UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
Commission File Number 1-8250
WELLS-GARDNER ELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
ILLINOIS (State or other jurisdiction of incorporation or organization) |
36-1944630 (IRS Employer Identification Number) |
9500 West 55 th Street, Suite A
McCook, Illinois 60525-3605
(Address of principal executive offices)
Registrant’s telephone number, including area code: 708/290-2100
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $1.00 par value |
NYSE MKT |
Title of each class |
Name of each exchange on which registered |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant 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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
Accelerated filer ☐ |
Non-accelerated filer ☐ |
Smaller Reporting Company ☒ |
(Do not check if a Smaller Reporting Company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant’s voting stock held by non-affiliates of the registrant (assuming for the purposes hereof, that directors, executive officers and 10% or greater stockholders of the registrant are affiliates of the registrant), based upon the closing sale price of the registrant’s Common Stock on March 3, 2014 was approximately $22,012,000.
The number of shares of the registrant’s Common Stock outstanding as of March 3, 2014, was approximately 11,771,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Annual Report to Shareholders for the year ended December 31, 2013 are incorporated into Part II of this Report on Form 10-K and filed as Exhibit 13.0 hereto. Portions of the Registrant’s definitive Proxy Statement relating to the Registrant’s 2014 Annual Meeting of Stockholders to be filed hereafter are incorporated into Part III of this Report on Form 10-K.
As used in this Annual Report on Form 10-K, the terms “we,” “us,” “our” and “the Company” mean Wells-Gardner Electronics Corporation, an Illinois corporation, and its subsidiaries, unless the context indicates a different meaning, and the term “common stock” means our common stock, $1.00 par value per share.
TABLE OF CONTENTS
PART I |
3 | |||
Item 1. BUSINESS |
3 | |||
Item 2. PROPERTIES |
7 | |||
Item 3. LEGAL PROCEEDINGS |
7 | |||
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
8 | |||
PART II |
9 | |||
Item 5. MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDERS MATTERS |
9 | |||
Item 6. SELECTED FINANCIAL DATA |
9 | |||
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
9 | |||
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
9 | |||
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
9 | |||
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
10 | |||
Item 9A. CONTROLS AND PROCEDURES |
10 | |||
Item 9B. OTHER INFORMATION |
11 | |||
PART III |
12 | |||
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT |
12 | |||
Item 11. EXECUTIVE COMPENSATION |
12 | |||
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
12 | |||
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
12 | |||
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES |
12 | |||
PART IV |
13 | |||
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
13 | |||
SIGNATURES |
17 | |||
Annual Report to Shareholders |
||||
Consent of Plante Moran PLLC |
||||
Certification of CEO Pursuant to Section 302 |
||||
Certification of CFO Pursuant to Section 302 |
||||
Statement of CEO and CFO Pursuant to Section 906 |
PART I
Item 1. BUSINESS
OVERVIEW
Founded in 1925, Wells-Gardner Electronics Corporation®, an Illinois corporation (wellsgardner.com), is a global distributor and manufacturer of liquid crystal display (LCD) video monitors (“displays”) and other related parts for a variety of markets including, but not limited to gaming machine manufacturers, coin-operated video game manufacturers and other display integrators. The Company has a subcontractor relationship with two different Taiwanese electronics manufacturing service companies to produce LCD video displays in China. In addition, the Company owns American Gaming & Electronics, Inc. (“AG&E”), a leading parts distributor and service center to the casino gaming markets. AG&E has offices in Las Vegas, Nevada; Hammonton, New Jersey; Hialeah, Florida and McCook, Illinois. As part of AG&E, the Company distributes Spielo Video Gaming Terminals in Illinois as well as LCD replacement kits and parts to casinos throughout the Americas. Through its wholly owned subsidiary AG&E and the subcontract production relationships, the Company has transitioned from a coin-operated amusement supplier to a key supplier to the gaming industry. Wells-Gardner’s common stock is publicly traded on the NYSE MKT exchange under the symbol WGA.
PRODUCTS
The Company’s primary business is the design, manufacture, assembly, marketing, distribution and service of electronic components which consist of LCD displays, gaming supplies and components, the integration of touch sensors to displays and the distribution of VGTs in Illinois. These video products, gaming parts and services, and VGTs accounted for 100 percent of revenue in 2013, 2012, and 2011.
The Company offers a full line of video monitors, with LCD sizes ranging from 6.4” to 55” with horizontal scan frequencies of 60k Hz and 120k Hz. In addition to providing standardized products, the Company also customizes electrical and mechanical applications to meet specific customer requirements and integrates touch screen sensors to video displays to allow interaction with a computer program by touching a video screen. The Company also designs and sells LCD replacement kits to replace CRT monitors in existing games (primarily IGT) directly to casinos. In addition the Company sells VGT games into the Illinois market and replacement components to casinos throughout the Americas.
The Company sells into the following markets:
Market |
2013 |
2012 |
2011 |
|||||||||
Monitors |
52 |
% |
75 |
% |
87 |
% |
||||||
VGTs and Parts |
48 |
% |
25 |
% |
13 |
% |
||||||
Totals |
100 |
% |
100 |
% |
100 |
% |
MANUFACTURING AND ASSEMBLY
The Company’s production activities consist primarily of electronic video board and mechanical designs by its US engineers, and assembling finished units (and to a limited extent subassemblies), aligning, testing and integrating touch sensors through its subcontracted operations in China and at its McCook, Illinois facility. In 2013, the Company had two sources performing final assembly of open frame video displays and supplying the Company with all of the LCD chassis subassemblies based on custom designs and setup specifications developed by the Company. These two sources are HTP Technologies Inc and the Axiomtek Display Solutions, a Division of Axiomtek Co., Ltd. Both HTP Technologies and Axiomtek Display Solutions have separate facilities in Qingxi, Guangdong Province, China. Both HTP and Axiomtek are headquartered in Taiwan. The Company has subcontract supply agreements with both companies and produces its major product lines with both Companies, so there is no reliance on a single source. Furthermore, both agreements are terminable at will, with appropriate notice. Both subcontract supply agreements require the company to purchase and supply the LCD panels and touch sensors and controllers to the subcontractor, are priced on a cost plus basis, and restrict HTP and Axiomtek from manufacturing and selling open frame displays to gaming and amusement companies headquartered in North America, South America, Europe and Australia and parts of the rest of the world other than the Company.
The Company relies on outside sources for the majority of its required components. A limited number of sources are available for some electronic components and other raw materials. The Company has three major sources of LCD panels, three major sources of its touch sensors and controllers, and one major source of electronic control boards. The three major sources of LCD panels are AU Optronics of Taiwan and Samsung Display and LG Display of Korea. The three major sources of touch sensors and controllers are 3M Touch Systems of the USA, TPK Holdings Co., Ltd. of Taiwan, and Digitech of South Korea. The major source of electronic control boards is USI, Inc of Taiwan, which builds the boards to the Company’s specifications. As the Company believes is characteristic of other manufacturers in its industry, it has been confronted with long lead times and cost pressures. Due to some of these extended lead times, the Company carries additional inventory of certain critical supply components.
MARKETING AND SALES
The Company sells products throughout the world. The Company uses a sales representative, JBJ Inc., under a Letter Agreement for a limited portion of the Company’s domestic product sales. The Company uses another sales representative, The Bright Group, under a Sales Representative Agreement for all its sales in Australia plus a portion of the Company’s domestic sales. The Company maintains its own internal sales staff for a majority of its sales for products not covered under these agreements and for repair and service of its products.
The Company’s business is generally not seasonal, although the Company closes its McCook production facility for two weeks in July and one week in December. The Company’s subcontractors in China close for about 10 days at Chinese New Year and several days each for May Day and Golden Week each year. However, sales generally are a little higher the first half of the year and a little lower the second half of the year.
The Company believes it has no unique or unusual practices or policies relating to working capital items and believes its practices are consistent with other comparable companies in its served markets. The Company currently believes that its financial requirements during the foreseeable future can be met with funds generated from operating activities and from its credit facility. The Company’s current credit facility expires August 21, 2016.
The Company has several major competitors based in Asia (Korea and Taiwan) and the United States. Competition is based upon price, product performance, service and warranty. In 2013 the Company experienced significant competition based upon price, but it was able to reduce costs even with the reduced average selling prices, which resulted in slightly lower margins compared to 2012. The Company believes that it is one of the two largest companies in the gaming and amusement video display market and there are six to ten total competitors.
The Company’s largest customer, Spielo, accounted for 18%, 26% and 12% of total revenues in 2013, 2012 and 2011, respectively, and for 5% and 15% of total accounts receivable as of December 31, 2013 and December 31, 2012, respectively. The second largest customer, a VGT operator, accounted for 8%, 3% and 0% of the total revenue in 2013, 2012 and 2011 respectively, and 10% and 4% of the total accounts receivable as of December 31, 2013 and December 31, 2012 respectively. The third largest customer accounted for 8%, 9% and 16% of the total revenue in 2013, 2012 and 2011, respectively, and 13% and 12% of the total accounts receivable as of December 31, 2013 and December 31, 2012, respectively. The fourth largest customer accounted for 6%, 10% and 14% of total revenue in 2013, 2012 and 2011, respectively and 3% and 4% of the total accounts receivable as of December 31, 2013 and December 2012 respectively. The fifth largest customer accounted for 6%, 13% and 22% of the total revenue in 2013, 2012 and 2011, respectively, and 10% and 22% of the total accounts receivable as of December 31, 2013 and December 2012, respectively. No other customer accounted for more than 10% of sales in 2013, 2012 or 2011.
The Company does not formally track backlog in its monitor category, but historically the Company has monitor open orders which represent two to three months’ sales. It is the Company’s experience that well over 90 percent of its monitor open orders result in revenue recognition and management is not presently aware of any information indicating that this historical pattern will not be repeated. The Company’s parts orders normally are shipped within two weeks, so there is minimal backlog in this category. The Company’s VGT product open orders typically are out six to nine months, but the operators are permitted to reschedule. The Company had a VGT backlog of approximately $13.7 million at year end 2013.
No material portion of the Company’s business is subject to re-negotiation of profits or termination of contracts or subcontracts at the election of any governmental entity.
The Company’s market for its products and services is highly competitive with low barriers to entry.
During 2013, the Company spent approximately $1,791,000 for product engineering, research and development costs, compared to $1,740,000 in 2012 and $1,502,000 in 2011. The Company does not license any patents. The Company has three US patents issued, one foreign patent issued, two pending US patent applications, three pending foreign patent applications, and two pending international patent applications. In addition, the Company has eleven copyrights issued, three registered trademarks and four trademark applications pending.
Compliance with federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has had no material effect upon the capital expenditures, earnings and competitive position of the Company.
As of December 31, 2013, the Company employed a total of approximately 66 full time and 3 part-time employees at all its locations. The Company believes its relationship with its employees is satisfactory. Certain employees at the Company’s McCook, Illinois facility are covered under a collective bargaining agreement expiring on June 30, 2016.
The Company’s export sales accounted for total revenues of 8%, 20% and 26% in 2013, 2012, and 2011, respectively, with the majority of these sales being shipped to Australia.
RISK FACTORS RELATED TO OUR BUSINESS AND INDUSTRY
Technology changes as required by our customers could limit and impair our ability to produce products.
We are predominantly dependent on LCD, controller chip, and touch based technologies. We are continuing to develop our expertise and broaden our product line in newer LCD products and multi-touch technologies. As we continue to participate in developing solutions for future technological applications for our customers such as software configuration tools and digital signage, and in the future, organic light emitting diode (“OLED”), transmissive, flexible LCDs and 3D, the need for us to be able to provide a value-added component to the technology remains a critical capability.
The loss or interruption of supply from our key parts suppliers could limit our ability to manufacture our products.
We purchase certain materials and components for our products from various suppliers, some of which are located outside of the U.S. We are obtaining all our LCD displays from three sources, namely AUO Optronics, Samsung Display, and LG Display. We are obtaining all our LCD chassis subassembly boards primarily from three sources, USI, Inc., HT Precision Technologies (“HTP”), and Axiomtek Display Systems (“ADS”) and final assembly also from HTP and ADS. Any loss or interruption of supply from our key parts suppliers may require us to find new suppliers. The number of suppliers for certain electronic components and raw materials is limited. We could experience production or development delays while we seek new suppliers and could have difficulty finding new suppliers, which would substantially impair our operating results and business.
Our growth could be impaired if we are not able to continue to develop and maintain the success of our Asian subcontract relationships.
Our Asian subcontract relationships for LCD video displays and chassis are an important part of our revenue and earnings plan. If we are unable to continue to successfully execute this strategy with our current LCD subcontractors, HTP and ADS, we may not be able to maintain our revenues and earnings as expected. Please see additional detail regarding our suppliers provided in the MANUFACTURING AND ASSEMBLY section on page 3.
The loss of Spielo or our next four largest customers would reduce our revenues and our profitability.
Our largest customer, Spielo Manufacturing ULC of Lottomatica, accounted for 18%, 26%, and 12% of total revenues in 2013, 2012 and 2011, respectively, and for 5% and 15% of total accounts receivable as of December 31, 2013 and 2012, respectively. A loss of this customer, or for that matter any of our five largest customers, could significantly reduce our revenues and profitability.
The goodwill of our American Gaming & Electronics acquisition in 2000 could become impaired.
The Company is required to measure the potential impairment of the goodwill related to our 2000 acquisition of American Gaming & Electronics per FASB ASC 350-20, Goodwill Subsequent Measurement, at least annually. The goodwill amount on our balance sheet at December 31, 2013 and 2012 is $1,329,000. The measurement of the American Gaming & Electronics reporting unit Fair Value requires certain management assumptions regarding future sales, gross margins, operating expense, effective tax rates, and net working capital requirements.
The 2013 year end analysis assumed that AGE would have significant sales from the Illinois Video Lottery terminal market in addition to its usual replacement kit, parts, and service distribution activities. The analysis also requires the Company to determine appropriate discount rates for the next five years, the perpetuity growth and discount rate, and the perpetuity tax rate. To the extent that the indicated Fair Value of a reporting unit is greater than its carrying value, then there is no indicated impairment. Conversely, in the event that the carrying value of the reporting unit exceeds its indicated Fair Value, then some level of goodwill impairment has potentially occurred and additional analysis is necessary to quantify the level of impairment (i.e. Step II), if any.
The Company passed the step I test at December 31, 2013 and 2012; therefore there was no impairment. However, there is no certainty in future periods that the Fair Value of the American Gaming & Electronics reporting unit will exceed its carrying value.
Intense competition in our industry could impair our ability to grow and achieve profitability.
We may not be able to compete effectively with current or future competitors. The market for our products and services is intensely competitive and constantly attracts new competitors even as others leave the industry due to low barriers to entry to our business. We expect this competition to further intensify in the future. Some of our competitors are large companies with greater financial, marketing and product development resources. In addition, new competitors may enter our key markets. This may place us at a disadvantage in responding to our competitors’ pricing strategies, technological advances and other initiatives.
The ability to assist our Illinois VGT customers to obtain financing may affect our VGT sales and profitability.
Our Illinois VGT customers require significant financing in order to purchase our VGT equipment. Due to the high initial cost of VGT equipment, approximately seventy five percent of our sales are dependent upon their ability to obtain financing. The Company has been successful to date in helping them to obtain financing from the equipment supplier and other independent sources, such as Firestone Financial. However, there is no certainty that the Company will be able to continue to receive adequate additional financing for our VGT customers in the future.
The gaming business is heavily regulated and we depend on our ability to obtain/maintain regulatory approvals.
The manufacture and distribution of parts for gaming machines are subject to extensive federal, state, local and foreign regulations, and the governments of the various gaming jurisdictions amend these regulations from time to time. Virtually all of these jurisdictions require licenses, permits, documentation of qualification, including evidence of financial stability, and other forms of approval for manufacturers and distributors of gaming machines and for their key personnel. The revocation or denial of a license in a particular jurisdiction could adversely affect our ability to obtain or maintain licenses in other jurisdictions. Also, there is always the potential that laws and regulations could be changed or repealed, even after their adoption. These changes could affect our business and results of operations.
The loss of our bank line would severely limit our ability to fund operations.
Our current bank line expires August 21, 2016 and requires the Company to maintain certain financial covenants. The Company fully intends to maintain compliance with the covenants under its bank line and expects it will be able to do so. If unsuccessful, the Company would be severely limited in its ability to fund operations.
The market price for our shares is susceptible to significant changes in market price.
Historically, the volume of trading of our shares has been relatively low. As a result, larger than average buy or sell orders on a given day, or news about us or the gaming industry, has had and may in the future have a significant impact on the trading price for our shares.
The current economic conditions might cause sales to decline without warning making it difficult to reduce costs fast enough to maintain profitability.
The Company is concerned that our customers and their customers business might decline more than they currently are forecasting making it difficult for us to reduce our expenses as fast as our sales decline. Although the Company will make every effort to keep our expenses in line with current sales, we could experience periods where the sales decline occurs so rapidly that we are unprofitable for a period of time.
Available Information
The Company files reports with the Securities and Exchange Commission and files all required reports under the Exchange Act of 1934, as amended. The public may read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Because we want to provide you with more meaningful and useful information, this Annual Report includes forward-looking statements that reflect our current expectations and projections about our future results, performance, prospects and opportunities. You can find many of these statements by looking for words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “estimate” and similar expressions. These forward-looking statements are based on information currently available to us and are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities in 2012 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and other factors include but are not limited to the factors described under the heading “Risk Factors” above. We caution you not to place undue reliance on any forward-looking statements. Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this Annual Report.
Item 2. PROPERTIES
The Company’s current manufacturing and corporate headquarters is located at 9500 West 55th Street, Suite A, McCook, Illinois 60525. The Company’s leased McCook facility has approximately 104,000 square feet of floor space. Approximately 40,000 of the 104,000 square feet of the plant are dedicated to production and service and approximately 43,000 of the 104,000 square feet are devoted to warehousing. Offices for engineering, sales and administration are also located at that facility. The plant is in good condition, is well maintained, and currently has over 80% excess production capacity as the Company currently runs at 10% capacity on one shift and could run multiple shifts. The Company also has other smaller leased facilities to support the operations of AGE in Nevada, New Jersey and Florida. The Company’s McCook facility lease expires on April 30, 2016.
Item 3. LEGAL PROCEEDINGS
As the Company sells its products and services to a broad customer base, from time to time it may be named in legal proceedings. The Company aggressively reviews all claims on a timely basis and in the opinion of management, any currently pending legal claims against the Company have no basis and no loss contingency reserves have been established.
The Company filed a patent infringement case against a competitor in April, 2010 in the US District Court, Northern District of Illinois. The Company is seeking royalty payments for use of its granted adder bracket patent. On April 28, 2011, the Company entered into a License and Settlement Agreement that settles all disputes and lawsuits to the parties’ satisfaction.
The Company terminated a Licensing Agreement with Dimension Technologies, Inc. ("DTI") dated November 11, 2008 effective October 27, 2010, following the expiration of a 90-day notice period. On October 26, 2010, DTI made a formal demand to the American Arbitration Association naming the Company as respondent, which Arbitration Demand was served on the Company November 1, 2010. The Arbitration Demand makes reference to a breach of the Licensing Agreement, as well as misrepresentation, conversion, and unfair competition relative to the Company's alleged use of DTI's proprietary technology and business information and references a claim in the amount of $5,000,000. In December 2011, DTI suggested the arbitration go to mediation. A mutually convenient date of January 19, 2012 was set for mediation. During mediation, a significantly lower settlement agreement was reached, the terms of which are confidential. On January 27, 2012, the Company entered a Settlement Agreement and Mutual Release that settles all disputes and arbitration to the parties’ satisfaction. The Company notes that the settlement was significantly below the disclosure guideline for this section of ten percent of assets. All expenses associated with the settlement agreement have been recorded in the December 31, 2011 financial statements.
Item 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II
Item 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES ,
(Item 201 of Regulation S-K is required for small reporting companies except for paragraph (e);
Item 701 of Regulation S-K is required for any information not provided in a previous form 10-Q).
