mgam_8k-050610.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of Report:
|
|
May
6, 2010
|
(Date
of earliest event reported)
|
|
(May
6, 2010)
|
(Exact
name of Registrant as Specified in its Charter)
000-28318
(Commission
File Number)
Texas
|
|
74-2611034
|
(State
or other jurisdiction
of
incorporation)
|
|
(IRS
Employer
Identification
No.)
|
|
|
206
Wild Basin Road South, Bldg. B, Suite 400,
Austin,
Texas
|
|
78746
|
(Address
of Principal Executive Offices)
|
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: (512) 334-7500
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
¨
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
¨
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
¨
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act 17 CFR
240.14d-2(b))
|
¨
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
Item 2.02
|
Results
of Operations and Financial
Condition.
|
On May 6,
2010, Multimedia Games, Inc. (the “Company”) issued a press release announcing
the results for its second quarter 2010, which ended on March 31, 2010, and
is incorporated by reference into this Item 2.02. The full text of the
press release issued in connection with the announcement is attached to this
Current Report on Form 8-K as Exhibit 99.1.
Use of
Non-GAAP Financial Information
The
Company uses the non-GAAP measure of EBITDA and Adjusted EBITDA in its earnings
releases. EBITDA is defined as earnings before interest, taxes,
amortization, depreciation, and accretion of contract
rights. Adjusted EBITDA represents the calculation of EBITDA, as
defined in the Company’s amended credit agreement, as adjusted, for the purpose
of evaluating compliance with the Company’s credit
agreement. Although EBITDA and Adjusted EBITDA are not a measure of
performance calculated in accordance with GAAP, the Company believes the use of
the non-GAAP financial measures EBITDA and Adjusted EBITDA enhance an overall
understanding of the Company’s past financial performance, and provide useful
information to the investor because of their historical use by the Company as a
performance measure, and the use of EBITDA by other companies in the gaming
equipment sector as a measure of performance. However, investors should not
consider these measures in isolation or as a substitute for net income,
operating income, or any other measure for determining the Company’s operating
performance that is calculated in accordance with GAAP. In addition, because
EBITDA and Adjusted EBITDA are not calculated in accordance with GAAP, EBITDA
and Adjusted EBITDA may not necessarily be comparable to similarly titled
measures employed by other companies. The non-GAAP financial measures included
in the press release have been reconciled to the corresponding GAAP financial
measures as required under the rules of the Securities and Exchange Commission
regarding the use of non-GAAP financial measures.
As
previously reported on the Company’s Current Report on Form 8-K, as filed with
the Securities and Exchange Commission on April 7, 2010, commencing
June 30, 2010, the Company will calculate Adjusted EBITDA differently as a
result of an amendment to its credit agreement. The revised
calculation of
“Adjusted
EBITDA,” as in
effect June 30, 2010, will be reported alongside the historical calculation of
EBITDA. Adjusted EBITDA will be presented and reconciled to EBITDA
and Net Income/Loss and Adjusted EBITDA will continue to be the basis for which
compliance with a number of covenants will be determined, including certain
ratios.
The
information regarding Item 2.02 in this Form 8-K and the Exhibit attached hereto
shall not be deemed “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the
liabilities of that section, nor shall it be deemed incorporated by reference in
any filing under the Securities Act of 1933 or the Exchange Act, except as
expressly set forth by specific reference in such a filing.
Item 9.01.
|
Financial
Statements and Exhibits.
|
Exhibit No.
|
|
Description
|
99.1
|
|
Press
Release, dated May 6, 2010, announcing Multimedia Games, Inc.’s second
quarter 2010 financial results.
|
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 hereunto
duly authorized.
|
MULTIMEDIA
GAMES, INC.
|
|
|
|
Dated:
May 6, 2010
|
By:
|
/s/
Uri L. Clinton
|
|
|
Uri
L. Clinton
|
|
|
Senior
Vice President, General Counsel and Corporate
Secretary
|
EXHIBIT
INDEX
Exhibit
Number
|
|
Description
|
99.1
|
|
Press
Release, dated May 6, 2010, announcing Multimedia Games, Inc.’s second
quarter 2010 financial results.
|
Exhibit
99.1
MULTIMEDIA GAMES, INC.
For
more information contact:
Ginny
Shanks
Chief
Marketing Officer
Multimedia
Games, Inc.
