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Previous: MARKET AMERICA INC, 10-Q, 1996-12-16 |
Next: DNX CORP, S-8, 1996-12-16 |
<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K/A-2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 14(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
----------
Date of Report (Date of earliest event reported): October 1, 1996
SCIENTIFIC GAMES HOLDINGS CORP.
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 000-22298 13-3615274
(STATE OF OTHER JURISDICTION OF (Commission File Number) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
1500 BLUEGRASS LAKES PARKWAY
ALPHARETTA, GEORGIA 30201
(770) 664-3700
(Address, including zip code, and telephone number, including area code, or
Registrant's principal executive offices)
----------
- ------------------------------------------------------------------------------
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
(a) On October 1, 1996, Scientific Games Holdings Corp. (the "Company"
or "SGI") acquired the shares of capital of Opax International
Limited, a United Kingdom subsidiary of Rexam PLC, a United Kingdom
corporation, and which was renamed Scientific Games International
Limited ("SGIL"). SGIL is a producer of instant lottery and
promotional game tickets with an international customer base and
two printing plants in the United Kingdom that will continue to be
utilized by the Company.
(b) The consideration paid was $22.8 million (L.14.6 million) and was
paid from the Company's cash reserves and from borrowings of $8
million under the Company's existing Bank Credit Agreement with
First Union National Bank. The principles followed in determining
the amount of the offer were historical earnings, market share and
future growth potential.
Item 7 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
The following audited financial statements of SGIL are included in Appendix A
hereto and incorporated herein by reference:
- Report of the Independent Auditors
- Consolidated Profit and Loss Account for the year ended 31 December
1995
- Consolidated Balance Sheet at 31 December 1995
- Group Statement of Cash Flows for the year ended 31 December 1995
- Notes to the Accounts at 31 December 1995
The following unaudited financial statements of SGIL are included in Appendix B
hereto and incorporated herein by reference:
- Unaudited Condensed Consolidated Profit and Loss Account for the
nine months ended 30 September 1996
- Unaudited Condensed Consolidated Balance Sheet as of 30 September
1996
- Unaudited Condensed Group Statement of Cash Flows for the nine
months ended 30 September 1996
- Notes to the Unaudited Condensed Financial Statements at 30
September 1996
(b) Pro Forma Financial Information
The pro forma financial information is included in Appendix C hereto
and incorporated herein by reference.
(c) Exhibits
#23.1 Consent of Independent Auditors
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SCIENTIFIC GAMES HOLDINGS CORP.
By: /s/ Cliff O. Bickell
----------------------------------------
Cliff O. Bickell
Vice President, Treasurer and Chief
Financial Officer
Date: December 16, 1996
3
<PAGE> 4
APPENDIX A
<PAGE> 5
SCIENTIFIC GAMES INTERNATIONAL
LIMITED (FORMERLY OPAX
INTERNATIONAL LIMITED)
Report for Inclusion in Form 8-K of the SEC
December 1996
A-1
<PAGE> 6
ERNST & YOUNG [LETTERHEAD]
REPORT OF THE INDEPENPENT AUDITORS
To the directors of Scientific Games International Limited (formerly Opax
International Limited)
We have audited the accompanying consolidated balance sheet of Scientific Games
International Limited as at 31 December 1995 and the related consolidated profit
and loss account and statement of cashflows for the year ended 31 December 1995.
The consolidated financial statements are the responsibility of the directors.
Our responsibility is to express an opinion on these financial statements
based on our audit.
BASIS OF OPINION
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurances about whether the financial statements
are free from material misstatement. An audit also includes assessing the
accounting principles used and significant estimates made by the management as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
OPINION
In our opinion, the consolidated statements referred to above present fairly in
all material respects the consolidated financial position of Scientific Games
International Limited at 31 December 1995 and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United Kingdom.
/s/ Ernst & Young
- ----------------------
Ernst & Young
Chartered Accountants
Leeds, England
25 April 1996,
except for Note 24 - Ultimate Holding Company
as to which the date of sale is 1 October 1996
A-2
<PAGE> 7
Scientific Games International Limited (formerly Opax International Limited)
- --------------------------------------------------------------------------------
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 1995
<TABLE>
<CAPTION>
1995
Notes L.
