-----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, N5HyfBIpOTkPKxfRkA6frCm8+oqCd7NysNRFC2omvXY3k/o/A7BWnKhk8cnSqucK Dk98dOdhaWaBn9sIZLWhzw== 0001005477-00-002205.txt : 20000316 0001005477-00-002205.hdr.sgml : 20000316 ACCESSION NUMBER: 0001005477-00-002205 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000131 FILED AS OF DATE: 20000315 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: SEC FILE NUMBER: 001-11693 FILM NUMBER: 570406 BUSINESS ADDRESS: STREET 1: 100 BELLEVUE CITY: NEWARK STATE: DE ZIP: 19714 BUSINESS PHONE: 3027374300 MAIL ADDRESS: STREET 1: 100 BELLEVUE ROAD CITY: NEWARK STATE: DE ZIP: 19714 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TOTE INC DATE OF NAME CHANGE: 19920317 10-Q 1 FORM 10-Q 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 period ended: January 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 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 March 9, 2000: Class A Common Stock: 36,603,369 Class B Common Stock: None Page 1 of 19 AUTOTOTE CORPORATION AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND OTHER INFORMATION QUARTER ENDED JANUARY 31, 2000 Page ---- PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements: Balance Sheets as of October 31, 1999 and January 31, 2000 3 Statements of Operations for the Three Months Ended January 31, 1999 and 2000 4 Statements of Cash Flows for the Three Months Ended January 31, 1999 and 2000 5 Notes to Consolidated Financial Statements 6-13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14-17 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8K 18 2 AUTOTOTE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts)
October 31, January 31, 1999 2000 ----------- ----------- ASSETS (Unaudited) Current assets: Cash and cash equivalents ................................................ $ 5,067 3,048 Restricted cash .......................................................... 771 721 Accounts receivable, net ................................................. 25,755 23,237 Inventories .............................................................. 14,636 16,751 Prepaid expenses, deposits and other current assets ...................... 2,319 3,132 --------- --------- Total current assets ................................................ 48,548 46,889 --------- --------- Property and equipment, at cost ............................................... 199,767 205,286 Less accumulated depreciation ............................................ 123,039 125,754 --------- --------- Net property and equipment .......................................... 76,728 79,532 --------- --------- Goodwill, net of amortization ................................................. 5,237 4,541 Operating right, net of amortization .......................................... 13,848 13,598 Other assets and investments .................................................. 21,198 21,714 --------- --------- $ 165,559 166,274 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Current installments of long-term debt ................................... $ 4,253 3,002 Accounts payable ......................................................... 20,102 15,297 Accrued liabilities ...................................................... 28,015 23,373 Interest payable ......................................................... 3,898 7,449 --------- --------- Total current liabilities ........................................... 56,268 49,121 --------- --------- Deferred income taxes ......................................................... 1,656 1,664 Other long-term liabilities ................................................... 2,963 3,093 Long-term debt, excluding current installments ................................ 117,891 125,369 Long-term debt, convertible subordinated debentures ........................... 35,000 35,000 --------- --------- Total liabilities ................................................... 213,778 214,247 --------- --------- 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 36,500 shares outstanding at October 31, 1999 and January 31, 2000, respectively .................................... 364 366 Class B non-voting common stock, par value $0.01 per share, 700 shares authorized, none outstanding .......................................... -- -- Additional paid-in capital ............................................... 149,622 150,021 Accumulated losses ....................................................... (196,852) (196,388) Treasury stock, at cost .................................................. (102) (102) Accumulated other comprehensive loss ..................................... (1,251) (1,870) --------- --------- Total stockholders' equity (deficit) ................................ (48,219) (47,973) --------- --------- Commitments and contingencies (see Notes 8, 10, 13 and 14 to the Consolidated Financial Statements in the Company's 1999 Annual Report on Form 10-K.) ....... $ 165,559 166,274 ========= =========
See accompanying notes to consolidated financial statements. 3 AUTOTOTE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended January 31, 1999 and 2000 (Unaudited, in thousands, except per share amounts)