512-334-7500
|
|
PRESS
RELEASE
Joseph
N. Jaffoni
Richard
Land
Jaffoni
& Collins Incorporated
|
MULTIMEDIA
GAMES REPORTS FISCAL 2010 SECOND QUARTER REVENUE OF $32.1 MILLION; DILUTED LOSS
PER SHARE OF $0.20 INCLUSIVE OF $0.20 PER SHARE IN NON-CASH CHARGES
|
-
|
Quarterly Unit Sales of 361
Company-Developed Games Reflects Initial Success of New Product
Development and Market Expansion
Efforts
|
|
-
|
$14.4 Million in Free Cash Flow
Drove Fifth Consecutive Quarter of Increasing Cash
Balances
|
|
-
|
Total Indebtedness Below $60
Million at Fiscal 2010 Second Quarter End with Total Net Indebtedness
(Inclusive of Cash Balances) Below $40
Million
|
AUSTIN,
Texas, May 6, 2010 – Multimedia Games, Inc. (Nasdaq: MGAM) (“Multimedia Games”
or the “Company”) today reported operating results for its fiscal 2010 second
quarter ended March 31, 2010, as summarized below:
Summary
of 2010 Q2 Results
(In millions,
except per share and unit data)
|
|
Three
Months Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
Revenue
|
|
$ |
32.1 |
|
|
$ |
33.9 |
|
EBITDA
(1)
(2)
|
|
$ |
12.8 |
|
|
$ |
12.7 |
|
Net
loss (3)
|
|
$ |
(5.6 |
) |
|
$ |
(3.4 |
) |
Diluted
loss per share (3)
|
|
$ |
(0.20 |
) |
|
$ |
(0.13 |
) |
|
|
|
|
|
|
|
|
|
New
units sold (Multimedia Games’ proprietary units)
|
|
|
361 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Average
participation installed units(4):
Domestic
|
|
|
9,011 |
|
|
|
11,328 |
|
International (5)
|
|
|
5,265 |
|
|
|
5,511 |
|
Quarter-end
participation installed units (4):
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
8,157 |
|
|
|
11,412 |
|
International (5)
|
|
|
5,022 |
|
|
|
5,377 |
|
(1)
|
EBITDA
is defined as earnings (loss) before net interest expense, income taxes,
depreciation, amortization, and accretion of contract
rights. A reconciliation of EBITDA to net (loss) income,
the most comparable Generally Accepted Accounting Principles (“GAAP”)
financial measure, can be found attached to this
release.
|
(2)
|
EBITDA
for the three-month periods ended March 31, 2010 and 2009 include pre-tax
charges of approximately $3.2 million, (of which $3.1 million related to
certain facilities in the Alabama market as described in the Company’s
Current Report on Form 8-K as filed April 30, 2010) and $6.0 million,
respectively, as summarized in the table
below.
|
(3)
|
Net
loss and Diluted loss per share for the three-month periods ended March
31, 2010 and 2009 include charges of approximately $5.8 million (of which
$5.7 million related to certain facilities in the Alabama market as
described in the Company’s Current Report on Form 8-K as filed April 30,
2010) or a tax-effected $0.20 per diluted share and $6.0 million, or a
tax-effected $0.15 per diluted share,
respectively.
|
(4)
|
Multimedia
Games’ average and quarter-end participation installed base at March 31,
2010 reflects a significant reduction in units installed at Alabama
charity bingo facilities. As of March 31, 2010, the Company had
320 units installed and in operation at one charity bingo facility in the
state compared with 2,273 units installed and in operation at three
facilities as of March 31, 2009.
|
(5)
|
International
participation installed units primarily reflect placements in
Mexico. For the three-month period ended March 31, 2009, the
International participation average and quarter end installed units also
included 252 units in Malta, which the Company elected to remove late in
fiscal 2009.
|
Patrick
Ramsey, Interim Chief Executive Officer of Multimedia Games, commented,
“Multimedia Games has a well-defined strategic road map, and our fiscal 2010
second quarter operating results highlight our continued progress in our
execution against this plan. We are providing increased value-added
support for our customers, including improved management of our installed base
of gaming units, while simultaneously executing on our product development plan
in order to create a growing number of new products for both Class II and Class
III markets. With our improved operating and financial discipline and
our new game development process, the Company is favorably positioned to
continue executing on focused growth initiatives.
“Fiscal
2010 second quarter and first half unit sales represent an encouraging start to
our product sales efforts. Through the first six months of fiscal
2010, we have generated $7.3 million in revenue through sales of proprietary
units. We also generated significant quarterly sequential win per
unit increases from our installed base of Oklahoma Class II units which exceeded
historical seasonality improvements.”
Continued
Progress with Management of Capital Structure
The
Company’s outstanding borrowings were reduced by 38%, or approximately $37
million, from the year ago period to $59.6 million as of March 31, 2010 and by
$10.2 million on a quarterly sequential basis. Multimedia Games’ cash
balance as of March 31, 2010 was approximately $21.2 million, the highest
reported level since fiscal 2004. As previously announced, Multimedia
Games recently amended its credit agreement to modify certain financial
covenants and reduce total borrowing capacity from $125 million to $90
million. The Company’s total trailing twelve-month net debt to
Consolidated EBITDA ratio was 0.75x as of March 31, 2010, compared with the 1.5x
limit as set forth in the amended agreement.
