<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 14(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 15, 1997
SCIENTIFIC GAMES HOLDINGS CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 000-22298 13-3615274
(STATE OF OTHER JURISDICTION OF (Commission File Number) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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 April 15, 1997, Scientific Games Holdings Corp. (the "Company")
acquired through a wholly owned Austrian Subsidiary, the shares of
capital of Tele Control, an Austrian subsidiary of Autotote
Corporation, a United States corporation. The name of Tele Control
was changed to Scientific Games Kommunikations-und
Computersysteme Gesellschaft mbH ("Tele Control"). Tele Control is
an on-line lottery and transaction processing company located in
Vienna, Austria, with a European customer base. The office located
in Vienna will continue to be utilized by the Company.
(b) The consideration paid was $26.6 million and was paid from the
Company's cash reserves and from borrowings of $23 million under
the Company's existing Bank Credit Agreement with First Union
National Bank as lead lender. The principles followed in
determining the amount of the consideration were historical
earnings, market share and future growth potential. The Company
expects to recognize a one-time write-off for in-process
technology related to this acquisition. The exact amount of the
write-off will be determined and reflected in the consolidated
financial statements of the Company for the quarter ending
June 30, 1997.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
The following audited financial statements of Tele Control are included in
Appendix A hereto and incorporated herein by reference (These Financial
Statements were prepared in accordance with Austrian statutory requirements
which may differ from U.S. generally accepted accounting principles):
- Auditor's Opinion
- Income Statement for the year ended October 31, 1996
- Balance Sheet as of October 31, 1996
- Cash Flow from Operations for the year ended October 31,
1996
- Notes to the Financial Statement at October 31, 1996
The following unaudited financial statements of Tele Control are included in
Appendix B hereto and incorporated herein by reference (These Financial
Statements were prepared in accordance with Austrian statutory requirements
which may differ from U.S. generally accepted accounting principles):
- Unaudited Condensed Consolidated Income Statement for the
three months ended January 31, 1997
- Unaudited Condensed Consolidated Balance Sheet as of
January 31, 1997
- Unaudited Condensed Statement of Cash Flows for the three
months ended January 31, 1997
- Notes to the Unaudited Condensed Financial Statements at
January 31, 1997
(b) Pro Forma Financial Information
The pro forma financial information is included in Appendix C hereto
and incorporated herein by reference. The proforma financial information does
not include the anticipated one-time write-off for in-process technology
referenced in Item 2 (b) above.
<PAGE> 3
(c) Exhibits
#23.1 Consent of Independent Auditors
<PAGE> 4
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: June 30, 1997
3
<PAGE> 5
APPENDIX A
<PAGE> 6
FINANCIAL STATEMENTS
TELE CONTROL
Year ended October 31, 1996
with Report of Independent Auditors
A-1
<PAGE> 7
Report on the Audit of the
Financial Statements as of October 31, 1996
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH
VIENNA
(TRANSLATION)
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KPMG Alpen-Treuhand Gesellschaft mbH/102597
November 22, 1996
This report contains 20 pages and 5 exhibits
<PAGE> 8
kpmg Alpen-Treuhand Gesellschaft mbH
102597
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Audit engagement and performance.....................................................................1
2. Legal and economic status of the Company.............................................................1
2.1. The Company's legal status...........................................................................1
2.2. Tax status...........................................................................................1
2.3. Economic status......................................................................................1
2.3.1. Overview.............................................................................................1
2.3.2. Significant long-term contracts and commitments......................................................1
3. Summarized comments on the financial statements......................................................1
3.1. Accounting and valuation principles..................................................................1
3.2. Structure of assets and financial position...........................................................1
3.3. Earnings position....................................................................................1
4. Accounting system....................................................................................1
5. Result of the audit and auditors' opinion............................................................1
</TABLE>
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kpmg Alpen-Treuhand Gesellschaft mbH
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EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT/PAGE
<S> <C>
Balance Sheet as of 1995/96
with prior year's comparative figures in thousand
Austrian Schilling (TATS) I/1-2
Income Statement for the Fiscal Year 1995/96
with prior year's comparative figures in thousand
Austrian Schilling (TATS) II
Notes to the Financial Statements for the Fiscal Year 1995/96
(including Appendices 1 and 2) III/1-15
Management Report 1995/96 (not translated) IV/1-3
General Conditions of Contract V
</TABLE>
NOTE:
When totalling up rounded amounts and percentages calculation variances
may occur due to the use of automatic calculation aids.
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kpmg Alpen-Treuhand Gesellschaft mbH
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1. AUDIT ENGAGEMENT AND PERFORMANCE
1 The management of
TELE CONTROL KOMMUNIKATIONS- UND COMPTERSYSTEME
GESELLSCHAFT mbH, VIENNA
(in the following abbreviated "TELE CONTROL" or "Company")
appointed us AUDITORS of the financial statements as of 1995/96, the
accounting system and the management report.
We carried out the audit in November 1996 at the Company's premises in
Vienna's 13th district, Klitschgasse 4.
2 PARTNER IN CHARGE of the engagement is Mr. Dr. Gottwald Kranebitter,
Austrian CPA.
3 Our audit was BASED on the books, correspondence and other records of
the Company. The additional EVIDENCE AND EXPLANATIONS required by us
were provided by the managing director and the Company's officers and
staff indicated by him.
4 The audit is a VOLUNTARY audit and was performed in compliance with
auditing principles specified in ss. 269 Austrian Commercial Code.
The audit is based on the GENERAL CONDITIONS OF CONTRACT FOR CPA
SERVICES (see Exhibit V) issued by the Austrian Chamber of Public
Accountants and agreed upon with the Company.
5 In performing our audit, we observed the AUDIT PRINCIPLES generally
accepted in Austria. The scope of our work did not extend to areas
which are usually covered by special engagements.
6 The nature and extent of our audit procedures are documented in our
WORKPAPERS.
7 We obtained the Company's representation confirming the COMPLETENESS
of the financial statements and of the management report.
1
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8 We agreed with the Company to issue an abbreviated audit report. Thus,
details and comments on financial statement items as well as a
description of accounting and valuation principles are omitted from our
report.
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2. LEGAL AND ECONOMIC STATUS OF THE COMPANY
2.1. THE COMPANY'S LEGAL STATUS
9 The Company was established under the ARTICLES OF INCORPORATION dated
August 5, 1985.
By shareholders' resolution and merger contract dated May 28, 1994, the
Company merged with BEFINA Beteiligung Gesellschaft mbH, TELE CONTROL
being the acquiring Company.
10 The Company is registered in the OFFICIAL TRADE REGISTER at the
Commercial Court Vienna under number 83200 d.
11 The COMPANY'S BUSINESS as described in the articles of incorporation
comprises the following:
a) planning, developing, installation and processing of
telecommunications systems,
b) offering services in automated EDP and IT,
c) supply and distribution of computer systems and
d) trade with industry related products.
12 The FINANCIAL YEAR begins November 1 and ends October 31 of the
following year.
13 The Company's OFFICERS are named in the notes to the financial
statements (Exhibit III).
14 As of 1995/96, the NOMINAL SHARE CAPITAL of TATS 500 is solely owned
by AUTOTOTE Corporation, New York, USA.
15 The audited Company is a SMALL CORPORATION according toss. 221
Austrian Commercial Code.
16 By WRITTEN SHAREHOLDERS' RESOLUTION dated January 19, 1996, the
following major decisions were approved:
- the financial statements as of 1995/96, with a total balance sheet
amount of ATS 169.504.666,62 were approved;
- the result for the year amounting to ATS 20.105.725,82 was confirmed;
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- the net income amounting to ATS 65.505.755,24, consisting of the
profit carried forward of 45.400.029,42 and the net income of the
year of ATS 20.105.725,82, shall be carried forward;
- the management's acts for the year 1995/96 have been ratified.
2.2. TAX STATUS
17 The Company is registered with the FINANZAMT FUR KORPERSCHAFTEN (Tax
authority for corporate entities) under REGISTRATION NO 420/9418.
The latest ASSESSMENTS were made for corporate and local income taxes
and VAT for the fiscal year 1993 and property tax as of January 1,
1993.
The latest TAX AUDIT covered federal and local income taxes, VAT and
property tax for the years 1991 to 1993; it was completed in 1996.
As of balance sheet date, there were no substantial TEMPORARY
DIFFERENCES BETWEEN THE STATUTORY BALANCE SHEET AND THE TAX FIGURES.
The Company's tax advisor is Mr. DDr. Kurt Bernegger, Vienna.
