-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N+g/P/vZksERlJrmBxeRsvr4kuVBtw7gHGc3NfINmeHMYzLxVmztN+uef9lcT+84 gE7zM9Of02VJmJxKD628Sg== 0000950109-97-002139.txt : 19970313 0000950109-97-002139.hdr.sgml : 19970313 ACCESSION NUMBER: 0000950109-97-002139 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970312 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUTOTOTE CORP CENTRAL INDEX KEY: 0000750004 STANDARD INDUSTRIAL CLASSIFICATION: CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS) [3578] IRS NUMBER: 810422894 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11693 FILM NUMBER: 97554938 BUSINESS ADDRESS: STREET 1: 888 7TH AVENUE CITY: NEW YORK STATE: NY ZIP: 10106-1894 BUSINESS PHONE: 3027374300 MAIL ADDRESS: STREET 1: 100 BELLEVUE ROAD CITY: NEWARK STATE: NJ ZIP: 19714 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TOTE INC DATE OF NAME CHANGE: 19920317 10-Q 1 FORM 10-Q 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 period ended: January 31, 1997 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, 25th Floor New York, New York 10022 (Address of principal executive offices) (212) 754-2233 (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports 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 __ --- As of March 7, 1997, 34,437,214 shares of the registrant's Class A Common Stock, $.01 par value per share, were issued and outstanding. Page 1 of 10 AUTOTOTE CORPORATION AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND OTHER INFORMATION QUARTER ENDED JANUARY 31, 1997
Page ---- PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements: Balance Sheets as of January 31, 1997 and October 31, 1996 3 Statements of Operations for the Three Months Ended January 31, 1997 and 1996 4 Statements of Cash Flows for the Three Months Ended January 31, 1997 and 1996 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-8 PART II. OTHER INFORMATION Item 1. Legal Proceedings 9 Item 6. Exhibits and Reports on Form 8K 9
2 AUTOTOTE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands, Except Per Share Amounts)
JANUARY 31, OCTOBER 31, 1997 1996 ------------- ------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents............................................................ $ 5,152 5,988 Restricted cash...................................................................... 537 611 Accounts receivable, net............................................................. 20,263 18,257 Inventories.......................................................................... 6,629 5,780 Unbilled receivables................................................................. 3,258 6,901 Prepaid expenses, deposits and other current assets.................................. 3,429 3,131 --------- --------- Total current assets............................................................. 39,268 40,668 --------- --------- Property and equipment, at cost.......................................................... 182,887 186,249 Less accumulated depreciation........................................................ 92,043 90,369 --------- --------- Net property and equipment...................................................... 90,844 95,880 --------- --------- Goodwill, net of amortization............................................................ 19,594 21,024 Operating right, net of amortization..................................................... 16,598 16,848 Other assets and investments............................................................. 20,151 22,373 --------- --------- $ 186,455 196,793 ========= ========= LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Current installments of long-term debt.............................................. $ 10,169 9,234 Accounts payable.................................................................... 14,196 14,242 Accrued liabilities................................................................. 20,448 20,436 --------- --------- Total current liabilities....................................................... 44,813 43,912 --------- --------- Deferred income taxes.................................................................... 7,272 7,675 Other long-term liabilities.............................................................. 1,977 5,612 Long-term debt, excluding current installments........................................... 117,448 119,790 Long-term debt, convertible subordinated debentures...................................... 40,000 40,000 --------- --------- Total liabilities................................................................ 211,510 216,989 ------- ------- Stockholder's 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, 34,437 and 31,474 shares outstanding at January 31, 1997 and October 31, 1996, respectively............................................................... 345 315 Class B non-voting common stock, par value $0.01 per share, 700 shares authorized, none outstanding......................................................... -- -- Additional paid-in capital........................................................... 146,938 143,369 Accumulated deficit.................................................................. (171,087) (163,664) Treasury stock, at cost.............................................................. (102) (102) Translation adjustment............................................................... (1,149) (114) --------- --------- Total stockholder's deficit...................................................... (25,055) (20,196) -------- -------- $ 186,455 196,793 ======== ========
See accompanying notes to consolidated financial statements. 3 AUTOTOTE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended January 31, 1997 and 1996 (In Thousands, Except Per Share Amounts) (Unaudited)
1997 1996 -------- -------- Operating revenues: Services................................................................ $ 31,420 29,568 Sales................................................................... 4,095 13,738 ------ ------ 35,515 43,306 ------ ------ Operating expenses (exclusive of depreciation and amortization): Services ............................................................... 18,742 18,847 Sales .................................................................. 2,813 8,698 ------ ------- 21,555 27,545 ------ ------- Total gross profit................................................. 13,960 15,761 ------ ------- Selling, general and administrative expenses................................. 7,538 8,170 Depreciation and amortization................................................ 9,709 9,436 ------ ------- Operating loss..................................................... (3,287) (1,845) ------ ------- Other deductions: Interest expense........................................................ 3,634 3,662 Litigation settlement................................................... -- 6,800 Other expense.. ........................................................ 107 292 ------ ------- 3,741 10,754 ------ ------- Loss before income tax expense ......................................... (7,028) (12,599) Income tax expense........................................................... 395 1,202 ------ ------- Net loss..................................................................... $ (7,423) (13,801) ====== ======= Net loss per common share.................................................... $ (0.23) (0.45) ====== ====== Weighted average number of common shares outstanding......................... 32,734 30,905 ====== ======
