Slot maker posts decline

Friday, Feb. 1, 2002 | 11:16 a.m.

WMS Industries Inc. of Chicago on Thursday reported a 70 percent decline in net income for the quarter ending Dec. 31.

The slot maker reported net income of $3.3 million, or 10 cents per share, compared to net income of $11 million, or 34 cents per share, in the year-ago quarter. Net income was at the low end of the range WMS told investors to expect two weeks ago. WMS said net income was reduced by $1.3 million, or 3 cents per share, by employee severance costs. The company said it laid off 17 percent of its workforce earlier this month, a move it said should cut expenses by 11 percent on an annual basis.

Revenues fell 27 percent to $49.1 million, and cash flow declined 43 percent to $12 million.

WMS blamed the earnings shortfall on ongoing problems with the software in its slot machines, as well as increased research and development. After a second glitch was reported in WMS slot software late last year, regulators stepped up their scrutiny of the company's software, delaying game sales.

WMS said it sold 2,606 slots during the quarter, compared to 5,004 sold in the year-ago period; this resulted in a 44 percent decline in machine sale revenues, to $25.5 million. WMS had 5,836 participation slots installed in casinos on Dec. 31, an 11 percent increase from Dec. 31, 2000, driving participation revenue up 8 percent to $23.6 million. However, the total base of participation machines fell by 104 from Sept. 30, 2001.

Despite the decline in participation slots, WMS said it has a backlog of orders for more than 1,000 participation machines.