UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended:3/31/98
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to .
Commission file number: 333-17795-01
WATERFORD GAMING FINANCE CORP.
---------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 06-1485836
--------- ------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
914 HARTFORD TPKE,
P.O. BOX 715,
WATERFORD, CT 06385
------------------ -------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (860) 442-4559
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
WATERFORD GAMING FINANCE CORP.
INDEX TO FORM 10-Q
Page
Number
PART I -- FINANCIAL INFORMATION
ITEM 1 -- Financial Statements
Report of Independent Accountants for Waterford Gaming
Finance Corp. 1
Financial Information 2
Condensed Balance Sheets of Waterford Gaming Finance Corp.
as of March 31, 1998 (unaudited) and December 31, 1997 3
Condensed Statements of Operations of Waterford Gaming Finance
Corp. for the three months ended March 31, 1998 (unaudited)
and March 31, 1997 (unaudited) 4
Condensed Statements of Cash Flows of Waterford Gaming
Finance Corp. for the three months ended March 31, 1998
(unaudited) and March 31, 1997 (unaudited) 5
Note to Condensed Financial Statements of Waterford Gaming
Finance Corp. (unaudited) 6
ITEM 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
ITEM 3 -- Quantitative and Qualitative Disclosures about
Market Risk 7
PART II -- OTHER INFORMATION
ITEM 1 -- Legal Proceedings 8
ITEM 2 -- Changes in Securities 8
ITEM 3 -- Defaults upon Senior Securities 8
ITEM 4 -- Submission of Matters to a Vote of Security Holders 8
ITEM 5 -- Other Information 8
ITEM 6 -- Exhibits and Reports on Form 8-K 8-9
Signatures - Waterford Gaming Finance Corp. 10
Report of Independent Accountants
---------------------------------
To the Stockholder of Waterford Gaming Finance Corp.:
We have reviewed the condensed balance sheet of Waterford Gaming Finance
Corp. (the "Company") as of March 31, 1998, and the related condensed
statements of operations and retained earnings (deficit) for the three
months ended March 31, 1998 and 1997, and the related condensed statement
of cash flows for the three months ended March 31, 1998 and 1997. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of December 31, 1997, and the related
statements of operations and retained earnings (deficit) and cash flows for
the year then ended (not presented herein); and in our report dated March
6, 1998, we expressed an unqualified opinion on those financial statements.
In our opinion, the information set forth in the condensed balance sheet as
of December 31, 1997, is fairly stated, in all material respects, in
relation to the balance sheet from which is has been derived.
Coopers & Lybrand, L.L.P.
Hartford, Connecticut
May 8, 1998
1
PART I. - FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
--------------------
The unaudited condensed financial information as of March 31, 1998, and for
the three months ended March 31, 1998, included in this report was reviewed
by Coopers & Lybrand, L.L.P., independent public accountants, in accordance
with the professional standards and procedures established for such reviews
by the American Institute of Certified Public Accountants.
2
WATERFORD GAMING FINANCE CORP.
CONDENSED BALANCE SHEETS
March 31, 1998 (Unaudited) and December 31, 1997
________
ASSETS
March 31, December 31,
1998 1997
------------ ------------
Cash $ 100 $ 100
===== =====
STOCKHOLDER'S EQUITY
Stockholder's equity:
Common stock, $.01 par value;
1,000 shares authorized, issued
and outstanding $ 10 $ 10
Additional paid-in capital 90 90
Retained earnings - -
----- -----
Total stockholder's equity $ 100 $ 100
===== =====
The accompanying note is an integral part of the financial statements.
3
WATERFORD GAMING FINANCE CORP.
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
for the three months ended March 31, 1998 and March 31, 1997
(Unaudited)
________
For the three For the three
months ended months ended
March 31, 1998 March 31, 1997
-------------- --------------
Revenue $ - $ -
Expenses:
Bank charges - 55
---- ----
Net income (loss) - (55)
Retained earnings (deficit),
beginning of quarter - (19)
---- ----
Retained earnings (deficit),
end of quarter $ - $(74)
==== ====
The accompanying note is an integral part of the financial statements.
4
WATERFORD GAMING FINANCE CORP.
CONDENSED STATEMENTS OF CASH FLOWS
for the three months ended March 31, 1998 and March 31, 1997
(Unaudited)
_________
For the three For the three
months ended months ended
March 31, 1998 March 31, 1997
-------------- --------------
Cash flows from operating activities:
Net income (loss) $ - $(55)
---- ----
Net cash used in operating activities - (55)
---- ----
Net decrease in cash - (55)
Cash at beginning of quarter 100 81
---- ----
Cash at end of quarter $100 $ 26
==== ====
The accompanying note is an integral part of the financial statements.
