Ag&e (WGA) 10-Q 13 Nov 13 2013 Q3 Quarterly report Financial data

Document_And_Entity_Informatio

Document And Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 09, 2013
Document and Entity Information [Abstract]	'	'
Entity Registrant Name	'WELLS GARDNER ELECTRONICS CORP	'
Document Type	'10-Q	'
Current Fiscal Year End Date	'--12-31	'
Entity Common Stock, Shares Outstanding	'	11,706,000
Amendment Flag	'false	'
Entity Central Index Key	'0000105608	'
Entity Current Reporting Status	'Yes	'
Entity Voluntary Filers	'No	'
Entity Filer Category	'Smaller Reporting Company	'
Entity Well-known Seasoned Issuer	'No	'
Document Period End Date	30-Sep-13	'
Document Fiscal Year Focus	'2013	'
Document Fiscal Period Focus	'Q3	'

Condensed_Consolidated_Stateme

Condensed Consolidated Statements of Operations (unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Net sales	$12,246,000	$11,727,000	$44,353,000	$36,913,000
Cost of sales	10,310,000	9,678,000	37,201,000	30,377,000
Gross margin	1,936,000	2,049,000	7,152,000	6,536,000
Engineering, selling & administrative expenses	1,967,000	2,258,000	6,555,000	6,589,000
Operating (Loss) Earnings	-31,000	-209,000	597,000	-53,000
Interest expense	15,000	26,000	60,000	86,000
Other income, net	-6,000	0	-6,000	-1,000
Income tax expense	0	0	2,000	21,000
Net (Loss) Earnings	($40,000)	($235,000)	$541,000	($159,000)
Earnings per share:	'	'	'	'
Basic (loss)earnings per share (in Dollars per share)	$0	($0.02)	$0.05	($0.01)
Diluted (loss) earnings per share (in Dollars per share)	$0	($0.02)	$0.05	($0.01)
Basic average common shares outstanding (in Shares)	11,703,139	11,664,224	11,707,321	11,651,099
Diluted average common shares outstanding (in Shares)	11,703,229	11,667,535	11,708,663	11,654,647

Condensed_Consolidated_Balance

Condensed Consolidated Balance Sheets (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Current assets:	'	'	'
Cash	$237,000	$768,000	$225,000
Accounts receivable, net	8,305,000	8,678,000	6,582,000
Accounts receivable, subcontractor	3,431,000	5,093,000	3,841,000
Inventory	11,833,000	10,817,000	9,334,000
Other current assets	903,000	855,000	574,000
Total current assets	24,709,000	26,211,000	20,556,000
Property, plant & equipment, net	181,000	257,000	254,000
Other assets:	'	'	'
Deferred tax asset, net	469,000	469,000	471,000
Other long term asset	186,000	49,000	17,000
Goodwill	1,329,000	1,329,000	1,329,000
Total other assets	1,984,000	1,847,000	1,817,000
Total assets	26,874,000	28,315,000	22,627,000
Current liabilities:	'	'	'
Accounts payable	6,173,000	4,167,000	1,872,000
Accounts payable, subcontractor	2,980,000	3,581,000	1,781,000
Accrued expenses	1,212,000	1,040,000	1,286,000
Total current liabilities	10,365,000	8,788,000	4,939,000
Long-term liabilities:	'	'	'
Note payable	72,000	3,701,000	2,206,000
Total liabilities	10,437,000	12,489,000	7,145,000
Shareholders' Equity:	'	'	'
Common stock: authorized 25,000,000 shares $1.00 par value; shares issued and outstanding: 11,706,286 shares as of September 30, 2013 11,666,898 shares as of September 30, 2012 11,666,898 shares as of December 31, 2012	11,706,000	11,667,000	11,667,000
Additional paid-in capital	5,162,000	5,131,000	5,131,000
Accumulated deficit	-183,000	-725,000	-1,047,000
Unearned compensation	-248,000	-247,000	-269,000
Total shareholders' equity	16,437,000	15,826,000	15,482,000
Total liabilities & shareholders' equity	$26,874,000	$28,315,000	$22,627,000

