Wow, what a call. I found it very interesting and don't have time to work out the numbers myself tonight, but here are my notes. I have the names wrong in the Q&A section as many of these people I don't know and the call was fuzzy at that point.
Mims, Wilson and Orton on the call. Now why did it take three weeks or better to organize the schedules of 3 people for the call? I leave that one open for debate.
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Wilson Stated: We are on the cusp of growing into the company as intended.
Plan to consolidate charitable bingo industry and Wilson will lead us to the next level of growth. Stated that he has plans to deepen and consolidate management. Stressed commitment to long term success and alignment of management with shareholders.
Mims on S.C.:
House passed ban on VGM's 76-44. It takes 29 votes in senate and have 23 votes.
Massive lobbying campaign to make sure they don't even have the 23 votes. Revenues from VGM have consistently improved.mainly from Gold Strike and Darlington. Darlington now running at $130,000 per week in revenue. 2 weeks bad in December due to Gov spouting off. (spouting off is my wording!) <<gg>>
Orton on Financials:
1997 outlook
audit on-going.
Revenues 12.5 million range for full year
Revenues 4th quarter 2.7 to 3.0 million
Gold strike, Lucky 4 and Darlington biggest revenues
70% gaming 30% bingo for year.
mid to late March for end of the year numbers.
earnings less than .44 for year
4th quareter gaming affected by smaller seasonal bump, higher expenses in SC because of closings, foot bill for charity taxes (???), higher labor costs relative to revenues expected and the corporation had higher legal and lobbying costs, higher accting and travel costs, and higher consulting expenses.
Bright side, trends going very well..pleased to report financial condition is better than ever. $25 million assets, $4 million liabilities, book value per share 2.25,cash $11 million, 1.25 per share, $500,000 in ongoing construction costs, license fees (upfront) and VGM machines as additional expenditures of cash.
no intention of issuing equity debt or other financing. Happy with capitalizatoin, cash transactoins going forward, no dilution
1998
Just 1st quarter acquistions included
20 million dollars revenue for year
2.5 to 3 million net income for year
.25 to .35 per share for year
.40 per share or better with additional acquistions
more shares outstanding that will affect results, taxes will affect, expensing more start-up costs, regulations in SC will effect, and subletting of several closed bingo properties
700+ VGMs, 400 on route, 200 in free standing casinos, 100 in bingo halls
no additional gaming until SC clarifies its position
14 bingo cneters in operation, closed 6 and sub-let 2, process of subletting the others
8 sc
3 tx
3 al
make more money with 14 than with 20
4 acquisition under letter of intent, 10 to 15 in various stages of negotiation in tx, canada, kentuky, alabama
14 plus 4 in 1st quarter, 10 to 15 by end of second quarter...30 plus halls by middle of year.
Want to be candid with shareholders, JTO sold 35,000 in early Jan. Diversification and tax purposes was reason, still holds 100,000 shares.
NASDAQ not filed. If stock price is $5 or better will file on completion of audit.
Target of 30% return on equity, 2 to 4 times proven cash flows is current acquistion pricing. Not going to make 30% ROE until all cash is invested, but then it sounds as if they should.
Stock ownership:
10% institutions
50% retail
40% management
stock buy back..prefer to invest capital in growing business unless stock continues to sell undervalued will consider buying back shares
Q&A might be posted after audit as well they may do other conference calls in the future.
Challenges to improving profitability. Original plan to consolidate 35,000 bingo halls..still on-going.
Q: Alex Brown - Mr Salye..question regarding Greg's departure..stated unfortunate press release concerning internal negotiations, once resolved, Greg was staying..and will become Chairman of Board. Greg excited about staying and leading it forward. Wants to strengthen management of company. Will work on this over next few months. Will not sell shares.
Q: Greg Stikmus - Stikmus Research, answer indicated that fundamentals not changed, still solid, greg back in charge, legal issue only is SC, otherwise still same fundamentals as they have been. Gaming tax take is 5% of SC total take. Searching for $100,000 million dollars to pay for new education in SC. Indicates SC will not be closing VGMs. Bad communication and stupid announcement caused stock price to dive after arb action on warrant call.
Q: Michael Anderson, MG Securities, Can Mims give likelihood of Gov prevailing, every other time VGM have prevailed. Odds are slim to prevail. Strong effort by Gov. In a tough race for Governorship and trying to find issues. 54% public support of VGMs right now and 67% if tie money to education. Settled late in the month of May.
Q: Question regarding Orton's estimates and JTO indicated that a doubling of operational profit in 1998 to remain flat on earnings per share.
Q: Tod Allen - 6 closed in SC and 2 closed in TX, competition with selves. IN TX sub-let property for more per month than making from BINGO. Only closed one acquisition hall, because we owned 3 halls in one town. Bought out competitor and closed down. Indicated that doing everything they can to earn more money for shareholders and if they can make more money with 14 than with 20, they will do that.
Q: Eric Better - Howard Rosencrans - will be purchases instead of poolings. My note: so Johns .40 indicates massive acquisition plans.
Q: Robert Kecseg - 1st research - excellent questions! What additional management help is needed at what levels. This is a good question cause Greg is emphasizes growing and strenghtening management. Greg ducked question. Tried to build up people he has.
VGMs - 15 new machines in Myrtle beach..using natural growth as opposed to purchasing. Ban won't kick in to 6/99 if at all.
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That is it. I thought it was a good call and indicates the growth this company will see. How come I seem to be at odds with what others think. So many are stating how negative the call was. I don't think so. Just like the press release the other day. That was a work of art and what they should have been emphasizing all along. Yes, we knew the numbers, but how many people out there did? Not many, I would suggest. Anway, will post more as time allows in terms of my analysis.
-Scott |