Net
capital expenditures in the fiscal 2010 second quarter were approximately $5.9
million compared to net cap-ex of approximately $1.4 million in the year ago
period; net cap-ex in the first six months of fiscal 2010 was $14.6 million
compared to net cap-ex of $26.5 million in the year-ago six month
period. Net capital expenditures is defined as capital expenditures,
less cap-ex transferred into inventory and sold during the period.
The
Company generated $14.4 million in free cash flow in the fiscal 2010 second
quarter compared to negative free cash flow of $5.0 million in the year ago
period. In addition, cash generation was $15.9 million in the second
quarter of fiscal 2010 compared to $2.4 million a year ago. Free cash
flow and cash generation in the fiscal 2010 second quarter period include the
benefit of $5.4 million related to a one-time tax refund from the U.S. Treasury
Department. (Definitions of “free cash flow” and “cash generation”
are provided on page 4 of this press release).
Adam
Chibib, Chief Financial Officer of Multimedia Games, commented, “As reflected in
the ongoing reduction of our outstanding borrowings, Multimedia Games continues
to further improve financial flexibility and continues to focus on prudent cost
management and a disciplined approach to capital allocation.”
Ramp
in Unit Sales and New Market Licensing Efforts
Multimedia
Games sold 361 new proprietary units in the fiscal 2010 second quarter and a
total of 493 units in the first half of fiscal 2010. The units were
sold in several markets where the Company has increased its market share,
including in both Washington State and the Alabama tribal gaming
markets. Gross margin on new unit sales in the fiscal 2010 second
quarter period was approximately 48%.
The
Company expects to continue to advance its new market licensing initiatives
including in Louisiana, Connecticut and additional tribal Class III
jurisdictions. As of March 31, 2010, the Company had 72 total gaming
licenses compared to 46 gaming licenses held at the beginning of fiscal 2009
when Multimedia Games’ new market licensing initiatives began.
Ramsey
noted, “In addition to our new market licensing efforts, we are also
diversifying our business model to include unit sales. As evidenced
by our recent sales efforts, our products appear to be resonating well with
casino operators and their players. Our success is also evidenced by
recognition for our products in industry trade
publications. Following the Global Gaming Expo trade show last
November, six of our video slot titles were included among the “50 Hottest
Slots” by Strictly
Slots magazine, the first time we have placed a product in this
ranking. More recently, our next generation slot tournament system,
TournEvent™, was recognized by Casino Enterprise Management
as one of the ten winners of its Fourth Annual ‘Slot Technology
Awards.’ With growing customer and industry awareness of our products
and additional new markets we expect to enter over the next several quarters, we
anticipate further progress in our unit sales initiatives.”
Summary
of Fiscal 2010 Second Quarter Operating Results
Multimedia
Games reported fiscal 2010 second quarter revenue of $32.1 million compared
with revenue of $33.9 million in the fiscal 2009 second
quarter. Fiscal 2010 second quarter revenue includes approximately
$23.4 million from gaming operations and approximately $5.3 million in revenue
from the sale of new proprietary units in the period compared with $28.9 million
in revenue from gaming operations and no revenue from the sale of new
proprietary units in the year-ago period. The $4.4 million in gaming
equipment and system sales in the year ago period included approximately $2.7
million in revenue related to the sale of 360 third-party units that were
previously in the Company’s participation installed base. Other
revenue, consisting primarily of service revenue, was approximately $0.6 million
for both the fiscal 2010 and fiscal 2009 second quarter periods.
Revenue
from gaming operations for the fiscal 2010 second quarter rose 4% on a quarterly
sequential basis. The Company believes the quarterly sequential
improvement is due, in part, to increased focus on floor management, as
supported by the performance of its new proprietary games and better utilization
of third party products, as well as historical seasonal influences on win per
unit trends. These factors were partially offset by the revenue
impact from the continued regulatory and legislative uncertainty in the Alabama
charity bingo market which resulted in a 57%, or $1.1 million, quarterly
sequential decline in revenue derived from unit placements in this
market.
The 19%
year-over-year decline in gaming operations revenue is attributable, in part, to
an approximate $1.9 million reduction in revenue from the Alabama charity bingo
market and an approximate $1.2 million reduction related to the sale of
third-party player stations previously included in the Oklahoma gaming
operations installed base. In addition, Multimedia Games had over 300
units out of operation late in the fiscal 2010 second quarter at WinStar World
Casino to allow for casino floor renovations which are expected to be completed
in the fiscal third quarter.