1999 2000 -------- -------- Operating revenues: Services .............................................................. $ 34,229 36,333 Sales ................................................................. 11,423 13,232 -------- -------- 45,652 49,565 -------- -------- Operating expenses (exclusive of depreciation and amortization shown below): Services .............................................................. 23,163 24,480 Sales ................................................................. 8,156 7,996 -------- -------- 31,319 32,476 -------- -------- Total gross profit ............................................... 14,333 17,089 Selling, general and administrative expenses ............................... 6,788 6,993 Depreciation and amortization .............................................. 5,733 5,510 -------- -------- Operating income ................................................. 1,812 4,586 -------- -------- Other deductions: Interest expense ...................................................... 4,070 3,997 Other expense ......................................................... 45 57 -------- -------- 4,115 4,054 -------- -------- Income (loss) before income tax expense ............................... (2,303) 532 Income tax expense ......................................................... 131 68 -------- -------- Net income (loss) .......................................................... $ (2,434) 464 ======== ======== Net income (loss) per basic share and diluted share ........................ $ (0.07) 0.01 ======== ======== Weighted average number of shares used in per share calculation: Basic shares .......................................................... 35,998 36,388 ======== ======== Diluted shares ........................................................ 35,998 40,352 ======== ========
See accompanying notes to consolidated financial statements. 4 AUTOTOTE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended January 31, 1999 and 2000 (Unaudited, in thousands)
1999 2000 ------- ------- Cash flows from operating activities: Net income (loss) ............................................... $(2,434) 464 ------- ------- Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization .............................. 5,733 5,510 Changes in operating assets and liabilities ................ 65 (6,066) Other ...................................................... 299 258 ------- ------- Total adjustments ..................................... 6,097 (298) ------- ------- Net cash provided by operating activities ............................ 3,663 166 ------- ------- Cash flows from investing activities: Capital expenditures ............................................ (326) (1,751) Wagering systems expenditures ................................... (1,832) (5,435) Increase in other assets and investments ........................ (2,582) (1,570) ------- ------- Net cash used in investing activities ................................ (4,740) (8,756) ------- ------- Cash flows from financing activities: Net borrowings under lines of credit ............................ -- 8,315 Proceeds from issuance of long-term debt ........................ 60 86 Payments on long-term debt ...................................... (750) (2,034) Proceeds from the issuance of common stock ...................... -- 338 ------- ------- Net cash provided by (used in) financing activities .................. (690) 6,705 ------- ------- Effect of exchange rate changes on cash .............................. (87) (134) ------- ------- Decrease in cash and cash equivalents ................................ (1,854) (2,019) Cash and cash equivalents, beginning of period ....................... 6,809 5,067 ------- ------- Cash and cash equivalents, end of period ............................. $ 4,955 3,048 ======= ======= Supplemental disclosure of cash flow information: Cash paid during the period for: Interest ........................................................ $ 61 65 ======= ======= Income taxes .................................................... $ 178 200 ======= =======
See accompanying notes to consolidated financial statements. 5 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 January 31, 2000 and the consolidated statements of operations for the three months ended January 31, 1999 and 2000, and the consolidated statements of cash flows for the three 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 January 31, 2000 and the results of its operations for the three months ended January 31, 1999 and 2000 and its cash flows for the three months ended January 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 1999 Annual Report on Form 10-K. The results of operations for the period ended January 31, 2000 are not necessarily indicative of the operating results for the full year. Basic Net Income (Loss) Per Share and Diluted Net Income (Loss) 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 month periods ended January 31, 1999 and 2000:
Three months ended January 31, -------------------- 1999 2000 -------- ------ Income (numerator) Net income (loss) ................................... $ (2,434) 464 -------- ------ Shares (denominator) Basic weighted average common shares outstanding .... 35,998 36,388 Effect of diluted securities-stock options, warrants, and deferred shares ............................... -- 3,964 -------- ------ Diluted weighted average common shares outstanding .. 35,998 40,352 ======== ====== Per Share Amount Basic net income (loss) per share ................... $ (0.07) 0.01 ======== ====== Diluted net income (loss) per share ................. $ (0.07) 0.01 ======== ======
At January 31, 2000, the Company had outstanding stock options, warrants, convertible subordinated debentures, Performance Accelerated Restricted Stock Units 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.) 6 AUTOTOTE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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 OTBs and bookmakers in Germany. The purchase, which included approximately $2,333 in cash 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 months ended January 31, 1999 would not have been materially different. 3) Business Segments The following tables represent revenues and profits by business segments for the three month periods ended January 31, 1999 and 2000. Corporate expenses are allocated among business segments. Interest expense and other (income) deductions are not allocated to business segments.