The information required by this Item is set forth in Exhibit 13.0 hereto, the Company’s Annual Report to Shareholders for the year ended December 31, 2013, under the caption “Common Share Market Price,” which information is incorporated herein by reference.
Issuer Purchases of Equity Securities: None
Recent Sales of Unregistered Securities: None
Item 6. SELECTED FINANCIAL DATA
The information required by this Item is set forth in Exhibit 13.0 hereto, the Company’s Annual Report to Shareholders for the year ended December 31, 2013, under the caption “Selected Financial Data,” which information is incorporated herein by reference.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by this Item is set forth in Exhibit 13.0 hereto, the Company’s Annual Report to Shareholders for the year ended December 31, 2013, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation” section, which information is incorporated herein by reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this Item is set forth in Exhibit 13.0 hereto, the Company’s Annual Report to Shareholders for the year ended December 31, 2013, under the caption “Market and Credit Risks” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, which information is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements together with the notes thereto are set forth in Exhibit 13.0 hereto, the Company’s Annual Report to Shareholders for the year ended December 31, 2013, which information is incorporated herein by reference:
|
- |
Consolidated Balance Sheets as of December 31, 2013 and 2012 |
- | Consolidated Statements of Operations for years ended December 31, 2013, 2012, and 2011 | |
- | Consolidated Statements of Shareholders’ Equity for years ended December 31, 2013, 2012, and 2011 | |
- | Consolidated Statements of Cash Flows for years ended December 31, 2013, 2012, and 2011 | |
- | Notes to the Consolidated Financial Statements | |
- | Independent Auditors’ Reports |
Quarterly financial data for the four quarters ended December 31, 2013 and 2012 are set forth in Exhibit 13.0 hereto in Note 13 of “Notes to the Consolidated Financial Statements” as part of the Company’s Annual Report to Shareholders for the year ended December 31, 2013, which information is incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Effective July 1, 2012 (the “Closing Date”), Blackman Kallick, LLP (“Blackman Kallick”), the independent registered public accounting firm of Wells-Gardner Electronics Corporation. (the “Company”), consummated a
merger with Plante & Moran, PLLC (“Plante & Moran”), with Plante & Moran being the surviving legal entity. As of the Closing Date, Plante & Moran succeeded Blackman Kallick as the Company’s independent registered public accounting firm as a matter of law, and by operation of law, the Company continued to engage the surviving legal entity, Plante & Moran as its independent registered public accounting firm.
Blackman Kallick’s reports on the Company’s financial statements for the fiscal years ended December 31, 2011 were clean opinions and did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal year ended December 31, 2011, and the subsequent interim period through July 1, 2012, there were (i) no disagreements (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Blackman Kallick on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Blackman Kallick would have caused Blackman Kallick to make reference thereto in its reports on the Company’s financial statements for such years, and (ii) no “reportable events” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).
During the fiscal year ended December 31, 2011 and the subsequent interim period through July 1, 2012, neither the Company, nor anyone on its behalf, consulted Plante & Moran on any matter.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
The Company maintains internal controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 [the “Exchange Act”]) designed to provide reasonable assurance that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These include controls and procedures designed to ensure that this information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
The Disclosure Committee, which is made up of the Company’s Chief Executive Officer, Chief Financial Officer and other management staff meets on a quarterly basis and has overview responsibility for this process. The Committee reviews a checklist of items during its meetings to document the review of any unusual items or issues raised. The Disclosure Committee conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2013.
Based on the evaluation, the Disclosure Committee concluded that the Company’s disclosure controls and procedures were operating and effective as of December 31, 2013.
Management’s Annual Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
The Company's Chairman, President and Chief Executive Officer, its Executive Vice President and Chief Financial Officer, and other members of the Disclosure Committee conducted an assessment of the effectiveness of the Company's internal control over financial reporting. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Furthermore, the Company’s independent auditors did not report to the Audit Committee any material weaknesses or significant deficiencies in financial reporting for the year ending December 31, 2013.
Based on such assessment, the Company's Disclosure Committee has concluded that, as of December 31, 2013, the Company’s internal control over financial reporting was effective.
Item 9B. OTHER INFORMATION
None
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated by reference under the captions “Election of Directors”, “Executive Officers”, “Section 16(a) Beneficial Ownership Reporting Compliance”, “Committees of the Board of Directors”, "Audit Committee" and “Notice of Business to be Conducted at a Special or Annual Meeting” in the Company’s definitive proxy statement related to its 2014 Annual Meeting of Shareholders.
The Company maintains a Code of Business Conduct & Ethics including a Whistleblower Policy governing the behavior of the Company’s employees, including its Executive and Corporate Officers, which is available for review on the Company’s website (www.wellsgardner.com) under its Investor Relations Corporate Governance section.
Item 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference under the captions “2013 Summary Compensation Table”, “2013 Outstanding Equity Awards at Fiscal Year-End Table”, “Potential Payments Upon the Termination or Change in Control” and “2013 Director Compensation Table” in the Company’s definitive proxy statement related to its 2014 Annual Meeting.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference under the caption “Securities Beneficially Owned by Principal Shareholders and Management” in the Company’s definitive proxy statement related to its 2014 Annual Meeting and in Exhibit 13.0 hereto, Company’s 2013 Annual Report, in Note 5 of “Notes to the Consolidated Financial Statements.”
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The Information required by this Item is incorporated by reference under the captions “Certain Transactions with Management” and “Committees of the Board of Directors” in the Company’s definitive proxy statement related to its 2014 Annual Meeting.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item is incorporated by reference under the caption “Proposal for Ratification of Appointment of Independent Certified Public Accountants”, “Report of the Audit Committee” and “Independent Certified Public Accountants” in the Company’s definitive proxy statement related to its 2014 Annual Meeting.
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) The following financial statements required by Part II, Item 8 of this annual report and are included in Exhibit 13.0 hereto:
|
- |
Consolidated Balance Sheets as of December 31, 2013 and 20112 |
- | Consolidated Statements of Operations for years ended December 31, 2013, 2012, and 2011 | |
- | Consolidated Statements of Shareholders’ Equity for years ended December 31, 2013, 2012, and 2011 | |
- | Consolidated Statements of Cash Flows for years ended December 31, 2013, 2012, and 2011 | |
- | Notes to the Consolidated Financial Statements | |
- | Independent Auditors’ Reports |
(3) (c) The following exhibits are incorporated by reference or filed herewith:
3.1 |
Articles of Incorporation of the Company, as amended, filed as Exhibit 3.1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference. |
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3.2 |
By-Laws of the Company, as amended and restated and in force February 18, 2010, filed as Exhibit 3.2 of the Company’s Current Report on Form 8-K dated February 23, 2010 and incorporated herein by reference. |
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|
3.3 |
First Amendment to the By-Laws for the Company as amended and restated and in force February 18, 2010, dated March 10,2014, filed herewith. |
10.1 |
Employment Agreement dated February 29, 1996 between the Company and Anthony Spier, as amended, filed as Exhibit 10.1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 1995 and incorporated herein by reference. |
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|
10.2 |
First, Second, Third and Fourth Amendment to the Employment Agreement between the Company and Anthony Spier filed as Exhibit 10.15 of the Company's Annual Report on Form 10-K for the year ended December 31, 2004 and incorporated herein by reference. |
10.3 |
Fifth Amendment to the Employment Agreement between the Company and Anthony Spier filed as Exhibit 10.3 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 and incorporated herein by reference. |
10.4 |
Sixth Amendment to the Employment Agreement between the Company and Anthony Spier filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 and incorporated herein by reference. |
10.5 |
Wells-Gardner Electronics Corporation Employee 401K Plan dated January 1, 1990, as amended, filed as Exhibit 10.10 of the Company’s Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference. |
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10.6 |
Wells-Gardner Electronics Corporation Amended and Restated Incentive Stock Plan, as amended and filed as Exhibit 4.1 of the Company’s Form S-8, dated August 21, 1998 and incorporated herein by reference. |
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10.7 |
Wells-Gardner Electronics Corporation Amended and Restated Executive Stock Award Plan, as amended and filed as Exhibit A to the Definitive Proxy Statement filed March 26, 2009 and incorporated herein by reference. |
10.8 |
Acquisition of Certain Assets of American Gaming and Electronics dated January 12, 2000, filed as Exhibits 2.1, 2.2 and 2.3 to the Company’s Current Report on Form 8-K, dated January 27, 2000 and incorporated herein by reference. |
10.9 |
Executive Stock Award Plan, filed as Exhibits 4.1 and 4.2 of the Company’s Form S-8, dated May 12, 2000 and incorporated herein by reference. |
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10.10 |
Agreement dated July 3, 2006, between the Company and Local 1031, I.B.E.W., AFL-CIO filed as Exhibit 10.9 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 and incorporated herein by reference. |
10.11 |
Agreement dated June 30, 2010 between the Company and Local 1031, I.B.E.W., AFL-CIO extending the collective bargaining agreement to June 30, 2011, filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 and incorporated herein by reference. |
10.12 |
Agreement dated June 28, 2011 including Contract Considerations dated July 19, 2011 between the Company and Local 1031, I.B.E.W., AFL-CIO, extending the collective bargaining agreement to June 30, 2012, filed as part of the Company's Annual Report on Form 10-K for the year ended December 31, 2011 and incorporated herein by reference. |
10.13 |
Agreement dated July 2, 2012 including Contract Considerations between the Company and Local 1031, I.B.E.W., AFL-CIO, extending the collective bargaining agreement to June 30, 2013, filed as part of the Company's Annual Report on Form 10-K for the year ended December 31, 2012 and incorporated herein by reference. |
10.14 |
Agreement between Wells-Gardner Electronics Corporation and Local 1031 of the International Brotherhood of Electrical Workers, AFL-CIO dated July 28, 2013 to July 3, 2016. |
10.15 |
Credit and Security Agreement with Wells-Fargo Bank, National Association, dated August 21, 2006 filed as Exhibit 10.1 to the Company’s Form 8K/A dated August 25, 2006 and incorporated herein by reference. |
10.16 |
First Amendment to Credit and Security Agreement with Wells-Fargo Bank, National Association, dated March 29, 2007 filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 and incorporated herein by reference. |
10.17 |
Second Amendment to Credit and Security Agreement with Wells-Fargo Bank, National Association, dated June 29, 2007 filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 and incorporated herein by reference. |
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10.18 |
Third Amendment to Credit and Security Agreement with Wells-Fargo Bank, National Association, dated September 15, 2009 filed as Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 and incorporated herein by reference. |
10.19 |
Fourth Amendment to Credit and Security Agreement with Wells-Fargo Bank, National Association, dated March 4, 2011 filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 and incorporated herein by reference. |
10.20 |
Fifth Amendment to Credit and Security Agreement and Waiver of 12/31/11 Defaults with Wells-Fargo Bank, National Association, dated March 5, 2012 filed as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 and incorporated herein by reference. |
Exhibit 101.INS | XBRL Instance Document |
Exhibit 101.SCH | XBRL Taxonomy Extension Schema |
Exhibit 101.CAL | XBRL Taxonomy Extension Calculation Linkbase |
Exhibit 101.DEF | XBRL Taxonomy Extension Definition Linkbase |
Exhibit 101.LAB | XBRL Taxonomy Extension Label Linkbase |
Exhibit 101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
PRESS RELEASES
The following press releases have been issued during the Company's fiscal year ended December 31, 2013, which are available for review on the Company's website (www.wellsgardner.com) under its Investor Information section:
DATE |
TITLE |
02/14/13 |
Wells-Gardner Reports Fourth Quarter And Full Year 2012 Results |
02/28/13 |
Wells-Gardner Has Received Purchase Orders For Over $30 Million of VGTs |
04/11/13 |
Wells-Gardner Electronics Corporation Retains Lytham Partners For Investor Relations |
04/15/13 |
Wells-Gardner Has Received Purchase Orders For Over $35 Million of VGTs |
05/08/13 |
Wells-Gardner Reports Financial Results for First Quarter of 2013 |
06/19/13 |
Wells-Gardner Announces Changes in Engineering Department Management |
06/20/13 |
Wells-Gardner Has Received Total Aggregate Purchase Orders Of Approximately $40 Million Of VGTs |
08/07/13 |
Wells-Gardner Reports Financial Results for Second Quarter of 2013 |
10/09/13 |
Wells-Gardner Electronics Corporation Introduces New Products At 2013 Global Gaming Expo |
11/07/13 |
Wells-Gardner Reports Financial Results for Third Quarter of 2013 |
11/12/13 |
Wells-Gardner Announces Distribution Agreement Between FutureLogic and American Gaming & Electronics |
12/04/13 |
Wells-Gardner Electronics Corporation Announces Strategic Alternatives Review |
02/13/14 |
Wells-Gardner Reports 2013 Year-End Financial Results |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
WELLS-GARDNER ELECTRONICS CORPORATION
By: |
/s/ ANTHONY SPIER |
Chairman of the Board, President |
|
|
|
Anthony Spier |
& Chief Executive Officer |
March 13, 2014 |
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/s/ JAMES F. BRACE |
Executive Vice President, Secretary, Treasurer |
|
|
|
James F. Brace |
& Chief Financial Officer |
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|
|
|
(Principal Accounting Officer) |
March 13, 2014 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated.
/s/ ANTHONY SPIER |
Chairman of the Board, President |
|
|
Anthony Spier |
& Chief Executive Officer |
March 13, 2014 |
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|
|
|
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/s/ MERLE BANTA |
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|
|
Merle Banta |
Director |
March 13, 2014 |
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|
|
|
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/s/ MARSHALL L. BURMAN |
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|
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Marshall L. Burman |
Director |
March 13, 2014 |
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|
|
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/s/ FRANK R. MARTIN |
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|
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Frank R. Martin |
Director |
March 13, 2014 |
FINANCIAL SCHEDULE
Schedules not included with this additional financial data have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
SCHEDULE II
UNAUDITED VALUATION AND QUALIFYING ACCOUNTS (in $000’s)
Year Ended December 31, |
||||||||||||
ALLOWANCE FOR DOUBTFUL ACCOUNTS |
2013 |
2012 |
2011 |
|||||||||
Beginning balance |
$ | 173 | $ | 206 | $ | 256 | ||||||
Additions charged to expense |
$ | 44 | $ | (7 |
) |
$ | (18 |
) |
||||
Deductions |
$ | (76 |
) |
$ | (26 |
) |
$ | (32 |
) |
|||
Balance at end of year |
$ | 141 | $ | 173 | $ | 206 | ||||||
INVENTORY OBSOLESCENCE RESERVE: |
||||||||||||
Beginning balance |
$ | 1,377 | $ | 1,557 | $ | 1,787 | ||||||
Additions charged to expense |
$ | 1,822 | $ | 1,033 | $ | 778 | ||||||
Deductions |
$ | (1,736 |
) |
$ | (1,213 |
) |
$ | (1,008 |
) |
|||
Balance at end of year |
$ | 1,463 | $ | 1,377 | $ | 1,557 | ||||||
DEFERRED TAX ASSET VALUATION ALLOWANCE: |
||||||||||||
Beginning balance |
$ | 2,528 | $ | 2,697 | $ | 2,844 | ||||||
Additions charged (credited to) to expense |
$ | (225 |
) |
$ | (169 |
) |
$ | (147 |
) |
|||
Balance at end of year |
$ | 2,303 | $ | 2,528 | $ | 2,697 | ||||||
WARRANTY RESERVE: |
||||||||||||
Beginning balance |
$ | 71 | $ | 87 | $ | 75 | ||||||
Additions |
$ | 120 | $ | 127 | $ | 212 | ||||||
Payments |
$ | (120 |
) |
$ | (143 |
) |
$ | (200 |
) |
|||
Balance at end of year |
$ | 71 | $ | 71 | $ | 87 |
- 18 -
Exhibit 3.3
FIRST AMENDMENT TO
AMENDED AND RESTATED BYLAWS
OF
WELLS-GARDNER ELECTRONICS CORPORATION
THIS FIRST AMENDMENT TO AMENDED AND RESTATED BYLAWS OF WELLS-GARDNER ELECTRONICS CORPORATION as approved on the 10th day of March, 2014, by unanimous written consent of the board of directors of Wells-Gardner Electronics Corporation.
The bylaws are amended as follows:
Article II Section 2 entitled “Special Meetings” is hereby amended to delete the following sentence:
To be timely, a shareholder’s notice must be delivered to and received at the principal office of the Corporation, in the case of a special meeting of shareholders, not earlier than sixty days nor later than ninety days prior to the date of the special meeting.
and replace it with the following sentence:
To be timely, a shareholder’s notice must be delivered to and received at the principal office of the Corporation, in the case of a special meeting of shareholders, not earlier than thirty days nor later than sixty days prior to the date of the special meeting.
Exhibit 10.14
AGREEMENT
BETWEEN
WELLS GARDNER
electronics corporation
AND
LOCAL 1031
OF
THE INTERNATIONAL BROTHERHOOD
OF ELECTRICAL WORKERS,
AFL-CIO
June 28, 2013 to July 3, 2016
TABLE OF CONTENT'S
PAGE |
||||
ARTICLE I |
UNION AND MANAGEMENT |
|
||
Section 1. |
Parties and Effective Date |
1 |
||
Section 2. |
Expiration Date and Renewal |
1 |
||
Section 3. |
Recognition |
1 |
||
Section 4. |
Management |
1-2 |
||
Section 5. |
Union Shop |
2 |
||
Section 6. |
Check-off |
2-3 |
||
Section 7. |
Non-Discrimination |
3 |
||
Section 8. |
Trial Period Employees |
3-4 |
||
ARTICLE II |
REPRESENTATIVE, GRIEVANCES AND ARBITRATION |
|
||
Section 1. |
Stewards |
4 |
||
Section 2. |
Grievance Procedure |
4-6 |
||
Section 3. |
Arbitration |
6 |
||
Section 4. |
No Strike or Lockouts |
6-7 |
||
ARTICLE III |
HOURS OF WORK AND OVERTIME |
|
||
Section 1. |
Regular Work Week |
7 |
||
Section 2. |
No Staggering |
7 |
||
Section 3. |
Changing Workweek |
7 |
||
Section 4. |
Overtime |
8 |
||
Section 5. |
Shift Premium |
8 |
||
Section 6. |
Preference of Shift and Overtime |
8 |
||
Section 7. |
Lunch Periods |
8 |
||
Section 8. |
Rest Periods |
9 |
||
Section 9. |
Reporting Pay |
9 |
||
Section 10. |
Call-Back Pay |
9 |
||
Section 11. |
No Pyramiding |
9 |
||
ARTICLE IV |
SENIORITY |
|
||
Section 1. |
Basis of Seniority |
9 |
||
Section 2. |
Effect of Seniority |
9-10 |
||
Section 3. |
Seniority List |
10 |
||
Section 4. |
Temporary Layoffs |
10-11 |
||
Section 5. |
Temporary Transfers |
11 |
||
Section 6. |
Options |
11 |
||
Section 7. |
Demotion |
11-12 |
||
Section 8. |
Rights on Recall |
12-13 |
||
Section 9. |
Skill & Ability |
13 |
||
Section 10. |
Vacancies |
13-14 |
||
Section 11. |
On-the-Job-Training |
14 |
||
Section 12. |
Leave of Absence |
15 |
||
Section 13. |
Loss of Seniority |
15-16 |
||
Section 14. |
Promotion to Exempt Positions |
16 |
i
TABLE OF CONTENT'S CONT'D
PAGE |
||||
ARTICLE V |
VACATION AND HOLIDAYS | |||
Section 1. |
Eligibility and Amount of Vacation |
16-17 |
||
Section 2. |
Minimum Hours |
17 |
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Section 3. |
Computation of Vacation Pay |
18 |
||
Section 4. |
Scheduling of Vacations |
18 |
||
Section 5. |
Date Due |
18 |
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Section 6. |
Consecutive Days, etc |
18 |
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Section 7. |
Retiree Pro-Rata Vacation Pay |
19 |
||
Section 8. |
Holidays and Holiday pay |
19-20 |
||
Section 9. |
Floating Holiday |
20 |
||
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||||
ARTICLE VI |
WAGES |
|
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Section 1. |
Rates |
20 |
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Section 2. |
Cost Of Living |
20-21 |
||
Section 3. |
New Classifications |
21 |
||
Section 4. |
Upgrading |
21 |
||
Section 5. |
New Experienced Employees |
21 |
||
Section 6. |
Payday |
22 |
||
Section 7. |
Piece Work |
22 |
||
Section 8. |
Pension Plan |
22 |
||
|
||||
ARTICLE VII |
INSURANCE |
22-23 |
||
|
||||
ARTICLE VIII |
GENERAL PROVISIONS |
|
||
Section 1. |
Saving Clause |
23 |
||
Section 2. |
Bulletin Board |
23 |
||
Section 3. |
Election Day |
23 |
||
Section 4. |
Supervisors |
24 |
||
Section 5. |
Right of Access |
24 |
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Section 6. |
Conflict with State & Federal Laws |
24 |
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Section 7. |
Female Employees |
24 |
||
Section 8. |
Paid Leave of Absence |
24-25 |
||
Section 9. |
Jury Service |
25 |
||
Section 10. |
Safety and Health Provisions |
25 |
||
Section 11. |
Union Employee Educational Assistance Program |
26 |
||
Section 12. |
Call-In Sick / Personal Day |
27 |
||
Section 13. |
Inventory Shutdown Scheduling |
27 |
||
Section 14. |
Severance Plan |
27 |
||
Section 15. |
401K Savings Plan |
27 |
||
APPENDIX "A" Wage Scale - Effective 06-30-03 |
28-31 |
|||
|
||||
APPENDIX "B" Insurance Coverage for Employees & Dependents | 32-33 | |||
|
||||
APPENDIX "C" Piece Work / Incentive System | 34 |
II
ARTICLE I
UNION AND MANAGEMENT
Section 1. Parties and Effective Date: The parties to this Agreement are: Wells-Gardner Electronics Corporation , its successors or assigns, hereinafter called the " Company " and Local 1031, International Brotherhood of Electrical Workers, AFL-CIO , hereinafter called the " Union ". This Agreement shall become effective June 28, 2013 .