See accompanying notes to consolidated financial statements. 4 AUTOTOTE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED JANUARY 31, 1997 AND 1996 (IN THOUSANDS) (UNAUDITED)
1997 1996 ---------- --------- Cash flows from operating activities: Net loss......................................................... $ (7,423) (13,801) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization................................. 9,709 9,436 Loss on disposal of assets.................................... 37 454 Litigation settlement......................................... -- 6,800 Non-cash interest charges..................................... -- 554 Changes in operating assets and liabilities................... 108 1,279 Other......................................................... 306 212 -------- ------- Total adjustments........................................ 10,160 18,735 -------- ------- Net cash provided by operating activities.......................... 2,737 4,934 -------- ------- Cash flows from investing activities: Capital expenditures............................................. (191) (338) Expenditures for equipment under wagering systems contracts...... (1,359) (2,420) Proceeds from asset disposals.................................... 247 987 Increase in other assets and other liabilities, net.............. (779) (441) -------- ------- Net cash used in investing activities.............................. (2,082) (2,212) -------- ------- Cash flows from financing activities: Net borrowings under revolving credit facility................... -- 760 Proceeds from issuance of long-term debt......................... 8 538 Payments on long-term debt....................................... (1,314) (1,587) -------- ------- Net cash used by financing activities.............................. (1,306) (289) -------- ------- Effect of exchange rate changes on cash............................ (185) (415) -------- ------- Increase/(decrease) in cash and cash equivalents................... (836) 2,018 Cash and cash equivalents, beginning of period..................... 5,988 4,991 -------- ------- Cash and cash equivalents, end of period........................... $ 5,152 7,009 ======== ======= Supplemental disclosure of cash flow information: Cash paid during the period for: Interest...................................................... $ 2,810 3,449 ======== ======= Income taxes.................................................. $ 250 237 ======== ======= The Company issued 2,964 shares of Class A Common Stock during the 1997 period in connection with the settlement of its stockholder litigation.
See accompanying notes to consolidated financial statements. 5 AUTOTOTE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 1997 (UNAUDITED) 1) CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheet as of January 31, 1997 and the consolidated statements of operations for the three months ended January 31, 1997 and 1996, and consolidated statements of cash flows for the three months then ended have been prepared by the Company and have not been audited. In the opinion of management, all adjustments necessary to present fairly the financial position of the Company at January 31, 1997, and the results of its operations for the three months ended January 31, 1997 and 1996, and its cash flows for the three months ended January 31, 1997 and 1996 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 ommitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's 1996 Annual Report on Form 10-K. The results of operations for the period ended January 31, 1997 are not necessarily indicative of the operating results for the full year. 2) INVENTORIES Inventories consist of the following: JANUARY 31, OCTOBER 31, 1997 1996 ----------- ----------- (in thousands) Parts................................. $ 2,938 3,295 Work-in-process....................... 1,249 909 Finished goods........................ 2,048 1,028 Ticket paper.......................... 394 548 ----- ----- Total................................. $ 6,629 5,780 ===== ===== 3) DEBT The Company's senior bank credit facility is governed by the Amended and Restated Credit Agreement dated January 26, 1996 ("the Senior Facility") for which Bankers Trust is agent. The Senior Facility provides for: 1) a $55 million term loan (the "A Term Loan"), 2) a $5 million term loan (the "B Term Loan"), and 3) a $75 million revolving credit facility ("the Revolver"), which includes a $25 million sublimit for letters of credit. On January 29, 1997, the Company amended the Senior Facility (the "Amendment") to revise the maturity and amortization of the A and B Term Loans, the maturity of the Revolver, the borrowing rate, certain financial covenants and to revise how proceeds from asset sales reduce scheduled principal payments. The maturity of the Revolver and A Term Loan were changed to February 13, 1998 and scheduled quarterly principal payments on the A Term Loan was reduced to $7.0 million in fiscal 1997 with the balance of $44.0 million due in fiscal 1998. The maturity of the B Term Loan was extended to April 30, 1997 with the remaining balance of $1.0 million due in equal installments of $.5 million in January 1997 and April 1997. Effective with the Amendment, borrowings under the Senior Facility bear interest at the Prime lending rate plus a margin ranging from 0.75% to 2.00% depending on the timing and amount of additional principal repayments made in fiscal 1997 in excess of scheduled principal repayments. The Senior Facility permits voluntary prepayments, and requires mandatory repayments upon the occurrence of certain events and in certain amounts, including certain proceeds from asset sales, equity sales and debt raised, and 75% of annual "Excess Cashflow," as defined. A commitment fee of 0.5% per year is payable on the unused amount under the Revolver. A letter of credit fee equal to 2.75% plus a facing fee of 1/8 of 1% per year is payable on each letter of credit issued. See Note 7 to the Consolidated Financial Statements for the year ended October 31, 1996 included in the Company's 1996 Annual Report on Form 10-K. In the quarter ended January 31, 1997, the Company made scheduled payments of $0.5 million on the A Term Loan and $0.5 million on the B Term Loan. As of January 31, 1997, the Company had approximately $21,605 available for borrowing under its Revolver, with $3.1 million in outstanding letters of credit and $122.9 million in outstanding borrowings. 