WMS Industries Inc. (WMS)
F1Q2012 (Qtr End 09/30/2011) Earnings Call
November 07, 2011 04:30 pm ET
Bill Pfund - VP, IR
Brian Gamache - Chairman & CEO
Scott Schweinfurth - EVP, CFO & Treasurer
Orrin Edidin - President
Steve Wieczynski - Stifel Nicolaus
Dennis Forst - KeyBanc
Carlo Santarelli - Deutsche Bank
Mark Strawn - Morgan Stanley
Joseph Greff - JPMorgan
Todd Eilers - Roth Capital Partners
David Katz - Jefferies & Co.
Joel Simkins - Credit Suisse
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Thank you, Jason. Welcome everyone to WMS Industries fiscal 2012 first quarter conference call. Our call today contains forward-looking statements concerning the outlook for WMS and future business conditions. These statements are based on currently available information and involve certain risks and uncertainties. The company's actual results may differ materially from those anticipated in the forward-looking statements depending on the factors described under Item 1 business and Item IA risk factors in the company's annual report on Form 10-K for the year ended June 30, 2011, and in our more recent press releases and reports filed with the SEC. The forward-looking statements made on this call and webcast, the archived version of the webcast, and in any transcripts of this call are only made as of this date, November 7, 2011.
This afternoon, Brian Gamache, our Chairman and Chief Executive Officer, will provide an overview with the first quarter results and key milestones; followed by Scott Schweinfurth, our CFO, with further insight on our financial results; and Orrin Edidin, our President, will discuss our progress on product and operational initiatives. We’ll conclude with final comments from Brian.
Now, let me turn the call over to Brian.
Thanks, Bill and good afternoon, everyone. WMS today reported total revenues of $156 million and diluted earnings per share of $0.07 for the fiscal 2012 first quarter inclusive of charges of $0.17 per diluted share. Since our last call in August, we’ve made significant operational improvements, achieved cost savings as a result of our re-organization and realignment and begun to receive a greater number of new product approvals all of which are in line with our expectations.
This progress is an encouraging indicator that we’ve reached an inflexion point in our performance. With quarterly sequential improvement anticipated in the December 2011 quarter to be followed by what we expect to be return to growth over prior year periods beginning in the second half of fiscal 12.
We realized meaningful cost savings in the first quarter as a result of restructuring and realignment actions reviewed in August. These actions realigned our product management and product development structure in our supply chain functions while reducing the global headcount by approximately 10% across all departments. We also received initial regulatory approvals of several participation games and more than 30 new per sale products including products previously delayed as well as approvals for our second and third portal applications enabled by our WAGE-NET network gaming solution.
We expect to receive additional jurisdictional approvals for these products by the end of December quarter which we expect will put us on a path to resume a more normal flow of product approvals in calendar 12. We also noted in this afternoon’s press release several strategic deals that demonstrated a continuing demand for our innovative products.
One, WMS’s selection by the Alberta Gaming and Liquor Commission to participate in their VLT replacement initiative. Two, signing an agreement with Caesar's Entertainment to be our launch partner for our exciting new Clue participation game once it’s approved later this fiscal year. And three, the extension of our distribution arrangement with eBet in Australia on a new five-year rolling basis with a potential to expand into Victoria and Queensland pending appropriate regulatory approval.
Now let me turn the call over to Scott.
Thanks Brian and good afternoon everyone. Based on the restructuring realignment actions we announced in August coupled with government enforcement actions in selected casinos in Mexico that began at the end of August, we recorded charges of $0.17 per fully diluted share in the September 2011 quarter.
Included in our press release is a supplemental schedule detailing the charges, but in summary we incurred pretax charges of $14 million as follows: $9.7 million or $0.12 per diluted share in line with the level we noted in our August call related to impairment and restructuring charges including $5.9 million of separation related expenses, as we reduced our work force by approximately 10% coupled with $3.8 million of costs related to our decision to close two locations and $4.3 million or $0.05 per diluted share associated with the write-down of receivables for a small number of customers in Mexico.
The situation in Mexico has been very dynamic with generally improving in recent weeks. However, we believe it prudent to establish appropriate reserves at September 30, 2011 for certain customers.
Now let’s review our financial performance and trends. For our first fiscal quarter total global shipments totaled 3,918 units compared to 5,338 units a year ago. Last year’s new unit shipments benefitted from strong launch demand for BB xD cabinet. This year we believe our lower demand resulted from customers postponing capital spending in Q1 until they got to the recent G2E Trade Show in early October to see the latest WMS products.