<S> <C> <C>
TURNOVER 2 16,330,536
----------
OPERATING PROFIT 3 668,136
Interest receivable 7 178,105
Interest payable 8 (23)
----------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 846,218
Tax on profit on ordinary activities 9 287,000
----------
PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION 1,133,218
Dividends 3,100,000
----------
DEFICIT FOR THE FINANCIAL YEAR (1,966,782)
==========
</TABLE>
GROUP STATEMENT OF RECOGNISED GAINS AND LOSSES
There are no gains or losses other than the profit on ordinary activities after
taxation of L.1,133,218.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1995
L.
<S> <C>
Total recognised gains and losses 1,133,218
Dividends (3,100,000)
----------
Net reduction to shareholders' funds (1,966,782)
Opening shareholders' funds 3,252,210
----------
Closing shareholders' funds 1,285,428
==========
</TABLE>
A-3
<PAGE> 8
Scientific Games International Limited (formerly Opax International Limited)
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
at 31 December 1995
<TABLE>
<CAPTION>
1995
Notes L.
<S> <C> <C>
FIXED ASSETS
Tangible assets 10 5,140,988
---------
CURRENT ASSETS
Stocks 11 876,184
Debtors 12 5,732,264
Cash at bank and in hand 778,723
---------
7,387,171
CREDITORS: amounts falling due within one year 13 5,747,028
---------
NET CURRENT ASSETS 1,640,143
---------
TOTAL ASSETS LESS CURRENT LIABILITIES 6,781,131
CREDITORS: amounts falling due after more than one year 14 5,025,000
PROVISION FOR LIABILITIES AND CHARGES 15 470,703
---------
NET ASSETS 1,285,428
=========
CAPITAL AND RESERVES
Called up share capital 17 100
Profit and loss account 18 1,285,328
---------
1,285,428
=========
</TABLE>
A-4
<PAGE> 9
Scientific Games International Limited (formerly Opax International Limited)
- --------------------------------------------------------------------------------
GROUP STATEMENT OF CASH FLOWS
for the year ended 31 December 1995
<TABLE>
<CAPTION>
1995
Notes L.
<S> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES 19 2,007,442
---------
RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE
Interest received 178,105
Interest paid (23)
Dividends paid (35,000)
---------
NET CASH INFLOW FROM RETURNS ON
INVESTMENTS AND SERVICING OF FINANCE 143,082
---------
TAXATION
Corporation tax paid (31,095)
---------
INVESTING ACTIVITIES
Payments to acquire tangible fixed assets (687,366)
Receipts from sales of tangible fixed assets 83,251
---------
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (604,115)
---------
NET CASH INFLOW BEFORE FINANCING 1,515,314
NET CASH INFLOW FROM FINANCING -
---------
INCREASE IN CASH AND CASH EQUIVALENTS 20 1,515,314
=========
</TABLE>
A-5
<PAGE> 10
Scientific Games International Limited (formerly Opax International Limited)
- --------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 December 1995
1. ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing
with items which are considered material in relation to the company's
accounts.
BASIS OF PREPARATION
The accounts are prepared under the historical cost convention modified to
include the revaluation of freehold land and buildings and in accordance
with applicable accounting standards.
BASIS OF CONSOLIDATION
The financial statements include the financial statements of Scientific
Games International and all subsidiary undertakings. The accounting date of
all subsidiary undertakings is the same as that of Scientific Games
International Limited.
DEPRECIATION
The cost or valuation of fixed assets, other than freehold land, is
depreciated on a straight line basis over the expected useful lives of the
assets concerned as follows:
Freehold buildings - 2%
Plant and machinery - 6% - 20%
Motor vehicles - 25%
Computer equipment - 25%
Fixtures and fittings - 10% - 20%
DEFERRED TAXATION
Deferred taxation is accounted for on all material timing differences using
the liability method except where the deferral is expected to continue for
the foreseeable future.
STOCKS
Stocks are valued at the lower of cost and net realisable value. Cost in
respect of work in progress and finished goods includes direct labour,
materials and production overheads.
PENSIONS
The expected cost of providing pensions in respect of defined benefit
schemes is charged to the profit and loss account over the estimated
service lives of the employees in the schemes.
LEASED ASSETS
Where assets are acquired by leasing arrangements which give rights
approximating to ownership ('finance leases') the amount representing the
outright purchase price of such assets is included in tangible fixed
assets. Depreciation is provided at rates designed to write off this net
cost in equal annual amounts over the shorter of the estimated useful lives
of the assets or the period of the leases. Future rentals are treated as a
liability.
