WMS Industries Inc. (NYSE:WMS) today reported revenue of $159.1
million and net income of $9.3 million, or $0.17 per diluted share,
for the quarter ended September 30, 2012, compared to revenue of
$155.6 million and net income of $3.8 million, or $0.07 per diluted
share, in the September 2011 quarter. Net income and diluted
earnings per share in the September 2012 quarter reflect higher
year-over-year research and development expenses to support the
growth of interactive products and services as well as for the
ongoing development and commercialization of a greater number of
new participation and for-sale games and cabinets. Reflecting these
factors, research and development expenses increased $3.2 million
year over year and $3.3 million on a quarterly sequential basis.
Diluted earnings per share in the September 2011 quarter included
impairment and restructuring charges of $0.12 per share, primarily
for facilities closure and separation-related costs, and $0.05 per
share to write down receivables from certain customers in
Mexico.
Recent Highlights:
- Gaming operations revenues increased
both year over year and on a quarterly sequential basis primarily
reflecting growth in revenue from interactive products and services
and the third consecutive quarter of growth in the installed
participation base to 9,632 gaming machines, which led to the first
installed base increase over the prior-year quarter in the last
eight quarters, partially offset by lower gaming operations daily
revenue per unit.
- Product sales revenues rose modestly
reflecting sales of 693 new video lottery terminals (VLTs) for the
Canada and Illinois VLT markets. Product sales revenues also
include higher other product sales revenues including one-time
software revenues of a VLT game set and higher revenues from used
gaming machine sales, which more than offset the anticipated lower
industry-wide shipments for new casino openings and expansions and
a lower average selling price reflecting the higher mix of
lower-priced VLTs and the competitive marketplace.
- Gross profit increased $4.1 million
reflecting a 120 basis point improvement in gross profit margin due
to higher product sales margin and a greater mix of gaming
operations revenues. Product sales gross margin was 53.1%, a fiscal
first quarter record, reflecting the mix of business, ongoing
benefits from the Company’s continuous improvement and supply chain
management initiatives, and the VLT game set software, which more
than offset the impact of a lower average selling price and the
seasonally lower unit volumes for the September quarter that
typically impacts margin.
- Adjusted EBITDA increased 24% to $52.9
million as EBITDA margin improved 570 basis points (Adjusted EBITDA
is a non-GAAP financial metric, and a reconciliation to net income
is provided in a supplemental schedule near the end of this
release.)
- Cash flow provided by operating
activities for the quarter ended September 30, 2012, was $21.0
million, a year-over-year increase of 60% or $7.9 million.
- WMS was selected by the Manitoba
Lotteries Corporation to join two incumbent suppliers to replace
existing VLT units throughout the province. WMS was previously
selected by the Alberta Liquor and Gaming Commission to participate
in their VLT replacement initiative.
- During the quarter, Jackpot Party®
Social Casino was launched and became one of the five largest and
most popular social casinos on Facebook®, as measured by the number
of daily active users and monetization rates.
- In September, the Company’s
first-of-its-kind interactive, casino-branded Play4Fun™ Network
went live at a tribal casino in Iowa, enabling the casino’s players
to access multiple play-for-fun slot and casual games online, all
under the casino’s own brand association.
- At the Global Gaming Exposition (G2E®),
WMS showcased more than 100 new games, including 22 new games
leveraging the advanced capabilities of the next-generation
CPU-NXT®3 operating platform and 87 new games for WMS’ successful
CPU-NXT2 platform. Also on display were five distinct cabinet
configurations, including the revolutionary new Gamefield xD™
cabinet for participation games, the all-new My Poker® video poker
dedicated gaming machines and the next-generation Blade™ cabinet,
WMS’ latest upright cabinet, as well as the ever-popular
Bluebird®2e and Bluebird xD™ cabinets. WMS also featured the
Williams Interactive™ branded products and services for online
wagering and play-for-fun social, casual and mobile gaming
opportunities.
“WMS’ progress with the commercialization of new innovative game
content and products is evident in both the year-over-year growth
of domestic replacement units shipped and solid demand in the
Canadian and Illinois VLT markets,” said Brian R. Gamache, Chairman
and Chief Executive Officer. “Following a period of transition and
re-focus on the development of products that address customers’
near-term needs, our newest for-sale and participation games
continue to re-establish WMS’ excellence in the creation of
differentiated content and games that deliver value to our
customers. Over the next three quarters, we will begin to
commercialize our latest games and platforms which were introduced
to broad acclaim at the recent Global Gaming Expo. We believe these
products are among the most exciting new games and cabinets we have
brought to market and expect them to provide casino operators with
new must-have products for their players.
