EX-99 3 ex-99.txt PRO FORMA OPERATING RESULTS Exhibit 99 SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES Calendar Year 2000 and Pro Forma Calendar Year 2000 Operating Results On a Basis Comparable to Calendar Year 2001 Reporting The Company changed its fiscal year-end to a calendar year-end, beginning with the year ending December 31, 2001, and acquired a significant subsidiary on September 6, 2000. In connection with the change to a calendar year-end, on February 20, 2001, the Company filed a 10-Q Transition Report for the period November 1, 2000 to December 31, 2000. The accompanying schedules of calendar year operating results, calendar year pro forma operating results and calendar year pro forma segment operating results are presented so that appropriate comparisons may be made to calendar year 2001 actual operating results. Unless otherwise indicated, all dollar amounts herein are stated in thousands, except per share amounts. Change In Fiscal Year The Company changed its fiscal year from an October 31 year-end to a calendar year-end, beginning with the year ending December 31, 2001. Acquisition of Scientific Games Holdings Corp. On September 6, 2000, the Company completed the acquisition of Scientific Games Holdings Corp. ("SGHC"), a world-leading supplier of lottery products, integrated lottery systems and support services, and pre-paid telephone cards. The acquisition was completed through a merger in which SGHC became a wholly-owned subsidiary of the Company at a cost of approximately $308,000 in aggregate merger consideration to SGHC stockholders, plus related fees and expenses. The acquisition was recorded using the purchase method of accounting. The acquired assets and liabilities were 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 $156,828 and has been recorded as goodwill, which is being amortized over 20 years. The operating results of SGHC's businesses have been included in the Company's consolidated statements of operations from the date of the acquisition. (See Notes 9 and 13 to the Consolidated Financial Statements for the fiscal year ended October 31, 2000 in the Company's 2000 Annual Report on Form 10-K.) Effective April 27, 2001, the Company changed its corporate name from Autotote Corporation to Scientific Games Corporation and its stock symbol to SGM [AMEX: SGM]. These calendar year operating results, calendar year pro forma operating results and calendar year pro forma segment operating results have been prepared for comparative purposes only. They should be read in conjunction with the historical Consolidated Financial Statements for the fiscal year ended October 31, 2000 in the Company's 2000 Annual Report on Form 10-K and with the Financial Statements, Pro Forma Financial Information and Exhibits in the Form 8-K/A filed by the Company on November 21, 2000. These calendar year pro forma operating results and calendar year pro forma segment operating results do not purport to represent what the Company's results of operations would have been if these transactions had actually occurred at the beginning of the year ended December 31, 2000 and are not intended to project the Company's results of operations for any future period. 1 Calendar Year Actual Operating Results The following table presents unaudited actual results for the period January 1 to December 31, 2000, after giving effect to the change in fiscal year, and the inclusion of the results of SGHC and related financing transactions, from September 6, 2000, the date of the SGHC acquisition. SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For The Year Ended December 31, 2000 (Unaudited) (In thousands, except per share amounts)
First Second Third Fourth Quarter Quarter Quarter Quarter Year -------- ------- ------- ------- ------- Operating revenues: Services ................................. $ 37,659 38,885 54,210 87,196 217,950 Sales .................................... 7,953 14,269 9,187 20,338 51,747 -------- ------ ------- ------- ------- 45,612 53,154 63,397 107,534 269,697 -------- ------ ------- ------- ------- Operating expenses (exclusive of depreciation and amortization shown below): Services ................................. 24,493 25,008 36,411 59,770 145,682 Sales .................................... 3,893 9,567 6,350 12,209 32,019 -------- ------ ------- ------- ------- 28,386 34,575 42,761 71,979 177,701 -------- ------ ------- ------- ------- Total gross profit .................... 17,226 18,579 20,636 35,555 91,996 Selling, general and administrative expenses ................................... 