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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission file number: 1-8300
WMS INDUSTRIES INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-2814522
-------- ----------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
3401 North California Ave., Chicago, IL 60618
(Address of Principal Executive Offices) (Zip Code)
(773) 961-1111
---------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO
----- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 30,773,388 shares of common
stock, $.50 par value, were outstanding at May 9, 2000 after deducting 77,312
shares held as treasury shares.
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WMS INDUSTRIES INC.
INDEX
PART I. FINANCIAL INFORMATION:
Page
Number
ITEM 1. Financial Statements:
Condensed Consolidated Statements of Income -
Three and nine months ended March 31, 2000 and 1999.............. 2
Condensed Consolidated Balance Sheets -
March 31, 2000 and June 30, 1999................................. 3-4
Condensed Consolidated Statements of Cash Flows -
Nine months ended March 31, 2000 and 1999........................ 5
Notes to Condensed Consolidated Financial Statements............. 6-7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 8-11
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk....... 11
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings................................................ 12
ITEM 4. Submission of Matters to a Vote of Security Holders.............. 12
ITEM 6. Exhibits and Reports on Form 8-K................................. 12
SIGNATURES ................................................................. 14
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WMS INDUSTRIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Thousands, except per share amounts)
(Unaudited)
Three Months ended Nine Months ended
March 31, March 31,
----------------------- ------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
Revenues
Machine sales $ 32,308 $ 28,110 $ 99,427 $ 67,862
Participation and leasing 16,831 $ 6,555 49,562 11,222
--------- --------- --------- ---------
Total gaming revenues 49,139 34,665 148,989 79,084
Contract manufacturing 3,470 3,794 9,649 11,230
--------- --------- --------- ---------
Total revenues 52,609 38,459 158,638 90,314
Costs and Expenses
Cost of gaming revenue 24,030 21,211 73,802 50,721
Cost of contract manufacturing 3,129 3,308 8,503 9,731
Research and development 3,177 2,520 8,385 6,408
Reversal of excess accrual due to settlement of litigation -- -- (13,160) --
Common stock option adjustments 851 539 1,763 1,140
Selling and administrative 9,842 6,822 29,798 18,769
--------- --------- --------- ---------
Total costs and expenses 41,029 34,400 109,091 86,769
--------- --------- --------- ---------
Operating income 11,580 4,059 49,547 3,545
Interest and other income and expense, net 854 946 2,414 2,785
--------- --------- --------- ---------
Income from continuing operations before income taxes 12,434 5,005 51,961 6,330
Provision for income taxes 4,725 1,916 19,745 2,419
--------- --------- --------- ---------
Income from continuing operations 7,709 3,089 32,216 3,911
Discontinued operations, net of applicable taxes
Loss from discontinued operations -- (1,252) (469) (4,953)
Costs related to discontinuance -- -- (13,200) --
--------- --------- --------- ---------
Net income (loss) $ 7,709 $ 1,837 $ 18,547 $ (1,042)
========= ========= ========= =========
Basic earnings (loss) per share of common stock:
Net income from continuing operations $ 0.25 $ 0.10 $ 1.05 $ 0.13
Loss from discontinued operations -- (0.04) (0.44) (0.17)
--------- --------- --------- ---------
Net income (loss) $ 0.25 $ 0.06 $ 0.61 $ (0.04)
========= ========= ========= =========
Diluted earnings (loss) per share of common stock:
Net income from continuing operations $ 0.25 $ 0.10 $ 1.03 $ 0.13
Loss from discontinued operations -- (0.04) (0.44) (0.17)
--------- --------- --------- ---------
Net income (loss) $ 0.25 $ 0.06 $ 0.59 $ (0.04)
========= ========= ========= =========
Shares used in per share calculations:
Basic 30,726 30,055 30,562 29,020
========= ========= ========= =========
Diluted 31,361 30,800 31,236 29,646
========= ========= ========= =========
See notes to condensed consolidated financial statements.
