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WMS Industries Inc. Reports Operating Results (10-Q)

February 04, 2010 | About:

WMS Industries Inc. (NYSE:WMS) filed Quarterly Report for the period ended 2009-12-31.

Wms Industries Inc. has a market cap of $2.27 billion; its shares were traded at around $38.65 with a P/E ratio of 22.4 and P/S ratio of 3.2. Wms Industries Inc. had an annual average earning growth of 53% over the past 5 years.WMS is in the portfolios of Bruce Kovner of Caxton Associates.

Highlight of Business Operations:

Quarter Ended December 2009 Result: During the three months ended December 31, 2009, our average installed base of participation gaming machines increased 9.1% over the prior year and, at December 31, 2009, our total installed participation footprint stood at 10,385 units compared to 9,741 units at December 31, 2008. Growth in the installed base was primarily led by our WAP gaming machines, which at December 31, 2009 comprised 30.1% of the footprint compared to 21.2% at December 31, 2008. The WAP footprint increased to 3,123 units at December 31, 2009 and were up 1,060 units or 51.4% compared to December 31, 2008, largely reflecting the successful launch of new WAP games. The increase in WAP games was partially offset by lower units of our stand-alone and LAP gaming machines at December 31, 2009. A shift in strategy in fiscal 2007 to focus on return on investment of our gaming operations assets helped result in revenue per day for the quarter ended December 31, 2009 increasing by 13.0% to $75.23 per day from $66.57 per day for the December 2008 quarter. This strategy includes limiting the number of gaming machines for specific new themes at each casino and re-deploying gaming machines from casinos generating lower revenue per day to casinos generating higher revenue per day. By controlling the initial placement of participation products, we continued to reduce the capital invested in gaming operations. A 13.0% improvement in the average daily revenue, coupled with the 9.1% improvement in the average installed base, produced a 23.4% year-over-year increase in participation revenue in our gaming operations business to $71.7 million for the quarter ended December 31, 2009, which attests to the continued strong play levels and player appeal of our participation products.

Quarter Ended December 2009 Result: For the quarter ended December 31, 2009 we had cash provided by operations of $47.3 million compared to $53.2 million of cash provided by operations in the prior year, for a change of $5.9 million. The net cash provided by operations for the quarter ended December 31, 2009 reflects higher net income which was more than offset by changes in operating assets and liabilities as higher total accounts and notes receivable from extended term financing being provided to select customers, coupled with inventory increasing primarily from the advance purchase of computer chips used in many of our gaming machines was partially offset by higher accounts payable.

In addition, in our cash flows from investing activities we made continued improvement in our management of the capital deployed in our gaming operations business. The installed footprint of participation gaming machines at December 31, 2009 increased 644 units or 6.6% over December 31, 2008. During the December 2009 quarter our investment in gaming operations equipment totaled $9.2 million, compared to the $14.6 million invested in the prior year quarter. Our total cash, cash equivalents and restricted cash as of December 31, 2009, rose 3.0% to $159.4 million from $154.7 million as of June 30, 2009 and increased by $24.0 from December 31, 2008.

The priorities for the utilization of our cash flow are to: continue to enhance stockholder value by emphasizing internal and external investments to create and license advanced technologies and intellectual property; seek acquisitions that can extend our international presence, increase our intellectual property portfolio and expand our earnings potential; and, when appropriate, repurchase shares in the open market or in privately negotiated transactions. For the quarter ended December 31, 2009, our research and development spending was $25.9 million, which was flat compared to the prior year. In the December 2009 quarter, we spent $15.5 million in property, plant and equipment, $9.2 million on additions to gaming operations equipment and $4.4 million to acquire or license long-term intangible and other assets. During the quarter ended December 31, 2009, we purchased shares of our common stock in the open market for approximately $15.0 million at an average cost of $40.78, and we used $0.2 million in cash to induce one holder of our 2.75% Convertible Subordinated Notes (Notes) due July 15, 2010 to early convert $25.7 million of the Notes into common shares.

On August 3, 2009, our Board of Directors authorized the repurchase of an additional $75 million of our common stock over the following twenty-four months increasing our remaining repurchase authorization to approximately $150 million. This authorization increases the existing program, previously authorized on August 4, 2008, from $150 million to $225 million and extended the expiration date to August 3, 2011. During the six months ended December 31, 2009, we purchased 367,760 shares for approximately $15.0 million at an average cost of $40.78 while during the six months ended December 31, 2008, we purchased 1,033,356 shares for approximately $25.5 million at December 31, 2008 at an average cost of $24.67 per share. As of December 31, 2009, we had approximately $135 million remaining of our repurchase authorization. Pursuant to the authorization, purchases may be made from time to time in the open market, through block purchases or in privately negotiated transactions. The timing and actual number of shares repurchased will depend on market conditions. At June 30, 2008, we had purchased approximately $0.5 million of our common stock, which was settled and paid in fiscal 2009.

From January 28, 2010 through February 3, 2010, we repurchased approximately 1% of our common shares outstanding, or 524,920 shares of our common stock in open market purchases for approximately $20.0 million at an average cost of $38.09 per share. As of February 3, 2010 we had approximately $115 million remaining of our repurchase authorization.

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