UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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: 6/30/2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ 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
incorporation or organization) Identification No.)
914 Hartford Turnpike, 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 .
<PAGE>
WATERFORD GAMING FINANCE CORP.
INDEX TO FORM 10-Q
Page
Number
PART I -- FINANCIAL INFORMATION
-------------------------------
ITEM 1 -- Financial Statements
Report of Independent Accountants 1
Financial Information 2
Condensed Balance Sheets of Waterford Gaming Finance Corp.
as of June 30, 2000 (unaudited) and December 31, 1999 3
Condensed Statements of Operations of Waterford Gaming Finance
Corp. for the three months and six months ended June 30, 2000
(unaudited) and June 30, 1999 (unaudited) 4
Condensed Statements of Cash Flows of Waterford Gaming Finance
Corp. for the six months ended June 30, 2000 (unaudited) and
June 30, 1999 (unaudited) 5
Notes to Condensed Financial Statements for 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 7
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
Signatures - Waterford Gaming Finance Corp. 9
<PAGE>
Report of Independent Accountants
---------------------------------
To the Stockholder of Waterford Gaming Finance Corp.:
We have reviewed the accompanying condensed balance sheet of Waterford Gaming
Finance Corp. (the "Company") as of June 30, 2000, and the related condensed
statements of operations and retained earnings (deficit)for the three months and
sixth months ended June 30, 2000 and 1999 and the related condensed statements
of cash flows for the six months ended June 30, 2000 and 1999. 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 auditing standards generally accepted in the United States, 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 accompanying condensed interim financial statements for them to
be in conformity with accounting principles generally accepted in the United
States.
We previously audited, in accordance with auditing standards generally accepted
in the United States, the balance sheet as of December 31, 1999, and the related
statements of operations and retained earnings (deficit) and of cash flows for
the year then ended (not presented herein); and in our report dated March 9,
2000, we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed balance sheet
as of December 31, 1999, is fairly stated, in all material respects, in relation
to the balance sheet from which it has been derived.
PricewaterhouseCoopers, LLP
July 28,2000
1
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PART I -- FINANCIAL INFORMATION
-------------------------------
Item 1 -- Financial Statements
The unaudited condensed financial information as of June 30, 2000 and 1999, and
for the three months and six months ended June 30, 2000 and 1999, included in
this report was reviewed by PricewaterhouseCoopers, LLP, independent public
accountants, in accordance with the professional standards and procedures
established for such reviews by the American Institute of Certified Public
Accountants.
2
<PAGE>
WATERFORD GAMING FINANCE CORP.
CONDENSED BALANCE SHEETS
June 30, 2000 (Unaudited) and December 31, 1999
-----------
June 30, December 31,
2000 1999
---------- ------------
ASSETS
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 (deficit) -- --
------ ------
Total stockholder's equity $ 100 $ 100
====== ======
The accompanying notes are an integral part of these condensed financial
statements.
3
<PAGE>
WATERFORD GAMING FINANCE CORP.
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
for the three months and six months ended June 30, 2000 and June 30, 1999
(Unaudited)
-----------
<TABLE>
<S> <C> <C> <C> <C>
For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
----------- ----------- ----------- -----------
Revenue $ -- $ -- $ -- $ --
Expenses -- -- -- --
----- ----- ----- -----
Net income (loss) -- -- -- --
Retained earnings (deficit),
beginning of period -- -- -- --
----- ----- ----- -----
Retained earnings (deficit),
end of period $ -- $ -- $ -- $ --
===== ===== ===== =====
The accompanying notes are an integral part of these condensed financial statements.
</TABLE>
4
<PAGE>
WATERFORD GAMING FINANCE CORP.
CONDENSED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 2000 and June 30, 1999
(Unaudited)
----------
For the six For the six
months ended month ended
June 30, 2000 June 30, 1999
------------- -------------
Cash flows from operating activities:
Net income (loss) $ -- $ --
----- -----
Net cash provided by operating
activities -- --
----- -----
Net increase in cash -- --
Cash at beginning of period 100 100
----- -----
Cash at end of period $ 100 $ 100
===== =====
The accompanying notes are an integral part of these condensed financial
statements.
5
<PAGE>
WATERFORD GAMING FINANCE CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
----------
1. Basis of Presentation:
The unaudited condensed interim financial statements have been prepared in
accordance with the policies described in Waterford Gaming Finance Corp.'s (the
"Company") 1999 audited financial statements and should be read in conjunction
with the Company's 1999 audited financial statements within the Company's Annual
Report for the fiscal year ended December 31, 1999 on Form 10-K as filed with
the Securities and Exchange Commission (the "Commission") File No. 333-17795-01
on March 27, 2000. The condensed balance sheet at December 31, 1999, 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 June 30, 2000, and the
results of operations and retained earnings (deficit) for the three months and
six months ended June 30, 2000 and of cash flows for the six months ended June
30, 2000. 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 $65 Million 12-3/4% senior notes payable (the "$65
Million Senior Notes"). The $65 Million Senior Notes were redeemed as part of
the Company's and Gaming's $125 Million 9-1/2% senior notes (the "$125 Million
Senior Notes") offering which was completed on March 17, 1999.