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WMS INDUSTRIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
March 31, June 30,
2000 1999
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 64,920 $ 58,663
Receivables, net of allowances of $3,388 and $2,883 40,172 35,516
Income tax receivable 4,646 3,258
Inventories, at lower of cost (FIFO) or market:
Raw materials and work in progress 13,776 11,452
Finished goods 26,363 24,392
--------- ---------
40,139 35,844
Deferred income taxes 10,167 17,595
Prepaid expenses 492 634
Assets of discontinued operations 10,766 31,702
--------- ---------
Total current assets 171,302 183,212
--------- ---------
Gaming machines on participation or lease 27,463 26,866
Less accumulated depreciation (10,001) (7,135)
--------- ---------
17,462 19,731
Property, plant and equipment 51,846 49,590
Less accumulated depreciation (20,498) (17,750)
--------- ---------
31,348 31,840
Other assets 2,174 3,296
--------- ---------
$ 222,286 $ 238,079
========= =========
See notes to condensed consolidated financial statements.
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WMS INDUSTRIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
March 31, June 30,
2000 1999
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,022 $ 5,162
Accrued compensation and related benefits 2,471 2,919
Accrued liability related to patent litigation -- 38,543
Liabilities related to discontinued operations 12,487 13,933
Other accrued liabilities 7,350 4,818
--------- ---------
Total current liabilities 28,330 65,375
--------- ---------
Deferred income taxes 428 625
Stockholders' equity:
Preferred stock (5,000,000 shares authorized, none issued) -- --
Common stock (30,821,813 and 30,428,621 shares issued) 15,411 15,214
Additional paid in capital 183,694 180,989
Accumulated deficit (5,195) (23,742)
--------- ---------
193,910 172,461
Treasury stock, at cost (77,312 shares) (382) (382)
--------- ---------
Total stockholders' equity 193,528 172,079
--------- ---------
$ 222,286 $ 238,079
========= =========
See notes to condensed consolidated financial statements.
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WMS INDUSTRIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
Nine Months Ended
March 31,
----------------------
2000 1999
-------- --------
Operating activities:
Net income (loss) $ 18,547 $ (1,042)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Loss from discontinued operations 13,669 4,953
Reversal of excess accrual due to settlement of litigation (13,160) --
Litigation payment (27,000) --
Depreciation and amortization 11,526 4,376
Receivables provision 505 635
Deferred income taxes 15,331 245
Tax benefit from exercise of stock options 1,624 75
(Decrease) increase from changes in operating assets and liabilities (4,936) 2,255
-------- --------
Net cash provided by continuing operating activities 16,106 11,497
Investing activities:
Purchase of property, plant and equipment (2,487) (5,887)
Additions to gaming machines on participation or lease (6,361) (13,326)
Net change in short-term investments -- 3,100
-------- --------
Net cash used by investing activities (8,848) (16,113)
Financing activities:
Cash received on exercise of common stock options 1,278 6,919
-------- --------
Cash transfer (to) from discontinued operations (2,279) 1,985
-------- --------
Increase in cash and cash equivalents 6,257 4,288
Cash and cash equivalents at beginning of period 58,663 36,902
-------- --------
Cash and cash equivalents at end of period $ 64,920 $ 41,190
======== ========
See notes to condensed consolidated financial statements.
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WMS INDUSTRIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information, the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the quarter and nine months ended March
31, 2000 are not necessarily indicative of the results that may be
expected for the fiscal year ending June 30, 2000. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K
for the year ended June 30, 1999.
2. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant
intercompany balances, transactions and stockholdings have been
eliminated.
Certain prior year balances have been reclassified to conform to the
current year presentation and restated to reflect the pinball and
cabinets segment as discontinued operations.
3. DISCONTINUED OPERATIONS
On October 25, 1999 (the measurement date), the Company announced the
closing of its pinball and cabinets segment. Accordingly, this segment
is accounted for as a discontinued operation in the accompanying
condensed consolidated financial statements.