Section 2. Expiration Date and Renewal: This Agreement shall remain in full force and effect until July 3, 2016 and then shall automatically renew itself from year to year thereafter, unless the Company or the Union gives written notice to the other party to amend, modify or terminate within not less than sixty (60) days prior to any expiration date. The parties may by mutual agreement modify or amend this Agreement at any time hereafter.
Section 3. Recognition: The Company recognizes the Union as the sole and exclusive collective bargaining agent for all of the Company's production and maintenance employees located at 9500 West 55 th Street – Suite A, McCook, Illinois 60525-3605 excluding Wells-Gardner Electronics Corporation executives and non-working supervisors, office, clerical and sales employees, engineering and laboratory employees, supervisors, guards, outside truck drivers, journey & craft persons who are represented for purposes of collective bargaining by unions affiliated with the AFL-CIO.
Section 4. Management: The management of the Company and its operations, the direction of the work force, including the right to hire, assign, suspend, transfer, promote, discharge or discipline for just cause and to maintain discipline and efficiency of its employees and the right to relieve employees from duty because of lack of work or for other legitimate reasons not in conflict with the provisions of this Agreement; the right to determine the extent to which the plant shall be operated; the right to introduce new or improved production methods, processes or equipment; the right to decide the number and locations of plants, the nature of equipment or machinery, the products to be manufactured, the methods and processes of manufacturing, the scheduling of production, the method of training employees, the designing and engineering of products and the control of raw materials; the right to continue in accordance with past practice to assign work to outside contractors; and the right to enact Company policies, plant rules and regulations which are not in conflict with this Agreement, are vested exclusively in the Company.
The Union recognizes that there are functions, powers, authorities and responsibilities belonging solely to the Company, prominent among which, but by no means inclusive, are those enumerated in the preceding paragraph. The management rights enumerated in said paragraph are not inclusive and shall not be deemed to exclude other functions not herein listed.
The term "just cause" as used in this Agreement includes but is not limited to any violations of a published plant rule established pursuant to the provisions of Article I.
Section 5. Union Shop: All employees covered by the terms of this Agreement shall be required to become and remain members of the Union as a condition of employment from and after the sixty-first (61st) day following the date of their employment or the effective date of this Agreement, whichever is later.
Section 6. Check-Off: The Company agrees that it will make weekly deductions from each weekly pay check covering any and all amount of dues and initiation fees that may hereafter become due to the Union for any of its employees covered hereunder, provided that the Union requests such deductions and accompanies such requests with properly and legally executed assignments, in accordance with law, authorizing such deductions. The employer further agrees that once each week, it will remit promptly to the Union such collected amounts. At the end of each calendar month, the Company shall forward to the Union an alphabetical list of the names and the total amounts deducted during said month from each employee covered. In lieu of this monthly alphabetical list, the Company may, at its option, forward to the Union such an alphabetical list each week along with the weekly remittance of collected amounts.
If through inadvertence or error, the Company fails or neglects to make a deduction which is properly due and owing from an employee's weekly pay check, such deduction shall be made from the next weekly pay check of the employee and promptly remitted to the Union. It is expressly agreed and understood that the Union assumes full responsibility for the validity and the legality of such employee's deductions as are made by the Company and hereby agrees to indemnify and save the Company harmless, by virtue of such collections and payments to the Union.
No deduction shall be made from any employee for union dues in any week in which such employee receives a check representing a total of less than eight (8) hours at the employees regular rate of pay nor shall any deduction be made from any employee's pay check prior to the date on which, by the terms of this Agreement, he/she is required to become a member of the Union as a condition of employment.
Section 7. Non-Discrimination: It is agreed between the parties that in the policies and practices of the Company and in the membership policies and practices of the Union there shall continue to be no discrimination against any employee on account of race, creed, color, national origin or sex.
Section 8. Trial Period Employees:
(a) |
Trial Period: New employees shall be on trial until they have been employed for a period of sixty (60) calendar days and during such period the Company shall have the right to dismiss or retain the employee at its own discretion. Upon completion of such sixty (60) calendar days of employment, the employee shall be deemed to be a regular employee. In all instances where a trial period employee is laid off for lack of work or granted a leave of absence for illness or other good cause, such reduction from active employment shall be deemed to be a layoff, unless at the date it occurs, the employee is given a written notice stating that he/she is terminated. |
(b) |
Return from Leave or Recall of Laid Off Trial Period Employee: Trial period employees who are laid off and by election of the Company subsequently recalled or who are granted a leave of absence and subsequently return to work, must complete sixty (60) calendar days of trial period active employment within six (6) months of the date of their original hire date in order to become a regular employee. Periods of trial period active employment, as referred to above, shall include any week in which the employee works at least one full day. At such time as the employee completes sixty (60) calendar day trial period active employment, his/her "original hiring date", for the purpose of determining his/her length of service (in accordance with Article IV, Section 3(b)) shall be established as that date sixty (60) calendar days prior to the date of completion of the trial period employment requirement. |
(c) |
Trial Period Employee Recalled Before Expiration of Six-Month Period: Trial period employees who have not completed sixty (60) calendar days of trial period employment within six (6) months from their original date of hire, but who are recalled or return from a leave of absence prior to the expiration of such six-month period will be permitted to complete the trial period requirement, although the six-month period elapses before such trial period is completed, provided the employee is not laid off before he/she completes his/her trial period employment. If such a layoff occurs before the employee bas completed his/her trial period and the six-month period has expired, said employee will be considered to have been terminated rather than laid off. |
(d) |
Extension of Trial Period: The Company shall have the right to extend the trial period to ninety (90) calendar days upon written notice to the Union and the employee prior to completion of the normal sixty (60) day trial period and shall retain the right to dismiss such employee during this extension period without being subject to review. In all instances where the trial period of a new employee is so extended, such employee's responsibility to become and remain a member of the Union in good standing as a condition of employment after sixty (60) days shall not be affected; and any benefits of the contract such as holiday pay and insurance coverage shall accrue to such- employee at the end of the initial sixty day period. |
ARTICLE II
REPRESENTATION, GRIEVANCES AND ARBITRATION
Section 1. Stewards: The Company agrees to recognize the Chief Steward and Shop Stewards selected by the Union in accordance with the Union rules and regulations. Such Chief Steward and Stewards may act as a grievance committee at the request of, and with, the Business Manager of the Union, or his/her representative. The Union will notify the Company as to the identity of such Chief Steward or Stewards and the Company shall not be required to recognize any other employees in the adjustment of complaints than those whose names are furnished to the Company as aforesaid. Such Chief Steward and Stewards shall be granted a reasonable amount of time during working hours for the purpose of investigating and adjusting complaints, provided however, that such Chief Steward and Stewards shall not leave their work without the permission of the immediate supervisor. Such permission, however, shall not be arbitrarily withheld. The Chief Steward and Stewards shall be granted top seniority in their respective departments for the purpose of layoffs and recalls.
Section 2. Grievance Procedure: Any grievance arising during the life of this contract pertaining to wages, hours of work and working conditions of employees in the bargaining unit shall be subject to the procedures outlined below:
Either the Company or the Union or any employee (or Steward, Chief Steward or Business Representative in his/her behalf) may file grievances. Grievances of the Company or Union shall be presented directly to the other in writing. Grievances of the employees shall be reduced to writing on grievance forms provided by the Union. All answers by the Company shall likewise be in writing. Grievances will be handled as follows:
|
Step 1. |
The employee, his/her Steward or both, shall present the matter in dispute for settlement to his/her Supervisor. If the Supervisor's decision is not satisfactory or is not given within three (3) working days, Step 2 will be followed. |
|
Step 2. |
Such grievance shall then be presented by the Chief Steward within three (3) working days after the Supervisor's unsatisfactory decision or failure to give a decision, whichever is applicable, to the Department Head. If the Department Head's decision is not satisfactory or is not given within three (3) working days, Step 3 will be followed. |
|
Step 3. |
Such grievance shall then be presented by the Business Representative of the Union within five (5) working days from receipt of the Department Head's unsatisfactory decision or failure to give a decision, whichever is applicable, to the Human Resources Director who shall give his/her answer not later than five (5) working days after the presentation of the grievance to him/her. |
If the decision of the Human Resources Director is not satisfactory, such grievance will be discussed by the Business Manager of the Union and the Human Resources Director within five (5) working days after receipt by the Business Manager of the unsatisfactory answer by the Human Resources Director. In the event the Company and the Union are unable to settle any grievance under the procedures outlined above, the grievance shall be further processed under Section 3 - Arbitration - of this Article.
A grievance must be filed no later than five (5) working days after the occurrence of the event in which it is predicated, except in instances where the employee, or his/her Steward or Chief Steward, could not reasonably have been expected to be aware of the occurrence of the grievance. A failure to file a grievance within the period specified shall be deemed a waiver of such matter. In all cases of grievances relating to time not worked, the Company shall be responsible only for the actual loss sustained by an employee. Any settlement of any grievance between the Company and a Steward, Chief Steward, or Business Representative in Steps 1, 2, and 3 above will not be final until reviewed and approved by the Business Manager of the Union or his/her designated representative. The Company may consider the matter closed unless it has been otherwise notified by the Business Manager of the Union or his/her delegated representative within ten (10) days after notice bas been given him/her of the terms and conditions of the proposed grievance settlement.
An employee may be discharged or disciplined for cause. However, in case any employee, or the Union in his/her behalf, claims that he/she has been unjustifiably discharged or disciplined, a written complaint shall be filed within five (5) working days from the date of his/her discharge or discipline. Such complaint or grievance shall start under Step 2 above. Prior to the discharge or disciplining of an employee (except in cases of an employee under the influence of alcohol, drugs, etc., or theft or sabotage), the Chief Steward shall be notified and given the opportunity to discuss the discharge or discipline. In case of discharge or discipline for being under the influence of alcohol, drugs, etc., or for theft or sabotage, the Chief Steward shall be notified Immediately after the discharge.
Section 3. Arbitration: In the event that the grievance or complaint cannot be adjusted in any of the foregoing steps, the matter may, at the request of either party, be submitted for final and binding arbitration by an impartial arbitrator who shall be chosen by mutual agreement of the Company and the Union. In the event that the Company and the Union are unable to agree upon an arbitrator, the parties will request the Federal- Mediation and Conciliation Service to submit a panel of nine (9) qualified arbitrators. Both the Company and the Union shall have the right to strike four (4) names from the panel submitted to the parties. The remaining name on the panel shall then become the impartial arbitrator. In the consideration of discipline or discharge cases, the arbitrator shall have authority and jurisdiction to direct the payment of back pay for lost time resulting from discharge. The arbitrator's decision shall be final and binding upon all parties. However, an arbitrator shall have no power or authority to add to, alter, or modify the terms of this Agreement or any supplementary agreement made between the parties hereto. The expenses of arbitration (except those of the respective parties) shall be borne equally between the Company and the Union.
Section 4. No Strikes or Lockouts: There shall be no strikes, refusal to work or slowdown by the Union during the life of this Agreement, and there shall be no lockout on the part of the Company, unless either the Company or the Union should refuse to participate in arbitration proceedings or abide by the decision of an arbitrator, in accordance with Section 3 of this Article. Should there be such refusal by either the Company or the Union, this Section, at the option of the other party, shall be deemed inapplicable. There shall be no liability on the part of the Union for unauthorized strikes, stoppages or slowdowns, by any of the employees, but the Company shall have the right to discipline or discharge any employee who initiates, instigates, or participates in such unauthorized strikes, stoppages, or slowdowns. In consideration of this Agreement, the Union agrees not to sue the Company, its officers or representatives, and the Company agrees not to sue the Union, its officers, agents, or members in connection with any labor relations matters in any court of law or equity. The parties agree that the sole procedure for settlement of any disputes concerning labor relations matters between the Company and the Union shall be the grievance and arbitration procedure hereof.
ARTICLE III
HOURS OF WORK AND OVERTIME
Section 1. Regular Workweek: The regular workweek shall consist of forty (40) hours on a schedule of eight (8) hours per day Monday through Friday.
Section 2. No Staggering: The working day shall be continuous and employees shall not be compelled to lay off work for any period of time during the day and to resume work thereafter during the same day except in the case of lunch period or rest period.
Section 3. Changing Workweek: Any changes in the regular workweek shall be by mutual agreement between the Company and the Union. The Company reserves the right to change regularly scheduled starting and quitting hours under emergency conditions, in which event the time worked before normal starting time or after the normal quitting time will not be considered overtime work payable at one and one-half (1½) time the employee's straight-time rate unless more than eight (8) hours of work are performed in a day or unless an employee is prevented from performing eight (8) hours of work for reasons of the Company's convenience rather than for circumstances beyond the control of the Company.
Section 4. Overtime: All work performed in excess of eight (8) hours in any one (1) day, and all work performed on Saturday, and all work performed prior to the employee's regular hour for starting or after the employee's regular hour for quitting shall be considered overtime and shall be compensated for on the basis of one and one-half (11/2) times the employees straight time rate. All work performed on Sunday shall be compensated for at two (2) times the employees straight time rate.
Section 5. Shift Premiums: Work performed on the second (or afternoon) shift shall be paid for at the rate of ten (10%) percent more than the rate paid for similar work on the first (or day) shift. Work performed on the third (or night) shift shall be paid for at the rate of fifteen (15%) percent more than the rate paid for similar work on the first (or day) shift. In ascertaining the vacation or holiday benefits to which an employee may be entitled, the shift premium shall be included in the computations.
Section 6. Preference of Shifts and Overtime: When a preference of shifts is available on account of the occurrence of a vacancy, preference will be given on the basis of seniority and preference in the assignment of overtime should be based on the following formula:
(a) |
Overtime on a job shall be assigned to those regularly doing that job in their respective departments pursuant to the principle of "line intact". |
(b) |
If additional help is required, employees with the greatest seniority in their classification in the department concerned and capable of doing the job in that department will be selected. |
(c) |
In the event no qualified employees wish the overtime assignment, it shall be assigned to and worked by the junior employee. |
(d) |
If necessary to go outside of that particular department, plant wide seniority will prevail if capable of doing the job. |
(e) |
In the event an employee is requested by the Company to work overtime, daily or Saturday, and he/she agrees to perform the overtime work but: (1) fails to notify the Company of his/her inability to report to work; or (ii) fails to give good cause explaining his/her inability to report for work; or (iii) fails to report for work, the employee shall not be permitted to work any overtime in any department for a period not to exceed thirty (30) days following the time the employee was requested to perform the overtime work. |
Section 7. Lunch Period: There shall be an allowance of a lunch period near the middle of a work shift of thirty (30) consecutive minutes.
Section 8. Rest Periods: On each shift of the day there shall be a ten (10) minute rest period for each four (4) hours worked without deduction in pay.
Section 9. Reporting Pay: Employees who report for work in person and have not been previously notified not to report shall receive four (4) hours' work or the equivalent in pay, based upon their regular straight time hourly rate of pay, except in case of an emergency beyond the control of the Company.
Section 10. Call-Back Pay: An employee who has left the plant and is called back to work shall work and receive no less than four (4) hours of overtime pay at his/her regular straight time rate of pay, or the applicable straight time rate of pay for the job performed, whichever is greater.
Section 11. No Pyramiding: In no event shall overtime or premium pay provided for in this Article be pyramided or duplicated. Only the applicable provision yielding the largest amount of pay shall be applied and such payment shall satisfy the requirements of all other applicable provisions. This limitation, however, does not apply to shift premiums.
ARTICLE IV
SENIORITY
Section 1. Basis of Seniority: Each employee will have seniority standing in the plant equal to the employee's total length of service with the Company in the bargaining unit, dated from his/her first day of last continuous employment therein except as provided in Sections 3, 11, and 12 of this Article.
Section 2. Effect of Seniority: Except as provided in Section 6 of Article III and Section 7 of this Article, in all cases of increase or decrease of forces, transfer, promotion, or demotion of employees and preference in the selection of shifts, plant-wide seniority shall prevail, provided the employees possess sufficient skill and ability to satisfactorily perform the work to be done.
Where new equipment or added responsibilities are added to existing job classifications, the Company, in the event of a reduction in force, shall go strictly by seniority, regardless of the lack of experience of the senior employee. The Company shall train as needed to retain the senior employees.
Section 3. Seniority Lists: The Company will furnish to the Union immediately after the signing of this Agreement, a Seniority List and will post copies of such list on the bulletin boards in the plant. The list is to be revised at six (6) month intervals.
The Company will also furnish to the Union monthly a list of additions to and deletions from the Seniority List.
(a) |
Except as otherwise provided in this Agreement, the Seniority List is to be used to determine an employee's seniority as to layoffs, recalls, promotions and demotions. An employee shall have his/her seniority date computed from his/her original date of employment in the bargaining unit, in determining the employee's seniority in cases of layoffs, recalls, promotions and demotions. |
(b) |
The Seniority List is to be used to determine which bracket in the vacation schedule is applicable. Since an employee's vacation is based on his/her length of service with the Company, his/her original hiring date or date of rehire will determine the length of his/her vacation. The amount of vacation pay for any one (1) year may be adjusted to comply with the minimum hours provision in this Agreement, but such adjustment shall not affect a succeeding year or years. |
(c) |
Employees having the same seniority (hired on the same date) will, if necessary, be rated by the Company based on their attendance and tardiness record. The employee with the least number of day absences in the contract year would be rated as having the most seniority. If no seniority can be determined by attendance, then the employee with the least amount of tardiness in the contract year will be rated as having the most seniority. |
Section 4. Temporary Layoffs: The parties recognize the necessity of temporary layoffs caused by shortage of materials or other reasons. It is, therefore, mutually agreed that such temporary layoffs may be made from time to time without regard to plant-wide seniority programs embodied in the contract. It is further agreed, however, that the number of hours each such employee may be laid off on such temporary layoff shall be recorded and no individual employee may be laid off on such temporary layoff without regard to seniority in excess of sixty (60) hours in each six month period of a contract year without any carry over from one six-month period to the next. When an individual employee would exceed that amount, then the Company is obligated to place him/her on another job in accordance with plant-wide seniority, provided such employee possesses sufficient ability, skill and experience to satisfactorily perform the work available.