Three Months Ended January 31, ---------------------- 1999 2000 -------- -------- Service revenue and product sales: Pari-mutuel operations ........... $ 20,188 27,436 Venue management operations ...... 14,314 14,346 Lottery operations ............... 10,721 7,456 SJC Video operations ............. 429 327 -------- -------- $ 45,652 49,565 ======== ======== Gross profit Pari-mutuel operations ........... $ 7,914 10,689 Venue management operations ...... 3,373 3,916 Lottery operations ............... 2,811 2,484 SJC Video operations ............. 235 -- -------- -------- Total gross profit ............ $ 14,333 17,089 ======== ======== Operating income (loss) Pari-mutuel operations ........... $ (888) 1,783 Venue management operations ...... 970 1,613 Lottery operations ............... 1,827 1,190 SJC Video operations ............. (97) -- -------- -------- 1,812 4,586 Other deductions: Interest expense ................... 4,070 3,997 Other expense ...................... 45 57 -------- -------- Income (loss) before income tax expense $ (2,303) 532 ======== ========
7 AUTOTOTE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Unaudited, in thousands, except per share amounts) 3) Business Segments--(Continued) October 31, January 31, 1999 2000 ----------- ----------- Assets Pari-mutuel operations .......... $110,598 113,082 Venue management operations ..... 34,613 34,368 Lottery operations .............. 20,348 18,824 SJC Video operations ............ -- -- -------- -------- $165,559 166,274 ======== ======== Three Months Ended January 31, ------------------------------ 1999 2000 ---------- ------------- Capital and wagering systems expenditures Pari-mutuel operations .......... $ 1,419 6,648 Venue management operations ..... 177 356 Lottery operations .............. 541 182 SJC Video operations ............ 21 -- -------- -------- $ 2,158 7,186 ======== ======== 4) Comprehensive Loss The following presents a reconciliation of net income (loss) to comprehensive loss for the three months ended January 31, 1999 and 2000: Three Months Ended January 31, ------------------------------ 1999 2000 ---------- ------------- Net income (loss) .................... $ (2,434) 464 Other comprehensive loss: Foreign currency translation .... (145) (619) -------- ---- Comprehensive loss ................... $ (2,579) (155) ======== ==== 5) Inventories Inventories consist of the following: October 31, January 31, 1999 2000 ----------- ----------- Parts and work-in-process ............ $ 13,735 15,810 Finished goods ....................... 344 209 Ticket paper ......................... 557 732 -------- ------ $ 14,636 16,751 ======== ====== 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. 8 AUTOTOTE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, in thousands, except per share amounts) 6) Debt At January 31, 2000, the Company had approximately $15,581 available for borrowing under the Company's revolving Credit Facility (the "Facility"). There were approximately $8,315 of borrowings outstanding under the Facility at January 31, 2000, and approximately $1,104 in letters of credit were issued under the Facility. 7) 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 Senior Notes bearing interest at an annual rate of 10 7/8% (the "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 "Term Loan"). The Term Loan was extended in conjunction with the Facility and is subject to certain restrictive and financial covenants contained in the Facility. Obligations under the Facility and the 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.) 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 and the non-wholly owned foreign subsidiaries (the "Non-Guarantor Subsidiaries") as of January 31, 2000 (unaudited) and October 31, 1999 (audited) and for the three month periods ended January 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 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. 9 AUTOTOTE CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET October 31, 1999 (in thousands)
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 liabilities .......................... $ 12,219 29,546 10,922 (672) 52,015 Current installments of long-term debt ....... 1,250 2,429 574 -- 4,253 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 January 31, 2000 (in thousands)