By January 2000, manufacturing for the pinball and cabinets segment was
completed. Management expects to sell the finished goods inventory by
June 2000. Any remaining property, including inventory and equipment,
is expected to be sold or disposed of at the earliest practical date.
The estimated loss on disposal is as follows (thousands of dollars):
Pre-tax Income tax
loss benefit Net
--------- ---------- ---------
Estimated loss on disposal $ 17,700 $ 6,700 $ 11,000
Estimated operating losses from
October 25, 1999 to anticipated disposal date 3,600 1,400 2,200
--------- --------- ---------
$ 21,300 $ 8,100 $ 13,200
========= ========= =========
Revenues of the pinball and cabinets segment were $3.4 million and
$22.9 million for the quarter and nine months ended March 31, 2000, and
$10.5 million and $24.4 million for the quarter and nine months ended
March 31, 1999. At March 31, 2000, the assets of the pinball and
cabinets segment consisted of trade receivables, inventories and plant
and equipment amounting to $10.8 million after deducting an allowance
of $9.3 million for write-offs to estimated realizable value. The
liabilities related to discontinued operations were $12.5 million,
including $4.8 million of reserves established for shutdown costs and
estimated operating losses through the disposal date.
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4. LITIGATION
See Item 1 of Part II for the status of litigation.
5. SEGMENT INFORMATION
The following summarizes the Condensed Consolidated Statements of
Income for the periods shown in the format presented as segment
information in the notes to the year-end consolidated financial
statements reflecting the pinball and cabinets segment as discontinued
operations (thousands of dollars):
Three Months ended Nine Months ended
March 31, March 31,
------------------------ ------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
Revenues
Gaming $ 49,139 $ 34,665 $ 148,989 $ 79,084
Contract manufacturing 3,470 3,794 9,649 11,230
--------- --------- --------- ---------
Total revenues $ 52,609 $ 38,459 $ 158,638 $ 90,314
========= ========= ========= =========
Gross Profit
Gaming $ 25,109 $ 13,454 $ 75,187 $ 28,363
Contract manufacturing 341 486 1,146 1,499
--------- --------- --------- ---------
Total gross profit $ 25,450 $ 13,940 $ 76,333 $ 29,862
========= ========= ========= =========
Operating income (loss)
Gaming $ 13,341 $ 4,818 $ 41,805 $ 5,721
Contract manufacturing 262 333 735 975
Reversal of excess accrual due to settlement of litigation -- -- 13,160 --
Common stock option adjustments (851) (539) (1,763) (1,140)
Unallocated general corporate expenses (1,172) (553) (4,390) (2,011)
--------- --------- --------- ---------
Total operating income 11,580 4,059 49,547 3,545
Interest and other income and expense, net 854 946 2,414 2,785
--------- --------- --------- ---------
Income from continuing operations before
income taxes $ 12,434 $ 5,005 $ 51,961 $ 6,330
========= ========= ========= =========
The basis of segmentation presented above is the same as that presented
in the last annual report.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report on Form 10-Q contains certain forward looking statements
concerning our future business conditions and outlook based on currently
available information that involves risks and uncertainties. Our actual results
could differ materially from those anticipated in the forward looking statements
as a result of these risks and uncertainties, including, without limitation, the
financial strength of the gaming industry, the expansion of legalized gaming
into new markets, the development, introduction and success of new games and new
technologies and the ability to maintain the scheduling of such introductions,
our ability to qualify for and maintain gaming licenses and approvals, the
outcome of certain legal proceedings to which we are a party and other risks
more fully described under "Item 1. Business - Risk Factors" in our Annual
Report on Form 10-K for the year ended June 30, 1999.
