SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period ended June 30, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 333-18295
COLONIAL HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
VIRGINIA 54-1826807
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
10515 Colonial Downs Parkway
New Kent, VA 23124
(Address of Principal Executive Offices)
(804) 966-7223
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Number of Shares of Class A Common Stock outstanding as of August 11, 2000 -
5,025,239
Number of Shares of Class B Common Stock outstanding as of August 11, 2000 -
2,242,500
<PAGE>
COLONIAL HOLDINGS, INC.
INDEX
Page
PART I. FINANCIAL STATEMENTS AND NOTES Number
------
Item 1. Financial Statements and Notes 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
<PAGE>
COLONIAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
ASSETS 2000 1999
-------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,083 $ 1,313
Horsemen's deposits 1,842 659
Accounts receivable 310 253
Prepaid expenses and other assets 385 114
-------- ----------
Total current assets 4,620 2,339
Property, plant and equipment
Land and improvements 15,585 15,554
Buildings and improvements 48,467 48,472
Equipment, furnishings, and fixtures 2,864 2,853
Leasehold improvements 1,124 1,124
-------- ----------
68,040 68,003
Less accumulated depreciation 4,592 3,817
-------- ----------
Property, plant and equipment, net 63,448 64,186
Licensing and organization costs, net of accumulated
amortization of $333 and $311, respectively 734 729
Other assets 94 151
-------- ----------
Total assets $68,896 $67,405
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,837 $ 2,764
Purses due horsemen 2,744 182
Accrued liabilities and other 1,974 1,184
Current maturities of long-term debt
and capital lease obligations 790 15,974
Current maturities of long-term debt - related parties - 8,800
-------- ----------
Total current liabilities 7,345 28,904
Long-term debt and capital lease obligations 18,365 1,750
Notes payable - related parties 8,175 1,225
-------- ----------
Total liabilities 33,885 31,879
Commitments and contingencies
Stockholders' equity
Class A, common stock, $0.01 par value; 12,000 shares
authorized; 5,025 shares issued and outstanding 50 50
Class B, common stock, $0.01 par value; 3,000 shares
authorized; 2,242 shares issued and outstanding 23 23
Additional paid-in capital 42,873 42,873
Accumulated deficit (7,935) (7,420)
-------- ----------
Total stockholders' equity 35,011 35,526
-------- ----------
Total liabilities and stockholders' equity $68,896 $67,405
======== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
COLONIAL HOLDINGS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Pari-mutuel and simulcasting commissions $6,610 $ 6,700 $13,133 $13,321
Other 365 533 740 935
------- -------- -------- --------
Total revenues 6,975 7,233 13,873 14,256
Operating expenses
Direct operating expenses
Purses, fees, and pari-mutuel taxes 2,893 2,639 5,682 4,651
Simulcast and other direct expenses 2,522 2,882 4,906 5,213
------- -------- -------- --------
Total direct operating expenses 5,415 5,521 10,588 9,864
Selling, general and administrative expenses 824 1,377 1,605 2,493
Depreciation and amortization 425 409 849 814
------- -------- -------- --------
Total operating expenses 6,664 7,307 13,042 13,171
------- -------- -------- --------
Earnings (loss) from operations 311 (74) 831 1,085
Interest expense, net (639) (957) (1,346) (1,601)
------- -------- -------- --------
Loss before income taxes (328) (1,031) (515) (516)
Provision for (benefit from) income taxes - - - -
------- -------- -------- --------
Net loss $ (328) $(1,031) $ (515) $ (516)
======= ======== ======== ========
Earnings (loss) per share data:
Basic and diluted loss per share $(0.05) $ (0.14) $ (0.07) $ (0.07)
Weighted average number of shares outstanding 7,260 7,260 7,260 7,260
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
COLONIAL HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended
June 30,
2000 1999
------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (515) $ (516)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 849 814
Other - 31
Changes in operating assets and liabilities:
Increase in accounts receivable and other assets (298) (214)
Net decrease in trade accounts payable and accrued liabilities (136) (169)
Increase in horsemen's deposits and purses due horsemen, net 1,379 1,550
------- --------
Net cash provided by operating activities 1,279 1,496
------- --------
INVESTING ACTIVITIES:
Capital expenditures, net of disposals (89) (373)
Decrease in construction payables (143) (759)
------- --------
Net cash used in investing activities (232) (1,132)
------- --------
FINANCING ACTIVITIES:
Proceeds from long-term debt, capital leases, and other 265 96
Payments on long-term debt and capital leases (542) (284)
------- --------
Net cash used in financing activities (277) (188)
------- --------
Net change in cash and cash equivalents 770 176
Cash and cash equivalents, beginning of period 1,313 1,155
------- --------
Cash and cash equivalents, end of period $2,083 $ 1,331
======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
COLONIAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
Effective August 7, 2000, Colonial Downs Holdings, Inc. changed its name to
Colonial Holdings, Inc. (the "Company") in order to reflect the Company's
objective of diversifying its sources of revenue outside of pari-mutuel wagering
in Virginia.
