<PAGE>
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: April 30, 1995
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.)
888 Seventh Avenue, New York, New York 10106-1894
-------------------------------------------------
(Address of principal executive offices)
(Zip Code)
212-541-6440
------------
(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 the latest practicable date:
Class A Common Stock: 28,922,446
Class B Common Stock: None
Page 1 of 16
<PAGE>
AUTOTOTE CORPORATION AND SUBSIDIARIES
QUARTER ENDED APRIL 30, 1995
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
April 30, 1995 (Unaudited) and
October 31, 1994............................ 3
Consolidated Statements of Operations
Three Months Ended April 30, 1995
and 1994 (Unaudited)........................ 4
Consolidated Statements of Operations
Six Months Ended April 30, 1995
and 1994 (Unaudited)........................ 5
Consolidated Statements of Cash Flows
Six Months Ended April 30, 1995 and
1994 (Unaudited)............................ 6
Notes to Consolidated Financial
Statements (Unaudited)...................... 7-9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations............................... 10-13
PART II. OTHER INFORMATION
Item 3. Legal Proceedings........................... 14
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters................. 14
Item 6. Exhibits and Reports on Form 8-K............ 14
2
<PAGE>
AUTOTOTE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
April 30, 1995 October 31, 1994
-------------------- --------------------
<S> <C> <C>
Assets
- ------
Current Assets:
Cash and cash equivalents $ 7,594 $ 6,743
Accounts receivable, net 31,499 34,476
Income tax receivable 579 579
Inventories 19,026 10,346
Prepaids, deposits and other 4,527 4,672
-------------------- --------------------
Total current assets 63,225 56,816
-------------------- --------------------
Property and equipment, at cost 184,274 162,531
Less accumulated depreciation 52,855 41,144
-------------------- --------------------
Net property and equipment 131,419 121,387
-------------------- --------------------
Goodwill, less amortization 26,218 23,052
Operating rights, less amortization 18,433 18,933
Other assets and investments 34,422 25,666
------------------- -------------------
$ 273,717 $ 245,854
=================== ===================
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities:
Notes payable and other short term borrowings 1,750 250
Senior credit facility (see note 5) 125,448 --
Current installments of long-term debt 1,398 792
Accounts payable 28,714 19,199
Accrued liabilities 19,552 17,164
Income taxes payable 3,424 3,548
------------------ ------------------
Total current liabilities 180,286 40,953
------------------ ------------------
Deferred income taxes 4,023 3,650
Other long-term liabilities 3,017 2,367
Long-term debt, excluding current installments 4,390 103,163
Long-term debt, convertible subordinated debentures 40,000 40,000
------------------ ------------------
Total liabilities 231,716 190,133
Stockholders' Equity:
Common stock 290 288
Additional paid-in-capital 135,351 134,864
Accumulated deficit (94,469) (79,580)
Treasury stock (295) --
Translation adjustment 1,124 149
------------------ -------------------
Total stockholders' equity 42,001 55,721
------------------ -------------------
$ 273,717 $ 245,854
================== ==================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
AUTOTOTE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
April 30, 1995 April 30, 1994
-------------------- -------------------
(Restated)
<S> <C> <C>
Operating Revenues:
Wagering systems $ 31,961 $ 24,558
Wagering equipment and other sales 5,171 13,888
-------------------- -------------------
37,132 38,446
Operating expenses (exclusive of depreciation
and amortization shown below):
Wagering systems 18,872 14,096
Inventory, equipment and contract adjustments -- 2,621
Wagering equipment and other sales 3,300 7,557
-------------------- -------------------
22,172 24,274
-------------------- -------------------
Total gross profit 14,960 14,172
-------------------- -------------------
Selling, general and administrative expenses 9,909 5,323
Write-off of investments and other -- 428
Depreciation and amortization 8,781 6,065
-------------------- -------------------
Operating income (loss) (3,730) 2,356
-------------------- -------------------
Other (income) expense
Interest expense 4,308 1,340
Other (income) expense 253 (87)
-------------------- -------------------
4,561 1,253
-------------------- -------------------
Earnings (loss) before income taxes and
extraordinary item (8,291) 1,103
Income taxes 667 150
-------------------- -------------------
Net earnings (loss) before extraordinary item (8,958) 953
Extraordinary item
(Write-off of financing fees and expenses) -- 4,222
-------------------- -------------------
Net loss $ (8,958) $ (3,269)
==================== ===================
Earnings (loss) per common share:
Earnings (loss) before extraordinary item (0.31) 0.03
Extraordinary item -- (0.15)
-------------------- -------------------