All other leasing agreements are 'operating leases' and the rentals are
charged to the profit and loss account as incurred.
A-6
<PAGE> 11
Scientific Games International Limited (formerly Opax International Limited)
- --------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 December 1995
1. ACCOUNTING POLICIES (continued)
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded at the rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are translated at the rate ruling at the balance sheet
date. All differences are taken to the profit and loss account.
2. TURNOVER
Turnover represents amounts invoiced by the company in respect of goods and
services provided during the year, excluding value added tax. The analysis
of turnover by geographical areas is as follows:
<TABLE>
<CAPTION>
1995
L.
<S> <C>
United Kingdom 3,355
Europe 10,390
Africa 2,355
South America 231
------
16,331
======
</TABLE>
In the opinion of the directors all material amounts of turnover derive
from the same class of business, that of lotteries printing and promotions.
3. OPERATING PROFIT
Operating profit is arrived at as follows:
<TABLE>
<CAPTION>
1995
L.
<S> <C>
Turnover 16,330,536
Decrease in stock of finished goods and work in progress (110,834)
----------
16,219,702
----------
Raw materials and consumables 5,214,321
Employee costs (note 4) 5,207,748
Depreciation of owned fixed assets 1,082,893
Auditors' remuneration - audit services 15,300
- non-audit services 13,000
Operating lease rentals - plant and machinery 32,055
Other operating charges 4,009,898
Profit on sale of fixed assets (23,649)
----------
15,551,566
----------
668,136
==========
</TABLE>
A-7
<PAGE> 12
Scientific Games International Limited (formerly Opax International Limited)
- --------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 December 1995
4. STAFF COSTS
<TABLE>
<CAPTION>
1995
L.
<S> <C>
Wages and salaries 4,582,001
Social security costs 389,484
Other pension costs 201,854
Redundancy costs 34,409
---------
5,207,748
=========
</TABLE>
The average weekly number of employees during the year was 231.
The employee costs shown below include the following remuneration in
respect of directors:
<TABLE>
<CAPTION>
1995
L.
<S> <C>
Remuneration 272,913
Compensation for loss of office 25,000
=========
</TABLE>
5. DIRECTORS' EMOLUMENTS
Directors' emoluments, excluding pension contributions, fell within the
following ranges:
<TABLE>
<CAPTION>
1995
No.
<S> <C> <C> <C>
L.Nil - L.5,000 1
L.10,001 - L.15,000 1
L.15,001 - L.20,000 1
L.20,001 - L.25,000 1
L.35,001 - L.40,000 1
L.50,001 - L.55,000 1
L.65,001 - L.70,000 2
</TABLE>
The emoluments, excluding pension contributions, of the chairman were
L.40,327. The emoluments, excluding pension contributions, of the highest
paid director were L.66,628.
TRANSACTIONS WITH A DIRECTOR
Prior to being appointed a director, Mr K Anderson entered into an
arrangement with the company to repay part of the debt owed by Technopax
SA, a company in which he had a 37.5% shareholding. The amount involved is
US$33,454 (L.21,547) payable in equal monthly sums over a period of two
years commencing April 1997.
A-8
<PAGE> 13
Scientific Games International Limited (formerly Opax International Limited)
- --------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 December 1995
6. PENSIONS
As part of The Rexam group, the majority of employees belonged to the Rexam
Employee Benefit Plan (formerly the Bowater Employees Benefit Plan), a
pension scheme of the defined benefit type. The charge in these accounts
represents contributions paid to the scheme.
The charge does not take full account of the surplus disclosed in the
scheme by the last actuarial valuation which was carried out as at 6 April
1994 and details of which are disclosed in the consolidated accounts of
Rexam PLC. The prepayment arising in respect of the Rexam group as a whole
under the scheme is also disclosed in those accounts.
Following the acquisition of the Company by Scientific Games Holdings
Corp. on 1 October 1996, arrangements have been made for the employees of
the Company to be transferred out of the Rexam Employee Benefit Plan into
a separate pension scheme administered by Bacon and Woodrow.
7. INTEREST RECEIVABLE
<TABLE>
<CAPTION>
1995
L.
