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Scientific Games Corp – ‘10-Q’ for 7/31/00

On: Thursday, 9/14/00, at 5:15pm ET · For: 7/31/00 · Accession #: 1005477-0-6542 · File #: 1-11693

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 9/14/00  Scientific Games Corp             10-Q        7/31/00   15:1.5M                                   CT EDGAR123/FA

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      25    156K 
 2: EX-3.3      Certificate of Designation                            18     71K 
 3: EX-3.4      Amendment to By-Laws                                   1      6K 
 4: EX-4.5      Indenture                                             10     42K 
 5: EX-4.6      Indenture                                            151    616K 
 6: EX-4.8      Indenture                                              8     25K 
 7: EX-4.9      Registration Rights Agreement                         28    103K 
 8: EX-10.38    Stockholders' Agreement                               27    114K 
 9: EX-10.39    Credit Agreement                                     165    686K 
10: EX-10.40    Security Agreement                                    72    196K 
11: EX-10.41    Warrant Registration Rights Agreement                 20     71K 
12: EX-10.42    Employment Agreement                                  13     58K 
13: EX-10.43    Consulting Agreement                                  11     49K 
14: EX-27       Financial Data Schedule                                1     10K 
15: EX-99.11    Form of Warrant                                       14     65K

10-Q — Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Changes in Securities Consolidated Financial Statements: Exhibits and Reports on Form 8-K Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations 18-22
1	1st Page - Filing Submission
2	Item 1. Consolidated Financial Statements:
"	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 18-22
23	Item 1. Legal Proceedings
"	Item 2. Changes in Securities
24	Item 6. Exhibits and Reports on Form 8-K

10-Q 1st Page of 25 TOC ↑Top Previous Next ↓Bottom Just 1st
 
 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549

 Form 10-Q

{Mark One}                                                                      

|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES        
EXCHANGE ACT OF 1934                                                

 For the quarterly and nine month periods ended: July 31, 2000

OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES       
EXCHANGE ACT OF 1934                                                

For the transition from _____________________ to ______________________ 

 Commission File number: 0-13063

AUTOTOTE CORPORATION
(Exact name of registrant as specified in its charter)

    Delaware                                                81-0422894
    --------                                                ----------
(State or other jurisdiction of                               (I.R.S. Employer  
incorporation or organization)                               Identification No.)

750 Lexington Avenue, New York, New York 10022
----------------------------------------------
(Address of principal executive offices)
(Zip Code)

(212)-754-2233
--------------
(Registrant's telephone number, including area code)

   Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of   
1934 during the preceding 12 months (or for such shorter period that the        
registrant was required to file such reports), and (2) has been subject to such 
filing requirements for the past 90 days.                                       

    Yes |X| No |_|

 APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of September 11, 2000:                                       

      Class A Common Stock: 36,909,292
Class B Common Stock: None

Page 1 of 25

10-Q 2nd Page of 25 TOC 1st Previous Next ↓Bottom Just 2nd
 AUTOTOTE CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 AND OTHER INFORMATION

 QUARTER ENDED JULY 31, 2000

                                                                          Page
                                                                          ----

PART I.  FINANCIAL INFORMATION                                                  

Item 1.  Consolidated Financial Statements:                                     

Balance Sheets as of October 31, 1999       
              and July 31, 2000                                        3

       Statements of Operations for the Three Months Ended
              July 31, 1999 and 2000                                   4

      Statements of Operations for the Nine Months Ended
              July 31, 1999 and 2000                                   5

      Statements of Cash Flows for the Nine Months Ended
              July 31, 1999 and 2000                                   6

                 Notes to Consolidated Financial Statements               7-17

Item 2.  Management's Discussion and Analysis of Financial                      
                  Condition and Results of Operations                      18-22

PART II. OTHER INFORMATION                                                      

Item 1.  Legal Proceedings                                                 23   

Item 2.  Changes in Securities                                             23   

Item 6.  Exhibits and Reports on Form 8-K                                  24   

2 

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 AUTOTOTE CORPORATION AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

                                                        [Enlarge/Download Table]

                                                                                 October 31,   July 31,  
                                                                                    1999         2000    
                                                                                 -----------   --------- 
                                           ASSETS                                             (Unaudited)
                                                                                                         
Current assets:                                                                                          
     Cash and cash equivalents ................................................   $   5,067       3,181  
     Restricted cash ..........................................................         771         795  
     Accounts receivable, net .................................................      25,755      23,645  
     Inventories ..............................................................      14,636       8,452  
     Prepaid expenses, deposits and other current assets ......................       2,319       3,138  
                                                                                  ---------   ---------  
          Total current assets ................................................      48,548      39,211  
                                                                                  ---------   ---------  
Property and equipment, at cost ...............................................     199,767     223,791  
     Less accumulated depreciation ............................................     123,039     132,424  
                                                                                  ---------   ---------  
          Net property and equipment ..........................................      76,728      91,367  
                                                                                  ---------   ---------  
Goodwill, net of amortization .................................................       5,237       3,992  
Operating right, net of amortization ..........................................      13,848      13,098  
Other assets and investments ..................................................      21,198      27,036  
                                                                                  ---------   ---------  
                                                                                  $ 165,559     174,704  
                                                                                  =========   =========  
                   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                        
Current liabilities:                                                                                     
     Current installments of long-term debt ...................................   $   4,253         877  
     Accounts payable .........................................................      20,102      13,456  
     Accrued liabilities ......................................................      28,015      20,770  
     Interest payable .........................................................       3,898       7,588  
                                                                                  ---------   ---------  
          Total current liabilities ...........................................      56,268      42,691  
                                                                                  ---------   ---------  
Deferred income taxes .........................................................       1,656       1,642  
Other long-term liabilities ...................................................       2,963       3,702  
Long-term debt, excluding current installments ................................     117,891     134,882  
Long-term debt, convertible subordinated debentures ...........................      35,000      35,000  
                                                                                  ---------   ---------  
          Total liabilities ...................................................     213,778     217,917  
                                                                                  ---------   ---------  
Stockholders' equity (deficit):                                                                          
     Preferred stock, par value $1.00 per share, 2,000 shares                                            
        authorized, none outstanding ..........................................          --          --  
     Class A common stock, par value $0.01 per share, 99,300 shares authorized,                          
        36,268 and 36,909 shares outstanding at October 31, 1999                                         
        and July 31, 2000 , respectively ......................................         364         370  
     Class B non-voting common stock, par value $0.01 per share, 700 shares                              
        authorized, none outstanding ..........................................          --          --  
     Additional paid-in capital ...............................................     149,622     151,289  
     Accumulated losses .......................................................    (196,852)   (192,421) 
     Accumulated other comprehensive loss .....................................      (1,251)     (2,349) 
     Treasury stock, at cost ..................................................        (102)       (102) 
                                                                                  ---------   ---------  
          Total stockholders' equity (deficit) ................................     (48,219)    (43,213) 
                                                                                  ---------   ---------  
                                                                                  $ 165,559     174,704  
                                                                                  =========   =========  

See accompanying notes to consolidated financial statements.

3 

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 AUTOTOTE CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS

 Three Months Ended July 31, 1999 and 2000
 (Unaudited, in thousands, except per share amounts)

                                                        [Enlarge/Download Table]

                                                                                1999        2000  
                                                                              --------   -------- 
                                                                                                  
Operating revenues:                                                                               
     Services ..............................................................  $ 38,883     40,840 
     Sales .................................................................    14,287      9,139 
                                                                              --------   -------- 
                                                                                53,170     49,979 
                                                                              --------   -------- 
Operating expenses (exclusive of depreciation and amortization shown below):                      
     Services ..............................................................    25,908     26,164 
     Sales .................................................................     9,631      5,563 
                                                                              --------   -------- 
                                                                                35,539     31,727 
                                                                              --------   -------- 
          Total gross profit ...............................................    17,631     18,252 
Selling, general and administrative expenses ...............................     6,641      6,662 
Depreciation and amortization ..............................................     5,352      5,308 
                                                                              --------   -------- 
          Operating income .................................................     5,638      6,282 
                                                                              --------   -------- 
Other deductions:                                                                                 
     Interest expense ......................................................     4,011      4,413 
     Other income ..........................................................      (163)       (67)
                                                                              --------   -------- 
                                                                                 3,848      4,346 
                                                                              --------   -------- 
Income before income tax expense (benefit) .................................     1,790      1,936 
Income tax expense (benefit) ...............................................      (105)       275 
                                                                              --------   -------- 
          Net income .......................................................  $  1,895      1,661 
                                                                              ========   ======== 

          Net income per basic share .......................................  $   0.05       0.05 
                                                                              ========   ======== 
          Net income per diluted share .....................................  $   0.05       0.04 
                                                                              ========   ======== 
Weighted average number of shares used in per share calculation:                                  
          Basic shares .....................................................    36,169     36,886 
                                                                              ========   ======== 
          Diluted shares ...................................................    38,699     41,430 
                                                                              ========   ======== 

See accompanying notes to consolidated financial statements.