Loss per common share $ (0.31) $ (0.12)
==================== ===================
Weighted average number of common shares
outstanding 28,913 28,107
==================== ===================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
AUTOTOTE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
April 30, 1995 April 30, 1994
----------------- -----------------
(Restated)
<S> <C> <C>
Operating Revenues:
Wagering systems $ 60,403 $ 45,205
Wagering equipment and other sales 7,846 21,530
----------------- -----------------
68,249 66,735
----------------- -----------------
Operating expenses (exclusive of depreciation
and amortization shown below):
Wagering systems 35,591 26,166
Inventory, equipment and contract adjustments -- 2,733
Wagering equipment and other sales 4,824 12,458
----------------- -----------------
40,415 41,357
----------------- -----------------
Total gross profit 27,834 25,378
----------------- -----------------
Selling, general and administrative expenses 17,604 9,922
Write-off of investments and other -- 895
Depreciation and amortization 16,498 11,186
----------------- -----------------
Operating income (loss) (6,268) 3,375
----------------- -----------------
Other (income) expenses
Interest expense 7,157 2,636
Other (income) expense 145 (205)
----------------- -----------------
7,302 2,431
----------------- -----------------
Earnings (loss) before income taxes and
extraordinary item (13,570) 944
Income taxes 1,319 94
----------------- -----------------
Net earnings (loss) before extraordinary item (14,889) 850
Extraordinary item
(Write-off of financing fees and expenses) -- 4,222
----------------- -----------------
Net loss $ (14,889) $ (3,372)
================= =================
Earnings (loss) per common share:
Earnings (loss) before extraordinary item (0.52) 0.03
Extraordinary item -- (0.15)
----------------- -----------------
Loss per common share $ (0.52) $ (0.12)
================= =================
Weighted average number of common shares
outstanding 28,862 28,047
================= =================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
AUTOTOTE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
April 30, 1995 April 30, 1994
------------------ ------------------
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (14,889) $ (3,372)
------------------ ------------------
Adjustments to reconcile net loss to cash
provided by operating activities:
Depreciation and amortization 16,498 11,186
Write-off of financing fees & expense -- 4,222
Write-off of investments and other -- 895
Changes in operating assets and liabilities
Accounts receivable 4,273 (7,523)
Inventories (7,073) (1,612)
Prepaids, deposits and other 171 (1,205)
Accounts payable 7,984 1,264
Accrued liabilities 156 2,993
Income taxes payable 891 (1,185)
Other 1,101 (1,232)
------------------ ------------------
Total adjustments 24,001 7,803
------------------ ------------------
Net cash provided by operating activities 9,112 4,431
------------------ ------------------
Cash flows from investing activities:
Capital expenditures (8,235) (3,731)
Expenditures for equipment under wagering system contracts (5,468) (19,361)
Increase in other assets and investments (5,176) (5,575)
Purchase of companies, net of cash acquired (15,978) --
Other 460 --
------------------ ------------------
Net cash used in investing activities (34,397) (28,667)
------------------ ------------------
Cash flows from financing activities:
Net borrowings (repayments) on lines-of-credit and other
short-term facilities 25,500 (1,034)
Proceeds from issuance of long-term debt 1,055 77,738
Payments on long-term debt (613) (55,798)
Net proceeds from issuance of common stock 194 530
------------------ ------------------
Net cash provided by financing activities 26,136 21,436
------------------ ------------------
Increase/(Decrease) in cash and cash equivalents 851 (2,800)
Cash and cash equivalents, beginning of period 6,743 10,524
------------------ ------------------
Cash and cash equivalents, end of period $ 7,594 $ 7,724
================== ==================
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 5,304 $ 3,415
================== ==================
Income taxes $ 432 $ 541
================== ==================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
AUTOTOTE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1) Consolidated Financial Statements
The consolidated balance sheet as of April 30, 1995 and the consolidated
statements of operations for the three and six month period ended April 30, 1995
and 1994, and consolidated statements of cash flows for the six months then
ended have been prepared by the Company, without audit. In the opinion of
management, all adjustments (consisting only of normal, recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows at April 30, 1995 and for all periods presented 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 October 31, 1994 Annual Report on form 10-K. The results of
operations for the period ended April 30, 1995 are not necessarily indicative of
the operating results for the full year.