6 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 January 31, 1997 and the results of operations for the three month period ended January 31, 1997, compared to the same period last year. This discussion should be read in conjunction with the Management's Discussion and Analysis section for the fiscal year ended October 31, 1996 ("fiscal 1996") included in the Company's 1996 Annual Report on Form 10-K. RESULTS OF OPERATIONS Three Months Ended January 31, 1997 Compared to Three Months Ended January 31, 1996
First Quarter Fiscal 1997 First Quarter Fiscal 1996 ----------------------------- ------------------------------- Pari- Pari- Mutuel Lottery Mutuel Lottery Operations Operations Total Operations Operations Total ----------------------------- ------------------------------- Revenue: Service revenue..................... $26,615 4,805 31,420 25,671 3,897 29,568 Sales revenue....................... 1,246 2,849 4,095 2,420 11,318 13,738 ------ ----- ------ ------ ------ ------ Total Revenue....................... $27,861 7,654 35,515 28,091 15,215 43,306 ====== ===== ====== ====== ====== ====== Gross Profit (excluding depreciation and amortization) $10,401 3,559 13,960 10,531 5,230 15,761 ====== ===== ====== ====== ====== ======
Revenue Analysis Revenues decreased 18% or $7.8 million to $35.5 million in the first quarter of the fiscal year ended October 31, 1997 from $43.3 million in the first quarter of the fiscal year ended October 31, 1996. Pari-mutuel Operations service revenues of $26.6 million for the first quarter of fiscal 1997 improved $0.9 million or 4% during the quarter as compared to the prior year. This improvement reflects revenue increases of $1.5 million as a result of growth in handle in the Company's North American pari- mutuel and Connecticut OTB operations, and the addition of new customers in the simulcasting business. These increases are partially offset by the $.6 million revenue loss because of the October 1996 sale of the casino/sports wagering business. The growth in handle during the first quarter of 1997 compared to the first quarter of 1996 is attributable to the addition of six new North American racetrack and OTB sites, full card simulcasting at two North American racetrack customers, 320 VGM machines to the lease base and the increase to seven days a week OTB operations in Connecticut, as well as to a much milder winter in 1997 than experienced the prior year. Sales revenue in the first quarter of fiscal 1997 decreased $1.2 million compared to $2.4 million for the first quarter of fiscal 1996, principally due to the decline in equipment sales to the international market. Lottery Operations service revenues increased $0.9 million during the first quarter of fiscal 1997 from $3.9 million to $4.8 million primarily because of higher revenues from services provided under the German Lottery contract. Sales revenues decreased significantly in the first quarter of fiscal 1997 to $2.8 million from $11.3 million in the same period in fiscal 1996. This decrease is primarily attributable to the fiscal 1996 delivery of systems to several German lottery contract sites coupled with deliveries of terminals and parts to EIS for sale to Italy's TOTIP pari-mutuel lottery pool. Gross Profit Analysis The total gross profit of $14.0 million for the first quarter of fiscal 1997 decreased by $1.8 million, or 11% compared to the first quarter of fiscal 1996, principally reflecting delivery of the German lottery systems during the fiscal 1996 quarter. Gross margins on equipment sales were 31% in the first quarter of 1997, down from the margins of 37% earned in the first quarter of fiscal 1996 as a result of a change in the mix of equipment being sold. Gross margins on service revenues improved to 40% during the first quarter of fiscal 1997 compared to 36% for the first quarter of 1996 due to higher volumes and improved margins in the European lottery business. 7 AUTOTOTE CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) Expense Analysis Selling, general and administrative expenses include marketing, sales, administrative, engineering and software development, finance, legal and other expenses. Selling, general and administrative expenses decreased $.6 million or 8% to $7.5 million in the first quarter of fiscal 1997 from $8.2 million in the first quarter of fiscal 1996 as a result of the sale of the Company's casino/sports wagering business in the fourth quarter of fiscal 1996, as well as continuing effects from the Company's cost containment and reduction programs. Depreciation and amortization expenses increased 3% to $9.7 million in the first quarter of 1997 compared to $9.4 million in the first quarter of fiscal 1996. The increase was primarily due to investment in UNIBET and other software development programs in fiscal 1996. Interest expense decreased slightly in the first quarter of 1997 primarily as a result of the sale of the casino/sports wagering business, mostly offset by higher interest costs under the Company's Senior Facility. Income Taxes Income tax expense was $.4 million in the 1997 period as compared to an expense of $1.2 million in the 1996 period. Income tax expense principally reflects foreign tax expense, since no tax benefit has been recognized on domestic operating losses. LIQUIDITY AND CAPITAL RESOURCES At January 31, 1997, the Company had cash and cash equivalents of $5.2 million as compared to $6.0 million at October 31, 1996. Net cash provided by operating activities was $2.7 million for the three months ended January 31, 1997. Net cash used in investing activities was $2.1 million for the first three months of fiscal 1997. Utilizing cash provided by operating activities, the Company invested principally in contract expenditures and software systems development. Net cash used by financing activities consisted primarily of repayments of $1.0 million under the Company's Senior Facility A and B Term Loans. As described in Note 3 to the Consolidated Financial Statements above, the Company had utilized nearly all availability under its Senior Facility at January 31, 1997. The Company believes that its cash resources at that date and its forecasted cash flows from operations provide sufficient liquidity to meet scheduled payments and anticipated capital expenditures in the current fiscal year arising from current commitments. The Company believes that additional financing and/or asset sales will be required to meet its scheduled payments and capital requirements in subsequent fiscal years. The Company is currently exploring financing and asset sales alternatives while continuing to implement cost containment and reduction programs. The Company will be required to evaluate its capital outlays and commitments in light of the availability and timing of additional financing, which currently remains uncertain. 