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Rod Smith

Resilient WMS Industries Reverses Loss

10 August 2004

In what Wall Street analysts and company executives call a successful turnaround story, WMS Industries on Monday posted net income of $896,000, or 3 cents per diluted share, for the quarter ending June 30, reversing a loss of $5.2 million, or 17 cents a share, a year earlier.

WMS President Brian Gamache Monday said the big story for his company is that WMS has won most of the regulatory approvals it needs to increase sales after withdrawing from the market for about two years.

Before 2001, Waukegan, Ill.-based WMS pioneered the multiline video slot platform and had an 18 percent share of the gaming device market. However, reliability and security problems with its slots led to customer cheating, and WMS voluntarily withdrew from the new-sales market to retool.

Prudential Securities analyst Bill Lerner called it a great quarter for WMS. However, he and company executives stressed the need to normalize operations, now that the company has returned to profitability.

Deustche Bank analyst Marc Falcone said the positive operating results were in line with Wall Street projections and guidance the company had provided.

"We think the backlog of orders yields a very strong outlook for the company in (its fiscal) 2005 (which started July 1) when we'll start to see a significant ramp-up in earnings power," he said.

For the year ended June 30, WMS still lost $883,000, an improvement from its loss of $8.2 million in the previous fiscal year.

Quarterly revenue rose 34 percent to $68.1 million from $50.9 million.

Revenue for fiscal 2004 increased to $230.2 million, up 29 percent from $178.7 million in fiscal 2003.

WMS Chief Financial Officer Scott Schweinfurth said the company expects revenue to increase to between $340 million and $360 million in 2005, based on current or expected slot machine orders from existing gaming jurisdictions.

Gamache said the pending mergers between MGM Mirage and Mandalay Resort Group and between Harrah's Entertainment and Caesars Entertainment should not affect his company's performance.

"We believe the two surviving entities have already ordered a great number of our games, and if we continue to provide great games, they'll continue to order," he said.

WMS closed Monday at $24.35, up 44 cents or 1.84 percent on volume of almost 1 million shares, double normal trading volume.

Resilient WMS Industries Reverses Loss is republished from