4 

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 AUTOTOTE CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS

Nine Months Ended July 31, 1999 and 2000
 (Unaudited, in thousands, except per share amounts)

                                                        [Enlarge/Download Table]

                                                                                1999      2000   
                                                                              --------  -------- 
                                                                                                 
Operating revenues:                                                                              
     Services ..............................................................  $109,608   115,458 
     Sales .................................................................    42,293    35,147 
                                                                              --------  -------- 
                                                                               151,901   150,605 
                                                                              --------  -------- 
Operating expenses (exclusive of depreciation and amortization shown below):                     
     Services ..............................................................    72,801    75,091 
     Sales .................................................................    30,505    21,916 
                                                                              --------  -------- 
                                                                               103,306    97,007 
                                                                              --------  -------- 
          Total gross profit ...............................................    48,595    53,598 
Selling, general and administrative expenses ...............................    19,854    19,909 
Depreciation and amortization ..............................................    16,363    15,960 
                                                                              --------  -------- 
          Operating income .................................................    12,378    17,729 
                                                                              --------  -------- 
Other deductions:                                                                                
     Interest expense ......................................................    12,181    12,850 
     Other (income) expense ................................................        77      (138)
                                                                              --------  -------- 
                                                                                12,258    12,712 
                                                                              --------  -------- 
Income before income tax expense ...........................................       120     5,017 
Income tax expense .........................................................        87       586 
                                                                              --------  -------- 
          Net income .......................................................  $     33     4,431 
                                                                              ========  ======== 

          Net income per basic share .......................................  $     --      0.12 
                                                                              ========  ======== 
          Net income per diluted share .....................................  $     --      0.11 
                                                                              ========  ======== 
Weighted average number of shares used in per share calculation:                                 
          Basic shares .....................................................    36,075    36,632 
                                                                              ========  ======== 
          Diluted shares ...................................................    38,004    41,250 
                                                                              ========  ======== 

See accompanying notes to consolidated financial statements.

5 

10-Q 6th Page of 25 TOC 1st Previous Next ↓Bottom Just 6th
 AUTOTOTE CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended July 31, 1999 and 2000
 (Unaudited, in thousands)

                                                        [Enlarge/Download Table]

                                                                          1999       2000   
                                                                        --------   -------- 
                                                                                            
Cash flows from operating activities:                                                       
     Net income ......................................................  $     33      4,431 
                                                                        --------   -------- 
     Adjustments to reconcile net income to cash provided by operating                      
       activities:                                                                          
          Depreciation and amortization ..............................    16,363     15,960 
          Changes in operating assets and liabilities ................     8,797     (2,564)
          Other ......................................................       946      1,170 
                                                                        --------   -------- 
               Total adjustments .....................................    26,106     14,566 
                                                                        --------   -------- 
Net cash provided by operating activities ............................    26,139     18,997 
                                                                        --------   -------- 

Cash flows from investing activities:                                                       
     Capital expenditures ............................................    (1,306)    (3,225)
     Wagering systems expenditures ...................................    (9,971)   (24,490)
     Increase in other assets and investments ........................    (5,034)    (8,176)
                                                                        --------   -------- 
Net cash used in investing activities ................................   (16,311)   (35,891)
                                                                        --------   -------- 

Cash flows from financing activities:                                                       
     Net borrowings under revolving credit facility ..................        --      6,420 
     Proceeds from the issuance of long-term debt ....................        60     11,021 
     Payments on long-term debt ......................................    (2,356)    (3,575)
     Net proceeds from issuance of common stock ......................       146      1,450 
                                                                        --------   -------- 
Net cash provided (used) by financing activities .....................    (2,150)    15,316 
                                                                        --------   -------- 

Effect of exchange rate changes on cash ..............................       (22)      (308)
                                                                        --------   -------- 
Increase (decrease) in cash and cash equivalents .....................     7,656     (1,886)
Cash and cash equivalents, beginning of period .......................     6,809      5,067 
                                                                        --------   -------- 
Cash and cash equivalents, end of period .............................  $ 14,465      3,181 
                                                                        ========   ======== 

Supplemental disclosure of cash flow information:                                           
  Cash paid during the period for:                                                          
     Interest ........................................................  $  7,843      8,500 
                                                                        ========   ======== 
     Income taxes ....................................................  $    579        586 
                                                                        ========   ======== 

See accompanying notes to consolidated financial statements.

6 

10-Q 7th Page of 25 TOC 1st Previous Next ↓Bottom Just 7th
 AUTOTOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 (Unaudited, in thousands, except per share amounts)

1)    Consolidated Financial Statements                                         

Basis of Presentation                                                           

   The consolidated balance sheet as of July 31, 2000 and the consolidated
statements of operations for the three and nine months ended July 31, 1999 and  
2000, and the consolidated statements of cash flows for the nine months then    
ended, have been prepared by the Company without audit. In the opinion of       
management, all adjustments necessary to present fairly the financial position  
of the Company at July 31, 2000 and the results of its operations for the three 
and nine months ended July 31, 1999 and 2000 and its cash flows for the nine    
months ended July 31, 1999 and 2000 have been made.                             

Certain information and footnote disclosures normally included in   
financial statements prepared in accordance with generally accepted accounting  
principles have been condensed or omitted. These consolidated financial         
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended 
October 31, 1999. The results of operations for the nine months ended July 31,  
2000 are not necessarily indicative of the operating results for the full year. 

Certain items in the prior year's financial statements have been    
reclassified to conform with the current year presentation.                     

Basic Net Income Per Share and Diluted Net Income Per Share                     

      The following represents a reconciliation of the numerator and denominator
used in computing basic and diluted net income per share for the three and nine 
month periods ended July 31, 1999 and 2000:                                     

                                                        [Enlarge/Download Table]

                                                           Three Months Ended   Nine Months Ended
                                                                 July 31,           July 31,     
                                                           ------------------  ------------------
                                                              1999      2000     1999      2000  
                                                            -------   -------  -------   ------- 
                                                                                                 
Income (numerator)                                                                               
Net income ..............................................   $ 1,895     1,661       33     4,431 
                                                            =======   =======  =======   ======= 

Shares (denominator)                                                                             
Basic weighted average common shares outstanding ........    36,169    36,886   36,075    36,632 
Effect of diluted securities-stock options, warrants, and                                        
     deferred shares ....................................     2,530     4,544    1,929     4,618 
                                                            -------   -------  -------   ------- 
Diluted weighted average common shares outstanding ......    38,699    41,430   38,004    41,250 
                                                            =======   =======  =======   ======= 

Per Share Amount                                                                                 
Basic net income per share ..............................   $  0.05      0.05       --      0.12 
                                                            =======   =======  =======   ======= 
Diluted net income per share ............................   $  0.05      0.04       --      0.11 
                                                            =======   =======  =======   ======= 

  At July 31, 2000, the Company had outstanding stock options, warrants,
convertible subordinated debentures and deferred shares which could potentially 
dilute basic earnings per share in the future. (See Notes 12 and 13 to the      
Consolidated Financial Statements for the year ended October 31, 1999 in the    
Company's 1999 Annual Report on Form 10-K.)                                     

7 

10-Q 8th Page of 25 TOC 1st Previous Next ↓Bottom Just 8th
 AUTOTOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

 (Unaudited, in thousands, except per share amounts)

2)    Acquisition of Datasport Assets and Interest in Datek                     

On September 1, 1999, the Company completed the purchase of selected
assets and the assumption of certain liabilities from Datasport Toto            
Dienstleistung GmbH & Co KG ("Datasport"). As a result of this purchase, the    
Company is the sole provider of totalisator and simulcasting services to the 14 
thoroughbred racetracks in Germany. The transaction also increased the Company's
ownership and control of Datek GmbH ("Datek"), the primary provider of          
pari-mutuel wagering to off-track betting establishments ("OTBs") and bookmakers
in Germany. The purchase, which included a cash payment of approximately $2,333 
and the assumption of certain liabilities, was recorded using the purchase      
method of accounting, and the acquired assets and liabilities have been recorded
at their estimated fair value at the date of acquisition. The excess of the     
purchase price over the fair values of the net assets acquired was approximately
$3.2 million and has been recorded as goodwill which is being amortized over 15 
years. The operating results of the Datasport and Datek businesses have been    
included in the consolidated statements of operations since the date of         
acquisition. Had the operating results of the Datasport and Datek businesses    
been included as if the transaction had been consummated on November 1, 1998,   
the pro forma operating results of the Company for the three and nine month     
periods ended July 31, 1999 would not have been materially different.           

3)    Business Segments                                                         

    The following tables represent revenues and profits by business segments
for the three and nine month periods ended July 31, 1999 and 2000. Corporate    
expenses are allocated among business segments. Interest expense and other      
(income) deductions are not allocated to business segments.                     

                                                                [Download Table]

                                     Three Months Ended     Nine Months Ended   
                                          July 31,              July 31,        
                                    --------------------   -------------------- 
                                      1999        2000       1999        2000   
                                    --------    --------   --------    -------- 
                                                                                
Service revenue and product sales:                                              
     Pari-mutuel operations ......  $ 27,597      22,185     69,082      73,525 
     Venue management operations .    16,277      16,139     46,023      46,208 
     Lottery operations ..........     9,282      11,655     36,196      30,545 
     SJC Video operations ........        14          --        600         327 
                                    --------    --------   --------    -------- 
                                    $ 53,170      49,979    151,901     150,605 
                                    ========    ========   ========    ======== 

Gross profit:                                                                   
     Pari-mutuel operations ......  $ 10,928      10,050     27,761      31,579 
     Venue management operations .     4,163       4,525     11,500      12,840 
     Lottery operations ..........     2,679       3,677      9,268       9,179 
     SJC Video operations ........      (139)         --         66          -- 
                                    --------    --------   --------    -------- 
          Total gross profit .....  $ 17,631      18,252     48,595      53,598 
                                    ========    ========   ========    ======== 

Operating income (loss):                                                        
     Pari-mutuel operations ......  $  2,825       1,945      2,909       6,639 
     Venue management operations .     1,784       2,204      4,498       6,048 
     Lottery operations ..........     1,459       2,133      5,843       5,042 
     SJC Video operations ........      (430)         --       (872)         -- 
                                    --------    --------   --------    -------- 
                                       5,638       6,282     12,378      17,729 
Other deductions:                                                               
     Interest expense ............     4,011       4,413     12,181      12,850 
     Other (income) expense ......      (163)        (67)        77        (138)
                                    --------    --------   --------    -------- 
Income before income tax expense .  $  1,790       1,936        120       5,017 
                                    ========    ========   ========    ======== 

8 

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 AUTOTOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

 (Unaudited, in thousands, except per share amounts)

