WAUKEGAN, Ill.--(BUSINESS WIRE)--April 29, 2003--
- Board of Directors Authorizes Additional $10 Million
share Buyback Program -
- Initial Version of CPU-NXT to Begin Field Trial -

WMS Industries Inc. (NYSE:WMS) today reported a net loss of $1.9 million, or $0.06 per diluted share, for the Company's fiscal third quarter ended March 31, 2003.

The Company's quarterly loss was primarily attributable to increased research and development, selling and administrative and depreciation expenses, as well as lower than anticipated participation revenues and gross margins. In the March 2002 quarter, WMS reported a breakeven result.

Revenues in the March 2003 quarter increased by 16% to $41.8 million compared with $36.1 million in the March 2002 quarter. The increase was primarily due to higher gaming machine sales to customers outside North America, which accounted for 67% of units sold in the current quarter compared to 56% in the prior year quarter.

The following table summarizes the key components related to revenue generation:

In addition to the 1,601 new units sold in the March 2003 quarter, the Company shipped 500 gaming stations to Multimedia Games, Inc. under an original equipment manufacturing (OEM) agreement. Revenues from parts, used games, OEM and conversions grew 52% compared to the prior year quarter.

The average installed base of participation gaming devices decreased by 7% to 5,336 units in the March 2003 quarter from 5,743 units in the March 2002 quarter, while the net revenue per day declined 4% from the prior year quarter to $37.10. The Company believes these decreases are due to WMS' current gaming platform not supporting key features and functionality that casino operators demand, such as certain cashless gaming options and multi-denomination/tokenization capabilities. The Company received four approvals for new participation games in the March quarter, including the next MONOPOLY(TM) branded game, FREE PARKING(TM). WMS currently has a net backlog of customer requests for over 400 additional participation gaming machines, an increase of 45% from the backlog at December 31, 2002. In addition, the Company currently has a backlog of over 1,000 game conversions to new participation themes.

Total gross profit increased to $24.3 million in the March 2003 quarter from $22.0 million in the March 2002 quarter. Gross profit margin on product sales for the March 2003 quarter was 37%, up from 20% in the prior year quarter, primarily due to higher margin products representing a greater percentage of product sales revenues and a lower average cost per unit due to higher production volumes, partially offset by a decrease in the average sales price per unit. Gross profit margin on participation and lease revenues decreased in the quarter ended March 31, 2003 to 79% from 84% in the prior year quarter due to the decrease in net revenue per day, lower gross margin on revenues from the SURVIVOR(TM) wide-area progressive product, which was first introduced in April 2002, and higher royalty rates payable to licensors.

Research and development expenses totaled $9.9 million in the March 2003 quarter compared to $6.7 million in the fiscal 2002 third quarter, an increase of $3.2 million, or 48%, principally related to the ongoing execution of the Company's technology improvement initiatives and planned product line expansion. WMS expects to incur increased research and development expenses in upcoming periods to concurrently complete the technology improvement plan while expanding its product offerings.

Selling and administrative expenses increased by $3.4 million or 36% from the prior year quarter, due to costs incurred in preparation for the Company's re-emergence, ongoing costs incurred to implement a new Enterprise Resource Planning system and increased legal expenses. WMS had an operating loss of $5.2 million in the March 2003 quarter, compared to an operating loss of $551,000 in the March 2002 quarter. The decrease in operating results was due primarily to the increase in research and development, selling and administrative and depreciation expenses, partially offset by an increase in gross profit. The effective income tax rate for the quarter reflects a benefit from a reduction in prior year taxes, which were less than amounts previously provided.

"During the quarter, we continued to advance both our technology improvement and product expansion plans," stated Brian R. Gamache, President and Chief Executive Officer. "In addition, we began implementing a comprehensive re-emergence plan in all operating areas. This re-emergence plan will ensure that all critical tasks and responsibilities are completed on time so we are prepared for our re-launch, which is now about six months away. The first visible indication of the re-launch will be a creative new marketing and communication campaign that begins this summer. In preparation for our re-emergence, our product submission and staffing expenses are ramping up.

