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EXHIBIT 13
AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
SCIENTIFIC GAMES INC. SAVINGS AND INVESTMENT PLAN
Year ended December 31, 1999 and as of December 31, 1998
with Report of Independent Auditors
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SCIENTIFIC GAMES INC. SAVINGS AND INVESTMENT PLAN
AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
YEAR ENDED DECEMBER 31, 1999 AND AS OF DECEMBER 31, 1998
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors........................................................ 1
Audited Financial Statements
Statements of Net Assets Available for Benefits....................................... 2
Statement of Changes in Net Assets Available for Benefits............................. 3
Notes to Financial Statements......................................................... 4
Supplemental Schedules
Schedule of Assets Held for Investment Purposes at End of Year........................ 11
Schedule of Reportable Transactions................................................... 13
</TABLE>
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REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Scientific Games Inc.
Savings and Investment Plan
We have audited the accompanying statements of net assets available for benefits
of Scientific Games Inc. Savings and Investment Plan as of December 31, 1999 and
1998, and the related statement of changes in net assets available for benefits
for the year ended December 31, 1999. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1999 and 1998, and the changes in its net assets available for
benefits for the year ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes at end of year as of December 31, 1999 and of
reportable transactions for the year then ended are presented for purposes of
additional analysis and are not a required part of the financial statements but
are supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in our audits of the financial statements and, in
our opinion, are fairly stated in all material respects in relation to the
financial statements taken as a whole.
May 19, 2000
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SCIENTIFIC GAMES INC. SAVINGS AND INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
------------------------------
<S> <C> <C>
ASSETS
Investments (See Note 3) $ 14,975,140 $ 12,223,657
Cash 1,814 --
Total assets 14,976,954 12,223,657
------------------------------
Net assets available for benefits $ 14,976,954 $ 12,223,657
==============================
</TABLE>
See accompanying notes.
2
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SCIENTIFIC GAMES INC. SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
Additions to net assets attributed to:
Investment income $ 1,046,107
Contributions:
Participants 1,557,579
Employer 569,661
------------
2,127,240
------------
Total additions 3,173,347
Deductions from net assets attributed to:
Benefits paid to participants 846,544
------------
2,326,803
Net realized and unrealized appreciation in fair value of investments 426,494
------------
Net increase in net assets available for benefits 2,753,297
Net assets available for benefits at beginning of year 12,223,657
------------
Net assets available for benefits at end of year $ 14,976,954
============
</TABLE>
See accompanying notes.
3
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SCIENTIFIC GAMES INC. SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of Scientific Games Inc. (the "Company") Savings and
Investment Plan (the "Plan") are prepared using the accrual method of
accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States requires management to make estimates
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
INVESTMENT VALUATION
Investments in mutual funds, collective trust funds, and equity securities are
stated at fair value based on quoted prices in an active market. Securities
traded on a national securities exchange are valued at the last reported sales
price on the last business day of the Plan year. Participant loans are valued at
cost, which approximates fair value.
INVESTMENT INCOME
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
RECLASSIFICATIONS
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
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SCIENTIFIC GAMES INC. SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADMINISTRATIVE EXPENSES
Loan fees are charged to Plan participants. The Company pays all other
administrative expenses of the Plan.
2. DESCRIPTION OF THE PLAN
GENERAL
The following description of the Plan provides only general information.
Participants should refer to the Summary Plan Description for a more complete
description of the Plan's provisions.
The Plan is a defined contribution thrift and investment plan under Section
401(k) of the Internal Revenue Code (the "Code") covering all full-time
employees of the Company who have completed six months of participation service,
as defined in the Plan agreement. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended (ERISA).
CONTRIBUTIONS
Participation in the Plan is voluntary. Participants can contribute up to 6% of
their earnings to the Plan in the form of Basic Contributions. Additionally, if
the maximum Basic Contribution is chosen, participants can contribute up to an
additional 9% of their earnings to the Plan in the form of Supplemental
Contributions providing that the annual deferral percentage rules of the Code
are not exceeded. The Company contributes to the Plan an amount equal to 50% of
the participants' Basic Contributions. Employer contributions are made in the
form of common stock of the Company's parent, Scientific Games Holdings Corp.
