WellsGardner Electronics Corp (WGA, Financial) filed Quarterly Report for the period ended 2009-06-30.
Wells-Gardner Electronics Corporation is a distributor and ISO 9001 certified manufacturer of color video monitors video liquid crystal & plasma displays coin doors coin mechanisms and other related distribution products for a wide variety of markets including but not limited to gaming machines coin-operated video games leisure and fitness automotive display intranet medical service and video walls. WellsGardner Electronics Corp has a market cap of $15.8 million; its shares were traded at around $1.52 with a P/E ratio of 30.4 and P/S ratio of 0.3.
For the first half ended June 30, 2009, net sales decreased by 12% to $25,980,000 from $29,441,000 the first half 2008. Overall video display unit volume declined 11% or $3.9 million primarily due to a 73% unit decline in CRT sales partially offset by a 4% unit increase in LCD sales. Parts sales increased $0.7 million and used games sales decreased $0.2 million in the first half 2009 compared to the same period 2008. Gaming sales for the first half 2009 declined by 7% to $23,856,000 from $25,765,000 in the first half 2008 due to a sluggish gaming market. Amusement sales decreased by 42% to $2,124,000 in the first half 2009 from $3,676,000 in the first half 2008 primarily due to lower replacement market sales. As a result, gaming sales accounted for 92% of total sales and amusement sales accounted for 8% of total sales the first half 2009 compared to 88% and 12% respectively in the same period 2008.
Gross margin for the first half 2009 decreased $0.1 million to $4.7 million or 18.0% of sales compared to $4.8 million or 16.2% in the first half 2008 for a 1.8 point increase in margin percentage. The $3.5 million sales decline reduced the gross margin by $561,000 while the increase in margin percentage increased the gross margin by $472,000. The margin improvement was due to significantly higher parts margin and sales mix and some improvement in display margins due to a higher percentage being produced in China and improved design and purchasing. The company is concentrating on new parts lines with improved margin and introducing new lower cost video display product for class III gaming, class II gaming and amusement markets.
Operating expense decreased by $382,000 in the first half 2009 compared to the same period 2008. Due to the $3.5 million sales decline, operating expenses increased to 14.6% of sales in the first half from 14.2% of sales in the same period last year. The operating expense reductions were due to a $166,000 decline in compensation and benefit expense due to lower headcount, a $171,000 decline in commission expenses, a $42,000 decline in IT depreciation expense and a $36,000 decline in other partially offset by a $33,000 increase in occupancy expense. The Company continues to reduce its headcount and to place emphasis on operating expense control.
Accounts receivable increased by $1,182,000 in the second quarter to $7,279,000 on June 30, 2009 due to the higher sales level compared to the first quarter 2009 particularly late in the second quarter. However, accounts receivable days outstanding decreased to 46 days on June 30, 2009 from 48 days on March 31, 2009 due to the higher average sales per day in the second quarter compared to the first quarter. Inventory decreased to $11,040,000 on June 30, 2009 compared to $11,065,000 on March 31, 2009. Even though the inventory decrease was modest in the second quarter, days cost of sales in inventory decreased to 85 days on June 30, 2009 from 106 days on March 31, 2009 due to the higher sales level. Prepaid expenses decreased by $158,000 in the second quarter. Due to subcontractors increased more than due from subcontractors by $1,445,000 in the second quarter due to the higher production level. Accounts payable decreased by $101,000 as accounts payable days outstanding decreased to 24 days on June 30, 2009 compared to 28 days at March 31, 2009 due to our paying vendors faster. Accrued expenses increased by $191,000 in the second quarter.
Accounts receivable increased by $1,038,000 in the first half to $7,279,000 on June 30, 2009 due to the higher sales level particularly late in the second quarter compared to the fourth quarter 2008. Accounts receivable days outstanding increased to 46 days on June 30, 2009 from 44 days on December 31, 2008. Inventory decreased $746,000 to $11,040,000 on June 30, 2009 compared to $11,786,000 on December 31, 2008. Days cost of sales in inventory decreased to 85 days on June 30, 2009 from 96 days on December 31, 2008 due to the higher sales and lower inventory levels. Prepaid expenses decreased by $345,000 in the first half 2009. Due to subcontractors increased more than due from subcontractors by $1,438,000 in the first half 2009 due to higher production levels. Accounts payable decreased by $437,000 in the first half 2009 as accounts payable days outstanding declined to 24 days on June 30, 2009 compared to 31 days at December 31, 2008 due to our paying vendors slightly faster. Accrued expenses increased by $336,000 in the first half 2009.
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Wells-Gardner Electronics Corporation is a distributor and ISO 9001 certified manufacturer of color video monitors video liquid crystal & plasma displays coin doors coin mechanisms and other related distribution products for a wide variety of markets including but not limited to gaming machines coin-operated video games leisure and fitness automotive display intranet medical service and video walls. WellsGardner Electronics Corp has a market cap of $15.8 million; its shares were traded at around $1.52 with a P/E ratio of 30.4 and P/S ratio of 0.3.
