WellsGardner Electronics Corp (WGA, Financial) filed Quarterly Report for the period ended 2010-06-30.
Wellsgardner Electronics Corp has a market cap of $23.96 million; its shares were traded at around $2.18 with a P/E ratio of 18.53 and P/S ratio of 0.46. WGA is in the portfolios of Jim Simons of Renaissance Technologies LLC.
For the six months ended June 30, 2010, net sales increased 4 percent to $26,964,000 compared to $25,980,000 for the six months ended June 30, 2009. Overall video display unit volume increased over 12,000 units or almost 25% year over year. Video display average selling price declined 11% year over year in the six months. The net of the video display volume increase and selling price decline resulted in a sales increase of $2.3 million. Parts sales declined by $1.1 million in the OEM division and used games sales decreased $0.2 million in the six months 2010 compared to the same period 2009. Gaming sales for the six months 2010 increased by 7% to $25,631,000 from $23,856,000 in the six months 2009 due to unit volume increases in the gaming market. Amusement sales decreased by 37% to $1,333,000 in the six months 2010 from $2,124,000 in the six months 2009 primarily due to lower industry game sales. As a result, gaming sales accounted for 96% of total sales and amusement sales accounted for 4% of total sales in the six months 2010 compared to 95% and 5% respectively in the same period 2009.
Gross margin for the first six months 2010 increased $278,000 to $4,962,000 or 18.4% of sales compared to $4,684,000 or 18.0% in the first six months 2009 for a 0.4 point increase in margin percentage. Increased sales accounted for a $178,000 increase in the gross margin and the 0.4% margin improvement accounted for $100,000 increase in the gross margin. The margin improvement was due to 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 second quarter 2010 were $505,000. Accounts receivable increased by $4,529,000 in the second quarter to $11,852,000 on June 30, 2010 due to longer credit terms extended to one customer in exchange for lower inventory carrying requirements and higher sales the last 45 days of the quarter. Accounts receivable days outstanding increased to 70 days on June 30, 2010 from 57 days on March 31, 2010. Inventory decreased by $817,000 to $8,513,000 on June 30, 2010 compared to $9,330,000 on March 31, 2010. The primary cause of the inventory decrease was very high sales the last 45 days of the quarter. As a result, days cost of sales in inventory decreased to 62 days on June 30, 2010 from 88 days on March 31, 2010. Prepaid expenses decreased by $501,000 in the second quarter 2010 primarily due to lower LCD purchases for our subcontractors. Due to subcontractors decreased more than due from subcontractors by $466,000 in the second quarter 2010 due to slightly lower production later in the quarter. Accounts payable days outstanding decreased to 24 days on June 30, 2010 from 35 days at March 31, 2010, resulting in accounts payable decrease of $429,000 for the quarter. Accrued expenses increased by $250,000 in the second quarter due to engineering reorganization and other payroll accruals.
Inventory increased by $505,000 to $8,513,000 on June 30, 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 six months than originally planned. As a result, days cost of sales in inventory decreased to 62 days on June 30, 2010 from 66 days on December 31, 2009. Prepaid expenses decreased by $417,000 in the first six months 2010 primarily due to lower LCD purchases for our subcontractors. Due to subcontractors decreased more than due from subcontractors by $631,000 in the six months due slightly lower production later in the quarter. Accounts payable days outstanding decreased to 24 days on June 30, 2010 from 27 days at December 31, 2009, but due to the higher second quarter activity accounts payable increased $30,000 for the period. Accrued expenses decreased by $23,000 in the six months.
