FINANCIALS

WMS INDUSTRIES INC.

6-YEAR CONSOLIDATED
FINANCIAL DATA

SELECTED FINANCIAL
AND OPERATING DATA

CONSOLIDATED
STATEMENTS OF INCOME

CONSOLIDATED
BALANCE SHEETS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME

CONSOLIDATED
STATEMENTS OF
CASH FLOWS

2012 FORM 10-K

	Fiscal Year Ended June 30,
(in millions, except per share amounts)	2012	2011	2010	2009	2008	2007
Statement of Income Data:
Revenues	$689.7	$783.3	$765.1	$706.4	$650.1	$539.8
Total gross profit	429.0	470.7	489.4	448.9	386.2	305.0
Impairment and restructuring ⁽¹⁾⁽²⁾	9.7	22.2	—	—	—	—
Operating income	87.4	110.4	167.9	136.6	104.4	74.2
Income before income taxes	99.1	123.6	170.5	140.4	105.6	71.7
Provision for income taxes	35.0	42.6	57.6	48.2	38.1	22.8
Net income^{(1)(2)(3)(4)(5)(6)}	$64.1	$81.0	$112.9	$92.2	$67.5	$48.9
Earnings Per Share:
Basic	$1.15	$1.40	$2.02	$1.87	$1.34	$1.01
Diluted	$1.15	$1.37	$1.88	$1.59	$1.15	$0.86
Weighted-Average Common Shares:
Basic common stock outstanding	55.5	57.7	56.0	49.2	50.2	48.4
Diluted common stock and common stock equivalents	55.8	59.0	60.4	59.1	60.6	59.6
Dividends Per Common Share	$—	$—	$—	$—	$—	$—
Purchases of Treasury Stock	$50.4	$101.5	$45.0	$40.5	$35.0	$—
Cash Flow Data:
Net cash provided by (used in):
Operating activities	$156.8	$157.1	$130.3	$179.2	$186.2	$118.9
Investing activities	(194.2)	(157.0)	(108.6)	(113.8)	(117.8)	(158.8)
Financing activities	10.8	(77.0)	9.7	(29.8)	(5.2)	35.6
Effect of exchange rates on cash and cash equivalents	(1.8)	0.9	(0.4)	(0.7)	0.4	2.4
Increase (decrease) in cash and cash equivalents	$(28.4)	$(76.0)	$31.0	$34.9	$63.6	$(1.9)
	As of June 30,
	2012	2011	2010	2009	2008	2007
Balance Sheet Data:
Cash and cash equivalents	$62.3	$90.7	$166.7	$135.7	$100.8	$37.2
Working capital	281.5	345.1	414.2	334.3	296.7	255.5
Total accounts and notes receivable, net	405.1	366.2	326.2	252.5	206.2	180.4
Total assets	1,154.1	1,046.3	1,007.0	856.0	772.7	655.7
Long-term debt⁽⁷⁾	60.0	—	—	115.0	115.0	115.0
Stockholders’ equity⁽⁷⁾	877.3	855.9	833.9	591.4	510.8	433.6