Section 5. Temporary Transfers: For periods of work not exceeding eighty (80) hours the Company may transfer or assign employees temporarily, on a voluntary basis, but subject to plant seniority in the class from which they are being transferred, to work in job classifications in which they do not hold a regular job assignment, but have sufficient skill and ability to satisfactorily perform the work. Such employees shall be paid as follows:
(a) |
If temporarily assigned to a job in a higher labor grade, the employee shall be paid, for the time involved, the next higher rate above his/her regular job rate in the progression scale for the higher grade. |
(b) |
If temporarily assigned to a job in a lower labor grade, the employee shall be paid his/her regular job rate. |
Section 6. Option: Any employee who is subject to demotion or transfer because of material shortage, curtailment of work or similar reasons, may have the option of accepting such demotion or taking a layoff until there is sufficient work in his/her regular classification. An employee who accepts such demotion or transfer may exercise such option up to four (4) weeks after the transfer or demotion, but he/she must give four (4) days' notice to the Company before he/she may exercise the option to take a voluntary layoff under this provision.
Section 7. Demotion:
(a) |
In the event of a reduction in force, or reduction in the work force of a job classification, all probationary employees in the classification shall first be removed from the classification or laid off. If further reduction is required; |
(b) |
Employees below the maximum rate in their respective classification shall be removed beginning with the lowest wage group in such classification based upon their plant seniority. |
(c) |
Employees effected by a reduction in force of job classifications five (5) or above first shall be offered a position which they bad previously held provided that they have sufficient seniority to displace an existing employee in the particular job classification and they have not previously "signed off" during the life of this agreement on that job classification. If an employee does not have the seniority to be transferred to a previously held job classification in a higher classification, the employee shall be offered a previously held job classification in a lower classification. If the employee does not have sufficient seniority for any previously held job classification, the employee shall be given an option to be transferred to a position in classification four (4) or below, provided that the employee has sufficient seniority to displace an individual currently working in the particular job classification. Employees not having sufficient seniority for a previously held job classification or any position in job classification four (4) or below shall be laid off in accordance with contractual requirements. |
(d) |
Employees working in job classification four (4) or below during a reduction in force in those classifications shall first be offered a previously held position if they have sufficient seniority to displace an individual from the particular job classification. Otherwise, the employee shall be transferred to another job classification within classifications four (4) or below for which the employee has sufficient seniority to displace an employee of lesser plant seniority. If the employee does not have seniority to displace any individual in job classification four (4) or below, the employee shall be laid off in accordance with contractual requirements. |
(e) |
All employees transferred during a reduction in force to another job classification which they have not previously performed shall be subject to a three (3) day qualifying period. During this time, the employee may elect to relinquish the position for any reason and/or "sign-off" the job classification. An employee who voluntarily elects to relinquish a position by signing off the job classification shall be laid off. During this three (3) day qualifying period the Company reserves the right to determine in its sole discretion whether an employee can adequately perform a particular job within the three (3) day qualifying period and the Company may then decide to lay off the employee. An employee who signed off voluntarily shall not be permitted to transfer to that job classification in the event of a future reduction in force for the life of this Agreement. An employee laid-off by the Company for being unable to adequately perform the job classification shall not be permitted to transfer to that job classification in the event of a future reduction in force until the employee provides that he/she possesses sufficient skill and ability to satisfactorily perform the work to be done. |
(f) |
All recalls during an increase in the work force shall be made in reverse order of seniority and pursuant to the applicable subsections of Article IV, Section 7 and 8. If there are vacancies in job classifications which they have previously performed, unless they have sufficient seniority to return to the classification from which they were originally removed as the need for additional employees in such job classifications presents itself, they will be given an opportunity to fill such vacancies. An employee with seniority may be recalled to Code 4 or lower even though he/she has not previously performed the work in such classification. |
Section 8. Rights on Recall: Any employee being recalled after a layoff shall be assured at least two (2) straight weeks of employment at the regular workweek schedule. In the event the Company has recalled an employee with such assurance, and then because of conditions over which the Company has no control (such as, but not limited to, power failure inability to acquire machinery and equipment to replace worn out machinery and equipment, bona fide material shortages over which the Company has no control), the Company is unable to furnish such two (2) weeks of employment, the Company shall not be bound by this provision. In the event the Company does not assure such two (2) weeks of employment at the normal scheduled number of hours per week, the employee may elect to not return until such time as the Company does assure two (2) such consecutive weeks of employment at the normal scheduled number of hours per week without loss of seniority status. In the event the employee does elect not to return, that employee shall notify the Company by telegraphic message or registered mail or in person to that effect so that the Company may keep an accurate record of the employees who still wish to retain seniority status. In the event the employee fails to notify the Company of his/her election not to return as herein provided, and fails to report as specified under Section 13(h) of this Article IV, the employee shall be regarded as having resigned.
Section 9. Skill and Ability: Every employee who has completed his/her trial period shall, for the purpose of this Article, be deemed to have sufficient skill and ability to perform any common labor or common assembly job - Code 4 and below.
Section 10. Vacancies: In the event that a permanent job vacancy develops in a classification covered by this Agreement, other than common labor or assembly, a notice of such vacancy shall be bulletined for a period of two (2) working days.
The bulletin shall contain the job title, the maximum rate to be paid for the job, and a brief description of the job to be performed. Should additional personnel be required for a job within thirty (30) days of the time the job was last posted, the Company shall not be required to bulletin again such job until expiration of the thirty (30) day period. It is understood that within such thirty (30) day period the Company may take such steps as are necessary to fill such open jobs, provided no qualified employees have bid or are available. However, if an employee is not currently working on the days the open job is posted, but returns to work within the thirty (30) day period referred to above, he/she may apply for such posted job and will be considered for such posted job vacancies still remaining open. Employees with seniority who desire promotions to posted higher rated classifications shall, during the period that such vacancy is bulletined, file a form provided by their Supervisor for this purpose. If applicants with qualifications sufficient to perform the work satisfactorily have made application for the bulletined job, the qualified applicant with the greatest plant seniority shall be selected. It is intended that whenever possible promotions shall be made within the ranks and according to seniority. The Company may fill a posted vacancy until it has been determined by the Company that there are applicants who possess the qualifications required. The Company may offer a posted vacancy to a new employee who did not apply, or may hire a new employee for such vacancy in the event the applicants for the posted vacancy do not possess sufficient qualifications to satisfactorily perform the job.
It is understood that employees who have bid upon, have been accepted, and are working on the posted job will not be eligible to bid on an additional posted job for a period of three (3) months following the time the job for which they were accepted was posted.
The successful bidder for a posted job opening shall have the option to return to his/her former job within a period of two (2) weeks following the first day worked in the posted job opening. The Company shall have the option, within the same two (2) week period to return such successful employee to his/her former job in the event such employee cannot satisfactorily perform the work required to be done. The successful bidder for a posted job opening shall receive retroactive pay from the first day worked in the posted job opening who successfully completes the two (2) week trial period.
Section 11. On-the-Job Training: Employees who bid on posted jobs, but do not possess sufficient qualifications to be selected, may be considered for training under the following procedures:
(a) |
The number to be considered for training will be in relation to the number needed to fill the posting at the time of posting. |
(b) |
Selection for training will be on the basis of related education, prior employment experience, current employment experience as related to the training to be given. Qualifications being comparable, seniority will govern. |
(c) |
Evaluation of qualifications for training, as well as the progress of the trainee, will be determined by the Company. |
(d) |
A trainee who is unable to progress satisfactorily will be returned to his/her prior classification without loss of seniority. |
Section 12. Leaves of Absence:
(a) |
The Company may grant leaves of absence without pay to all regular employees of the Company for good cause, taking into consideration not only the personal problems of the employee but also the Company's operational needs for production. Such leaves for good cause other than for medical reasons shall not exceed ninety (90) days except for Union activity, which may be indefinite. Leaves of absence for illness will be granted for such periods as have been recommended by competent medical authority but not to exceed one (1) year. In the event an employee is hospitalized in excess of seven (7) days, an automatic leave of absence shall be granted up to thirty (30)days, provided that the Human Resources Director of the Company is notified of the hospitalization within three (3) working days from the last day worked. Any other request for leave of absence for illness must be made by an employee on forms provided by the Company and must be accompanied by a report from the employee's doctor recommending the time required for leave of absence. |
(b) |
Because pregnancy by itself is not a disabling condition for any fixed period of time, the Company agrees to grant maternity leaves of absence based upon the medical opinion of the employee's physician. The leave of absence shall begin when it is determined by the employee's physician that the employee is no longer able to perform those duties characteristic of her position. The leave shall continue until, and only until, the employee, on the basis of her physician's opinion, is able to return to work, not to exceed one (1) year. |
(c) |
Employees on a bona fide leave of absence, when returning to work, shall return to their former classification if such work is being performed. Application forms of all leaves of absence must be completed and be submitted to the Company within five (5) working days from their last day worked or their date of recall, and such application for leaves shall be required for any period of seven (7) or more consecutive calendar days in which the employee is out of the service of the Company. |
d) |
Employees granted a leave of absence will not be asked or required to use their remaining vacation days left before granting said leave. |
Section 13. Loss of Seniority: An employee shall lose his/her seniority when any of the following occur:
(a) |
Discharge for cause. |
(b) |
Quitting. |
(c) |
Absence from work for three (3) working days without notifying the Human Resources Department of the Company. |
(d) |
Failure to apply for a leave of absence as required. |
(e) |
Exceeding leave of absence without notification to the Human Resources Department presenting good cause. |
(f) |
Working for another employer for wages while on leave of absence (this does not apply to leaves of absence for Union activity or layoffs). |
(g) |
Layoff or sick leave for a continuous period in excess of one (1) year for purposes of seniority only. |
(h) |
Failure to report for work on recall or to notify the Human Resources Department of intention to report within three (3) regularly scheduled working days following the date notification is sent by mailgram or certified letter to the employee's last known address registered with the Human Resources Department. |
Section 14. Promotion to Exempt Positions: Any employee covered by this Agreement who is transferred to a supervisory position outside of the bargaining unit, shall retain his/her seniority as of the date of transfer. Any employee who is, or has been, employed in a supervisory position outside of the bargaining unit, shall not accumulate seniority in the bargaining unit while so employed.
ARTICLE V
VACATIONS AND HOLIDAYS
Section 1. Eligibility and Amount of Vacation: The Company will grant vacation with pay to each employee in accordance with the following schedule:
(a) |
All employees who on June 1st have been employed by the Company (in or out of the bargaining unit) six (6) months or more but less than twelve (12) months, shall be granted one-half (1/2) week's vacation with pay; |
(b) |
All employees who on June 1st have been employed by the Company (in or out of the bargaining unit) for a period of twelve (12) or more months, but less than two (2) years, shall be granted one (1) week's vacation with pay; |
(c) |
All employees who on June 1st have been employed by the Company (in or out of the bargaining unit) for two (2) years or more, but less than ten (10) years, shall be granted two (2) weeks' vacation with pay; |
(d) |
All employees who on June 1st have been employed by the Company (in or out of the bargaining unit) ten (10) years or more, but less than fifteen (15) years, shall be granted three (3) weeks' vacation with pay; |
(e) |
All employees who on June 1st have been employed by the Company, (in or out of the bargaining unit), fifteen (15) years, but less than twenty-five (25) years, shall be granted four (4) weeks vacation with pay; |
(f) |
All employees who on June 1st have been employed by the Company (in or out of the bargaining unit) twenty-five (25) years or more, shall be granted five (5) week's vacation with pay; |
(g) |
Additional vacation with pay shall be granted to those employees who as of December 31, have accrued seniority which would entitle them to additional vacation benefits over those to which they were entitled on the preceding June 1. The same limitations and requirements as prescribed for in Article V shall- also apply and the date, June 1, shall be replaced by the date December 31, where appropriate. |
Section 2. Minimum Hours:
(a) |
Employees with seniority (in or out of the bargaining unit). One (1) year or more. To qualify for full vacation benefits, the employee, as of June 1st with seniority, must have worked, or have been available for work eighty (80%) percent of the work year prior to June 1st. Time off due to occupational injury, jury duty or layoff shall be considered as time available for work. No vacation benefits shall be paid to an employee who has worked less than thirty (30%) percent of the work year prior to June 1st. An employee who has worked more than thirty (30%) percent of the work year, but has worked or been available for work less than eighty (80%) percent of the work year prior to June 1st, will be granted a vacation which will be equal to his/her vacation bracket multiplied by the percentage of time worked and time available for work. |
If an employee is on layoff, in military service, or bona fide leave of absence as of June 1st, he/she shall be paid at vacation time, the same portion of his/her vacation as the time actually worked bears to the work year, When he/she is recalled he/she must return within three (3) working days and work at least two (2) weeks. If he/she does so, he/she shall then receive the unpaid balance of his/her vacation benefit to which he/she is entitled.
(b) |
Employees with seniority (in or out of the bargaining unit) of at least six (6) months, but less than one (1) year. To qualify for full vacation benefits the employee, as of June 1st with seniority, must have worked (availability for work does not apply) eighty (80%) percent of the time from date of employment to June 1st. An employee who has worked more than thirty (30%) percent but less than eighty (80%) percent of the time from date of employment to June 1st, will be granted a vacation equal to twenty (20) hours multiplied by the percentage of time actually worked. No vacation benefits will be paid to an employee who has worked less than thirty (30%) percent of the time from date of employment to June 1st. |
Section 3. Computation of Vacation Pay: In computing vacation benefits, one (1) week's vacation with pay shall be equivalent to five (5) working days, and eight (8) hours' pay shall be equivalent to one (1) working day. If the employee is paid at a flat hourly rate, the vacation pay shall be at the highest rate earned for at least thirty (30) consecutive days during the year prior to June 1st, including shift premiums, if any.
Section 4. Scheduling of Vacations: Prior to May 1st of each calendar year, departmental heads will consult with all employees entitled to vacations and from such consultations the Company shall establish a working schedule agreeable to the Union for the vacation period. In determining vacation schedules, the Company will respect the seniority and wishes of the employee to the extent that its needs will permit. (a) The vacation season for those employees eligible for more than two (2) weeks vacation with pay, shall be during the twelve (12) month period beginning on January 1st. (b) The vacation season, for those employees hired between June 2 and prior to December 31, eligible for additional vacation with pay, shall be taken between their hire date and December 31. The Company may elect to close the plant for a specified vacation period.
Section 5. Date Due: Vacation pay which bas been earned, in accordance with this Article, shall be paid to the employee on the payday immediately preceding the start of each employee's vacation.
Section 6. Consecutive Days, Etc.: All vacations of two (2) weeks or less shall be taken on consecutive days unless the Company and the employee agree on a different division of the vacation time. If an employee is eligible for a vacation in excess of two (2) weeks, or additional vacation, his/her vacation schedule for such an additional vacation, if any, shall be determined pursuant to Section 4 of this Article. Vacations shall not be changed without thirty (30) days notice, or the consent of the employee involved. If any employee voluntarily responds to a Company request to return from his/her vacation prior to its expiration date, he/she shall be reimbursed for all out-of-pocket expense in connection with such recall and allotted an additional vacation period for the untaken vacation time.
Section 7. Retiree Pro-rata Vacation Pay: Any employee who retires prior to June 1st of any calendar year at the retirement age prescribed by the Social Security laws of the United States and who has given to the Company a two (2) month notice in writing in advance of his/her intention to do so shall be paid the pro-rata vacation pay earned by such employee, the amount of which is to be determined by provisions of Section 1, 2, and 3 of Article V.
Section 8. Holidays and Holiday Pay: Employees who qualify hereunder shall be paid for eight (8) hours straight-time pay for each of the following holidays or the dates on which they are observed, though no work shall be performed on such days:
New Years' Day
Dr. Martin Luther King's Birthday
Washington's Birthday
Good Friday
Memorial Day
Christmas Eve Day
Christmas Day
Fourth of July
Labor Day
Thanksgiving Day
Friday after Thanksgiving Day
One Floating Holiday -
See Section 9 below
Employees who work on said holidays shall be paid, in addition to eight (8) hours holiday pay, double time for all time worked. An employee shall be eligible for holiday pay who shall have been employed for a period of sixty (60) calendar days before such holiday and has met one of the following additional conditions:
(a) |
Worked the regularly scheduled workday preceding and the regularly scheduled workday succeeding the holiday, unless an absence for one of such days shall be excused for good cause, substantiated by the employee, or |
(b) |
Been at work in the two (2) weeks preceding said holiday and laid off during such preceding two (2) weeks, or |
(c) |
Is on a bona fide leave of absence starting within the two (2) weeks immediately preceding such holiday, or on the workday immediately following such holiday, or |
(d) |
If no work is scheduled between two (2) holidays, to be eligible for pay for both holidays, an employee must work his/her preceding scheduled workday and his/her scheduled workday succeeding such holidays. To be eligible for pay for one (1) of the holidays, an employee must work either his/her scheduled workday preceding the first holiday or his/her scheduled workday succeeding the second holiday. |
(e) |
An employee who fails to work any portion of the last hour on the regularly scheduled workday preceding and the regularly scheduled workday succeeding a holiday or holidays, shall not lose holiday pay for such holidays if excused by the Company for good cause. |
Section 9. Floating Holiday: Subject to the eligibility requirements for holiday pay, the recognized holidays hereunder shall include one (1) additional holiday, designated as a "floating holiday". The Company shall select the day on which such holiday will be observed and shall give not less than two (2) weeks notice prior to the date on which such floating holiday will be celebrated.
ARTICLE VI
WAGES
1. Section 1. Rates: Effective June 28, 2013, Wage increases will be as follows: 1 st year – 5%; 2 nd year – 3%; 3 rd year – 3%. (cf. memorandum of understanding). The wage rate, to be paid under the terms of this Agreement to employees in each occupational classification, are those appearing in Appendix "A" which reflect said wage rates is attached hereto and made a part hereof. Such rates are minimum rates of pay only. The Company may not pay less than those rates, but nothing in this Agreement shall prevent the payment of rates higher than those listed in said schedule.
Section 2. Cost of Living: There will be no cost of living increases for the current contract year (cf. memorandum of understanding).
Section 3. New Classifications: Prior to establishing a new classification, the Union shall be advised of the Company's intention and the rate which the Company wishes to apply. After thirty (30) days of operation but before sixty (60) days, either party may request negotiations on the rate for the new classification. The rate resulting from these negotiations shall become the permanent rate. In the event no request is made to negotiate a change in the rate as to the new classification, it is understood that the established rate shall be the effective rate.
Section 4. Upgrading: . An employee being upgraded, who has not previously worked in the classification to which he/she is upgraded, shall be placed in the next higher rate in the progression plan of the new classification above the rate being paid to such employee prior to the upgrading. If the employee has previously worked in the classification to which he/she is upgraded, he/she shall receive the rate to which the amount of his/her previous experience entitles him/her. Such changes in the rate shall be paid retroactive from the first day worked following such transfer who successfully completes the two (2) week trial period. To be eligible for a rate change, an employee must have worked at least four hundred (400) hours and a period of at least thirteen (13) weeks shall have elapsed since his/her first employment or his/her last classification change.
Section 5. New Experienced Employees: New employees who have worked during the last eighteen (18) months in the type of work available and whose previous experience can be verified shall be placed on two (2) weeks trial period at the starting rate of pay in their respective classifications and at the expiration of such trial period, if retained in the employ of the Company, shall be given credit in the automatic progression plan, as outlined in Appendix "A" hereof for their proved experience in similar work.
Section 6. Payday: Wages shall be paid on Friday of each week and shall include all work performed up until twelve (12) midnight of the previous Sunday.
Section 7. Piece Work: If the Company utilizes a piece work incentive or bonus plan, the operations of such a plan shall be covered by the provisions of Appendix "C" hereof.