3)    Business Segments--(Continued)                                            

                                       October 31,    July 31,
                                         1999         2000
                                       -----------    --------
Assets                                                              
  Pari-mutuel operations .............   $110,598      111,293
  Venue management operations ........     34,613       34,832
  Lottery operations .................     20,348       28,579
  SJC Video operations ...............         --           --
                                         --------     --------
                                         $165,559      174,704
                                         ========     ========

                                          Nine Months Ended July 31,
                                          --------------------------
                                         1999         2000
                                         --------     --------
Capital and wagering systems expenditures                           
  Pari-mutuel operations .............   $  7,749       16,981
  Venue management operations ........      1,016        1,479
  Lottery operations .................      2,428        9,255
  SJC Video operations ...............         84           --
                                         --------     --------
                                         $ 11,277       27,715
                                         ========     ========

4)    Comprehensive Income (Loss)                                               

  The following presents a reconciliation of net income to comprehensive
income (loss) for the three and nine months ended July 31, 1999 and 2000:       

                                                                [Download Table]

                                    Three months ended   Nine months ended  
                                         July 31,             July 31,      
                                    ------------------  ------------------- 
                                     1999        2000    1999         2000  
                                    ------      ------  ------       ------ 
                                                                            
Net income .......................  $1,895       1,661      33        4,431 
Other comprehensive income (loss):                                          
     Foreign currency translation       50          78    (287)      (1,098)
                                    ------      ------  ------       ------ 
Comprehensive income (loss) ......  $1,945       1,739    (254)       3,333 
                                    ======      ======  ======       ====== 

5)    Inventories                                                               

Inventories consist of the following:                               

                                            October 31,       July 31,
                                             1999             2000
                                            ----------        --------
Parts and work-in-process ..........         $13,735           7,429
Finished goods .....................             344             189
Ticket paper .......................             557             834
                                             -------         -------
                                             $14,636           8,452
                                             =======         =======

   Work-in-process includes costs for equipment expected to be sold. Costs
incurred for equipment associated with specific wagering system service         
contracts not yet placed in service are classified as construction in progress  
in property and equipment.                                                      

9 

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 AUTOTOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 (Unaudited, in thousands, except per share amounts)

6)    Other Assets and Investments                                              

Other assets at July 31, 2000 includes $750 loaned by the Company to
Atlantic City Racing Association ("ACRA"). The loan is secured by a mortgage on 
certain real estate owned by ACRA. In consideration for this loan, the Company  
had the right to acquire ACRA for an additional $6,250 subject to certain other 
adjustments. The Company had extended its option to acquire the ACRA until      
August 31, 2000. The extension period expired without the Company exercising its
option. The Company is currently evaluating its ability to extend the option and
determining what portion, if any, of the loan will be recovered. If the Company 
decides in the fourth quarter of fiscal 2000 not to pursue the acquisition of   
ACRA, the Company will charge to expense deferred acquisition costs of          
approximately $350, and may charge $750 to expense if the Company decides that  
the loan is not recoverable.                                                    

7)    Debt                                                                      

     On June 19, 2000, the Company entered into a $10,000 term loan (the "2000
Term Loan") which matures on February 15, 2001. The 2000 Term Loan bears        
interest at a rate of prime plus 2.50% per annum or LIBOR plus 3.50% per annum, 
and such interest is paid quarterly. Loan repayments of $100 were due August 15 
and November 15, 2000, with a final principal payment of $9,800 due at maturity.

 At July 31, 2000, the Company had approximately $17,806 available for
borrowing under the Company's then existing revolving credit facility (the "Old 
Facility"). There were $6,420 in borrowings outstanding under the Old Facility  
at July 31, 2000, approximately $774 in letters of credit were issued under the 
Old Facility, and $110,000 was outstanding under the 10 7/8%, Series B Senior   
Notes due 2004 (the "10 7/8% Notes"). All borrowings outstanding under the Old  
Facility, the 2000 Term Loan, the 1998 Term Loan, the 10 7/8% Notes and $35,000 
of convertible subordinated debentures were repaid on September 6, 2000 at the  
time of the Scientific Games acquisition and approximately $450 in letters of   
credit were collateralized by funds deposited into escrow. (See below.)         

8)    Acquisition of Scientific Games Holdings Corp. and New Debt and Equity    
Financing                                                           

     On September 6, 2000, the Company completed the acquisition of Scientific
Games Holdings Corp. ("Scientific Games"), a world leading supplier of lottery  
products, integrated lottery systems and support services, and pre-paid         
telephone cards. The acquisition was completed through a merger in which        
Scientific Games became a wholly-owned subsidiary of the Company, at a cost of  
approximately $308,000 in aggregate merger consideration to Scientific Games    
stockholders, plus related fees and expenses. The acquisition will be recorded  
using the purchase method of accounting, the acquired assets and liabilities    
will be recorded at their estimated fair value at the date of acquisition and   
the operating results of Scientific Games' businesses will be included in the   
consolidated statements of operations from the date of the acquisition.         

     The Scientific Games acquisition and the refinancing of substantially all
existing debt of both the Company (see Note 7) and Scientific Games, along with 
the payment of certain related fees and expenses, was completed with funds      
provided by: (1) proceeds from the issuance of $150,000 principal amount of the 
Company's 12 1/2% Senior Subordinated Notes due August 15, 2010 (the "Notes");  
(2) $280,000 of term loan borrowings under the terms of a new senior credit     
facility (the "New Facility"); (3) $2,987 of borrowings under the revolving     
credit facility of the New Facility; (4) $4,805 of cash on hand; and (5)        
$110,000 of gross proceeds from the sale of new convertible preferred stock,    
principally to an affiliated entity of Olivetti S.p.A. (collectively, the       
"Transactions").                                                                

   The Notes were originally issued on August 14, 2000, in anticipation of
the completion of the pending Scientific Games acquisition, with the proceeds of
the Note issuance being held in escrow for the redemption of the Notes if the   
consummation of the Scientific Games acquisition and other Transactions did not 
occur. The process was completed and the escrow released on September 6, 2000.  
The Notes bear interest at the rate of 12 1/2% per annum payable semi-annually  
on each February 15 and August 15, commencing February 15, 2001. The Notes are  
senior subordinated, unsecured obligations of the Company, ranking junior to all
existing and future senior debt including obligations under the New Facility.   
The Notes are fully and unconditionally guaranteed on a senior subordinated     
basis by all of the Company's wholly-owned U.S. subsidiaries.                   

10

10-Q 11th Page of 25 TOC 1st Previous Next ↓Bottom Just 11th
 AUTOTOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 (Unaudited, in thousands, except per share amounts)

8)    Acquisition of Scientific Games Holdings Corp. and New Debt and Equity    
Financing--(Continued)                                              

      The Notes will be redeemable, at the option of the Company, at any time on
or after August 15, 2005, in whole or in part. In addition, on or before August 
15, 2003, the Company may, at its option, redeem up to 35% of the Notes at 112% 
of the principal amount thereof, plus accrued and unpaid interest, with the net 
proceeds of equity offerings, provided at least 65% of the original aggregate   
principal amount of the Company's new Notes remains outstanding immediately     
after such redemption.                                                          

     In addition to the issuance of the Notes, the Company also entered into a
New Facility with certain lenders, providing for borrowings of up to $345,000.  
The New Facility, consists of: (a) a $65,000 revolving credit facility (the     
"Revolver") which matures in September 2006 with interest at the Base Rate (as  
defined) plus a margin of 2.25% per annum, or at the rate of LIBOR plus a margin
of 3.50% per annum, plus a commitment fee on the unused portion of 0.05% per    
annum for the first six months and thereafter as determined by reference to a   
leverage-based pricing grid; (b) a $60,000 term loan (the "Term A Loan") which  
matures in September 2006 with interest at the Base Rate plus a margin of 2.25% 
per annum, or at the rate of LIBOR plus 3.50% per annum for the first six months
and thereafter as determined by reference to a leverage-based pricing grid; and 
(c) a $220,000 term loan (the "Term B Loan") which matures in September 2007    
with interest at the Base Rate plus a margin of 3.00% per annum or at the rate  
of LIBOR plus 4.25% per annum. The New Facility is secured by a first-priority, 
perfected lien on: (i) substantially all the property and assets (real and      
personal, tangible and intangible) of the Company and its domestic subsidiaries,
(ii) 100% of the capital stock of all of the direct and indirect domestic       
subsidiaries and 65% of the capital stock of the foreign subsidiaries of the    
Company and (iii) all inter-company indebtedness owing to the Company and its   
material subsidiaries. The New Facility will also be supported by guarantees    
provided by all of the Company's direct and indirect, wholly-owned domestic     
subsidiaries. The New Facility will be subject to the following mandatory       
prepayments with certain customary exceptions, to the extent of: (i) 100% of the
net cash proceeds from the sale or issuance of debt securities; (ii) 100% of the
net proceeds from the sale of assets and casualty insurance proceeds; (iii) 50% 
of the Company's excess cash flow (as defined), or if the leverage ratio is less
than 3.00 to 1.00, 25% of the Company's excess cash flow; and (iv) 50% of the   
net cash proceeds from the sale or issuance of equity (except for the issuance  
of the Company's new convertible preferred stock).                              