(1) Net income in fiscal 2012 includes $9.2 million of net after-tax charges, or $0.16 per diluted share, principally recorded in the September 2011 quarter, which includes $6.7 million net after-tax of impairment and restructuring charges, including $3.8 million net after-tax of separation-related costs and $2.9 million net after-tax of costs related to the decision to close two facilities; $2.5 million net after-tax, or $0.04 per diluted share, of non-cash charges to write-down receivables following government enforcement actions at certain casinos in Mexico; and $1.3 million net after-tax, or $0.02 per diluted share, of costs for legal settlements. Net income also includes a net after-tax cash benefit of $1.3 million from litigation settlement recorded in the December 2011 period.
(2)Net income in fiscal 2011 includes $16.6 million of net after-tax charges, or $0.28 per diluted share, which includes $14.3 million, or $0.24 per diluted share, of net after-tax impairment and restructuring charges comprised of $11.8 million, or $0.20 per diluted share, for net after-tax non-cash asset impairments (including $6.8 million net of taxes for impairment of technology licenses, $2.1 million net of taxes for impairment of the Orion™ brand name, $1.9 million net of taxes for an impairment charge to write-down the value of the Orion Gaming facility in the Netherlands to fair value upon closing the facility, $0.9 million net of taxes for impairment of receivables related to government action to close casinos in Venezuela and $0.1 million net of taxes of other impairment charges); and $2.5 million or $0.04 per diluted share for after-tax restructuring charges (primarily separation costs); along with $5.9 million of after-tax charges, or $0.10 per diluted share, for asset write-downs and other charges (including charges for inventory write-downs related to winding down the Orion and original Bluebird product lines); partially offset by $2.5 million or $0.04 per diluted share from after-tax cash proceeds of litigation settlement and $0.02 per diluted share benefit recorded in income taxes related to the period January 1, 2010 through June 30, 2010 from the retroactive reinstatement of the Federal research and development tax credit.
(3) Net income in fiscal 2010 includes a $3.6 million net tax benefit from a lower effective income tax rate resulting from discrete tax items, primarily the favorable completion of federal income tax audits through fiscal 2007.
(4) Net income in fiscal 2009 includes a $3.1 million after-tax gain from a cash settlement of trademark litigation and a $1.1 million income tax benefit related to the period January 1, 2008 through June 30, 2008 due to the retroactive reinstatement of the Federal research and development tax credit.
(5) Net income in fiscal 2008 includes a $2.3 million after-tax write-down to net realizable value of a technology license.
(6) Net income in fiscal 2007 includes a $1.0 million after-tax charge for expenses associated with management separation costs during the period and a $0.7 million income tax benefit related to the period January 1, 2006 through June 30, 2006, due to the retroactive reinstatement of the Federal research and development tax credit in December 2006.
(7) On October 18, 2011, we entered into an amended and restated revolving credit agreement with a group of eight banks. This agreement provides for borrowings up to $400 million through October 18, 2016, with the ability to expand the facility to $500 million from the existing lenders willing to increase their commitments or from additional lenders with the consent of the administrative agent. At June 30, 2012, $60.0 million was outstanding under the amended and restated revolving credit facility. In fiscal 2010, we issued 8.7 million of our common shares upon the early conversion to common stock of $115.0 million principal amount of our 2.75% Convertible Subordinated Notes (“Notes”). As a result of the conversion of all of our Notes, our stockholders equity was increased by $115.0 million.

				Favorable (Unfavorable)
	Fiscal Year Ended			2012 vs. 2011	2011 vs. 2010
(in millions, except unit, per unit and per day data)	2012	2011	2010	%	%
Product Sales Revenues
New unit revenues	$333.6	$403.2	$387.6	(17.3)	4.0
Other product sales revenues	94.7	86.0	73.3	10.1	17.3
Total product sales revenues	$428.3	$489.2	$460.9	(12.4)	6.1
New units sold	20,903	24,216	24,944	(13.7)	(2.9)
Average sales price per new unit	$15,959	$16,651	$15,540	(4.2)	7.1
Gross profit on product sales revenues⁽¹⁾	$223.1	$235.3	$243.5	(5.2)	(3.4)
Gross margin on product sales revenues⁽¹⁾	52.1%	48.1%	52.8%	8.3	(8.9)
Gaming Operations Revenues
Participation revenues	$234.2	$277.7	$ 287.6	(15.7)	(3.4)
Other gaming operations revenues	27.2	16.4	16.6	65.9	(1.2)
Total gaming operations revenues	$261.4	$294.1	$304.2	(11.1)	(3.3)
Installed Participation Base at Year End with Lease
Payments based on:
Percentage of coin-in units	3,681	3,780	3,765	(2.6)	0.4
Percentage of net win units	2,859	3,072	3,334	(6.9)	(7.9)
Daily lease rate units⁽²⁾	3,021	3,018	3,322	0.1	(9.2)
Total Installed Participation Base at Year End	9,561	9,870	10,421	(3.1)	(5.3)
Average participation installed base units	9,335	10,046	10,298	(7.1)	(2.4)
Average revenue per day per participation units	$68.52	$75.76	$76.53	(9.6)	(1.0)
Gross profit on gaming operations revenues⁽¹⁾	$205.9	$235.4	$245.9	(12.5)	(4.3)
Gross margin on gaming operations revenues⁽¹⁾	78.8%	80.0%	80.8%	(1.5)	(0.1)
Total revenues	$689.7	$783.3	$765.1	(11.9)	2.4
Total gross profit⁽¹⁾	$429.0	$470.7	$489.4	(8.9)	(3.8)
Total gross margin⁽¹⁾	62.2%	60.1%	64.0%	3.5	(6.1)
Total operating income	$87.4	$110.4	$167.9	(20.8)	(34.2)
Total operating margin	12.7%	14.1%	21.9%	(9.9)	(35.6)
Net income	$64.1	$81.0	$112.9	(20.9)	(28.3)
Earnings Per Share:
Basic	$1.15	$1.40	$2.02	(17.9)	(30.7)
Diluted	$1.15	$1.37	$1.88	(16.1)	(27.1)

bp basis points
(1) As used herein, gross profit and gross margin exclude depreciation and amortization and distribution expense.
(2) Includes only participation game theme units with fixed daily lease rates. Does not include units with product sales game themes placed under fixed-term, daily fee operating leases.