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kpmg Alpen-Treuhand Gesellschaft mbH
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2.3. ECONOMIC STATUS
2.3.1. OVERVIEW
18 The Company develops and markets specific computer software for long-
distance data transmission which is mainly used for on-line lotteries
and betting-systems as well as by banks and credit card companies.
Software developed by the Company is used by Lotteries in Austria,
Switzerland, The Netherlands and Germany. There are ongoing sales
negotiations with further lotteries. In addition to the development of
software the Company provides computer hardware to its key accounts
which is purchased from different vendors.
During the fiscal year 1995/96 TELE CONTROL shipped hardware to German
Lotteries and installed the software for these projects. Due to the
already complete billing for the hardware there was a significant rise
in sales and cost of goods sold compared to previous year. The billings
for software are executed as far as the installation is concluded and
approved by the customers.
19 TELE CONTROL employed in average 107 employees (previous year: 109).
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2.3.2. SIGNIFICANT LONG-TERM CONTRACTS AND COMMITMENTS
20 CO-OPERATION AGREEMENT
In 1993 TELE CONTROL signed a co-operation agreement with "IDJ", a
french lottery company, for the installation of betting-systems for six
german state lotteries. The sales amount resulting from this agreement
will be ATS 344 mio. or DEM 48,8 mio. All services are billed to "IDJ"
which is the main contractor for these projects.
Most of the software installation was completed by February 1996.
Due to adjustments of the hardware attributable to the contract partner
there is a delay in the final completion of the installation. However,
the Company reckons that the installation will be completed in course
of the business year 1996/97.
According to an agreed instalment plan TELE CONTROL received payments
during the business year 1995/96 which amounted to approx. DEM 12,8
mio. (ATS 91 mio.). Out of the amount agreed upon of DEM 48,8 mio. (ATS
344 mio.) DEM 30,6 mio. (ATS 216 mio.) have been paid to the Company
until balance sheet date.
LEASE AGREEMENT
The Company's offices in Klitschgasse 4 are leased from IMMOC
Immobilien- und ComputerleasinggmbH. As stipulated in a memorandum
dated May 15, 1991, the contract was entered for an indefinite period
of time. TELE CONTROL gave up the right to terminate the contract for
the first 15 years. The Company paid ATS 15 mio. as an advance rent
payment for the first 15 years which were capitalized and amortized
over the period for which lease termination is not possible.
As a safeguarding deposit the tenant received ATS 1,2 mio.
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kpmg Alpen-Treuhand Gesellschaft mbH
102597
3. SUMMARIZED COMMENTS ON THE FINANCIAL STATEMENTS
3.1. ACCOUNTING AND VALUATION PRINCIPLES
The accounting and valuation principles are presented in the notes to
the financial statements (Exhibit III).
3.2. STRUCTURE OF ASSETS AND FINANCIAL POSITION
21 The following is a comparison of assets, equity and liabilities
summarized under operational aspects. The development provides
information about the Company's financial position.
<TABLE>
<CAPTION>
Oct. 31, 1996 Oct. 31, 1995 Change
TATS % TATS % TATS
--------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
FIXED ASSETS
Intangible assets 10.858 7,7 12.166 7,2 -1.308
Tangible assets 18.739 13,3 21.719 12,8 -2.980
--------------------------------------------
29.597 21,0 33.885 20,0 -4.288
Financial assets 1.082 0,8 1.082 0,6 0
--------------------------------------------
30.679 21,8 34.967 20,6 -4.288
CURRENT ASSETS AND PREPAID EXPENSES
Inventories 14.554 10,3 43.782 25,8 -29.228
Accounts receivable - trade 25.130 17,9 29.752 17,6 -4.622
Accounts receivable - affiliates 57.252 40,7 53.930 31,8 3.322
Cash 7.599 5,4 2.209 1,3 5.390
Other assets, prepaid expenses and deferred 5.408 3,9 4.865 2,9 543
--------------------------------------------
109.943 78,2 134.538 79,4 -24.595
--------------------------------------------
140.622 100,0 169.505 100,0 -28.883
============================================
</TABLE>
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kpmg Alpen-Treuhand Gesellschaft mbH
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<TABLE>
<CAPTION>
Oct. 31, 1996 Oct. 31, 1995 Change
TATS % TATS % TATS
------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
SHAREHOLDER'S EQUITY AND RESERVES
Share capital 500 0,3 500 0,3 0
Retained earnings 0 0,0 3.544 2,1 -3.544
Net income 83.945 59,7 65.506 38,6 18.439
------------------------------------------------
84.445 60,0 69.550 41,0 14.895
Valuation reserve 2.651 1,9 3.758 2,2 -1.107
Untaxed reserves 5.062 3,6 8.099 4,8 -3.037
------------------------------------------------
92.158 65,5 81.407 48,0 10.751
LONG-TERM LIABILITIES
Accrued severance payments 3.756 2,7 2.879 1,7 877
SHORT-TERM LIABILITIES AND DEFERRED INCOME
Advance payments received 3 838 2,7 44.026 26,0 -40.188
Accounts payable - trade 4.767 3,4 14.851 8,8 -10.084
Accounts payable - affiliates 7.119 5,1 0 0,0 7.119
Other short-term liabilities 11.374 8,1 11.283 6,7 91
Accrued income taxes and other accruals 17.610 12,5 15.059 8,8 2.551
------------------------------------------------
44.708 31,8 85.219 50,3 -40.511
------------------------------------------------
140.622 100,0 169.505 100,0 -28.883
================================================
</TABLE>
22 The main changes in assets and financial position are due to the
following reasons:
The decrease in inventories results from the shipment of hardware and
the installation of software for major projects at German Lotteries in
course of the business year 1995/96. The trade receivables consist
mainly of billings for these projects and are due from the main
contractor "IDJ" (ref 19). Billings to and payments from "IDJ" follow
an agreed upon schedule. The outstanding amount at a certain point of
time, therefore, depends on the schedule and the partner's adherence to
the contract.
Receivables from affiliates relate to a loan and interest thereon
granted to the parent company. This year's increase results from
interest accrued for the business year 1995/96.
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kpmg Alpen-Treuhand Gesellschaft mbH
102597
The decrease of advance payments is due to their set-off with billings
to "IDJ". Due to the shipment of hardware for major projects at German
Lotteries and the related cash inflow the Company was able to decrease
accounts payable.
The payables due to affiliates refer to the management fee charged to
TELE CONTROL by the parent company for the first time in 1995/96. This
management fee includes the salary of the managing director.
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kpmg Alpen-Treuhand Gesellschaft mbH
102597
23 The following ratios are derived from the balance sheets as of
October 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
October 31,
1996 1995 1994
-----------------------
<S> <C> <C> <C>
FIXED ASSETS COVERAGE:
Equity + Long-term liabilities 3,13 2,41 1,92
------------------------------
Fixed assets
DEBT TO EQUITY RATIO:
Liabilities 0,53 1,08 1,08
-----------
Equity
INTENSITY OF FIXED ASSETS:
Fixed assets x 100 22% 21% 26%
------------------
Total assets
CAPITAL INVESTMENT FACTOR:
Capital investments 0,41 1,26 1,00
-------------------
Depreciation for the year
INVENTORY INTENSITY:
Inventories x l00 10% 26% 11%
-----------------
Total assets
LIQUIDITY:
Cash and cash equivalents + Current assets 0,85 0,43 1,16
------------------------------------------
Short-term liabilities
WORKING CAPITAL (TATS): 65.235 49.319 29.976
WORKING CAPITAL RATIO:
Current assets 2,46 1,58 1,48
--------------
Short-term liabilities
</TABLE>
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kpmg Alpen-Treuhand Gesellschaft mbH
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24 The following statement of cash flows is derived from the financial
statements of the previous two years and shows the SOURCE AND
ALLOCATION OF FUNDS in 1995/96 and 1994/95:
<TABLE>
<CAPTION>
1995/96 1994/95
TATS TATS
--------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
OPERATIONAL CASH FLOWS
Net income before changes in reserves 10.750 21.349
Amortization of intangible and depreciation of tangible fixed assets 8.607 7.957
Write-up of intangible assets and tangible fixed assets due to the tax audit -828 0
Depreciation of financial assets 0 53
Change in long-term accruals 877 435
------- --------
19.406 29.794
CHANGE IN CURRENT ASSETS
Inventories 29.228 -30.304
Accounts receivable - trade 4.622 -20.451
Accounts receivable - affiliates -3.322 -47.201
Other assets, prepaid expenses and deferred charges -543 -3.051
------- --------
29.985 -101.007
CHANGE IN CURRENT LIABILITIES
Accounts payable - trade -10.084 10.413
Accounts payable - affiliates 7.119 0
Advance payments -40.188 5.677
Other liabilities, accruals and deferred income 2.642 6.657
------- --------
-40.511 22.747
------- --------
8.880 -48.466
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to intangible assets and tangible fixed assets -3.764 -12.145
Disposals of intangible assets and tangible fixed assets 274 2.082
Investments in financial assets 0 -388
------- --------
-3.490 -10.451
------- --------
CHANGE IN CASH ON HAND AND IN BANKS 5.390 -58.917
======= ========
</TABLE>
The cash flows from operating activities result mainly from the sale of
goods and the billings for projects. Out of this operational cash flows
only a part was used for capital investments. As a result net cash
increased.