 The indenture governing the Notes and the agreement governing the New
Facility contain certain covenants that, among other things, limit the Company's
ability and the ability of certain of the Company's restricted subsidiaries, to 
incur additional indebtedness, pay dividends or distributions or make certain   
other restricted payments, purchase or redeem capital stock, make investments or
extend credit, engage in certain transactions with affiliates, engage in        
sale-leaseback transactions, consummate certain asset sales, effect a           
consolidation or merger or sell, transfer, lease or otherwise dispose of all or 
substantially all assets, and create certain liens and other encumbrances on new
assets. Additionally, the agreement governing the New Facility contains the     
following financial covenants which will be computed quarterly on a rolling     
four-quarter basis as applicable: (i) minimum Interest Coverage ratio, (ii)     
minimum Fixed Charge Coverage ratio; (iii) maximum Leverage ratio; and (iv)     
minimum Net Worth.                                                              

     On September 6, 2000, the Company issued, for gross proceeds of $110,000,
1.1 million shares of new Series A Convertible Preferred Stock (the "Preferred  
Stock"), including $100,000 to Cirmatica Gaming, S.A., an affiliate of          
Lottomatica S.p.A. (the state concessionaire for the Italian Lotto game and an  
affiliate of Olivetti S.p.A. and Telecom Italia S.p.A.), and $10,000 to other   
investors through Ramius Securities, LLC ("Ramius"), which acted as placement   
agent.                                                                          

      The Preferred Stock is convertible into Company common stock at a price of
$6.00 per share (subject to potential reset to no less than $5.00 per share     
based on possible future market price minimums), will mature and become         
mandatorily convertible into common stock after five years and will pay         
dividends at the rate of 6% per annum (payable in kind in additional shares or, 
at the Company's option beginning with the ninth quarterly dividend date, in    
cash). The holders of Preferred Stock also have the right to participate on an  
as-converted basis in any dividends with respect to the common stock. The       
holders of Preferred Stock have the right to vote along with the holders of     
common stock on all matters on which the holders of common stock are entitled to
vote, are entitled to vote separately as a class with respect to certain        
matters, and are also entitled to certain rights of first refusal with respect  
to future financings. The Preferred Stock is also subject to certain customary  
anti-dilution provisions. In addition, the holders of Preferred Stock have the  
right to designate, initially, four members of the Company's Board of Directors 
(and to elect three additional Directors in the event of certain defaults by the
Company). The Preferred Stock has preference over common stock with regard to   
the distribution of assets upon a liquidation, dissolution or other winding up  
of the Company.                                                                 

11

10-Q 12th Page of 25 TOC 1st Previous Next ↓Bottom Just 12th
 AUTOTOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

 (Unaudited, in thousands, except per share amounts)

8)    Acquisition of Scientific Games Holdings Corp. and New Debt and Equity    
Financing--(Continued)                                              

    In connection with the Transactions, the Company also issued 27.5 shares
of Preferred Stock to Ramius, which acted as placement agent in connection with 
the sale of the Preferred Stock, and issued warrants to purchase at a nominal   
price 2,900 shares of the Company's common stock to Donaldson, Lufkin & Jenrette
Securities Corporation and LBI Group, Inc. (an affiliate of Lehman Brothers),   
the Company's financial advisors in connection with their services to the       
Company in obtaining certain financing commitments.                             

     In the fourth quarter of fiscal 2000, the Company expects to take charges
in connection with the refinancing which could aggregate approximately $23      
million for the write-off of deferred financing fees related to the Old         
Facility, to record the premium paid to repurchase the 10 7/8% Notes and        
expenses associated with certain bridge loans.                                  

     Further information regarding aspects of the Scientific Games acquisition
and financing can be found in the Current Reports on Form 8-K filed by the      
Company on May 19, 2000 and May 26, 2000 and certain Exhibits to this Quarterly 
Report on Form 10-Q.                                                            

9)    Financial Information for Guarantor Subsidiaries and Non-Guarantor        
Subsidiaries                                                        

The Company conducts substantially all of its business through its  
domestic and foreign subsidiaries. In July 1997, the Company issued $110,000    
aggregate principal amount of 10 7/8% Notes. On May 22, 1998, the Company and   
Autotote Lottery Corporation entered into a $12,000 three-year term loan        
arrangement that bears interest at a fixed annual rate of 8.87% (the "1998 Term 
Loan"). On June 19, 2000, the Company entered into a $10,000 term loan (the     
"2000 Term Loan") which bears interest at a rate of prime plus 2.50% per annum  
or LIBOR plus 3.50% per annum and matures on February 15, 2001. The 1998 Term   
Loan and the 2000 Term Loan were extended in conjunction with the Old Facility  
and are subject to certain restrictive and financial covenants contained in the 
Old Facility. Obligations under the Old Facility and the 10 7/8% Notes are      
jointly and severally guaranteed by substantially all of the Company's          
wholly-owned domestic subsidiaries (the "Guarantor Subsidiaries"). (See Note 8  
to the Consolidated Financial Statements for the year ended October 31, 1999 in 
the Company's 1999 Annual Report on Form 10-K.)                                 

On August 14, 2000, in connection with the Transactions, the Company
issued $150,000 aggregate principal amount of its new Notes, with the proceeds  
being held in escrow, and on September 6, 2000 the escrow was released and the  
Company entered into its New Facility with certain lenders for borrowings of up 
to $345,000. Obligations under the New Facility and the Notes are fully and     
unconditionally guaranteed by all of the Company's Guarantor Subsidiaries. (See 
Note 8).                                                                        

    Presented below is condensed consolidating financial information for (i)
Autotote Corporation (the "Parent Company") which includes the activities of    
Autotote Management Corporation, (ii) the Guarantor Subsidiaries and (iii) the  
wholly-owned foreign subsidiaries and the non-wholly owned domestic and foreign 
subsidiaries (the "Non-Guarantor Subsidiaries") as of October 31, 1999 (audited)
and July 31, 2000 (unaudited) and for the three and nine month periods ended    
July 31, 1999 and 2000 (unaudited). The condensed consolidating financial       
information has been presented to show the nature of assets held, results of    
operations and cash flows of the Parent Company, Guarantor Subsidiaries and     
Non-Guarantor Subsidiaries assuming the guarantee structure of the Notes and the
New Facility were in effect at the beginning of the periods presented. Separate 
financial statements for Guarantor Subsidiaries are not presented based on      
management's determination that they would not provide additional information   
that is material to investors.                                                  

      The condensed consolidating financial information reflects the investments
of the Parent Company in the Guarantor and Non-Guarantor Subsidiaries using the 
equity method of accounting. In addition, corporate interest and administrative 
expenses have not been allocated to the subsidiaries.                           

12

10-Q 13th Page of 25 TOC 1st Previous Next ↓Bottom Just 13th
 AUTOTOTE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
October 31, 1999
(in thousands)

                                                        [Enlarge/Download Table]

                                                             Parent      Guarantor    Non-Guarantor  Eliminating              
                                                             Company    Subsidiaries  Subsidiaries     Entries    Consolidated
                                                            ---------   ------------  -------------  -----------  ------------
                                                                                                                              
ASSETS                                                                                                                        
   Cash and cash equivalents .............................. $   1,598          506         2,963            --          5,067 
   Accounts receivable, net ...............................        --       21,083         4,672            --         25,755 
   Other current assets ...................................        30       14,143         4,017          (464)        17,726 
   Property and equipment, net ............................       298       66,973         9,708          (251)        76,728 
   Investment in subsidiaries .............................    58,214           --            --       (58,214)            -- 
   Goodwill ...............................................       198          353         4,686            --          5,237 
   Other assets ...........................................     6,199       30,385           659        (2,197)        35,046 
                                                            ---------    ---------     ---------     ---------      --------- 

      Total assets ........................................ $  66,537      133,443        26,705       (61,126)       165,559 
                                                            =========    =========     =========     =========      ========= 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                
   Current installments of long-term debt ................. $   1,250        2,429           574            --          4,253 
   Current liabilities ....................................    12,219       29,546        10,922          (672)        52,015 
   Long-term debt, excluding current installments .........   145,000        6,627         1,264            --        152,891 
   Other non-current liabilities ..........................     2,193        1,233         1,766          (573)         4,619 
   Intercompany balances ..................................   (45,906)      43,214         1,942           750             -- 
   Stockholders' equity (deficit) .........................   (48,219)      50,394        10,237       (60,631)       (48,219)
                                                            ---------    ---------     ---------     ---------      --------- 

      Total liabilities and stockholders' equity (deficit)  $  66,537      133,443        26,705       (61,126)       165,559 
                                                            =========    =========     =========     =========      ========= 

 AUTOTOTE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
 July 31, 2000
 (Unaudited, in thousands)

                                                        [Enlarge/Download Table]

                                                             Parent      Guarantor    Non-Guarantor  Eliminating              
                                                             Company    Subsidiaries  Subsidiaries     Entries    Consolidated
                                                            ---------   ------------  -------------  -----------  ------------
                                                                                                                              
ASSETS                                                                                                                        
   Cash and cash equivalents .............................. $      35        1,147         1,998             1          3,181 
   Accounts receivable, net ...............................        --       18,473         5,172            --         23,645 
   Other current assets ...................................        17        8,933         3,686          (251)        12,385 
   Property and equipment, net ............................       272       80,343        11,019          (267)        91,367 
   Investment in subsidiaries .............................    81,938           --            --       (81,938)            -- 
   Goodwill ...............................................       193           --         3,799            --          3,992 
   Other assets ...........................................     9,440       31,669         1,387        (2,362)        40,134 
                                                            ---------    ---------     ---------     ---------      --------- 

      Total assets ........................................ $  91,895      140,565        27,061       (84,817)       174,704 
                                                            =========    =========     =========     =========      ========= 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                
   Current installments of long-term debt ................. $     100            7           770            --            877 
   Current liabilities ....................................    14,427       20,058         7,631          (302)        41,814 
   Long-term debt, excluding current installments .........   161,320        7,222         1,340            --        169,882 
   Other non-current liabilities ..........................     3,086          648         2,183          (573)         5,344 
   Intercompany balances ..................................   (43,825)      39,657         3,783           385             -- 
   Stockholders' equity (deficit) .........................   (43,213)      72,973        11,354       (84,327)       (43,213)
                                                            ---------    ---------     ---------     ---------      --------- 

      Total liabilities and stockholders' equity (deficit)  $  91,895      140,565        27,061       (84,817)       174,704 
                                                            =========    =========     =========     =========      ========= 