(in millions of U.S. dollars and millions of shares, except per share amounts)	2012	2011	2010
Revenues:
Product sales	$428.3	$489.2	$460.9
Gaming operations	261.4	294.1	304.2
Total revenues	689.7	783.3	765.1
Costs and Expenses:
Cost of product sales^(a)	205.2	253.9	217.4
Cost of gaming operations^(a)	55.5	58.7	58.3
Research and development	94.5	117.0	105.9
Selling and administrative	145.2	150.0	148.4
Depreciation and amortization^(a)	92.2	71.1	67.2
Impairment and restructuring charges	9.7	22.2	—
Total costs and expenses	602.3	672.9	597.2
Operating Income	87.4	110.4	167.9
Interest expense	(1.6)	(1.2)	(3.2)
Interest income and other income and expense, net	13.3	14.4	5.8
Income before income taxes	99.1	123.6	170.5
Provision for income taxes	35.0	42.6	57.6
Net Income	$64.1	$81.0	$112.9
Earnings per share:
Basic	$1.15	$1.40	$2.02
Diluted	$1.15	$1.37	$1.88
Weighted-average common shares:
Basic common stock outstanding	55.5	57.7	56.0
Diluted common stock and common stock equivalents	55.8	59.0	60.4

(a) Cost of product sales and cost of gaming operations exclude the following amounts of depreciation and amortization, which are included in the depreciation and amortization line item:
Cost of product sales	$6.4	$4.8	$4.4
Cost of gaming operations	$57.6	$40.1	$44.0

(in millions of U.S. dollars and millions of shares)	2012	2011
Assets
Current Assets:
Cash and cash equivalents	$62.3	$90.7
Restricted cash and cash equivalents	13.8	14.3
Total cash, cash equivalents and restricted cash	76.1	105.0
Accounts and notes receivable, net	282.8	284.6
Inventories	53.3	67.1
Other current assets	40.1	40.8
Total current assets	452.3	497.5
Non-Current Assets:
Long-term notes receivable, net	122.3	81.6
Gaming operations equipment, net	115.7	86.8
Property, plant and equipment, net	226.7	171.5
Intangible assets, net	178.9	153.9
Deferred income tax assets	39.3	43.1
Other assets, net	18.9	11.9
Total non-current assets	701.8	548.8
Total Assets	$1,154.1	$1,046.3
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$84.8	$66.2
Accrued compensation and related benefits	9.5	12.3
Other accrued liabilities	76.5	73.9
Total current liabilities	170.8	152.4
Non-Current Liabilities:
Long-term debt	60.0	—
Deferred income tax liabilities	22.7	23.9
Other non-current liabilities	23.3	14.1
Total non-current liabilities	106.0	38.0
Commitments, contingencies and indemnifications	—	—
Stockholders’ Equity:
Preferred stock (5.0 shares authorized, none issued)	—	—
Common stock (200.0 shares authorized and 59.7 shares issued)	29.8	29.8
Additional paid-in capital	443.5	437.9
Treasury stock, at cost (4.9 and 2.9 shares, respectively)	(144.1)	(104.9)
Retained earnings	554.9	490.0
Accumulated other comprehensive income (loss)	(6.8)	3.1
Total stockholders’ equity	877.3	855.9
Total Liabilities and Stockholders’ Equity	$1,154.1	$1,046.3

