally reflecting $2.1 million of other
income related to the settlement of litigation.
The effective tax rate for the December 2011 quarter was 35%
compared to 31% for the December 2010 quarter. The December 2011
quarter reflects the benefit from the U.S. Federal Research &
Development Tax Credit which more than offset an increase in the
Illinois corporate tax rate that became effective January 1, 2011,
and the impact of certain international subsidiary start-up
operating losses that did not benefit the effective global tax
rate. The December 2010 quarter included a 530-basis point
favorable impact on the effective tax rate as a result of the
retroactive reinstatement of the U.S. Federal Research &
Development Tax Credit legislation. As the U.S. Federal Research
& Development Tax Credit legislation expired December 31, 2011,
the Company expects its effective tax rate in the second half of
fiscal 2012 to be 36%-to-37%.
Cash flow provided by operating activities for the six months
ended December 31, 2011, increased 48% to $65.7 million from $44.5
million in the prior-year period. The increase primarily reflects a
substantially smaller increase in operating assets and liabilities,
an increase in depreciation and amortization, and higher other
non-cash charges, partially offset by the impact of lower net
income, less favorable tax-related items and a decrease in
share-based compensation. Total receivables, net of $333.0 million
at December 31, 2011, were down $33.2 million from June 30, 2011,
levels, and declined $1.6 million from September 30, 2011, even as
revenue increased $6.6 million on a quarterly sequential basis.
Long-term notes receivable, net were $87.0 million at December 31,
2011, compared with $81.6 million at June 30, 2011, and $75.3
million at December 31, 2010, largely reflecting higher sales
during the past twelve months into markets such as certain Latin
American countries that historically have depended upon extended
financings. Inventory was $4.7 million higher on a quarterly
sequential basis, primarily reflecting an increase in finished
goods inventory for upcoming new casino openings. Total current
liabilities at December 31, 2011, were down $28.1 million from June
30, 2011, primarily due to higher payments for income taxes and the
timing on payments of accounts payable.
Net cash used in investing activities for the six months ended
December 31, 2011, was $73.5 million compared to $71.2 million in
the year-ago period due to the $4.7 million increase in capital
deployed for additions to gaming operations equipment as the
Company continues to transition its installed participation base
from original Bluebird units to the next-generation of Bluebird2
and Bluebird xD gaming machines, partially offset by a $4.3 million
decrease in capital to acquire or license intangible and other
non-current assets. Capital expenditures for property, plant and
equipment increased $1.9 million compared with the prior-year
period. Net cash used in financing activities decreased to $2.3
million compared to $33.9 million in the prior year, primarily due
to $35.0 million in proceeds from borrowings under the Company’s
line of credit and lower stock repurchase activity in the six
months ended December 31, 2011, compared to the 2010 period,
partially offset by lower cash received and tax benefits from stock
option activity.
Adjusted EBITDA, a non-GAAP financial metric (see reconciliation
to net income schedule near the end of this release), was $57.7
million in the December 2011 quarter compared with $66.0 million in
the prior-year period. The adjusted EBITDA margin for the December
2011 quarter was 35.6%, an increase over the 33.0% in the year-ago
period.
Total cash, cash equivalents and restricted cash was $92.8
million at December 31, 2011, a quarterly sequential increase of
$10.4 million, inclusive of $9.6 million used for share repurchases
during the quarter. Total cash, cash equivalents and restricted
cash was $105.0 million at June 30, 2011.
Share Repurchase Program Update
During the three months ended December 31, 2011, the Company
purchased $9.6 million of its common stock, or 500,449 shares,
under its share repurchase authorization. During the six months
ended December 31, 2011, WMS repurchased 1.8 million shares, or
over 3% of its outstanding shares, for an aggregate $37.1 million.
Reflecting $138.6 million in share repurchases over the last six
quarters, approximately $161.4 million remains available on WMS’
repurchase authorization. At December 31, 2011, WMS had 55.3
million shares outstanding and 4.4 million shares held in the
Company’s treasury.