6,731 6,544 10,035 20,501 43,811 Depreciation and amortization ................ 5,370 5,069 8,222 14,203 32,864 -------- ------ ------- ------- ------- Operating income ...................... 5,125 6,966 2,379 851 15,321 -------- ------ ------- ------- ------- Other deductions: Interest expense ......................... 4,253 4,388 15,367 13,316 37,324 Other (income) expense ................... (78) (111) (498) 3 (684) -------- ------ ------- ------- ------- 4,175 4,277 14,869 13,319 36,640 -------- ------ ------- ------- ------- Income (loss) before extraordinary item and income tax expense .............. 950 2,689 (12,490) (12,468) (21,319) Income tax expense ........................... 116 405 229 146 896 -------- ------ ------- ------- ------- Net income (loss) before extraordinary items .................... 834 2,284 (12,719) (12,614) (22,215) Extraordinary items .......................... -- -- 12,567 -- 12,567 -------- ------ ------- ------- ------- Net income (loss) ........................ 834 2,284 (25,286) (12,614) (34,782) Convertible preferred stock paid-in-kind dividend ...................... -- -- 439 1,718 2,157 -------- ------ ------- ------- ------- Net income (loss) available to common stockholders ................ $ 834 2,284 (25,725) (14,332) (36,939) ======== ====== ======= ======= ======= Basic and diluted net income (loss) per share: Net income (loss) before extraordinary items .................... $ 0.02 0.06 (0.34) (0.32) (0.59) Extraordinary items ...................... -- -- (0.34) -- (0.34) -------- ------ ------- ------- ------- Net income (loss) ........................ $ 0.02 0.06 (0.68) (0.32) (0.93) ======== ====== ======= ======= ======= Net income (loss) available to common stockholders ...................... $ 0.02 0.06 (0.70) (0.36) (0.98) ======== ====== ======= ======= ======= Weighted average number of shares used in per share calculations: Basic shares ............................. 36,544 36,807 36,931 39,855 37,539 ======== ====== ======= ======= ======= Diluted shares ........................... 41,888 41,086 36,931 39,855 37,539 ======== ====== ======= ======= =======
2 Pro Forma Operating Results -- Acquisition of Scientific Games Holdings Corp. The following table presents unaudited pro forma results of operations as if the SGHC acquisition and related financing transactions had occurred on January 1, 2000, after giving effect to certain adjustments, including amortization of goodwill and other identifiable intangible assets, additional depreciation expense, increased interest expense, convertible preferred stock dividends and related income tax effects associated with the SGHC acquisition and related financing transactions. The SGHC acquisition and related financing transactions were previously reported in the Form 8-K/A filed by the Company on November 21, 2000.
For the Year Ended December 31, 2000 -------------------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter Year --------- ------- ------- ------- ------- (Unaudited) (In thousands, except per share data) Operating revenues .................. $ 104,674 114,602 99,879 107,534 426,689 Operating expenses(exclusive of depreciation and amortization shown below) ..................... 65,791 75,961 68,622 71,979 282,353 Gross Profit ........................ 38,883 38,641 31,257 35,555 144,336 Selling, general and administrative expenses .......... 17,356 15,491 16,792 20,501 70,140 Depreciation and amortization ....... 11,969 11,848 12,423 14,203 50,443 Operating income .................... 9,558 11,302 2,042 851 23,753 Loss before income tax benefit and extraordinary item ........... (3,062) (1,037) (10,293) (12,468) (26,860) Net loss before extraordinary items . (2,153) (1,043) (9,379) (12,614) (25,189) Extraordinary items ................. -- -- 12,567 -- 12,567 --------- ------- ------- ------- ------- Net loss ............................ (2,153) (1,043) (21,946) (12,614) (37,756) Convertible preferred stock paid-in-kind dividend ............ 1,691 1,691 1,691 1,718 6,791 --------- ------- ------- ------- ------- Net loss available to common stockholders ..................... $ (3,844) (2,734) (23,637) (14,332) (44,547) ========= ======= ======= ======= ======= Basic and diluted net loss per share: Net loss before extraordinary items . $ (0.06) (0.03) (0.25) (0.32) (0.67) Extraordinary items ................. -- -- (0.34) -- (0.34) --------- ------- ------- ------- ------- Net loss ............................ $ (0.06) (0.03) (0.59) (0.32) (1.01) ========= ======= ======= ======= ======= Net loss available to common stockholders ..................... $ (0.11) (0.07) (0.64) (0.36) (1.19) ========= ======= ======= ======= ======= Weighted average number of shares used in per share calculations: Basic shares ................... 36,544 36,807 36,931 39,855 37,539 ========= ======= ======= ======= ======= Diluted shares ................. 36,544 36,807 36,931 39,855 37,539 ========= ======= ======= ======= =======
