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: June 30, 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 August 11, 2004, there were 30,438,031 shares of the registrant’s common stock, par value $0.01 per share, outstanding.
INDEX
| PART I. FINANCIAL INFORMATION |
||||
| Item 1. |
Financial Statements (Unaudited) |
|||
| Consolidated Balance Sheets (As of June 30, 2004 and September 30, 2003) |
3 | |||
| Consolidated Statements of Income (For the three months ended June 30, 2004 and 2003) |
4 | |||
| Consolidated Statements of Income (For the nine months ended June 30, 2004 and 2003) |
5 | |||
| Consolidated Statements of Cash Flows (For the nine months ended June 30, 2004 and 2003) |
6 | |||
| 8 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 | ||
| Item 3. |
37 | |||
| Item 4. |
37 | |||
| PART II. OTHER INFORMATION |
||||
| Item 1. |
39 | |||
| Item 6. |
39 | |||
-2-
PART I
FINANCIAL INFORMATION
ITEM 2. FINANCIAL STATEMENTS
MULTIMEDIA GAMES, INC.
As of June 30, 2004 and September 30, 2003
(In thousands, except shares and per-share amounts)
| June 30, 2004 |
September 30, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 29,648 | $ | 26,319 | ||||
| Accounts receivable |
9,890 | 6,387 | ||||||
| Allowance for doubtful accounts receivable |
(591 | ) | (521 | ) | ||||
| Inventory, net |
4,125 | 2,446 | ||||||
| Prepaid expenses and other |
2,783 | 1,811 | ||||||
| Notes receivable, net |
1,939 | 3,659 | ||||||
| Federal and state income tax receivable |
2,718 | 1,539 | ||||||
| Deferred income taxes |
1,827 | 1,584 | ||||||
| Total current assets |
52,339 | 43,224 | ||||||
| Restricted cash and long-term investments |
1,216 | 1,380 | ||||||
| Inventory, net – non-current |
23,118 | 11,742 | ||||||
| Property and equipment, net |
103,229 | 78,524 | ||||||
| Notes receivable – non-current |
7,155 | 500 | ||||||
| Other assets |
19,105 | 8,360 | ||||||
| Total assets |
$ | 206,162 | $ | 143,730 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: |
||||||||
| Current portion of long-term debt and capital leases |
$ | 9,633 | $ | 4,558 | ||||
| Accounts payable and accrued expenses |
25,603 | 20,138 | ||||||
| Deferred revenue |
244 | 24 | ||||||
| Total current liabilities |
35,480 | 24,720 | ||||||
| Long-term debt and capital leases, less current portion |
13,114 | 9,402 | ||||||
| Other long-term liabilities |
4,206 | 3,393 | ||||||
| Deferred income taxes |
7,314 | 4,103 | ||||||
| Total liabilities |
60,114 | 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 30,382,438 and 28,694,028 shares issued, and 28,084,290 and 26,483,622 shares outstanding, respectively |
304 | 287 | ||||||
| Additional paid-in capital |
64,405 | 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 |
89,901 | 64,295 | ||||||
| Total stockholders’ equity |
146,048 | 102,112 | ||||||
| Total liabilities and stockholders’ equity |
$ | 206,162 | $ | 143,730 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
-3-
MULTIMEDIA GAMES, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended June 30, 2004 and 2003
(In thousands, except per-share amounts)
(Unaudited)
| 2004 |
2003 |
|||||||
| REVENUES: |
||||||||
| Gaming revenue – Class II |
$ | 97,692 | $ | 82,055 | ||||
| Gaming revenue – All other |
24,267 | 1,068 | ||||||
| Player terminal and license sale and lease revenue |
805 | 12,489 | ||||||
| Other |
740 | 384 | ||||||
| Total revenues |
123,504 | 95,996 | ||||||
| Allotments to facility operators |
86,584 | 58,004 | ||||||
| Bingo prizes and related costs |
— | 68 | ||||||
| Net revenues |
36,920 | 37,924 | ||||||
| OPERATING COSTS AND EXPENSES: |
||||||||