Section 8. Pension Plan: During the term of this Agreement, the Company shall maintain for each of the employees covered by this Agreement a Pension Benefits Plan. The Company and the Union have agreed to a pension benefits plan named the National Integrated Group Pension Plan.
The employee pension plan is funded solely by the Company and the contribution rate is based on cents per hour paid as follows:
Effective June 28, 2013 The company will continue to pay sixty six cents (66¢) per hour during this contract year which is six cents above the last agreed pension increase to sixty cents (60¢) per hour, will be contributed for each employee based upon hours paid of this Agreement. Any additional increase under the Rehabilitation Plan 2010 for this contract year will be paid by the company.
ARTICLE VII
INSURANCE
During the term of this Agreement, the Company will maintain for the employees covered by this Agreement, an insurance policy with a responsible insurance company with coverages and provisions set forth in Appendix "B" of this Agreement. The premium per week per employee, one (1) dependent and family coverage is guaranteed for this contract year.
This article applies only to employees with sixty (60) days or more of seniority but does not apply to part-time employees.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Saving Clause: All benefits affecting the employees covered by this Agreement presently in effect and which are not definitely referred to or changed herein, shall remain in effect during the life of this contract.
Section 2. Bulletin Board: A bulletin board will be provided by the Company for the Union's use. The Union shall have the privilege of posting notices concerning its official business and social activities upon such bulletin board. Where the size of the plant requires it, more than one (1) bulletin board will be furnished by the Company.
Section 3. Election Day: In conformity with the laws of the State of Illinois, employees who are legitimate registered voters will be given time off not to exceed two (2) hours for voting at general elections. At the time of an election in which a President of the United States will be selected, employees will be given paid time off not to exceed two (2) hours.
Section 4. Supervisors: Departmental production supervisors shall not engage in production work, except such production work may be undertaken when instructing new employees, breaking in a new job, correcting faults of production procedures and dealing with emergencies.
Section 5. Right of Access: Authorized Union officers or representatives shall have access to the factory during business hours upon reasonable notification to the Company for investigation and adjustment of matters covered by or arising under this Agreement.
Section 6. Conflict with State and Federal Law: Should any provision of this Agreement be declared illegal by any court of competent jurisdiction such provision shall immediately become null and void leaving the remainder of the Agreement in full force and effect and the parties shall thereupon seek to negotiate substitute provisions which are in conformity with the applicable law.
Section 7. Female Employees: There shall be equal pay for equal work performed regardless of the sex of the employee. There shall be no discrimination in wages, hours, or other terms or conditions of employment, or in training or upgrading, on account of the sex or marital status of the employee.
Section 8. Paid Leave of Absence: In instances of the death of a member of the immediate family of a regular employee, the Company will, where required, grant a paid leave of up to three (3) regular working days to enable such employee to attend the funeral and otherwise assist in arrangements pertaining to the burial of such member of the family. An employee who travels a long distance to attend a funeral or services shall be authorized one (1) additional day following the funeral or services, but not to exceed three (3) days pay. Each day's pay shall consist of the employee's regular rate of eight (8) hours. The term "immediate family", as used herein, is defined as consisting of the following members only: Mother, Father, Husband, Wife, Children, Brother, Sister, Mother-in-law, Father-in-law, Grandparents, Grandparents-in-law and Grandchildren. Where a death occurs to any such member of the employee's family, he/she shall make application to the Human Resources Director for such paid leave. Such paid leave will not be granted in instances when the employee, otherwise eligible, does not attend the funeral. The employee absent on a paid leave shall not be eligible for, or notified of, any overtime which is scheduled during the period of such employee's leave.
This provision is not applicable if you are on a formal leave of absence, on a company designated holiday or during periods of vacation.
Section 9. Jury Service: An employee who shall have been employed sixty (60) calendar days immediately prior to reporting for jury duty and who performs jury service shall be paid an amount for each day of the regular workweek that such employee performs jury service as shall equal eight (8) hours of straight-time pay at the employee's regular hourly rate less the jury fee legally payable to such employee for that day of jury service. An employee shall have performed jury service on any day that such employee reports to Court for jury service pursuant to an Order of Court. The payments as provided herein shall be for the entire period of service on a jury pursuant to an Order of Court. To be entitled to receive such jury service pay differential, such employee shall furnish the Human Resources Director of the Company a voucher from the Court wherein such jury service is performed setting forth the number of days of jury service and the jury fees paid to such employee for jury service.
In the event an employee performs jury service on a day for which such employee receives a vacation and/or holiday pay, such employee shall not be paid jury service pay differential for that day. An employee who is on leave of absence, layoff, paid death leave, or who is accruing Workers' Compensation benefits shall not be paid jury service pay differential while on such status. An employee performing jury service shall return to work on his/her first regular workday after being excused from such jury service.
Section 10. Safety and Health Provisions: The Company shall make reasonable provisions for the safety and health of employees during working hours and shall provide all reasonable protective devices and other equipment to protect them from injury.
Section 11. Union Employee Educational Assistance Program:
(A) Education Eligibility Requirements:
1. |
Educational courses must be related to the classification of work being or to be performed by the employee. |
2. |
Such courses and institutions must be approved by the Company prior to enrollment. |
3. |
Courses are to be taken during non-scheduled working hours. |
(B) Amount of Reimbursement:
1. |
For employees who complete specialized courses, the Company will pay up to 100% of the tuition charges per semester at the satisfactory (grade "C" or better) completion of the course material in an approved school. |
2. |
When education expenses are partially paid by assistant-ships, scholarships, fellowships, or G.I. Bill Benefits, tuition reimbursements is based on the net amount actually paid by the employee, excluding amounts paid through assistantship, scholarships, fellowships, or G.I. Bill Benefits. |
(C) Method of Reimbursement:
1. |
To be eligible for tuition refund, the employee must, prior to the time of enrollment, fill out an application form per semester, for course(s) contemplated. |
2. |
Obtain the approval of the employee's supervisor who in turn will get the Company approval through Human Resources. |
3. |
Upon completion of course(s), submit to the employees supervisor a written statement from the school stating that the course(s) have been satisfactorily completed. This is usually a copy of the grade statement. |
4. |
A tuition receipt. |
The supervisor will forward this information to the Human Resources Director and within two (2) weeks the employee will receive a check containing the proper tuition refund as well as his/her tuition receipt and grade statement. |
||
5. |
If for any reason employment is terminated before completion of the program, then the Company's obligation ceases. |
Section 12. Call-in Sick / Personal Day: Each regular employee of the Company shall be eligible for a call-in sick/personal day of one (1) each contract year. Such day is not cumulative from year to year but the Company will pay the employee by July 1 of each contract year for the day not taken. One (1) such day shall equal eight (8) hours pay at the employee's regular hourly rate of pay.
Section 13. Inventory Shutdown Scheduling: The Company will schedule inventory by departmental seniority, and shall, in the event that additional employees are required in the stock room area, first ask former stock room area employees to work.
Section 14. Severance Plan: The Company will agree to negotiate a severance plan if the plant operations were to move beyond a radius of more than twenty (20) miles from the McCook plant.
Section 15. 401K Savings Plan: The Company agrees to start up and administer a 401K Savings Plan if thirty percent (30%) or more participation is achieved.
Signed this 13th day of August , 2013.
Wells Gardner Electronics Corporation |
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Local 1031, International Brotherhood Of Electrical Workers, AFL-CIO |
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/s/ Anthony S. Spier |
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/s/ José A. Caez |
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Anthony Spier |
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José A. Caez |
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President/CEO |
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Business Manager/Financial Sec’y |
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ATTACHED TO AND MADE PART OF AGREEMENT BETWEEN WELLS-GARDNER ELECTRONICS CORPORATION AND LOCAL 1031, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, FOR PERIOD JUNE 28, 2013 UNTIL JULY 3, 2016.
APPENDIX "A"
WAGE SCALE EFFECTIVE 6/28/13 THROUGH 07/03/16
|
JOB CLASSIFICATION |
START |
2MO |
3MO |
|
|
2-8 |
Sweeper |
|
|
|
|
|
|
Effective 6/28/13 |
9.47 |
13.57 |
13.68 |
|
|
3-2 |
Assy., Wirer-Solderer |
|
|
|
|
|
3-5 |
Riveter |
|
|
|
|
|
|
Effective 6/28/13 |
9.47 |
13.68 |
13.79 |
|
|
|
|
|
|
|
|
|
|
|
START |
2MO |
12MO |
24MO |
36MO |
|
|
|
|
|
|
|
|
Hired After 7/1/97 |
8.43 |
9.19 |
9.92 |
11.41 |
13.68 |
|
G.L. Specialist |
|
|
|
|
|
|
Effective 6/28/13 |
|
14.43 |
|
|
|
|
|
|
|
|
|
|
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JOB CLASSIFICATION |
START |
2MO |
3MO |
|
|
|
|
|
|
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|
4-1 |
Wire Cutting Machine Operator |
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|
|
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4-3 |
Bailer-Sweeper |
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|
|
|
|
4-5 |
Packer-Final Assembly |
|
|
|
|
|
|
Effective 6/28/13 |
9.49 |
13.69 |
13.93 |
|
|
|
|
|
|
|
|
|
|
|
START |
2MO |
12MO |
24MO |
36MO |
|
|
|
|
|
|
|
|
Hired after 7/1/97 |
8.23 |
8.94 |
9.74 |
11.22 |
13.27 |
|
|
|
|
|
|
|
G.L. |
Specialist |
|
|
3MO |
|
|
Effective 6/28/13 | 13.74 |
ATTACHED TO AND MADE PART OF AGREEMENT BETWEEN WELLS-GARDNER ELECTRONICS CORPORATION AND LOCAL 1031, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, FOR PERIOD JUNE 28, 2013 UNTIL JULY 3,2016.
APPENDIX "A" CONT’D
WAGE SCALE EFFECTIVE 06/28/2013 THROUGH 07/03/2016
|
JOB CLASSIFICATION |
START |
2MO |
6MO |
|
|
|
|
|
|
|
|
|
5-1 |
Heavy Packer |
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|
|
|
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5-2 |
Stockkeeper, Stock Delivery |
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5-5 |
Rivet/Pems Set-Up Oper. |
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|
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5-6 |
Prepare & Operate Insertion Machine |
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|
|
|
5-7 |
Automatic Checking Machine Operator |
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|
|
|
|
|
Effective 6/28/13 |
9.60 |
13.78 |
14.04 |
|
|
|
|
|
|
|
|
|
|
|
START |
2MO |
12MO |
24MO |
36MO |
|
|
|
|
|
|
|
|
Hired After 7/1/97 |
8.54 |
9.32 |
10.11 |
11.69 |
14.04 |
|
|
|
|
|
|
|
G.L. |
Specialist |
|
|
6MO |
|
|
|
Effective 6/28/13 |
|
|
14.49 |
|
|
|
|
|
|
|
|
|
|
JOB CLASSIFICATION |
START |
2MO |
6MO |
|
|
|
|
|
|
|
|
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7-2 |
Wire Cutting Mac, Set-Up & Oper. |
|
|
|
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7-3 |
Inventory Expeditor |
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|
|
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7-5 |
Riding Power Vehicle Operator |
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|
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7-7 |
Assy. Inspector |
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|
|
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7-8 |
Relief & Repair Operator |
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|
|
|
|
|
Effective 6/28/13 |
9.80 |
14.04 |
14.42 |
|
|
ATTACHED TO AND MADE PART OF AGREEMENT BETWEEN WELLS-GARDNER ELECTRONICS CORPORATION AND LOCAL 1031, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, FOR PERIOD JUNE 28, 2013 UNTIL JULY 3, 2016.
APPENDIX "A" CONT’D
WAGE SCALE EFFECTIVE 6/28/13 THROUGH 07/03/2016
|
JOB CLASSIFICATION |
START |
2MO |
6MO |
|
|
|
|
|
|
|
|
|
7-11 |
Building Fireperson |
|
|
|
|
|
|
Effective 6/28/13 |
8.85 |
14.20 |
14.51 |
|
|
|
|
|
|
|
|
|
G.L. |
Specialist |
|
|
|
|
|
|
Effective 6/28/13 |
|
|
14.49 |
|
|
|
|
|
|
|
|
|
|
JOB CLASSIFICATION |
START |
2MO |
6MO |
9MO |
|
|
|
|
|
|
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|
8-2 |
Tester-Phaser "B" (Printed Boards) |
|
|
|
|
|
8-3 |
Bonding Machine Operator |
|
|
|
|
|
8-4 |
Fine Patcher |
|
|
|
|
|
|
Effective 6/28/13 |
10.05 |
14.25 |
14.43 |
14.70 |
|
|
|
|
|
|
|
|
G.L. |
Specialist |
|
|
6MO |
|
|
|
Effective 6/28/13 |
|
|
14.45 |
|
|
JOB |
CLASSIFICATION |
START |
2MO |
6MO |
9MO |
12MO |
|
|
|
|
|
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10-2 |
Tool Crib Worker |
|
|
|
|
|
|
Effective 6/28/13 |
10.28 |
14.50 |
14.63 |
14.83 |
14.98 |
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|
|
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11-2 |
Tester |
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11-6 |
Cabinet Finisher |
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|
|
|
|
|
Effective 6/28/13 |
10.38 |
14.56 |
14.72 |
14.89 |
15.09 |
|
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|
|
|
|
|
G.L. |
Specialist |
|
|
|
|
12MO |
Effective 6/28/13 | 15.17 |
ATTACHED TO AND MADE PART OF AGREEMENT BETWEEN WELLS-GARDNER ELECTRONICS CORPORATION AND LOCAL 1031, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, FOR PERIOD JUNE 28, 2013 UNTIL JULY 3, 2016.
APPENDIX "A" CONT’D
WAGE SCALE EFFECTIVE 6/28/13 THROUGH 07/03/2016
|
JOB CLASSIFICATION |
START |
2MO |
6MO |
9MO |
12MO |
|
|
|
|
|
|
|
12-4 |
Precision Mechanical Assembler |
|
|
|
|
|
12-9 |
Final Line Inspector(Comp.Prod.) |
|
|
|
|
|
|
Effective 6/28/13 |
10.45 |
14.50 |
14.92 |
15.10 |
15.32 |
|
|
|
|
|
|
|
12-10 |
Master Cabinet Finisher |
|
|
|
|
|
|
Effective 6/28/13 |
10.53 |
14.89 |
15.03 |
15.16 |
15.39 |
|
|
|
|
|
|
|
*12-12 |
Maintenance "B" |
|
|
|
|
|
|
Effective 6/28/13 |
10.96 |
15.16 |
15.37 |
15.63 |
16.20 |
|
|
|
|
|
|
|
G.L. |
Specialist |
|
|
|
|
|
|
Effective 6/28/13 |
|
|
|
|
15.91 |
|
|
|
|
|
|
|
13-1 |
Analyzer |
|
|
|
|
|
|
Effective 6/28/13 |
11.42 |
15.73 |
15.83 |
16.00 |
16.20 |
|
|
|
|
|
|
|
14-1 |
Master Analyzer |
12.11 |
16.55 |
16.94 |
|
|
14-2 |
Maintenance "A" |
|
|
|
|
|
|
Effective 6/28/13 |
12.11 |
16.55 |
16.94 |
|
|
|
|
|
|
|
|
|
G.L. |
Specialist |
|
|
|
|
|
|
Effective 6/28/13 |
|
|
|
|
17.65 |
|
|
|
|
|
|
|
15-1 | Senior Master Analyzer | |||||
Effective 6/28/13 | 20.67 | |||||
16.1 | Technical Specialist | |||||
Effective 6/28/13 | 21.61 | |||||
16.2 | Maintenance Administrator | |||||
Effective 6/28/13 | ||||||
17.2 | Production Administrator | |||||
Effective 6/28/13 |
* Education Bonus 1 Course 10¢ per hour
(after maximum rate) 2 or more Courses 10¢ per hour (additional)
ATTACHED TO AND MADE PART OF AGREEMENT BETWEEN WELLS-GARDNER ELECTRONICS CORPORATION AND LOCAL 1031, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, FOR PERIOD JUNE 28, 2013 UNTIL JULY 3, 2016.
APPENDIX "B"
THE INSURANCE COVERAGE FOR EMPLOYEES AND DEPENDENTS
COVERED BY THIS AGREEMENT
NON-OCCUPATIONAL - WEEKLY DISABILITY BENEFITS:
(EMPLOYEES ONLY)
Benefits are payable for accident from the first (1st) day and for sickness from the eighth (8th) day for a period up to thirteen (13) weeks for any one (1) disability.
The weekly benefits are:
Effective 6/28/13 - $240.00
LIFE INSURANCE: (Employees Only)
Effective 6/28/13- $23,000 (AD&D - $23,000)
DENTAL INSURANCE PLAN:
Effective the first year of this Agreement, Olympia Plan 1500. The premium cost of this plan shall be $10.00 per month for the employee coverage to be paid entirely by the Company for the term of this Agreement. The premium cost of this plan for single plus one coverage shall be $17.00 and family coverage shall be $20.00 per month. An employee may elect to secure this coverage for his/her dependents at a premium cost of $1.79 per week to be paid for by the employee for the term of this Agreement.
OPTICAL PLAN OFFERED BY VSP (VISION SERVICE PLAN) VISION:
Covers employee and dependents. Entire premium cost to be paid for by the Company for the term of this Agreement.
CONTINUATION OF INSURANCE COVERAGE:
Temporary Lay-off:
An insured, temporarily laid-off employee will be covered by insurance benefits at no cost until the end of the month in which the layoff occurs.
ATTACHED TO AND MADE PART OF AGREEMENT BETWEEN WELLS-GARDNER ELECTRONICS CORPORATION AND LOCAL 1031, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, FOR PERIOD JUNE 28, 2013 UNTIL JULY 3. 2016.
APPENDIX "B" (CONT'D)
If a temporarily laid-off employee desires to continue the insurance, all coverages, except weekly disability benefits, may be continued for a period not to exceed six (6) months, providing the laid-off employee makes the first premium payment in full for the following month within seven (7) days from the date of the layoff, or the first of the following month, whichever occurs first.
Sick Leave:
The insurance for an employee on sick leave will be paid by Wells-Gardner Electronics Corporation for three (3) months. If the employee wishes to continue his/her insurance after this period, he/she may do so for an additional three (3) months, provided the required monthly premium is paid by the employee to Wells-Gardner Electronics Corporation before the end of the third month of sick leave and monthly thereafter.
All employees shall be provided together with their dependents all rights under COBRA.
Total Disability of Employee:
In the event an employee becomes totally disabled, as determined by the provisions and regulations of the Social Security laws, the Company will pay the entire premium cost for the continuation of such employee's medical insurance coverage for a period of up to two (2) years or until such employee reaches age sixty-five (65), whichever occurs first.
Death of Employee:
In the event an employee dies while in the active employ of the Company, the Company will pay the entire premium cost for the continuation of the medical insurance coverage for the spouse and dependent children for a period up to one (1) year; provided however that:
(1) |
Such medical insurance coverage shall cease upon the remarriage of the spouse and provided also that, |
(2) |
The spouse or dependent children shall not be eligible for coverage under any other employer paid insurance plan. |
ATTACHED TO AND MADE PART OF AGREEMENT BETWEEN WELLS-GARDNER ELECTRONICS CORPORATION AND LOCAL 1031, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, FOR PERIOD JUNE 28, 2013 UNTIL JULY 3, 2016.
APPENDIX "C"
It is understood and agreed by the parties hereto that the Company may continue and/or install a piece work or incentive system in its plant. Such incentive plan must be mutually agreed to between the parties. In the event it does so, piece work or incentive rates shall be established by the time studies made by the Company and same may be revised. Employees shall have the right to question the time study on any job which they believe to be improperly timed. In such event the Company shall cause an investigation to be made and if it believes that an error may have been committed, it shall cause such job to be re-timed. In the event such re-timing is still questioned or in the event the Company fails to re-time such job, the matter may be handled according to the grievance procedure provided for in this Agreement. It is understood and agreed that incentive rates will be so adjusted as to compensate employees working on the incentive basis for the rest periods without additional pay thereafter.