13

10-Q 14th Page of 25 TOC 1st Previous Next ↓Bottom Just 14th
 AUTOTOTE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended July 31, 1999
 (Unaudited, in thousands)

                                                        [Enlarge/Download Table]

                                                                Parent     Guarantor    Non-Guarantor  Eliminating              
                                                                Company   Subsidiaries  Subsidiaries     Entries    Consolidated
                                                               ---------  ------------  -------------  -----------  ------------
                                                                                                                                
Operating revenues ...........................................  $    --       46,250        13,351       (6,431)       53,170   
Operating expenses ...........................................       --       29,284        12,682       (6,427)       35,539   
                                                                -------      -------       -------      -------       -------   

   Gross profit ..............................................       --       16,966           669           (4)       17,631   

Selling, general and administrative expenses .................    2,387        3,286           972           (4)        6,641   
Depreciation and amortization ................................       46        4,578           753          (25)        5,352   
                                                                -------      -------       -------      -------       -------   
   Operating income (loss) ...................................   (2,433)       9,102        (1,056)          25         5,638   
Interest expense .............................................    3,679          221           111           --         4,011   
Other (income) expense .......................................      (50)         (28)          (85)          --          (163)  
                                                                -------      -------       -------      -------       -------   
Income (loss) before equity in income of subsidiaries,                                                                          
   and income taxes ..........................................   (6,062)       8,909        (1,082)          25         1,790   
Equity in income of subsidiaries .............................    8,008           --            --       (8,008)           --   
Income tax expense (benefit) .................................       51           57          (213)          --          (105)  
                                                                -------      -------       -------      -------       -------   

Net income (loss) ............................................  $ 1,895        8,852          (869)      (7,983)        1,895   
                                                                =======      =======       =======      =======       =======   

 AUTOTOTE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended July 31, 2000
 (Unaudited, in thousands)

                                                        [Enlarge/Download Table]

                                                                Parent     Guarantor    Non-Guarantor  Eliminating              
                                                                Company   Subsidiaries  Subsidiaries     Entries    Consolidated
                                                               ---------  ------------  -------------  -----------  ------------
                                                                                                                                
Operating revenues ...........................................  $    --       40,384        13,539       (3,944)       49,979   
Operating expenses ...........................................       --       25,893         9,745       (3,911)       31,727   
                                                                -------      -------       -------      -------       -------   

   Gross profit ..............................................       --       14,491         3,794          (33)       18,252   

Selling, general and administrative expenses .................    2,735        3,017           913           (3)        6,662   
Depreciation and amortization ................................       69        4,489           775          (25)        5,308   
                                                                -------      -------       -------      -------       -------   
   Operating income (loss) ...................................   (2,804)       6,985         2,106           (5)        6,282   
Interest expense .............................................    4,199          141           267         (194)        4,413   
Other (income) expense .......................................     (146)          (9)         (106)         194           (67)  
                                                                -------      -------       -------      -------       -------   
Income (loss) before equity in income of subsidiaries,                                                                          
   and income taxes ..........................................   (6,857)       6,853         1,945           (5)        1,936   
Equity in income of subsidiaries .............................    8,539           --            --       (8,539)           --   
Income tax expense ...........................................       21           69           185           --           275   
                                                                -------      -------       -------      -------       -------   

Net income ...................................................  $ 1,661        6,784         1,760       (8,544)        1,661   
                                                                =======      =======       =======      =======       =======   

14

10-Q 15th Page of 25 TOC 1st Previous Next ↓Bottom Just 15th
 AUTOTOTE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
 Nine Months Ended July 31, 1999
 (Unaudited, in thousands)

                                                        [Enlarge/Download Table]

                                                                Parent      Guarantor    Non-Guarantor  Eliminating              
                                                                Company    Subsidiaries  Subsidiaries     Entries    Consolidated
                                                               ---------   ------------  -------------  -----------  ------------
                                                                                                                                 
Operating revenues ...........................................  $     --     131,715        34,239       (14,053)      151,901   
Operating expenses ...........................................        --      86,694        30,654       (14,042)      103,306   
                                                                --------    --------      --------      --------      --------   

   Gross profit ..............................................        --      45,021         3,585           (11)       48,595   

Selling, general and administrative expenses .................     6,852       9,859         3,159           (16)       19,854   
Depreciation and amortization ................................       136      14,105         2,199           (77)       16,363   
                                                                --------    --------      --------      --------      --------   
   Operating income (loss) ...................................    (6,988)     21,057        (1,773)           82        12,378   
Interest expense .............................................    11,232         727           222            --        12,181   
Other (income) expense .......................................    (1,825)         52             2         1,848            77   
                                                                --------    --------      --------      --------      --------   
Income (loss) before equity in income of subsidiaries,                                                                           
   and income taxes ..........................................   (16,395)     20,278        (1,997)       (1,766)          120   
Equity in income  of subsidiaries ............................    16,597          --            --       (16,597)           --   
Income tax expense (benefit) .................................       169         102          (184)           --            87   
                                                                --------    --------      --------      --------      --------   

Net income (loss) ............................................  $     33      20,176        (1,813)      (18,363)           33   
                                                                ========    ========      ========      ========      ========   

 AUTOTOTE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
 Nine Months Ended July 31, 2000
 (Unaudited, in thousands)

                                                        [Enlarge/Download Table]

                                                                Parent      Guarantor    Non-Guarantor  Eliminating              
                                                                Company    Subsidiaries  Subsidiaries     Entries    Consolidated
                                                               ---------   ------------  -------------  -----------  ------------
                                                                                                                                 
Operating revenues ...........................................  $     --     125,464        37,904       (12,763)      150,605   
Operating expenses ...........................................        --      79,074        30,658       (12,725)       97,007   
                                                                --------    --------      --------      --------      --------   

   Gross profit ..............................................        --      46,390         7,246           (38)       53,598   

Selling, general and administrative expenses .................     7,297       9,481         3,139            (8)       19,909   
Depreciation and amortization ................................       213      13,336         2,488           (77)       15,960   
                                                                --------    --------      --------      --------      --------   
   Operating income (loss) ...................................    (7,510)     23,573         1,619            47        17,729   
Interest expense .............................................    12,106         580           578          (414)       12,850   
Other (income) expense .......................................      (369)       (168)          (15)          414          (138)  
                                                                --------    --------      --------      --------      --------   
Income (loss) before equity in income of subsidiaries,                                                                           
   and income taxes ..........................................   (19,247)     23,161         1,056            47         5,017   
Equity in income  of subsidiaries ............................    23,785          --            --       (23,785)           --   
Income tax expense ...........................................       107         384            95            --           586   
                                                                --------    --------      --------      --------      --------   

Net income ...................................................  $  4,431      22,777           961       (23,738)        4,431   
                                                                ========    ========      ========      ========      ========   

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 AUTOTOTE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
 Nine Months Ended July 31, 1999
 (Unaudited, in thousands)

                                                        [Enlarge/Download Table]

                                                                Parent      Guarantor    Non-Guarantor  Eliminating              
                                                                Company    Subsidiaries  Subsidiaries     Entries    Consolidated
                                                               ---------   ------------  -------------  -----------  ------------
                                                                                                                                 
Net income (loss) ............................................  $     33      20,176        (1,813)      (18,363)           33   
   Depreciation and amortization .............................       136      14,105         2,199           (77)       16,363   
   Equity in income of subsidiaries ..........................   (16,597)         --            --        16,597            --   
   Other non-cash adjustments ................................       930          15             1            --           946   
   Changes in working capital ................................     2,557       8,343        (1,944)         (159)        8,797   
                                                                --------    --------      --------      --------      --------   

Net cash provided by (used in) operating activities ..........   (12,941)     42,639        (1,557)       (2,002)       26,139   
                                                                --------    --------      --------      --------      --------   

Cash flows from investing activities:                                                                                            
   Capital and wagering systems expenditures .................       (26)     (9,467)       (1,780)           (4)      (11,277)  
   Other assets and investments ..............................      (504)     (5,447)         (275)        1,192        (5,034)  
                                                                --------    --------      --------      --------      --------   

Net cash provided by (used in) investing activities ..........      (530)    (14,914)       (2,055)        1,188       (16,311)  
                                                                --------    --------      --------      --------      --------   

Cash flows from financing activities:                                                                                            
   Proceeds from issuance of long-term debt ..................        --          60            --            --            60   
   Payments on long-term debt ................................        --      (2,066)         (290)           --        (2,356)  
   Net proceeds from stock issue .............................       146          --            --            --           146   
   Other, principally intercompany balances ..................    23,081     (25,316)        1,621           614            --   
                                                                --------    --------      --------      --------      --------   

Net cash provided by (used in) financing activities ..........    23,227     (27,322)        1,331           614        (2,150)  
                                                                --------    --------      --------      --------      --------   

Effect of exchange rate changes on cash ......................        45          --          (267)          200           (22)  
                                                                --------    --------      --------      --------      --------   

Increase/(decrease) in cash and cash equivalents .............     9,801         403        (2,548)           --         7,656   
Cash and cash equivalents, beginning of period ...............     2,054         193         4,562            --         6,809   
                                                                --------    --------      --------      --------      --------   

Cash and cash equivalents, end of period .....................  $ 11,855         596         2,014            --        14,465   
                                                                ========    ========      ========      ========      ========   

16

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 AUTOTOTE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
 Nine Months Ended July 31, 2000
 (Unaudited, in thousands)

                                                        [Enlarge/Download Table]

                                                                Parent      Guarantor    Non-Guarantor  Eliminating              
                                                                Company    Subsidiaries  Subsidiaries     Entries    Consolidated
                                                               ---------   ------------  -------------  -----------  ------------
                                                                                                                                 
