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, 2005
| ¨ | 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 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 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 4, 2005, there were 27,422,118 shares of the Registrant’s common stock, par value $0.01 per share, outstanding.
FORM 10-Q
| PART I. FINANCIAL INFORMATION |
||||
| Item 1. |
Financial Statements (Unaudited) | |||
|
Consolidated Balance Sheets (As of March 31, 2005 and September 30, 2004) |
3 | |||
|
Consolidated Statements of Income (For the three months ended March 31, 2005 and 2004) |
4 | |||
|
Consolidated Statements of Income (For the six months ended March 31, 2005 and 2004) |
5 | |||
|
Consolidated Statements of Cash Flows (For the six months ended March 31, 2005 and 2004) |
6 | |||
| Notes to Consolidated Financial Statements | 8 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | ||
| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk | 38 | ||
| Item 4. |
Controls and Procedures | 38 | ||
| PART II. OTHER INFORMATION |
||||
| Item 1. |
Legal Proceedings | 39 | ||
| Item 2. |
Unregistered Sales of Securities and Use of Proceeds | 39 | ||
| Item 4. |
Submission of Matters to a Vote of Security Holders | 39 | ||
| Item 6. |
Exhibits | 39 | ||
-2-
CONSOLIDATED BALANCE SHEETS
As of March 31, 2005 and September 30, 2004
(In thousands, except shares and per-share amounts)
| March 31, 2005 |
September 30, 2004 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 11,259 | $ | 4,768 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $706 and $533, respectively |
12,295 | 10,397 | ||||||
| Inventory |
731 | 930 | ||||||
| Prepaid expenses and other |
3,471 | 2,242 | ||||||
| Notes receivable, net |
6,957 | 12,299 | ||||||
| Federal and state income tax receivable |
580 | 5,044 | ||||||
| Deferred income taxes |
2,001 | 1,909 | ||||||
| Total current assets |
37,294 | 37,589 | ||||||
| Restricted cash and long-term investments |
1,137 | 1,216 | ||||||
| Leased gaming equipment, net |
47,150 | 40,652 | ||||||
| Property and equipment, net |
92,576 | 93,090 | ||||||
| Notes receivable – noncurrent |
21,752 | 20,588 | ||||||
| Intangible assets, net |
38,135 | 21,941 | ||||||
| Other assets |
1,836 | 2,331 | ||||||
| Total assets |
$ | 239,880 | $ | 217,407 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: |
||||||||
| Current portion of long-term debt and capital leases |
$ | 15,061 | $ | 9,713 | ||||
| Accounts payable and accrued expenses |
26,304 | 25,780 | ||||||
| Federal income tax payable |
4,202 | — | ||||||
| Deferred revenue |
2,135 | 1,847 | ||||||
| Total current liabilities |
47,702 | 37,340 | ||||||
| Revolving line of credit |
7,600 | — | ||||||
| Long-term debt and capital leases, less current portion |
11,462 | 10,753 | ||||||
| Other long-term liabilities |
3,305 | 3,932 | ||||||
| Deferred revenue – noncurrent |
1,340 | 2,050 | ||||||
| Deferred income taxes |
10,900 | 13,185 | ||||||
| Total liabilities |
82,309 | 67,260 | ||||||
| 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, 30,585,428 and 30,453,245 shares issued, and 27,608,994 and 27,917,597 shares outstanding, respectively |
306 | 305 | ||||||
| Additional paid-in capital |
66,225 | 65,157 | ||||||
| Treasury stock, 2,976,434 and 2,535,648 shares at cost |
(16,262 | ) | (12,382 | ) | ||||
| Retained earnings |
107,302 | 97,067 | ||||||
| Total stockholders’ equity |
157,571 | 150,147 | ||||||
| Total liabilities and stockholders’ equity |
$ | 239,880 | $ | 217,407 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
-3-
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2005 and 2004
(In thousands, except per-share amounts)
(Unaudited)
| 2005 |
2004 |
|||||||
| Revenues: |
||||||||
| Gaming revenue: |
||||||||
| Class II |