ATTACHED TO AND MADE PART OF AGREEMENT BETWEEN WELLS-GARDNER ELECTRONICS CORPORATION AND LOCAL 1031, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, AFL-CIO, FOR PERIOD JUNE 28, 2013 UNTIL JUNE 29, 2016.
APPENDIX "D"
MEMORANDUM OF UNDERSTANDING
2. |
This is a three year contract. Wage increases will be as follows: 1 st year – 5%; 2 nd year – 3%; 3 rd year – 3%. |
3. |
There will be no increase in employee contributions to the BC/BS medical plans. The benefits will remain the same. Should future changes be needed, they will be reviewed with the union. |
4. |
Any increase in cost from the VSP optical plan or Guardian Dental will be absorbed by the company. |
5. |
Cola provisions of the contract are applicable to the second and third year of the contract. |
39
Exhibit 13.0
SELECTED FINANCIAL DATA |
(in $000's except for per share data) |
Years Ended December 31, |
||||||||||||||||||||
2013 |
2012 |
2011 |
2010 |
2009 |
||||||||||||||||
Net sales |
$ | 57,916 | $ | 51,117 | $ | 42,894 | $ | 45,704 | $ | 52,526 | ||||||||||
Gross Margin |
$ | 9,334 | $ | 8,968 | $ | 7,991 | $ | 8,396 | $ | 9,148 | ||||||||||
Operating earnings |
$ | 710 | $ | 291 | $ | (146 | ) | $ | 363 | $ | 1,377 | |||||||||
Net earnings |
$ | 651 | $ | 164 | $ | 28 | $ | 190 | $ | 1,097 | ||||||||||
Basic net earnings per common share |
$ | 0.06 | $ | 0.01 | $ | 0.00 | $ | 0.02 | $ | 0.10 | ||||||||||
Diluted net earnings per common share |
$ | 0.06 | $ | 0.01 | $ | 0.00 | $ | 0.02 | $ | 0.10 | ||||||||||
Total assets |
$ | 26,714 | $ | 28,315 | $ | 22,392 | $ | 18,949 | $ | 24,305 | ||||||||||
Long-term liabilities |
$ | 1,598 | $ | 3,701 | $ | 1,059 | $ | 565 | $ | 2,178 | ||||||||||
Working capital |
$ | 16,118 | $ | 17,542 | $ | 14,563 | $ | 14,087 | $ | 15,569 |
COMMON SHARE MARKET PRICE
The Company's common shares are traded on the NYSE Mkt Stock Exchange under the symbol WGA.
On December 31, 2013, there were approximately 794 holders of record of the common shares.
High and low prices, for the last two years were:
2013 Prices |
2012 Prices |
|||||||||||||||
High |
Low |
High |
Low |
|||||||||||||
Quarter ended: |
||||||||||||||||
March 31 |
$ | 2.14 | $ | 1.78 | $ | 2.40 | $ | 1.91 | ||||||||
June 30 |
$ | 2.43 | $ | 1.68 | $ | 2.33 | $ | 1.86 | ||||||||
September 30 |
$ | 2.05 | $ | 1.58 | $ | 2.54 | $ | 2.00 | ||||||||
December 31 |
$ | 1.93 | $ | 1.51 | $ | 2.30 | $ | 1.58 |
CORPORATE PROFILE:
Founded in 1925, Wells-Gardner Electronics Corporation is a distributor and manufacturer of color video monitors and other related distribution products for a variety of markets including, but not limited to, gaming machine manufacturers, casinos, coin-operated video game manufacturers and other display integrators. The Company has most of its LCD displays manufactured in Mainland China. In addition, the company’s American Gaming & Electronics, Inc. subsidiary (“AGE”), a leading parts distributor to the gaming markets, sells parts and services to over 700 casinos in North America with offices in Las Vegas, Nevada, Hammonton, New Jersey, Hialeah, Florida and McCook, Illinois. AGE is also a licensed distributor of video gaming terminals in Illinois.
2013 President’s Report
To our shareholders, customers, suppliers and employees ,
Wells-Gardner turned in a strong performance in 2013. Revenue for the year increased 13 percent to $57.9 million compared to $51.1 million in 2012. Full year 2013 VLT sales in the state of Illinois increased 230 percent despite delays in orders during the third quarter due to a product update by our strategic partner. Virtually all of the delayed orders during the third quarter were received and shipped in the fourth quarter. Coupled with increased revenue in our parts business during 2013 we generated solid double-digit revenue percentage growth.
Net income for full year 2013 was $651,000, or $0.06 per diluted share, compared to net income of $164,000, or $0.01 per diluted share, in 2012; an increase of 297 percent. We are very pleased with the financial results of the year. 2013 was our eighth consecutive year of profitability. Our strong sales and marketing focus on our VLT business in the state of Illinois, driving revenue growth in our parts business and aggressively managing operating expenses yielded great results in 2013. It was a very solid year for Wells-Gardner.
With regards to our monitor business, 2013 was another challenging year. Our expectation going forward is that the market place will continue to remain highly competitive in 2014 and beyond. The sale of parts to the gaming industry increased for full year 2013. Casinos and gaming establishments throughout the U.S. typically buy parts to extend the operating life of existing equipment and, in turn, delay the purchase of new equipment. The increase in parts sales for the year is a meaningful indicator that a full-scale replacement cycle has not yet commenced. The need to refresh the gaming experience throughout the industry is important to keep it customers coming back. That said, 2013 was the sixth consecutive year without an equipment replacement cycle in the U.S. gaming industry.
As we look ahead in 2014, we are pleased that our wholly-owned subsidiary, American Gaming and Electronics, better known as AG&E, has entered into a sales representative, distribution and service agreement during the fourth quarter with FutureLogic, Inc. AG&E will be the exclusive distributor for FutureLogic gaming printer products in the upper Midwestern states, including Illinois, Indiana, Iowa, Wisconsin, Minnesota and Michigan, as well as a non-exclusive distributor in 14 states, including California, Nevada and Arizona. With a large installed base of customers, FutureLogic’s recognition of AG&E as one of the partners to represent their market leading products strongly endorses our position as a leading parts provider to the gaming industry. We look forward to a long and mutually beneficial collaboration.
During 2013 we continued to make progress in operating more efficiently with approximate annualized savings of $500,000 for the year related to the reconfiguration of our engineering department. However, that was partially offset by increased sales commissions and bonus payments related to the significant increase in VLT sales during the fourth quarter and the full year. Operating expenses as a percent of sales decreased to 14.9% in full year 2013 versus 17% in 2012. We are pleased with the improving efficiencies.
The dynamics in the Illinois VLT market remains essentially the same with the Illinois Gaming Board continuing to issue approximately 650 to 800 new licenses each quarter, to bars and other eligible establishments, give or take some minor variations from month to month. While we do not expect that the gaming board will meaningfully accelerate the issuance of licenses in the foreseeable future, with our newly updated VLT product we are ready to meet any level of demand should market conditions change.
We believe that our VLT market share in the state of Illinois remains at approximately 20 percent. Illinois will continue to be a very competitive market for VLTs. However, our extensive experience in the gaming industry and our reputation for high quality and exceptional customer service, positions us well to maintain our position in the market as the program becomes more fully implemented in Illinois. We have a great partnership with our VLT manufacturer, GTech, and we expect to continue to be one of the leading VLT providers in the state. GTech markets into Illinois under their brand name, Spielo.
Since the economic downturn commenced in 2008, casino operators have dramatically reduced spending on updating their gaming floors and upgrading their existing technology until they see that economic conditions are sustainably improved. While we have seen measurable improvement throughout the economy at large, we are not yet seeing increased CapEx spending by the casino industry. That continues to impact our customers and our business. We expect that as the economy continues to steadily improve, we will see the long overdue replacement cycle take hold. When the industry decides to forge ahead with increased capital expenditures, Wells-Gardner is very well positioned to benefit.
2014 Product Development Initiatives
It is our expectation that the efforts in our product development process over the past three years will begin to translate into sales in 2014. Progress continues to be made in the development of a new “Button Deck” product for one of our major gaming customers. We expect to generate initial revenue from this product in 2014.
With regards to the gaming machines industry, a transition is taking place to use 23 inch LCD screens in the new generation of machines. We are currently in the process of developing new 23 inch LCD screens for several of our gaming machine OEMs (original equipment manufacturers).
Also in development are new 42 inch and 55 inch LCD screens for the amusement game machines sector and digital signage. These new larger sizes will replace the older 26 inch and 32 inch designs used in amusement game machines in the past five to seven years.
In another exciting area of opportunity we are developing 27 inch LCD kits to replace both 26 inch CRTs and 26 inch LCDs in amusement game machines. The new 27 inch screens on which we are wrapping up development, will fit into a 26 inch cabinet and provide cost efficiencies to our customers. No other competitor that we are aware of is offering a replacement kit for this size, consequently, we expect additional sales in the amusement replacement market.
Balance Sheet and Financial Condition
The financial foundation of Wells-Gardner continues to be strong. We continue to run the company conservatively with an unceasing focus on managing expenses, paying down debt, and operating our business from internally generated cash flow. Our balance sheet continues to remain very strong. Our debt decreased $2.1 million to $1.6 million at December 31, 2013 from $3.7 million at December 31, 2012. Cash at December 31, 2013 was $464,000. The Company’s debt equity ratio was less than 10% at December 31, 2013 compared to 23% at December 31, 2012. It is worth noting that we had cash provided by operations of $1.8 million for the year ended December 31, 2013. We are easily in compliance with all bank covenants with Wells Fargo Bank as of December 31, 2013.
Gaming Industry Outlook
The major growth in the global gaming industry continues in Asia, particularly in Macau and Singapore. There is further growth in the Philippines and potential growth opportunities in Japan and Taiwan.
In the US, it appears that casino construction will begin to increase modestly in the next couple of years. The Commonwealth of Maryland has approved a casino and MGM will build that casino at National Harbor, which is a 300-acre multi-use waterfront development on the shores of the Potomac River in Prince George’s County just south of Washington, DC.
In Baltimore, the Horseshoe Casino is expected to open in 2014 as an urban two-story casino, and will be the second largest casino in Maryland with a 122,000 square foot gaming floor in the vicinity of the city's famed Inner Harbor.
New casino licenses have been granted in Massachusetts, which is expected to grant upwards of three new casino licenses during 2014, and in Mississippi where a number of licenses for new casinos have been granted.
In a peripheral VLT segment, Pennsylvania, Maryland, Minnesota and Ohio have approved paper-based lottery games for bars, taverns and fraternal organizations. While these are non-VLT games, it could represent an initial step forward in the future for VLTs to be adopted in other states.
Strategic Review
On December 4, 2013 the Board of Directors of Wells-Gardner Electronics Corporation authorized management to explore strategic alternatives. The Company has retained Innovation Capital, based in El Segundo, California, as its financial advisor to conduct a thorough review of the Company’s business and assets and to provide recommendations for consideration by the Wells-Gardner Board of Directors. There can be no assurance that this evaluation process will result in any transaction. Management will report the results of the strategic review at the conclusion of the process.
2014 Wells-Gardner Outlook
As it relates to our outlook 2014, based on our best estimates and information available at this time, we believe 2014 net sales will be in a range between $53 and $57 million, compared to $57.9 million in 2013, with the first quarter of 2014 expected to be the most challenging quarter of the year. We expect that demand for VLT units in 2014 will be comparable to that of 2013.
As always, we appreciate your support as we continue to navigate through the challenging economic environment in the gaming industry. We are committed to providing the highest quality products and customer service to our customers with the overarching objective to enhance the value of your investment in Wells-Gardner.
Sincerely,
Anthony Spier
Chairman and Chief Executive Officer
Wells-Gardner Electronics Corporation
March 3, 2014
MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Net sales increased $6.8 million or 13% to $57.9 million in 2013 compared to $51.1 million in 2012. Monitor sales decreased $8.4 million or 22% to $30.0 million in 2013 compared to $38.4 million in 2012 representing 52% of total sales in 2013 compared to 75% in 2012. The monitor decrease was due to monitor unit volume decreasing by 16% or 17,500 units to 92,000 units in 2013 compared to 109,500 units in 2012 and the average monitor selling price declining by 10%. VGT and Parts sales increased $15.2 million or 119% to $27.9 million in 2013 compared to $12.7 million in 2012 representing 48% of total sales in 2013 compared to 25% in 2012. The VGT and Parts increase was due almost entirely to much higher VGT sales.
Gross margin for 2013 increased $366,000 to $9.33 million or 16.1% of sales compared to $8.97 million or 17.5% of sales in 2012. Monitor gross margins declined by $1.79 million due to the significant unit volume decline and the average monitor selling price decline. The monitor gross margin declined to 15.2% of sales in 2013 from 16.5% of sales in 2012 primarily due to less overhead absorption resulting from the lower monitor unit volume and to higher inventory reserve and freight expense. VGT and Parts gross margins increased by $2.15 million primarily due to the higher VGT sales. The VGT and Parts gross margin declined to 17.1% of sales in 2013 from 20.6% of sales in 2012 due to the much lower VGT margin percentage compared to the much higher parts margin percentage.
Operating expenses decreased $53,000 to $8.63 million in 2013 compared to $8.68 million in 2012. Operating expenses decreased $447,000 in 2013 due to no Oracle expense in 2013 compared to 2012. As a result other operating expense increased $394,000 in 2013 compared to 2012. These 2013 increases were primarily due to higher compensation and sales commission expense partially offset by lower service expenses including lower legal, travel, consulting, recruiting, depreciation and occupancy expenses. The Company continues to place great emphasis on operating expense control.
Operating income was $710,000 in 2013 compared to operating income of $291,000 in 2012 primarily due to significantly higher sales with moderately higher gross margins and slightly lower operating expenses in 2013 compared to 2012.
Interest expense was $77,000 in 2013 compared to $113,000 in 2012 due to lower average debt balances. Other income & expense was a $10,000 credit in 2013 compared to a $1,000 credit in 2012.
Income tax benefit was $8,000 in 2013 compared to $15,000 expense in 2012. The Company has available a net operating loss carry forward of approximately $5.3 million as of December 31, 2013.
Net income was $651,000 in 2013 compared to net income of $164,000 in 2012. For 2013 basic and diluted earnings per share was $0.06 compared to basic and diluted earnings per share of $0.01 in 2012.
Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
Net sales increased $8.2 million or 19% to $51.1 million in 2012 compared to $42.9 million in 2011. Monitor sales increased $0.9 million or 2.4% to $38.4 million in 2012 compared to $37.5 million in 2011 representing 75% of total sales in 2012 compared to 87% in 2011. The monitor increase was due to monitor unit volume increasing by 14% or 13,500 units to 109,500 units in 2012 compared to 96,000 units in 2011 partially offset by the average monitor selling price declining by 10%. VGT and Parts sales increased $7.3 million or 136% to $12.7 million in 2012 compared to $5.4 million in 2011 representing 25% of total sales in 2012 compared to 13% in 2011. The VGT and Parts increase was primarily due to VGT sales starting the second half 2012. However parts sales also noticeably increased.
Gross margin for 2012 increased $977,000 million to $8.97 million or 17.5% of sales in 2012 compared to $7.99 million or 18.6% of sales in 2011. Monitor gross margins declined by $0.2 million despite higher sales primarily due the average monitor selling price and the standard margin declining. The monitor gross margin declined to 16.5% of sales in 2012 from 17.5% of sales in 2011 primarily due to the standard margin declining 1.3% of sales as overhead absorption actually improved by 0.3%. VGT and Parts gross margins increased by $1.2 million primarily due to the higher VGT sales. The VGT and Parts gross margin declined to 20.6% of sales in 2012 from 26.5% of sales in 2011 due to the much lower VGT margin percentage compared to the much higher parts margin percentage.
Operating expenses increased $540,000 to $8.68 million in 2012 compared to $8.14 million in 2011. Operating expenses increased $447,000 for the upgrading of Oracle in 2012, $263,000 to support the startup of VGT sales in Illinois, $237,000 to support additional engineering resources, $173,000 for sales commissions, and an $82,000 increase in other areas partially offset by a reduction of $662,000 in litigation expense from two lawsuits in 2011. The Company continues to place great emphasis on operating expense control.
Operating earnings were $291,000 in 2012 compared to a loss of $146,000 in 2011 due to higher sales with a slightly lower margin and higher operating expenses primarily due to the Oracle upgrade expense.
Interest expense was $113,000 in 2012 compared to $120,000 in 2011 due to slightly lower average debt balances. Other expense was a $1,000 credit in 2012 compared to zero in 2011.
Income tax expense was $15,000 in 2012 compared to a benefit of $294,000 in 2011 due to a significant reduction in the deferred tax valuation account in 2011. The reduction in the deferred tax valuation account is due to the Company believing it is more likely than not the Company will be sufficiently profitable in the next twelve to eighteen months to recognize the related tax benefit now. The Company has available a net operating loss carry forward of approximately $5.3 million as of December 31, 2012.
Net income was $164,000 in 2012 compared to net income of $28,000 in 2011. For 2012 basic and diluted earnings per share was $0.01 compared to basic and diluted earnings per share of $0.00 in 2011.
2014 Outlook
The Company anticipates sales in 2014 of between $53 million and $57 million compared to $57.9 million in 2013 with slightly less monitor sales due to lower average selling prices and slightly less VGT and Parts sales as the Illinois market matures. Total monitor sales are expected to be lower than normal in the first quarter due to a major customer shifting to vendor managed inventory where the Company maintains inventory near their production facility. The Company continues to develop proprietary gaming and amusement monitor product including button decks as well as signage product. We will continue to aggressively control other costs, interest expense and inventory levels.
Market & Credit Risk s
The Company is subject to certain market risks, mainly interest rates. On August 21, 2006, the Company entered into a four-year credit facility with Wells Fargo Bank NA. On September 15, 2009, the Company amended the term of the credit agreement extending it to August 21, 2013. The amended credit agreement is a $12 million revolving credit facility. The credit facility has several financial covenants including a minimum book net worth, minimum net earnings, maximum capital expenditures and maximum compensation increases. The financial covenants included a provision that any future write off of goodwill will be an add back to the net worth and earnings covenants.
On March 4, 2011, the Company amended the term of the credit agreement to August 21, 2014, the interest rate to LIBOR plus 375 basis points, and the minimum book net worth and minimum net earnings covenants were modified. On March 5, 2012, the Company amended the term of the credit agreement to August 21, 2015. The amendment included a waiver for the fourth quarter 2011 minimum book net worth and minimum net earnings covenants and eliminated the book net worth covenant for future periods. The financial covenants for the first three quarters 2012 were modified with the year end 2012 covenants remaining the same. The amendment also increased the year end minimum earnings covenant for 2013 and 2014, and raised the capital expenditure limit to $400,000 per year for 2013, 2014 and 2015.
On March 8, 2013, the Company amended the term of the credit agreement to August 21, 2016, the interest rate to LIBOR plus 275 basis points, changed the year end minimum net earnings to $200,000 for 2013, 2014 and 2015, reduced the borrowing base block to $250,000, and created a basket of $1,250,000 for small acquisitions or stock buy backs as long as the Company has excess availability of $2,500,000 both before and after making the permitted acquisition or permitted redemption of Company stock.
An adverse change in interest rates during the time that this debt is outstanding would cause an increase in the amount of interest paid. The Company may pay down the loans at any time; however, monthly interest charges are not less than $5,000 per month to termination. All bank debt is due and payable on August 21, 2016. As of December 31, 2013, the Company had total outstanding bank debt of $1.6 million at an average interest rate of 3.0%. In addition, the Company pays $19,000 credit insurance on selected foreign receivables.
Critical Accounting Policies
The preparation of the Company’s consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires the Company’s management to adopt accounting policies and to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Management periodically evaluates its policies, estimates and assumptions related to, among others: revenue recognition, receivables and provision for bad debt, inventory obsolescence and costing methods, provision for warranty, goodwill, income taxes and valuation allowance for deferred taxes, and contingencies. The Company’s management bases its estimates on historical experience and expectations of the future. Actual reported and future amounts could differ from those estimates under different conditions and assumptions.