Net income (loss) ............................................  $  4,431      22,777           961       (23,738)        4,431   
   Depreciation and amortization .............................       213      13,336         2,488           (77)       15,960   
   Equity in income of subsidiaries ..........................   (23,785)         --            --        23,785            --   
   Other non-cash adjustments ................................       915         369          (114)           --         1,170   
   Changes in working capital ................................     2,260      (1,550)       (3,274)           --        (2,564)  
                                                                --------    --------      --------      --------      --------   

Net cash provided by (used in ) operating activities .........   (15,966)     34,932            61           (30)       18,997   
                                                                --------    --------      --------      --------      --------   

Cash flows from investing activities:                                                                                            
   Capital and wagering systems expenditures .................       (68)    (23,735)       (3,942)           30       (27,715)  
   Other assets and investments ..............................    (3,188)     (5,040)         (453)          505        (8,176)  
                                                                --------    --------      --------      --------      --------   

Net cash provided by (used in) investing activities ..........    (3,256)    (28,775)       (4,395)          535       (35,891)  
                                                                --------    --------      --------      --------      --------   

Cash flows from financing activities:                                                                                            
   Net proceeds from issuance of long-term debt ..............    16,420          --         1,021            --        17,441   
   Payments on long-term debt ................................    (1,250)     (1,827)         (498)           --        (3,575)  
   Net Proceeds from stock issue .............................     1,450          --            --            --         1,450   
   Other, principally intercompany balances ..................     1,039      (3,923)        3,389          (505)           --   
                                                                --------    --------      --------      --------      --------   

Net cash provided by (used in) financing activities ..........    17,659      (5,750)        3,912          (505)       15,316   
                                                                --------    --------      --------      --------      --------   

Effect of exchange rate changes on cash ......................        --         235          (543)           --          (308)  
                                                                --------    --------      --------      --------      --------   

Increase/(decrease) in cash and cash equivalents .............    (1,563)        642          (965)           --        (1,886)  
Cash and cash equivalents, beginning of period ...............     1,598         506         2,963            --         5,067   
                                                                --------    --------      --------      --------      --------   

Cash and cash equivalents, end of period .....................  $     35       1,148         1,998            --         3,181   
                                                                ========    ========      ========      ========      ========   

17

10-Q 18th Page of 25 TOC 1st Previous Next ↓Bottom Just 18th
 AUTOTOTE CORPORATION AND SUBSIDIARIES
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS

     The following discussion addresses the financial condition of the Company
as of July 31, 2000 and the results of its operations for the three and nine    
month periods ended July 31, 2000, compared to the same periods last year. This 
discussion should be read in conjunction with the Management's Discussion and   
Analysis of Financial Condition and Results of Operations for the fiscal year   
ended October 31, 1999 included in the Company's 1999 Annual Report on Form     
10-K.                                                                           

  The Company operates primarily in three business segments, Pari-mutuel
Operations, Venue Management and Lottery Operations. Pari-mutuel Operations     
include all aspects of the Company's pari-mutuel service business, which        
encompass North American and international on-track, off-track and inter-track  
pari-mutuel services, simulcasting and communications services, video gaming,   
and sales of pari-mutuel systems and equipment. Venue Management includes the   
Connecticut off-track betting ("OTB") operations and the Netherlands on-track   
and off-track betting operations. Lottery Operations include both domestic and  
international lottery service, as well as sales of lottery systems and          
equipment. In the second quarter of fiscal 2000, the Company completed the sale 
of its SJC Video business.                                                      

     Historically, the Company's revenues have been derived from two principal
sources: service revenues and sales revenues. Service revenues are earned       
pursuant to multi-year contracts to provide wagering systems and other services,
which are typically based on a percentage of Handle and/or daily or monthly     
fees; or are derived from wagering by customers at facilities owned or leased by
the Company. Sales revenues are derived from sales contracts for wagering       
equipment, services and software. The first quarter and a portion of the second 
quarter of the Company's fiscal year traditionally comprise the weakest season  
for pari-mutuel wagering service revenue. Wagering equipment sales revenues     
usually reflect a limited number of large transactions which do not recur on an 
annual basis, but which historically have given rise to additional terminal and 
systems software sales to existing customers. Consequently, revenues and        
operating results can vary substantially from period to period as a result of   
the timing of revenue recognition for major equipment sales.                    

                                                        [Enlarge/Download Table]

                                                             Three Months ended        Nine Months ended 
Results of Operations:                                             July 31,                July 31,      
                                                            -------------------       -------------------
                                                             1999        2000          1999        2000  
                                                            -------     -------       -------     -------
                                                                           (in thousands)                
                                                                                                         
Pari-mutuel Operations                                                                                   
Operating Revenues:                                                                                      
     Service revenue ...................................... $19,663      21,137        55,548      59,539
     Sales revenue ........................................   7,934       1,048        13,534      13,986
                                                            -------     -------       -------     -------
          Total Revenue ................................... $27,597      22,185        69,082      73,525
                                                            =======     =======       =======     =======
Gross Profit (excluding depreciation and amortization)  ... $10,928      10,050        27,761      31,579
                                                            =======     =======       =======     =======

Venue Management Operations                                                                              
Operating Revenues:                                                                                      
     Service revenue ...................................... $16,277      16,139        46,023      46,208
                                                            =======     =======       =======     =======
Gross Profit (excluding depreciation and amortization)  ... $ 4,163       4,525        11,500      12,840
                                                            =======     =======       =======     =======

18

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 AUTOTOTE CORPORATION AND SUBSIDIARIES
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS-(Continued)

                                                        [Enlarge/Download Table]

                                                             Three Months ended        Nine Months ended 
                                                                   July 31,                July 31,      
                                                            -------------------       -------------------
                                                             1999        2000          1999        2000  
                                                            -------     -------       -------     -------
Results of Operations:                                                     (in thousands)                
                                                                                                         
Lottery Operations                                                                                       
Operating Revenues:                                                                                      
     Service revenue ...................................... $ 2,929       3,564         7,437       9,384
     Sales revenue ........................................   6,353       8,091        28,759      21,161
                                                            -------     -------       -------     -------
          Total Revenue ................................... $ 9,282      11,655        36,196      30,545
                                                            =======     =======       =======     =======
Gross Profit (excluding depreciation and amortization)  ... $ 2,679       3,677         9,268       9,179
                                                            =======     =======       =======     =======

SJC Video Operations                                                                                     
Operating Revenues:                                                                                      
     Service revenue ...................................... $    14          --           600         327
                                                            =======     =======       =======     =======
 Gross Profit (Loss)(excluding depreciation and                                                          
     amortization) ........................................ $  (139)         --            66          --
                                                            =======     =======       =======     =======

Company Total                                                                                            
Operating Revenues:                                                                                      
     Service revenue ...................................... $38,883      40,840       109,608     115,458
     Sales revenue ........................................  14,287       9,139        42,293      35,147
                                                            -------     -------       -------     -------
          Total Revenue ................................... $53,170      49,979       151,901     150,605
                                                            =======     =======       =======     =======
Gross Profit (excluding depreciation and amortization)  ... $17,631      18,252        48,595      53,598
                                                            =======     =======       =======     =======

Three Months Ended July 31, 2000 Compared to Three Months Ended July 31, 1999   

  Pari-mutuel Operations service revenues of $21.1 million for the third
quarter of fiscal 2000 improved $1.5 million or 7% from the third quarter of the
prior year. This improvement reflects primarily $1.5 million in revenues from   
the German operations that were acquired in the fourth quarter of fiscal 1999   
and improved revenues in the Company's NASRIN(TM) operations. These increases   
were partially offset by lower service revenues in the North American           
simulcasting operations. Pari-mutuel Operations sales revenues decreased by $6.9
million to $1.0 million in the third quarter of fiscal 2000 due primarily to the
prior year period sales of systems and terminals to the Company's customers in  
the UK, Ireland, Korea and Finland. Pari-mutuel Operations gross profit of $10.1
million or 45% of total revenues, decreased from gross profit of $10.9 million  
or 40% of total revenues in the same period last year. Lower gross profit on    
international equipment sales and lower revenues in the North American          
simulcasting operations, were partially offset by an increase in gross profit on
improved NASRIN(TM) service revenues and improved Handle in the German          
pari-mutuel operations.                                                         

 Venue Management Operations service revenues of $16.1 million for the
third quarter of fiscal 2000 decreased 1% from the service revenues in the third
quarter of the prior year. Handle-related revenue increases of 4% in the        
Connecticut OTB operations were offset by a decrease in the Netherlands         
operations, due primarily to the impact of foreign exchange on reported         
revenues. Gross profit was $4.5 million or 28% of service revenue in the third  
quarter of fiscal 2000, increased over the gross profit of $4.2 million or 26%  
of service revenue in the third quarter of fiscal 1999. This improvement        
primarily reflects higher Handle-related revenues and cost savings in the       
Connecticut OTB operations.                                                     

      Lottery Operations service revenues in the third quarter of fiscal 2000 of
$3.6 million improved $0.6 million from the third quarter of the prior year due 
to the July 2000 launch of the Vermont and New Hampshire lotteries. The $1.7    
million increase in sales revenues to $8.1 million in the third quarter of      
fiscal 2000 is primarily attributable to sales of lottery equipment to the      
Vermont and New Hampshire lotteries and increased sales of Extrema(TM) terminals
to the Company's customer in Italy. Lottery Operations gross profit of $3.7     
million or 32% of total revenues, increased from gross profit of $2.7 million or
29% of total revenues in the same period last year. Higher gross profit was     
earned on improved service revenues due to the two new lottery service contracts
and higher margins on domestic equipment sales.                                 