Fiscal 2012 Outlook
Reflecting ongoing progress in obtaining approvals on new
participation and for-sale products, favorable customer response to
new products and continuing benefits from the restructuring and
realignment initiatives, WMS expects to achieve further quarterly
sequential growth in revenue and operating margin in both the March
and June 2012 quarters, leading to year-over-year growth in the
second half of fiscal 2012. Notwithstanding these expectations, WMS
continues to believe fiscal 2012 annual revenue will be below
fiscal 2011 revenue reflecting the lower comparable results
generated in the first half of fiscal 2012, while annual operating
margin is expected to improve year over year due to the Company’s
cost containment and restructuring initiatives. WMS continues to
expect that sequential growth in the second-half of the fiscal year
will be driven by improvements in the flow of approvals for new
products, modest growth in the gaming operations business and an
improvement in new unit demand from new casino openings. The
Company does not expect revenue in fiscal 2012 from the opening of
the Illinois VLT market or from the VLT market in Italy. WMS
believes that the challenged economic and industry environment will
continue resulting in only limited improvement in the industry
replacement cycle in calendar 2012. R&D spending in fiscal 2012
is targeted to approximate 13-to-14% of total annual revenues.
WMS Industries is hosting a conference call and webcast at 4:30
PM ET today, Thursday, January 26, 2012. The conference call
numbers are 212/231-2900 or 415/226-5357. To access the live call
on the Internet, log on to www.wms.com (select “Investor
Relations”). Following its completion, a replay of the call can be
accessed for thirty days on the Internet via www.wms.com.
About WMS
WMS is engaged in serving the gaming industry worldwide by
designing, manufacturing and marketing games, video and mechanical
reel-spinning gaming machines, video lottery terminals and in
gaming operations, which consists of the placement of leased
participation gaming machines in legal gaming venues. WMS is
proactively addressing the next stage of casino gaming floor
evolution with its WAGE-NET networked gaming solution, a suite of
systems technologies and applications designed to increase
customers’ revenue generating capabilities and operational
efficiency. The Company’s interactive gaming operations develop and
market products and solutions that address global online and mobile
gaming opportunities. More information on WMS can be found at
www.wms.com or visit the Company on Facebook, Twitter or
YouTube.
Product names mentioned in this release are trademarks of WMS,
except for the following:
BATTLESHIP and MONOPOLY are trademarks of Hasbro. Used with
permission. ©2012 Hasbro. All rights reserved.
THE WIZARD OF OZ and all related characters and elements are
trademarks of and © Turner Entertainment Co. (s12) Judy Garland as
Dorothy from THE WIZARD OF OZ. (s12)
This press release contains forward-looking statements
concerning our future business performance, strategy, outlook,
plans, products and liquidity, including, but not limited to, the
statements set forth under the caption “Fiscal 2012 Outlook.”
Forward-looking statements may be typically identified by such
words as “may,” “will,” “should,” “expect,” “anticipate,” “plan,”
“likely,” “believe,” “estimate,” “project,” and “intend,” among
others. These forward-looking statements are subject to risks and
uncertainties that could cause our actual results to differ
materially from the expectations expressed in the forward-looking
statements. Although we believe that the expectations reflected in
our forward-looking statements are reasonable, any or all of our
forward-looking statements may prove to be incorrect. Consequently,
no forward-looking statements may be guaranteed. Factors which
could cause our actual results to differ from expectations include
(1) delay or refusal by regulators to approve our new gaming
platforms, cabinet designs, game themes and related hardware and
software; (2) changes in regulations or regulatory interpretations
that may adversely affect existing product placements or future
placements; (3) an inability to introduce in a timely manner new
games and gaming machines that achieve and maintain market
acceptance; (4) a decrease in the desire of casino customers to
upgrade gaming machines or allot floor space to leased or
participation games, resulting in reduced demand for our products;
(5) a reduction in capital spending or interruption in payments by
casino customers associated with business weakness or economic
uncertainty that adversely affects our customers' ability to make
purchases or pay; (6) a greater-than-expected demand for operating
leases by customers over outright product sales or sales financing
leases that shift revenue recognition from a single period to the
term of such operating leases; (7) future costs relating to our
planned restructuring and other charges that may be higher than
currently estimated, including additional charges related to
actions at a later time not presently contemplated; (8) ability to
realize in full, or part, the anticipated savings and expense
reductions from restructuring and lower staffing; (9) adverse
affects on product development, innovation and the ability to
retain and attract key personnel following the restructuring and
reorganization actions; (10) a reduction in play levels of our
participation games by casino patrons, whether due to economic
conditions or increased placements of competitive product; (11)
inability of suppliers of key components to timely meet our
requirements to fulfill customer orders; (12) increased pricing or
promotional competitive activity that adversely affects our average
selling price or product revenues; (13) a failure to obtain and
maintain our gaming licenses and regulatory approvals; (14) failure
of customers or players to adapt to the new technologies that we
introduce in new product concepts; (15) a software anomaly or
fraudulent manipulation of our gaming machines and software; (16) a
failure to obtain the right to use or an inability to adapt to
rapid development of new technologies; (17) an infringement claim
seeking to restrict our use of material technologies; (18) risks of
doing business in international markets, including political and
economic instability, terrorist activity and foreign currency
fluctuations; and (19) the unfavorable outcome of any legal
proceedings in which we may be involved from time to time. These
factors and other factors that could cause actual results to differ
from expectations are more fully described under “Item 1.