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kpmg Alpen-Treuhand Gesellschaft mbH
102597
3.3. EARNINGS POSITION
25 The following schedule presents condensed income statement for the
years ended 1995/96 and 1995/96 and the changes in net income:
<TABLE>
<CAPTION>
1995/96 1994/95 Change
TATS % TATS % TATS
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales 264.996 103,5 151.243 87,8 113.753
Change in work in process -16.213 -6,3 16.318 9,4 -32.531
----------------------------------------------------------------
248.783 97,2 167.561 97,2 81.222
Other operating income 7.134 2,8 4.780 2,8 2.354
----------------------------------------------------------------
INCOME FROM OPERATIONS 255.917 100,0 172.341 100,0 83.576
Cost of goods purchased -116.917 -45,5 -39.508 -22,9 -76.909
Personnel expenses -77.987 -30,5 -70.262 -40,8 -7.725
Amortization of intangible and depreciation of
tangible fixed assets -8.607 -3,4 -7.958 -4,6 -649
Operational taxes -367 -0,1 -242 -0,1 -125
Other operating expenses -38.665 -15,1 -24.833 -14,5 -13.832
----------------------------------------------------------------
OPERATING EXPENSES -242.043 -94,6 -142.803 -82,9 -99.240
----------------------------------------------------------------
OPERATING RESULT 13.874 5,4 29.538 17,1 -15.664
Financial result 3.846 1,5 3.507 2,1 339
----------------------------------------------------------------
ORDINARY BUSINESS RESULT 17.720 6,9 33.045 19,2 -15.325
Extraordinary financial result 0 0,0 -53 -0,1 53
----------------------------------------------------------------
NET INCOME BEFORE INCOME TAXES 17.720 6,9 32.992 19,1 -15.272
Taxes on income -6.970 -2,7 -11.643 -6,7 4.673
----------------------------------------------------------------
NET INCOME BEFORE CHANGES IN RESERVE 10.750 4,2 21.349 12,4 -10.599
Changes in reserves 7.689 3,0 -1.243 -0,7 8.932
----------------------------------------------------------------
NET INCOME 18.439 7,2 20.106 11,7 -1.667
================================================================
</TABLE>
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A comparison of the single revenue components to the previous year
shows the following development:
<TABLE>
<CAPTION>
1995/96 1995/96 Change
TATS % TATS % TATS
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Revenues from software development 54.230 20,5 87.799 58,1 -33.569
2. Sales of goods 172.592 65,1 28.029 18,5 144.563
3. Revenues from software maintenance 29.069 11,0 28.908 19,1 161
4. Revenues from computer center services 9.001 3,4 6.742 4,5 2.259
5. Other revenues and discounts 104 0,0 -235 -0,2 339
-------------------------------------------------
264.996 100,0 151.243 100,0 113.753
=================================================
</TABLE>
Due to shipments of computer hardware to major German Lottery projects
revenues from sales of goods increased significantly, while revenues
from software development decreased compared to prior year. A
considerable increase in sales was reported from services offered by
the computer center.
In compliance with the increase in sales there was also an increase in
cost of goods purchased. In general the net value added (income from
operation less cost of goods purchased) decreased from 77,1 % for the
previous year to 54,5 % in 1995/96. Both, the increase of the other
operating expenses and the personnel expenses are the main reasons for
the decrease of the operating result. The increase of the other
operating expenses resulted from the higher amounts spent on fairs and
exhibitions, a significant increase in travel expenses as well as the
management fee paid to the parent company.
The financial result relates basically to interest charged for the loan
to the parent company.
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26 The following ratios can be derived from the financial statements of
the last three years:
<TABLE>
<CAPTION>
1995/1996 1994/1995
--------------------
<S> <C> <C>
RETURN ON ASSETS:
Operating result x 100 9% 20%
----------------------
Average total assets
RETURN ON SALES:
Operating result x 100 5% 20%
----------------------
Net sales
RECEIVABLES TURNOVER:
Net sales 9,66 7,75
------------------------------------
Average accounts receivables balance
INVENTORY TURNOVER:
Purchases 3,99 1,38
-------------------
Average inventories
PAYABLES TURNOVER:
Purchases 11,87 4,10
----------------------
Average trade payables
RETURN ON SHAREHOLDERS' EQUITY:
Income before taxes x 100 20% 47%
----------------------------
Average shareholders' equity
</TABLE>
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4. ACCOUNTING SYSTEM
27 Business transactions are recorded based on manually or automatically
prepared documents and processed by using a central EDP System (Brand
DEC, Type VAX VMS 6.2). Fixed assets accounting as well as parts of the
compilation of financial statements are performed outside the Company.
The CHART OF ACCOUNTS is established as recommended by the Austrian
Chamber of Public Accountants. The financial statements could be
directly traced to the general and sub-ledger accounts.
The accounting documents are filed in systematical and chronological
orders and adequately reflect the underlying business transactions.
POSTINGS to the accounts were made completely and on a timely basis,
following systematic criteria.
INTERNAL CONTROL PROCEDURES are in place and provide reasonable
assurance that transactions are completely, timely and correctly
recorded.
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5. RESULT OF THE AUDIT AND AUDITORS' OPINION
28 ACCOUNTING SYSTEM
From our audit (both, substantive and systems tests) we obtained
evidence that generally accepted accounting principles were complied
with and internal control procedures were adequate and effective.
29 FINANCIAL STATEMENTS
The format and classification of the balance sheet and income statement
as well as the valuation of individual assets and liabilities are in
compliance with the Austrian Commercial Code. Identifiable risks are
reserved for by means of write-downs, accruals and provisions.
The notes to the financial statements include all disclosures as
required by the Austrian Commercial Code to provide a true and fair
view of the Company's financial position and performance.
30 MANAGEMENT REPORT
The management report includes all information as required by ss. 243
Austrian Commercial Code and presents a true and fair view of the
Company's economic status.
31 EVIDENCE AND EXPLANATIONS
The Company's representatives have sufficiently rendered all evidence
and explanations requested by us.
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32 DISCLOSURE PURSUANT TOSS. 273 (2) AUSTRIAN COMMERCIAL CODE
During the performance of our audit we did not note any facts which
questioned the Company's ability to continue as a going concern or
which indicated a material offence of the Company's legal
representatives against Austrian law or the Company's articles of
incorporation.
33 ABBREVIATED REPORTING
The abbreviated reporting agreed upon with the Company relates to the
accounting and valuation principles as well as to details and comments
on financial statement items.
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AUDITORS' OPINION
As there are no objections, we express the following unqualified
opinion on the FINANCIAL STATEMENTS AS OF OCTOBER 31, 1996, of
TELE CONTROL KOMMUNIKATIONS- UND COMPUTERSYSTEME
GESELLSCHAFT mbH, VIENNA:
"As the result of our due audit we can certify that the
accounting records and the financial statements comply with
the legal regulations. The financial statements give a true
and fair view of the Company's assets, the liabilities,
financial position and profit or loss in conformity with
generally accepted accounting principles. The management
report corresponds with the financial statements."