19

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 AUTOTOTE CORPORATION AND SUBSIDIARIES
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-(Continued) 

Expense Analysis                                                                

Selling, general and administrative expenses including software     
development costs increased less than $0.1 million or less than 1% to $6.7      
million in the third quarter of fiscal 2000. Higher expenses due to increased   
operating levels in the North American and German pari-mutuel operations, and   
the Vermont and New Hampshire lotteries which began in July 2000, were partially
offset by cost reductions in NASRIN(TM) and France, and the absence of the SJC  
Video business.                                                                 

 Depreciation and amortization expenses decreased $0.1 million to $5.3
million in the third quarter of fiscal 2000. Depreciation increased $0.1        
million, primarily due to the installation of wagering system equipment at new  
North American pari-mutuel customers, partly offset by the absence of the SJC   
Video business depreciation. Amortization expense decreased $0.2 million as a   
result of the full amortization of intangible assets associated with the North  
American simulcasting operations.                                               

Interest expense increased $0.4 million to $4.4 million in the third
quarter of fiscal 2000 as a result of an increase in average outstanding        
borrowings during the period.                                                   

Income Taxes                                                                    

      Income tax expense was $0.3 million in the third quarter of fiscal 2000 as
compared to a tax benefit $0.1 million in the third quarter of fiscal 1999.     
Income tax expense principally reflects federal alternative minimum tax, foreign
and state income taxes.                                                         

Nine Months Ended July 31, 2000 Compared to Nine Months Ended July 31, 1999     

  Pari-mutuel Operations service revenues of $59.5 million for the first
nine months of fiscal 2000 improved $4.0 million or 7% from the first nine      
months of the prior year. This improvement primarily reflects $4.1 million in   
revenues from the German operations that were acquired in the fourth quarter of 
fiscal 1999 and improved revenues in the Company's North American pari-mutuel   
operations, NASRIN(TM) service operations and Ireland pari-mutuel services.     
These increases were partially offset by lower service revenues in the French   
operations and lower service revenues in North American simulcasting operations.
Pari-mutuel Operations sales revenues increased by $0.5 million to $14.0 million
in the first nine months of fiscal 2000 due to the sales of terminals to the    
Company's international customers, primarily in Italy and Chile. Pari-mutuel    
Operations gross profit of $31.6 million or 43% of total revenues, increased    
from gross profit of $27.8 million or 40% in the same period last year. Higher  
gross profit on improved Handle, primarily in the German and North American     
pari-mutuel operations, higher NASRIN(TM) service revenues and increased        
equipment sales, were partially offset by a decrease in gross profit due to     
lower Handle in the French pari-mutuel operations, lower satellite time sales,  
and higher satellite service fees due to a credit received in fiscal 1999 from  
our satellite provider as a result of a service interruption.                   

 Venue Management Operations service revenues of $46.2 million for the
first nine months of fiscal 2000 increased $0.2 million over the service        
revenues of the first nine months of the prior year. Handle-related revenue     
increases of 3% in the Connecticut OTB operations, were partly offset by the    
impact of foreign exchange on the reported Netherlands operations revenues.     
Gross profit was $12.8 million or 28% of service revenue in the first nine      
months of fiscal 2000, an increase over the gross profit of $11.5 million or 25%
of service revenue in the first nine months of fiscal 1999. This improvement    
primarily reflects higher Handle-related revenues and cost savings in the       
Connecticut OTB operations.                                                     

  Lottery Operations service revenues in the first nine months of fiscal
2000 of $9.4 million improved $1.9 million from the first nine months of the    
prior year due to the April 1999 launch of the Montana lottery and the July 2000
launches of the Vermont and New Hampshire lotteries. The $7.6 million decrease  
in equipment sales to $21.2 million in the first nine months of fiscal 2000 is  
primarily attributable to the April 1999 Montana lottery equipment sale and     
fewer terminal sales as compared to the fiscal 1999 period, primarily for use in
Italy. Lottery Operations gross profit of $9.2 million or 30% of total revenues,
decreased from gross profit of $9.3 million or 26% of total revenues in the same
period last year. Higher gross profit on improved service revenue due to the    
three new lottery service contracts and improved equipment sales gross margins  
due to the mix of products sold, were more than offset by a decrease in gross   
profit due to the lower volume of domestic and international equipment sales.   

20

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 AUTOTOTE CORPORATION AND SUBSIDIARIES
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS-(Continued)

Expense Analysis                                                                

Selling, general and administrative expenses including software     
development costs were comparable at $19.9 million for the first nine months of 
fiscal 2000 and fiscal 1999. Higher expenses due to increased operating levels  
in the North American and German pari-mutuel operations and the Montana lottery 
which began in April 1999, and the Vermont and New Hampshire lotteries which    
began in July 2000, were offset by cost reductions in NASRIN(TM) and France, and
the absence of the SJC Video business.                                          

  Depreciation and amortization expenses decreased $0.4 million or 2% to
$16.0 million in the first nine months of fiscal 2000. Depreciation expense     
decreased $0.1 million, primarily due to the full depreciation of certain assets
in prior periods and the absence of the SJC Video business. Amortization expense
decreased $0.3 million as a result of the full amortization of intangible assets
associated with the North American simulcasting operations.                     

      Interest expense increased $0.7 million to $12.9 million in the first nine
months of fiscal 2000 as a result of an increase in average outstanding         
borrowings during the period.                                                   

Income Taxes                                                                    

  Income tax expense was $0.6 million in the first nine months of fiscal
2000, as compared to $0.1 million in the first nine months of fiscal 1999.      
Income tax expense principally reflects federal alternative minimum tax, foreign
and state income taxes.                                                         

Liquidity, Capital Resources and Working Capital Deficiency                     

 At July 31, 2000, the Company's available cash and borrowing capacity
totaled $21.0 million compared to $29.0 million at October 31, 1999. Net cash   
provided by operating activities decreased by $7.1 million to $19.0 million for 
the nine months ended July 31, 2000 from $26.1 million in the nine months ended 
July 31, 1999. A $4.4 million increase in net income was offset by a $11.4      
million decrease in changes in operating assets and liabilities, primarily      
decreases in accounts payable and other current liabilities and increases in    
accounts receivable and inventory. In the first nine months of fiscal 2000, the 
Company utilized $19.0 million of cash provided by operating activities, $17.4  
million of long-term borrowings, $1.5 million in proceeds from stock sales, and 
$1.9 million of available cash, to invest $27.7 million principally in capital  
and contract expenditures in connection with the January 2000 start-up of the   
Monmouth/Meadowlands service contract and the July 2000 start-ups of the Vermont
and New Hampshire state lotteries. The Company also invested $8.2 million in    
software systems development and other assets, and used $3.6 million to reduce  
other long-term loans.                                                          

At July 31, 2000, the Company's current liabilities exceeded current
assets by $3.5 million, an improvement of $4.2 million from October 31, 1999.   
The improvement results principally from a $9.3 million reduction in current    
assets, offset by a $13.6 million reduction in current liabilities, which       
included the classification of substantially all debt as long term. The         
classification of debt as long-term is the result of the debt refinancing which 
was done in connection with the September 6, 2000 acquisition of Scientific     
Games Holdings Corp (see below).                                                

      As described above in Note 7 to the Consolidated Financial Statements, the
Company had $17.8 million of borrowing availability under its Old Facility at   
July 31, 2000. At September 6, 2000 following consummation of the Transactions  
(see below), the Company had $62.0 million of borrowing availability under its  
New Facility. The Company believes that its cash resources, anticipated cash    
flows from operations and borrowing availability under the New Facility will    
provide sufficient liquidity to meet scheduled interest payments and anticipated
capital expenditures during the next twelve months.                             

21

10-Q 22nd Page of 25 TOC 1st Previous Next ↓Bottom Just 22nd
 AUTOTOTE CORPORATION AND SUBSIDIARIES
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS-(Continued)

Acquisition of Scientific Games Holdings Corp and New Debt and Equity Financing 

    On September 6, 2000 the Company completed the acquisition of Scientific
Games, a world leading supplier of lottery products, integrated lottery systems 
and support services, and pre-paid telephone cards. The acquisition was         
completed through a merger in which Scientific Games became a wholly-owned      
subsidiary of the Company at a cost of approximately $308,000 in aggregate      
merger consideration to Scientific Games stockholders, plus related fees and    
expenses. The acquisition will be recorded using the purchase method of         
accounting, and the acquired assets and liabilities will be recorded at their   
estimated fair value at the date of acquisition and the operating results of    
Scientific Games businesses will be included in the consolidated statements of  
operations from the date of the acquisition.                                    

     The Scientific Games acquisition and the refinancing of substantially all
existing debt of both the Company (see Note 8) and Scientific Games, along with 
the payment of related fees and expenses, was completed with funds provided by: 
(1) proceeds from the issuance of $150,000 of the new Notes; (2) $280,000 of    
term loan borrowings under the New Facility; (3) $2,987 of borrowings under the 
revolving credit facility of the New Facility; (4) $4,805 of cash on hand, and  
(5) $110,000 of gross proceeds from the sale of new Preferred Stock.            

    Further information regarding the acquisition and financing can be found
in current reports on Form 8-K filed by the Company on May 19, 2000 and May 26, 
2000 and certain Exhibits to this Quarterly Report on Form 10-Q.                

Recent Accounting Pronouncements                                                

     In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities," as     
amended. SFAS 133, as amended, standardizes the accounting for derivative       
instruments, including certain derivative instruments embedded in other         
contracts. Under the standard, entities are required to carry all derivative    
instruments in the statement of financial position at fair value. SFAS 133, as  
amended, is effective beginning in the first quarter of our fiscal year ending  
October 31, 2001. The Company has not determined the impact that SFAS 133 will  
have on its financial statements and believes that such determination will not  
be meaningful until closer to the date of initial adoption.                     