Parent Guarantor Non-Guarantor Eliminating Company Subsidiaries Subsidiaries Entries Consolidated --------- ------------ ------------- ----------- ----------- ASSETS Cash and cash equivalents .................... $ 439 1,076 1,533 -- 3,048 Accounts receivable, net ..................... -- 18,626 4,611 -- 23,237 Other current assets ......................... 14 16,152 4,872 (434) 20,604 Property and equipment, net .................. 283 70,033 9,505 (289) 79,532 Investment in subsidiaries ................... 65,027 -- -- (65,027) -- Goodwill ..................................... 196 88 4,257 -- 4,541 Other assets ................................. 6,387 30,699 632 (2,406) 35,312 --------- --------- --------- --------- --------- Total assets .............................. $ 72,346 136,674 25,410 (68,156) 166,274 ========= ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities .......................... $ 14,086 22,897 9,586 (450) 46,119 Current installments of long-term debt ....... -- 2,407 595 -- 3,002 Long-term debt, excluding current installments 153,315 6,026 1,028 -- 160,369 Other non-current liabilities ................ 2,441 733 2,155 (572) 4,757 Intercompany balances ........................ (49,523) 47,004 2,088 431 -- Stockholders' equity (deficit) ............... (47,973) 57,607 9,958 (67,565) (47,973) --------- --------- --------- --------- --------- Total liabilities and stockholders' equity (deficit) ....................... $ 72,346 136,674 25,410 (68,156) 166,274 ========= ========= ========= ========= =========
10 AUTOTOTE CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED STATEMENT OF OPERATIONS Three Months Ended January 31, 1999 (in thousands)
Parent Guarantor Non-Guarantor Eliminating Company Subsidiaries Subsidiaries Entries Consolidated --------- ------------ ------------- ----------- ----------- Operating revenues .............................. $ -- 39,071 10,444 (3,863) 45,652 Operating expenses .............................. -- 26,409 8,778 (3,868) 31,319 --------- --------- --------- --------- --------- Gross profit ................................. -- 12,662 1,666 5 14,333 Selling, general and administrative expenses .... 2,637 3,204 947 -- 6,788 Depreciation and amortization ................... 45 5,002 711 (25) 5,733 --------- --------- --------- --------- --------- Operating income (loss) ...................... (2,682) 4,456 8 30 1,812 Interest expense ................................ 3,753 291 49 (23) 4,070 Other (income) expense .......................... (10) 8 24 23 45 --------- --------- --------- --------- --------- Income (loss) before equity in income of subsidiaries, and income taxes ............... (6,425) 4,157 (65) 30 (2,303) Equity in income of subsidiaries ............... 4,011 -- -- (4,011) -- Income tax expense .............................. 20 19 92 -- 131 --------- --------- --------- --------- --------- Net income (loss) ............................... $ (2,434) 4,138 (157) (3,981) (2,434) ========= ========= ========= ========= =========
AUTOTOTE CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED STATEMENT OF OPERATIONS Three Months Ended January 31, 2000 (in thousands)
Parent Guarantor Non-Guarantor Eliminating Company Subsidiaries Subsidiaries Entries Consolidated --------- ------------ ------------- ----------- ----------- Operating revenues .............................. $ -- 42,149 12,163 (4,747) 49,565 Operating expenses .............................. -- 26,570 10,653 (4,747) 32,476 --------- --------- --------- --------- --------- Gross profit ................................. -- 15,579 1,510 -- 17,089 Selling, general and administrative expenses .... 2,517 3,438 1,038 -- 6,993 Depreciation and amortization ................... 72 4,624 839 (25) 5,510 --------- --------- --------- --------- --------- Operating income (loss) ...................... (2,589) 7,517 (367) 25 4,586 Interest expense ................................ 3,729 219 166 (117) 3,997 Other (income) expense .......................... (3) 10 4 46 57 --------- --------- --------- --------- --------- Income (loss) before equity in income of subsidiaries and income taxes ................ (6,315) 7,288 (537) 96 532 Equity in income of subsidiaries ................ 6,779 -- -- (6,779) -- Income tax expense .............................. -- 100 (32) -- 68 --------- --------- --------- --------- --------- Net income (loss) ............................... $ 464 7,188 (505) (6,683) 464 ========= ========= ========= ========= =========
11 AUTOTOTE CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED STATEMENT OF CASH FLOWS Three Months Ended January 31, 1999 (in thousands)