Additional amounts may be contributed at the discretion of the Company's board
of directors.
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SCIENTIFIC GAMES INC. SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. DESCRIPTION OF THE PLAN (CONTINUED)
PLAN AMENDMENT
Effective January 1, 1999 the plan was amended to increase the Company matching
contribution percentage on participants' Basic Contributions to 50% from 33
1/3%.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contribution and
allocations of the Company's contribution and Plan earnings. Allocations are
based on participant earnings or account balances, as defined. The benefit to
which a participant is entitled is the benefit that can be provided from the
participant's vested account.
INVESTMENT OPTIONS
Upon enrollment in the Plan, a participant may direct participant contributions
in any of thirteen investment alternatives, including a Scientific Games
Holdings Corp. stock fund, which is used for the Company matching contributions.
VESTING
Participant contributions and matching employer contributions are fully vested
and non-forfeitable at all times.
PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50% of their account balances. All
loans made to eligible participants are secured by the total vested balance of
the participant's account and bear interest at a rate commensurate with local
prevailing rates as determined by the Plan administrator. Interest rates on
loans outstanding at December 31, 1999 range from 7.0% to 10.0%. Principal and
interest are paid ratably through payroll deductions over periods generally
ranging from 5 to 15 years.
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SCIENTIFIC GAMES INC. SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. DESCRIPTION OF THE PLAN (CONTINUED)
PAYMENT OF BENEFITS
Upon termination of service due to death, disability, or retirement, a
participant may elect to receive either a lump-sum amount equal to the value of
the participant's vested interest in his or her account, or annual installments.
For termination of service due to other reasons, a participant receives the
value of the vested interest in his or her account as a lump-sum distribution.
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SCIENTIFIC GAMES INC. SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS
The fair value of individual investments that represent 5% or more of the Plan's
net assets at December 31 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
--------------------------
<S> <C> <C>
T. Rowe Price Associates, Inc.:
Equity Income Fund
170,978 and 157,218 shares, respectively $4,241,966 $4,137,984
New Horizons Fund
160,550 and 143,714 shares, respectively 4,419,962 3,354,276
Stable Value Fund 1,401,891 and 1,164,206
shares, respectively 1,401,892 1,164,206
Spectrum Income Fund 93,316 and 84,666
shares, respectively 999,421 973,657
Equity Index 500 Fund
19,517 and 7,921 shares, respectively 772,102 264,404
Scientific Games Holdings Corp. Common Stock
84,123 and 62,205 shares, respectively 1,393,299* 1,174,118*
</TABLE>
---------------
*Nonparticipant-directed
During 1999, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated in value by
$426,494 as follows:
<TABLE>
<S> <C>
Mutual funds $ 594,302
Common stock (167,808)
----------
$ 426,494
==========
</TABLE>
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SCIENTIFIC GAMES INC. SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets and the significant components of the changes
in net assets relating to nonparticipant-directed investments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
--------------------------
<S> <C> <C>
Net assets:
Scientific Games Holdings Corp.
common stock $1,393,299 $1,174,118
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
------------
<S> <C>
Changes in net assets:
Contributions $ 647,241
Repayment of loans 24,062
Net depreciation in fair value (167,808)
Benefits paid to participants (74,056)
Loan disbursements (34,919)
Transfers to participant-directed investments (175,339)
----------
$ 219,181
==========
</TABLE>
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SCIENTIFIC GAMES INC. SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will remain fully vested in their accounts.
6. PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by T. Rowe Price
Associates, Inc. T. Rowe Price Associates, Inc. is the trustee as defined by the
Plan and, therefore, these transactions qualify as party-in-interest
transactions. The Scientific Games Holdings Corp. Common Stock fund held
investments in securities of the parent company with a fair value of $1,393,299
and $1,174,118 as of December 31, 1999 and 1998, respectively.