<S> <C>
Bank interest 50,533
Other interest 15,253
Receivable from fellow subsidiary undertakings undertakings 112,319
--------
178,105
========
</TABLE>
8. INTEREST PAYABLE
<TABLE>
<CAPTION>
1995
L.
<S> <C>
Other interest 23
========
</TABLE>
9. TAXATION
<TABLE>
<CAPTION>
1995
L.
<S> <C>
The credit based on the profit for the year comprises:
Corporation tax at 33% (367,000)
Amounts relating to prior periods 240,000
Advance corporation tax (surrendered by parent company at nil cost) 222,000
--------
95,000
Deferred taxation 192,000
--------
287,000
========
</TABLE>
A-9
<PAGE> 14
Scientific Games International Limited (formerly Opax International Limited)
- --------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 December 1995
10. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Freehold Leasehold
land and land and Plant and
buildings buildings machinery Total
L. L. L. L.
<S> <C> <C> <C> <C>
Cost or valuation:
At 1 January 1995 1,200,000 7,670 9,286,870 10,494,540
Additions - non group -- -- 552,384 552,384
- group -- -- 612,753 612,753
Disposals - non group -- -- (290,281) (290,281)
- group -- -- (40,716) (40,716)
--------- --------- ---------- ----------
At 31 December 1996 1,200,000 7,670 10,121,010 11,328,680
========= ========= ========== ==========
At valuation 1992 1,200,000
=========
Depreciation:
At 1 January, 1995 40,000 2,065 4,856,358 4,898,423
Charge for the year 20,000 590 1,062,303 1,082,893
Disposals - non group -- -- (248,221) (248,221)
Adjustment re group
transfers - Additions -- -- 477,771 477,771
- Disposals -- -- (23,174) (23,174)
--------- --------- ---------- ----------
At 31 December 1995 60,000 2,655 6,125,037 6,187,692
--------- --------- ---------- ----------
Net book value:
At 31 December 1995 1,140,000 5,015 3,955,973 5,140,988
========= ========= ========== ==========
</TABLE>
Included in the freehold land and buildings is land of L.200,000 which is
not depreciated. The freehold land and buildings were sold at net book
value then leased back on 30 September 1996.
On the historical cost of the freehold land and buildings was as follows:
<TABLE>
<S> <C>
L.
At 1 January 1995 and 31 December 1995 1,650,000
Cumulative depreciation based on cost was:
At 1 January 1995 133,353
At 31 December 1995 159,353
</TABLE>
A-10
<PAGE> 15
Scientific Games International Limited (formerly Opax International Limited)
- --------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 December 1995
11. STOCKS
<TABLE>
<CAPTION>
1995
L.
<S> <C>
Raw materials and consumables 335,868
Work in progress 489,101
Finished goods 51,215
----------
876,184
==========
12. DEBTORS
1995
L.
Trade debtors 2,525,736
Amounts due from fellow subsidiary undertakings 2,937,527
Other debtors 159,839
Prepayments and accrued income 109,162
----------
5,732,264
==========
13. CREDITORS: amounts falling due within one year
1995
L.
Trade creditors 1,014,600
Amounts owed to fellow subsidiary undertakings 220,605
Corporation tax payable 146,448
Other taxation and social security 110,717
Other creditors 667,227
Accruals and deferred income 487,431
Proposed dividend 3,100,000
----------
5,747,028
==========
</TABLE>
14. CREDITORS: amounts falling due within one year
The medium term loan from the Company's parent undertaking, Rexam plc
was repaid on 1 October 1996, following the acquisition of the Company
by Scientific Game Holdings Corp.
A-11
<PAGE> 16
Scientific Games International Limited (formerly Opax International Limited)
- -------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 December 1995
15. PROVISION FOR LIABILITIES AND CHARGES
Deferred taxation provided in the accounts and the amounts not
provided are as follows:
<TABLE>
<CAPTION>
Deferred
taxation
(note 16)
L.
<S> <C>
At 1 January 1995 662,703
Released during the year (192,000)
---------
At 31 December 1995 470,703
=========
</TABLE>
16. DEFERRED TAXATION
<TABLE>
<CAPTION>
1995
Full
Amount potential
provided liability
L. L.
<S> <C> <C>
Accelerated capital allowances 465,703 581,000
Other short term timing differences 5,000 5,000
------- -------
470,703 586,000
======= =======
</TABLE>
17. SHARE CAPITAL
<TABLE>
<CAPTION>
Allotted, called up
Authorized and fully paid
1995 1995
NO. L.