5
WATERFORD GAMING FINANCE CORP.
NOTE TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
_________
1. Basis of Presentation:
The unaudited condensed interim financial statements have been
prepared in accordance with the policies and should be read in
conjunction with the Company's 1997 audited financial statements
within the Company's Annual Report for the fiscal year ended December
31, 1997 on Form 10-K as filed with the Securities and Exchange
Commission (the "Commission") File No. 333-17795-01 on March 30, 1998.
The condensed Balance Sheet at December 31, 1997 contained herein was
derived from audited financial statements, but does not include all
disclosures contained in the Form 10-K and required by generally
accepted accounting principles.
The unaudited condensed interim financial statements include normal
and recurring adjustments which are, in the opinion of management,
necessary to present a fair statement of financial position as of
March 31, 1998, and the results of operations and retained earnings
(deficit) and cash flows for the three months ended March 31, 1998.
Results of operations for the period are not necessarily indicative of
the results to be expected for the full year.
The Company is a wholly-owned subsidiary of Waterford Gaming, L.L.C.
("Gaming"). Effective as of May 15, 1997 the Company functioned
as a co-issuer with its parent, Gaming, to issue 12-3/4% senior
notes payable (the "Senior Notes").
6
Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Company's financial statements and the
notes thereto.
The Company is a wholly-owned subsidiary of Gaming.
Results of Operations
- ---------------------
Discussion of the quarter ended March 31, 1998
- ----------------------------------------------
For the quarter ended March 31, 1998 the Company had no revenue and
expense.
Discussion of the quarter ended March 31, 1997
- ----------------------------------------------
Revenue for the quarter ended March 31, 1997 was $0.
Bank charges for the quarter ended March 31, 1997 were $55.
As a result of the foregoing factors, the Company experienced a net loss of
$55 for the three months ended March 31, 1997.
The Company is not expected to have significant operating activity.
Funding for future operations will come from the financial support of its
parent company.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
NOT APPLICABLE
7
Part II - Other Information:
-----------------
Item 1 -- Legal Proceedings:
-----------------
NONE
Item 2 -- Changes in Securities:
---------------------
NONE
Item 3 -- Defaults Upon Senior Securities:
-------------------------------
NONE
Item 4 -- Submission of Matters to a Vote of Security Holders:
---------------------------------------------------
NONE
Item 5 -- Other Information:
-----------------
NONE
Item 6 -- Exhibits and Reports on Form 8-K:
--------------------------------
(a) Exhibits
Exhibit No. Description
3.1 Certificate of Incorporation of Waterford
Gaming Finance Corp. (i)
3.2 Bylaws of Waterford Gaming Finance Corp. (i)
8
4.1 Indenture, dated as of November 8, 1996,
between Waterford Gaming, L.L.C. and
Waterford Gaming Finance Corp.,
the issuers, and Fleet National Bank, as
trustee, relating to $65,000,000 12-3/4%
Senior Notes due 2003. (i)
4.2 Registration Rights Agreement, dated as of
November 8, 1996, among, Waterford Gaming,
L.L.C., Waterford Gaming Finance Corp., Bear,
Stearns & Co., Inc., and Merrill Lynch,
Pierce, Fenner & Smith Incorporated. (i)
4.3 Specimen Form of 12-3/4% Senior Notes due
2003 (the "Private Notes") (included in
Exhibit 4.1). (i)
4.4 Specimen Form of 12-3/4% Senior Notes due
2003 (the "Exchange Notes") (included in
Exhibit 4.1). (i)
10.1 Purchase Agreement, dated as of November 5,
1996, among Waterford Gaming, L.L.C.,
Waterford Gaming Finance Corp., Bear, Stearns
& Co., Inc. and Merrill Lynch, Pierce, Fenner
& Smith Incorporated. (i)
10.2 Waiver and Acknowledgment of Noteholder. (ii)
21.1 Subsidiaries of Waterford Gaming Finance
Corp. (i)
27 Financial Data Schedule - included in Edgar
filing only.
99.1 Quarterly Report, for the quarter ended March
31, 1998, on Form 10-Q of the Mohegan Tribal
Gaming Authority (the "Authority") dated
May 13, 1998, incorporated by reference to the
Authority's electronic filing of such report on
Form 10-Q Commission file reference no. 033-80655.
99.2 Quarterly Report on Form 10-Q of Waterford
Gaming, L.L.C., dated May 14, 1998, incorporated
by reference to Waterford Gaming L.L.C.'s electronic
filing of such report on Form 10-Q Commission
file reference no. 333-17795.