2) Restatement
The Company has restated its interim financial results for the first,
second and third quarters of fiscal 1994. The restatement relates principally
to: (i) inclusion in wagering equipment operating expenses in the third quarter
of $5.9 million out of a total of $7.5 million non-tax deductible payment in
1994 made to former Tele Control Group stockholders pursuant to contingent
payment provisions in the Tele Control Group acquisition agreement as a result
of the award of certain lottery contracts to the Tele Control Group in the third
quarter, (ii) an annualized increase of $5.3 million in amortization and
depreciation as a result of the final review of the allocation of purchase price
and the useful life of goodwill and certain other assets, recorded in connection
with the 1993 acquisitions of the Tele Control Group, the ETAG Group, Autotote
Lottery and the right to operate the Connecticut OTB (the "1993 Acquisitions");
(iii) $3.3 million in corrections consisting of inventory, equipment and
contract adjustments resulting in charges to the financial statements delivered
by the sellers in connection with the Company's acquisition on July 20, 1994 of
Marvin H. Sugarman Productions, Inc., and Racing Technology, Inc., for periods
prior to the acquisition; and other factors.
3) Acquisitions
In January 1995, the Company acquired substantially all of the assets of
the Simulcast Division of LDDS Corporation (formerly IDB Communications Group
Inc.) ("IDB") and the rights and obligations under leases relating to eight C-
band satellite transponders for a purchase price of $13.7 million in cash. The
acquisition has been accounted for by the purchase method of accounting, and
accordingly, the purchase price has been allocated to the assets acquired based
on
7
<PAGE>
3) Acquisitions (contd.)
preliminary estimates of fair values at the date of acquisition. The excess of
the purchase price over the estimated fair values of the net assets acquired was
$2.6 million and has been recorded as goodwill, which will be amortized over 5
years.
In November 1994, the Company acquired the outstanding stock of the
holding company of SEPMO S.A., ("SEPMO"), a French supplier of wagering systems
and services to the French off-track betting network and other customers for
$2.3 million. The acquisition has been accounted for by the purchase method of
accounting, and accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on preliminary estimates of fair values
at the date of acquisition. The excess of the purchase price over the estimated
fair values of the net assets acquired was $1.3 million and has been recorded as
goodwill, which will be amortized over 5 years.
The operating results of these acquisition are included in the Company's
consolidated results of operations from the date of the acquisitions.
4) Inventories
<TABLE>
<CAPTION>
April 30, October 31,
Inventories consist of the following: 1995 1994
------------------------------------- -------- ----------
<S> <C> <C>
Parts $11,095 $ 3,579
Work-in-Process 6,145 5,887
Finished Goods 773 443
------- -------
18,013 9,909
Ticket Paper 729 437
------- -------
Total $18,742 $10,346
======= =======
</TABLE>
5) Debt
The Company has classified $125.4 million of its senior bank credit
facility as a current liability as of April 30, 1995, since the Company was in
violation of certain financial covenants as of that date. The Company received a
waiver from its bank group, effective May 26, 1995, which waives these covenant
violations through July 14, 1995. The Company is engaged in active discussions
with its bank group to address ongoing compliance with the senior bank credit
facility and to address future financing needs and alternatives.
6) Litigation
As stated in the 10-K, the Company and certain of its officers and
directors have been named as defendants in fifteen lawsuits commenced in
February 1995 as class actions in the United States District Court for the
District of Delaware. The putative classes consist of
8
<PAGE>
6) Litigation (contd.)
purchasers of Class A Common Stock and put and call options between March 1994
and January 1995. The complaints allege that the Company and certain of its
officers and directors violated the federal securities laws and seek remedies of
unspecified monetary damages and awards of fees and expenses. All parties to the
actions have agreed to consolidate the litigations in the United states District
Court in the District of Delaware by jointly submitting a proposed Pre-Trial
Order for consolidation. The likelihood of success and the ultimate outcome of
the consolidated litigation cannot be evaluated before the Consolidated
Complaint is filed, and no provisions for liability, if any, that may result
from the consolidated litigation has been recognized in the accompanying
consolidated financial statements.
7) Subsequent Events
On June 8, 1995 the Company announced that it had exercised its right to
withdraw from a preliminary agreement dated December 30, 1994 with Elettronica
S.p.A. and Elettronica Ingegneria Sistemi S.p.A. (EIS) of Rome, Italy to acquire
an 87.8% interest in certain gaming and information technology assets of EIS.
