UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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, 2004
| ¨ | Transition Report Pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number: 001-14551
Multimedia Games, Inc.
(Exact Name of registrant as Specified in its Charter)
| Texas | 74-2611034 | |
| (State or other jurisdiction of incorporation) | (IRS Employer Identification Number) | |
| 206 Wild Basin Road, Building B, Fourth Floor Austin, Texas |
78746 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (512) 334-7500
Registrant’s website: www.multimediagames.com
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 past 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) Yes x No ¨
As of May 12, 2004, there were 27,891,634 shares of the registrant’s common stock, par value $0.01 per share, outstanding.
INDEX
2
FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
As of March 31, 2004 and September 30, 2003
(In thousands, except shares and per-share amounts)
| March 31, 2004 |
September 30, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 36,634 | $ | 26,319 | ||||
| Accounts receivable |
10,950 | 6,387 | ||||||
| Allowance for doubtful accounts receivable |
(516 | ) | (521 | ) | ||||
| Inventory, net |
2,113 | 2,446 | ||||||
| Prepaid expenses and other |
2,112 | 1,811 | ||||||
| Notes receivable, net |
2,900 | 3,659 | ||||||
| Federal and state income tax receivable |
1,190 | 1,539 | ||||||
| Deferred income taxes |
2,033 | 1,584 | ||||||
| Total current assets |
57,416 | 43,224 | ||||||
| Restricted cash and long-term investments |
1,297 | 1,380 | ||||||
| Inventory, net – non-current |
15,197 | 11,742 | ||||||
| Property and equipment, net |
89,693 | 78,524 | ||||||
| Notes receivable – non-current |
4,537 | 500 | ||||||
| Other assets |
19,266 | 8,360 | ||||||
| Total assets |
$ | 187,406 | $ | 143,730 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: |
||||||||
| Current portion of long-term debt and capital leases |
$ | 9,293 | $ | 4,558 | ||||
| Accounts payable and accrued expenses |
21,535 | 20,138 | ||||||
| Deferred revenue |
429 | 24 | ||||||
| Total current liabilities |
31,257 | 24,720 | ||||||
| Long-term debt and capital leases, less current portion |
14,687 | 9,402 | ||||||
| Other long-term liabilities |
4,731 | 3,393 | ||||||
| Deferred income taxes |
5,183 | 4,103 | ||||||
| Total liabilities |
55,858 | 41,618 | ||||||
| Commitments and contingencies (Note 2) |
||||||||
| 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 29,997,154 and 28,694,028 shares issued, and 27,699,006 and 26,483,622 shares outstanding, respectively |
300 | 287 | ||||||
| Additional paid-in capital |
59,745 | 45,487 | ||||||
| Stockholders’ notes receivable |
— | (1,466 | ) | |||||
| Treasury stock, 2,298,148 and 2,210,406 shares at cost, respectively |
(8,562 | ) | (6,491 | ) | ||||
| Retained earnings |
80,065 | 64,295 | ||||||
| Total stockholders’ equity |
131,548 | 102,112 | ||||||
| Total liabilities and stockholders’ equity |
$ | 187,406 | $ | 143,730 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2004 and 2003
(In thousands, except per-share amounts)
(Unaudited)
| 2004 |
2003 |
|||||||
| REVENUES: |
||||||||
| Gaming revenue – Class II |
$ | 105,266 | $ | 85,882 | ||||
| Gaming revenue – All other |
17,655 | 1,047 | ||||||
| Player terminal and license sale and lease revenue |
3,011 | 2,491 | ||||||
| Other |
421 | 310 | ||||||
| Total revenues |
126,353 | 89,730 | ||||||
| Allotments to facility operators |
86,753 | 60,608 | ||||||
| Bingo prizes and related costs |
— | 383 | ||||||
| Net revenues |
39,600 | 28,739 | ||||||