(in millions of U.S. dollars)	2012	2011	2010
Cash Flows from Operating Activities
Net income	$64.1	$81.0	$112.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	77.8	71.1	67.2
Amortization of intangible and other non-current assets	29.0	21.6	22.2
Share-based compensation	15.8	18.7	20.3
Non-cash restructuring and impairment charges	0.6	18.4	—
Other non-cash items	11.7	11.4	2.4
Deferred income tax benefit	(1.0)	(13.1)	(6.6)
Tax benefit from exercise of stock options	(0.2)	(10.1)	(20.1)
Change in operating assets and liabilities, net:
Restricted cash	0.5	3.6	1.1
Total accounts and notes receivable	(44.8)	(46.8)	(76.7)
Inventories	15.7	(9.5)	(14.4)
Current liabilities	10.0	21.4	44.9
Other current and long-term assets and long-term liabilities	(22.4)	(10.6)	(22.9)
Net cash provided by operating activities	156.8	157.1	130.3
Cash Flows from Investing Activities
Additions to gaming operations equipment	(83.0)	(65.9)	(43.5)
Additions to property, plant and equipment	(81.4)	(66.2)	(56.8)
Acquisitions of business, net of cash acquired	(16.4)	—	—
Payments to acquire or license intangible and other non-current assets	(13.4)	(24.9)	(8.3)
Net cash used in investing activities	(194.2)	(157.0)	(108.6)
Cash Flows from Financing Activities
Proceeds from borrowings under revolving credit facility	60.0	—	—
Purchase of treasury stock	(50.4)	(101.5)	(45.0)
Debt issuance costs	(2.4)	—	(1.7)
Cash received from exercise of stock options and employee stock purchase plan	3.4	14.4	37.2
Tax benefits from exercise of stock options	0.2	10.1	20.1
Other	—	—	(0.9)
Net cash provided by (used in) financing activities	10.8	(77.0)	9.7
Effect of exchange rates on cash and cash equivalents	(1.8)	0.9	(0.4)
Increase (Decrease) In Cash and Cash Equivalents	(28.4)	(76.0)	31.0
Cash and Cash Equivalents, beginning of year	90.7	166.7	135.7
Cash and Cash Equivalents, end of year	$62.3	$90.7	$166.7

Common shares issued	Common shares held in treasury		Common stock	Additional paid-in capital	Treasury stock, at cost	Retained earnings	Accumulated other comprehensive income (loss)	Total stockholders’ equity
(in millions of U.S. dollars and millions of shares)
51.0	(1.8)	Balance, June 30, 2009	$25.5	$311.9	$ (45.4)	$296.1	$ 3.3	$ 591.4
		Comprehensive income:
—	—	Net income	—	—	—	112.9	—	112.9
—	—	Foreign currency translation adjustment	—	—	—	—	(9.4)	(9.4)
—	—	Comprehensive income	—	—	—	—	—	103.5
—	2.0	Vesting of restricted stock and exercise of stock options and related tax benefits	—	(8.0)	54.5	—	—	46.5
8.7	—	Conversion of Convertible Subordinated Notes to common stock	4.3	110.7	—	—	—	115.0
—	(1.1)	Purchase of treasury shares	—	—	(45.0)	—	—	(45.0)
—	—	Share-based payment expense	—	20.3	—	—	—	20.3
—	—	Other	—	0.6	1.6	—	—	2.2
59.7	(0.9)	Balance, June 30, 2010	29.8	435.5	(34.3)	409.0	(6.1)	833.9
		Comprehensive income:
—	—	Net income	—	—	—	81.0	—	81.0
—	—	Foreign currency translation adjustment	—	—	—	—	9.2	9.2
—	—	Comprehensive income	—	—	—	—	—	90.2
—	0.8	Vesting of restricted stock and exercise of stock options and related tax benefits	—	(16.3)	30.9	—	—	14.6
—	(2.8)	Purchase of treasury shares	—	—	(101.5)	—	—	(101.5)
—	—	Share-based payment expense	—	18.7	—	—	—	18.7
59.7	(2.9)	Balance, June 30, 2011	29.8	437.9	(104.9)	490.0	3.1	855.9
		Comprehensive income:
—	—	Net income	—	—	—	64.1	—	64.1
—	—	Foreign currency translation adjustment	—	—	—	—	(9.9)	(9.9)
—	—	Comprehensive income	—	—	—	—	—	54.2
—	0.4	Vesting of restricted stock and exercise of stock options and related tax benefits	—	(10.2)	11.2	—	—	1.0
—	(2.4)	Purchase of treasury shares	—	—	(50.4)	—	—	(50.4)
—	—	Share-based payment expense	—	15.8	—	—	—	15.8
—	—	Impact of ASU 2010-16 accounting change on WAP base jackpot liabilities	—	—	—	0.8	—	0.8
59.7	(4.9)	Balance, June 30, 2012	$29.8	$443.5	$(144.1)	$554.9	$ (6.8)	$ 877.3

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FINANCIALS