8 AUTOTOTE CORPORATION AND SUBSIDIARIES Quarter Ended January 31, 1997 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As stated in the Company's 1996 Annual Report on Form 10-K, the Company and certain of its officers and directors were named as defendants in a number of lawsuits commenced in February 1995 as class actions in the United States District Court for the District of Delaware. These lawsuits were consolidated into one class action in June 1995. The Settlement Agreement was finalized on December 24, 1996, in accordance with a definitive Stipulation and Agreement of Settlement dated July 19, 1996. The Company paid $7.5 million in cash plus 2,963,590 shares of Class A Common Stock which had an aggregate value of $3.5 million based on the average price of the Company's Class A Common Stock for 10 trading days preceding the final hearing in the District Court. Insurance companies providing directors and officers insurance contributed approximately $6.5 million of the cash portion of the settlement (with $1.25 million of that amount in the form of a loan to the Company, with the payment terms subject to negotiation). The Company accrued a charge of $6.8 million against earnings for the quarter ended January 31, 1996 to reflect the then expected settlement and anticipated legal fees. There will be no further charges against earnings as a result of the Settlement Agreement. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.26 Second Amendment and Waiver, dated as of January 29, 1997, among the Registrant, Bankers Trust Company and other Lenders. 27 Financial Data Schedule. (b) No reports on Form 8-K were filed during the first quarter of fiscal 1997. 9 AUTOTOTE CORPORATION AND SUBSIDIARIES QUARTER ENDED JANUARY 31, 1997 SIGNATURES Pursuant to the requirements of the Securities and 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/ William Luke ---------------- Name: William Luke Title: Vice President & Chief Financial Officer Dated: March 11, 1997 10 EX-10.26 2 SECOND AMENDMENT AND WAIVER EXHIBIT 10.26 SECOND AMENDMENT AND WAIVER --------------------------- SECOND AMENDMENT AND WAIVER (this "Amendment"), dated as of January 29, 1997, among AUTOTOTE CORPORATION, a Delaware corporation ("Holdings"), AUTOTOTE SYSTEMS, INC., a Delaware corporation (the "Borrower"), the lenders party to the Credit Agreement referred to below (the "Banks"), and BANKERS TRUST COMPANY, as Agent (in such capacity, the "Agent"). All capitalized terms used herein and not otherwise defined herein shall have the respective meanings provided such terms in the Credit Agreement referred to below. W I T N E S S E T H : - - - - - - - - - - WHEREAS, Holdings, the Borrower, the Banks and the Agent are parties to a Credit Agreement, dated as of October 31, 1991, and amended and restated as of October 30, 1992, and amended and restated as of June 4, 1993, and amended and restated as of April 28, 1994, and further amended and restated as of January 26, 1996 (as amended, modified or supplemented through the date hereof, the "Credit Agreement"); WHEREAS, Holdings and the Borrower have requested that the Banks grant the amendments and waiver to the Credit Agreement as herein provided; and WHEREAS, the Banks wish to grant the amendments and waiver to the Credit Agreement on the terms, and subject to the conditions, set forth herein; NOW, THEREFORE, it is agreed: 1. Section 3.01 of the Credit Agreement is hereby amended by inserting the following new clauses (h) and (i) at the end thereof; "(h) In consideration of the Banks entering into the Second Amendment, the Borrower hereby agrees to pay to the Agent for the pro rata distribution to the Banks (based on the Banks' outstanding Term Loans and Revolving Loan Commitments on the Second Amendment Effective Date) a fee in the aggregate amount of $1,100,000, which fee shall be due and payable on the earliest of (i) the date, if any, that the Loans have been declared due and payable (or have become due and payable) in accordance with the provisions of Section 10, (ii) the date upon which the Borrower repays all outstanding Loans and terminates the Total Revolving Loan Commitment and (iii) the A Term Loan Maturity Date, provided, however, that such fee shall not be payable in the event that either (x) the Borrower shall have repaid at least $19,500,000 of Term Loans after the Second Amendment Effective Date and on or prior to August 15, 1997 or (y) Holdings shall have received at least $1,100,000 of new cash equity proceeds after the Second Amendment Effective Date and on or prior to August 15, 1997 and all such cash equity proceeds shall have been used to repay outstanding Term Loans in accordance with the provisions of Sections 4.01 and 4.02(h). (i) In consideration of the Banks entering into the Second Amendment, the Borrower also hereby agrees to pay to the Agent for the pro rata distribution to --- ---- the Banks (based on the Banks' outstanding Term Loans and Revolving Loan Commitments on the Second Amendment Effective Date) a fee in the aggregate amount of $2,000,000 (subject to reduction as provided below), which fee shall be due and payable on the earliest of (i) the date, if any, that the Loans have been declared due and payable (or have become due or payable) pursuant to Section 10, (ii) the date upon which the Borrower repays all outstanding Loans and terminates the Total Revolving Loan Commitment and (iii) the A Term Loan Maturity Date, provided, however, in the event that (I) after the Second -------- ------- Amendment Effective Date and no later than April 15, 1997, either (x) the Borrower shall have repaid at least $21,000,000 of Term Loans, then no portion of such fee shall be payable pursuant to any clause of this Section 3.01(i) or (y) the Borrower shall have repaid at least $16,000,000 of Term Loans but less than $21,000,000 of Term Loans, then only $500,000 of such fee shall be payable pursuant to this Section 