SIGNIFICANT EVENTS AND TRENDS
In October 1999, we announced that we had decided to close our pinball and
cabinets segment as part of a plan to focus on our gaming segment. In the first
quarter, we recorded a $21.3 million pre-tax loss on disposal, including cash
expenses of $10.1 million, for projected operating losses through the disposal
date, severance pay, and shut down expenses. We do not anticipate that this
discontinued operation will have a material effect on our liquidity or
operations in future periods. The loss on disposal included about $11.2 million
in non-cash losses from write-downs of receivables, inventory, plant and
equipment to net realizable value on disposal. Tax benefits related to the loss
on disposal were estimated to be $8.1 million. The exact amount of the proceeds
received and the loss ultimately recorded will depend upon several factors over
the course of the shut down period and at the date the sale of the remaining
assets is consummated. Our consolidated financial statements have been restated
to reflect the operating loss from the segment and the expected loss on disposal
as a discontinued operation.
In December 1999, we announced that we had settled our litigation with
International Game Technology regarding their Telnaes patent. We made a
tax-deductible payment of $27.0 million to them and agreed to split evenly with
them about $3.4 million held in an escrow account pending resolution of this
matter. Because we had previously established a reserve of about $38.5 million
for this litigation and previously expensed that amount, we recognized pre-tax
income of $13.2 million in the December 1999 quarter from the reversal of the
excess accrual. This resulted in an increase in income from continuing
operations, on an after-tax basis, of $8.2 million, or $0.26 per diluted share.
FINANCIAL CONDITION
Cash flows from operating, investing and financing activities during the nine
months ended March 31, 2000 resulted in a net cash increase of $6.3 million as
compared to a net cash increase of $4.3 million during the nine months ended
March 31, 1999.
Cash provided by operating activities before changes in operating assets and
liabilities was $21.0 million for the nine months ended March 31, 2000 as
compared to $9.2 million of cash provided by operations for the nine months
ended March 31, 1999. The current period's increase in cash provided from
operations before changes in operating assets and liabilities relative to the
comparable prior year's period is primarily a result of an increase in non-cash
depreciation and amortization related primarily to gaming machines on
participation or lease coupled with a higher loss from discontinued operations
and the net increase in deferred income taxes partially offset by the payment
for the litigation settlement with IGT and the reversal of the excess accrual
due to the settlement of litigation.
The changes in operating assets and liabilities for the nine months ended March
31, 2000 were primarily due to increases in receivables and inventories from the
comparable balances at June 30, 1999, partially offset by an increase in
accounts payable. The operating assets and liabilities changes for the nine
months ended March 31, 1999 were primarily due to increases in accounts payable
from the comparable balances at June 30, 1998.
Cash used by investing activities was $8.8 million for the nine months ended
March 31, 2000 compared with cash used of $16.1 million for the nine months
ended March 31, 1999. Cash used for the purchase of property, plant and
equipment during the nine months ended March 31, 2000 was $2.5 million compared
to $5.9 million for the
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nine months ended March 31, 1999. We used $6.4 million of cash for additions to
gaming machines on participation or lease in the current nine-month period, as
compared to $13.3 million in the comparable prior year period. Net cash of $3.1
million was received from the maturity of short-term investments during the nine
months ended March 31, 1999.
We have no material commitments for property or equipment investments at this
time.
Cash provided by financing activities, which was primarily from common stock
option proceeds, for the nine months ended March 31, 2000 was $1.3 million
compared to $6.9 million in the prior year's nine-month period. We have an
unused $25.0 million revolving credit agreement expiring August 1, 2000, which
contains customary bank line of credit terms.
During the current nine-month period, management decided to withdraw a proposed
offering of 3,500,000 shares of common stock due to adverse market conditions.
Costs and expenses related to the offering of $0.4 million were written off in
the September 1999 quarter. We expect no adverse changes in financial condition
or results of operations as a result of this action.