Revenue Recognition
In general, the Company recognizes revenue when the following criteria are met: evidence of an arrangement between the Company and its customer exists, shipment has occurred or services have been rendered, the sales price is fixed and determinable and collectability is reasonably assured. Revenue from video gaming terminal sales with standard payment terms is recognized upon the passage of title and transfer of the risk of loss. The Company recognizes revenue even if it retains a form of title to products delivered to customers, provided the sole purpose is to enable the Company to recover the products in the event of a customer payment default and the arrangement does not prohibit the customer’s use of the product in the ordinary course of business.
Receivables & Provision for Bad Debt
The Company is exposed to credit risk on certain assets, primarily accounts receivable. The Company provides credit to customers in the ordinary course of business and performs ongoing credit evaluations. Concentrations of credit risk with respect to trade receivables are limited except for the Company’s four largest customers. The Company currently believes its allowance for doubtful accounts is sufficient to cover customer credit risks.
Inventory Obsolescence & Costing Methods
The Company uses a standard cost method to value inventory. Standard costs are reset periodically and are the expected cost of producing a good or service for the next four to six months. The standard cost method used approximates the lower of cost (first-in, first-out) or market within a reasonable allowance. The Company provides an allowance for estimated obsolete or excess inventory based on assumptions about future demands for its products. During 2013 the Company’s slow moving and obsolescence reserve increased $86,000 due to adjusting standards to FIFO.
Provision for Warranty
The Company offers certain warranties on its products and has a general provision for potential future charges incurred in connection with in-warranty repairs and services. This reserve is based on historical actual repairs.
Goodwill
The Company accounts for its goodwill resulting from the acquisition of American Gaming & Electronics in conformity with FASB ASC 350-20 Goodwill Subsequent Measurement . This ASC section requires that goodwill not be amortized, but instead be tested for impairment at least annually, which the Company does annually in the fourth quarter. The Company determined that there was no impairment of goodwill in 2013 and 2012 by utilization of a discounted cash flow analysis. However, there is no certainty in future periods that the fair value of the reporting unit will exceed its carrying value.
Engineering Research & Development
Engineering research and development costs for the years ended December 31, 2013, 2012 and 2011 were approximately $1,791,000, $1,740,000, and $1,502,000, respectively, which were 3.1%, 3.4%, and 3.5% of annual sales, respectively.
Income Taxes & Valuation Allowance for Deferred Taxes
The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The amount of deferred tax asset we recognize is based upon our expected income for the next twelve to eighteen months. We record a valuation allowance to reduce deferred tax assets to an amount for which the realization is more likely than not.
Contingencies
When applicable, the Company assesses its exposures to loss contingencies including legal and other matters and provides for an exposure if it is judged to be probable and estimable. If the actual loss from a contingency differs from management’s estimates, operating results could be impacted.
Liquidity & Capital Resources
Accounts receivable decreased to $7.5 million in 2013 compared to $8.7 million in 2012. This $1.2 million provision of cash is due to $0.6 million lower sales in the fourth quarter 2013 compared to the fourth quarter 2012 and lower days outstanding. Days sales in accounts receivable decreased to 50 days at year end 2013 compared to 55 days at year end 2012. Accounts receivable due from subcontractors decreased to $4.1 million in 2013 compared to $5.1 million in 2012, a $1.0 million provision of cash due to lower LCD panel and touch inventory at year end 2013 compared to 2012.
Inventory increased to $11.8 million in 2013 compared to $10.8 million in 2012. This $1.0 million use of cash was due to $1.5 million increase in monitor inventory to support our two largest customers partially offset by a $0.5 million reduction in VGT and Parts inventories. Days cost of sales in inventory increased to 95 days at year end 2013 compared to 84 days cost of sales at year end 2012.
Accounts payable decreased to $3.1 million in 2013 compared to $4.2 million in 2012, a $1.1 million use of cash to reduce days payable. Days payables outstanding decreased to 57 days at year end 2013 compared to 75 days at year end 2012. Accounts payable to subcontractors increased to $4.1 million in 2013 compared to $3.6 million in 2012, a $0.5 million provision of cash.
Prepaid expenses decreased $0.2 million and accrued expenses increased $0.4 million providing $0.6 million of cash flow for the twelve months.
The net of our 2013 earnings, depreciation and amortization, and other non cash adjustments to earnings resulted in a $0.6 million provision of cash in operations. The net of earnings and non cash adjustments plus the working capital changes noted above resulted in $1.8 million of cash being provided by operations.
Capital additions, primarily IT equipment, were $30,000 (net of disposals) of cash used by investing activities.
Long-term liabilities decreased to $1.6 million in 2013 compared to $3.7 million in 2012, which used $2.1 million of cash. Cash provided by sales of stock issued under the employee stock option plan and stock grants was minimal in 2013 and 2012. These two items resulted in $2.1 million of net cash used by financing activities. Cash at the beginning of the year was $0.8 million and at the end of the year was $0.5 million.
Shareholders’ equity was $16.57 million in 2013 compared to $15.83 million in 2012 or an increase of $0.74 million. This increase was attributed to the Company’s net earnings in 2013 and the stock grants and amortization of unearned compensation relating to the employee stock grant plan for 2013.
The Company is dependent on its credit facility to fund operations, as some critical inventory requires long lead times. Under its current credit facility, the Company is required to maintain certain financial covenants that the Company must meet each quarter during the term of the agreement. While the Company currently expects to meet these financial covenants during 2013, its liquidity could be adversely affected if it is unable to do so. Overall, the Company currently believes that its future financial requirements can be met with funds generated from operating activities and from its credit facility during the foreseeable future.
Contractual Obligations
The following table summarizes the Company’s contractual commitments as of December 31, 2013. The commitments are discussed in the indicated notes to the Company’s consolidated financial statements:
Payments Due In Year Ending December 31, |
||||||||||||||||||||||||
(in $000’s) |
Total |
2014 |
2015 |
2016 |
2017 |
Thereafter |
||||||||||||||||||
Note Payable (Note 4) |
$ | 1,598 | $ | --- | $ | --- | $ | 1,598 | $ | --- | $ | --- | ||||||||||||
Operating Leases (Note 11) |
$ | 1,555 | $ | 672 | $ | 652 | $ | 223 | $ | 8 | $ | --- | ||||||||||||
$ | 3,153 | $ | 672 | $ | 652 | $ | 1,821 | $ | 8 | $ | --- |
Inflation
In 2013 and 2012, inflation has not had a material effect on the Company’s results of operations.
CONSOLIDATED BALANCE SHEETS
As of December 31,
(in $000’s except for share information)
2013 |
2012 |
|||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash |
$ | 464 | $ | 768 | ||||
Accounts receivable, net of allowances of $162 in 2013 and $188 in 2012 |
7,481 | 8,678 | ||||||
Accounts receivable, subcontractor |
4,062 | 5,093 | ||||||
Inventory |
11,840 | 10,817 | ||||||
Current deferred tax asset, net |
170 | 119 | ||||||
Prepaid expenses & other assets |
650 | 855 | ||||||
Total current assets |
$ | 24,667 | $ | 26,330 | ||||
Property, Plant & Equipment (at cost): |
||||||||
Leasehold improvements |
558 | 558 | ||||||
Machinery, equipment & software |
8,920 | 8,924 | ||||||
less: Accumulated depreciation & amortization |
(9,318 | ) | (9,225 | ) | ||||
Property, plant & equipment, net |
$ | 160 | 257 | |||||
Other Assets: |
||||||||
Deferred tax asset, net |
327 | 350 | ||||||
Other long term receivable |
231 | 49 | ||||||
Goodwill |
1,329 | 1,329 | ||||||
Total other assets |
$ | 1,887 | $ | 1,728 | ||||
Total Assets |
$ | 26,714 | $ | 28,315 | ||||
LIABILITIES & SHAREHOLDERS' EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
3,058 | 4,167 | ||||||
Accounts payable, subcontractor |
4,046 | 3,581 | ||||||
Accrued expenses |
1,445 | 1,040 | ||||||
Total current liabilities |
$ | 8,549 | $ | 8,788 | ||||
Long-Term Liabilities: |
||||||||
Note payable |
1,598 | 3,701 | ||||||
Total long-term liabilities |
$ | 1,598 | $ | 3,701 | ||||
Total Liabilities |
$ | 10,147 | $ | 12,489 | ||||
Shareholders' Equity: |
||||||||
Common shares: $1 par value; 25,000,000 shares authorized; |
||||||||
11,700,286 shares issued and outstanding at December 31, 2013 |
||||||||
11,666,898 shares issued and outstanding at December 31, 2012 |
11,700 | 11,667 | ||||||
Capital in excess of par value |
5,157 | 5,131 | ||||||
Accumulated deficit |
(73 | ) | (725 | ) | ||||
Unearned compensation |
(217 | ) | (247 | ) | ||||
Total Shareholders' Equity |
$ | 16,567 | $ | 15,826 | ||||
Total Liabilities & Shareholders’ Equity |
$ | 26,714 | $ | 28,315 |
See accompanying notes to the consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
(in $000’s except for share & per share data)
2013 |
2012 |
2011 |
||||||||||
Net sales |
$ | 57,916 | $ | 51,117 | $ | 42,894 | ||||||
Cost of sales |
48,582 | 42,149 | 34,903 | |||||||||
Gross margin |
9,334 | 8,968 | 7,991 | |||||||||
Engineering, selling & administrative |
8,624 | 8,677 | 8,137 | |||||||||
Operating earnings (loss) |
710 | 291 | (146 | ) | ||||||||
Other expense (income): |
||||||||||||
Interest |
77 | 113 | 120 | |||||||||
Other (income) |
(10 | ) | (1 | ) | 0 | |||||||
Earnings (loss) before income tax |
643 | 179 | (266 | ) | ||||||||
Income tax (benefit) expense |
(8 | ) | 15 | (294 | ) | |||||||
Net earnings |
$ | 651 | $ | 164 | $ | 28 | ||||||
Basic net earnings per common share |
$ | 0.06 | $ | 0.01 | $ | 0.00 | ||||||
Diluted net earnings per common share |
$ | 0.06 | $ | 0.01 | $ | 0.00 | ||||||
Basic common weighted shares outstanding |
11,707,043 | 11,655,060 | 11,591,681 | |||||||||
Diluted common weighted shares outstanding |
11,707,887 | 11,658,246 | 11,598,536 |
See accompanying notes to the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(in $000’s)
2013 |
2012 |
2011 |
|||||||||||
Cash flows from operating activities: |
|||||||||||||
Net earnings |
$ | 651 | $ | 164 | $ | 28 | |||||||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |
|||||||||||||
Depreciation and amortization |
127 | 160 | 207 | ||||||||||
Bad debt recoveries |
(32 | ) | (33 | ) | (18 | ) | |||||||
Amortization of unearned compensation |
72 | 83 | 78 | ||||||||||
Increase in long term receivable |
(182 | ) | (49 | ) | 0 | ||||||||
Deferred income tax |
(28 | ) | 2 | (294 | ) | ||||||||
Changes in current assets & liabilities: |
|||||||||||||
Accounts receivable, net |
1,229 | (2,282 | ) | (1,584 | ) | ||||||||
Inventory |
(1,023 | ) | (1,708 | ) | (509 | ) | |||||||
Prepaid expenses & other |
205 | (345 | ) | 166 | |||||||||
Accounts payable, net |
(1,109 | ) | 3,382 | (93 | ) | ||||||||
Due to/from subcontractor |
1,496 | (1,067 | ) | 1,346 | |||||||||
Accrued expenses |
405 | (260 | ) | 408 | |||||||||
Net cash provided by (used in) operating activities |
$ | 1,811 | $ | (1,953 | ) | $ | (265 | ) | |||||
Cash flows used in investing activities: |
|||||||||||||
Additions to property, plant & equipment, net |
(30 | ) | (160 | ) | (43 | ) | |||||||
Net cash used in investing activities |
$ | (30 | ) | $ | (160 | ) | $ | (43 | ) | ||||
Cash flows from financing activities: |
|||||||||||||
(Repayments) Borrowings from note payable |
(2,103 | ) | 2,642 | 494 | |||||||||
Proceeds from stock issued & options exercised |
18 | 18 | 6 | ||||||||||
Net cash (used in) provided by financing activities |
$ | (2,085 | ) | $ | 2,660 | $ | 500 | ||||||
Net (decrease) increase in cash |
(304 | ) | 547 | 192 | |||||||||
Cash at beginning of year |
768 | 221 | 29 | ||||||||||
Cash at end of year |
$ | 464 | $ | 768 | $ | 221 | |||||||
Supplemental cash flows disclosure: |
|||||||||||||
Income taxes paid |
$ | 2 | $ | 11 | $ | 6 | |||||||
Interest paid |
$ | 77 | $ | 113 | $ | 120 |
See accompanying notes to the consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in $000’s)
Capital In |
Total |
|||||||||||||||||||
Common |
Excess Of |
Accumulated |
Unearned |
Shareholders' |
||||||||||||||||
Shares |
Par Value |
Deficit |
Compensation |
Equity |
||||||||||||||||
December 31, 2010 |
$ | 10,988 | $ | 5,515 | $ | (916 | ) | $ | (137 | ) | $ | 15,449 | ||||||||
Net earnings |
28 | 28 | ||||||||||||||||||
Stock dividend issued |
552 | (552 | ) | 0 | ||||||||||||||||
Issuance / forfeiture of stock awards (net) |
50 | 86 | (136 | ) | 0 | |||||||||||||||
Stock options exercised |
4 | 2 | 6 | |||||||||||||||||
Amortization of unearned compensation |
78 | 78 | ||||||||||||||||||
December 31, 2011 |
$ | 11,594 | $ | 5,051 | $ | (889 | ) | $ | (195 | ) | $ | 15,561 | ||||||||
Net earnings |
164 | 164 | ||||||||||||||||||
Issuance / forfeiture of stock awards (net) |
61 | 74 | (135 | ) | 0 | |||||||||||||||
Stock options exercised |
11 | 7 | 18 | |||||||||||||||||
Amortization of unearned compensation |
83 | 83 | ||||||||||||||||||
December 31, 2012 |
$ | 11,666 | $ | 5,132 | $ | (724 | ) | $ | (247 | ) | $ | 15,826 | ||||||||
Net earnings |
651 | 651 | ||||||||||||||||||
Issuance / forfeiture of stock awards (net) |
22 | 19 | (54 | ) | (13 | ) | ||||||||||||||
Stock options exercised |
11 | 7 | 18 | |||||||||||||||||
Amortization of unearned compensation |
85 | 85 | ||||||||||||||||||
December 31, 2013 |
$ | 11,700 | $ | 5,157 | $ | (73 | ) | $ | (217 | ) | $ | 16,567 |
See accompanying notes to the consolidated financial statements.
NOTES TO THE FINANCIAL STATEMENTS
Note 1. DESCRIPTION OF THE BUSINESS
Wells-Gardner Electronics Corporation is a global distributor and manufacturer of liquid crystal display (LCD), video monitors and other related distribution products for a variety of markets including, but not limited to, gaming machine manufacturers, casinos, coin-operated video game manufacturers and other display integrators. The Company’s primary business is the distribution, design, manufacture, assembly, service and marketing of color LCD video monitors, gaming supplies and other components, with facilities in the United States and manufacturing subcontract relationships with two separate Taiwanese electronics companies to manufacture LCD video displays in China. The Company is also a licensed distributor of video gaming terminals in Illinois. The Company is the exclusive distributor of Spielo VGT’s in Illinois.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The financial statements of the Company include the accounts of Wells-Gardner Electronics Corporation and its wholly-owned subsidiary, American Gaming & Electronics, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.
Management Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP USA) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses, during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
In general, the Company recognizes revenue when the following criteria are met: evidence of an arrangement between the Company and its customer exists, shipment has occurred or services have been rendered, the sales price is fixed and determinable and collectibility is reasonably assured. Generally, these terms are met upon shipment.
Revenue from video gaming terminal sales with standard payment terms is recognized upon the passage of title and transfer of the risk of loss. The Company recognizes revenue even if it retains a form of title to products delivered to customers, provided the sole purpose is to enable the Company to recover the products in the event of a customer payment default and the arrangement does not prohibit the customer’s use of the product in the ordinary course of business.
Financial Instruments
The fair value of the Company’s financial instruments does not materially vary from the carrying value of such instruments.
Receivables
Receivables are carried at original invoice or closing statement amount less estimates made for doubtful receivables. Management determines the allowances for doubtful accounts by reviewing and identifying troubled accounts on a monthly basis and by using historical experience applied to an aging of accounts. A receivable is considered to be past due if any portion of the receivable balance is outstanding past terms which are normally 30 to 60 days. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received.
Inventory Obsolescence & Costing Methods
The Company uses a standard cost method to value inventory. Standard cost is the expected cost of producing a good or service under normal conditions. The standard cost method used approximates the lower of cost (first-in, first-out) or market within a reasonable allowance. The Company provides an allowance for estimated obsolete or excess inventory based on assumptions about future demands for its products.
Provision for Warranty
The Company offers certain warranties on its products and has a general provision for estimated future charges incurred in connection with in-warranty repairs and services. This provision is based on historical actual repairs. If the actual charges incurred exceed management’s estimates, operating results could be impacted.
Property, Plant & Equipment
Property, plant and equipment are stated at cost and are depreciated and amortized for financial reporting purposes over the estimated useful lives on a straight-line basis as follows: machinery & equipment - five to fifteen years and leasehold improvements - shorter of lease term or estimated useful life. Capitalized software costs are amortized on a straight-line basis over the expected economic life of the software of three to seven years.
Goodwill
The Company accounts for its goodwill resulting from its purchase of American Gaming and Electronics, Inc. in conformity with GAAP USA . GAAP USA requires that goodwill not be amortized, but instead be tested for impairment at least annually, which the Company does annually in the fourth quarter. The Company determined that there was no impairment of goodwill in 2013 and 2012 by utilization of a discounted cash flow analysis.
Engineering Research & Development
Engineering research and development costs for the years ended December 31, 2013, 2012 and 2011 were approximately $1,791,000, $1,740,000, and $1,502,000, respectively, which were 3.1%, 3.4%, and 3.5% of annual sales, respectively. These costs are recorded in engineering, selling & administrative expenses on the consolidated statement of operations.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, the Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The Company records a valuation allowance to reduce deferred tax assets to an amount for which realization is more likely than not.
Earnings Per Share
Basic earnings per share is based on the weighted-average number of common shares outstanding whereas diluted earnings per share includes the dilutive effect of unexercised common stock options and warrants. Potentially dilutive securities are excluded from diluted earnings per share calculations for periods with a net loss. For all periods reported, earnings per share have been retroactively restated to reflect the stock dividends issued in 2011.
Stock Based Compensation
At December 31, 2013, the Company has two stock-based compensation plans, which are described more fully in Note 5. The Company accounts for these plans under the recognition and measurement principles of GAAP USA.
Reclassifications
Certain amounts in previously issued financial statements and financial statement footnotes have been reclassified to conform to the current year’s presentation.
Subsequent Events
The Company evaluated subsequent events through the date the financial statements were issued.
Recently Issued Accounting Pronouncements
None.