Condensed_Consolidated_Balance1

Condensed Consolidated Balance Sheets (Parentheticals) (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Common stock, shares authorized (in Shares)	25,000,000	25,000,000	25,000,000
Common stock, par value (in Dollars per share)	$1	$1	$1
Common stock, shares issued (in Shares)	11,706,286	11,666,898	11,666,898
Common stock, shares outstanding (in Shares)	11,706,286	11,666,898	11,666,898

Condensed_Consolidated_Stateme1

Condensed Consolidated Statements of Cash Flows (unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities:	'	'	'	'
Net (loss) earnings	($40,000)	($235,000)	$541,000	($159,000)
Adjustments to reconcile net (loss) earnings to net cash provided by (used in) operating activities:	'	'	'	'
Depreciation and amortization	29,000	40,000	104,000	119,000
Bad debt recovery	2,000	13,000	1,000	-43,000
Amortization of unearned compensation	8,000	21,000	52,000	61,000
Issuance of long term asset	-22,000	-17,000	-122,000	-17,000
Changes in current assets & liabilities	'	'	'	'
Accounts receivable	-416,000	1,486,000	357,000	-176,000
Inventory	-1,394,000	-1,987,000	-1,016,000	-225,000
Prepaid expenses & other	-265,000	433,000	-48,000	-64,000
Accounts payable	2,613,000	857,000	2,006,000	1,087,000
Due to/from subcontractor	623,000	-448,000	1,061,000	-1,615,000
Accrued expenses	-61,000	175,000	172,000	-14,000
Net cash provided by (used in) operating activities	1,077,000	338,000	3,108,000	-1,046,000
Cash used in investing activities:	'	'	'	'
Additions to plant & equipment, net	-4,000	-23,000	-28,000	-116,000
Net cash used in investing activities	-4,000	-23,000	-28,000	-116,000
Cash (used in) provided by financing activities:	'	'	'	'
(Repayments) borrowings - note payable	-912,000	-130,000	-3,629,000	1,148,000
Proceeds from shares issued, options exercised and purchase plan	15,000	0	18,000	18,000
Net cash (used in) provided by financing activities	-897,000	-130,000	-3,611,000	1,166,000
Net increase (decrease) in cash	176,000	185,000	-531,000	4,000
Cash at beginning of period	61,000	40,000	768,000	221,000
Cash at end of period	237,000	225,000	237,000	225,000
Supplemental cash flow disclosure:	'	'	'	'
Interest paid	15,000	26,000	60,000	86,000
Taxes paid	$0	$0	$2,000	$21,000

Note_1

Note 1	9 Months Ended
	Sep. 30, 2013
Disclosure Text Block [Abstract]	'
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]	'
	1.       In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of the financial position and results of operations for the periods presented. These condensed financial statements were prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information or footnotes necessary for a complete presentation in conformity with accounting principles generally accepted in the United States. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes included in the Company's 2012 Annual Report to Shareholders. The results of operations for the three months and nine months ended September 30, 2013 are not necessarily indicative of the operating results for the full year.

Note_2

Note 2	9 Months Ended
	Sep. 30, 2013
Earnings per share: [Abstract]	'
Earnings Per Share [Text Block]	'
	2.       Basic earnings per share are based on the weighted average number of shares outstanding whereas diluted earnings per share include the dilutive effect of unexercised common stock equivalents. Potentially dilutive securities are excluded from diluted earnings per share calculations for periods with a net loss.

Note_3

Note 3	9 Months Ended
	Sep. 30, 2013
Accounting Policies [Abstract]	'
Significant Accounting Policies [Text Block]	'
	3.       Revenue from video gaming terminal sales with standard payment terms is recognized upon the passage of title and transfer of the risk of loss. The Company recognizes revenue even if it retains a form of title to products delivered to customers, provided the sole purpose is to enable the Company to recover the products in the event of a customer payment default and the arrangement does not prohibit the customer’s use of the product in the ordinary course of business.

Note_4

Note 4	9 Months Ended
	Sep. 30, 2013
Fair Value Disclosures [Abstract]	'
Fair Value Disclosures [Text Block]	'
	4.       The fair value of the Company’s financial instruments does not materially vary from the carrying value of such instruments.