Selling,
general and administrative (“SG&A”) expenses for the fiscal 2010 second
quarter declined 2%, or $0.3 million, year over year to approximately $14.2
million and were approximately 44% of revenues. Fiscal 2010 and 2009
second quarter SG&A included non-cash stock compensation costs of $0.6
million and $0.5 million, respectively.
Write-off,
reserve, impairment and settlement charges in the fiscal 2010 second quarter
period were approximately $3.2 million compared with approximately $6.0 million
in the fiscal 2009 second quarter. The majority of these charges in
the 2010 fiscal second quarter related to the Alabama market as described in the
Company’s Current Report on Form 8-K as filed April 30, 2010. The
following table provides a comparison of items included in write-offs, reserves,
impairment and settlement charges for the Q2 2010 and Q2 2009
periods.
(In
thousands)
|
|
Three-month
Periods Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
Certain
litigation and settlement costs
|
|
$ |
- |
|
|
$ |
4,241 |
|
Reserve
against note and accounts receivable
|
|
|
2,762 |
|
|
|
248 |
|
Write
off of certain install costs and portable buildings in
Alabama
|
|
|
332 |
|
|
|
- |
|
Severance
and related benefit costs
|
|
|
- |
|
|
|
1,064 |
|
Write
off of property and equipment and intangibles
|
|
|
72 |
|
|
|
482 |
|
Total
write-offs, reserves, impairment
and settlement
costs
|
|
$ |
3,166 |
|
|
$ |
6,035 |
|
Depreciation
and amortization expense was $13.7 million in the quarter ended March 31, 2010
compared with $15.6 million in the year ago period. Income tax
expense for the fiscal 2010 second quarter was approximately $2.8 million and
reflects a non-cash charge of approximately $2.6 million to increase the
Company’s tax valuation allowance. This charge is related to
Multimedia Games’ determination that due to the expected reduction in revenues
from Alabama (as described in the Company’s Current Report on Form 8-K, as filed
April 30, 2010), the Company no longer expects to recover a portion of its
deferred tax assets.
Process
to Evaluate Strategic Alternatives
As
announced on March 15, 2010, Multimedia Games’ Board of Directors commenced
a process to evaluate the Company’s strategic alternatives to enhance
shareholder value and has established a Special Committee to manage that
process. No timetable has been set for completion of this evaluation
process, and there can be no assurance that any transaction will
result. The Board has engaged Deutsche Bank to provide
financial advice and assist the Board with its evaluation process. The
Company does not intend to comment further on the evaluation process until the
evaluation is complete.
Definitions
of “cash generation” and “free cash flow”
Multimedia
Games’ management tracks cash generation (which is cash flow from operating
activities plus cash flows from investing activities) as well as free cash flow
(cash flow from operating activities less net capital expenditures) as relevant
measures of the Company’s performance. Cash generation helps assess
the performance of operations, manufacturing investments and includes the
amounts received and paid for the Company’s development
agreements. Cash generation is a more comprehensive internal metric
and more representative of the Company’s ability to pay down
debt. Free cash flow helps measure the efficiency of the Company’s
capital expenditures.
2010
Second Quarter Conference Call and Webcast
Multimedia
Games is hosting a conference call and webcast today, May 6, 2010, beginning at
9:00 a.m. ET (8:00 a.m. CT). Both the call and
the webcast are open to the general public. The conference call
number is 720-545-0001 (domestic or international). Please call five
minutes prior to the presentation to ensure that you are connected.
Interested
parties may also access the conference call live on the Internet at
http://ir.multimediagames.com/events.cfm. Approximately two hours
after the call has concluded, an archived version of the webcast will be
available for replay at the same location at
http://ir.multimediagames.com/events.cfm.
About
Multimedia Games
Gaming
technology developer and distributor, Multimedia Games, is a creator and
supplier of comprehensive systems, content and electronic gaming units for Class
III and Class II Native American gaming markets, as well as for commercial
casinos and charity and international bingo markets. Multimedia
Games’ revenue is primarily derived from gaming units in operation domestically
and internationally installed on revenue-sharing
arrangements. Multimedia Games also supplies the central determinant
system for the video lottery terminals (“VLTs”) installed at racetracks in the
State of New York. Multimedia Games is focused on pursuing market
expansion and new product development for both Class II and Class III
markets. Additional information may be found at www.multimediagames.com.