Vienna, 1995/96
KPMG ALPEN-TREUHAND GESELLSCHAFT MBH
Wirtschaftsprufungs- und
Steuerberatungsgesellschaft
(signed) (signed)
Dr. Gottwald Kranebitter ppa Mag. Helmut Kerschbaumer
Austrian Certified Public Accountants
A-21
<PAGE> 28
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT I/1
102597
BALANCE SHEET AS OF OCTOBER 31, 1996
with prior year's comparative figures in thousand Austrian Schilling (TATS)
ASSETS:
<TABLE>
<CAPTION>
Oct. 31, 1996 Oct. 31, 1996
ATS ATS
----------------------------
<S> <C> <C>
A. FIXED ASSETS
I. INTANGIBLE ASSETS
1. Industrial property rights and similar rights 10,000,000.00 11,000
2. Software licenses 857,592.00 1,166
---------------------------
10,857,592.00 12,166
II. PROPERTY, PLANT AND EQUIPMENT
1. Land with buildings and buildings on non-owned land 4,490,139.00 3,817
2. Machinery and equipment 8,907,739.00 10,659
3. Tools, furniture and fixtures 5,340,885.00 7,243
---------------------------
18,738,763.00 21,719
III. FINANCIAL ASSETS
1. Non current securities 1,082,194.00 1,082
----------------------------
30,678,549.00 34,967
B. CURRENT ASSETS
I. INVENTORIES
1. Work in process 13,582,892.00 29,795
2. Goods for resale 971,153.86 13,987
---------------------------
14,554,045.86 43,782
II. ACCOUNTS RECEIVABLE
1. Accounts receivable - trade 25,129,682.23 29,752
2. Accounts receivable - affiliates 57,252,321.78 53,930
3. Other receivables 3,623,073.44 3,027
---------------------------
86,005,077.45 86,709
III. CASH ON HAND AND IN BANKS 7,599,163.97 2,209
---------------------------
108,158,287.28 132,700
C. PREPAID EXPENSES AND DEFERRED CHARGES 1,785,125.66 1,838
---------------------------
140,621,961.94 169,505
===========================
</TABLE>
A-22
<PAGE> 29
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT I/2
102597
LIABILITIES AND SHAREHOLDER'S EQUITY:
<TABLE>
<CAPTION>
Oct. 31, 1996 Oct. 31, 1996
ATS TATS
-------------------------------
<S> <C> <C>
A. SHAREHOLDER'S EQUITY
I. SHARE CAPITAL 500,000.00 500
II. RESERVES
1. Retained earnings 0.00 3,544
III. NET INCOME 83,944,623.21 65,506
-------------------------------
84,444,623.21 69,550
B. UNTAXED RESERVES
1. Valuation reserve from special depreciation for tax purposes according
to Section 13 Income Tax Act 1988, Section 8 and 122 Income Tax Act 1972
a) Industrial property rights and similar rights 13,082.00 14
b) Land with buildings and buildings on non-owned land 432,674.00 441
c) Tools, furniture and fixtures 2,205,151.00 3,303
-------------------------------
2,650,907.00 3,758
2. Other untaxed reserves 5,062,027.00 8,099
-------------------------------
7,712,934.00 11,857
C. ACCRUALS
1. Accrued severance payments 3,755,804.00 2,879
2. Accrued income taxes 4,825,322.00 5,387
3. Other accruals 12,785,096.20 9,672
-------------------------------
21,366,222.20 17,938
D. LIABILITIES
1. Advance payments received 3,838,168.79 44,026
2. Accounts payable - trade 4,766,850.98 14,851
3. Accounts payable-affiliates 7,118,546.00 0
4. Other liabilities 6,622,068.72 6,375
-------------------------------
22,345,634.49 65,252
E. DEFERRED INCOME 4,752,548.04 4,908
-------------------------------
140,621,961.94 169,505
===============================
</TABLE>
A-23
<PAGE> 30
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT II
102597
INCOME STATEMENT FOR THE FISCAL YEAR 1995/96
with prior year's comparative figures in thousand Austrian Schilling (TATS)
<TABLE>
<CAPTION>
1995/96 1994/95
ATS TATS
------------------------------------
<S> <C> <C>
Net sales 264,995,974.79 151,243
Decrease/Increase in work in process -16,212,612.97 16,318
Other operating income
a) Income from disposal of fixed assets excluding financial assets 1,008,451.00 127
b) Income from the reversal of accruals 92,475.00 605
c) Other 6,032,861.18 4,049
------------------------------------
7,133,787.18 4,781
Cost of materials and services purchased -116,417,100.91 -39,508
Personnel expenses
a) Wages -560,033.80 -416
b) Salaries -60,025,955.88 -53,387
c) Expenses for severance payments -1,502,906.48 -435
d) Expenses for statutory social security and payroll related taxes
and contributions -14,329,433.33 -13,699
e) Other social benefits -1,569,099.26 -2,326
------------------------------------
-77,987,428.75 -70,263
Amortization of intangible and depreciation of tangible fixed assets -8,607,001.00 -7,958
Other operating expenses
a) Taxes, other than on income -366,579.61 -242
b) Sundry -38,664,841.71 -24,832
------------------------------------
-39,031,421.32 -25,074
====================================
SUBTOTAL FROM LINE 1. TO 7. 13,874,197.02 29,539
Income from interest, securities and similar income (thereof from
affiliates: ATS 3326168.41000; 1994/95: TATS 2071.254) 4,181,559.95 4,017
Extraordinary depreciation of financial assets 0.00 -53
Interest and similar expenses -335,466.73 -510
------------------------------------
SUBTOTAL FROM LINE 9. TO 11. 3,846,093.22 3,454
------------------------------------
ORDINARY BUSINESS RESULT 17,720,290.24 32,993
Taxes on income -6,970,417.00 -11,644
------------------------------------
NET INCOME BEFORE CHANGES IN RESERVES 10,749,873.24 21,349
Reversal of untaxed reserves 5,038,858.13 5,840
Reversal of other reserves 4,751,878.40 0
Allocation to untaxed reserves -894,117.40 -3,539
Allocation to other reserves -1,207,624.40 -3,544
Profit carried forward 65,505,755.24 45,400
------------------------------------
NET INCOME 83,944,623.21 65,506
====================================
</TABLE>
A-24
<PAGE> 31
TELE CONTROL KOMMUNIKATIONS-UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA
EXHIBIT III/1
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR 1995/96
(TRANSLATION)
A-25
<PAGE> 32
TELE CONTROL KOMMUNIKATIONS-UND EXHIBIT III/2
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. Notes to the financial statements............................................. 3
1.1. Accounting and valuation principles........................................... 3
1.2. General comments on the balance sheet and income statement.................... 6
1.3. Disclosures relating to the balance sheet..................................... 6
1.4. Information relating to the income statement..................................14
</TABLE>
A-26
<PAGE> 33
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT III/3
1. NOTES TO THE FINANCIAL STATEMENTS
1.1. ACCOUNTING AND VALUATION PRINCIPLES
GENERAL
The financial statements were prepared under consideration of Generally
Accepted Accounting Principles as applied in Austria, giving a true and fair
view of the Company's financial position and performance.
Inclusion, valuation and presentation of any item of the financial statements
was prepared according to the requirements of the Austrian Commercial Code and
taking into account the special regulations for corporations.
INTANGIBLE ASSETS
Intangible assets acquired from third parties are valued at cost reduced by
amortization based on the expected useful life, if applicable.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are valued at cost less ordinary depreciation.
Ordinary depreciation is based on the expected useful life and is applied,
according to Tax Law requirements, on a straight-line basis.
Low value assets up to ATS 5.000 are fully depreciated in the year of
acquisition.
A-27
<PAGE> 34
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT III/4
FINANCIAL ASSETS
Financial assets are valuated at cost. If necessary, an extraordinary write
down is made to reflect a lower market value as of balance sheet date.
MISCELLANEOUS
Fixed assets were adjusted on November 1, 1995, to amounts resulting from a tax
audit for the business years 1991 to 1993.
INVENTORIES
Inventories are valued at cost. If replacement values as of balance sheet date
were lower, these values were used.
Work in process is valued at costs incurred for unfinished projects up to
balance sheet date. In particular these costs consist of:
a) direct labor costs,
b) direct material costs,
c) specific cost for services rendered,
d) variable overhead costs,
e) appropriate parts of fixed overhead costs.
ACCOUNTS RECEIVABLE
Accounts receivable are valued considering all recognizable risks.
ACCRUALS FOR SEVERANCE PAYMENTS AND SIMILAR EMPLOYEE BENEFITS
The accrual for employee severance payments is stated at 50% of the vested
legal and contractual benefits as of balance sheet date. The reasonable
economic value (calculated by
A-28
<PAGE> 35
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT III/5
finance mathematical methods) is not materially different from this amount (not
more than 25%).
Accruals for untaken vocation days are included in the total required amount.
TAX ACCRUALS
Tax accruals consist of not yet assessed federal and local income taxes.
OTHER ACCRUALS
Other accruals are set up for liabilities not yet precisely determinable with
all identifiable risks taken into account.
LIABILITIES
Liabilities are included in the balance sheet at repayment amounts. If the
value at balance sheet date exceeded the repayment amount the higher amount was
used.
PRINCIPLES OF CONVERSION OF FOREIGN CURRENCY ITEMS INTO AUSTRIAN
SCHILLING
The financial statements include receivables and liabilities denominated in
foreign currency which are converted into Austrian Schilling at balance sheet
date.