| OPERATING COSTS AND EXPENSES: |
||||||||
| Cost of player terminals and licenses sold |
2,163 | 836 | ||||||
| Selling, general and administrative expenses |
15,480 | 10,008 | ||||||
| Amortization and depreciation |
8,276 | 5,132 | ||||||
| Total operating costs and expenses |
25,919 | 15,976 | ||||||
| Operating income |
13,681 | 12,763 | ||||||
| OTHER INCOME (EXPENSE): |
||||||||
| Interest income |
365 | 82 | ||||||
| Interest expense |
(415 | ) | (41 | ) | ||||
| Income before income taxes |
13,631 | 12,804 | ||||||
| Income tax expense |
5,131 | 4,861 | ||||||
| Net income |
$ | 8,500 | $ | 7,943 | ||||
| Basic earnings per share |
$ | 0.31 | $ | 0.31 | ||||
| Diluted earnings per share |
$ | 0.28 | $ | 0.28 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF INCOME
For the Six Months Ended March 31, 2004 and 2003
(In thousands, except per-share amounts)
(Unaudited)
| 2004 |
2003 |
|||||||
| REVENUES: |
||||||||
| Gaming revenue – Class II |
$ | 205,151 | $ | 167,654 | ||||
| Gaming revenue – All other |
19,827 | 2,064 | ||||||
| Player terminal and license sale and lease revenue |
6,388 | 3,134 | ||||||
| Other |
843 | 726 | ||||||
| Total revenues |
232,209 | 173,578 | ||||||
| Allotments to facility operators |
158,154 | 117,641 | ||||||
| Bingo prizes and related costs |
— | 1,103 | ||||||
| Net revenues |
74,055 | 54,834 | ||||||
| OPERATING COSTS AND EXPENSES: |
||||||||
| Cost of player terminals and licenses sold |
4,099 | 1,395 | ||||||
| Selling, general and administrative expenses |
28,844 | 19,068 | ||||||
| Amortization and depreciation |
15,880 | 9,561 | ||||||
| Total operating costs and expenses |
48,823 | 30,024 | ||||||
| Operating income |
25,232 | 24,810 | ||||||
| OTHER INCOME (EXPENSE): |
||||||||
| Interest income |
728 | 192 | ||||||
| Interest expense |
(638 | ) | (58 | ) | ||||
| Income before income taxes |
25,322 | 24,944 | ||||||
| Income tax expense |
9,552 | 9,551 | ||||||
| Net income |
$ | 15,770 | $ | 15,393 | ||||
| Basic earnings per share |
$ | 0.58 | $ | 0.60 | ||||
| Diluted earnings per share |
$ | 0.51 | $ | 0.53 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2004 and 2003
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
(Unaudited)
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 15,770 | $ | 15,393 | ||||
| Adjustments to reconcile net income to cash and cash equivalents provided by operating activities: |
||||||||
| Amortization and depreciation |
15,880 | 9,561 | ||||||
| Loss on disposal of equipment |
— | 51 | ||||||
| Options issued to consultants |
232 | 93 | ||||||
| Recovery of doubtful accounts |
(53 | ) | (27 | ) | ||||
| Provision for obsolete inventory |
525 | 274 | ||||||
| Deferred income taxes |
631 | (148 | ) | |||||
| Accrued interest on notes receivable |
(604 | ) | — | |||||
| (Increase) decrease in: |
||||||||
| Accounts receivable |
(4,682 | ) | (94 | ) | ||||
| Inventory |
(15,282 | ) | (11,447 | ) | ||||
| Prepaid expenses and other assets |
(8,295 | ) | (742 | ) | ||||
| Federal and state income tax receivable |
349 | 4,048 | ||||||
| Other long-term liabilities |
1,421 | — | ||||||
| Notes receivable – current |
(506 | ) | 1,131 | |||||
| Accounts payable and accrued expenses |
1,564 | (1,714 | ) | |||||
| Deferred revenue |
405 | — | ||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES |
7,355 | 16,379 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Acquisition of property and equipment and patents |
(9,813 | ) | (9,059 | ) | ||||
| Restricted cash and long-term investments and other long-term liabilities |
(37 | ) | 261 | |||||
| Advances under development agreements |
||||||||