We believe that existing cash, cash equivalents, short-term investments and
available borrowing capacity together with funds generated from operations will
be adequate to fund the anticipated level of inventories and receivables
required in the operation of our business as well as to fund our other presently
anticipated needs for the next twelve months.
RESULTS OF OPERATIONS
Segment information is presented in note 5 of the condensed consolidated
financial statements in Part I, Item 1.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH
THREE MONTHS ENDED MARCH 31, 1999
Consolidated revenues increased to $52.6 million in the quarter ended March 31,
2000 from $38.5 million in the quarter ended March 31, 1999. This resulted from
unit price increases for video and reel-type slot machines and from growth in
the installed base of participation and leased games on the MONOPOLY(R) themed
models. We shipped 3,684 gaming machines in the current quarter, resulting in
product and parts sales of $32.3 million versus 3,688 machines and $28.1 million
of product and parts sales in the comparable prior year quarter. Revenues from
participation and leased games rose 157% to $16.8 million in the current quarter
based on 3,630 units leased at the end of the period as compared to revenues of
$6.6 million in the prior year's quarter based on 1,814 units leased at the end
of the prior year's period.
Consolidated gross profit increased 83% to $25.4 million in the quarter ended
March 31, 2000 from $13.9 million in the quarter ended March 31, 1999 due to
continued growth in participation and lease revenues, higher average unit sales
pricing, and cost and productivity gains. The gross margin percentage increased
from 36.2% to 48.4%.
Research and development expenses increased $0.7 million, or 26.1%, in the
current quarter to $3.2 million as compared to $2.5 million in the prior year's
quarter, which reflects our operating strategy of continuing to develop new
themes and designs for our gaming machines.
Selling and administrative expenses increased $3.0 million, or 44.3%, in the
current quarter to $9.8 million from $6.8 million in the prior year's quarter.
The increase reflects continuing investment in staffing and support due to the
growth in revenues, higher investment in development of new markets domestically
and internationally, and higher legal expenses for litigation and regulatory
matters.
Consolidated operating income was $11.6 million in the March 31, 2000 quarter
compared to income of $4.0 million in the prior year's quarter. This increase
results from higher revenue and gross margins, partially offset by increased
spending on research and development and selling and administrative expenses
described above.
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Income from continuing operations was $7.7 million, $0.25 per diluted share, for
the quarter ended March 31, 2000 compared with income from continuing operations
of $3.1 million, $0.10 per diluted share, in the March 31, 1999 quarter. These
amounts are net of our provision for current and deferred taxes of $4.7 million
and $1.9 million for the current and prior year quarter, respectively.
Net income, which includes both continuing operations and discontinued
operations, was $7.7 million, $0.25 per diluted share, for the quarter ended
March 31, 2000 compared to net income of $1.8 million, $0.06 per diluted share,
for the prior year fiscal quarter. The prior year's quarter reflected a pre-tax
loss from the discontinued pinball and cabinets segment of $1.3 million, which
represents the operating losses of that segment incurred in that quarter.
NINE MONTHS ENDED MARCH 31, 2000 COMPARED WITH
NINE MONTHS ENDED MARCH 31, 1999
Consolidated revenues increased to $158.6 million in the nine months ended March
31, 2000 from $90.3 million in the nine months ended March 31, 1999. This
resulted from unit price increases and market share growth in video and
reel-type slot machine sales and from growth in the installed base of
participation and leased games on the MONOPOLY(R) themed models. We shipped
12,068 gaming machines for product sales of $99.4 million for the current
year-to-date period versus 9,101 machines and $67.9 million of product sales in
the comparable prior year period. Revenues from participation and leased games
rose to $49.6 million in the current nine month period based on 3,630 units
leased at the end of the period as compared to revenues of $11.2 million in the
prior year's nine-month period from 1,814 units leased at the end of the prior
year's period.
Consolidated gross profit increased to $76.3 million in the nine months ended
March 31, 2000 from $29.9 million in the nine months ended March 31, 1999 due
continued growth in participation and lease revenues, higher average unit sales
pricing, and cost and productivity gains. The gross margin percentage increased
from 33.1% to 48.1%.
