WMS hurt by game delays

Wednesday, Aug. 14, 2002 | 11:14 a.m.

Slot machine manufacturer WMS Industries Inc. of Chicago on Tuesday reported declines in second quarter earnings, revenues and cash flow in part because of a decline in game approvals by regulators.

Part of the problem was a software glitch that stalled the launch of new machines in Mississippi by 10 months.

Still, the company said a modest profit, cost-cutting measures and a completed technology upgrade are signs of an upswing.

WMS Industries earned $700,000, or 2 cents per share, in the second quarter compared to $3.2 million, or 10 cents per share, a year ago. Wall Street analysts had expected the company to earn 1 cent per share.

Revenue declined from $65.8 million to $43.2 million during the period, and cash flow declined from $22.9 million to $6.2 million.

Cash flow is defined as earnings before interest, taxes, depreciation and amortization and is a key indicator of performance in the gaming industry.

The decline in cash flow was primarily due to lower product sales caused by a lack of new game approvals and increased costs related to a software upgrade, the company said.

The number of installed participation games increased by 7 percent in the second quarter, to 5,808 units, compared to the same period last year. Demand this year was helped by the launch of three games based on popular themes: Hollywood Squares, Survivor and Pac-Man, the company said.

The company has a backlog of requests for more than 1,000 machines, including demand for Pac-Man games expected to be shipped following the end of an exclusivity period at Park Place Entertainment Corp. casinos and games in jurisdictions where approvals have yet to be received.

The number of games sold during the quarter declined more than 200 percent, to 1,312 units, from the previous year. A lack of new game approvals, due to the company's focus on repairing a software glitch, contributed to the decline, the company said.

Shares of WMS have surged more than 40 percent in recent days after news that Mississippi regulators would begin accepting WMS machines for approval after a hiatus of nearly a year while the company completed a required software upgrade. The company's stock rose more than 2.4 percent in early trading this morning, to $13.94.