Cautionary
Language
This
press release contains forward-looking statements based on Multimedia Games'
current expectations and projections, which are intended to qualify for the safe
harbor from liability established by the Private Securities Litigation Reform
Act of 1995. The words "believe", “will”, “expect”, “plan”, “begin”,
“new”, “anticipate”, “continue”, “intend”, “progress”, “improve”, “achieve”,
“focus”, “further”, “aim”, “initiate,” “start,” “remain,” “improve,” “perform,”
“utilize,” “ongoing,” “work towards,” “increase,” “pending,” “seem,” “still,”
“road map”, “commence,” “enhance,” “position”, “execute”, “strategy”, “create”,
“effort”, “develop”, “expand”, “grow”, “establish”, “ongoing”, “advance”,
“appear”, “commit”, “approach”, “process”, “objective”, “generate”, or the
negative or other variations thereof or comparable terminology as they relate to
Multimedia Games and its products, plans, and markets are intended to identify
such forward-looking statements. These forward-looking statements
include, but are not limited to, references to: future actions; new projects;
new products and platforms; new developments; new strategies; new licensing
approvals; new markets; new marketing, sales and/or promotional plans; new
organizational structure, regulatory, compliance, and licensing initiatives,
including new personnel; new initiatives; customer satisfaction; ongoing
negotiations to secure favorable terms with new and existing customers; ability
to offer products to customers on a “for sale” basis; cash management and
financial discipline; and improved future performance, outcomes of contingencies
and future financial results of either Multimedia Games or its
customers. All forward-looking statements are based on current
expectations and projections of future events.
These
forward-looking statements reflect the current views and assumptions of
Multimedia Games, and are subject to various risks and uncertainties that cannot
be predicted or qualified and could cause actual results in Multimedia Games’
performance to differ materially from those expressed or implied by such forward
looking statements. These risks and uncertainties include, but are
not limited to: (i) failure to successfully execute our strategic road map,
operating plan, product or sales initiatives, or diversify our business model as
anticipated and/or the outcomes of these initiatives may differ materially from
their stated objectives; (ii) the adoption of a new business model and
initiatives may adversely impact longer-term revenue from our existing business
model and we may not be able to effectively reduce our reliance on third party
products; (iii) the Company’s ability to comply with the terms, conditions, and
covenants of its credit facility or improve our financial, fiscal and operating
discipline; (iv) the adverse effects of local, national, and/or international
economic, credit and capital market conditions on the economy in general,
including, but not limited to, the gaming and tribal gaming industries in
particular; (v) unfavorable changes in laws, regulatory requirements or
enforcement actions – either ongoing or unanticipated – against us, our games or
customers, and/or adverse decisions by courts, customers, regulators and/or
governmental bodies, in Alabama or otherwise, including any lawsuit related
thereto or a finding our games, despite efforts to comply, are found not be in
compliance with regulatory standards; (vi) delay or prevention of our entry into
new Class III and commercial markets, including but not limited to the
Mississippi and Louisiana markets, as well as Class II markets, due to the
inability of Multimedia Games or its key employees to secure or maintain
required licenses or approvals, inability of Multimedia Games to meet technical
requirements, or other issues; (vii) unfavorable changes in the preferences
of our customers or their end users resulting in the removal of our games;
(viii) software or hardware malfunction or fraudulent manipulation thereof;
(ix) inability to successfully introduce new and existing games, products,
platforms and/or systems into new and existing markets; (x) failure to
expand our installed base in certain markets or the failure to achieve improved
performance of our games; (xi) failure to secure favorable outcomes in pending
litigation, and consequences to our business, operating results or financial
condition (including without limitation possible adverse effects on cost
controls, cash flows and compliance with the terms of our credit agreement, as
amended); and (xii) the failure to attract and/or retain key employees or
successfully implement a strategic review process or such strategic review
process may distract management from focusing on the operating plan or result in
the loss of new business opportunities; Other important risks
and uncertainties that may affect the Company's business are detailed from time
to time in the “Certain Risks” and “Risk Factors” sections of Multimedia Games’
Annual Report on Form 10-K and elsewhere in Multimedia Games’ filings with the
Securities and Exchange Commission. Readers are cautioned that all
forward-looking statements speak only to the facts and circumstances present as
of the date of this press release.
