WellsGardner Electronics Corp (WGA, Financial) filed Quarterly Report for the period ended 2010-09-30.
Wellsgardner Electronics Corp has a market cap of $22.2 million; its shares were traded at around $2.02 with a P/E ratio of 17.2 and P/S ratio of 0.4.
For the nine months ended September 30, 2010, net sales decreased 4 percent to $37,995,000 compared to $39,426,000 for the nine months ended September 30, 2009. Overall video display unit volume increased 8,000 units or almost 10% year over year. Video display average selling price declined 8% year over year in the nine months. The net of the video display volume increase and selling price decline resulted in a sales increase of $0.4 million. Parts sales declined by $1.7 million primarily in the OEM division and used games sales decreased $0.1 million in the nine months 2010 compared to the same period 2009. Gaming sales for the nine months 2010 decreased by 3% to $35,696,000 from $36,669,000 in the nine months 2009 due to parts sales decreases exceeding video display unit volume increases in the gaming market. Amusement sales decreased by 17% to $2,300,000 in the nine months 2010 from $2,758,000 in the nine months 2009 primarily due to lower industry game sales. As a result, gaming sales accounted for 94% of total sales and amusement sales accounted for 6% of total sales in the nine months 2010 compared to 93% and 7% respectively in the same period 2009.
Gross margin for the first nine months 2010 decreased $154,000 to $6,922,000 or 18.2% of sales compared to $7,076,000 or 18.0% in the first nine months 2009 for over a 0.2 point increase in margin percentage. Decreased sales accounted for a $257,000 decrease in the gross margin and the 0.2% margin improvement accounted for $103,000 increase in the gross margin. The small margin improvement was due to slightly higher unit volume and improved board design costs. The Company is concentrating on new parts lines with improved margin and introducing new lower cost video display products for all markets.
Earnings plus non cash adjustments for the third quarter 2010 was a loss of ($96,000). Accounts receivable decreased by $4,967,000 in the third quarter to $6,858,000 on September 30, 2010 due to lower sales, particularly the last 45 days of the quarter. Accounts receivable days outstanding decreased to 57 days on September 30, 2010 from 70 days on June 30, 2010. Inventory increased by $69,000 to $8,582,000 on September 30, 2010 from $8,513,000 on June 30, 2010. The primary cause of the inventory increase was lower sales in the third quarter than expected. As a result, days cost of sales in inventory increased to 87 days at September 30, 2010 compared to 62 days on June 30, 2010. Prepaid expenses increased by $418,000 in the third quarter 2010 primarily due to higher LCD purchases for our subcontractors. Due to subcontractors decreased more than due from subcontractors by $759,000 in the third quarter 2010 due to continuing production declines. Accounts payable days outstanding increased to 39 days on September 30, 2010 from 24 days on June 30, 2010 due to continuing production declines resulting in accounts payable decrease of $114,000 for the quarter. Accrued expenses increased by $45,000 in the third quarter due to payroll accruals.
Earnings plus non cash adjustments for the nine months ended September 30, 2010 were $570,000. Accounts receivable decreased by $248,000 in the nine months to $6,858,000 on September 30, 2010 due to lower sales in the third quarter 2010 compared to the fourth quarter 2009. Accounts receivable days outstanding increased to 57 days on September 30, 2010 from 50 days on December 31, 2009 due to longer credit terms extended to one customer in exchange for lower inventory carrying requirements. Inventory increased by $574,000 to $8,582,000 on September 30, 2010 compared to $8,008,000 on December 31, 2009. The primary cause of the inventory increase was slower sales for two customers in the last three months than originally planned. As a result, the higher inventory for these two customers plus lower sales the third quarter 2010 compared to the fourth quarter 2009, days cost of sales in inventory increased to 94 days on September 30, 2010 from 66 days on December 31, 2009. Prepaid expenses increased by $1,000 in the first nine months 2010. Due to subcontractors decreased more than due from subcontractors by $1,390,000 in the nine months due significantly lower production the last three months compared to the end of 2009 and the first six months of 2010. Accounts payable days outstanding increased to 40 days on September 30, 2010 from 27 days at December 31, 2009 to our more normal level during the year. Accrued expenses increased by $68,000 in the nine months.
As of September 30, 2010, the Company had total outstanding bank debt of $0.8 million at an average interest rate of 5.3%. The loan is at three month Libor plus 5.00% with a minimum interest charge of $10,000 per month. All of the Company s debt is subject to variable interest rates at this time. An adverse change in interest rates during the time that this debt is outstanding would cause an increase in the amount of interest paid. If the debt would exceed approximately $2.25 million, then a 100 basis point increase in interest rates would result in additional interest expense recognized in the financial statements. The Company may make payments towards the loans at any time without penalty. However, there is a minimum interest charge of $10,000 per month through August, 2012 which reduces to $5,000 per month through August, 2013.
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Wellsgardner Electronics Corp has a market cap of $22.2 million; its shares were traded at around $2.02 with a P/E ratio of 17.2 and P/S ratio of 0.4.