EIS has been a distributor of Autotote Systems, terminals and related equipment
in Italy and other countries for over 15 years. The Company expects this
business relationship to continue.
The Company entered into an agreement, effective May 26,1995, whereby the
Company's bank group has agreed to waive compliance with certain financial
covenants through July 14, 1995. As a result, the Company is currently in full
compliance with all applicable covenants.
The Company is in the process of critically evaluating its business
strategies, including manufacturing operations, marketing and product
development programs, geographic reach, and product lines. The Company
preliminary anticipates that its business will be significantly restructured and
streamlined, and that support for certain of its products, systems and
operations will be rationalized. As a result, the Company also anticipates that
there will be a reduction of its employee work force worldwide, closure of
facilities, and a related write-down in the carrying value of various assets. On
a preliminary basis, a total loss provision for the implementation of these
actions and various asset write downs could amount to between $17 million and
$23 million in the Company's third quarter 1995 results. This estimated loss
includes up to $3.3 million relating to contracts to sell video gaming machines
for operations in Mexico.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion addresses the financial condition of the Company
as of April 30, 1995 and the results of operations for the three and six months
period ended April 30, 1995, compared to the same periods last year. This
discussion should be read in conjunction with the Management's Discussion and
Analysis section (pages 22 - 32) for the fiscal year ended October 31, 1994
included in the Company's Annual Report on Form 10-K.
Restatement
The Company has restated its interim financial results for the first,
second and third quarters of fiscal 1994. The restatement relates principally
to: (I) inclusion in wagering equipment operating expenses in the third quarter
of $5.9 million out of a total of $7.5 million non-tax deductible payment in
1994 made to former Tele Control Group stockholders pursuant to contingent
payment provisions in the Tele Control Group acquisition agreement as a result
of the award of certain lottery contracts to the Tele control Group in the third
quarter, (ii) an annualized increase of $5.3 million in amortization and
depreciation as a result of the final review of the allocation of purchase price
and the useful life of goodwill and certain other assets, recorded in connection
with the 1993 acquisitions of the Tele Control Group, the ETAG Group, Autotote
Lottery and the right to operate the Connecticut OTB (the "1993 Acquisitions");
(iii) $3.3 million in corrections consisting of inventory, equipment and
contract adjustments resulting in charges to the financial statements delivered
by the sellers in connection with the Company's acquisition on July 20, 1994 of
Marvin H. Sugarman Productions, Inc., and Racing Technology, Inc., for periods
prior to the acquisition; and other factors.
Second Quarter Fiscal 1995 Compared to Second Quarter Fiscal 1994
Revenue Analysis
Revenues decreased 3% or $1.3 million to $37.1 million in the second
quarter of fiscal 1995 from $38.4 million in the second quarter of fiscal 1994.
The decrease is primarily attributable to a decline in wagering equipment and
other sales of $8.7 million, largely reflecting an $7.4 million sale in the
second quarter of 1994 of MAX 2000 terminals to Italy's TOTIP pool. Offsetting
this decline was improvement in wagering system revenues of $7.4 million
reflecting strong performances in the Company's off-track betting franchise in
Connecticut and significant growth in simulcasting revenues as a result of the
first quarter 1995 acquisition of substantially all of the assets of the
Simulcast Division of LDDS Corporation (formerly the IDB Communications Group,
Inc.) ("IDB"). Also, included in second quarter 1995 results are $2.0 million
in wagering system revenue and $1.4 million in wagering equipment and other
sales attributable to the Company's first quarter 1995 acquisition of a French
pari-mutuel concern ("SEPMO").
10
<PAGE>
Expense Analysis
Total gross margin improved $0.8 million, or 6% to $15 million in the
second quarter of 1995. Excluding a fiscal 1994 charge of $2.6 million for
inventory, equipment and contract adjustments relating to simulcasting
operations, gross margin decreased $1.8 million. Accounting for the decrease
was a 1994 gross margin of $3.6 million relating to the sale of MAX 2000
terminals to Italy's TOTIP pool partially offset by the inclusion in 1995 second
quarter of $1.9 million attributable to SEPMO.
Selling, general and administrative expenses increased 86% to $9.9 million
in the second quarter of 1995 compared to $5.3 million in the second quarter of
1994. The increase in SG&A expense included $1.2 million attributable to the
operations of SEPMO and increased expenses for market development, legal and
other professional fees.
