BW1641 OCT 25,1999 12:44 PACIFIC 15:44 EASTERN
WMS Industries Reports First Quarter Results;
Company Discontinues Pinball and Cabinets Manufacturing Segment
CHICAGO--(BUSINESS WIRE)--Oct. 25, 1999--WMS Industries Inc. (NYSE:WMS) announced today its results of operations for the fiscal 2000 first quarter ended September 30, 1999. WMS also reported that it will discontinue its pinball and cabinets manufacturing operations.
Revenues from continuing operations for the fiscal 2000 first quarter increased 135% to $51.2 million compared with $21.8 million in the prior year period. Income from continuing operations, on an after-tax basis, increased to $8.9 million, $0.29 per share, from a loss of ($0.1) million, nil per share, in the prior year period.
The Company's gaming subsidiary, WMS Gaming Inc., which designs, manufactures and markets casino gaming devices and video lottery terminals, reported a 155% increase in revenues to $48.0 million in the fiscal 2000 first quarter, up from $18.8 million in the prior year's first fiscal quarter. The revenue increase in the September 1999 quarter resulted from the sale of 4,083 video and reel type gaming devices compared to 2,333 in the prior year quarter, and $15.7 million of participation and lease revenues in the September 1999 quarter compared to $2.0 million in the prior year quarter. The participation and lease revenue is primarily from the Company's MONOPOLY(R)-themed gaming machines, introduced in October 1998.
WMS Gaming's segment gross profit for the September 1999 quarter increased 328% to $24.9 million from $5.8 million in the September 1998 quarter. WMS Gaming's segment operating income was $15.1 million compared to a loss of ($0.7) million in the prior year first quarter. The increase in the segment gross profit and change in operating income reflects the impact additional revenue has on the profitability of the Gaming segment, and in particular the increase in the participation and lease revenue that has a higher gross profit. A large part of WMS Gaming's operating expenses do not increase with an increase in revenue, therefore a significant part of the gross profit on incremental sales of gaming devices or increases in lease revenue results in higher segment operating income.
The Company continues to install, on a participation or lease arrangement, both reel type and video models of MONOPOLY(R)-themed participation gaming devices. At September 30, 1999, the Company had approximately 3,189 MONOPOLY(R)-themed gaming devices installed nationwide, a 17% sequential quarterly increase from the 2,715 units at June 30, 1999. MONOPOLY(R)-themed gaming devices are installed in all major U.S. gaming jurisdictions. Currently, the Company has over 3,600 MONOPOLY(R)-themed gaming devices installed or on order backlog. The MONOPOLY(R) trademark is being used under an exclusive license from Hasbro, Inc. (NYSE:HAS).
The Company began installing its newest MONOPOLY(R)-themed gaming device, Chairman of the Board, in mid-September following license approval in Nevada. Chairman of the Board is available in both video and reel-spinning models. License approval for Chairman of the Board in other major gaming jurisdictions is expected to be completed over the next four to eight weeks.
The Company continues to manufacture under a contract the coin-operated video games designed and sold by Midway Games Inc. (NYSE:MWY). Segment operating income for the September 1999 quarter was $0.2 million on sales of $3.2 million, compared to $0.2 million operating income on sales of $2.9 million in the comparable prior year's quarter.
WMS has decided to discontinue the operations of its pinball and cabinets segment as a result of a prolonged period of weak demand and ongoing losses. The Company estimates the after-tax loss on disposal to be ($13.2) million, which reflects the writedown of certain assets to anticipated realizable value and the accrual of shutdown expenses, including $4.2 million of pre-tax severance pay and related benefits. The Company's prior period consolidated financial statements have been restated to reflect the operating loss from the segment as loss from discontinued operations. Net cash to be generated from the liquidation of the assets and liabilities of the pinball and cabinets segment is anticipated to be approximately $9.4 million, including tax benefits, although the exact amount of the loss ultimately recorded will depend on several factors, including the ultimate proceeds received for assets. The Company does not anticipate that the discontinued pinball and cabinets segment operations will have a material negative impact on its liquidity or its future operating results. The pinball and cabinets segment experienced operating losses of $7.0 million in fiscal 1999, $7.8 million in fiscal 1998, and $3.0 million in fiscal 1997. Reflecting the one-time charges, the Company's net loss for the period ended September 30, 1999 was ($4.7) million, ($0.15) per share, compared to a loss of ($1.6) million, ($0.06) per share, in the same quarter in the prior year.
This press release contains certain forward looking statements concerning future business conditions and the outlook for the Company based on currently available information that involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in the forward looking statements as a result of certain risks and uncertainties, including, without limitation, the financial strength of the gaming and pinball industries, the actual proceeds and expenses of the disposition of the assets and liabilities of the discontinued pinball and cabinets manufacturing segment, the expansion of legalized gaming into new markets and legislative and regulatory changes in existing gaming markets, the development, introduction and success of new games and new technologies and the ability to maintain the scheduling of such introductions, the ability of the Company to qualify for and maintain gaming licenses and approvals, the outcome of certain legal proceedings to which the Company is a party and other risks more fully described under "--Factors Affecting Future Performance" in the Company's Annual Report on Form 10-K.
WMS Industries Inc. is engaged in the design, manufacture and sale of gaming devices and video lottery terminals and contract manufacturing.