Business”, “Item 1A. Risk Factors” and “Legal Proceedings” in our
Annual Report on Form 10-K for the year ended June 30, 2011, and
our more recent reports filed with the U.S. Securities and Exchange
Commission.
- financial tables follow -
WMS INDUSTRIES INC. CONDENSED CONSOLIDATED
STATEMENTS OF INCOME For the Three and Six Months Ended
December 31, 2011 and 2010 (in millions of U.S. dollars and
millions of shares, except per share amounts)
(unaudited) Three Months Ended
Six Months Ended
December 31,
December 31,
2011 2010
2011 2010
REVENUES: Product sales $ 97.5 $ 127.2 $ 184.6 $ 238.4
Gaming operations 64.7 72.7
133.2 149.0
Total revenues 162.2
199.9 317.8 387.4
COSTS AND EXPENSES:
Cost of product sales (1) 48.7 63.1 91.5 120.2 Cost of gaming
operations (1) 14.4 15.6 28.7 30.1 Research and development 23.7
30.1 48.1 58.8 Selling and administrative 33.2 38.1 71.5 76.4
Impairment and restructuring charges — — 9.7 3.8 Depreciation and
amortization (1) 21.2 16.3 43.8
32.1
Total costs and expenses
141.2 163.2 293.3
321.4 OPERATING INCOME
21.0 36.7 24.5 66.0 Interest expense
(0.4 ) (0.2 ) (0.8 ) (0.6 ) Interest income and other income and
expense, net 4.2 2.4 6.9
3.9 Income before income taxes 24.8 38.9 30.6 69.3
Provision for income taxes 8.7 11.9
10.7 22.8
NET INCOME
$
16.1
$
27.0
$
19.9
$
46.5
Earnings per share:
Basic $ 0.29 $ 0.47 $ 0.36 $ 0.80
Diluted $ 0.29 $ 0.46 $ 0.35 $ 0.78
Weighted-average common shares:
Basic common stock outstanding 55.6 57.8
55.9 58.0 Diluted common stock
and common stock equivalents 55.8 59.1
56.2 59.3 (1) Cost of
product sales and cost of gaming operations exclude the following
amounts of depreciation and
amortization, which are included in the
depreciation and amortization line item:
Cost of product sales $ 1.4 $ 1.2 $ 2.8 $ 2.4 Cost of gaming
operations $ 13.1 $ 9.2 $ 27.2 $ 18.7
WMS INDUSTRIES
INC. CONDENSED CONSOLIDATED BALANCE SHEETS December
31 and June 30, 2011 (in millions of U.S. dollars and
millions of shares) December 31,
June 30, ASSETS 2011
2011 CURRENT ASSETS: (unaudited) Cash and cash
equivalents $ 79.3 $ 90.7 Restricted cash and cash equivalents
13.5 14.3
Total cash, cash
equivalents and restricted cash 92.8 105.0
Accounts and notes receivable, net of allowances of $7.1 and $5.5,
respectively 246.0 284.6 Inventories 69.1 67.1 Other current assets
46.8 40.8
Total current assets
454.7 497.5 NON-CURRENT ASSETS:
Long-term notes receivable, net 87.0 81.6
Gaming operations equipment, net of
accumulated depreciation and amortization of
$210.6 and $270.5, respectively 96.9 86.8
Property, plant and equipment, net of
accumulated depreciation and amortization of
$127.0 and $115.7, respectively 189.9 171.5 Intangible assets, net
148.1 153.9 Deferred income tax assets 46.5 43.1 Other assets, net
18.6 11.9
Total non-current
assets 587.0 548.8
TOTAL ASSETS $ 1,041.7 $
1,046.3
LIABILITIES AND STOCKHOLDERS’
EQUITY
CURRENT LIABILITIES: Accounts payable $ 58.7 $ 66.2
Accrued compensation and related benefits 7.0 12.3 Other accrued
liabilities 58.6 73.9
Total current
liabilities 124.3 152.4 NON-CURRENT
LIABILITIES: Long-term debt 35.0 —
Deferred income tax liabilities
25.8 23.9 Other non-current liabilities 14.4
14.1
Total non-current liabilities 75.2
38.0 Commitments, contingencies and indemnifications — —
STOCKHOLDERS’ EQUITY: Preferred stock (5.0 shares
authorized, none issued) — — Common stock (200.0 shares authorized
and 59.7 shares issued) 29.8 29.8 Additional paid-in capital 436.8
437.9 Treasury stock, at cost (4.4 and 2.9 shares, respectively)
(132.8 ) (104.9 ) Retained earnings 510.7 490.0 Accumulated other
comprehensive income (loss) (2.3 ) 3.1
Total stockholders’ equity 842.2
855.9 TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY $ 1,041.7 $ 1,046.3