3.01(i) (and no further fees shall be payable pursuant -2- to any clause of this Section 3.01(i)), (II) after the Second Amendment Effective Date and no later than July 15, 1997, either (x) the Borrower shall have repaid at least $23,000,000 of Term Loans, then only $500,000 of such fee shall be payable pursuant to any clause of this Section 3.01(i) (and no further fees shall be payable pursuant to any clause of this Section 3.01(i)) or (y) the Borrower shall have repaid at least $18,000,000 of Term Loans but less than $23,000,000 of Term Loans, then only $875,000 of such fee shall be payable pursuant to this Section 3.01(i) (and no further fees shall be payable pursuant to any clause of this Section 3.01(i)), (III) after the Second Amendment Effective Date and no later than October 15, 1997, either (x) the Borrower shall have repaid at least $24,500,000 of Term Loans, then only $1,000,000 of such fee shall be payable to this Section 3.01(i) (and no further fees shall be payable pursuant to any clause of this Section 3.01(i)) or (y) the Borrower shall have repaid at least $19,500,000 of Term Loans but less than $24,500,000 of Term Loans, then only $1,250,000 of such fee shall be payable pursuant to this Section 3.01(i) (and no further fees shall be payable pursuant to any clause of this Section 3.01(i)) and (IV) after the Second Amendment Effective Date and no later than February 12, 1998, either (x) the Borrower shall have repaid at least $30,000,000 of Term Loans then only $1,500,000 of such fee shall be payable pursuant to this Section 3.01(i) or (y) the Borrower shall have repaid at least $25,000,000 Term Loans but less than $30,000,000 of Term Loans, then only $1,625,000 of such fee shall be due and payable pursuant to this Section 3.01(i)." 2. Section 3.03 of the Credit Agreement is hereby amended by (i) inserting "(a)" immediately before the words "The Total Revolving Loan Commitment" appearing therein and (ii) inserting the following new clause (b) at the end thereof: "(b) On each date upon which a mandatory repayment of Term Loans pursuant to Section 4.02(c), (d), (e), (f)(i) or (g) is required (and exceeds in amount the aggregate principal amount of Term Loans then outstanding) or would be required if Term Loans were then outstanding, the Total Revolving Loan -3- Commitment shall be permanently reduced by the amount, if any, by which the amount required to be applied pursuant to said Section (determined as if an unlimited amount of Term Loans were actually outstanding) exceeds the aggregate principal amount of Term Loans then outstanding. Each reduction to the Total Revolving Loan Commitment pursuant to this Section 3.03(b) shall be applied proportionately to permanently reduce the Revolving Loan Commitment of each Bank with such a Commitment." 3. Section 4.01(iv)(C) of the Credit Agreement is hereby deleted in its entirety and the following new Section 4.01(iv)(C) is inserted in lieu thereof: "(C) each prepayment of any Tranche of Term Loans pursuant to this Section 4.01 (other than pursuant to clause (v) below) shall reduce the then remaining Scheduled Repayments of such Tranche of Term Loans in inverse order of maturity; and". 4. Section 4.02(a) of the Credit Agreement is hereby amended by inserting the following new clause at the end thereof: "(iii) In addition to any other mandatory repayments pursuant to this Section 4.02, the Borrower shall prepay outstanding Revolving Loans (with no corresponding reduction to the Total Revolving Loan Commitment, except as otherwise provided in Section 3.03(b)) as, and to the extent, required by Section 4.02(h)." 5. The table appearing in Section 4.02(b)(i) of the Credit Agreement is hereby deleted in its entirety and the following new table is inserted in lieu thereof:
"Date Amount ---- ------ the last Business Day in January, 1997 $ 500,000 the last Business Day in April, 1997 $1,500,000 the last Business Day in July, 1997 $1,500,000 the last Business Day in October, 1997 $3,500,000 the last Business Day in January, 1998 $2,000,000 A Term Loan Maturity Date $42,000,000" .
-4- 6. The table appearing in Section 4.02(b)(ii) of the Credit Agreement is hereby deleted in its entirety and the following new table is inserted in lieu thereof: "Date Amount ---- ------ the last Business Day in January, 1997 $500,000 B Term Loan Maturity Date $500,000". 7. Section 4.02(h) of the Credit Agreement is hereby deleted in its entirety and the following new Section 4.02(h) is inserted in lieu thereof: "(h) All mandatory repayments of Term Loans pursuant to Sections 4.02(c), (d), (e), (f) and (g) which are required to be applied in accordance with the provisions of this Section 4.02(h) shall, except as provided in the proviso to the immediately succeeding sentence, be applied to the outstanding A Term Loans and the outstanding B Term Loans on a pro --- rata basis (based on the then outstanding principal amount of the A Term ---- Loans and the B Term Loans). All such mandatory repayments of each Tranche of Term Loans shall be applied to reduce the then remaining Scheduled Repayments of such Tranche of Term Loans in inverse order of maturity; provided, however, that the Net Sale Proceeds from the sale of the assets -------- ------- of, or the capital stock of, Tele Control shall be applied as follows: (1) first, the first $20,000,000 of Net Sale Proceeds shall be allocated $19,500,000 to the then outstanding A Term Loans and $500,000 to the then outstanding B Term Loans, provided that if no B Term Loans are (or no longer remain) outstanding, the Net Sale Proceeds allocated thereto shall instead be applied to the then outstanding A Term Loans, and with any amounts to be applied (x) to the outstanding B Term Loans to be applied first to the Scheduled B Repayment that is due on the B Term Loan Maturity Date and then to the Scheduled B Repayment that is due on the last Business Day in -5- January 1997 and (y) to the outstanding A Term Loans to be applied as follows: (i) the first $500,000 shall be applied to reduce the Scheduled A Repayment that is due on the last Business Day in April 1997, or if such Scheduled A Repayment has already been paid in full or no longer remains outstanding after giving effect to such repayment, such amount (or portion thereof) shall be applied to reduce the then remaining Scheduled A Repayments in inverse order of maturity; (ii) the next $500,000 shall be applied to reduce the Scheduled A Repayment that is due on the last Business Day in July 1997, or if such Scheduled A Repayment has already been paid in full or no longer remains outstanding after giving effect to such repayment, such amount (or portion thereof) shall be applied to reduce the then remaining