Depreciation and amortization expenses increased 45% to $8.8 million in the
second quarter of 1995 compared to $6.1 million in the second quarter of fiscal
1994. The increased depreciation and amortization was primarily due to fiscal
1994 capital additions for North American pari-mutuel and video gaming
operations, and the first quarter 1995 acquisitions of SEPMO and the
simulcasting assets of IDB.
Interest expense increased $3.0 million to $4.3 million in the second
quarter of 1995 compared to $1.3 million in the second quarter of fiscal 1994,
principally reflecting increased borrowings to finance 1994 capital additions in
North American pari-mutuel and video gaming operations, acquisitions, $0.7
million in 1995 costs to procure a waiver of certain financial covenant
violations of the Company's senior bank credit facility agreement, and the
capitalization of certain 1994 interest in connection with capital projects.
Six Months Ended April 30, 1995 Compared to Six Months Ended April 30, 1994
Revenue Analysis
Revenues increased 2% or $1.5 million to $68.2 million in fiscal 1995 from
$66.7 million in the prior year period. Wagering system revenues increased
$15.2 million or 34% to $60.4 million, compared to $45.2 million in the prior
year period. The wagering systems revenues increase reflected continued
improvements in the Company's North American pari-mutuel and off-track betting
businesses; significant growth in simulcasting operations, largely reflecting
the 1995 IDB acquisition; and increased revenues for the Company's European
lottery operations. Offsetting this improvement was a decline in wagering
equipment and other sales of $13.7 million to $7.8 million, reflecting the
absence of 1994 revenues of $13.2 million relating to the sale of MAX 2000
terminals to Italy's TOTIP pool. Included in the six month 1995 results were
$3.8 million in wagering systems revenues and $2.2 million in wagering equipment
and other sales attributable to the Company's first quarter 1995 acquisition of
a French pari-mutuel concern ("SEPMO").
11
<PAGE>
Expense Analysis
Total gross margin increased $2.4 million, or 10% to $27.8 million in
fiscal 1995 as compared to $25.4 million in the prior year period. Excluding
1994 charges of $2.7 million for inventory, equipment and contract adjustments
relating to simulcasting operations, total gross margin declined $0.3 million
reflecting the inclusion in 1994 of $5.3 million attributable to the sale of MAX
2000 terminals largely offset by 1995 gross margin of $3.1 million attributable
to SEPMO and an increase in simulcasting gross margin of $1.3 million.
Selling, general and administrative expenses increased 77% to $17.6 million
in the 1995 period compared to $9.9 million in the prior year period. The
increase in SG&A expense included $2.0 million attributable to the operations of
SEPMO and increased expenses for market development, legal and other
professional fees.
Depreciation and amortization expenses increased 48% to $16.5 million in
the 1995 period compared to $11.2 million in the 1994 period. The increased
depreciation and amortization was primarily due to capital additions for North
American pari-mutuel and video gaming operations, and the first quarter 1995
acquisitions of SEPMO and the simulcasting assets of IDB.
Interest expense increased $4.6 million to $7.2 million in the 1995 period
compared to $2.6 million in fiscal 1994, principally reflecting increased
borrowings to finance capital additions in North American wagering businesses,
acquisitions, $0.7 million in 1995 costs to procure a waiver of certain
financial covenant violations of the Company's senior bank credit facility
agreement, and the capitalization of certain 1994 interest in connection with
capital projects.
Income Taxes
Income tax expense was $1.3 million in the 1995 period as compared to $0.1
million in the 1994 period. Income tax expense for the 1995 period principally
reflects foreign tax expense. No tax benefit has been recognized on domestic
operating losses.
Liquidity and Capital Resources
The Company's wagering system contracts are capital intensive, requiring
substantial initial cash outlays which are recouped over time from cash flows
from the contracts. New lottery contracts would also require substantial initial
cash outlays. The amounts of the Company's future capital expenditures for
wagering systems equipment and lottery equipment will depend on the Company's
ability to enter into service contracts with new customers and renewal of
existing contracts with systems upgrades. Each new customer may require the
manufacture and assembly of a new wagering system unless the dates of operations
and requirements of a new wagering facility allow an existing system to be used
at such facility. New lottery service contracts generally will require the
manufacture and
12
<PAGE>
Liquidity and Capital Resources (contd.)
assembly of new systems. Under some circumstances, the Company may be required
to begin manufacture of wagering systems prior to award of a contract in a
competitive bidding situation. Expenditures related to the sale of the Company's
wagering equipment are generally funded, in part, by customer advance payments.