2. $125 Million 9-1/2% Senior Notes
On March 17, 1999, the Company and Gaming, issued $125 Million Senior Notes,
which mature March 15, 2010. Payment of the principal of, and interest on, the
$125 Million Senior Notes is subordinate in right of payment to all their
existing and future secured debts.
Interest is payable semi-annually in arrears on March 15 and September 15 at a
rate of 9-1/2% per annum and commenced on September 15, 1999.
The principal amount of the $125 Million Senior Notes is payable on March 15,
2010. The Company and Gaming may elect to redeem the $125 Million Senior Notes
at any time on or after March 15, 2004 at a redemption price equal to a
percentage (105.182% after March 14, 2004 and declining to 104.318% after March
14, 2005, 103.455% after March 14, 2006, 102.591% after March 14, 2007, 101.727%
after March 14, 2008, 100.864% after March 14, 2009 and to 100% after March 14,
2010) of the principal amount thereof plus accrued interest. The $125 Million
Senior Notes provide that upon the occurrence of a Change of Control (as
defined), the holders thereof will have the option to require the redemption of
the $125 Million Senior Notes at a redemption price equal to 101% of the
principal amount thereof plus accrued interest.
If the Company and Gaming have any Company Excess Cash, as defined, they must
redeem the $125 Million Senior Notes (on a semi-annual basis on March 15 and
September 15) equal to a percentage (109.500% after March 15, 1999 and declining
to 108.636% after March 14, 2000, 107.773% after March 14, 2001, 106.909% after
March 14, 2002, 106.045% after March 14, 2003, 105.182% after March 14, 2004,
104.318% after March 14, 2005, 103.455% after March 14, 2006, 102.591% after
March 14, 2007, 101.727% after March 14, 2008, 100.864% after March 14, 2009 and
to 100% after March 14, 2010). On August 1, 1999 the Company and Gaming had
Company Excess Cash, as defined, available for mandatory redemption of the $125
Million Senior Notes totaling approximately $8,983,000, and accordingly on
September 15, 1999 the Company and Gaming made a mandatory redemption of $125
Million Senior Notes in the principal amount of $2,841,000 at the redemption
price of 109.50%. On February 1, 2000 the Company and Gaming had Company Excess
Cash, as defined, available for mandatory redemption of the $125 Million Senior
Notes totaling approximately $8,276,000 and accordingly the Company and Gaming
made a mandatory redemption of $125 Million Senior Notes in the principal amount
of $2,277,000 at the redemption price of 108.636% on March 15, 2000. On August
1, 2000 the Company and Gaming had Company Excess Cash, as defined, available
for mandatory redemption of the $125 Million Senior Notes, totaling aproximately
$5,902,000, and accordingly on September 15, 2000 the Company and Gaming will
make a mandatory redemption of $125 Million Senior Notes in the principal amount
of $191,000 at the redemption price of 108.636%. In some circumstances, if
either Gaming or its partner in Trading Cove Associates ("TCA") exercises the
option to buy or sell partnership interests in TCA, the Company and Gaming must
redeem the $125 Million Senior Notes.
The indenture relating to the $125 Million Senior Notes (the "Indenture")
contains certain affirmative and negative covenants customarily contained in
agreements of this type, including without limitation, covenants that restrict,
subject to specified exceptions the Company's and Gaming's ability to (i) borrow
money, (ii) pay dividends on stock or make certain other restricted payments,
(iii) use assets as security in other transactions, (iv) make investments, (v)
sell other assets or merge with other companies and (vi) engage in any business
except as currently conducted or contemplated or amend their relationship with
TCA. The Indenture also provides for customary events of default and the
establishment of a restricted investment fund with a trustee for interest
reserves.
6
<PAGE>
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 condensed financial statements and the notes
thereto.
The Company is a wholly-owned subsidiary of Gaming.
Results of Operations
---------------------
Discussion of the quarter ended June 30, 2000
---------------------------------------------
For the quarter ended June 30, 2000, the Company had no revenue and expense.
Discussion of the quarter ended June 30, 1999
---------------------------------------------
For the quarter ended June 30, 1999, the Company had no revenue and expense.
Discussion of the six months ended June 30, 2000
------------------------------------------------
For the six months ended June 30, 2000, the Company had no revenue and expense.