Scheduled A Repayments in inverse order of maturity; (iii) the next $500,000 shall be applied to reduce the Scheduled A Repayment that is due on the last Business Day in October 1997, or if such Scheduled A Repayment has already been paid in full or no longer remains outstanding after giving effect to such repayment, such amount (or portion thereof) shall be applied to reduce the then remaining Scheduled A Repayments in inverse order of maturity; -6- (iv) the next $1,000,000 shall be applied to reduce the Scheduled A Repayment that is due on the last Business day in January 1998, or if such Scheduled A Repayment has already been paid in full or no longer remains outstanding after giving effect to such repayment, such amount (or portion thereof) shall be applied to reduce the then remaining Scheduled A Repayments in inverse order of maturity; and (v) the next $17,000,000 shall be applied to reduce the then remaining Scheduled A Repayments in inverse order of maturity; (2) second, the next $2,000,000 of Net Sale Proceeds (other than any Net Sale Proceeds which represent funds released from any escrow account, 100% of which funds shall be applied as provided in clause (1) above or clause (3) below, which ever is applicable) shall be applied to prepay any outstanding Revolving Loans and if no Revolving Loans are (or remain) outstanding, such amount (or portion thereof) may be retained by the Borrower; and (3) third, any remaining Net Sale Proceeds shall be applied to reduce the then remaining Scheduled A Repayments in inverse order of maturity." 8. Section 8.01(f)(ii) of the Credit Agreement is hereby amended by inserting the following sentence at the end thereof: "In addition to the foregoing, no later than March 5, 1997, a certificate of the chief financial officer of Holdings to the effect that, to the best of such officer's knowledge, no Default or Event of Default -7- has occurred and is continuing or, if any Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof, which certificate shall also set forth (in reasonable detail) the calculations required to establish whether Holdings and the Borrower were in compliance with the provisions of Section 9.10 for the Test Period ended on February 28, 1997." 9. Section 9.02 of the Credit Agreement is hereby amended by (i) deleting the word "and" appearing at the end of clause (vii) thereof, (ii) deleting the period appearing at the end of clause (viii) thereof and inserting ";and" in lieu thereof and (iii) inserting the following new clause (ix) at the end thereof: "(ix) all of the capital stock or assets of Tele Control may be sold so long as (i) the gross cash proceeds and the Net Sale Proceeds therefrom equals at least $25,000,000 and $20,000,000, respectively, (ii) all such proceeds are paid in cash and are paid at the closing of such sale (although up to $2,500,000 of the gross cash proceeds may be paid into an escrow account to cover certain potential indemnity claims against Holdings or any of its Subsidiaries by the buyer of Tele Control), (iii) 100% of the Net Sale Proceeds therefrom are applied in accordance with the provisions of Section 4.02(h), (iv) such sale occurs on or prior to April 15, 1997, (v) copies of the substantially final documentation for such sale are delivered to the Banks at least three Business Days prior to the consummation of such sale and (vi) the material terms and conditions of such sale are consistent with the terms set forth in that certain Letter dated January 14, 1997 between Holdings and Scientific Games Holdings Corp." 10. Section 9.09 of the Credit Agreement is hereby deleted in its entirety and the following new Section 9.09 is inserted in lieu thereof: "9.09 Consolidated Interest Coverage Ratio. (a) Prior to the ------------------------------------ consummation of the sale of Tele Control, Holdings will not permit the Consolidated Interest Coverage Ratio for any Test Period ended on the last day of a fiscal -8- quarter set forth below to be less than the ratio set forth opposite such fiscal quarter below:
Fiscal Quarter Ended Ratio -------------- ----- January 31, 1997 1.90:1.00 April 30, 1997 1.88:1.00 July 31, 1997 1.93:1.00 October 31, 1997 1.80:1.00 January 31, 1998 1.87:1.00 April 30, 1998 1.94:1:00 July 31, 1998 2.00:1.00."
(b) On or after the sale of Tele Control, Holdings will not permit the Consolidated Interest Coverage Ratio for any Test Period ended on the last day of the fiscal quarter set forth below to be less than the ratio set forth opposite such fiscal quarter below:
Fiscal Quarter Ended Ratio -------------- ----- January 31, 1997 1.90:1.00 April 30, 1997 1.89:1.00 July 31, 1997 1.92:1.00 October 31, 1997 1.76:1.00 January 31, 1998 1.79:1.00 April 30, 1998 1.89:1.00 July 31, 1998 1.99:1.00."
11. Section 9.10 of the Credit Agreement is hereby deleted in its entirety and the following new Section 9.10 is inserted in lieu thereof: "9.10 Consolidated Fixed Charge Coverage Ratio. Holdings will not ---------------------------------------- permit the Consolidated Fixed Charge Coverage Ratio for any Test Period ended on a day set forth below to be less than the ratio set forth opposite such day below: Test Period -9-
Ratio Ended On ----- ---------------- 0.90:1.00 January 31, 1997 1.00:1.00 February 28, 1997 1.00:1.00 July 31, 1997 1.00:1.00 January 31, 1998 1.00:1.00". July 31, 1998
12. Section 9.11 of the Credit Agreement is hereby deleted in its entirety and the following new Section 9.11 is inserted in lieu thereof: "9.11 Maximum Leverage Ratio. (a) Prior to the consummation of the ---------------------- sale of Tele Control, Holdings will not permit the Leverage Ratio at any time during a period set forth below to be greater than the ratio set forth opposite such period below:
Period Ratio ------ ----- Fiscal quarter ending January 31, 1997 4.44:1.00 Fiscal quarter ending April 30, 1997 4.34:1.00 Fiscal quarter ending July 31, 1997 4.12:1.00 Fiscal quarter ending October 31, 1997 4.25:1.00 Fiscal quarter ending January 31, 1998 4.01:1.00 Fiscal quarter ending April 30, 1998 3.85:1.00 Fiscal quarter ending July 31, 1998 3.71:1.00
(b) On or after the consummation of the sale of Tele Control, Holdings will not permit the Leverage Ratio at any time during a period set forth below to be greater than the ratio set forth opposite such period below: -10-
Period Ratio ------ ----- Fiscal quarter ending January 31, 1997 4.44:1.00 Fiscal quarter ending April 30, 1997 4.26:1.00 Fiscal quarter ending July 31, 1997 4.07:1.00 Fiscal quarter ending October 31, 1997 4.07:1.00 Fiscal quarter ending January 31, 1998 4.09:1.00 Fiscal quarter ending April 30, 1998 3.83:1.00 Fiscal quarter ending July 31, 1998 3.63:1.00."