Multimedia
Games expressly disclaims any implied operating results based on the historical
data presented in this release or any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
CONDENSED CONSOLIDATED BALANCE
SHEETS
As
of March 31, 2010 and September 30, 2009
(In
thousands, except share and per-share amounts)
(Unaudited)
|
|
|
March
31,
|
|
|
September
30,
|
|
ASSETS
|
|
2010
|
|
|
2009
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$ |
21,199 |
|
|
$ |
12,455 |
|
Accounts receivable, net of
allowance for doubtful accounts
of
$3,252 and $3,676, respectively
|
|
|
12,378 |
|
|
|
13,424 |
|
Inventory
|
|
|
4,340 |
|
|
|
5,742 |
|
Deferred
contract costs, net
|
|
|
543 |
|
|
|
1,826 |
|
Prepaid expenses and
other
|
|
|
2,117 |
|
|
|
2,806 |
|
Current portion of notes
receivable, net
|
|
|
14,050 |
|
|
|
15,780 |
|
Federal
and state income tax receivable
|
|
|
1,944 |
|
|
|
6,246 |
|
Deferred income
taxes
|
|
|
201 |
|
|
|
1,138 |
|
Total current
assets
|
|
|
56,772 |
|
|
|
59,417 |
|
Restricted
cash and long-term investments
|
|
|
737 |
|
|
|
804 |
|
Property
and equipment and leased gaming equipment, net
|
|
|
58,855 |
|
|
|
69,050 |
|
Long-term
portion of notes receivable, net
|
|
|
31,215 |
|
|
|
40,124 |
|
Intangible
assets, net
|
|
|
31,581 |
|
|
|
33,361 |
|
Value
added tax receivable
|
|
|
8,483 |
|
|
|
7,516 |
|
Other
assets
|
|
|
2,098 |
|
|
|
2,379 |
|
Deferred
income taxes
|
|
|
1,351 |
|
|
|
2,969 |
|
Total assets
|
|
$ |
191,092 |
|
|
$ |
215,620 |
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Current portion of long-term
debt
|
|
$ |
750 |
|
|
$ |
750 |
|
Accounts payable and accrued
expenses
|
|
|
24,807 |
|
|
|
27,626 |
|
Deferred
revenue
|
|
|
2,090 |
|
|
|
2,341 |
|
Total current
liabilities
|
|
|
27,647 |
|
|
|
30,717 |
|
Revolving
line of credit
|
|
|
— |
|
|
|
15,000 |
|
Long-term
debt, less current portion
|
|
|
58,875 |
|
|
|
59,250 |
|
Other
long-term liabilities
|
|
|
737 |
|
|
|
789 |
|
Deferred
revenue, less current portion
|
|
|
2,863 |
|
|
|
2,409 |
|
Total
liabilities
|
|
|
90,122 |
|
|
|
108,165 |
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock:
Series A, $0.01 par value,
1,800,000 shares authorized,
no
shares issued and outstanding
|
|
|
— |
|
|
|
— |
|
Series
B, $0.01 par value, 200,000 shares authorized,
no
shares issued and outstanding
|
|
|
— |
|
|
|
— |
|
Common
stock, $0.01 par value, 75,000,000 shares authorized, 33,332,762 and
33,121,337 shares issued, and 27,429,345 and 27,217,920 shares
outstanding, respectively
|
|
|
333 |
|
|
|
331 |
|
Additional
paid-in capital
|
|
|
88,491 |
|
|
|
86,317 |
|
Treasury
stock, 5,903,417 common shares at cost
|
|
|
(50,128 |
) |
|
|
(50,128 |
) |
Retained
earnings
|
|
|
63,077 |
|
|
|
72,803 |
|
Accumulated other comprehensive
loss, net
|
|
|
(803 |
) |
|
|
(1,868 |
) |
Total stockholders’
equity
|
|
|
100,970 |
|
|
|
107,455 |
|
Total liabilities and
stockholders’ equity
|
|
$ |
191,092 |
|
|
$ |
215,620 |
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
For
the Three Months Ended March 31, 2010 and 2009
(In
thousands, except per-share amounts)
(Unaudited)
|
|
|
Three
Months Ended
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
REVENUES:
|
|
|
|
|
|
|
Gaming
operations
|
|
$ |
23,416 |
|
|
$ |
28,881 |
|
Gaming equipment and system
sales
|
|
|
8,169 |
|
|
|
4,355 |
|
Other
|
|
|
553 |
|
|
|
634 |
|
Total revenues
|
|
|
32,138 |
|
|
|
33,870 |
|
|
|
|
|
|
|
|
|
|
OPERATING
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
Cost of revenues(1)
|
|
|
3,727 |
|
|
|
2,327 |
|
Selling, general and
administrative expenses
|
|
|
14,170 |
|
|
|
14,438 |
|
Write-off,
reserve, impairment and settlement charges
|
|
|
3,166 |
|
|
|
6,035 |
|
Amortization and
depreciation
|
|
|
13,670 |
|
|
|
15,639 |
|
Total operating costs and
expenses
|
|
|
34,733 |
|
|
|
38,439 |
|
Operating loss
|
|
|
(2,595 |
) |
|
|
(4,569 |
) |
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
