WellsGardner Electronics Corp (WGA, Financial) filed Quarterly Report for the period ended 2010-03-31.
Wellsgardner Electronics Corp has a market cap of $22.4 million; its shares were traded at around $2.03 with a P/E ratio of 17.7 and P/S ratio of 0.4. WGA is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Gross margin for the first quarter 2010 increased $59,000 to $2,142,000 or 18.5% of sales compared to $2,083,000 or 18.0% in the first quarter 2009 for a 0.5 point increase in margin percentage. The $59,000 increase in margin was due to the margin percentage increase. The margin improvement was due to a higher percentage being produced in China 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.
Net income was $105,000 in the first quarter 2010 compared to $103,000 in the first quarter 2009. For the first quarter 2010 basic and diluted earnings per share was $0.01 compared to basic and diluted earnings per share of $0.01 in the first quarter 2009.
Earnings plus non cash adjustments were $161,000. Accounts receivable increased by $106,000 in the first quarter to $7,250,000 on March 31, 2010 due to longer credit terms extended to one customer in exchange for lower inventory carrying requirements. Accounts receivable days outstanding increased to 57 days on March 31, 2010 from 50 days on December 31, 2009. Inventory increased by $1,322,000 to $9,330,000 on March 31, 2010 compared to $8,008,000 on December 31, 2009. The primary cause of the inventory increase was slower sales for three customers in the first quarter than originally planned. As a result, days cost of sales in inventory increased to 88 days on March 31, 2010 from 66 days on December 31, 2009. Prepaid expenses increased by $84,000 in the first quarter primarily due to higher LCD purchases for our subcontractors. Due to subcontractors increased more than due from subcontractors by $165,000 in the first quarter due slightly higher production later in the quarter. Accounts payable days outstanding increased to 35 days on March 31, 2010 from 27 days at December 31, 2009, resulting in accounts payable increase of $399,000 for the quarter. Accrued expenses decreased by $311,000 in the first quarter.
Long-term notes payable increased by $1,398,000 to $3,576,000 on March 31, 2010 from $2,178,000 on December, 2009. Proceeds from options exercised were $20,000 during the first quarter 2010. These resulted in $1,418,000 of cash provided by financing activities.
As of March 31, 2010, the Company had total outstanding bank debt of $3.6 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 $15,000 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 $3 million, then a 100 basis point increase in interest rates would result in an annual increase of approximately $30,000 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 $15,000 per month through August, 2011 which reduces to $10,000 per month through August, 2012.
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Wellsgardner Electronics Corp has a market cap of $22.4 million; its shares were traded at around $2.03 with a P/E ratio of 17.7 and P/S ratio of 0.4. WGA is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
For the first quarter ended March 31, 2010, net sales essentially were flat at $11,576,000 compared to $11,604,000 the first quarter 2009. Overall video display unit volume increased almost 4,000 units or over 15%. Video display average selling price declined over 10% year over year in the first quarter. The net of the video display volume increase and selling price decline resulted in a sales increase of $0.3 million. Parts sales declined by $0.4 million and used games sales increased $0.1 million in the first quarter 2010 compared to the same quarter 2009. Gaming sales for the first quarter 2010 increased by 3% to $10,798,000 from $10,469,000 in the first quarter 2009 due to unit volume increases in the gaming market. Amusement sales decreased by 31% to $778,000 in the first quarter 2010 from $1,135,000 in the first quarter 2009 primarily due to lower industry game sales. As a result, gaming sales accounted for 93% of total sales and amusement sales accounted for 7% of total sales in the first quarter 2010 compared to 90% and 10% respectively in the same quarter 2009.Gross margin for the first quarter 2010 increased $59,000 to $2,142,000 or 18.5% of sales compared to $2,083,000 or 18.0% in the first quarter 2009 for a 0.5 point increase in margin percentage. The $59,000 increase in margin was due to the margin percentage increase. The margin improvement was due to a higher percentage being produced in China 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.
Net income was $105,000 in the first quarter 2010 compared to $103,000 in the first quarter 2009. For the first quarter 2010 basic and diluted earnings per share was $0.01 compared to basic and diluted earnings per share of $0.01 in the first quarter 2009.
Earnings plus non cash adjustments were $161,000. Accounts receivable increased by $106,000 in the first quarter to $7,250,000 on March 31, 2010 due to longer credit terms extended to one customer in exchange for lower inventory carrying requirements. Accounts receivable days outstanding increased to 57 days on March 31, 2010 from 50 days on December 31, 2009. Inventory increased by $1,322,000 to $9,330,000 on March 31, 2010 compared to $8,008,000 on December 31, 2009. The primary cause of the inventory increase was slower sales for three customers in the first quarter than originally planned. As a result, days cost of sales in inventory increased to 88 days on March 31, 2010 from 66 days on December 31, 2009. Prepaid expenses increased by $84,000 in the first quarter primarily due to higher LCD purchases for our subcontractors. Due to subcontractors increased more than due from subcontractors by $165,000 in the first quarter due slightly higher production later in the quarter. Accounts payable days outstanding increased to 35 days on March 31, 2010 from 27 days at December 31, 2009, resulting in accounts payable increase of $399,000 for the quarter. Accrued expenses decreased by $311,000 in the first quarter.
Long-term notes payable increased by $1,398,000 to $3,576,000 on March 31, 2010 from $2,178,000 on December, 2009. Proceeds from options exercised were $20,000 during the first quarter 2010. These resulted in $1,418,000 of cash provided by financing activities.
As of March 31, 2010, the Company had total outstanding bank debt of $3.6 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 $15,000 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 $3 million, then a 100 basis point increase in interest rates would result in an annual increase of approximately $30,000 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 $15,000 per month through August, 2011 which reduces to $10,000 per month through August, 2012.
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