13. Section 9.12 of the Credit Agreement is hereby deleted in its entirety and the following new Section 9.12 is inserted in lieu thereof: "9.12 Minimum Consolidated EBITDA. (a) Prior to the consummation of --------------------------- the sale of Tele Control, Holdings will not permit Consolidated EBITDA for any Test Period ended on the last day of a fiscal quarter set forth below to be less than the amount set forth opposite such fiscal quarter below:
Fiscal Quarter Ending Amount --------------------- ------ January 31, 1997 $29,356,000 April 30, 1997 $28,515,000 July 31, 1997 $30,537,000 October 31, 1997 $27,969,000 January 31, 1998 $29,149,000 April 30, 1998 $29,889,000 July 31, 1998 $30,491,000
(b) On or after the consummation of the sale of Tele Control, Holdings will not permit Consolidated EBITDA for any Test Period ended on the last day of a fiscal quarter set forth below to be less than the amount set forth opposite such fiscal quarter below:
Fiscal Quarter Ending Amount --------------------- ------ January 31, 1997 $29,356,000 April 30, 1997 $26,791,000 July 31, 1997 $28,606,000 October 31, 1997 $24,844,000 January 31, 1998 $24,447,000 April 30, 1998 $25,569,000
-11- July 31, 1998 $26,479,000". 14. The definition of "Applicable L/C Percentage" appearing in Section 11.01 of the Credit Agreement is hereby deleted in its entirety and the following new definition of "Applicable L/C Percentage" is inserted in lieu thereof: "Applicable L/C Percentage" shall mean, at any time, a percentage per annum equal to 2-3/4%. 15. The definition of "Applicable Margin" appearing in Section 11.01 of the Credit Agreement is hereby amended by inserting the following proviso at the end thereof: ", provided, however, from and after the Second Amendment Effective Date -------- ------- the Interest Reduction Discount for Base Rate Loans shall no longer be available and the Applicable Margin for A Term Loans, B Term Loans and Revolving Loans that are maintained as Base Rate Loans and for Swingline Loans initially shall be 1-1/4%, provided that such Applicable Margin shall be increased to (x) 1-1/2% on and after July 31, 1997 in the event that the Borrower has not repaid or prepaid at least $19,500,000 of Term Loans after the Second Amendment Effective Date and on or before July 31, 1997 and (y) 2% on and after October 31, 1997 in the event that the Borrower has not repaid or prepaid at least $23,000,000 of Term Loans after the Second Amendment Effective Date and on or before October 31, 1997; provided -------- further, however, if on any date after the Second Amendment Effective Date ---------------- the Borrower shall have repaid at least $15,000,000 of Term Loans in excess of the amount of Scheduled Repayments that are due through such date (as such Scheduled Repayments are determined on the Second Amendment Effective Date) then such Applicable Margin from and after such date shall be reduced permanently to 3/4 of 1%." 16. The definition of "A Term Loan Maturity Date" appearing in Section 11.01 of the Credit Agreement is hereby amended by deleting the date "November 1, 1997" appearing therein and inserting the date "February 13, 1998" in lieu thereof. -12- 17. The definition of "B Term Loan Maturity Date" appearing in Section 11.01 of the Credit Agreement is hereby amended by deleting the date "January 31, 1997" appearing therein and inserting the date "April 30, 1997" in lieu thereof. 18. The definition of "Final Maturity Date" appearing in Section 11.01 of the Credit Agreement is hereby deleted in its entirety and the following new definition of "Final Maturity Date" is inserted in lieu thereof: "Final Maturity Date" shall mean February 13, 1998, provided, however, the Final Maturity Date shall automatically be extended to July 31, 1998 in the event that the sale of Tele Control is consummated on or before April 15, 1997 in accordance with the terms of this Agreement. 19. The definition of "Required Banks" appearing in Section 11.01 of the Credit Agreement is hereby amended by deleting the words "greater than 59%" appearing in clause (B) thereof and inserting the words "equal to at least 70%" in lieu thereof. 20. The definition of "Test Period" appearing in Section 11.01 of the Credit Agreement is hereby amended by inserting the following proviso at the end thereof: ", provided, however, for purposes of determining compliance with Section 9.10 as of February 28, 1997, such period shall consist of the twelve consecutive months of Holdings ending as of February 28, 1997 (taken as one accounting period)". 21. Section 11.01 of the Credit Agreement is hereby amended by inserting the following new definitions in the appropriate alphabetical order: "Second Amendment" shall mean the Second Amendment, dated as of January 29, 1997, to this Agreement. "Second Amendment Effective Date" shall have the meaning provided in the Second Amendment. -13- "Tele Control" shall mean Tele Control Kommunikations und Computersysteme GesMBH, an Austrian corporation and a Wholly-Owned Subsidiary of Holdings. 22. Notwithstanding anything to the contrary contained in the definition of "Consolidated Fixed Charges", the principal repayment of Term Loans made with the proceeds of the sale of Autotote CBS, Inc. shall be excluded from the calculation of Consolidated Fixed Charges. In addition, notwithstanding anything to the contrary contained in the definition of "Consolidated Interest Expense," the fees contemplated to be paid by this Amendment, as well as the reduction in the exercise price of the Warrants contemplated by the Amendment to the September 1995 Warrant Agreement and the January 1996 Warrant Agreement in the form attached hereto, shall be excluded from the calculation of "Consolidated Interest Expense." 