Net cash provided by operating activities was $9.1 million for the six
months of fiscal 1995 and was primarily attributable to improved collection of
accounts receivable and timing of certain payments, partially offset by
increases in inventories. At April 30, 1995, the Company had cash and cash
equivalents of $7.6 million as compared to $6.7 million at October 31, 1994.
Net cash used in investing activities was $34.4 million for the six months
of 1995. With proceeds from the senior bank credit facility, the Company
acquired for $13.7 million, substantially all of the assets of IDB and the
rights and obligations under leases relating to eight C-Band satellite
transponders. The Company invested $8.2 million in capital expenditures, of
which $1.9 million represents the construction of facilities in Las Vegas and
$5.1 million represents expenditures related to its simulcasting facility
located in New Haven, Connecticut. Approximately $2.3 million was invested to
acquire the holding company of SEPMO S.A., a supplier of wagering systems
and services to the French off-track betting network and other customers.
Net cash provided by financing activities consisted principally of
borrowings of $25.5 million from the senior bank credit facility, of which $13.5
million was used to purchase substantially all of the assets of IDB and the
rights and obligations under leases relating to eight C-Band satellite
transponders. At April 30, 1995, the unused portion of the Company's senior bank
credit facility was $7.8 million. The Company received a waiver from its bank
group, effective May 26, 1995, which waives covenant violations through July 14,
1995. The Company is engaged in active discussions with its bank group to
address ongoing compliance with the senior bank credit facility and to address
future financing alternatives.
In fiscal 1995, the Company has bid on an upcoming lottery contract in
North America. This contract and any additional North American lottery, OTB
privatization, or start-up awards received by the Company would be capital
intensive, requiring substantial initial cash outlays. The Company believes that
additional sources of capital will be required to satisfy these potential
capital needs and its anticipated capital needs arising from current
commitments. The Company is currently exploring financing alternatives to meet
its capital requirements while simultaneously developing programs to reduce its
level of ongoing expenditures. The Company will be required to evaluate its
capital outlays and commitments in light of the availability and timing of
additional financing, which currently remains uncertain.
13
<PAGE>
AUTOTOTE CORPORATION AND SUBSIDIARIES
Quarter Ended April 30, 1995
PART II. OTHER INFORMATION
Item 3. Legal Proceedings
The Company and certain of its officers and directors have been named
defendants in a number of lawsuits commenced in February 1995 as class actions
in the United States District Court for the District of Delaware. The putative
classes consist of purchasers of Class A Common Stock and put and call options
between March 1994 and January, 1995. The complaints allege that the Company and
certain of its officers and directors violated the federal securities laws and
seek remedies of unspecified monetary damages and awards of fees and expenses.
All parties to the actions have agreed to consolidate the litigations in the
United states District Court in the District of Delaware by jointly submitting a
proposed Pre-Trial Order for consolidation, pursuant to which a consolidated
complaint is to be filed. The likelihood of success and the ultimate outcome of
the consolidated litigation cannot be evaluated before the Consolidated
Complaint is filed.
Item 5. Market for Registrant's Common Equity and Related Stockholder matters
The Company's Proxy Statement dated July 7, 1994, stated that proposals of
stockholders intended to be presented at the next annual meeting of stockholders
must be received by the Company for inclusion in the Company's proxy materials
not later than October 15, 1994. The next annual meeting of stockholders is now
proposed to take place on August 22, 1995. Accordingly, the date by which any
proposal that a holder of the Company's Class A Common Stock wishes to be
presented at the next annual meeting of stockholders must be received by the
Secretary of the Company is extended to July 1, 1995. Any such stockholder must
also comply with such rules as may be prescribed from time to time by the
Securities and Exchange Commission regarding proposals of security holders.
Page
Item 6. Exhibits and Reports on Form 8-K Number
(a) Exhibits
Exhibit 27 - Financial Data Schedule 16
(b) No information is required to be reported hereunder
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
AUTOTOTE CORPORATION
--------------------
(Registrant)
By: /s/ Philip G. Taggart
-------------------------
Name: Philip G. Taggart
Title: Corporate Controller and Chief
Accounting Officer
Dated: June 14, 1995
15
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> APR-30-1995
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<COMMON> 290
0
0
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<SALES> 68,249
<TOTAL-REVENUES> 68,249
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