As of June 30, 2010, the Company had total outstanding bank debt of $5.8 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 $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 $248,000 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 $23.96 million; its shares were traded at around $2.18 with a P/E ratio of 18.53 and P/S ratio of 0.46. WGA is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
For the second quarter ended June 30, 2010, net sales increased 7 percent to $15,388,000 compared to $14,376,000 the second quarter 2009. Overall video display unit volume increased over 8,500 units or over 30% year over year. Video display average selling price declined 11% year over year in the second quarter. The net of the video display volume increase and selling price decline resulted in a sales increase of $2.0 million. Parts sales declined by $0.7 million in the OEM division and used games sales decreased $0.3 million in the second quarter 2010 compared to the same quarter 2009. Gaming sales for the second quarter 2010 increased by 11% to $14,833,000 from $13,387,000 in the second quarter 2009 due to unit volume increases in the gaming market. Amusement sales decreased by 44% to $555,000 in the second quarter 2010 from $989,000 in the second quarter 2009 primarily due to lower industry game sales. As a result, gaming sales accounted for 96% of total sales and amusement sales accounted for 4% of total sales in the second quarter 2010 compared to 93% and 7% respectively in the same quarter 2009.For the six months ended June 30, 2010, net sales increased 4 percent to $26,964,000 compared to $25,980,000 for the six months ended June 30, 2009. Overall video display unit volume increased over 12,000 units or almost 25% year over year. Video display average selling price declined 11% year over year in the six months. The net of the video display volume increase and selling price decline resulted in a sales increase of $2.3 million. Parts sales declined by $1.1 million in the OEM division and used games sales decreased $0.2 million in the six months 2010 compared to the same period 2009. Gaming sales for the six months 2010 increased by 7% to $25,631,000 from $23,856,000 in the six months 2009 due to unit volume increases in the gaming market. Amusement sales decreased by 37% to $1,333,000 in the six months 2010 from $2,124,000 in the six months 2009 primarily due to lower industry game sales. As a result, gaming sales accounted for 96% of total sales and amusement sales accounted for 4% of total sales in the six months 2010 compared to 95% and 5% respectively in the same period 2009.
Gross margin for the first six months 2010 increased $278,000 to $4,962,000 or 18.4% of sales compared to $4,684,000 or 18.0% in the first six months 2009 for a 0.4 point increase in margin percentage. Increased sales accounted for a $178,000 increase in the gross margin and the 0.4% margin improvement accounted for $100,000 increase in the gross margin. The margin improvement was due to 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 second quarter 2010 were $505,000. Accounts receivable increased by $4,529,000 in the second quarter to $11,852,000 on June 30, 2010 due to longer credit terms extended to one customer in exchange for lower inventory carrying requirements and higher sales the last 45 days of the quarter. Accounts receivable days outstanding increased to 70 days on June 30, 2010 from 57 days on March 31, 2010. Inventory decreased by $817,000 to $8,513,000 on June 30, 2010 compared to $9,330,000 on March 31, 2010. The primary cause of the inventory decrease was very high sales the last 45 days of the quarter. As a result, days cost of sales in inventory decreased to 62 days on June 30, 2010 from 88 days on March 31, 2010. Prepaid expenses decreased by $501,000 in the second quarter 2010 primarily due to lower LCD purchases for our subcontractors. Due to subcontractors decreased more than due from subcontractors by $466,000 in the second quarter 2010 due to slightly lower production later in the quarter. Accounts payable days outstanding decreased to 24 days on June 30, 2010 from 35 days at March 31, 2010, resulting in accounts payable decrease of $429,000 for the quarter. Accrued expenses increased by $250,000 in the second quarter due to engineering reorganization and other payroll accruals.
Inventory increased by $505,000 to $8,513,000 on June 30, 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 six months than originally planned. As a result, days cost of sales in inventory decreased to 62 days on June 30, 2010 from 66 days on December 31, 2009. Prepaid expenses decreased by $417,000 in the first six months 2010 primarily due to lower LCD purchases for our subcontractors. Due to subcontractors decreased more than due from subcontractors by $631,000 in the six months due slightly lower production later in the quarter. Accounts payable days outstanding decreased to 24 days on June 30, 2010 from 27 days at December 31, 2009, but due to the higher second quarter activity accounts payable increased $30,000 for the period. Accrued expenses decreased by $23,000 in the six months.
As of June 30, 2010, the Company had total outstanding bank debt of $5.8 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 $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 $248,000 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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