919 |
|
|
|
1,246 |
|
Interest
expense
|
|
|
(1,142 |
) |
|
|
(1,891 |
) |
Loss
before income taxes
|
|
|
(2,818 |
) |
|
|
(5,214 |
) |
Income
tax (expense) benefit
|
|
|
(2,779 |
) |
|
|
1,820 |
|
Net loss
|
|
$ |
(5,597 |
) |
|
$ |
(3,394 |
) |
Basic
and diluted loss per common share
|
|
$ |
(0.20 |
) |
|
$ |
(0.13 |
) |
Shares
used in loss per common share:
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
27,341 |
|
|
|
26,643 |
|
|
(1)
|
Cost
of revenues exclude depreciation and amortization of gaming equipment,
content license rights and other depreciable assets, which are included
separately in the amortization and depreciation line
item.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
For
the Six Months Ended March 31, 2010 and 2009
(In
thousands, except per-share amounts)
(Unaudited)
|
|
|
Six
Months Ended
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
REVENUES:
|
|
|
|
|
|
|
Gaming
operations
|
|
$ |
45,838 |
|
|
$ |
55,229 |
|
Gaming equipment and system
sales
|
|
|
11,419 |
|
|
|
6,121 |
|
Other
|
|
|
1,146 |
|
|
|
1,096 |
|
Total revenues
|
|
|
58,403 |
|
|
|
62,446 |
|
|
|
|
|
|
|
|
|
|
OPERATING
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
Cost of revenues(1)
|
|
|
5,837 |
|
|
|
4,174 |
|
Selling, general and
administrative expenses
|
|
|
28,790 |
|
|
|
30,765 |
|
Write-off,
reserve, impairment and settlement charges
|
|
|
3,515 |
|
|
|
9,972 |
|
Amortization and
depreciation
|
|
|
27,224 |
|
|
|
30,504 |
|
Total operating costs and
expenses
|
|
|
65,366 |
|
|
|
75,415 |
|
Operating loss
|
|
|
(6,963 |
) |
|
|
(12,969 |
) |
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,968 |
|
|
|
2,536 |
|
Interest
expense
|
|
|
(2,450 |
) |
|
|
(4,026 |
) |
Other income
|
|
|
- |
|
|
|
74 |
|
Loss
before income taxes
|
|
|
(7,445 |
) |
|
|
(14,385 |
) |
Income
tax (expense) benefit
|
|
|
(2,281 |
) |
|
|
5,067 |
|
Net loss
|
|
$ |
(9,726 |
) |
|
$ |
(9,318 |
) |
Basic
and diluted loss per common share
|
|
$ |
(0.36 |
) |
|
$ |
(0.35 |
) |
Shares
used in loss per common share:
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
27,291 |
|
|
|
26,633 |
|
|
(1)
|
Cost
of revenues exclude depreciation and amortization of gaming equipment,
content license rights and other depreciable assets, which are included
separately in the amortization and depreciation line
item.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For
the Six-Months Ended March 31, 2010 and 2009
|
|
2010
|
|
|
2009
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
(In
thousands)
|
|
Net
loss
|
|
$ |
(9,726 |
) |
|
$ |
(9,318 |
) |
Adjustments
to reconcile net loss to cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
1,607 |
|
|
|
2,698 |
|
Depreciation
|
|
|
25,617 |
|
|
|
27,806 |
|
Accretion
of contract rights
|
|
|
3,478 |
|
|
|
2,912 |
|
Adjustments
to long-lived assets
|
|
|
620 |
|
|
|
(832 |
) |
Deferred
income taxes
|
|
|
2,555 |
|
|
|
(1,824 |
) |
Share-based
compensation
|
|
|
1,224 |
|
|
|
1,124 |
|
Provision
for doubtful accounts
|
|
|
2,913 |
|
|
|
397 |
|
Interest
income from imputed interest
|
|
|
(1,751 |
) |
|
|
(2,274 |
) |
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
846 |
|
|
|
(4,789 |
) |
Inventory
|
|
|
1,206 |
|
|
|
765 |
|
Deferred
contract costs
|
|
|
1,283 |
|
|
|
(1,004 |
) |
Prepaid
expenses and other
|
|
|
770 |
|
|
|
(656 |
) |
Federal
and state income tax receivable
|
|
|
4,302 |
|
|
|
(3,799 |
) |
Notes
receivable
|
|
|
1,320 |
|
|
|
303 |
|
Accounts
payable and accrued expenses
|
|
|
(3,235 |
) |
|
|
(1,155 |
) |
Other
long-term liabilities
|
|
|
15 |
|
|
|
(15 |
) |
Deferred
revenue
|
|
|
203 |
|
|
|
987 |
|
NET
CASH PROVIDED BY OPERATING ACTIVITIES
|
|
|
33,247 |
|
|
|
11,326 |
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Acquisitions
of property and equipment
and
leased gaming equipment
|
|
|
(17,352 |
) |
|
|
(27,319 |
) |
Transfer
of leased gaming equipment to inventory
|
|
|
2,773 |
|
|
|
818 |
|
Acquisition