$ | 31,222 | $ | 31,184 | ||||
| Charity |
5,454 | 2,315 | ||||||
| All other |
2,121 | 2,669 | ||||||
| Player terminal and license sale and lease revenue |
811 | 3,011 | ||||||
| Other |
439 | 421 | ||||||
| Total revenues |
40,047 | 39,600 | ||||||
| OPERATING COSTS AND EXPENSES: |
||||||||
| Cost of player terminals and licenses sold |
960 | 1,886 | ||||||
| Selling, general and administrative expenses |
15,606 | 15,480 | ||||||
| Amortization and depreciation |
14,763 | 8,553 | ||||||
| Total operating costs and expenses |
31,329 | 25,919 | ||||||
| Operating income |
8,718 | 13,681 | ||||||
| OTHER INCOME (EXPENSE): |
||||||||
| Interest income |
350 | 365 | ||||||
| Interest expense |
(663 | ) | (415 | ) | ||||
| Income before income taxes |
8,405 | 13,631 | ||||||
| Income tax expense |
3,193 | 5,131 | ||||||
| Net income |
$ | 5,212 | $ | 8,500 | ||||
| Basic earnings per share |
$ | 0.19 | $ | 0.31 | ||||
| Diluted earnings per share |
$ | 0.18 | $ | 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, 2005 and 2004
(In thousands, except per-share amounts)
(Unaudited)
| 2005 |
2004 |
|||||||
| Revenues: |
||||||||
| Gaming revenue: |
||||||||
| Class II |
$ | 58,891 | $ | 60,431 | ||||
| Charity |
10,054 | 2,445 | ||||||
| All other |
7,421 | 3,948 | ||||||
| Player terminal and license sale and lease revenue |
1,805 | 6,388 | ||||||
| Other |
1,042 | 843 | ||||||
| Total revenues |
79,213 | 74,055 | ||||||
| OPERATING COSTS AND EXPENSES: |
||||||||
| Cost of player terminals and licenses sold |
1,801 | 3,574 | ||||||
| Selling, general and administrative expenses |
32,431 | 28,844 | ||||||
| Amortization and depreciation |
28,044 | 16,405 | ||||||
| Total operating costs and expenses |
62,276 | 48,823 | ||||||
| Operating income |
16,937 | 25,232 | ||||||
| OTHER INCOME (EXPENSE): |
||||||||
| Interest income |
782 | 728 | ||||||
| Interest expense |
(1,217 | ) | (638 | ) | ||||
| Income before income taxes |
16,502 | 25,322 | ||||||
| Income tax expense |
6,267 | 9,552 | ||||||
| Net income |
$ | 10,235 | $ | 15,770 | ||||
| Basic earnings per share |
$ | 0.37 | $ | 0.58 | ||||
| Diluted earnings per share |
$ | 0.34 | $ | 0.51 | ||||
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, 2005 and 2004
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
(Unaudited)
| 2005 |
2004 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 10,235 | $ | 15,770 | ||||
| Adjustments to reconcile net income to cash and cash equivalents provided by operating activities: |
||||||||
| Amortization |
1,930 | 995 | ||||||
| Depreciation |
26,114 | 15,410 | ||||||
| Accretion of contract rights |
801 | — | ||||||
| Write off of long-lived assets |
117 | — | ||||||
| Provision for inventory and long-lived assets |
35 | — | ||||||
| Deferred income taxes |
(2,377 | ) | 631 | |||||
| Options issued to consultants |
81 | 232 | ||||||
| Provision for (Recovery of) doubtful accounts |
142 | (53 | ) | |||||
| (Increase) decrease in: |
||||||||
| Accounts receivable |
(2,374 | ) | (4,682 | ) | ||||
| Inventory |
199 | 240 | ||||||
| Prepaid expenses and other |
(1,736 | ) | (1,052 | ) | ||||
| Federal and state income tax payable/receivable |
8,666 | 349 | ||||||
| Notes receivable |
3,732 | (1,110 | ) | |||||
| Increase (decrease) in: |
||||||||
| Accounts payable and accrued expenses |
858 | 1,564 | ||||||
| Deferred revenue |
(422 | ) | 405 | |||||
| Other long-term liabilities |
(548 | ) | 1,421 | |||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES |
45,453 | 30,120 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Acquisition of property and equipment and leased gaming equipment |
(30,243 | ) | (31,378 | ) | ||||
| Acquisition of intangible assets |
(6,859 | ) | (1,200 | ) | ||||
| Advances under development agreements |
(21,088 | ) | ||||||