23. Holdings, the Borrower and the Banks hereby acknowledge and agree that the Net Sale Proceeds from the sale of the assets or capital stock of Tele Control shall (i) exclude any cash on the balance sheet of Tele Control to the extent that the purchase price for such sale is increased by the amount of such cash and (ii) include any proceeds released to Holdings or any of its Subsidiaries from any escrow accounts established in connection with such sale. 24. Holdings, the Borrower and the Banks hereby acknowledge and agree that, notwithstanding anything to the contrary contained in the Credit Agreement, from and after the Second Amendment Effective Date (as defined below), no new Interest Periods may be selected, the Eurodollar Rate interest option shall no longer be available and all Loans shall be incurred and maintained as Base Rate Loans, although any outstanding Eurodollar Loans on the Second Amendment Effective Date may remain outstanding (and shall bear interest as currently provided in the Credit Agreement) until the end of the respective Interest Periods with respect thereto. 25. The Banks hereby waive the Event of Default that has arisen under the Credit Agreement solely as a result of Holdings and the Borrower failing to comply with the provisions of Section 9.10 of the Credit Agreement for the Test Period ended on October 31, 1996. -14- 26. Notwithstanding anything to the contrary contained in the Credit Agreement, for purposes of amending or modifying any provision of the Credit Agreement which relates to the sale of Tele Control the "Required Banks" shall be determined on the basis provided in clause (B) of the definition of "Required Banks" appearing in Section 11.01 of the Credit Agreement. 27. The Borrower hereby covenants and agrees that, promptly upon receipt of an invoice from each Bank's outside counsel, the Borrower shall pay each such Bank's outside legal fees and expenses arising in connection with the Second Amendment in an amount not to exceed $7,500 for each such Bank, provided that the limitation set forth in this Section 27 shall not apply to the legal fees and expenses of outside legal counsel to the Agent. 28. In order to induce the Banks to enter into this Amendment, each of Holdings and the Borrower hereby represents and warrants that (i) there exists no Default or Event of Default on the Second Amendment Effective Date, after giving effect to this Amendment, (ii) all representations and warranties contained in the Credit Agreement and in the other Credit Documents are true and correct in all material respects on the Second Amendment Effective Date, after giving effect to this Amendment with the same effect as though such representations and warranties had been made on the Second Amendment Effective Date, (iii) neither Holdings nor any of its Subsidiaries has any defense, set- off or counterclaim in respect of the Obligations or the Guaranteed Obligations (as defined in the Credit Agreement and in the Subsidiaries Guaranty) nor do they have any claim against the Agent, the Collateral Agent, any Issuing Bank or any Bank arising out of, related to, or in connection with, any Credit Document and (iv) the Obligations and the Guaranteed Obligations (as defined in the Credit Agreement and in the Subsidiaries Guaranty) are and remain the legal, valid and binding obligations of Holdings, the Borrower and the other Credit Parties, as the case may be, enforceable against all such Credit Parties in accordance with their respective terms. 29. This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of -15- any other provision of the Credit Agreement or any other Credit Document. 30. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrower and the Agent. 31. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 32. This Amendment shall become effective on the date (the "Second Amendment Effective Date") when (i) Holdings, the Borrower and each Bank shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile transmission) the same to the Agent at its Notice Office, (ii) Holdings and each Bank shall have signed a counterpart of the Amendment to the September 1995 Warrant Agreement and the January 1996 Warrant Agreement in the form attached hereto and (iii) the Borrower shall have paid to the Agent for the pro rata distribution to the Banks --- ---- (based on the Banks' outstanding Term Loan and Revolving Loan Commitments on the Second Amendment Effective Date) an amendment fee equal to $250,000 in the aggregate. 33. From and after the Second Amendment Effective Date, all references in the Credit Agreement and each of the Credit Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as amended hereby. * * * -16- IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written. AUTOTOTE CORPORATION By____________________________ _______ Title: AUTOTOTE SYSTEMS, INC. By___________________________ _______ Title: BANKERS TRUST COMPANY, Individually and as Agent By___________________________ _______ Title: BANK OF IRELAND, GRAND CAYMAN BRANCH By___________________________ _______ Title: BANK POLSKA KASA OPIEKI, S.A. By___________________________ _______ Title: BHF-BANK AKTIENGESELLSCHAFT By___________________________ _______ Title: By___________________________ _______ Title: CREDITANSTALT CORPORATE FINANCE, INC. By___________________________ _______ Title: By___________________________ _______ Title: CORESTATES BANK By___________________________ _______ Title: EUROPEAN AMERICAN BANK By___________________________ _______ Title: FLEET NATIONAL BANK By___________________________ _______ Title: GIROCREDIT BANK AG DER SPARKASSEN, GRAND CAYMAN ISLAND BRANCH By___________________________ _______ Title: By___________________________ _______ Title: EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF AUTOTOTE CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS OCT-31-1997 NOV-01-1996 JAN-31-1997 5,152 0 22,578 2,315 6,629 39,268 182,887 92,043 186,455 44,813 40,000 0 0 345 (25,400) 186,455 35,515 35,515 21,555 21,555 17,354 0 3,634 (7,028) 395 (7,423) 0 0 0 (7,423) (0.23) (0.23)
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