WMS INDUSTRIES INC. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS For the Six Months Ended December
31, 2011 and 2010 (in millions of U.S. dollars)
(unaudited) Six Months Ended
December 31, CASH FLOWS FROM OPERATING ACTIVITIES
2011 2010 Net
income $ 19.9 $ 46.5 Adjustments to reconcile net income to net
cash provided by (used in) operating activities: Depreciation 37.1
32.1 Amortization of intangible and other non-current assets 14.2
9.9 Share-based compensation 7.6 10.6 Other non-cash items 10.2 5.0
Deferred income taxes (2.0 ) 10.9 Tax benefit from exercise of
stock options (0.2 ) (6.5 ) Change in operating assets and
liabilities (21.1 ) (64.0 )
Net cash provided by
operating activities 65.7 44.5
CASH FLOWS FROM
INVESTING ACTIVITIES Additions to gaming operations equipment
(35.6 ) (30.9 ) Purchase of property, plant and equipment (31.1 )
(29.2 ) Payments to acquire or license intangible and other
non-current assets (6.8 ) (11.1 )
Net cash used in
investing activities (73.5 ) (71.2 )
CASH FLOWS FROM
FINANCING ACTIVITIES Purchase of treasury stock (37.1 ) (50.0 )
Proceeds from borrowings under revolving credit facility 35.0 —
Debt issuance costs (2.5 ) — Cash received from exercise of stock
options 2.1 9.6 Tax benefit from exercise of stock options
0.2 6.5
Net cash used in financing
activities (2.3 ) (33.9 )
Effect of Exchange Rates on Cash
and Cash Equivalents (1.3 ) 0.7
DECREASE IN CASH AND CASH EQUIVALENTS (11.4 ) (59.9 )
CASH AND CASH EQUIVALENTS, beginning of period 90.7
166.7
CASH AND CASH EQUIVALENTS, end of
period $ 79.3 $ 106.8
WMS INDUSTRIES
INC. Supplemental Data – Earnings per Share (in
millions of U.S. dollars and millions of shares, except per share
amounts) (unaudited) Three Months
Ended Six Months Ended December 31,
December 31, 2011 2010 2011
2010 Net income $ 16.1 $ 27.0 $ 19.9 $ 46.5
Basic weighted average common shares outstanding 55.6 57.8
55.9 58.0 Dilutive effect of stock options 0.1 1.0 0.2 1.0 Dilutive
effect of restricted common stock and warrants 0.1
0.3 0.1 0.3
Diluted weighted average common stock and
common stock
equivalents 55.8 59.1 56.2 59.3
Basic earnings per share of common stock $ 0.29 $ 0.47 $ 0.36 $
0.80
Diluted earnings per share of common stock
and common stock
equivalents
$ 0.29 $ 0.46 $ 0.35 $ 0.78
Supplemental Data – Reconciliation
of Net Income to Adjusted EBITDA (in millions of U.S.
dollars) (unaudited) Three Months
Ended Six Months Ended December 31,
December 31, 2011
2010 2011
2010 Net income $ 16.1 $ 27.0
$ 19.9 $ 46.5 Net income $ 16.1 $ 27.0
$ 19.9 $ 46.5 Depreciation 17.8 16.3 37.1 32.1 Amortization of
intangible and other non-current assets 7.6 4.6 14.2 9.9 Provision
for income taxes 8.7 11.9 10.7 22.8 Interest expense 0.4 0.2 0.8
0.6 Share-based compensation 5.0 5.5 7.6 10.6 Other non-cash items
2.1 0.5 10.2 5.0
Adjusted EBITDA $ 57.7 $ 66.0 $ 100.5
$ 127.5
Adjusted EBITDA margin 35.6 %
33.0 % 31.6 % 32.9 %
Adjusted EBITDA (earnings before interest, taxes, depreciation,
amortization, share-based compensation and other non-cash items,
including non-cash impairment and restructuring charges) and
adjusted EBITDA margin are supplemental non-GAAP financial metrics
used by our management and commonly used by industry analysts to
evaluate our financial performance. Adjusted EBITDA and adjusted
EBITDA margin provide additional useful information to investors
regarding our ability to service debt and are commonly used
financial analysis metrics for measuring and comparing gaming
companies in areas of liquidity, operating performance, valuation
and leverage. Adjusted EBITDA and adjusted EBITDA margin should not
be construed as an alternative to operating income (as an indicator
of our operating performance) or net cash from operations (as a
measure of liquidity) as determined in accordance with U.S.