Discussion of the six months ended June 30, 1999
------------------------------------------------
For the six months ended June 30, 1999, the Company had no revenue and expense.
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
PART II -- OTHER INFORMATION:
-----------------------------
Item 1 -- Legal Proceedings:
On January 6, 1998, Leisure Resort Technology, Inc. ("Leisure") and defendants
Waterford Gaming, L.L.C., Trading Cove Associates, LMW Investments, Inc., and
Slavik Suites, Inc. settled a prior lawsuit brought by Leisure. In connection
with this settlement, Leisure and Trading Cove Associates, Waterford Gaming,
L.L.C., LMW Investments, Inc., and Slavik Suites, Inc. entered into a settlement
and release agreement. Pursuant to this settlement and release agreement,
Waterford Gaming, L.L.C. bought out Leisure's beneficial interest in Trading
Cove Associates.
By complaint dated January 7, 2000, as amended February 4, 2000, Leisure filed a
four count complaint naming as defendants Waterford Gaming, L.L.C., Trading Cove
Associates, LMW Investments, Inc., Slavik Suites, Inc., Waterford Group, L.L.C.,
Len Wolman and Mark Wolman (collectively, the "Defendants"). The matter is
pending in the Judicial District of Middlesex at Middletown, Connecticut. The
suit alleges breach of fiduciary duties, fraudulent non-disclosure, violation of
Connecticut Statutes Section 42-110a, et seq., and unjust enrichment in
connection with the negotiation by certain of the Defendants of the settlement
and release agreement. The suit seeks unspecified legal and equitable damages. A
Motion to Strike and a Motion for Summary Judgement, each with respect to all
claims, have been filed on behalf of all of the Defendants. The Defendants are
awaiting a ruling on the Motion to Strike and the Motion for Summary Judgement
which were argued on behalf of all Defendants on June 19, 2000.
Waterford Gaming, L.L.C. believes that it has meritorious defenses and intends
to vigorously contest the claims in this action and to assert all available
defenses. At the present time, Waterford Gaming, L.L.C. is unable to express an
opinion on the likelihood of an unfavorable outcome or to give an estimate of
the amount or range of potential loss to Waterford Gaming, L.L.C. as a result of
this litigation due to the disputed issues of law and/or facts on which the
outcome of this litigation depends and due to the infancy of both the action and
discovery in the action.
7
<PAGE>
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)
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)
4.1.1 First Supplemental Indenture, dated as of March 4,
1999, among Waterford Gaming, L.L.C. and Waterford
Gaming Finance Corp., as issuers, and State Street
Bank and Trust Company, as trustee, relating to
$65,000,000 12-3/4% Senior Notes due 2003. (iii)
4.2 Indenture, dated as of March 17, 1999, among
Waterford Gaming, L.L.C. and Waterford Gaming
Finance Corp., as issuers, and State Street Bank
and Trust Company, as trustee, relating to
$125,000,000 9-1/2% Senior Notes due 2010. (iii)
4.3 Security and Control Agreement, dated as of March
17, 1999, among Waterford Gaming, L.L.C. and
Waterford Gaming Finance Corp., as pledgors and
State Street Bank and Trust Company, as securities
intermediary. (iii)
4.4 Specimen Form of 9-1/2% Senior Notes due 2010
(included in Exhibit 4.2). (iii)
10.1 Purchase Agreement, dated as of March 10, 1999,
among Waterford Gaming, L.L.C., Waterford Gaming
Finance Corp., Bear, Stearns & Co., Inc., Merrill
Lynch, Pierce, Fenner and Smith Inc. and Salomon
Smith Barney (iii)
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 June 30,
2000 on Form 10-Q of Waterford Gaming, L.L.C.,
dated August 9, 2000, incorporated by reference to
Waterford Gaming, L.L.C.'s electronic filing of
such report on Form 10-Q Securities and Exchange
Commission (the "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) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the period ended March 31, 1998, Commission File No. 333-17795-01, as
accepted by the Commission on May 14, 1998.
(iii)Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the period ended March 31, 1999, Commission File No. 333-17795-01, as
accepted by the Commission on May 17, 1999.
(b) Reports on Form 8-K
-------------------
Form 8-K filed on May 15, 2000.
Item 5.
The Mohegan Tribal Gaming Authority (the "Authority") has
filed its quarterly report on Form 10-Q for the quarter
ended March 31, 2000, a copy of which has been filed as an
exhibit to this report and is incorporated by reference to
the Authority's electronic filing of such report on Form
10-Q, Securities and Exchange Commission file reference no.
033-80655.
Date of Report: May 12, 2000.
8
<PAGE>
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: August 9, 2000 By: /s/Len Wolman
Len Wolman, Chief Executive Officer
Date: August 9, 2000 By: /s/Del Lauria
Del Lauria, Treasurer
9
