Wells-Gardner Reports Second Quarter and First Half 2010 Earnings

CHICAGO, IL -- (Marketwire) -- 08/05/10 -- Wells-Gardner Electronics Corporation (NYSE Amex: WGA) announced net earnings for the second quarter ending June 30, 2010 were $441,000 or $0.04 per share, a 9 percent reduction compared to net earnings of $484,000 or $0.04 per share in the same period the prior year. The second quarter results included $261,000 of non-recurring charges which was made up of $122,000 of reorganization charges and $139,000 of operating expenses related to the Illinois Video Lottery business, which is not expected to begin generating revenue until the first quarter 2011. Prior year results included non-recurring tax charges of $73,000. Second quarter 2010 sales were $15.4 million, which is an increase of 7 per cent over the $14.4 million in the same quarter 2009.

For the six months ending June 30, 2010, net earnings were $546,000 or $0.05 per share compared to $587,000 or $0.05 per share in the first six months 2009. The six month 2010 earnings included non-recurring charges of $362,000, which was made up of $122,000 of reorganization charges and $240,000 of operating expenses related to the Illinois Video Lottery business. The first half 2009 earnings included non-recurring tax charges of $168,000. Sales for the first half 2010 were $27.0 million, an increase of 4 per cent compared to $26.0 million in the same period in 2009.

"We remain extremely pleased with our earnings performance in this difficult market environment," said Anthony Spier, Wells-Gardner's Chairman and Chief Executive Officer. "On a comparative basis eliminating non-recurring charges, our earnings in the second quarter 2010 were $702,000, which was an increase of 26 per cent compared to the earnings of $558,000 in the prior year second quarter. This increase in earnings was driven by both an increase in sales due to strong performance by two of our major OEM customers and by a small increase in margins. Margins increased in the quarter to 18.3 per cent compared to 18.1 per cent in the same quarter in the prior year due to higher volumes, improved design, and purchasing cost control."

"The balance sheet continues to remain strong in spite of debt increasing temporarily to $5.8 million as of June 30, 2010 compared with $3.2 million at June 30, 2009 due to a $4.5 million increase in accounts receivable caused by sales being significantly higher in the latter part of the quarter this year compared to the same period last year. Even with this borrowing increase the debt has been reduced by $3.4 million over the past three and a half years. The Company's debt equity ratio is now 37 per cent compared to 70 per cent at year end 2006. We expect the debt to be under $3 million by the end of the third quarter."

Outlook
"Given the lack of a definitive startup date, we are currently estimating that the Illinois Video Lottery will begin in the middle of the first quarter 2011. As a result we expect that sales for the full year 2010 will be in the range of $48 to $51 million, compared to $52.5 million in 2009, as the worldwide gaming slot machine market remains sluggish. We should note that first half results were above our expectations. Second half sales are expected to be lower than the first half resulting in a challenging third and fourth quarter given the continuing spending for the Illinois VLT market without revenue. We expect Company sales will be in the range of $75 to $80 million in 2011 as the Illinois Video Lottery business gets started. We will continue to aggressively control costs, inventory levels and interest expenses."

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 the majority of its LCDs and CRT monitors 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, Egg Harbor Township, New Jersey, Miami, Florida and McCook, Illinois. AGE also sells refurbished gaming machines on a global basis as well as installs and services some brands of gaming machines in casinos in North America.

This press release contains forward-looking statements within the meaning of the federal securities laws. Those statements include statements regarding the intent, belief or expectations of the Company and its management. Readers are cautioned that the forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those expressed in any forward-looking statement. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, development of competing technologies, availability of adequate credit, interruption or loss of supply from key suppliers, increased competition, the regulatory process and regulatory and legislative changes affecting the gaming industry. Wells-Gardner assumes no obligation to update the information contained in this release to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. For additional investor information, please contact Jim Brace -- Wells-Gardner at (708) 290-2120 or Alan Woinski -- Gaming USA Corporation at (201) 599-8484.

WELLS-GARDNER ELECTRONICS CORPORATION
Condensed Consolidated Statements of Earnings (unaudited)
Three Months and Six Months Ended June 30, 2010 and 2009

                    Three Months Ended June 30,   Six Months Ended June 30,
                    ---------------------------  ---------------------------
                        2010           2009          2010           2009
----------------------------------------------------------------------------
Net sales           $ 15,388,000   $ 14,376,000  $ 26,964,000   $ 25,980,000
Cost of sales         12,568,000     11,775,000    22,002,000     21,296,000
----------------------------------------------------------------------------
Gross margin           2,820,000      2,601,000     4,962,000      4,684,000
Engineering,
 selling &
 administrative
 expenses              2,316,000      1,978,000     4,308,000      3,797,000
----------------------------------------------------------------------------
Operating Earnings       504,000        623,000       654,000        887,000
Interest expense          69,000         58,000       111,000        116,000
Other expense, net             -         73,000             -        166,000
Income Tax expense        (6,000)         8,000        (3,000)        18,000
----------------------------------------------------------------------------
Net Earnings        $    441,000   $    484,000  $    546,000   $    587,000
============================================================================

Earnings per share:
Basic earnings per
 share              $       0.04   $       0.04  $       0.05   $       0.05
Diluted earnings
 per share          $       0.04   $       0.04  $       0.05   $       0.05

Basic average
 common shares
 outstanding          10,992,767     10,942,013    10,978,729     10,933,706
Diluted average
 common shares
 outstanding          10,997,456     10,942,013    10,985,925     10,933,706

** See acccompanying notes to the unaudited condensed consolidated financial statements.