7. INCOME TAX STATUS
The Internal Revenue Service ruled on November 25, 1994 that the Plan qualifies
under Section 401(a) of the Code and, therefore, the related trust is exempt
from taxation. The Plan has been amended since receiving the determination
letter. Once qualified, the Plan is required to operate in conformity with the
Code to maintain its qualification. The Plan administrator believes the Plan is
being operated in compliance with the applicable requirements of the Code and,
therefore, believes the Plan is qualified and the related trust is tax exempt.
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SUPPLEMENTAL SCHEDULES
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SCIENTIFIC GAMES INC. SAVINGS AND INVESTMENT PLAN
EIN: 58-1943521
PLAN #: 001
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AT END OF YEAR
DECEMBER 31, 1999
<TABLE>
<CAPTION>
(C)
DESCRIPTION OF
INVESTMENT, INCLUDING
(B) MATURITY DATE,
IDENTITY OF ISSUE, RATE OF INTEREST, (E)
BORROWER, COLLATERAL, PAR OR (D) CURRENT
(A) LESSOR OR SIMILAR PARTY MATURITY VALUE COST VALUE
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
* T. Rowe Price Associates, Inc. Equity Income Fund # $4,241,966
* T. Rowe Price Associates, Inc. New Horizons Fund # 4,419,962
* T. Rowe Price Associates, Inc. Spectrum Growth Fund # 38,547
* T. Rowe Price Associates, Inc. Stable Value Fund # 1,401,892
* T. Rowe Price Associates, Inc. International Stock Fund # 395,409
* T. Rowe Price Associates, Inc. Equity Index 500 Fund # 772,102
* T. Rowe Price Associates, Inc. Mid-Cap Growth Fund # 474,158
* T. Rowe Price Associates, Inc. Value Fund # 148,870
* T. Rowe Price Associates, Inc. Balanced Fund # 34,104
* T. Rowe Price Associates, Inc. Small-Cap Stock Fund # 34,115
* T. Rowe Price Associates, Inc. Spectrum Income Fund # 999,421
</TABLE>
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SCIENTIFIC GAMES INC. SAVINGS AND INVESTMENT PLAN
EIN: 58-1943521
PLAN #: 001
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AT END OF YEAR (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
(C)
DESCRIPTION OF
INVESTMENT, INCLUDING
(B) MATURITY DATE,
IDENTITY OF ISSUE, RATE OF INTEREST, (E)
BORROWER, COLLATERAL, PAR OR (D) CURRENT
(A) LESSOR OR SIMILAR PARTY MATURITY VALUE COST VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
* T. Rowe Price Associates, Inc. Corporate Income Fund # 18,445
* Scientific Games Holdings
Corp. Common Stock $1,959,027 1,393,299
Participant loans Interest rates ranging from
7-10%, maturing over 60
months 602,850
------------
$ 14,975,140
============
</TABLE>
* Indicates a party-in-interest to the Plan.
# Not applicable for participant-directed investments.
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SCIENTIFIC GAMES INC. SAVINGS AND INVESTMENT PLAN
EIN: 58-1943521
PLAN #: 001
SCHEDULE H, LINE 4j - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
(H)
CURRENT VALUE (I)
(C) (D) (G) OF ASSET ON NET
(A) (B) PURCHASE SELLING COST TRANSACTION GAIN OR
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE OF ASSET DATE (LOSS)
-------------------------------------------------------------------------------------------------------------------------------
CATEGORY (III) - SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS.
<S> <C> <C> <C> <C> <C> <C>
T. Rowe Price Associates, Inc. Scientific Games Holdings Corp.
Common Stock $671,313 $ -- $671,313 $671,313 $ --
T. Rowe Price Associates, Inc. Scientific Games Holdings Corp.
Common Stock -- 284,324 223,330 -- 60,994
</TABLE>
THERE WERE NO CATEGORY (I), (II) OR (IV) TRANSACTIONS DURING THE YEAR ENDED
DECEMBER 31, 1999.
Note: The information required by columns (e) and (f) is not applicable.
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