Forward-Looking Statements                                                      

This quarterly report on Form 10-Q contains certain statements and  
projections (including statements concerning plans and objectives of management 
for the future operations and services, statements concerning revenue           
expectations and statements concerning mergers and re-financing) other than     
those covering historical information, that should be considered forward-looking
and subject to certain risks and uncertainties. Such forward-looking statements 
are based on management's belief as well as assumptions made by, and information
currently available to, management pursuant to "safe harbor" provisions of the  
Private Securities Litigation Reform Act of 1995. The Company's actual results  
may differ materially from the plans envisioned in, or results projected by,    
those statements if the Company's assumptions prove to be incorrect or for a    
variety of other reasons, including those relating to factors identified in the 
Company's Annual Report on Form 10-K for the year ended October 31, 1999 as part
of a Cautionary Statement for purposes of such safe harbor. The Company cautions
that such factors are not exclusive. The Company does not undertake to update   
any forward-looking statement that may be made from time to time by, or on      
behalf of, the Company.                                                         

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 AUTOTOTE CORPORATION AND SUBSIDIARIES
 Quarter Ended July 31, 2000

PART II. Other Information                                                      

Item 1. Legal Proceedings                                                       

  No significant changes have occurred with respect to legal proceedings
disclosed in Part 1, Item 3, of the Company's Annual Report on Form 10-K for the
year ended October 31, 1999.                                                    

Item 2. Changes in Securities                                                   

     There were no changes in securities subject to this item during the third
quarter of 2000. On September 6, 2000, as part of the Transactions, the Company 
issued, for gross proceeds of $110 million, 1.1 million shares of new Series A  
Convertible Preferred Stock, including $100 million to Cirmatica Gaming, S.A.,  
an affiliate of Lottomatica S.p.A. (the state concessionaire for the Italian    
Lotto game and an affiliate of Olivetti S.p.A. and Telecom Italia S.p.A.), and  
$10 million to other investors through Ramius Securities, LLC, which acted as   
placement agent. The Company also issued 27,500 shares of Preferred Stock to    
Ramius in connection with such services.                                        

      The Preferred Stock is convertible into Company common stock at a price of
$6.00 per share (subject to potential reset to no less than $5.00 per share     
based on possible future market price minimums), will mature and become         
mandatorily convertible into common stock after five years and will pay         
dividends at the rate of 6% per annum (payable in kind in additional shares or, 
at the Company's option beginning with the ninth quarterly dividend date, in    
cash). The holders of Preferred Stock also have the right to participate on an  
as-converted basis in any dividends with respect to the common stock. The       
holders of Preferred Stock have the right to vote along with the holders of     
common stock on all matters on which the holders of common stock are entitled to
vote, are entitled to vote separately as a class with respect to certain        
matters, and are also entitled to certain rights of first refusal with respect  
to future financings. The Preferred Stock is also subject to certain customary  
anti-dilution provisions. In addition, the holders of Preferred Stock have the  
right to designate, initially, four members of the Company's Board of Directors 
(and to elect three additional Directors in the event of certain defaults by the
Company). The Preferred Stock has preference over common stock with regard to   
the distribution of assets upon a liquidation, dissolution or other winding up  
of the Company.                                                                 

      On September 6, 2000, the Company also issued Warrants (the "Warrants") to
purchase up to 2.9 million shares of the Company's common stock to its financial
advisors, Donaldson, Lufkin & Jenrette Securities Corporation and LBI Group,    
Inc. (an affiliate of Lehman Brothers) (which received 80% and 20%,             
respectively, of such Warrants), in connection with their services to the       
Company in obtaining certain financing commitments. The Warrants are exercisable
until September 6, 2007 at a nominal exercise price determined by a formula set 
forth in the Warrant.                                                           

      Based upon representations of the acquirers of the Preferred Stock and the
Warrants, the Preferred Stock and the Warrants were issued in private           
transactions in reliance upon exemptions from registration under Section 4(2) of
the Securities Act of 1933, as amended. Holders of both the Preferred Stock and 
the Warrants are entitled to the benefits of certain registration rights.       

    The foregoing is only a summary of certain terms of the Preferred Stock,
the Warrants, and related agreements and is qualified by reference to Exhibits  
3.3, 10.38, 10.41 and 99.11 hereto, which are incorporated herein by reference. 

23

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 AUTOTOTE CORPORATION AND SUBSIDIARIES
 Quarter Ended July 31, 2000

PART II. Other Information                                                      

Item 6. Exhibits and Reports on Form 8-K                                        

(a)   Exhibits                                                      

Exhibit                                                                         
Number                            Description                                   
------                            -----------                                   
3.3         Certificate of Designations, Preferences and Relative,              
           Participating, Optional and Other Special Rights of Preferred Stock
            and Qualifications, Limitations and Restrictions Thereof of Series A
         Convertible Preferred Stock, filed with the Secretary of State of
Delaware on September 6, 2000.                          
3.4         Amendment to Bylaws of the Company.(1)                              
4.5         First Supplemental Indenture, dated as August 5, 2000, among the    
          Company, the Guarantors and The Bank of New York (successor to IBJ
     Schroder Bank & Trust Company), as trustee, supplementing the
    Indenture, dated as of July 28, 1997, among the Company, the
       subsidiaries of the Company named therein as guarantors and IBJ
            Schroder Bank & Trust Company, as trustee, relating to the Company's
10 7/8% Senior Notes due 2004.                          
4.6         Indenture, dated as of August 14, 2000, among the Company, the      
   Subsidiary Guarantors and The Bank of New York, as Trustee.
4.7         Form of Series A 12 1/2% Senior Subordinated Note due 2010.(2)      
4.8         First Supplemental Indenture, dated as of September 6, 2000, among  
           the Company, the Guarantors, the Additional Guarantors and The Bank
         of New York, as trustee, supplementing the Indenture, dated as of
           August 14, 2000, among the Company, the Guarantors and the Trustee,
       relating to the Company's 12 1/2% Senior Subordinated Notes due
2010.                                                   
4.9         Registration Rights Agreement by and among the Company, the         
          Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation
and Lehman Brothers Inc., dated as of August 14, 2000.  
10.38       Form of Stockholders' Agreement by and among Cirmatica Gaming, S.A.,
         The Oak Fund, Peconic Fund Ltd., Ramius Securities, LLC, Olivetti
    International S.A. and the Company, dated September 6, 2000,
relating to the Preferred Stock.                        
10.39       Credit Agreement among the Company, DLJ Capital Funding, Inc.,      
   Lehman Commercial Paper Inc., DLJ Capital Funding, Inc., as
            Administrative Agent, Syndication Agent, Lead Arranger and Sole Book
       Running Manager, Lehman Commercial Paper Inc., as Documentation
    Agent, and Lehman Brothers Inc., as Co-Arranger, dated as of
September 6, 2000.                                      
10.40       Security Agreement among the Company, the Subsidiary Guarantors and 
the Administrative Agent, dated as of September 6, 2000.
10.41       Form of Warrant Registration Rights Agreement among the Company,    
         Donaldson, Lufkin & Jenrette Securities Corporation and LBI Group
Inc. dated as of September 6, 2000.                     
10.42       Form of Employment and Severance Benefit Agreement, entered into    
     between Scientific Games Holdings Corp. and certain employees
effective September 6, 2000.                            
10.43       Form of Consulting Agreement by and between the Company and William 
      G. Malloy, dated May 18, 2000 and effective September 6, 2000.
99.11       Form of Warrant issued to Donaldson, Lufkin & Jenrette Securities   
Corporation and LBI Group Inc.                          

(1) The amendment to the Company's Bylaws is filed herewith. The Company's      
Bylaws are incorporated by reference to Exhibit 4.4 to the Company's            
Registration Statement on Form S-8 (Registration No. 33-46594) which became     
effective March 20, 1992.                                                       
(2) Filed herewith as Exhibit A to Exhibit 4.2.                                 

27    Financial Data Schedule.                                      

    Current reports on Form 8-K were filed on May 19, 2000 and May 26, 2000,
regarding the proposed acquisition by the Company of Scientific Games Holdings  
Corp. and certain related matters.                                              

24

10-Q Last Page of 25 TOC 1st Previous Next ↓Bottom Just 25th
 AUTOTOTE CORPORATION AND SUBSIDIARIES
 Quarter Ended July 31, 2000

SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the        
undersigned, thereunto duly authorized.                                         

              AUTOTOTE CORPORATION
              --------------------
              (Registrant)

         By:    /s/ DeWayne E. Laird
                --------------------
     Name:  DeWayne E. Laird
                             Title: Vice President & Chief Financial Officer

Dated: September 14, 2000                                                       

25

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

	8/15/10	10
	9/6/07	23
	8/15/05	11
	8/15/03	11
	10/31/01	22
	2/15/01	10	12	424B3, NT 10-Q
	11/15/00	10
Filed on:	9/14/00	25
	9/11/00	1
	9/6/00	10	24	3, 3/A, 8-K, 8-K/A
	8/31/00	10
	8/14/00	10	24
	8/5/00	24
For Period End:	7/31/00	1	25
	6/19/00	10	12
	5/26/00	12	24	8-K
	5/19/00	12	24	8-K
	5/18/00	24		8-K
	10/31/99	2	23	10-K
	9/1/99	8
	7/31/99	2	21	10-Q
	11/1/98	8
	5/22/98	12
	7/28/97	24		8-K
	3/20/92	24
				List all Filings

3 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 3/01/23  Light & Wonder, Inc.              10-K       12/31/22  135:17M
 3/01/22  Light & Wonder, Inc.              10-K       12/31/21  139:18M
 3/01/21  Light & Wonder, Inc.              10-K       12/31/20  153:19M

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Filing Submission 0001005477-00-006542 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Scientific Games Corp – ‘10-Q’ for 7/31/00

On: Thursday, 9/14/00, at 5:15pm ET · For: 7/31/00 · Accession #: 1005477-0-6542 · File #: 1-11693

Quarterly Report — Form 10-QFiling Table of Contents

10-Q — Quarterly ReportDocument Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

3 Subsequent Filings that Reference this Filing

Quarterly Report — Form 10-Q
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10-Q — Quarterly Report
Document Table of Contents