(i) Incorporated by reference to the Registrant's Registration
Statement on Form S-4, Commission File No. 333-17795-01,
declared effective on May 15, 1997.
(ii) Filed herewith.
(b) No Form 8-K filings.
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
Date: May 14, 1998 By: /s/Len Wolman
Len Wolman, Chief Executive Officer
Date: May 14, 1998 By: /s/Del Lauria
Del Lauria, Treasurer
10
WATERFORD GAMING, L.L.C.
WATERFORD GAMING FINANCE CORP.
12 % SENIOR NOTES DUE 2003
WAIVER AND ACKNOWLEDGMENT OF NOTEHOLDER
THIS WAIVER AND ACKNOWLEDGMENT (the "Waiver") is delivered to
Waterford Gaming, L.L.C., a Delaware limited liability company
("Company"), in connection with the 12 % Senior Notes due 2003 (the
"Notes"), issued by the Company and Waterford Gaming Finance Corp., a
Delaware corporation (together with the Company, the "Issuers"), under the
Indenture, dated as of November 8, 1996, among the Issuers and Fleet
National Bank, as Trustee ("Indenture").
In consideration of the receipt of 1.5% (one hundred and fifty basis
points or $15) per $1,000 of the principal amount of Notes beneficially
owned by us (the "Fee"), the payment of which is subject to and
conditioned upon the terms set forth in paragraph 7 below, and other good
and valuable consideration in connection with our execution and delivery
of this Waiver to the Company, the undersigned hereby acknowledges,
declares and agrees as follows:
1. We are the beneficial owner of the aggregate outstanding
principal amount of Notes set forth beside our name below.
2. We are familiar with (i) the Indenture, (ii) the Relinquishment
Agreement, dated as of February 7, 1998 ("Relinquishment Agreement"),
between The Mohegan Tribal Gaming Authority (the "Authority") and
Trading Cove Associates ("TCA") and the letter of the same date among
the Authority, The Mohegan Tribe of Indians of Connecticut (the
"Tribe"), the Company and Sun International Hotels Limited ("SIHL")
with respect to the Authority's Subordinated Notes due 2003 (the
"Letter"), (iii) the Development Services Agreement, dated February 7,
1998, between the Authority, the Tribe and TCA (the "Development
Agreement") and (iv) the Side Letter relating to various waivers,
dated February 7, 1998 between the Authority and TCA (the "Waiver Side
Letter," and together with the Relinquishment Agreement, the Letter
and the Development Agreement, the "Transaction Agreements"). We also
are familiar with the content of Exhibit A hereto, an excerpt (the
"Excerpt") from an agreement among Sun Cove, Ltd. ("Sun Cove"), TCA and
the Company (therein called "WG").
3. We acknowledge and agree that the Transaction Agreements and the
Excerpt and the transactions contemplated thereby (including any
changes, amendments or modifications thereto that may be requested or
required by the Bureau of Indian Affairs ("BIA") or the National
Indian Gaming Commission ("NIGC") as a result of it review of such
documents and transactions (the "Amendments")) do not, directly or
indirectly, terminate, amend or waive any provisions of an Operative
Document in a manner adverse to the economic interest of the Holders
(as such capitalized terms are defined in the Indenture), or otherwise
violate or conflict with any provision of the Indenture.
4. We agree to waive compliance by the Company with any provision of the
Indenture so as to allow the Company and/or TCA to agree to any
termination, amendment or waiver of any provision of any Operative
Document consistent with the Transaction Agreements, and Excerpt and
the transactions contemplated thereby (including without limitation any
Amendments).
5. We hereby acknowledge and agree that (i) the payment of the Fee does
not violate or conflict with any provisions of the Indenture and (ii)
this is an irrevocable continuing instrument, binding on us and every
subsequent transferee of all or any portion of the Notes, which we now
beneficially own (including any Notes issued in exchange or replacement
therefor, "our Notes"), whether or not notation regarding the content of
this instrument is made on the Notes in their present global form or any
future certificated form. In addition, we consent to the making of any
such appropriate notation, for notice purposes, by the Securities
Custodian or the Trustee (as such terms are defined in the Indenture).
6. We further understand that, in connection with the transactions
contemplated by the Transaction Agreements, the Company may pay up to
$5,000,000 to fund certain initial development expenses (the
"Development Expenses") and we hereby consent and agree that such
payment of Development Expenses complies with the provisions of the
Indenture in all respects and constitutes a permissible disbursement
of the Company under that certain Cash Collateral and Disbursement
Agreement, dated November 8, 1996, between and among Fleet National
Bank, as Trustee, Fleet National Bank, as Disbursement Agent and the
Company (the "Cash Collateral Agreement") and to the extent otherwise
required by the Indenture or the Cash Collateral Agreement, we hereby
waive any requirement that the Company comply with such agreements in
connection with the payment of the Development Expenses.