“In addition, we are generating very exciting revenue growth
from our interactive products and services as we continue to invest
in attractive long-term growth opportunities,” continued Gamache.
“We are extremely pleased by the initial success we are achieving
in leveraging the value of our library of proven gaming content
into the interactive markets, including social, casual and mobile
entertainment. This success is reflected in the $9 million
year-over-year growth in revenue from interactive products and
services, and we anticipate a range of $35-to-$40 million in annual
revenue for fiscal 2013 from these revenue streams. While the costs
needed to build a sustainable foundation for interactive products
and services impact near-term operating profitability, we believe
this investment favorably positions WMS to participate in the
attractive, high-margin growth potential of these opportunities
that can lead to the creation of new value for our
shareholders.”
Gamache concluded, “With improved product sales ship share,
terrific titles and platforms for our gaming operations business
and momentum with our interactive products and services, we fully
expect to generate further progress across our worldwide business
in the coming quarters.”
Fiscal 2013 First Quarter Financial Review
The following table summarizes key components related to revenue
generation for the three months ended September 30, 2012, and 2011
(dollars in millions, except unit, per unit and per day data):
Three Months Ended September 30,
Increase/(Decrease) Product Sales Revenues:
2012 2011 Amount % New
gaming machine sales revenues $ 60.8 $ 64.9 $ (4.1 ) (6.3 ) Other
product sales revenues 27.2 22.2
5.0 22.5
Total product sales revenues $
88.0 $ 87.1 $ 0.9
1.0 Average sales price per new unit $ 16,033
$ 16,574 $ (541 ) (3.3 ) New unit shipments to the U.S. and Canada
2,453 2,530 (77 ) (3.0 ) New unit shipments to International
markets 1,338 1,388 (50 ) (3.6 )
Total new units on which revenue was recognized 3,791 3,918 (127 )
(3.2 ) Used unit shipments globally 1,660
2,472 (812 ) (32.8 )
Total unit shipments
globally 5,451 6,390
(939 ) (14.7 ) Conversion
kit sales globally 2,400 5,500 (3,100 ) (56.4 ) Gross profit
on product sales revenues (1) $ 46.7 $ 44.3 $ 2.4 5.4 Gross margin
on product sales revenues (1) 53.1 % 50.9 % 220bp 4.3
Gaming Operations Revenues: Participation revenues $ 57.0 $
63.3 $ (6.3 ) (10.0 ) Interactive products and services revenues
9.5 0.7 8.8 nm Other gaming operations revenues 4.6
4.5 0.1 2.2
Total gaming operations
revenues $ 71.1 $ 68.5
$ 2.6 3.8
Installed participation units at period
end, with lease payments based on:
Percentage of coin-in 3,633 3,616 17 0.5 Percentage of net win
2,857 2,952 (95 ) (3.2 ) Daily lease rate (2) 3,142
3,024 118 3.9
Total installed
participation units at period end 9,632
9,592 40 0.4
Average installed participation units 9,503 9,602 (99 ) (1.0
) Average revenue per day per participation unit $ 65.23 $ 71.70 $
(6.47 ) (9.0 ) Gross profit on gaming operations revenues
(1) $ 55.9 $ 54.2 $ 1.7 3.1 Gross margin on gaming operations
revenues (1) 78.6 % 79.1 % (50)bp (0.6 )
Total
revenues $ 159.1 $ 155.6
$ 3.5 2.2 Total gross profit
(1) $ 102.6 $ 98.5
$ 4.1 4.2 Total gross margin (1)
64.5 % 63.3 %
120bp 1.9
(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.
Product Sales Revenues
Total product sales revenues for the September 2012 quarter rose
1% over the year-ago period to $88.0 million. WMS shipped 2,453 new
gaming machines to customers in the U.S. and Canada, inclusive of
693 VLTs for Canada and the new Illinois VLT markets. Replacement
units shipped to U.S. and Canadian customers increased 8% over the
prior-year period to 1,726 gaming machines, while new gaming
machine sales for new casino openings and expansions totaled 727
units compared with approximately 900 units in the September 2011
quarter. WMS shipped 1,338 new units, or 35% of total global new
unit shipments, to international customers in the September 2012
quarter, compared to 1,388 new units, or 35% of global sales, in
the year-ago period. The average sales price for new units of
$16,033 rose modestly on a quarterly sequential basis but declined
approximately 3% year over year, reflecting the mix of the
lower-priced VLT units and a competitive marketplace.