Foreign exchange receivables are valued using the selling rate at the day of
inception. A write down is recorded if the rate at balance sheet date was
lower. These write downs were not directly subtracted from the receivables but
booked as a reserve.
A-29
<PAGE> 36
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT III/6
In general, foreign exchange liabilities are recorded using the buying rate at
the date of transaction. In case of a higher rate at balance sheet date a
write-up is recorded in the financial statements. For trade payables the
write-up is separately presented as a reserve.
1.2 GENERAL COMMENTS ON THE BALANCE SHEET AND INCOME STATEMENT
ITEMS BELONGING TO MORE THAN ONE BALANCE SHEET SECTIONS
Trade receivables due from affiliates were included in trade receivables.
Details are given in the notes to the financial statements.
Received prepayments from affiliated companies for open orders amounting to ATS
576.732,79 are included in the item "advance payments received".
1.3. DISCLOSURES RELATING TO THE BALANCE SHEET
DISCLOSURES ON FIXED ASSET ITEMS
GENERAL
The statement of changes in fixed assets and the breakdown of depreciation can
be seen in Appendix 1 to the notes. The following disclosures provide
information about the calculation of the values of fixed asset items.
LAND-VALUE
The value of the land portion of the item "land with buildings" amounts to ATS
62.700,00 and is separately presented in Appendix 1.
A-30
<PAGE> 37
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT III/7
TAX LAW DEPRECIATION
Special depreciation for tax purposes is presented as "valuation reserve from
special depreciation" (Appendix 2 to the notes).
The statement of charges in fixed assets contains the normal depreciation as
well as the depreciation according to Tax Law.
ACCUMULATED DEPRECIATION
The full depreciation of low value assets (for tax purposes) is included in
additions, depreciation of the year and accumulated depreciation. They will be
shown as disposals after expiration of their expected useful life of 5 years.
After expiration of their useful lives the corresponding amount will be
deducted from acquisition costs and accumulated depreciation.
VALUATION RESERVE FOR LOW VALUE ASSETS
A valuation reserve (for tax purposes) for low value assets included in fixed
assets was set up because these items comprised a material amount of fixed
asset additions in the respective business years.
FINANCIAL ASSETS
According to Section 14 of the Income Tax Act financial assets are required as
funding for severance payments.
A-31
<PAGE> 38
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GELLESCHAFT mbH, VIENNA EXHIBIT III/8
CHANGES DUE TO THE TAX AUDIT
Due to the tax audit for the years 1991 to 1993 a change in the values of fixed
assets was recorded. This resulted on one hand from capitalization of
previously expensed costs and on the other hand from extending the expected
useful lives of some items.
The correction was booked by restating November 1, 1995, balances and was
separately presented in the statement of changes in fixed assets and in the
income statement.
ACCOUNTS RECEIVABLE
The following breaks down the maturity and origin of and allowances for
accounts receivable:
<TABLE>
<CAPTION>
October 31, October 31,
1996 1995
ATS ATS
---------------- ----------------
<S> <C> <C>
1. ACCOUNTS RECEIVABLE - TRADE 25,129,682,23 29,751,616,18
thereof maturing later than 1 year 0,00 0,00
thereof intercompany 1,223,245,56 2.279,516,74
DEDUCTED: allowances for bad debts 184,158,00 22,145,00
2. ACCOUNTS RECEIVABLE - AFFILIATES 57,252,321,78 53,929,933,61
thereof maturing later than 1 year 0,00 0,00
3. OTHER RECEIVABLES 3,623,073,44 3,026,739,28
thereof maturing later than 1 year 1,212,607,00 1,200,000,00
</TABLE>
A-32
<PAGE> 39
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT III/9
OTHER RECEIVABLES
Other receivables consist of:
<TABLE>
<CAPTION> Oct. 31, 1996 Oct. 31, 1995
ATS ATS
-----------------------------------
<S> <C> <C>
Amount due from German tax authorities (payable) 597.266,01
Rent deposit 1.212.607,00 1.200.000,00
Prepayment for leasing contracts 205.889,00 0,00
Credit at suppliers 1.047,60 0,00
Travel advances 11.816,00 48.516,00
Receivables from employees 151.440,00 186.720,81
VAT (not yet due) 16.954,00 170.606,36
Receivables from foreign tax authorities 706.518,00 744.969,10
Prepaid income tax on interest 5.211,00 5.211,00
Prepaid income tax 1.216.555,00 0,00
Sundry 95.035,84 73.450,00
3.623.073,44 3.026.739,28
===================================
</TABLE>
To make sure that the accrual principle is not violated as of October 31, 1996
the following amounts for anticipative transactions were considered:
- - on the account "other receivables" (sundry):
<TABLE>
<CAPTION>
ATS
---------
<S> <C>
- - interest for an employee loan up to 10/31/96 17.890,00
- - interest on securities up to 10/31/96 76.000,00
- - Refund of sickpayments to employees 1.145,84
---------
95.035,84
=========
- - on the account "intercompany netting"
</TABLE>
<TABLE>
<CAPTION>
ATS
------------
<S> <C>
- - interest up to 10/31/95 2.071.253,57
- - interest up to 10/31/96 3.326.168,41
------------
5.397.421,98
============
</TABLE>
A-33
<PAGE> 40
TELE CONTROL KOMMUNIKATIONS- UN
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT III/10
PREPAID EXPENSES AND DEFERRED CHARGES
The following payments made prior to October 31, 1996, and relating to
expenditures for the next business year are recorded as prepaid expenses and
deferred charges:
<TABLE>
<CAPTION>
ATS
------------
<S> <C>
Infotechnik Maintenance 11-12/1996 9.249,24
Artaker Maintenance 11/1996-3/1997 8.500,00
Standard Telephon Lease 11-12/1996 55.452,00
ARD Subscription 11-12/1996 600,00
Scholler Modem Lease 11-12/1996 7.392,00
QM-Charge 11/1996-10/1997 9.166,67
ISDN-Service Fee 11/1996-8/1997 2.312,50
ISDN-Service Fee 11/1996-9/1997 2.543,75
Morawa Subscription 11/1996-10/1997 2.981,82
Digital Maintenance 11-12/1996 93.044,71
Digital Maintenance (domestic) 11-12/1996 139.033,89
Digital Maintenance (abroad) 11-12/1996 1.250.274,09
Datentechnik Maintenance 11-12/1996 4.716,00
Tennis Club (fringe benefits) 1.11.1996-13.4.1997 18.888,89
Heilig Snow Plough Fee 1996/97 4.590,00
Gerling Transport insurance 11-12/1996 5.000,00
RTS Maintenance 11/1996-2/1997 21.666,68
Oracle Maintenance 11/1996-1/1997 27.744,00
Oracle Maintenance 11/1996-3/1997 21.000,00
Oracle Maintenance 11/1996-12/1996 39.534,00
ProSoft Program-Service 11/1996-1/1997 10.641,90
Lease Stuttgart 11/1996 11.526,52
Motor insurance 11/1996 13.771,00
Assets/Electricity insurance 11-12/1996 6.288,20
Insurance Klitschgasse 11-12/1996 19.207,80
------------
1.785.125,66
============
</TABLE>
A-34
<PAGE> 41
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT III/11
RETAINED EARNINGS
Changes in retained earnings for the business year were the following:
<TABLE>
<CAPTION>
ATS
-------------
<S> <C>
BALANCE AS OF NOVEMBER 1, 1995 3.544.254,00
Change due to the tax audit (additional allocation of investment
tax credits for 1991) 18.161,00
Tax free reversal of the investment tax credits of 1992 1.189.463,40
Reversal of retained earnings -4.751.878,40
-------------
BALANCE AS OF OCTOBER 31, 1996 0,00
=============
</TABLE>
UNTAXED RESERVES
CHANGES IN VALUATION RESERVE
Allocation to and reversal of the valuation reserve correspond with the fixed
asset items and can be seen in Appendix 2 to the Notes.