generally accepted accounting principles. All companies do not
calculate adjusted EBITDA and adjusted EBITDA margin in necessarily
the same manner, and WMS’ presentation may not be comparable to
those presented by other companies.
WMS INDUSTRIES INC. Supplemental Data – Items
Impacting Comparability: Net Charges (Credits) For the Three
and Six Months Ended December 31, 2011 and 2010 (in millions
of U.S. dollars, except per share amounts) (unaudited)
Three Months Ended
December 31, 2011
Three Months Ended
December 31, 2010
Six Months Ended
December 31, 2011
Six Months Ended
December 31, 2010
Per Per Per
Pre-tax diluted Pre-tax diluted
Pre-tax Per diluted Pre-tax diluted
DESCRIPTION OF
NET CHARGES (CREDITS)
amount share amount share amount
share amount share IMPAIRMENT AND
RESTRUCTURING CHARGES Non-cash Charges Impairment of
property, plant and equipment $ — $ — $ — $ — $ 0.6 $ 0.01 $ 2.4 $
0.03
Cash Charges Restructuring charges —
— — — 9.1
0.11 1.4 0.01
Total
Impairment and Restructuring Charges — — — —
$
9.7 0.12 3.8 0.04 OTHER
CHARGES
Non-cash charges to write-down Mexican
customer receivables (recorded in selling
and
administrative expenses) — — —
— 4.3 0.05 —
—
TOTAL IMPAIRMENT, RESTRUCTURING AND
OTHER CHARGES $ —
$ —
$
— $ — $ 14.0
$ 0.17 $3 .8 $
0.04 CASH BENEFITS:
Proceeds from litigation settlement
(recorded
in interest income and other income
and
expense, net) $ (2.1 ) $ (0.02 ) — — $ (2.1 ) $ (0.02 ) — —
Prior period impact from retroactive
reinstatement of the Federal research
and
development tax credit (recorded in
provision
for income taxes) — — —
(0.02 ) — — — (0.02 )
TOTAL CASH BENEFITS $ (2.1 )
$ (0.02 ) —
$ (0.02
) $ (2.1 ) $ (0.02
) —
$ (0.02 ) TOTAL
NET CHARGES (CREDITS) $ (2.1 ) $
(0.02 ) $ — $ (0.02
) $ 11.9 $ 0.15
$ 3.8 $ 0.02
The three-month period ended December 31, 2011, includes a
pre-tax benefit of $2.1 million, or $0.02 per diluted share, from
litigation settlement included in interest income and other income
and expense, net. The three-month period ended December 31, 2010
includes a $0.02 per diluted share benefit from the retroactive
reinstatement of the Federal research and development tax credit
related to the period January 1, 2010 through September 30,
2010.
The six-month period ended December 31, 2011, includes $14.0
million of pre-tax charges, or $0.17 per diluted share, which
includes $9.7 million pre-tax of impairment and restructuring
charges, including $5.9 million pre-tax of separation-related costs
and $3.8 million pre-tax of costs related to the decision to close
two facilities; and $4.3 million pre-tax, or $0.05 per diluted
share, of non-cash charges to write-down receivables following
government enforcement actions at certain casinos in Mexico. This
six-month period also includes a pre-tax cash benefit of $2.1
million from litigation settlement. The six-month period ended
December 31, 2010, includes $3.8 million of pre-tax impairment and
restructuring charges, or $0.04 per diluted share, that previously
had been included in selling and administrative expense, which
includes $2.4 million pre-tax of asset impairment charges and $1.4
million pre-tax of separation-related restructuring charges related
to closing WMS’ main facility in the Netherlands. The six-month
period includes a $0.02 per diluted share benefit recorded in
income taxes in the December 2010 quarter related to the period
January 1, 2010 through September 30, 2010 from the retroactive
reinstatement of the Federal research and development tax
credit.
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