Other product sales revenue increased 23% over the prior-year
period to $27.2 million, reflecting higher revenue from a smaller
number of used gaming machines at higher prices than the year-ago
period, and other revenues, including one-time VLT software game
set revenues, partially offset by lower conversion kit sales
revenue compared to the record level of a year ago.
Gaming Operations Revenues
Gaming operations revenues increased to $71.1 million in the
September 2012 quarter from $68.5 million in the year-ago period,
marking the first year-over-year increase in gaming operations
revenues in the last eight quarters. The quarter-end installed
participation base increased by 71 units on a quarterly sequential
basis to 9,632 gaming machines at September 30, 2012, and increased
40 units over the quarter end installed base a year-ago. The
average installed participation base for the September 2012 quarter
increased by 253 units on a quarterly sequential basis and was down
99 units compared to a year ago. Average revenue per day in the
quarter of $65.23 per unit declined 2% on a quarterly sequential
basis and was down from $71.70 in the September 2011 quarter.
Revenue from interactive products and services increased to $9.5
million from $0.7 million in the prior-year period, primarily
reflecting the successful July 2012 launch of Jackpot Party® Social
Casino on Facebook®, which currently ranks among the five most
popular social casinos on Facebook based on the number of daily
active users, coupled with organic growth in our UK-based B2C
online website and the addition of Phantom EFX retail sales and
Jadestone game server integration revenues.
Other gaming operations revenue increased $0.1 million on a
year-over-year basis to $4.6 million, primarily reflecting growth
in networked gaming products and services.
Total gross profit, excluding depreciation, amortization and
distribution expense as used herein, increased 4% to $102.6 million
from $98.5 million in the year-ago period. Total gross margin
improved to 64.5% compared to 63.3% a year ago. Product sales gross
margin rose 220 basis points to 53.1% in the September 2012 quarter
compared to 50.9% in the prior-year quarter. The year-over-year
increase reflects the benefits from our mix of business, ongoing
continuous improvement initiatives, strategic sourcing actions, and
a year-over-year improvement in gross margin on other product
revenues due to higher margin on used gaming machine sales and
high-margin VLT software game set revenues. Gaming operations gross
margin was 78.6% in the September 2012 quarter compared with 79.1%
in the prior year, reflecting the impact of higher jackpot expense
on wide-area progressive games, partially offset by the benefit of
increased revenues from high-margin interactive products and
services, and compares favorably to 77.4% in the June 2012
quarter.
The following table summarizes key components of operating
expenses and operating income for the three months ended September
30, 2012, and 2011 ($ in millions):
Three Months Ended September 30,
Increase/(Decrease) Operating Expenses: 2012
2011
Amount % Research and development
$ 27.6 $ 24.4 $ 3.2 13.1 As a percentage of revenues 17.4 % 15.7 %
170bp 10.8 Selling and administrative 34.4 38.3 (3.9 ) (10.2 ) As a
percentage of revenues 21.6 % 24.6 % (300)bp (12.2 ) Depreciation
and amortization 28.0 22.6 5.4 23.9 As a percentage of revenues
17.6 % 14.5 % 310bp 21.4 Impairment and restructuring charges — 9.7
(9.7 ) nm As a percentage of revenues — 6.2 %
(620)bp nm
Total operating expenses $ 90.0
$ 95.0 $ (5.0 )
(5.3 ) Operating expenses as a percentage of
revenues 56.6 % 61.0 %
(440)bp (7.2 ) Operating income
$ 12.6 $ 3.5 $
9.1 260.0 Operating margin 7.9
% 2.2 % 570bp 259.1
Research and development expenses in the September 2012 quarter
increased $3.2 million on a year-over-year basis, and $3.3 million
on a quarterly sequential basis to $27.6 million. The increase
reflects incremental development costs to re-engineer and
re-purpose a portion of the Company’s library of slot gaming
content for distribution as interactive products and services,
coupled with a modest increase in spending for the Company’s
innovative new casino gaming products.
Selling and administrative expenses in the September 2012
quarter of $34.4 million were $3.9 million lower than the year-ago
period as the prior year included $4.3 million in bad debt expense
related to the write-down of Mexican customer receivables. Higher
marketing and incremental administrative expenses to support
interactive products and services were partially offset by ongoing
cost savings initiatives.