<S> <C> <C>
Ordinary shares of L.1 each 1,000 100
======= =======
</TABLE>
18. PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
L.
<S> <C>
At 1 January 1995 3,252,110
Deficit for the year (1,966,782)
----------
At 31 December 1995 1,285,328
==========
</TABLE>
A-12
<PAGE> 17
Scientific Games International Limited (formerly Opax International Limited)
- -------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 December 1995
19. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1995
L.
<S> <C>
Operating profit 668,136
Depreciation of tangible fixed assets 1,082,893
Profit on disposal of tangible fixed assets (23,649)
Decrease in stock 126,748
Increase in trade debtors (116,205)
Increase in trade creditors 269,519
---------
Net cash inflow from operating activities 2,007,442
=========
</TABLE>
20. ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Interest Total cash
Cash bearing and cash
at bank loans equivalents
L. L. L.
<S> <C> <C> <C>
As at 1 January 1995 611,123 1,589,813 2,200,936
Net cash inflow 167,600 1,347,714 1,515,314
--------- --------- ---------
As 31 December 1995 778,723 2,937,527 3,716,250
========= ========= =========
</TABLE>
21. FUTURE CAPITAL EXPENDITURE
<TABLE>
<CAPTION>
1995
L.
<S> <C>
Contracted commitments 130,000
=======
Authorised by the directors but not contracted 95,000
=======
</TABLE>
22. CONTINGENT LIABILITIES
As a member of the Rexam PLC group for VAT purposes the company had
joint and several liabilities for all amounts due to Customs and
Excise under this arrangement.
23. OBLIGATIONS UNDER FINANCE LEASES AND HIRE PURCHASE
The annual commitment under non-cancellable operating leases are as
follows:
<TABLE>
<CAPTION>
Land and 1995
buildings Other
L. L.
<S> <C> <C>
Operating leases which expire:
within one year - 25,370
within two to five years - 5,057
after five years 182,118 -
--------- -------
182,118 30,427
========= =======
</TABLE>
A-13
<PAGE> 18
Scientific Games International Limited (formerly Opax International Limited)
- -------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
at 31 December 1995
24. ULTIMATE HOLDING COMPANY
The parent company of the group of undertakings for which group accounts
have been drawn up and of which the Company was a member, is Rexam PLC,
registered in England and Wales. Copies of Rexam PLC's accounts can be
obtained from 114 Knightsbridge, London, WS1X 7NN.
On 1 October 1996, the Company was wholly acquired by Scientific Games
Holdings Corp., a company registered in the United States of America.
A-14
<PAGE> 19
APPENDIX B
<PAGE> 20
FINANCIAL STATEMENTS
SGIL
For the period ending September 30, 1996
(unaudited)
B-1
<PAGE> 21
Scientific Games International Limited (formerly Opax International Limited)
- --------------------------------------------------------------------------------
UNAUDITED CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the nine months ended 30 September 1996
<TABLE>
<CAPTION>
Nine months
ended
30 September
1996
<S> <C>
L.
TURNOVER 12,828,824
-----------
OPERATING PROFIT 764,773
Interest receivable 64,693
-----------
Profit before tax 829,466
Taxation (337,154)
-----------
RETAINED PROFIT 492,312
===========
</TABLE>
GROUP STATEMENT OF RECOGNISED GAINS AND LOSSES
There are no gains and losses other than the profit on ordinary activities
after taxation of L.492,312.
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
for the nine months ended 30 September 1996
<TABLE>
<S> <C>
L.
Total recognized gains and losses 492,312
Opening shareholders' funds 1,285,428
---------
Closing shareholders' funds 1,777,740
=========
</TABLE>
B-2
<PAGE> 22
Scientific Games International Limited (formerly Opax International Limited)
- -------------------------------------------------------------------------------
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
as at 30 September 1996
<TABLE>
<CAPTION>
Nine months
ended
30 September
1996
<S> <C>
FIXED ASSETS L.