of intangible assets
|
|
|
(1,740 |
) |
|
|
(1,488 |
) |
Advances
under development agreements
|
|
|
(1,950 |
) |
|
|
(1,250 |
) |
Repayments
under development agreements
|
|
|
8,551 |
|
|
|
11,166 |
|
NET
CASH USED IN INVESTING ACTIVITIES
|
|
|
(9,718 |
) |
|
|
(18,073 |
) |
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds
from exercise of stock options,
warrants
and related tax benefit
|
|
|
952 |
|
|
|
62 |
|
Principal
payments of long-term debt
|
|
|
(375 |
) |
|
|
(738 |
) |
Proceeds
from revolving lines of credit
|
|
|
— |
|
|
|
10,000 |
|
Payments
on revolving lines of credit
|
|
|
(15,000 |
) |
|
|
- |
|
NET
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
(14,423 |
) |
|
|
9,324 |
|
EFFECT
OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS
|
|
|
(362 |
) |
|
|
383 |
|
Net
increase in cash and cash equivalents
|
|
|
8,744 |
|
|
|
2,960 |
|
Cash
and cash equivalents, beginning of period
|
|
|
12,455 |
|
|
|
6,289 |
|
Cash
and cash equivalents, end of period
|
|
$ |
21,199 |
|
|
$ |
9,249 |
|
Reconciliation
of U.S. GAAP Net loss to EBITDA and Adjusted EBITDA:
EBITDA is
defined as earnings (loss) before net interest expense,
taxes, amortization, depreciation, and accretion of contract
rights. Although EBITDA is not a measure of performance calculated in
accordance with generally accepted accounting principles (“GAAP”), Multimedia
Games believes the use of the non-GAAP financial measure EBITDA enhances an
overall understanding of Multimedia Games’ past financial performance, and
provides useful information to the investor because of its historical use by
Multimedia Games as a performance measure, and the use of EBITDA by other
companies in the gaming equipment sector as a measure of
performance. However, investors should not consider this measure in
isolation or as a substitute for net income, operating income, or any other
measure for determining Multimedia Games’ operating performance that is
calculated in accordance with GAAP. In addition, because EBITDA is
not calculated in accordance with GAAP, it may not necessarily be comparable to
similarly titled measures employed by other
companies. A reconciliation of EBITDA and Adjusted EBITDA to the
most comparable GAAP financial measure, net loss, follows:
Reconciliation
of U.S. GAAP Net loss to EBITDA:
|
|
|
|
For
the Three Months Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(in
thousands)
|
|
Net
loss
|
|
$ |
(5,597 |
) |
|
$ |
(3,394 |
) |
Add
back:
|
|
|
|
|
|
|
|
|
Amortization
and depreciation
|
|
|
13,670 |
|
|
|
15,639 |
|
Accretion
of contract rights(1)
|
|
|
1,737 |
|
|
|
1,586 |
|
Interest
expense, net
|
|
|
223 |
|
|
|
645 |
|
Income
tax expense (benefit)
|
|
|
2,779 |
|
|
|
(1,820 |
) |
EBITDA
|
|
$ |
12,812 |
|
|
$ |
12,656 |
|
Calculation
of Trailing Twelve Months Adjusted EBITDA
through
March 31, 2010 as Defined in Credit Agreement
(in
thousands)
Net
loss
|
|
$ |
(45,186 |
) |
Add
back:
|
|
|
|
|
Amortization
and depreciation
|
|
|
57,735 |
|
Accretion
of contract rights(1)
|
|
|
6,816 |
|
Interest
expense, net
|
|
|
858 |
|
Income
tax expense
|
|
|
21,346 |
|
EBITDA
|
|
|
41,569 |
|
Add
back:
|
|
|
|
|
Other(2)
|
|
|
16,636 |
|
Adjusted
EBITDA(3)
|
|
$ |
58,205 |
|
|
(1)
|
“Accretion
of contract rights” relates to the amortization of intangible assets for
development projects. These amounts are recorded net of revenues in the
Consolidated Statements of
Operations.
|
|
(2)
|
“Other”
relates to interest income, legal costs and settlement fees incurred in
the trailing twelve month period related to the settled Diamond Game
litigation, non-cash stock option expense and non-cash asset impairment
charges as provided in the Company’s amended credit facility
agreement.
|
|
(3)
|
Adjusted
EBITDA represents the calculation of EBITDA, as defined in Multimedia
Games’ amended credit agreement, as amended, solely for the purpose of
defining EBITDA within the Company’s credit
agreement.
|