3 Segment Reporting We operate in four business segments: Lottery Group, Pari-mutuel Group, Venue Management Group and Telecommunications Group. Our Lottery Group consists of two product lines: Instant Tickets and Related Services ("ITRS") and Lottery Systems. ITRS includes ticket design and manufacturing as well as value-added services, including game design, sales and marketing support, inventory management and warehousing and fulfillment services. In addition, this division includes promotional instant tickets and pull-tab tickets that we sell to both lottery and non-lottery customers. Lottery Systems includes the supply of transaction processing software for the accounting and validation of both instant ticket and on-line lottery games, point-of-sale terminal hardware sales, central site computers and communication hardware sales, and ongoing support and maintenance services for these products. This product line also includes software and hardware and support service for sports betting and credit card processing systems. Prior to the SGHC acquisition, our Lottery Group consisted solely of the Lottery Systems product line, exclusive of sports betting and credit card processing services. Our Pari-mutuel Group is comprised of our North American and international on-track, off-track and inter-track pari-mutuel services, simulcasting and communications services, and video gaming, as well as sales of pari-mutuel systems and equipment. Our Venue Management Group is comprised of the Connecticut off-track betting operations, and the Company's Netherlands on-track and off-track betting operations. Our Telecommunications Group is comprised of the prepaid cellular phone cards business, which was acquired by the Company as part of the SGHC acquisition. The Company's revenues are derived from two principal sources: service revenues and sales revenues. Service revenues are earned pursuant to multi-year contracts to provide ITRS and wagering systems and services; or are derived from wagering by customers at facilities owned or leased by the Company. Sales revenues are derived from sales of prepaid phone cards and from contracts for the sale of wagering systems, equipment, and software licenses. The first calendar quarter and the fourth calendar quarter of the year traditionally comprise the weakest season for the Company's pari-mutuel wagering service revenue. Wagering equipment sales and software license revenues usually reflect a limited number of large transactions that do not recur on an annual basis. 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 and software license revenue. In addition, instant ticket and prepaid phone card sales may vary depending on the size and timing of contract awards, changes in customer budgets, inventory ticket position, lottery retail sales and general economic conditions. Operating results may also vary significantly from period to period depending on the addition or disposition of business units in each period. The acquisition of SGHC in 2000, which was accounted for as a purchase, affects the comparability of operations from period to period (see Note 3 to the Consolidated Financial Statements for the fiscal year ended October 31, 2000 included in the Company's 2000 Annual Report on Form 10-K). 4 The following tables present: o Actual Segment Operating Results--the actual operating results of the Company's segments on a calendar year basis for the year ended December 31, 2000, with the operating results of SGHC's businesses included from September 6, 2000, the date of the acquisition. o Pro Forma Segment Operating Results--the pro forma operating results of the Company's segments on a calendar year basis for the year ended December 31, 2000, with the operating results of SGHC's businesses, after giving effect to certain adjustments, including amortization of goodwill and other identifiable intangible assets, additional depreciation expense, increased interest expense, convertible preferred stock dividends and related income tax effects associated with the SGHC acquisition and related financing transactions, as if the acquisition had occurred at the beginning of the calendar year. These results should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended October 31, 2000, included in the Company's 2000 Annual Report on Form 10-K and with Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Quarterly Reports on Form 10-Q for the periods ended March 31, 2001 and June 30, 2001. 5 SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES Actual Segment Operating Results (with SCHC from date of acquisition) Year Ended December 31, 2000 (Unaudited, in thousands)