Depreciation and amortization expense was $28.0 million in the
September 2012 quarter compared with $22.6 million in the year-ago
quarter and $25.3 million in the June 2012 quarter. The increase
primarily reflects the Company’s investment in gaming operations
equipment over the last 12 months to upgrade and transition its
installed base of participation units, coupled with the additional
depreciation associated with the completion of a new facility plus
amortization of finite-lived intangible assets from our two
acquisitions in the June 2012 quarter.
Cash Flow and Balance Sheet
Cash flow provided by operating activities for the quarter ended
September 30, 2012, was $21.0 million, a year-over-year increase of
$7.9 million, or a 60% improvement over the prior year, reflecting
higher net income, depreciation and amortization and share-based
compensation, partially offset by lower other non-cash items. Total
receivables, net were $387.8 million at September 30, 2012,
compared with $334.6 million at September 30, 2011, which reflects
the use of the Company’s financial liquidity to support customers’
efforts to refresh their slot base during a period of constrained
capital for many casino operators. Total receivables, net were down
from $405.1 million at June 30, 2012, reflecting the lower seasonal
revenue on a quarterly sequential basis. Inventory was $52.5
million, or $11.9 million lower than at September 30, 2011,
primarily reflecting operational improvements and lower finished
goods inventory, and was slightly below the $53.3 million in
inventory at June 30, 2012. Total current liabilities at September
30, 2012, declined $40.5 million from June 30, 2012, due to lower
accounts payables and lower accrued liabilities reflecting the
timing of income tax payments.
Net cash used in investing activities was $48.7 million in the
September 2012 quarter compared to $42.7 million in the prior-year
quarter, reflecting a $3.5 million increase in capital deployed for
gaming operations equipment as we continued to upgrade our
installed base with newer gaming cabinets and operating systems,
and $4.4 million for higher property, plant and equipment
expenditures, primarily related to costs to complete two
significant projects during the quarter, all of which were
partially offset by a $1.9 million decrease in capital deployed to
acquire or license intangible and other non-current assets. With
two major property, plant and equipment projects now largely
complete and anticipated lower capital investment in gaming
operations assets, the Company expects an aggregate 20% decline in
annual capital spending on gaming operations equipment and
property, plant and equipment in fiscal 2013.
Net cash provided by financing activities was $20.6 million
compared to $8.2 million in the prior year primarily due to $22.5
million of lower stock repurchase activity compared with the
prior-year period, partially offset by $10.0 million of lower net
borrowings under the Company’s line of credit.
Adjusted EBITDA, a non-GAAP financial metric (see reconciliation
to net income schedule near the end of this release), increased 24%
to $52.9 million in the September 2012 quarter compared with $42.8
million in the prior-year period. The adjusted EBITDA margin for
the September 2012 quarter improved to 33.2% from 27.5% in the
year-ago period.
Total cash, cash equivalents and restricted cash was $69.1
million at September 30, 2012.
Share Repurchase Program Update
During the three months ended September 30, 2012, the Company
purchased 317,347 shares of its common stock for total
consideration of $5.0 million. Approximately $143 million remains
available pursuant to WMS’ share repurchase authorization. At
September 30, 2012, WMS had 54.6 million shares outstanding and 5.1
million shares in the Company’s treasury.
Fiscal Year 2013 Outlook
The Company continues to expect annual revenue growth to
reflect: 1) modest growth in product sales ship share in the U.S.
and Canada and in the installed participation base reflecting the
favorable customer response to the Company’s latest innovative new
gaming content, platforms and cabinets; 2) higher VLT demand from
Canadian and Illinois VLT operators that will offset lower domestic
new casino and expansion unit demand, albeit at lower average
selling prices as VLT’s typically are lower in price than gaming
machines sold to new casino openings and expansions; 3) ongoing
revenue growth from interactive products and services; and 4) an
increased contribution from the ongoing commercialization of the
Company’s networked gaming system and portal game applications.
Revenues are expected to grow modestly from the September 2012
quarter to the December 2012 quarter and slightly exceed those
reported in the December 2011 quarter. However, lower-margin VLTs
are expected to exceed 25% of new units sold resulting in product
sales margin declining to a range of 48%-to-49% and operating
income is expected to be slightly lower than the September 2012
quarter, reflecting an incremental increase in costs to support
interactive products and services. WMS anticipates revenue growth
will accelerate in the second half of fiscal 2013 with the launch
of new cabinets, new games with more diversified math models, an
increase in the revenue per day from its gaming operations
business, and increased revenues from interactive products and
services.
