A few interesting financial performance figures for SGMS's last 6 fiscal years (2007-2012), according to Morningstar Financial:
- Annual Sales have declined from $1.1 B in 2007 to around $930 M in 2012 (est.)
- During this period of time, Total Assets on the balance sheet have remained relatively flat at $2.2 B
- During this period of time, Long Term Debt has increased from $1.2 B to $1.6 B
Although the figures above don't seem horrible taken at face value, during this 6 year period of weak financial performance, the Company spent massively to try to grow the company's asset base and revenues:
- SGMS management invested $872 M in CAPEX
- SGMS management invested another $702 M in Acquisitions & Other Investments
- SGMS had to pay $518 M in Interest Expense (cash) on the LTD that financed these investments
- SGMS management used cash to buyback $120 M of its stock (a big waste of scarce $$$)
- SGMS management made no net pay-downs of the LTD, leaving SGMS highly leveraged
So, as a result of all the wasted investment and poor overall financial performance during this period of time:
- SGMS did not grow its productive base of assets, despite massive investment spending
- SGMS did not grow its revenues nor its earnings, despite massive investment spending
- SGMS management had to write off nearly $450 M in a variety of assets during this period of time, an amount not surprisingly equal to the amount of new net LTD on the balance sheet
- The book value of SGMS's Shareholders' Equity fell from $661 M to $400 M from 2007 to 2012
- The market value of SGMS stock dropped from a high of $40/share in 2007 to $7/share today
- Despite the massive investment spending, SGMS has a market cap of only $660 M (1.5 x Book)
- As evidenced in the Q3 announcement, SGMS has no positive momentum in its primary markets
- SGMS's core businesses do not generate acceptable levels of profitability on a consistent basis
- SGMS has little financial capability to make meaningful investments in growth initiatives
- SGMS will have a declining ability to service its massive LTD load
- IMO, SGMS's creditors will have some difficult decisions to make in the months and years ahead
- I think a Debt for Equity swap should eventually be considered by new management
New Managment is the operative here. Current management/OLD management don't know what a SWAP is :) no less engage in forming one.
Sooo..What did they do right? Nothing..again..but the stock didn't crash and it really should be a 2 dollar stock they haven't turned a profit in a good long time... Its almost like money is changing hands between the same people and at the end of the day the same players just divy up the money.
Churning but not really. Given that their competitors are in the same boat and there aren't many lottery providers or for whatever reason there are states that do need them it could be what holds them up. Unlike Twinkies, the Govt. Needs those scratchoffs. The decline from 40 - 7 was predictable. What I mean is a lot of us knew their plans had no chance regardless of any enthusiasms on Wallstreet. The rise from 7- 40 was sharp, like most failures and surprising to some knowing there was little chance to fullfil promises ALW and RONNY P had made. It's depressing that it isn't 2 bucks.. why? because they provide no real way to make money as a shareholder unless you're the worlds best day trader. Well I'm glad I could add to this discussion with my comments.
If I lived as clodse to SGMS as Tom T. I'd go on a rampage.
Soxman, you are so on the money here. Seems SGMS wants to be like our government in many ways. We the shareholders (public) can only hope they will make the right decisions in the future. Seems SGMS is on the fiscal cliff itself. Investyourbuck
Soxman, thanks for the writeup; I've been a holder of sgms all the way back to when it was Autotote. I made alot of $$ over the years from this company but I agree that the fundamentals have changed. No growth worth mentioning. Their biggest problem is that any profit generation is being used to cover interest expense and that is even falling short !! Of course increased sales would help tremendously.
PS... Do you think they will make the analysts concensus of 6 cents/share for the current quarter?