Note_5

Note 5	9 Months Ended
	Sep. 30, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]	'
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]	'
	5.       The Company maintains an Incentive Stock Option Plan and a Stock Award Plan under which officers and key employees may acquire up to a maximum of 2,052,408 common shares.
	Stock Options
	The Company’s Stock Option Plan ended on December 31, 2008. Options could be granted through December 31, 2008 at an option price not less than fair market value on the date of grant and are exercisable not earlier than six months nor later than ten years from the date of grant. Options vest over two and three year periods. As of September 30, 2013, 1 person held outstanding options and was eligible to participate in the plan. Such options expire on various dates through April 8, 2014.
	Under the stock option plan, the exercise price of each option equals the market price of the Company’s stock on the date of grant. For purposes of calculating the compensation cost, the fair value of each grant was estimated on the date of grant using the Black-Scholes option-pricing model. The Company has not issued any Incentive Stock Options since 2004, except for adjustments to previous grants for the 5% stock dividend declared in subsequent years. It is the Company’s policy to issue new stock certificates to satisfy stock option exercises.
	The following table summarizes information about stock options outstanding for the nine months ending September 30, 2013:
		Shares	Weighted	Weighted Average	Aggregate
			Average	Remaining	Intrinsic
			Exercise Price	Contractual Life	Value
	Outstanding at beginning of year	18,931	$2.00
	Granted	0	$0.00
	Forfeited	0	$0.00
	Exercised	-11,358	$1.58
	Outstanding, Sept 30, 2013	7,573	$2.62	0.5	$0
		7,573	$2.62	0.5	$0
	Exercisable, Sept 30, 2013
	Restricted Shares
	All restricted shares granted are governed by the Company’s Stock Award Plan, which was approved by shareholders in 2000. As of September 30, 2013, 153,130 restricted shares are outstanding on a dividend adjusted basis. The employees will earn the restricted shares in exchange for services to be provided to the Company over a three-year or five-year vesting period. Total unrecognized compensation cost related to unvested stock awards is approximately $248,000 and is expected to be recognized over a weighted average period of 2 years.
	The following table summarizes information regarding Restricted Share activity for the nine months ending September 30, 2013:
		Shares	Weighted Average Grant Date
			Fair Value
	Unvested at December 31, 2012	171,246	$2.14
	Granted	64,000	$1.99
	Vested	-46,146	$1.94
	Forfeited	-35,970	$2.08
	Unvested, September 30, 2013	153,130	$2.16

Note_6

Note 6	9 Months Ended
	Sep. 30, 2013
Inventory Disclosure [Abstract]	'
Inventory Disclosure [Text Block]	'
	6.       Our inventory detail as of September 30, 2013, September 30, 2012 and December 31, 2012 was as follows:
	(in $000's)	Sept 30,		Sept 30,		December 31,
		2013		2012		2012
		(unaudited)		(unaudited)
	Inventory:
	Raw materials	$	2,690	$	2,834	$	2,662
	In transit finished goods		1,570		1,034		950
	Finished goods		7,573		5,466		7,205
	Total	$	11,833	$	9,334	$	10,817

Note_7

Note 7	9 Months Ended
	Sep. 30, 2013
Line Of Credit Facilities [Abstract]	'
Line Of Credit Facilities [Text Block]	'
	7.       On March 8, 2013, the Company signed an amendment to extend the term of its credit agreement with Wells Fargo Bank one year to August 21, 2016. The total credit line of $12 million and the annual maintenance fees remained the same while the interest rate was lowered to LIBOR plus 275 basis points. The amendment decreased the year end minimum earnings covenant to $200,000 for 2013 and all future years. The amendment also includes provisions to allow permitted acquisitions and permitted redemptions of Company stock up to $1,250,000 as long as the Company has excess availability of $2,500,000 both before and after the completion of permitted acquisitions and permitted redemptions. As of September 30, 2013, the Company had total outstanding bank debt of $0.1 million at an average interest rate of 3.125%. The Company is in compliance with all of its covenants at September 30, 2013.