Research and development expenses increased $2.0 million, or 30.9%, in the
current nine-month period to $8.4 million as compared to $6.4 million in the
prior year's nine-month period, which reflects our operating strategy of
continuing to develop new themes and designs for our gaming machines.
Selling and administrative expenses increased $11.0 million, or 58.8%, in the
current nine-month period to $29.8 million from $18.8 million in the prior
year's nine-month period. The increase reflects continuing investment in
staffing and support due to the growth in revenues, higher investment in
development of new markets domestically and internationally, and higher legal
expenses for litigation and regulatory matters.
Consolidated operating income was $49.5 million in the nine months ended March
31, 2000, compared to income of $3.5 million in the prior year's nine month
period. This reflects a $13.2 million pre-tax increase to income due to the
litigation settlement for less than the amount reserved and the results of
increased sales revenues and higher gross margins, partially offset by increased
spending on research and development, and selling and administrative expenses as
described above.
Income from continuing operations was $32.2 million, $1.03 per diluted share,
for the nine months ended March 31, 2000 compared with, income from continuing
operations of $3.9 million, $0.13 per diluted share, in the nine months ended
March 31, 1999. These amounts are net of our provision for current and deferred
taxes of $19.7 million and $2.4 million for the current and prior year
nine-month period, respectively.
Net income, which includes both continuing operations and discontinued
operations, was $18.5 million, $0.59 per diluted share, for the nine months
ended March 31, 2000 compared to a net loss of $1.0 million, $0.04 per diluted
share, for the prior year nine-month period. The current period net income
reflects a pre-tax gain of $13.2 million from the litigation settlement for less
than the amount originally reserved, less related tax benefits of $5.0 million.
This was offset by pre-tax losses from the discontinued pinball and cabinet
segment totaling $22.0 million and $8.3 million of related tax benefits in the
first quarter. The pre-tax losses on discontinued operations includes $11.2
million of non-cash write-offs of inventory, accounts receivable and property
and equipment to
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estimated net realizable value; $10.1 million in reserves for shutdown expenses
(including future operating losses of $3.6 million); and the first quarter's
operating loss of $0.7 million. The prior year's period reflected a pre-tax loss
from the discontinued pinball and cabinets segment of $8.0 million, which
represents the operating losses of that segment incurred in that period.
YEAR 2000
The term Year 2000 is used to refer to a computer-related problem where some
software programs and embedded programs in electronic systems microprocessors
may not work properly when processing a date after 1999.
About 800 of our video lottery terminals in operation for the Delaware Lottery
became temporarily inoperative in late December 1999. We repaired the problem
within a week, which involved replacing certain computer chips in the machines.
In April 2000, we paid in settlement a total of $1,012,000, of which amount
$750,000 had been reserved for in the December 1999 quarter. Because these
machines were of a specific model used by a single customer, we believe that the
malfunction discussed above represents an isolated case and does not indicate a
systemic risk to us. We are not aware of any other date-related problems, and do
not anticipate a materially adverse change in our liquidity or financial
position as a result of such problems.
MONOPOLY(R)is a registered trademark of Hasbro.(C) 1999 Hasbro, Inc. All rights
reserved. Used with permission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information concerning the patent litigation between International Game
Technology ("IGT") and us as set forth in "Part II Item 1 Legal Proceedings" in
our quarterly report on Form 10-Q for the quarter ended September 30, 1999, is
incorporated here by this reference.
On February 14, 2000, WMS filed its Answer and Counterclaim to Compliant denying
IGT's allegations of infringement of U.S. Pat. No. 5,951,397, and raising
affirmative defenses and counterclaims concerning violations by IGT of federal
antitrust laws and other state laws. On February 25, 2000, IGT filed its
Plaintiff's Motion for Leave to File Amended Compliant Against WMS.