Tangible assets 3,655,725
-----------
CURRENT ASSETS
Stocks 789,912
Debtors 2,243,437
Cash at bank and in hand 1,105,696
-----------
4,139,045
CREDITORS: amounts falling due within one year 5,589,173
-----------
NET CURRENT LIABILITIES (1,450,128)
TOTAL ASSETS LESS CURRENT LIABILITIES 2,205,597
PROVISION FOR LIABILITIES AND CHARGES
Deferred taxation 427,857
-----------
NET ASSETS 1,777,740
===========
CAPITAL AND RESERVES
Called up share capital 100
Profit and loss account 1,777,640
-----------
1,777,740
===========
</TABLE>
B-3
<PAGE> 23
Scientific Games International Limited (formerly Opax International Limited)
- --------------------------------------------------------------------------------
UNAUDITED CONDENSED GROUP STATEMENT OF CASH FLOWS
for the nine months ended 30 September 1996
<TABLE>
<CAPTION>
1996
<S> <C>
L.
NET CASH INFLOW FROM OPERATING ACTIVITIES 1,714,530
------------
RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE
Interest received 64,693
Dividends paid (3,100,000)
------------
NET CASH OUTFLOW FROM RETURNS ON
INVESTMENTS AND SERVICING OF FINANCE (3,035,307)
------------
TAXATION
Corporation tax paid (136,505)
------------
INVESTING ACTIVITIES
Payments to acquire tangible fixed assets (492,256)
Proceeds from sale of freehold property 1,140,000
Receipts from sales of other tangible fixed assets 34,580
------------
NET CASH INFLOW FROM INVESTING ACTIVITIES 682,324
------------
NET CASH OUTFLOW BEFORE FINANCING (774,958)
FINANCING ACTIVITIES
Repayment of loan (1,835,596)
NET CASH OUTFLOW FROM FINANCING (1,835,596)
------------
DECREASE IN CASH AND CASH EQUIVALENTS (2,610,554)
============
</TABLE>
B-4
<PAGE> 24
Scientific Games International Limited (formerly Opax International Limited)
- -------------------------------------------------------------------------------
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
at 30 September 1996
CHANGE IN NAME
Following its acquisition by Scientific Games Holding Corp. on 1 October 1996,
the Company changed its name from Opax International Limited to Scientific
Games International Limited.
UK STATUTORY REQUIREMENTS
These financial statements are not the Company's statutory accounts within the
meaning of section 240 of Companies Act. Statutory accounts for the year ended
31 December 1995, on which the auditors gave an unqualified opinion, have been
delivered to the Registrar of Companies for England and Wales.
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
These condensed financial statements are unaudited; however, in the opinion of
the directors, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation have been made. Operating results for the
nine month period ended 30 September 1996 are not necessarily indicative of the
results that may be expected for the year ending 31 December 1996. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended 31 December 1995 included
elsewhere in this current report.
BASIS OF CONSOLIDATION
The financial statements include the financial statements of Scientific Games
International and all subsidiary undertakings. The accounting date of all
subsidiary undertakings is the same as that of Scientific Games International
Limited.
B-5
<PAGE> 25
APPENDIX C
<PAGE> 26
SCIENTIFIC GAMES HOLDINGS CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
On October 1, 1996, Scientific Games Holdings Corp. (the "Company" or "SGI")
acquired the shares of capital of Opax International Limited, a United Kingdom
subsidiary of Rexam PLC, a United Kingdom corporation, and which was renamed
Scientific Games International Limited ("SGIL"). SGIL is a producer of instant
lottery and promotional game tickets with an international customer base and
two printing plants in the United Kingdom.
The following unaudited pro forma consolidated balance sheet of the Company as
of September 30, 1996 is based on the historical consolidated balance sheet of
the Company and the balance sheet of SGIL. The unaudited pro forma consolidated
balance gives effect to the acquisition under the purchase method of accounting
and reflects the assumptions and the adjustments described in the accompanying
notes.
The unaudited pro forma consolidated balance sheet does not purport to
represent the Company's actual financial position that would have been reported
had the acquisition occurred on December 31, 1995.
The pro forma adjustments are based upon currently available information and
upon certain assumptions that management believes are reasonable under the
circumstances. This unaudited pro forma balance sheet should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto for the year ended December 31, 1995 (as filed on the annual report,
Form 10-K) and for the quarter ended September 30, 1996 (as filed on Form
10-Q).
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Scientific Games Holdings Corp.