Highlight of Business Operations:
For the second quarter ended June 30, 2009, net sales decreased by 1% to $14,376,000 from $14,525,000 in second quarter 2008. Overall video display unit volume was flat with a $0.5 million sales decline primarily due to a 85% unit decline in CRT sales mostly offset by a 21% unit increase in LCD sales. Parts sales increased $0.4 million and used games sales decreased $0.1 million in the second quarter 2009 compared to the same quarter 2008. Gaming sales for the second quarter 2009 increased by 2% to $13,387,000 from $13,148,000 in the second quarter 2008 due to an improving gaming market. Amusement sales decreased by 28% to $989,000 in the second quarter 2009 from $1,378,000 in the second quarter 2008 primarily due to lower replacement market sales. As a result, gaming sales accounted for 93% of total sales and amusement sales accounted for 7% of total sales in the second quarter 2009 compared to 90% and 10% respectively in the same quarter 2008.For the first half ended June 30, 2009, net sales decreased by 12% to $25,980,000 from $29,441,000 the first half 2008. Overall video display unit volume declined 11% or $3.9 million primarily due to a 73% unit decline in CRT sales partially offset by a 4% unit increase in LCD sales. Parts sales increased $0.7 million and used games sales decreased $0.2 million in the first half 2009 compared to the same period 2008. Gaming sales for the first half 2009 declined by 7% to $23,856,000 from $25,765,000 in the first half 2008 due to a sluggish gaming market. Amusement sales decreased by 42% to $2,124,000 in the first half 2009 from $3,676,000 in the first half 2008 primarily due to lower replacement market sales. As a result, gaming sales accounted for 92% of total sales and amusement sales accounted for 8% of total sales the first half 2009 compared to 88% and 12% respectively in the same period 2008.
Gross margin for the first half 2009 decreased $0.1 million to $4.7 million or 18.0% of sales compared to $4.8 million or 16.2% in the first half 2008 for a 1.8 point increase in margin percentage. The $3.5 million sales decline reduced the gross margin by $561,000 while the increase in margin percentage increased the gross margin by $472,000. The margin improvement was due to significantly higher parts margin and sales mix and some improvement in display margins due to a higher percentage being produced in China and improved design and purchasing. The company is concentrating on new parts lines with improved margin and introducing new lower cost video display product for class III gaming, class II gaming and amusement markets.
Operating expense decreased by $382,000 in the first half 2009 compared to the same period 2008. Due to the $3.5 million sales decline, operating expenses increased to 14.6% of sales in the first half from 14.2% of sales in the same period last year. The operating expense reductions were due to a $166,000 decline in compensation and benefit expense due to lower headcount, a $171,000 decline in commission expenses, a $42,000 decline in IT depreciation expense and a $36,000 decline in other partially offset by a $33,000 increase in occupancy expense. The Company continues to reduce its headcount and to place emphasis on operating expense control.
Accounts receivable increased by $1,182,000 in the second quarter to $7,279,000 on June 30, 2009 due to the higher sales level compared to the first quarter 2009 particularly late in the second quarter. However, accounts receivable days outstanding decreased to 46 days on June 30, 2009 from 48 days on March 31, 2009 due to the higher average sales per day in the second quarter compared to the first quarter. Inventory decreased to $11,040,000 on June 30, 2009 compared to $11,065,000 on March 31, 2009. Even though the inventory decrease was modest in the second quarter, days cost of sales in inventory decreased to 85 days on June 30, 2009 from 106 days on March 31, 2009 due to the higher sales level. Prepaid expenses decreased by $158,000 in the second quarter. Due to subcontractors increased more than due from subcontractors by $1,445,000 in the second quarter due to the higher production level. Accounts payable decreased by $101,000 as accounts payable days outstanding decreased to 24 days on June 30, 2009 compared to 28 days at March 31, 2009 due to our paying vendors faster. Accrued expenses increased by $191,000 in the second quarter.
Accounts receivable increased by $1,038,000 in the first half to $7,279,000 on June 30, 2009 due to the higher sales level particularly late in the second quarter compared to the fourth quarter 2008. Accounts receivable days outstanding increased to 46 days on June 30, 2009 from 44 days on December 31, 2008. Inventory decreased $746,000 to $11,040,000 on June 30, 2009 compared to $11,786,000 on December 31, 2008. Days cost of sales in inventory decreased to 85 days on June 30, 2009 from 96 days on December 31, 2008 due to the higher sales and lower inventory levels. Prepaid expenses decreased by $345,000 in the first half 2009. Due to subcontractors increased more than due from subcontractors by $1,438,000 in the first half 2009 due to higher production levels. Accounts payable decreased by $437,000 in the first half 2009 as accounts payable days outstanding declined to 24 days on June 30, 2009 compared to 31 days at December 31, 2008 due to our paying vendors slightly faster. Accrued expenses increased by $336,000 in the first half 2009.
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