Parent Guarantor Non-Guarantor Eliminating Company Subsidiaries Subsidiaries Entries Consolidated --------- ------------ ------------- ----------- ----------- Net income (loss) ............................... $ (2,434) 4,138 (157) (3,981) (2,434) Depreciation and amortization ................ 45 5,002 711 (25) 5,733 Equity in income of subsidiaries ............. (4,011) -- -- 4,011 -- Changes in operating assets and liabilities .. 2,568 (1,251) (1,433) 181 65 Other non-cash adjustments ................... 303 (20) 16 -- 299 --------- --------- --------- --------- --------- Net cash provided by (used in) operating activities (3,529) 7,869 (863) 186 3,663 --------- --------- --------- --------- --------- Cash flows from investing activities: Capital and wagering systems expenditures .... (7) (1,998) (149) (4) (2,158) Other assets and investments ................. (149) (2,303) (161) 31 (2,582) --------- --------- --------- --------- --------- Net cash provided by (used in) investing activities (156) (4,301) (310) 27 (4,740) --------- --------- --------- --------- --------- Cash flows from financing activities: Proceeds from issuance of long-term debt ..... -- 60 -- -- 60 Payments on long-term debt ................... -- (685) (65) -- (750) Other, principally intercompany balances ..... 3,471 (3,517) 101 (55) -- --------- --------- --------- --------- --------- Net cash provided by (used in) financing activities 3,471 (4,142) 36 (55) (690) --------- --------- --------- --------- --------- Effect of exchange rate changes on cash ......... -- 1 (138) 50 (87) --------- --------- --------- --------- --------- Increase (decrease) in cash and cash equivalents (214) (573) (1,275) 208 (1,854) Cash and cash equivalents, beginning of period .. 2,054 401 4,562 (208) 6,809 --------- --------- --------- --------- --------- Cash and cash equivalents, end of period ........ $ 1,840 (172) 3,287 -- 4,955 ========= ========= ========= ========= =========
12 AUTOTOTE CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED STATEMENT OF CASH FLOWS Three Months Ended January 31, 2000 (in thousands)
Parent Guarantor Non-Guarantor Eliminating Company Subsidiaries Subsidiaries Entries Consolidated --------- ------------ ------------- ----------- ----------- Net income (loss) ............................... $ 464 7,188 (505) (6,683) 464 Depreciation and amortization ................ 72 4,624 839 (25) 5,510 Equity in income of subsidiaries ............. (6,779) -- -- 6,779 -- Other non-cash adjustments ................... 283 23 (48) -- 258 Changes in working capital ................... 1,883 (5,321) (1,940) (688) (6,066) --------- --------- --------- --------- --------- Net cash provided by (used in) operating activities (4,077) 6,514 (1,654) (617) 166 --------- --------- --------- --------- --------- Cash flows from investing activities: Capital and wagering systems expenditures .... (17) (6,287) (882) -- (7,186) Other assets and investments ................. (198) (1,709) 412 (75) (1,570) --------- --------- --------- --------- --------- Net cash provided by (used in) investing activities (215) (7,996) (470) (75) (8,756) --------- --------- --------- --------- --------- Cash flows from financing activities: Net borrowing under lines of credit .......... 8,315 -- -- -- 8,315 Proceeds from issuance of long-term debt ..... -- -- 86 -- 86 Payments on long-term debt ................... (1,250) (611) (173) -- (2,034) Other, principally intercompany balances ..... (3,932) 2,294 1,213 763 338 --------- --------- --------- --------- --------- Net cash provided by (used in) financing activities 3,133 1,683 1,126 763 6,705 --------- --------- --------- --------- --------- Effect of exchange rate changes on cash ......... -- 369 (432) (71) (134) --------- --------- --------- --------- --------- Increase (decrease) in cash and cash equivalents (1,159) 570 (1,430) -- (2,019) Cash and cash equivalents, beginning of period .. 1,598 506 2,963 -- 5,067 --------- --------- --------- --------- --------- Cash and cash equivalents, end of period ........ $ 439 1,076 1,533 -- 3,048 ========= ========= ========= ========= =========
13 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, 2000 and the results of its operations for the three month period ended January 31, 2000, compared to the same period 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. We operate primarily in three business segments, Pari-mutuel Operations, Venue Management and Lottery Operations. Pari-mutuel Operations include all aspects of our pari-mutuel service business, which encompass our 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 operations and our 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. During fiscal 1999, the Company commenced negotiations to sell its SJC Video business. Historically, our 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 us. Sales revenues are derived from sales contracts for wagering equipment, services and software. The first quarter of our fiscal year and a portion of our second fiscal quarter 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.