| Cost of player terminals and licenses sold |
967 | 7,335 | ||||||
| Selling, general and administrative expenses |
12,951 | 10,599 | ||||||
| Amortization and depreciation |
9,464 | 5,512 | ||||||
| Total operating costs and expenses |
23,382 | 23,446 | ||||||
| Operating income |
13,538 | 14,478 | ||||||
| OTHER INCOME (EXPENSE): |
||||||||
| Interest income |
178 | 71 | ||||||
| Interest expense |
(429 | ) | (187 | ) | ||||
| Income before income taxes |
13,287 | 14,362 | ||||||
| Income tax expense |
3,451 | 5,498 | ||||||
| Net income |
$ | 9,836 | $ | 8,864 | ||||
| Basic earnings per share |
$ | 0.35 | $ | 0.34 | ||||
| Diluted earnings per share |
$ | 0.32 | $ | 0.30 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
-4-
MULTIMEDIA GAMES, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Nine months Ended June 30, 2004 and 2003
(In thousands, except per-share amounts)
(Unaudited)
| 2004 |
2003 |
|||||||
| REVENUES: |
||||||||
| Gaming revenue – Class II |
$ | 302,843 | $ | 249,709 | ||||
| Gaming revenue – All other |
44,094 | 3,132 | ||||||
| Player terminal and license sale and lease revenue |
7,193 | 15,623 | ||||||
| Other |
1,583 | 1,110 | ||||||
| Total revenues |
355,713 | 269,574 | ||||||
| Allotments to facility operators |
244,738 | 175,645 | ||||||
| Bingo prizes and related costs |
— | 1,171 | ||||||
| Net revenues |
110,975 | 92,758 | ||||||
| OPERATING COSTS AND EXPENSES: |
||||||||
| Cost of player terminals and licenses sold |
5,066 | 8,730 | ||||||
| Selling, general and administrative expenses |
41,795 | 29,667 | ||||||
| Amortization and depreciation |
25,344 | 15,073 | ||||||
| Total operating costs and expenses |
72,205 | 53,470 | ||||||
| Operating income |
38,770 | 39,288 | ||||||
| OTHER INCOME (EXPENSE): |
||||||||
| Interest income |
906 | 263 | ||||||
| Interest expense |
(1,067 | ) | (245 | ) | ||||
| Income before income taxes |
38,609 | 39,306 | ||||||
| Income tax expense |
13,003 | 15,049 | ||||||
| Net income |
$ | 25,606 | $ | 24,257 | ||||
| Basic earnings per share |
$ | 0.94 | $ | 0.94 | ||||
| Diluted earnings per share |
$ | 0.83 | $ | 0.83 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
-5-
MULTIMEDIA GAMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine months Ended June 30, 2004 and 2003
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
(Unaudited)
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 25,606 | $ | 24,257 | ||||
| Adjustments to reconcile net income to cash and cash equivalents provided by operating activities: |
||||||||
| Amortization and depreciation |
25,344 | 15,073 | ||||||
| Accretion of contract rights |
36 | — | ||||||
| Accrued interest on notes receivable |
(682 | ) | — | |||||
| Deferred income taxes |
2,968 | 1,192 | ||||||
| Loss on disposal of equipment |
— | 51 | ||||||
| Options issued to consultants |
383 | 184 | ||||||
| Provision for obsolete inventory |
826 | 672 | ||||||
| Recovery of doubtful accounts |
(17 | ) | — | |||||
| (Increase) decrease in: |
||||||||
| Accounts receivable |
(3,583 | ) | (509 | ) | ||||
| Inventory |
(25,525 | ) | (9,472 | ) | ||||
| Prepaid expenses and other assets |
(8,978 | ) | (46 | ) | ||||
| Federal and state income tax receivable |
(1,179 | ) | (2,431 | ) | ||||
| Other long-term liabilities |
977 | — | ||||||
| Notes receivable – current |
1,410 | (4,614 | ) | |||||
| Accounts payable and accrued expenses |
5,632 | 360 | ||||||
| Deferred revenue |
220 | (1,905 | ) | |||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES |
23,438 | 22,812 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Acquisition of property and equipment and patents |
(31,467 | ) | ||||||