Note 3. INVENTORY
Net inventory, which includes a valuation reserve of $1,463, $1,377 and $1,557 in 2013, 2012 and 2011, respectively, consisted of the following components:
December 31, |
||||||||||||
(in $000's) |
2013 |
2012 |
2011 |
|||||||||
Raw materials |
$ | 3,009 | $ | 2,662 | $ | 2,815 | ||||||
Intransit finished goods |
$ | 2,291 | $ | 950 | $ | 1,379 | ||||||
Finished goods |
$ | 6,540 | $ | 7,205 | $ | 4,915 | ||||||
Total |
$ | 11,840 | $ | 10,817 | $ | 9,109 |
Note 4. DEBT
On March 08, 2013, the Company signed an amendment to extend the term of the credit agreement with Wells Fargo Bank one year to August 21, 2016. The total credit line of $12 million and the annual maintenance fees remained the same while the interest rate was lowered to Libor plus 275 basis points. Substantially all assets of the Company are secured as collateral for this credit facility and the Company must maintain certain financial covenants including minimum net earnings, maximum capital expenditures and maximum compensation increases. The amendment decreased the year end minimum earnings covenant to $200,000 for 2013 and all future years. The amendment also includes provisions to allow permitted acquisitions and permitted redemptions of Company stock up to $1,250,000 as long as the Company has excess availability of $2,500,000 both before and after the completion of permitted acquisitions and permitted redemptions. At December 31, 2013 and 2012, the Company had total outstanding bank debt of $1.6 million and $3.7 million, respectively, at a combined average interest rate of 3.0% and 4.125%, respectively. As of December 31, 2013 the Company had availability of $7.1 million in addition to the $1.6 million outstanding. Availability is 85% of eligible accounts receivable and 55% of eligible inventory less outstanding debt.
Note 5. STOCK PLANS
The Company maintains an Incentive Stock Option and Stock Award Plan under which officers and key employees may acquire up to a maximum of 2,155,028 common shares.
Stock Options
Under the Incentive Stock Option Plan, which expired in 2008, options were available to be awarded. No options have been awarded since 2004. At December 31, 2013, there are 7,573 options outstanding that are fully vested and exercisable, with a weighted average exercise price of $2.62, and aggregate intrinsic value of $0. The options expire in April 2014.
Restricted Shares
All shares granted are governed by the Company’s Stock Award Plan, which was approved by shareholders in 2000 and amended in 2009. The employees will earn the restricted shares in exchange for services to be provided to the Company over a three year or five-year vesting period. The fair value of restricted shares is based on the market price on the grant date. In 2013 and 2012, the Company granted 64,000 and 61,000 restricted shares, respectively, with weighted average grant date fair values of $1.99 and $2.21, respectively. The compensation cost related to the stock awards is expensed on a straight-line basis over the vesting period. The Company recorded $72,000, $83,000 and $78,000 in related net compensation expense for the years ended December 31, 2013, 2012 and 2011, respectively. As of December 31, 2013, 147,130 restricted shares are outstanding on a dividend adjusted basis. Total unrecognized compensation cost related to unvested stock awards is approximately $217,000 and is expected to be recognized over a weighted average period of 3 years.
The following table summarizes information regarding restricted share activity for the twelve months ending December 31, 2013:
Weighted average |
||||||||
Grant Date |
||||||||
Shares |
Fair Value |
|||||||
Unvested at December 31, 2012 |
171,246 | $ | 2.14 | |||||
Granted |
64,000 | $ | 1.99 | |||||
Vested |
(46,146 | ) | $ | 1.94 | ||||
Forfeited |
(41,970 | ) | $ | 2.05 | ||||
Unvested, December 31, 2013 |
147,130 | $ | 2.16 |
Note 6. ACCRUED EXPENSES
Accrued expenses consisted of the following items:
December 31, |
||||||||
(in $000's) |
2013 |
2012 |
||||||
Payroll & related costs |
$ | 418 | $ | 92 | ||||
Sales commissions |
$ | 167 | $ | 139 | ||||
Ocean Freight |
$ | 150 | $ | 180 | ||||
Sales Tax |
$ | 125 | $ | 163 | ||||
Warranty |
$ | 71 | $ | 71 | ||||
Other accrued expenses |
$ | 514 | $ | 395 | ||||
Total |
$ | 1,445 | $ | 1,040 |
Warranty provision roll forward:
Year Ended December 31, |
||||||||
Warranty provision: |
2013 |
2012 |
||||||
Beginning Balance |
$ | 71 | $ | 87 | ||||
Additions |
$ | 120 | $ | 127 | ||||
Payments |
$ | (120 | ) | $ | (143 | ) | ||
Balance at end of year |
$ | 71 | $ | 71 |
Note 7. OPERATING SEGMENTS AND SIGNIFICANT CUSTOMERS
The Company has two reportable segments derived from the different characteristics of our major product lines: Monitors and VGT & Parts. Net sales and gross margin for each segment are provided below. The accounting policies of the segments are the same as those described in the Note 1 of the Notes to the Consolidated Financial Statements.
The Company does not rely on any segment asset allocations and the Company does not consider them meaningful because of the shared nature of our facilities; however, we have estimated the segment asset allocations below for those assets for which we can reasonably determine. The unallocated asset category is the remainder of our total assets. The asset allocation is estimated and is not a measure used by our chief operating decision maker about allocating resources to the operating segments.
Assets |
December 31, |
|||||||
(in $000's) |
2013 |
2012 |
||||||
Monitor Segment |
$ | 5,678 | $ | 4,453 | ||||
VGT and Parts Segment |
$ | 6,161 | $ | 6,364 | ||||
Unallocated Assets |
$ | 14,875 | $ | 17,498 | ||||
Total |
$ | 26,714 | $ | 28,315 |
Segment Income Statement (in $000’s) |
2013 |
2012 |
2011 |
|||||||||
Monitor Segment Sales |
$ | 29,972 | $ | 38,377 | $ | 37,487 | ||||||
VGT & Parts Segment Sales |
27,944 | 12,740 | 5,407 | |||||||||
Total Sales |
$ | 57,916 | $ | 51,117 | $ | 42,894 | ||||||
Monitor Segment Gross Margin |
4,564 | 6,342 | 6,556 | |||||||||
VGT & Parts Segment Gross Margin |
4,770 | 2,626 | 1,435 | |||||||||
Total gross margin |
$ | 9,334 | $ | 8,968 | $ | 7,991 | ||||||
Operating expenses |
8,624 | 8,677 | 8,137 | |||||||||
Operating earnings (loss) |
$ | 710 | $ | 291 | $ | (146 | ) | |||||
Total other expense, net |
67 | 112 | 120 | |||||||||
Earnings (loss) before income tax |
$ | 643 | $ | 179 | $ | (266 | ) | |||||
Income tax (benefit) expense |
(8 | ) | 15 | (294 | ) | |||||||
Net earnings |
$ | 651 | $ | 164 | $ | 28 |
The Company’s largest customer accounted for 18%, 26% and 12% of total revenues in 2013, 2012 and 2011, respectively, and 5% and 15% of total accounts receivable as of December 31, 2013 and December 31, 2012, respectively. The second largest customer accounted for 8%, 3% and 0% of the total revenue in 2013, 2012 and 2011 respectively, and 10% and 4% of the total accounts receivable as of December 31, 2013 and December 31, 2012 respectively. The third largest customer accounted for 8%, 9% and 16% of the total revenue in 2013, 2012 and 2011, respectively, and 13% and 12% of the total accounts receivable as of December 31, 2013 and December 31, 2012, respectively. The fourth largest customer accounted for 6%, 10% and 14% of total revenue in 2013, 2012 and 2011, respectively and 3% and 4% of the total accounts receivable as of December 31, 2013 and December 2012 respectively. The next largest customer accounted for 6%, 13% and 22% of the total revenue in 2013, 2012 and 2011, respectively, and 10% and 22% of the total accounts receivable as of December 31, 2013 and December 2012, respectively. No other customer accounted for more than 10% of sales in 2013, 2012 or 2011.
Note 8. INCOME TAXES
The effective income tax rates differed from the expected Federal income tax rate (34%) for the following reasons:
(in $000's) |
2013 |
2012 |
2011 |
|||||||||
Computed expected tax expense (benefit) |
$ | 219 | $ | 61 | $ | (91 | ) | |||||
State income tax expense, net of Federal tax effect |
$ | 30 | $ | 11 | $ | (17 | ) | |||||
Other, net (primarily change in prior estimates) |
$ | (32 | ) | $ | 112 | $ | (39 | ) | ||||
Change in valuation allowance (regarding current year activity) |
$ | (225 | ) | $ | (169 | ) | $ | (147 | ) | |||
Income Tax (Benefit) Expense |
$ | (8 | ) | $ | 15 | $ | (294 | ) |
Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and as measured by income tax regulations. Temporary differences which gave rise to deferred tax assets and deferred tax liabilities consisted of:
December 31: |
||||||||||||||
(in $000's) |
2013 |
2012 |
2011 |
|||||||||||
Deferred tax assets: |
||||||||||||||
Allowance for doubtful accounts |
$ | 57 | $ | 70 | $ | 83 | ||||||||
Warranty provision |
$ | 29 | $ | 28 | $ | 35 | ||||||||
Inventory reserve |
$ | 589 | $ | 554 | $ | 627 | ||||||||
Property, plant, equipment and software, principally depreciation |
$ | 139 | $ | 128 | $ | 126 | ||||||||
Net operating loss carry forwards |
$ | 2,345 | $ | 2,402 | $ | 2,504 | ||||||||
Alternative minimum tax credit carry forwards |
$ | 148 | $ | 136 | $ | 136 | ||||||||
Other |
$ | 7 | $ | 107 | $ | 85 | ||||||||
Total gross deferred tax assets |
$ | 3,314 | $ | 3,425 | $ | 3,596 | ||||||||
Less valuation allowance |
$ | (2,303 | ) | $ | (2,528 | ) | $ | (2,697 | ) | |||||
Total deferred tax assets |
$ | 1,011 | $ | 897 | $ | 899 | ||||||||
Deferred tax liabilities: |
||||||||||||||
Goodwill |
$ | 514 | $ | 428 | $ | 428 | ||||||||
Total deferred tax liabilities |
$ | 514 | $ | 428 | $ | 428 | ||||||||
Net deferred taxes |
$ | 497 | $ | 469 | $ | 471 |
An income tax valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has historically provided a partial valuation allowance on its net deferred tax benefits. However, the Company reduced the valuation allowance by $225,000 and $169,000 in the 2013 and 2012 years, respectively, and increased the valuation allowance by $147,000 in 2011 in order to recognize the portion of deferred tax assets expected to be realized in the near future. As of December 31, 2013, the Company has net operating loss carry forwards for Federal income tax purposes of approximately $5,270,000, which are available to offset future Federal taxable income, if any, that begin to expire in 2021. The Company also has a net operating loss carry forward for Illinois state income tax purposes of approximately $5,823,000 as of December 31, 2013. The Company also has alternative minimum tax credit carry forwards of approximately $148,000, which are available to reduce future Federal regular income taxes, if any, over an indefinite period. No unrecognized tax benefits are set to expire in the next twelve months that may have an impact upon the Company’s effective tax rate.
The Company files tax returns in the U.S. federal jurisdiction and various state jurisdictions. The tax years 2010, 2011, 2012 and 2013 remain open to examinations. Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. During the twelve months ended December 31, 2013, the Company did not recognize expense for interest or penalties related to income tax, and does not have any amounts accrued at December 31, 2013, as the Company does not believe it has taken any uncertain tax positions.
Note 9. EARNINGS PER SHARE
In 2011, the Company issued a five percent (5%) stock dividend payable to all shareholders. The stock dividend resulted in the issuance of 552,259 additional common shares in 2011. All reported earnings per share disclosures have been retroactively restated to reflect this dividend. The following table presents a reconciliation of the numerators and denominators of basic and diluted earnings per common share for the years ended December 31:
(in $000's except for per share data) |
2013 |
2012 |
2011 |
||||||||||
Basic earnings per common share: |
|||||||||||||
Net earnings |
$ | 651 | $ | 164 | $ | 28 | |||||||
Weighted-average common shares outstanding |
11,707 | 11,655 | 11,592 | ||||||||||
Basic net earnings per common share |
$ | 0.06 | $ | 0.01 | $ | 0.00 | |||||||
Diluted earnings per common share: |
|||||||||||||
Net earnings |
$ | 651 | $ | 164 | $ | 28 | |||||||
Weighted-average common shares outstanding |
11,707 | 11,655 | 11,592 | ||||||||||
Add: Effect of dilutive stock options |
1 | 3 | 7 | ||||||||||
Adjusted weighted-average common shares outstanding |
11,708 | 11,658 | 11,599 | ||||||||||
Diluted net earnings per common share |
$ | 0.06 | $ | 0.01 | $ | 0.00 |
For the year ended December 31, 2013, 2012 and 2011, there were 7,573, 7,573 and 7,573 options, respectively, which were anti-dilutive and excluded from the diluted earnings per share calculation.
Note 10. RELATED PARTY
The Company engages a law firm to provide legal services to the Company which employed as a Partner a family member of the Company’s President and Chief Executive Officer. Total fees paid to this firm were approximately $55,000, $136,000 and $382,000 in 2013, 2012 and 2011, respectively. The amount due to the firm included in accounts payable was $0 as of December 31, 2013 and 2012, respectively.
Note 11. LEASE COMMITMENTS
The Company leases certain buildings, data processing and other equipment under operating lease agreements expiring through the year 2017. The future minimum lease payments required under operating leases are as follows:
Years ending December 31 |
(in $000's) |
|||
2014 |
$ | 671 | ||
2015 |
$ | 651 | ||
2016 |
$ | 223 | ||
2017 |
$ | 4 | ||
$ | 1,549 |
Rent expense related to operating leases was approximately $716,000, $718,000 and $758,000 during the years ended December 31, 2013, 2012 and 2011, respectively.
Note 12. UNAUDITED QUARTERLY FINANCIAL DATA
Selected quarterly data for 2013 and 2012 are as follows:
2013 |
||||||||||||||||
(in $000's except per share data) |
First |
Second |
Third |
Fourth |
||||||||||||
Net sales |
$ | 18,031 | $ | 14,075 | $ | 12,246 | $ | 13,563 | ||||||||
Gross margin |
$ | 2,960 | $ | 2,256 | $ | 1,936 | $ | 2,182 | ||||||||
Net earnings (loss) |
$ | 549 | $ | 31 | $ | (40 | ) | $ | 111 | |||||||
Basic net earnings (loss) per share |
$ | 0.05 | $ | 0.00 | $ | (0.00 | ) | $ | 0.01 | |||||||
Diluted net earnings (loss) per share |
$ | 0.05 | $ | 0.00 | $ | (0.00 | ) | $ | 0.01 |
2012 |
||||||||||||||||
(in $000's except per share data) |
First |
Second |
Third |
Fourth |
||||||||||||
Net sales |
$ | 12,343 | $ | 12,843 | $ | 11,727 | $ | 14,205 | ||||||||
Gross margin |
$ | 2,185 | $ | 2,302 | $ | 2,049 | $ | 2,432 | ||||||||
Net earnings |
$ | 202 | $ | (126 | ) | $ | (235 | ) | $ | 323 | ||||||
Basic net earnings per share |
$ | 0.02 | $ | (0.01 | ) | $ | (0.02 | ) | $ | 0.03 | ||||||
Diluted net earnings per share |
$ | 0.02 | $ | (0.01 | ) | $ | (0.02 | ) | $ | 0.03 |
Report of Independent Registered Public Accounting Firm
To The Board of Directors and Shareholders of
Wells-Gardner Electronics Corporation and Subsidiary
McCook, Illinois
We have audited the accompanying consolidated statements of operations, shareholders' equity and cash flows for the year ended December 31, 2011 of Wells-Gardner Electronics Corporation and Subsidiary . These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of the operations and cash flows of Wells-Gardner Electronics Corporation and Subsidiary for the year then ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.
/s/ Blackman Kallick, LLP
Chicago, Illinois
March 8, 2012
Report of Independent Registered Public Accounting Firm
To The Board of Directors and Shareholders of
Wells-Gardner Electronics Corporation and Subsidiary
McCook, Illinois
We have audited the accompanying consolidated balance sheets of Wells-Gardner Electronics Corporation and Subsidiary as of December 31, 2013 and 2012, and the related consolidated statements of operations, shareholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wells-Gardner Electronics Corporation and Subsidiary as of December 31, 2013 and 2012 and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ Plante & Moran, PLLC
Chicago, Illinois
March 13, 2014
BOARD OF DIRECTORS |
EXECUTIVE OFFICERS |
|
Anthony Spier Chairman, President & Chief Executive Officer |
Anthony Spier Chairman, President & Chief Executive Officer |
|
Marshall L. Burman Retired Partner Edwards Wildman Palmer LLP |
James F. Brace Executive Vice President, Secretary, Treasurer & Chief Financial Officer |
|
Merle H. Banta Chairman & Chief Executive Officer BHH Management, Inc |
||
Frank R. Martin Attorney Righeimer, Martin & Cinquino, P.C. |
||
CORPORATE INFORMATION |
||
ANNUAL MEETING |
BANKER |
|
The Annual Meeting of Shareholders will take place at 10:00 a.m. on Tuesday, May 13, 2014 at the corporate offices of the Company. |
Wells Fargo Bank N.A. Chicago, Illinois | |
FORM 10-K |
AUDITOR |
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A copy of the Company’s annual report on Form 10-K, as filed with the Securities and Exchange Commission, is available with- out charge upon written request to James F. Brace at the corporate offices of the Company. |
Plante Moran, PLLC Chicago, Illinois |
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TRANSFER AGENT |
COUNSEL |
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Broadridge Corporate Issuer Solutions, Inc. PO Box 1342 Brentwood, NY 11717
Phone: 877-830-4936 Fax: 215-553-5402 E-mail: shareholder@broadridge.com |
Gould & Ratner, LLP Chicago, Illinois |
Exhibit 23.0
REPORT AND CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
Wells-Gardner Electronics Corporation
The audit referred to in our report dated March 8, 2012, included the related consolidated financial statement schedule for the year ended December 31, 2011, included in Form 10-K. This consolidated financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this consolidated financial statement schedule based on our audit. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We consent to the incorporation by reference in the registration statements (Nos. 2-72090, 2-09137, 33-63920, 3361535, 33,02981, and 333-72629) on Form S-8 of Wells-Gardner Electronics Corporation of our report dated March 8, 2012, with respect to the consolidated statements of operations, shareholders’ equity, and cash flows of Wells-Gardner Electronics Corporation for the year ended December 31, 2011 and our report in the preceding paragraph regarding the related consolidated financial statement schedule, which report appears in or is incorporated by reference in this annual report on Form 10-K of Wells-Gardner Electronics Corporation.
/s/ Blackman Kallick, LLP
Chicago, Illinois
March 8, 2012
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
Wells-Gardner Electronics Corporation
We consent to the incorporation by reference in the registration statements (Nos. 2-72090, 2-09137, 33-63920, 3361535, 33,02981, and 333-72629) on Form S-8 of Wells-Gardner Electronics Corporation of our report dated March 13, 2014, with respect to the consolidated balance sheets of Wells-Gardner Electronics Corporation as of December 31, 2013 and 2012, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the years ended December 31, 2013 and 2012, which report appears in or are incorporated by reference in the annual report on Form 10-K of Wells-Gardner Electronics Corporation.
/s/ Plante & Moran, PLLC
Chicago, Illinois
March 13, 2014
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Anthony Spier, certify that:
(1) |
I have reviewed this Annual Report on Form 10-K of Wells-Gardner Electronics Corporation; |
(2) |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(5) |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: March 13, 2014 |
By: |
/s/ ANTHONY SPIER |
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Anthony Spier |
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Chairman, President & |
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Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James F. Brace, certify that:
(1) |
I have reviewed this Annual Report on Form 10-K of Wells-Gardner Electronics Corporation; |
(2) |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(5) |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: March 13, 2014 |
By: |
/s/ JAMES F. BRACE |
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James F. Brace |
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Executive Vice President & Chief Financial Officer,
Secretary & Treasurer |
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Exhibit 32.1
STATEMENT OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Anthony Spier, and I, James F Brace certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Wells-Gardner Electronics Corporation (the “Company”) on Form 10-K for the fiscal year ended December 31, 2013:
(1) |
Fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; |
(2) |
That the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
This written statement is being furnished to the Securities and Exchange Commission as an exhibit to such Form 10-K. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Date: March 13, 2014 |
By: |
/s/ ANTHONY SPIER |
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Anthony Spier |
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Chairman, President & |
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Chief Executive Officer |
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Date: March 13, 2014 |
By: |
/s/ JAMES F. BRACE |
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James F. Brace |
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Executive Vice President |
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& Chief Financial Officer, Secretary &Treasurer |