WMS expects spending on R&D initiatives will increase on a
quarterly sequential basis and that on an annual basis these
expenses are anticipated to approximate 15%-to-16% of total fiscal
2013 revenues. WMS also expects selling and administrative expenses
will increase on a quarterly sequential basis, reflecting the
marketing and administrative needs to support growth in the
Company’s interactive products and services initiatives. In total,
the increase in development, marketing, depreciation and
amortization and administrative costs to grow the Company’s
interactive products and services is expected to total
approximately $30-to-$35 million in fiscal 2013.
The Company routinely reviews its guidance and may update it
from time to time based on changes in the market and its
operations.
WMS Industries is hosting a conference call and webcast at 4:30
PM ET today, Thursday, November 1, 2012. The conference call
numbers are 212/231-2905 or 415/226-5355. 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 serves 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. The Company
also develops and markets digital gaming content, products,
services and end-to-end solutions that address global online
wagering and play-for-fun social, casual and mobile gaming
opportunities. 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. More information on WMS can be found at
www.wms.com or visit the Company on Facebook®, Twitter® or
YouTube®.
G2E is a registered trademark of the American Gaming Association
and Reed Elsevier Inc. Used with permission.
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 Year 2013 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. We undertake no
obligation to update such forward looking statements, all of which
are made only as of this date, November 1, 2012. Factors that 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 to restructure our business
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 taken in
fiscal 2011 and 2012; (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, changes in importation
and repatriation regulations such as currently experienced in
Argentina, 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, 2012, and our more recent reports filed with
the U.S. Securities and Exchange Commission.
WMS INDUSTRIES INC. CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (in millions of U.S. dollars and millions of shares,
except per share amounts) (unaudited)
Three Months EndedSeptember
30,
REVENUES: 2012 2011 Product
sales $ 88.0 $ 87.1 Gaming operations 71.1
68.5
Total revenues 159.1 155.6
COSTS AND EXPENSES: Cost of product sales (1) 41.3 42.8 Cost
of gaming operations (1) 15.2 14.3 Research and development 27.6
24.4 Selling and administrative 34.4 38.3 Depreciation and
amortization (1) 28.0 22.6 Impairment and restructuring charges
— 9.7
Total costs and expenses
146.5 152.1
OPERATING INCOME 12.6 3.5 Interest expense
(0.7 ) (0.4 ) Interest income and other income and expense, net
2.4 2.7 Income before income taxes 14.3
5.8 Provision for income taxes 5.0 2.0
NET INCOME $ 9.3 $ 3.8
Earnings per share:
Basic
$ 0.17 $ 0.07
Diluted
$ 0.17 $ 0.07
Weighted-average common shares: Basic common stock
outstanding
54.5 56.2
Diluted common stock and common stock equivalents
54.7 56.6
1) Cost of product sales and cost of
gaming operations exclude the following amounts ofdepreciation and
amortization, which are included in the depreciation and
amortization line item:
Cost of product sales $ 2.0 $ 1.4 Cost of gaming operations
$ 17.6 $ 14.1
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (in millions of U.S. dollars)
(unaudited) Three Months Ended September
30, 2012 2011 Net income $ 9.3 $
3.8 Foreign currency translation adjustment, net of taxes
2.9 (3.1 )
Total comprehensive income $
12.2 $ 0.7 WMS INDUSTRIES
INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in
millions of U.S. dollars and millions of shares)
September 30, June 30, ASSETS 2012
2012 CURRENT ASSETS: (unaudited) (audited) Cash and
cash equivalents $ 54.9 $ 62.3 Restricted cash and cash equivalents
14.2 13.8
Total cash, cash
equivalents and restricted cash 69.1 76.1
Accounts and notes receivable, net of allowances of $7.2 and $6.9,
respectively 284.4 282.8 Inventories 52.5 53.3 Other current assets
48.3 40.1
Total current assets
454.3 452.3 NON-CURRENT ASSETS:
Long-term notes receivable, net 103.4 122.3
Gaming operations equipment, net of
accumulated depreciation and amortization of $237.7 and $227.1,
respectively
