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: 3/31/2000
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 .
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 March 31, 2000 (unaudited) and December 31, 1999 3
Condensed Statements of Operations of Waterford Gaming Finance
Corp. for the three months ended March 31, 2000
(unaudited) and March 31, 1999 (unaudited) 4
Condensed Statements of Cash Flows of Waterford Gaming Finance
Corp. for the three months ended March 31, 2000 (unaudited) and
March 31, 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 8
Item 3 -- Quantitative and Qualitative Disclosures about
Market Risk 9
PART II -- OTHER INFORMATION
Item 1 -- Legal Proceedings 9
Item 2 -- Changes in Securities 9
Item 3 -- Defaults upon Senior Securities 9
Item 4 -- Submission of Matters to a Vote of Security Holders 9
Item 5 -- Other Information 9
Item 6 -- Exhibits and Reports on Form 8-K 10
Signatures - Waterford Gaming Finance Corp. 12
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 March 31, 2000, and the related
condensed statements of operations and retained earnings (deficit) for the
three months ended March 31, 2000 and 1999 and the related condensed statements
of cash flows for the three months ended March 31, 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
May 8, 2000
1
PART I -- FINANCIAL INFORMATION
---------------------
Item 1.-- Financial Statements
--------------------
The unaudited condensed financial information as of March 31, 2000 and
1999, and for the three months ended March 31, 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
WATERFORD GAMING FINANCE CORP.
CONDENSED BALANCE SHEETS
March 31, 2000 (Unaudited) and December 31, 1999
-----------
March 31, 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
WATERFORD GAMING FINANCE CORP.
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
for the three months ended March 31, 2000 and March 31, 1999
(Unaudited)
-----------
For the three For the three
months ended months ended
March 31, March 31,
2000 1999
------------- -------------
Revenue $ -- $ --
Expenses -- --
------------- -------------
Net income (loss) -- --
Retained earnings (deficit),
beginning of quarter -- --
------------- -------------
Retained earnings (deficit),
end of quarter $ -- $ --
============= =============
The accompanying notes are an integral part of these condensed financial
statements.
4
WATERFORD GAMING FINANCE CORP.
CONDENSED STATEMENTS OF CASH FLOWS
for the three months ended March 31, 2000 and March 31, 1999
(Unaudited)
----------
For the three For the three
months ended months ended
March 31, March 31,
2000 1999
------------- -------------
Cash flows from operating activities:
Net income (loss) $ -- $ --
------- -------
Net cash provided by operating
activities -- --
------- -------
Net increase in cash -- --
Cash at beginning of quarter 100 100
------- -------
Cash at end of quarter $ 100 $ 100
======= =======
The accompanying notes are an integral part of these condensed financial
statements.
5
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 March
31, 2000, and the results of operations and retained earnings (deficit)
and cash flows for the three months ended March 31, 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.
6
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. 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.
7
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 March 31, 2000
- ----------------------------------------------
For the quarter ended March 31, 2000, the Company had no revenue and
expense.
Discussion of the quarter ended March 31, 1999
- ----------------------------------------------
For the quarter ended March 31, 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.
8
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.
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.
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
9
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 March
31, 2000 on Form 10-Q of Waterford Gaming,
L.L.C., dated May 11, 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.
10
(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
-------------------
None
11
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 11, 2000 By: /s/Len Wolman
Len Wolman, Chief Executive Officer
Date: May 11, 2000 By: /s/Del Lauria
Del Lauria, Treasurer
12
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<ARTICLE> 5
<LEGEND>
Waterford Gaming Finance Corp.
All amounts are unaudited.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 100
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<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 100
<PP&E> 0
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0
0
<COMMON> 10
<OTHER-SE> 90
<TOTAL-LIABILITY-AND-EQUITY> 100
<SALES> 0
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<CGS> 0
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<INCOME-PRETAX> 0
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