On February 25, 2000, IGT filed its Plaintiff's Motion for Leave to File Amended
Complaint Against WMS.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our Annual Meeting of Stockholders on January 25, 2000. The matters
submitted to a stockholder vote were:
1) the election of eight members to the Board of Directors; and
2) the ratification of the appointment of Ernst & Young LLP as independent
auditors for the 2000 fiscal year.
The voting results were as follows:
1) Our stockholders re-elected each of the eight incumbent directors, as
follows:
Nominee For Withheld
------------------------- ------------ ----------
William C. Bartholomay 29,260,620 315,902
William E. McKenna 29,257,340 318,372
Norman J. Menell 29,260,602 315,110
Louis J. Nicastro 29,257,790 317,922
Neil D. Nicastro 29,107,332 468,380
Harvey Reich 29,258,790 316,922
David M. Satz, Jr. 29,253,690 322,022
Ira S. Scheinfeld 28,958,402 617,310
2) Stockholders voted 29,487,094 shares (99.7% of the shares represented at
the meeting) in favor of the ratification of the appointment of Ernst & Young
LLP as independent auditors for the 2000 fiscal year; 64,330 shares (0.2% of the
shares represented at the meeting) voted against approval, and 24,288 shares
(less than 0.1% of the shares represented at the meeting) abstained from voting
or were unmarked and not voted.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(a) Amended and Restated Certificate of Incorporation of WMS dated February
17, 1987; Certificate of Amendment dated January 28, 1993; and
Certificate of Correction dated May 4, 1994, incorporated by reference
to Exhibit 3(a) to our Annual Report on Form 10-K for the year ended
June 30, 1994.
3(b) Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of WMS, as filed with the Secretary of the State of
Delaware of February 25, 1998, incorporated by reference to Exhibit
3(a) to our Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1998.
3(c) Form of Certificate of Designations of Series A Preferred Stock,
incorporated by reference to Exhibit A to the Rights Agreement dated as
of March 5, 1998 between us and The Bank of New York, as Rights Agent,
filed as Exhibit 1 to our registration Statement on Form 8-A (File No.
1-8300) filed March 25, 1998.
12
14
3(d) By-Laws of WMS, as amended and restated through June 26, 1996,
incorporated by reference to Exhibit 3(b) to our Annual Report on Form
10-K for the year ended June 30, 1996.
10(a) Employment Agreement dated as of March 21, 2000 between WMS and Brian
R. Gamache
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
13
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WMS INDUSTRIES INC.
Dated: May 12, 2000 By: /s/ Scott D. Schweinfurth
-----------------------------------
Scott D. Schweinfurth
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
14
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EXHIBIT INDEX
No. Description
- --- -----------
3(a) Amended and Restated Certificate of Incorporation of WMS dated February
17, 1987; Certificate of Amendment dated January 28, 1993; and
Certificate of Correction dated May 4, 1994, incorporated by reference
to Exhibit 3(a) to our Annual Report on Form 10-K for the year ended
June 30, 1994.
3(b) Certificate of Amendment to the Amended and Restated Certificate of
Incorporation of WMS, as filed with the Secretary of the State of
Delaware of February 25, 1998, incorporated by reference to Exhibit
3(a) to our Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1998.
3(c) Form of Certificate of Designations of Series A Preferred Stock,
incorporated by reference to Exhibit A to the Rights Agreement dated as
of March 5, 1998 between us and The Bank of New York, as Rights Agent,
filed as Exhibit 1 to our registration Statement on Form 8-A (File No.
1-8300) filed March 25, 1998.
3(d) By-Laws of WMS, as amended and restated through June 26,
1996,incorporated by reference to Exhibit 3(b) to our Annual Report on
Form 10-K for the year ended June 30, 1996.
10(a) Employment Agreement dated as of March 21, 2000 between WMS and Brian
R. Gamache
27 Financial Data Schedule
15