125.7 115.7
Property, plant and equipment, net of
accumulated depreciation and amortization of $150.6 and $142.0,
respectively
232.7 226.7 Intangible assets, net 176.9 178.9 Deferred income tax
assets 40.0 39.3 Other assets, net 18.7 18.9
Total non-current assets 697.4
701.8 TOTAL ASSETS $
1,151.7 $ 1,154.1
LIABILITIES AND STOCKHOLDERS’
EQUITY
CURRENT LIABILITIES: Accounts payable $ 66.9 $ 84.8
Accrued compensation and related benefits 8.8 9.5 Other accrued
liabilities 54.6 76.5
Total current
liabilities 130.3 170.8 NON-CURRENT
LIABILITIES: Long-term debt 85.0 60.0
Deferred income tax liabilities
22.7 22.7 Other non-current liabilities 25.0
23.3
Total non-current liabilities 132.7
106.0 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 444.0
443.5 Treasury stock, at cost (5.1 and 4.9 shares, respectively)
(145.4 ) (144.1 ) Retained earnings 564.2 554.9 Accumulated other
comprehensive income (loss) (3.9 ) (6.8 )
Total
stockholders’ equity 888.7
877.3 TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY $ 1,151.7 $ 1,154.1
WMS INDUSTRIES INC. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (in millions of U.S. dollars)
(unaudited) Three Months Ended September
30, 2012 2011 CASH FLOWS FROM OPERATING
ACTIVITIES Net income $ 9.3 $ 3.8
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 23.0 19.3 Amortization of intangible and other
non-current assets 9.0 6.6 Share-based compensation 4.4 2.6 Other
non-cash items 1.5 8.1 Deferred income tax benefit (0.7 ) (0.9 )
Change in operating assets and liabilities (25.5 )
(26.4 )
Net cash provided by operating activities 21.0 13.1
CASH FLOWS FROM INVESTING ACTIVITIES Additions to
gaming operations equipment (25.6 ) (22.1 ) Additions to property,
plant and equipment (20.3 ) (15.9 ) Payments to acquire or license
intangible and other non-current assets (2.8 ) (4.7 )
Net cash used in investing activities (48.7 ) (42.7 )
CASH FLOWS FROM FINANCING ACTIVITIES Borrowings under
revolving credit facility make this first line 38.0 35.0 Repayments
of borrowings under revolving credit facility make this first line
(13.0 ) — Purchases of treasury stock (5.0 ) (27.5 ) Cash received
from exercise of stock options and employee stock purchase plan
0.6 0.7
Net cash provided by
financing activities 20.6 8.2
Effect of exchange rates on
cash and cash equivalents (0.3 ) (1.0 )
DECREASE IN CASH AND CASH EQUIVALENTS (7.4 ) (22.4 )
CASH
AND CASH EQUIVALENTS, beginning of period 62.3
90.7
CASH AND CASH EQUIVALENTS, end of period
$ 54.9 $ 68.3
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 September
30, 2012 2011 Net income $ 9.3 $
3.8 Basic weighted average common shares outstanding 54.5
56.2 Dilutive effect of stock options 0.1 0.3 Dilutive effect of
restricted common stock and warrants 0.1 0.1
Diluted weighted average common stock and
common stock equivalents
54.7 56.6 Basic earnings per share of common
stock $ 0.17 $ 0.07 Diluted earnings per share of common stock and
common stock equivalents $ 0.17 $ 0.07
Supplemental Data
– Reconciliation of Net Income to Adjusted EBITDA (in
millions of U.S. dollars) (unaudited)
Three Months EndedSeptember
30,
2012 2011 Net income $ 9.3
$ 3.8 Net income $ 9.3 $ 3.8 Depreciation 23.0
19.3 Amortization of intangible and other non-current assets 9.0
6.6 Provision for income taxes 5.0 2.0 Interest expense 0.7 0.4
Share-based compensation 4.4 2.6 Other non-cash items 1.5
8.1
Adjusted EBITDA $ 52.9 $
42.8
Adjusted EBITDA margin 33.2 % 27.5
%
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 provided by operating
activities (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: Charges (in millions of U.S. dollars, except
per share amounts) (unaudited)
Three Months EndedSeptember 30,
2012
Three Months EndedSeptember 30,
2011
DESCRIPTION OF
CHARGES
Pre-taxamounts
Perdilutedshare
Pre-taxamounts
Perdilutedshare
IMPAIRMENT AND RESTRUCTURING CHARGES Non-cash Charges
Impairment of property, plant and equipment — — $ 0.6 $ 0.01
Cash Charges Restructuring charges — — 9.1
0.11
Total Impairment and Restructuring Charges — —
9.7 0.12 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
We did not record any impairment, restructuring or other charges
in the three months ended September 30, 2012.
The three month period ended September 30, 2011, includes $14.0
million of pre-tax charges, or $0.17 per diluted share, which
includes $9.7 million pre-tax, or $0.12 per diluted share, 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.
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