Pro Forma Consolidated Condensed Balance Sheet
As of September 30, 1996
(In Thousands except share and per share data)
(unaudited)
<TABLE>
<CAPTION>
Pro forma Adjusted
SGI SGIL Adjustments Pro forma
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $22,618 $1,729 ($22,780) 1 $1,567
Trade receivables, net of allowance for doubtful accounts
of $138 and $25, respectively 26,635 3,509 0 30,144
Inventories 9,720 1,235 0 10,955
Prepaid expenses and other current assets 556 0 0 556
Deferred income tax benefit 1,280 0 0 1,280
-------- ------- -------- --------
Total current assets 60,809 6,473 (22,780) 44,502
Property and equipment, at cost:
Land 2,521 0 0 2,521
Building 11,719 0 0 11,719
Production and other equipment 63,080 16,489 0 79,569
-------- ------- -------- --------
77,320 16,489 0 93,809
Less accumulated depreciation and amortization (30,838) (10,771) 0 (41,609)
-------- ------- -------- --------
46,482 5,718 0 52,200
Goodwill 2,147 0 15,256 1 17,403
Other assets 1,212 0 (244) 1 968
-------- ------- -------- --------
$110,650 $12,191 ($7,768) $115,073
======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $3,467 $2,153 $0 $5,620
Accrued liabilities 6,350 991 0 7,341
Income taxes payable 2,799 610 0 3,409
Current portion of capital lease obligations 562 0 0 562
Loan from parent 0 4,988 (4,988) 1 0
-------- ------- -------- --------
Total current liabilities 13,178 8,741 (4,988) 16,931
Capital lease obligations, less current portion 8 0 0 8
Long-term debt 8,000 0 0 8,000
Deferred income taxes payable 2,891 669 0 3,560
Stockholders' equity:
Common stock per value $.001 per share:
shares authorized: 25,750,000;
issued and outstanding shares: 12,113,224 12 0 0 12
Additional paid-in capital 54,322 0 0 54,322
Retained earnings 32,310 2,780 (2,780) 1 32,310
-------- ------- -------- --------
86,644 2,780 (2,780) 86,644
Less notes receivable form officers for the sale
of common stock to such officers (71) 0 0 (71)
-------- ------- -------- --------
Total stockholders' equity 86,573 2,780 (2,780) 86,573
-------- ------- -------- --------
$110,650 $12,191 ($7,768) $115,073
======== ======= ======== ========
</TABLE>
See accompanying note.
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SCIENTIFIC GAMES HOLDINGS CORP.
PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
The following unaudited pro forma consolidated statements of earnings of the
Company for the period ending September 30, 1996 and year ended December 31,
1995 are based in the historical consolidated financial statements of the
Company and the financial statements of SGIL and are presented as if the
acquisition had occurred on January 1, 1995. The unaudited pro forma
consolidated statements of earnings give effect to the acquisition under the
purchase method of accounting and reflects the assumptions and the adjustments
described in the accompanying notes.
These unaudited pro forma consolidated statements of earnings do not purport to
represent the Company's actual results of operations that would have been
reported had the acquisition occurred on January 1, 1995.
The pro forma adjustments are based upon currently available information and
upon certain assumptions that management believes are reasonable under the
circumstances. This unaudited pro forma statements of earnings should be read
in conjunction with the Company's Consolidated Financial Statements and the
Notes thereto for the year ended December 31, 1995 (as filed on the annual
report, Form 10-K) and for the nine month period ended September 30, 1996 (as
filed on Form 10-Q).
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<PAGE> 29
Scientific Games Holdings Corp.
Pro Forma Consolidated Condensed Statement of Earnings
For the nine month period ended September 30, 1996
(In Thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
Pro forma Adjusted
SGI SGIL Adjustments Pro forma
<S> <C> <C> <C> <C>
Revenue $102,363 $19,718 $122,081
Cost of revenues excluding depreciation and
amortization 62,701 13,807 133 1 76,640
-------- -------- ------- --------
39,662 5,911 (133) 45,441
Selling, general and administrative expenses
excluding depreciation and amortization 12,527 3,435 133 1 15,894
(201) 2
Depreciation, amortization and other charges 6,500 1,260 (23) 3 8,118
381 4
-------- -------- ------- --------
20,635 1,216 (422) 21,429
Interest income 789 100 (443) 5 446
Gain/(loss) on foreign currency 670 (40) 630
Interest expense (45) (2) (368) 5 (415)
-------- -------- ------- --------
Earnings before income tax 22,049 1,274 (1,233) 22,090
Income tax expense (benefit) 8,835 518 (135) 6 9,218
-------- -------- ------- --------
Net earnings $13,214 $756 ($1,098) $12,872
======== ======== ======= ========
Earnings per common share $0.98 $0.95
======== ========
Weighted average number of common and common
equivalent shares outstanding 13,493 13,493
</TABLE>
See accompanying note.