UNTAXED RESERVES FROM INVESTMENT TAX CREDITS
The investment tax credits are broken down as follows:
<TABLE>
<CAPTION>
Reversal due
to expiration Reversal due
Investment tax Balance Increase due to tax of time/ to early Balance
credit for the year as of audit force major disposal New Additions as of
Oct 31, 1995 Oct. 31, 1996
ATS ATS ATS ATS ATS ATS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1992 1.059.700,00 131.703,40 1.186.936,40 4.467,00 0,00 0,00
1993 1.889.145,00 85.744,00 0,00 6.648,00 0,00 1.968.241,00
1994 1.482.724,00 0,00 2.527,00 0,00 0,00 1.480.197,00
1995 1.308.062,00 0,00 0,00 0,00 0,00 1.308.062,00
1996 0,00 0,00 0,00 0,00 305.527,00 305.527,00
--------------------------------------------------------------------------------------------
5.739.631,00 217.447,40 1.189.463,40 11.115,00 305.527,00 5.062.027,00
============================================================================================
</TABLE>
A-35
<PAGE> 42
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT III/12
OTHER ACCRUALS
Other accruals consist of:
<TABLE>
<CAPTION>
Oct. 31, 1996 Oct. 31, 1995
ATS ATS
-----------------------------
<S> <C> <C>
Accrued consulting 501.000,00 360.000,00
Accrued litigation 130.000,00 0,00
Accrued warranty 2.133.000,00 0,00
Accrued for special salary payments 4.487.830,00 4.582.549,00
Accrued vacation 4.607.500,00 4.200.352,00
Accrued salaries 140.166,20 0,00
Other accruals 785.600,00 528.800,00
-----------------------------
12.785.096,20 9.671.701,00
=============================
</TABLE>
As of October 31, 1996 the account "OTHER ACCRUALS" includes the following
expenditures relating to the financial period 1995/96:
<TABLE>
<CAPTION>
ATS
----------
<S> <C>
Consulting Dr. Wolfel 51.200,00
Solidarity fee for disabled 78.400,00
Datex, costs for on-line computer services 142.000,00
Car and mobile phone expenses 26.000,00
Telephon expenses 143.000,00
Transport costs for fair in Vancouver 5.000,00
Charges for fair in Vancouver 220.000,00
Travel expenses 120.000,00
----------
785.600,00
==========
</TABLE>
A-36
<PAGE> 43
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT III/13
LIABILITIES
The following breakdown shows the maturity of the liabilities as of October 31,
1996 and 1995:
<TABLE>
<CAPTION>
Oct. 31, 1996 Oct. 31, 1995
ATS ATS
----------------------------
<S> <C> <C> <C>
1. ADVANCE PAYMENTS RECEIVED 3.838.168,79 44.025.517,81
thereof payable within 1 year 3.838.168,79 44.025.517,81
2. ACCOUNTS PAYABLE - TRADE 4.766.850,98 14.850.933,64
thereof payable within 1 year 4.766.850,98 14.850.933,64
3. ACCOUNTS PAYABLE - AFFILIATES 7.118.546,00 0,00
thereof payable within 1 year 7.118.546,00 0,00
4. OTHER LIABILITIES 6.622.068,72 6.375.034,75
thereof payable within 1 year 6.622.068,72 6.375.034,75
</TABLE>
OTHER LIABILITIES
Other liabilities consist of the following:
<TABLE>
<CAPTION>
Oct. 31, 1996 Oct. 31, 1995
ATS ATS
----------------------------
<S> <C> <C>
German salary income tax 208.663,00 0,00
Netting account for tax authorities for
VAT (Austria) 954.870,00 1.845,00
VAT (Austria) 1.961.550,00 1.761.000,00
VAT (Germany) 535.326,00 0,00
VAT (Switzerland) 193.234,15 141.578,65
VAT (Netherlands) 0,00 23.559,00
Social security payments - federal 164.707,00 244.057,00
Salary income tax payable 714.633,06 1.101.437,65
Social security payments - local tax 101.575,00 151.091,00
Health insurance (social security) 1.212.961,09 1.254.926,86
Health insurance payable - Germany 71.680,00 0,00
Payables for wages & salaries 49.442,09 28.089,00
Credit from customers 16.160,02 0,00
Union dues 4.006,21 15.243,44
Other payables 433.261,10 1.652.207,15
--------------------------
6.622.068,72 6.375.034,75
==========================
</TABLE>
A-37
<PAGE> 44
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT III/14
The following anticipative transactions have been recorded as "other payables"
in order not to violate the accrual principle:
<TABLE>
<CAPTION>
ATS
----------
<S> <C>
Mobile phone 12.537,25
Personnel costs for stand-by 10/1996 (including related costs) 68.523,00
Way/time remuneration 10/1996 (including related costs) 68.289,00
Bernegger, tax consulting services 9-10/1996 101.724,00
Travel expenses 10/1996 58.966,85
Overtime 10/1996 (including related costs) 86.975,00
TC, Insurance remittance 25.428,00
Chamber payments 7-9/1996 8.074,00
Chamber payments 10/1996 2.744,00
433.261,10
==========
</TABLE>
DEFERRED INCOME
Deferred income comprises payments received prior to balance sheet date for
maintenance services to be rendered in November and December 1996.
LIABILITIES FROM THE USE OF ASSETS NOT SHOWN IN THE BALANCE SHEET
(lease obligations)
The total amount of liabilities arising from leasing contracts not shown in the
balance sheet is:
<TABLE>
<CAPTION>
ATS
-------------
<S> <C>
for the next year: 6.952.319,00
for the next five years: 34.159.545,00
</TABLE>
1.4 INFORMATION RELATING TO THE INCOME STATEMENT
GENERAL
The income statement is complied using the total cost format.
A-38
<PAGE> 45
TELE CONTROL KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH, VIENNA EXHIBIT III/15
ALLOCATION AND REVERSAL OF UNTAXED RESERVES
Allocation and reversal of untaxed reserves can be seen in Appendix 2 to the
Notes (valuation reserve) as well as from the changes in investment tax credits
on page 11.
COMMENTS ON THE EFFECT OF THE TAX AUDIT
The adjustments to the balance sheet due to the outcome of the tax audit for
the years 1991 to 1993 consist of the following:
<TABLE>
<CAPTION>
ATS
----------
<S> <C>
Capitalization of fixed assets (previously expensed -
book value rolled forward to ) 466.579,00
Change of expected useful lives for fixed assets
(book value rolled forward to ) 360.924,00
Change of investment tax credits (thereof ATS 18.161,00
for already reversed investment tax credits that have
been allocated to retained earnings) -235.608,40
Trade income tax not yet accrued -26.027,00
VAT adjustment not yet accrued -3.402,00
Corporate income tax not yet accrued -49.530,00
----------
Ordinary business result increase due to tax audit 512.935,60
==========
</TABLE>
OTHER INFORMATION
EMPLOYEES
During the course of the year the Company employed 104 salaried and 3 waged
employees.
BOARD OF MANAGEMENT
The managing director for the business year was Mr. Bruce Longhurst.
<TABLE>
<S> <C>
Vienna,October 31, 1996 (signed)
....................... .......................