Results of Operations: Three Months Ended January 31, ------------------------------- 1999 2000 ---- ---- Pari-mutuel Operations (in thousands) Operating Revenues: Service revenue .................................. $17,314 18,892 Sales revenue .................................... 2,874 8,544 ------- ------ Total Revenue ................................. $20,188 27,436 ======= ====== Gross Profit (excluding depreciation and amortization) $ 7,914 10,689 ======= ====== Venue Management Operations Operating Revenues: Service revenue .................................. $14,314 14,346 ======= ====== Gross Profit (excluding depreciation and amortization) $ 3,373 3,916 ======= ======
14 AUTOTOTE CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued)
Results of Operations: Three Months Ended January 31, ------------------------------ 1999 2000 ------- ----- Lottery Operations (in thousands) Operating Revenues: Service revenue .................................. $ 2,172 2,768 Sales revenue .................................... 8,549 4,688 ------- ------ Total Revenue ................................. $10,721 7,456 ======= ====== Gross Profit (excluding depreciation and amortization) $ 2,811 2,484 ======= ====== SJC Video Operating Revenues: Service revenue .................................. $ 429 327 ======= ====== Gross Profit (excluding depreciation and amortization) $ 235 -- ======= ====== Company Total Operating Revenues: Service revenue .................................. $34,229 36,333 Sales revenue .................................... 11,423 13,232 ------- ------ Total Revenue ................................. $45,652 49,565 ======= ====== Gross Profit (excluding depreciation and amortization) $14,333 17,089 ======= ======
Three Months Ended January 31, 2000 Compared to Three Months Ended January 31, 1999 Pari-mutuel Operations service revenues of $18.9 million for the first quarter of fiscal 2000 improved $1.6 million or 9% from the first quarter of the prior year. This improvement reflects primarily $1.6 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 and NASRIN(TM) operations. These increases were partially offset by lower service revenues in the French operations. Pari-mutuel Operations sales revenues increased by $5.7 million to $8.5 million in the first quarter of fiscal 2000 due primarily to the sales of terminals to the Company's international customers, primarily in Italy and Chile. Pari-mutuel Operations gross profit of $10.7 million or 39% of total revenues, increased from gross profit of $7.9 million in the same period last year. Higher gross profit on improved handle, primarily in North America and Germany pari-mutuel operations and higher equipment sales were partially offset by a decrease in gross profit on lower handle in the French pari-mutuel operations and higher satellite service fees due to a credit received in fiscal 1999 from our satellite provider resulting from a service interruption. Venue Management Operations service revenues of $14.3 million for the first quarter of fiscal 2000 approximated the service revenues of the first quarter of the prior year as revenue increases due to increased handle in the Connecticut operations were offset by the impact of foreign exchange on the reported revenues of the Netherlands operations. Gross profit was $3.9 million or 27% percent of service revenue in the first quarter of fiscal 2000, an increase over the gross profit of $3.4 million or 24% percentage of service revenue in the first quarter of fiscal 1999. This improvement primarily reflects higher handle-related revenues and cost savings in the Connecticut operations. 15 AUTOTOTE CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued) Lottery Operations service revenues in the first quarter of fiscal 2000 of $2.8, improved $0.6 million from the first quarter of the prior year due to the April 1999 launch of the Montana lottery. The $3.9 million decrease in sales to $4.7 million in the first quarter of fiscal 2000 is primarily attributable to lower sales of terminals, primarily for use in Italy. Lottery Operations gross profit of $2.5 million or 33% of total revenues, decreased from gross profit of $2.8 million or 26% of total revenues in the same period last year. Higher gross profit on improved service revenue due to the new Montana lottery operation were more than offset by a decrease in gross profit on the lower international equipment sales. Expense Analysis Selling, general and administrative expenses including software development costs increased $0.2 million or 3% to $7.0 million in the first quarter of fiscal 2000. Higher expenses were due to increased operating levels in the North American and German pari-mutuels operations and the Montana lottery which began in April 1999. Depreciation and amortization expenses decreased $0.2 million or 4% to $5.5 