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<PAGE> 30
Scientific Games Holdings Corp.
Pro Forma Consolidated Statement of Earnings
For the year ended December 31, 1995
(In Thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
Pro forma Adjusted
SGI SGIL Adjustments Pro forma
<S> <C> <C> <C> <C>
Revenue $149,235 $25,801 $175,036
Cost of revenues excluding depreciation and
amortization 88,276 18,502 182 1 106,960
-------- -------- ------- --------
60,959 7,300 (182) 68,077
Selling, general and administrative expenses
excluding depreciation and amortization 14,778 4,584 182 1 19,324
(219) 2
Depreciation, amortization and other charges 8,817 1,711 (32) 3 11,006
509 4
-------- -------- ------- --------
37,364 1,005 (622) 37,747
Interest income 613 281 (591) 5 304
Gain/(loss) on foreign currency 23 51 74
Interest expense (289) 0 (491) 5 (780)
-------- -------- ------- --------
Earnings before income tax 37,711 1,337 (1,703) 37,344
Income tax expense (benefit) 15,283 (453) (394) 6 14,435
-------- -------- ------- --------
Net earnings $22,428 $1,790 ($1,309) $22,909
======== ======== ======= ========
Earnings per common share $1.64 $1.68
======== ========
Weighted average number of common and common
equivalent shares outstanding 13,653 13,653
</TABLE>
See accompanying note.
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SCIENTIFIC GAMES HOLDINGS CORP.
NOTE TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Note A - Pro Forma Adjustments
The pro forma adjustments to reflect the Transaction are as follows:
BALANCE SHEET - AS OF SEPTEMBER 30, 1996
1. Pro forma adjustments reflect cash paid for SGIL, the repayment of a loan
from the seller, the goodwill which resulted from the excess purchase price
over the net asset acquired and the reclass of previously recorded deferred
acquisition costs to goodwill.
STATEMENT OF OPERATIONS - YEAR ENDED DECEMBER 31, 1995 AND
PERIOD ENDING SEPTEMBER 30, 1996
1. Reflects lease expense for a building owned by the seller and not purchased
as part of the acquisition.
2. Reflects the difference in certain management expenses related to the
Company's combined operations.
3. Reflects decreased depreciation expense for a building owned by the seller
and not purchased as part of the acquisition.
4. Reflects amortization of goodwill associated with the acquisition over a 30
year period.
5. Reflects a decrease in interest income and an increase in interest expense
as a result of the cash paid for SGIL.
6. Reflects the adjustment of the income tax provision as a result of
adjustments 1, 2, 3 and 5 above.
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<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements of
Scientific Games Holdings Corp. listed below of our report dated April 25,
1996, with respect to the consolidated financial statements of Scientific Games
International Limited (formerly Opax International Limited), included in its
Current Report on Form 8-K dated December 16, 1996 filed with the Securities
and Exchange Commission.
- - Registration Statement No. 33-78322 on Form S-8 dated April 29, 1994 and
related Prospectus
- - Registration Statement No. 33-78324 on Form S-8 dated April 29, 1994 and
related Prospectus
- - Registration Statement No. 33-78326 on Form S-8 dated April 29, 1994 and
related Prospectus
- - Registration Statement No. 33-78328 on Form S-8 dated April 29, 1994 and
related Prospectus
- - Registration Statement No. 33-78330 on Form S-8 dated April 29, 1994 and
related Prospectus
- - Registration Statement No. 33-90948 on Form S-8 dated April 5, 1995 and
related Prospectus
- - Registration Statement No. 33-90950 on Form S-8 dated April 4, 1995 and
related Prospectus
- - Registration Statement on Form S-8 dated April 1, 1996 and related
Prospectus pertaining to the Scientific Games Savings and Investment Plan
- - Registration Statement No. 333-05847 on Form S-8 dated June 12, 1996 and
related Prospectus
ERNST & YOUNG
Leeds, England
October 1, 1996
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