Location, date Managing Director
</TABLE>
A-39
<PAGE> 46
102597
STATEMENT OF CHANGES IN FIXED ASSETS
<TABLE>
<CAPTION>
Acquisition/Manufacturing Cost
Balance Additions Disposals Changes due
as of to tax audit
Nov. 1, 1995
ATS ATS ATS ATS
--------------------------------------------------
<S> <C> <C> <C> <C>
I.INTANGIBLE ASSETS
PATENTS, LICENCES, RENTAL RIGHTS
0120 Licences 2,520,683 199,815 240,566 7,460
0128 Licences low value assets 21,622 6,770 7,045 0
0140 Rental rights 15,000,000 0 0 0
--------------------------------------------------
17,542,305 206,585 247,611 7,460
II.PROPERTY, PLANT AND EQUIPMENT
1. LAND AND BUILDINGS
0200 Land 62,700 0 0 0
0221 Company flat Adolfstorg. 49, Hppt. 11/1 1,176,098 0 0 0
0250 Leasehold improvements 4,491,132 831,750 0 272,565
--------------------------------------------------
5,729,930 831,750 0 272,565
2. MACHINERY AND EQUIPMENT
0400 Equipment & machinery 8,645,971 69,076 285,239 83,346
0621 Computer equipment & machinery
(Computer center) 15,012,236 1,940,661 0 0
0622 Computer equipment (administration) 637,382 21,480 0 0
-------------------------------------------------
24,295,589 2,031,217 285,239 83,346
3. OFFICE FURNITURE AND EQUIPMENT
0550 Office furniture/fixtures 4,495,567 178,876 48,162 554,262
0670 Art pieces 190,214 0 0 0
0620 Office equipment 664,893 100,400 70,020 0
0680 Low value assets 7,090,815 414,993 140,657 0
--------------------------------------------------
12,441,489 694,269 258,839 554,262
4. VEHICLES
0630 Company cars 2,501,398 0 960,211 0
0635 Company trucks 289,246 0 0 0
--------------------------------------------------
2,790,644 0 960,211 0
5. SECURITY SYSTEMS
0570 Interior-Security system 265,567 0 0 117,755
-------------------------------------------------
45,523,219 3,557,236 1,504,289 1,027,928
III.FINANCIAL ASSETS
0901 Securities for accrualed 1,154,247 0 0 0
severance payments --------------------------------------------------
64,219,771 3,763,821 1,751,900 1,035,388
==================================================
<CAPTION>
Accumulated Addition due Net book Net book Depreciation
Balance depreciation to tax audit value value 1996
as of Oct. 31, 1996 Oct. 31, 1995
Oct. 31, 1996
ATS ATS ATS ATS ATS ATS
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
I. INTANGIBLE ASSETS
PATENTS, LICENCES, RENTAL RIGHTS
0120 Licences 2,487,392 1,642,882 0 844,510 1,152,084 507,384
0128 Licences low value assets 21,347 8,265 0 13,082 13,885 5,002
0140 Rental rights 15,000,000 5,000,000 0 10,000,000 11,000,000 1,000,000
-------------------------------------------------------------------------------
17,508,739 6,651,147 0 10,857,592 12,165,969 1,512,386
II.PROPERTY, PLANT AND EQUIPMENT
1. LAND AND BUILDINGS
0200 Land 62,700 0 0 62,700 62,700 0
0221 Company flat Adolfstorg. 49,
Hppt. 11/1 1,176,098 303,155 0 872,943 904,854 31,911
0250 Leasehold improvements 5,595,447 2,040,951 273,245 3,554,496 2,849,363 571,863
-------------------------------------------------------------------------------
6,834,245 2,344,106 273,245 4,490,139 3,816,917 603,774
2. MACHINERY AND EQUIPMENT
0400 Equipment & machinery 8,513,154 8,265,279 0 247,875 321,886 145,585
0621 Computer equipment & machinery
(Computer center) 16,952,897 8,437,716 0 8,515,181 10,082,243 3,507,723
0622 Computer equipment (administration) 658,862 514,179 0 144,683 255,325 132,122
-------------------------------------------------------------------------------
26,124,913 17,217,174 0 8,907,739 10,659,454 3,785,430
3. OFFICE FURNITURE AND EQUIPMENT
0550 Office furniture/fixtures 5,180,543 3,618,218 87,679 1,562,325 1,803,853 740,202
0670 Art pieces 190,214 0 0 190,214 190,214 0
0620 Office equipment 695,273 490,556 0 204,717 209,849 105,529
0680 Low value assets 7,365,151 5,182,132 0 2,183,019 3,256,665 1,468,091
-------------------------------------------------------------------------------
13,431,181 9,290,906 87,679 4,140,275 5,460,581 2,313,822
4. VEHICLES
0630 Company cars 1,541,187 618,219 0 922,968 1,416,987 257,075
0635 Company trucks 289,246 144,623 0 144,623 202,472 57,849
-------------------------------------------------------------------------------
1,830,433 762,842 0 1,067,591 1,619,459 314,924
5. SECURITY SYSTEMS
0570 Interior-Security system 383,322 250,303 0 133,019 162,582 76,665
--------------------------------------------------------------------------------
48,604,094 29,865,331 360,924 18,738,763 21,718,993 7,094,615
III.FINANCIAL ASSETS
0901 Securities for accrualed 1,154,247 72,053 0 1,082,194 1,082,194 0
severance payments -------------------------------------------------------------------------------
67,267,080 36,588,531 360,924 30,678,549 34,967,156 8,607,001
===============================================================================
</TABLE>
<PAGE> 47
102597 APPENDIX 2
STATEMENT OF CHANGES IN VALUATION RESERVE
<TABLE>
<CAPTION>
Balance Allocation Deletions Reversals Balance
as of as of
Nov. 1, 1995 Oct. 31, 1996
ATS ATS ATS ATS ATS
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Licences - low value assets 13,885.00 6,093.00 2,571.00 4,325.00 13,082.00
Company flat, Adolfstorgasse 49,
Hppt. 11/1 441,032.00 0.00 0.00 8,358.00 432,674.00
Office furniture and equipment 46,747.00 0.00 0.00 24,613.00 22,134.00
Low value assets 3,256,665.00 365,050.00 20,548.00 1,418,148.00 2,183,017.00
----------------------------------------------------------------------
3,758,329.00 371,143.00 23,119.00 1,455,444.00 2,650,907.00
======================================================================
Breakdown:
Accelerated depreciation 487,779.00 0.00 0.00 32,971.00 454,808.00
Low value assets 3,270,550.00 371,143.00 23,119.00 1,422,473.00 2,196,099.00
</TABLE>
<PAGE> 48
APPENDIX B
<PAGE> 49
FINANCIAL STATEMENTS
TELE CONTROL
For the period ending January 31, 1997
(unaudited)
B-1
<PAGE> 50
TELECONTROL
Condensed Statement of Operations
For the three months ended January 31, 1997
(in thousands)
(unauditied)
<TABLE>
<CAPTION>
in ATS
1/31/97
-------
<S> <C>
Revenues 30,634
Cost of revenues excluding
depreciation and amortization 20,070
-------
10,564
Selling, general and administrative
expenses excluding depreciation
and amortization 5,695
-------
4,869
Depreciation and amortization 2,160
-------
2,709
Interest income 467
Gain on foreign currency
Interest expense 25
-------
Income before income taxes 3,151
Income tax expense 1,071
-------
Net income 2,080
=======
</TABLE>
B-2
<PAGE> 51
TELECONTROL
Condensed Balance Sheet
For the three months ended January 31, 1997
(in thousands)
(unauditied)
<TABLE>
<CAPTION>
in ATS
01/31/97
--------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents 9,356
Trade receivable 110,468
Inventories 177
Prepaid expenses and other current assets 5,878
Deferred income tax benefit
--------
Total current assets 125,878
Property and equipment, at cost:
Land
Buildings
Production and other equipment 66,387
Property held for lease
Construction in Progress
--------
66,387
Less accumulated depreciation and amortization 38,676
--------
27,711
Goodwill
Other assets 1,082
--------
154,671
========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable 59,065
Accrued liabilities 7,654
Income taxes payable 3,736
--------
Total current liabilities 70,455
Credit facility
Other long-term liabilities 3,562
Deferred income taxes payable 901
Stockholder's equity
Common stock 500
Additional paid in capital
Retained earnings 79,253
--------
79,753
Less notes receivable from officers for the sale
of common stock
Cumulative foreign currency translation adjustment
--------
Total stockholders' equity 79,753
--------
154,671
========
</TABLE>
B-3
<PAGE> 52
TELECONTROL
Condensed Statement of Cash Flow
For the three months ended January 31, 1997
(in thousands)
(unauditied)
<TABLE>
<CAPTION>
in ATS
01/31/97
-------------
<S> <C>
Operating activities
Net earnings 2,080
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 2,160
Amortization of intangibles
Gain on disposal of property and equipment
Stock compensation expense
Deferred income taxes Foreign currency translation adjustment
Changes in operating assets and liabilities:
Accounts receivable (27,244)
Inventories 794
Prepaid expense and other assets (1,328)
Accounts payable 31,984
Accrued liabilities (5,131)
Other long term liabilities (194)
Income taxes payable (1,089)
---------------
Net cash provided by operating activities 2,031
Investing activities
Proceeds from sales of property and equipment
Purchases of property and equipment (275)
Acquisition costs
---------------
Net cash used in investing activities (275)
Financing activities
Payments on notes receivables
Payments of debt
Repurchase of common stock
Proceeds of exercise of common stock options
---------------
Net cash used in financing activities 0
---------------
Increase in cash and cash equivalents 1,757
Cash and cash equivalents at beginning of period 7,599
---------------
Cash and cash equivalents at end of period 9,356
===============
</TABLE>
B-4
<PAGE> 53
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
AT JANUARY 31, 1997
Austrian Statutory Requirements
These financial statements are the Company's statutory accounts for the quarter
ended January 31, 1997.
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
three month period ended January 31, 1997 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended October 31, 1996 included
elsewhere in this current report.
B-5
<PAGE> 54
APPENDIX C
<PAGE> 55
SCIENTIFIC GAMES HOLDINGS CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
On April 15, 1997, Scientific Games Holdings Corp. (the "Company") acquired
through a wholly owned Austrian subsidiary, the shares of capital of Tele
Control, an Austrian subsidiary of Autotote Corporation, a United States
corporation. The name of Tele Control was changed to Scientific Games
Kommunikations-una Computersysteme Gesellschaft mbH ("Tele Control"). Tele
Control is an on-line lottery and transaction processing company located in
Vienna, Austria, with an international customer base. The office located in
Vienna will continue to be utilized by the Company.