million in the first quarter of fiscal 2000. Depreciation decreased $0.3 million, primarily due to full depreciation of certain assets in prior periods. Amortization expense increased $0.1 million as a result of the amortization of intangible assets associated with the German operation acquired in September 1999. Interest expense decreased $0.1 million to $4.0 million in the first quarter of fiscal as a result of fluctuations in long term borrowings. Income Taxes Income tax expense was $0.1 million in both the first quarter of fiscal 2000 and the first quarter of fiscal 1999. Income tax expense principally reflects foreign and state income taxes, since no federal tax benefit has been recognized on domestic operating losses. Liquidity, Capital Resources and Working Capital Deficiency At January 31, 2000, the Company's available cash and borrowing capacity totaled $18.6 million compared to $29.0 million at October 31, 1999. Net cash provided by operating activities decreased by $3.5 million to $0.2 million for the quarter ended January 31, 2000 from $3.7 million in the quarter ended January 31, 1999 as a result of an increase in inventory and the decrease in accounts payable. In the first quarter of fiscal 2000, the Company utilized $0.2 million of cash provided by operating activities, $8.3 million of long-term borrowings and $2.0 million of available cash, to invest $8.8 million, principally in capital and contract expenditures in connection with the start-up of the Monmouth/Meadowlands service contract and in software systems development, and used $2.0 million to reduce other long-term loans. At January 31, 2000, the Company's current liabilities exceeded current assets by $2.2 million, an improvement of $5.5 million from October 31, 1999. The improvement results principally from cash flows from operations that were used to reduce accounts payable. As described above in Note 6 to the Consolidated Financial Statements, the Company had $15.6 million of borrowing availability under its Facility at January 31, 2000. The Company believes that its cash resources, anticipated cash flows from operations and borrowing availability under the Facility will provide sufficient liquidity to meet scheduled interest payments and anticipated capital expenditures during the next twelve months. The Company believes that additional financing will be required to enable it to meet the scheduled maturity of the Term Loan and Credit Facility in February 2001 and the scheduled maturity of the Subordinated Debentures in August 2001. The Company also believes that additional financing will be required to enable it to meet the scheduled maturity of the Notes and for capital expenditures that are not financed through cash flows from operations. 16 AUTOTOTE CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(Continued) Recent Accounting Pronouncements In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 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 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. Year 2000 We are dedicated to providing uninterrupted, high quality performance from our computer software systems, products and satellite communications network before, during and after year 2000. Since fiscal 1997, we have tested our critical systems, surveyed our principal suppliers, identified all internal systems with date-related deficiencies, developed solutions for those internal systems that have been found to have date-related deficiencies, and remediated any deficient systems. As a result of our planning and remediation, we encountered no significant problems with any of our systems as we entered the year 2000. We will continue to monitor our systems and take appropriate actions, when and if necessary. We do not expect to encounter any significant problems with year 2000 date-related deficiencies, however, our belief and expectations may ultimately prove to be inaccurate. 17 AUTOTOTE CORPORATION AND SUBSIDIARIES Quarter Ended January 31, 12000 PART II. Other Information Item 1. Legal Proceedings No significant changes have occurred with respect to legal proceedings as disclosed in Part 1, Item 3, of the Company's 1999 Annual Report on Form 10-K. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Stockholders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule. No current reports on Form 8-K were filed during the first quarter of fiscal 2000. 18 AUTOTOTE CORPORATION AND SUBSIDIARIES Quarter Ended January 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: March 15, 2000 19 EX-27 2 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-31-2000 NOV-1-1999 JAN-31-2000 3,048 0 26,049 (2,812) 16,751 46,889 205,286 125,754 166,274 49,121 35,000 0 0 366 (48,339) 166,274 49,565 49,565 32,476 32,476 12,560 0 3,997 532 68 464 0 0 0 464 0.01 0.01
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