Note_8

Note 8	9 Months Ended
	Sep. 30, 2013
Income Tax Disclosure [Abstract]	'
Income Tax Disclosure [Text Block]	'
	8.       An income tax valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The net change in the valuation allowance for the nine months ended September 30, 2013 was a decrease of $93,000 to recognize the decrease in deferred tax assets during the first nine months. The net deferred tax asset of $469,000 as of September 30, 2013 represents the Company’s belief that it is more likely than not that a profit will be generated over the next twelve to eighteen months which will allow the Company to use a portion of the current net operating loss carry forwards. As of December 31, 2012, the Company has net operating loss carry forwards for Federal income tax purposes of approximately $5,901,000, which are available to offset future Federal taxable income, if any, that begin to expire in 2021. The Company also has a net operating loss carry forward for Illinois state income tax purposes of approximately $5,923,000 as of December 31, 2012. The Company also has alternative minimum tax credit carry forwards of approximately $136,000, which are available to reduce future Federal regular income taxes, if any, over an indefinite period. No unrecognized tax benefits are set to expire in the next twelve months that may have an impact upon the Company’s effective tax rate. The Company files tax returns in the U.S. federal jurisdiction and various state jurisdictions. The tax years 2010, 2011 and 2012 remain open to examinations. Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. During the nine months ended September 30, 2013, the Company did not recognize expense for interest or penalties related to income tax, and do not have any amounts accrued at September 30, 2013, as the Company does not believe it has taken any uncertain income tax positions.

Note_9

Note 9	9 Months Ended
	Sep. 30, 2013
Disclosure Text Block Supplement [Abstract]	'
Goodwill Disclosure [Text Block]	'
	9.       The Company’s goodwill resulting from its purchase of American Gaming and Electronics, Inc. (AGE) is tested for impairment at least annually, which the Company does in the fourth quarter or more often if circumstances warrant. The Company determined that there was no impairment of goodwill in 2012 and 2011 by utilization of a discounted cash flow analysis. The model utilizes numerous assumptions, including but not limited to future sales estimates of AGEs traditional products and of Video Gaming Terminals (VGTs) related to the new Illinois VGT business. Due to the nature of such estimates, there is no certainty in future periods that the Fair Value of the American Gaming & Electronics reporting unit will exceed its carrying value.

Note_10

Note 10	9 Months Ended
	Sep. 30, 2013
Subsequent Events [Abstract]	'
Subsequent Events [Text Block]	'
	10.     The Company has evaluated subsequent events through the date the financial statements were issued for the nine months ended September 30, 2013.

Note_5_Tables

Note 5 (Tables)	9 Months Ended
	Sep. 30, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]	'
Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]	'
		Shares	Weighted	Weighted Average	Aggregate
			Average	Remaining	Intrinsic
			Exercise Price	Contractual Life	Value
	Outstanding at beginning of year	18,931	$2.00
	Granted	0	$0.00
	Forfeited	0	$0.00
	Exercised	-11,358	$1.58
	Outstanding, Sept 30, 2013	7,573	$2.62	0.5	$0
		7,573	$2.62	0.5	$0
	Exercisable, Sept 30, 2013
Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]	'
		Shares	Weighted Average Grant Date
			Fair Value
	Unvested at December 31, 2012	171,246	$2.14
	Granted	64,000	$1.99
	Vested	-46,146	$1.94
	Forfeited	-35,970	$2.08
	Unvested, September 30, 2013	153,130	$2.16

Note_6_Tables

Note 6 (Tables)	9 Months Ended
	Sep. 30, 2013
Inventory Disclosure [Abstract]	'
Schedule of Inventory, Current [Table Text Block]	'
	(in $000's)	Sept 30,		Sept 30,		December 31,
		2013		2012		2012
		(unaudited)		(unaudited)
	Inventory:
	Raw materials	$	2,690	$	2,834	$	2,662
	In transit finished goods		1,570		1,034		950
	Finished goods		7,573		5,466		7,205
	Total	$	11,833	$	9,334	$	10,817