First Second Third Fourth Year Quarter Quarter Quarter Quarter 2000 ------- ------- ------- ------- ------- Lottery Group Service revenue .............. $ 2,969 2,937 16,982 51,267 74,155 Sales revenue ................ -- 11,891 6,712 3,808 22,411 ------- ------ ------ ------- ------- Total operating revenue ...... $ 2,969 14,828 23,694 55,075 96,566 ======= ====== ====== ======= ======= Gross Profit (excluding depreciation and amortization) $ 915 4,097 6,445 18,026 29,483 ======= ====== ====== ======= ======= Pari-mutuel Group Service revenue .............. $19,536 20,002 21,539 20,731 81,808 Sales revenue ................ 7,953 2,378 637 5,615 16,583 ------- ------ ------ ------- ------- Total operating revenue ...... $27,489 22,380 22,176 26,346 98,391 ======= ====== ====== ======= ======= Gross Profit (excluding depreciation and amortization) $12,010 10,159 9,187 8,696 40,052 ======= ====== ====== ======= ======= Venue Management Group Service revenue .............. $15,154 15,946 15,689 15,198 61,987 ======= ====== ====== ======= ======= Gross Profit (excluding depreciation and amortization) $ 4,301 4,323 4,223 4,203 17,050 ======= ====== ====== ======= ======= Telecommunications Group Sales revenue ................ $ -- -- 1,838 10,915 12,753 ======= ====== ====== ======= ======= Gross Profit (excluding depreciation and amortization) $ -- -- 781 4,630 5,411 ======= ====== ====== ======= ======= Company Total Service revenue .............. $37,659 38,885 54,210 87,196 217,950 Sales revenue ................ 7,953 14,269 9,187 20,338 51,747 ------- ------ ------ ------- ------- Total operating revenue ...... $45,612 53,154 63,397 107,534 269,697 ======= ====== ====== ======= ======= Gross Profit (excluding depreciation and amortization) $17,226 18,579 20,636 35,555 91,996 ======= ====== ====== ======= =======
6 SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES Pro Forma Segment Operating Results (with SGHC from January 1, 2000) Year Ended December 31, 2000 (Unaudited, in thousands)
First Second Third Fourth Quarter Quarter Quarter Quarter Year -------- ------- ------- ------- ------- Lottery Group Service revenue .............. $ 47,391 51,028 46,601 51,267 196,287 Sales revenue ................ 3,706 15,148 7,716 3,808 30,378 -------- ------- ------ ------- ------- Total operating revenue ...... $ 51,097 66,176 54,317 55,075 226,665 ======== ======= ====== ======= ======= Gross Profit (excluding depreciation and amortization) $ 17,688 19,914 14,665 18,026 70,293 ======== ======= ====== ======= ======= Pari-mutuel Group Service revenue .............. $ 19,536 20,002 21,539 20,731 81,808 Sales revenue ................ 7,953 2,378 637 5,615 16,583 -------- ------- ------ ------- ------- Total operating revenue ...... $ 27,489 22,380 22,176 26,346 98,391 ======== ======= ====== ======= ======= Gross Profit (excluding depreciation and amortization) $ 12,010 10,159 9,187 8,696 40,052 ======== ======= ====== ======= ======= Venue Management Group Service revenue .............. $ 15,154 15,946 15,689 15,198 61,987 ======== ======= ====== ======= ======= Gross Profit (excluding depreciation and amortization) $ 4,301 4,323 4,223 4,203 17,050 ======== ======= ====== ======= ======= Telecommunications Group Sales revenue ................ $ 10,934 10,100 7,697 10,915 39,646 ======== ======= ====== ======= ======= Gross Profit (excluding depreciation and amortization) $ 4,884 4,245 3,182 4,630 16,941 ======== ======= ====== ======= ======= Company Total Service revenue .............. $ 82,081 86,976 83,829 87,196 340,082 Sales revenue ................ 22,593 27,626 16,050 20,338 86,607 -------- ------- ------ ------- ------- Total operating revenue ...... $104,674 114,602 99,879 107,534 426,689 ======== ======= ====== ======= ======= Gross Profit (excluding depreciation and amortization) $ 38,883 38,641 31,257 35,555 144,336 ======== ======= ====== ======= =======
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