"Version 2.57 of our legacy operating system has continued to show significant improvement over prior versions of the software, and except for three casinos in Ontario, we have completed all mandatory upgrades," commented Gamache. "Version 2.59 of the operating system is specific to printer gaming devices and it has been approved by the lab in Nevada. We are about to begin a field trial being conducted by the Audit Division of the Nevada Gaming Control Board. We expect to complete the upgrade of our printer gaming devices in Nevada in July.

"For the mid-term phase of the technology improvement plan, we have submitted both versions of CPU-NXT(TM) to the six North American gaming labs and have already begun receiving the first lab approvals for the initial version of the operating system software. We anticipate announcing our choice between the two versions of CPU-NXT early this summer. We are scheduled to begin our first field trial in early May and are on track to receive our first CPU-NXT approval late in the September 2003 quarter. We expect new game approvals on this system a month or two later, and shipments of our first new games on the CPU-NXT operating system in our new Bluebird (TM) cabinet in the December 2003 quarter.

"Our growth strategy includes expanding the product lines we can offer to our customers. During the March quarter, we also submitted our mechanical reel-spinning platform to the gaming labs, and they are currently testing this product. We expect to begin field trials for this product next month. Earlier this month, we received our Nevada gaming license to operate an inter-casino linked system, a key step in launching our proprietary wide-area progressive system in summer 2004. These new product offerings should significantly expand and diversify our future potential revenue sources.

"Our balance sheet remains strong," Gamache concluded. "We've actively managed our working capital while investing in licensed brands and technologies. We expect that both the June and September 2003 quarters will result in moderate operating losses but no significant reduction in cash and investments, other than cash to be used in our new share repurchase program. In addition, in the June quarter we anticipate that we will record a charge for a previously announced restricted stock grant if our Board of Directors determines that we have met the vesting conditions, which are primarily based on the stabilization of the legacy operating system. During the March quarter we completed the $10 million share repurchase program authorized by our Board of Directors in September. Since the first program was put in place in January 2002, we have repurchased 2,401,200 shares on the open market, or 7.4% of the previous number of shares outstanding, for $30.0 million at an average price of $12.49 per share. Additionally, our Board of Directors has now approved a new $10.0 million stock buy-back program for the next twelve months. Any share repurchases will be made from time to time in open market or privately negotiated transactions."

WMS Industries Inc. is hosting a conference call and web cast at 4:30 p.m. EDT today, Tuesday April 29, 2003. The conference call numbers are 212/676-5411 or 415/537-1859. To access the live call on the Internet, log on to http://wmsgaming.com (select "Co. Info," then "Investor Relations"). Following its completion, a replay of the call can be accessed for sixty days on the Internet via http://wmsgaming.com.

MONOPOLY(TM) and FREE PARKING(TM) are trademarks of Hasbro, Inc. (C) 2003 Hasbro, Inc. All rights reserved. Used with permission.

SURVIVOR(TM) is a trademark of Survivor Productions LLC.

CPU-NXT(TM) and Bluebird(TM) are trademarks of WMS Gaming Inc. All rights reserved. (C)2003 WMS Industries Inc.

This press release contains forward-looking statements concerning future business conditions and the outlook for the Company based on currently available information that involves risks and uncertainties as more fully described under "Item 1. Business - Risk Factors" in the Company's Annual Report on Form 10-K. The Company's actual results could differ materially from those anticipated in the forward-looking statements depending on factors, including, but not limited to: the expansion of legalized gaming into new markets; the development, introduction and success of new games and new technologies; the ability to maintain the scheduling of these introductions; the occurrence of software anomalies that affect the Company's games; the ability of the Company to implement its technology improvement plan; and the ability of the Company to qualify for and maintain gaming licenses and approvals. The forward-looking statements made herein are only made as of the date of this press release, and the Company undertakes no obligation to publicly update the forward-looking statements to reflect subsequent events or circumstances, except as required by law.

WMS Industries Inc. is engaged in the design, manufacture and sale and lease of gaming machines and video lottery terminals