The following unaudited pro forma consolidated balance sheet of the Company as
of December 31, 1996 is based on the historical consolidated balance sheet of
the Company at December 31, 1996 and the balance sheet of Tele Control at
October 31, 1996. The Tele Control balance sheet was prepared in accordance
with Austrian statutory requirements which may differ from U.S. generally
accepted accounting principles. The unaudited pro forma consolidated balance
sheet 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, 1996.
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, 1996 (as filed on the annual report,
Form 10-K) and for the quarter ended March 31, 1997 (as filed on Form 10-Q).
C-1
<PAGE> 56
SCIENTIFIC GAMES HOLDINGS CORP.
Pro-forma Condensed Consolidated Balance Sheet
March 31, 1997
Balance Sheet
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
TeleControl
SGHC (statutory) Pro-forma
(unaudited) (unaudited) Consolidated
03/31/97 01/31/97 Pro-forma adjustments (unaudited)
---------------- --------------- ---------------------------------
ASSETS
Current assets:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents 9,610 901 (1) (2,000) 8,511
Trade receivable 23,064 10,644 (1) (8,323) 25,385
Inventories 12,625 17 (1) 2,475 15,117
Prepaid expenses and other current assets 1,626 566 2,192
Deferred income tax benefit 1,254 0 1,254
--------------- ------- ------ -------
Total current assets 48,179 12,129 (7,848) 52,460
Property and equipment, at cost:
Land 2,521 0 2,521
Buildings 12,043 0 12,043
Production and other equipment 69,958 6,397 76,355
Property held for lease 1,424 0 1,424
Construction in Progress 922 0 922
--------------- ------ ------- -------
86,868 6,397 0 93,265
Less accumulated depreciation and amortization 34,974 3,727 38,701
--------------- ------ ------- -------
51,894 2,670 0 54,564
Goodwill 23,852 0 (1) 19,676 43,528
Other assets 5,462 104 (1) 2,660 8,226
--------------- ------ ------- -------
129,387 14,903 14,488 158,778
=============== ====== ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable 6,894 5,691 (1) (1,436) 11,149
Accrued liabilities 13,123 737 (1) 2,805 16,665
Income taxes payable 6,064 360 (1) (191) 6,233
--------------- ------ ------- --------
Total current liabilities 26,081 6,789 1,178 34,048
Credit facility 0 0 (1) 23,000 23,000
Other long-term liabilities 501 343 844
Deferred income taxes payable 3,529 87 3,616
Stockholder's equity
Common stock 12 48 60
Additional paid in capital 56,832 0 56,832
Retained earnings 42,155 7,636 (1) (9,690) 40,101
--------------- ------ ------- --------
98,999 7,684 (9,690) 96,993
Less notes receivable from officers for the sale
of common stock (71) 0 (71)
Cumulative foreign currency translation adjustment 348 0 348
--------------- ------ ------- --------
Total stockholders' equity 99,276 7,684 (9,690) 97,270
--------------- ------ ------- --------
129,387 14,903 14,488 158,778
=============== ====== ======= ========
</TABLE>
C-2
<PAGE> 57
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 year ending December 31, 1996 and period ended March 31, 1997
are based in the historical consolidated financial statements of the Company and
the financial statements of Tele Control and are presented as if the acquisition
had occurred on January 1, 1996. The Tele Control Statements of Earnings were
prepared in accordance with Austrian statutory requirements which may differ
from U.S. generally accepted accounting principles. 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, 1996.
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, 1996 (as filed on the annual report,
Form 10-K) and for the three month period ended March 31, 1997 (as filed on Form
10-Q).
C-3
<PAGE> 58
SCIENTIFIC GAMES HOLDINGS CORP.
Pro-forma Statement of Operations
For the Three Months Ended March 31, 1997
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
TeleControl
SGHC (statutory)
(unaudited) (unaudited) Pro-forma
03/31/97 01/31/97 Pro-forma adjustments Consolidated
---------------- ---------------- --------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues 45,612 2,769 48,381
Cost of revenues excluding 0
depreciation and amortization 28,649 1,814 30,463
---------------- ---------------- --------------- ----------------
16,963 955 0 17,918
Selling, general and administrative
expenses excluding depreciation
and amortization 5,309 515 (1) (150) 5,674
---------------- ---------------- --------------- ----------------
11,654 440 150 12,244
Depreciation and amortization 2,590 195 (1) 358 3,143
---------------- ---------------- --------------- ----------------
9,064 245 (208) 9,101
Interest income 73 42 115
Gain on foreign currency 151 0 151
Interest expense 51 2 (1) 241 294
---------------- ---------------- --------------- ----------------
Income before income taxes 9,237 285 (449) 9,073
Income tax expense 3,750 97 (1) (30) 3,817
---------------- ---------------- --------------- ----------------
Net income 5,487 188 (419) 5,256
================ ================ =============== ================
Income per common share 0.44 0.42
================ ================
Weighted-average number of common
and common equivalent shares
outstanding 12,596 12,596
================ ================
</TABLE>
C-4
<PAGE> 59
SCIENTIFIC GAMES HOLDINGS CORP.
Pro-forma Statement of Operations
For the Twelve Months Ended December 31, 1996
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
TeleControl
SGHC (statutory)
(audited) (audited) Pro-forma
12/31/96 10/31/96 Pro-forma adjustments Consolidated
---------------- ---------------- --------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues 146,620 25,946 172,566
Cost of revenues excluding 0
depreciation and amortization 90,442 12,645 103,087
---------------- ---------------- --------------- ----------------
56,178 13,300 0 69,478
Selling, general and administrative
expenses excluding depreciation
and amortization 17,494 10,424 (1) (600) 27,318
---------------- ---------------- --------------- ----------------
38,684 2,876 600 42,160
Depreciation and amortization 9,133 821 (1) 1,431 11,385
---------------- ---------------- --------------- ----------------
29,551 2,056 (831) 30,776
Interest income 917 367 1,284
Gain on foreign currency 748 0 748
Interest expense 153 0 (1) 964 1,117
---------------- ---------------- --------------- ----------------
Income before income taxes 31,063 2,423 (1,795) 31,691
Income tax expense 12,337 665 (1) (161) 12,841
---------------- ---------------- --------------- ----------------
Net income 18,726 1,758 (1,634) 18,850
================ ================ =============== ================
Income per common share 1.41 1.42
================ ================
Weighted-average number of common
and common equivalent shares
outstanding 13,266 13,266
================ ================
</TABLE>
C-5
<PAGE> 60
SCIENTIFIC GAMES HOLDINGS CORP.
NOTE TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Note A - Pro Forma Adjustments
The pro forma adjustments to reflect the acquisition of Tele Control are as
follows:
BALANCE SHEET - AS OF MARCH 31, 1997
1. Pro forma adjustments reflect cash paid for Tele Control, the dividend of
the intercompany receivable from the seller, the goodwill which resulted
from the excess purchase price over the net assets acquired and the
reclassification of previously recorded deferred acquisition costs to
goodwill.
STATEMENT OF OPERATIONS - YEAR ENDED DECEMBER 31, 1996 AND
PERIOD ENDING MARCH 31, 1997
1. Reflects an increase in interest expense as a result of the cash paid for
Tele Control.
2. Reflects the difference in certain management expenses related to the
Company's combined operations.
3. Reflects amortization of goodwill associated with the acquisition over a 15
year period.
4. Reflects the adjustment of the income tax provision as a result of
adjustments 1 and 2 above.
C-6
<PAGE> 1
EXHIBIT 23.1
SCIENTIFIC GAMES KOMMUNIKATIONS- UND
COMPUTERSYSTEME GESELLSCHAFT mbH
GESCHAFTSFUHRUNG
Klitschgasse 4
A-1130 Wien Contact: Gottwald Kranebitter
June 26, 1997
SCIENTIFIC GAMES KOMMUNIKATIONS- UND COMPUTERSYSTEME GESELLSCHAFT MBH,
VIENNA
Ladies and Gentlemen,
We consent to the inclusion of our report dated November 22, 1996, with respect
to the financial statements of TELE CONTROL Kommunications- und Computersysteme
Gesellschaft mbH, Vienna (now: SCIENTIFIC GAMES Kommunikations- und
Computersysteme Gesellschaft mbH), for the year ended October 31, 1996, which
report appears in the Form 8-K of Scientific Games Holdings Corp., dated June
30, 1997.
Yours Sincerely,
KPMG Aplen-Treuhand Gesellschaft mbH
Wirtschaftsprufungs- und
Steuerberatungsgesellschaft