Note_5_Details

Note 5 (Details) (USD $)	Sep. 30, 2013	Sep. 30, 2013	Dec. 31, 2008	Dec. 31, 2008	Sep. 30, 2013	Sep. 30, 2013	Sep. 30, 2013
		Employee Stock Option [Member]	Employee Stock Option [Member]	Employee Stock Option [Member]	Restricted Stock [Member]	Restricted Stock [Member]	Restricted Stock [Member]
			Minimum [Member]	Maximum [Member]		Minimum [Member]	Maximum [Member]
Note 5 (Details) [Line Items]	'	'	'	'	'	'	'
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in Shares)	2,052,408	'	'	'	'	'	'
Share-based Compensation Arrangement by Share-based Payment Award, Exercisable Period	'	'	'6 months	'10 years	'	'	'
Number of Eligible Participants	'	1	'	'	'	'	'
Common Stock Dividend, Percentage	'	5.00%	'	'	'	'	'
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number (in Shares)	'	'	'	'	153,130	'	'
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	'	'	'	'	'	'3 years	'5 years
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized (in Dollars)	'	'	'	'	$248,000	'	'
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	'	'	'	'	'2 years	'	'

Note_5_Details_Stock_Options_O

Note 5 (Details) - Stock Options Outstanding (USD $)	9 Months Ended
	Sep. 30, 2013
Stock Options Outstanding [Abstract]	'
Outstanding at beginning of year	18,931
Outstanding at beginning of year (in Dollars per share)	$2
Granted	0
Granted (in Dollars per share)	$0
Forfeited	0
Forfeited (in Dollars per share)	$0
Exercised	-11,358
Exercised (in Dollars per share)	$1.58
Outstanding, Sept 30, 2013	7,573
Outstanding, Sept 30, 2013 (in Dollars per share)	$2.62
Outstanding, Sept 30, 2013	'6 months
Outstanding, Sept 30, 2013 (in Dollars)	$0
Exercisable, Sept 30, 2013	7,573
Exercisable, Sept 30, 2013 (in Dollars per share)	$2.62
Exercisable, Sept 30, 2013	'6 months
Exercisable, Sept 30, 2013 (in Dollars)	$0

Note_5_Details_Restricted_Shar

Note 5 (Details) - Restricted Share Activity (Restricted Stock [Member], USD $)	9 Months Ended
	Sep. 30, 2013
Restricted Stock [Member]	'
Note 5 (Details) - Restricted Share Activity [Line Items]	'
Unvested at December 31, 2012	171,246
Unvested at December 31, 2012 (in Dollars per share)	$2.14
Granted	64,000
Granted (in Dollars per share)	$1.99
Vested	-46,146
Vested (in Dollars per share)	$1.94
Forfeited	-35,970
Forfeited (in Dollars per share)	$2.08
Unvested, September 30, 2013	153,130
Unvested, September 30, 2013 (in Dollars per share)	$2.16

Note_6_Details_Inventory_Detai

Note 6 (Details) - Inventory Detail (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Inventory:	'	'	'
Raw materials	$2,690,000	$2,662,000	$2,834,000
In transit finished goods	1,570,000	950,000	1,034,000
Finished goods	7,573,000	7,205,000	5,466,000
Total	$11,833,000	$10,817,000	$9,334,000

Note_7_Details

Note 7 (Details) (USD $)	0 Months Ended
	Mar. 08, 2013	Sep. 30, 2013
Line Of Credit Facilities [Abstract]	'	'
Line of Credit Facility, Maximum Borrowing Capacity	$12,000,000	'
Debt Instrument, Basis Spread on Variable Rate (in Basis Points)	2.75%	'
Year End Minimum Earnings Covenant	200,000	'
Debt Covenants, Permitted Acquisitions and Redemptions	1,250,000	'
Excess Availability Threshold Amount	2,500,000	'
Loans Payable to Bank	'	$100,000
Debt, Weighted Average Interest Rate	'	3.13%

Note_8_Details

Note 8 (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Income Tax Disclosure [Abstract]	'	'
Valuation Allowance, Deferred Tax Asset, Change in Amount	($93,000)	'
Deferred Tax Assets, Net of Valuation Allowance	469,000	'
Deferred Tax Assets, Operating Loss Carryforwards, Domestic	'	5,901,000
Deferred Tax Assets, Operating Loss Carryforwards, State and Local	'	5,923,000
Deferred Tax Assets, Tax Credit Carryforwards, Alternative Minimum Tax	$136,000	'