Highlight of Business Operations:
For the third quarter ended September 30, 2010, net sales decreased 18 percent to $11,031,000 compared to $13,446,000 the third quarter 2009. Overall video display unit volume decreased 4,000 units or 15% year over year. Video display average selling price declined 2% year over year in the quarter. The net of the video display volume decrease and selling price decline resulted in a video display sales decrease of $1.9 million. Parts sales declined by $0.6 million and used games sales increased $0.1 million in the third quarter 2010 compared to the same quarter 2009. Gaming sales for the third quarter decreased by 21% to $10,065,000 from $12,812,000 in the third quarter prior year due to video display and parts decreases in the gaming market. Amusement sales increased by 52% to $967,000 in the third quarter 2010 from $634,000 in the third quarter 2009 due to higher sales to two OEM customers. As a result, gaming sales accounted for 91% of total sales and amusement sales accounted for 9% of total sales in the third quarter 2010 compared to 95% and 5% respectively in the same quarter 2009.For the nine months ended September 30, 2010, net sales decreased 4 percent to $37,995,000 compared to $39,426,000 for the nine months ended September 30, 2009. Overall video display unit volume increased 8,000 units or almost 10% year over year. Video display average selling price declined 8% year over year in the nine months. The net of the video display volume increase and selling price decline resulted in a sales increase of $0.4 million. Parts sales declined by $1.7 million primarily in the OEM division and used games sales decreased $0.1 million in the nine months 2010 compared to the same period 2009. Gaming sales for the nine months 2010 decreased by 3% to $35,696,000 from $36,669,000 in the nine months 2009 due to parts sales decreases exceeding video display unit volume increases in the gaming market. Amusement sales decreased by 17% to $2,300,000 in the nine months 2010 from $2,758,000 in the nine months 2009 primarily due to lower industry game sales. As a result, gaming sales accounted for 94% of total sales and amusement sales accounted for 6% of total sales in the nine months 2010 compared to 93% and 7% respectively in the same period 2009.
Gross margin for the first nine months 2010 decreased $154,000 to $6,922,000 or 18.2% of sales compared to $7,076,000 or 18.0% in the first nine months 2009 for over a 0.2 point increase in margin percentage. Decreased sales accounted for a $257,000 decrease in the gross margin and the 0.2% margin improvement accounted for $103,000 increase in the gross margin. The small margin improvement was due to slightly higher unit volume and improved board design costs. The Company is concentrating on new parts lines with improved margin and introducing new lower cost video display products for all markets.
Earnings plus non cash adjustments for the third quarter 2010 was a loss of ($96,000). Accounts receivable decreased by $4,967,000 in the third quarter to $6,858,000 on September 30, 2010 due to lower sales, particularly the last 45 days of the quarter. Accounts receivable days outstanding decreased to 57 days on September 30, 2010 from 70 days on June 30, 2010. Inventory increased by $69,000 to $8,582,000 on September 30, 2010 from $8,513,000 on June 30, 2010. The primary cause of the inventory increase was lower sales in the third quarter than expected. As a result, days cost of sales in inventory increased to 87 days at September 30, 2010 compared to 62 days on June 30, 2010. Prepaid expenses increased by $418,000 in the third quarter 2010 primarily due to higher LCD purchases for our subcontractors. Due to subcontractors decreased more than due from subcontractors by $759,000 in the third quarter 2010 due to continuing production declines. Accounts payable days outstanding increased to 39 days on September 30, 2010 from 24 days on June 30, 2010 due to continuing production declines resulting in accounts payable decrease of $114,000 for the quarter. Accrued expenses increased by $45,000 in the third quarter due to payroll accruals.
Earnings plus non cash adjustments for the nine months ended September 30, 2010 were $570,000. Accounts receivable decreased by $248,000 in the nine months to $6,858,000 on September 30, 2010 due to lower sales in the third quarter 2010 compared to the fourth quarter 2009. Accounts receivable days outstanding increased to 57 days on September 30, 2010 from 50 days on December 31, 2009 due to longer credit terms extended to one customer in exchange for lower inventory carrying requirements. Inventory increased by $574,000 to $8,582,000 on September 30, 2010 compared to $8,008,000 on December 31, 2009. The primary cause of the inventory increase was slower sales for two customers in the last three months than originally planned. As a result, the higher inventory for these two customers plus lower sales the third quarter 2010 compared to the fourth quarter 2009, days cost of sales in inventory increased to 94 days on September 30, 2010 from 66 days on December 31, 2009. Prepaid expenses increased by $1,000 in the first nine months 2010. Due to subcontractors decreased more than due from subcontractors by $1,390,000 in the nine months due significantly lower production the last three months compared to the end of 2009 and the first six months of 2010. Accounts payable days outstanding increased to 40 days on September 30, 2010 from 27 days at December 31, 2009 to our more normal level during the year. Accrued expenses increased by $68,000 in the nine months.
As of September 30, 2010, the Company had total outstanding bank debt of $0.8 million at an average interest rate of 5.3%. The loan is at three month Libor plus 5.00% with a minimum interest charge of $10,000 per month. All of the Company s debt is subject to variable interest rates at this time. An adverse change in interest rates during the time that this debt is outstanding would cause an increase in the amount of interest paid. If the debt would exceed approximately $2.25 million, then a 100 basis point increase in interest rates would result in additional interest expense recognized in the financial statements. The Company may make payments towards the loans at any time without penalty. However, there is a minimum interest charge of $10,000 per month through August, 2012 which reduces to $5,000 per month through August, 2013.
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