7. We understand that payment of the Fee is subject to (i) receipt
of approval of the Transaction Agreements from the BIA and the NIGC and
(ii) the receipt by the Company of executed copies of this Waiver from
beneficial holders of the Notes representing at least 50% in aggregate
principal amount of outstanding Notes on the date of execution hereof
(the foregoing clauses (i) and (ii) are referred to herein as the
"Requisite Approvals"). We further understand that we are required to
return an executed version of this Waiver no later than April 6, 1998
(the "Termination Date") in order to receive the payment of the Fee.
We understand that the Company hereby agrees to pay to us, by wire
transfer in immediately available funds, in accordance with the payment
provisions set forth in the Indenture, the Fee promptly upon the later
of (i) receipt of the Requisite Approvals and (ii) the Termination Date.
We also understand that the Company is not obligated to, but may in its
sole discretion at anytime prior to the Termination Date, upon notice to
the Trustee, extend the Termination Date.
8. In connection with our business, we hold an extensive portfolio
of investment securities. We have experience in the corporate debt
market, have knowledge and experience in financial and business matters,
and are capable of evaluating the merits and risks of investment in the
Notes, taking into account the Transaction Agreements, and the Excerpt
and the transactions contemplated thereby (including without limitation
any Amendments). We have received and receive answers from the Issuers,
concerning the Transaction Agreements and the information, including but
not limited to copies of the Transaction Agreements, and have been
provided with access by the Issuers to information and with the
opportunity to ask questions of Excerpt and such contemplated
transactions (including, without limitation, any Amendments) and with
the opportunity to obtain any additional information necessary to
verify the accuracy of the information obtained.
9. We acknowledge that we have performed our own investigation of
the financial risks involved in delivering this instrument and are not
relying upon Bear, Stearns & Co. Inc. or any other person to have
conducted such investigation.
10. Recognizing that we are not the registered owner of our Notes,
which along with the other Notes are registered with The Depository
Trust Company ("DTC") and held by a custodian in global form, we hereby
instruct our nominee, whose name is set forth below, in its capacity as
a DTC participant on our behalf, to sign below and to sign and deliver
such additional instruments as the Company or the Trustee may reasonably
deem necessary and reasonably request or desirable in order to confirm
and carry out the purpose and intent of this instrument in regard to our
Notes (including without limitation, any documents or instruments
necessary to cause the execution and deliveries of the DTC Omnibus
Proxy).
$_____________________________________ ________________________
(Principal Amount of Notes Beneficially Owned) (Name of Beneficial Owner)
Dated:__________________________ By:_______________________________
Its:______________________________
ACKNOWLEDGED WATERFORD GAMING, L.L.C.
AND AGREED:
________________________________ By: LMW Investments, Inc., member
[insert name of DTC participant]
By:___________________________ By:_____________________________
Its:__________________________ Its:____________________________
By: Slavik Suites, Inc. member
By:_____________________________
Its:____________________________
EXHIBIT A
To
ACKNOWLEDGMENT OF NOTEHOLDER
EXCERPT
Notwithstanding existing provisions of the TCA Partnership Agreement or
any other document regarding the payment of fees or distribution of cash
flow of TCA to its partners, if and only if the Relinquishment Agreement
has become effective, during the 7-year period beginning January 1, 2000,
WG will not be entitled to receive any fees or cash flow from TCA (with
the exception of: (i) the existing agreement regarding annual expenses of
TCA contained in the letter agreement dated October 19, 1996 among Sun
Cove, Slavik Suites, Inc. ("Slavik") and LMW Investments, Inc. ("LMW"),
not to exceed $2,000,000 a year ("Annual Expenses"); and (ii) WG's right
to receive $2,000,000 for use by it solely to pay such amount to Leisure
Resort Technology, Inc. ("Leisure") in 2003, or earlier if necessary,
pursuant to the Settlement and Release Agreement dated January 6, 1998
among Leisure, Lee R. Tyrol, TCA, Slavik, LMW, RJH Development Corp., WG
and Sun Cove) in any year until TCA has first paid Sun Cove consideration
in the amount of $5,000,000 in such year.
<TABLE> <S> <C>
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<LEGEND>
Waterford Gaming Finance Corp.
All amounts are unaudited.
</LEGEND>
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<PERIOD-END> MAR-31-1998
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