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles have been omitted. These financial statements
should be read in conjunction with the Company's annual financial statements for
the year ended December 31, 1999 included in the Company's Form 10-K filed with
the Securities and Exchange Commission on April 3, 2000.
In the opinion of management, the financial statements include all
adjustments (consisting only of normal recurring adjustments) considered
necessary to present fairly the financial position of the Company as of June 30,
2000 and the results of its operations and its cash flows for the respective six
month periods ended June 30, 2000 and 1999. Interim results for the six months
ended June 30, 2000 are not necessarily indicative of results that may be
expected for the fiscal year ending December 31, 2000.
Basic earnings (loss) per share is computed by dividing earnings available
to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilutive effect of securities (which can consist of stock options and warrants)
that could share in earnings of an entity.
Certain reclassifications have been made in the prior period's financial
statements in order to conform to the June 30, 2000 presentation.
<PAGE>
2. LONG-TERM DEBT, NOTES PAYABLE-RELATED PARTIES, AND CAPITAL LEASES
Long-Term Debt, Notes Payable-Related Parties, and Capital Leases,
consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Note payable to a bank maturing June 2000, bearing
interest at a variable rate (9.625% at June 30, 2000),
collateralized by substantially all assets, except the
Racing Centers, of the Company and guaranteed by certain
shareholders and related parties $10,000,000 $10,000,000
</TABLE>
<PAGE>
COLONIAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
2. LONG-TERM DEBT, NOTES PAYABLE-RELATED PARTIES, AND CAPITAL LEASES -
(CONTINUED)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Note payable under the revolving credit facility with a bank,
bearing interest at a variable rate (9.625% at June 30,
2000), due June 30, 2000, collateralized by substantially
all assets, except the Racing Centers, of the Company and
guaranteed by certain shareholders and related parties 5,000,000 5,000,000
Convertible subordinated note payable to CD Entertainment,
Ltd., maturing September 2000, with interest payable quarterly
at a rate of 7.25%, collateralized by a second deed of
trust on the racetrack facility 5,500,000 5,500,000
Note payable to a bank, maturing October 2000, bearing
interest at prime plus 1.0% (10.5% at June 30, 2000),
with monthly principal payment of $15,000, collateralized
by certain fixed assets 390,000 480,000
Convertible subordinated note payable to CD Entertainment,
Ltd., maturing August 2000, with an interest rate of 8.5%,
collateralized by the Hampton Racing Center 1,000,000 1,000,000
Note payable to Norglass, Inc. maturing September 24, 2000,
monthly interest payment at a rate of 6% until maturity 1,850,000 1,850,000
Note payable to Maryland Jockey Club, maturing December 2005,
bearing interest at a rate of 7.75% payable quarterly for
the first two years and equal installments of interest and
principal to be paid quarterly over the remaining five year
term of the note, beginning in the first quarter of 2001 1,450,000 1,450,000
Note payable to Maryland Jockey Club, bearing interest at
the prime rate, payable in two equal installments during
the years 2000 and 2001 300,308 600,000
Note payable to CD Entertainment, Ltd., bearing interest
at the prime rate, payable in two equal installments during
the years 2000 and 2001 900,000 900,000
Note payable to CD Entertainment, Ltd., maturing August 2001,
with monthly interest payment at the Lender's cost of funds
plus one-half percent (approximately 8.8% at June 30, 2000) 300,000 300,000
</TABLE>
<PAGE>
COLONIAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
2. LONG-TERM DEBT, NOTES PAYABLE-RELATED PARTIES, AND CAPITAL LEASES -
(CONTINUED)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Note payable to CD Entertainment, Ltd., maturing September
2001, with monthly interest payment at the Lender's cost of
funds plus one-half percent (approximately 8.8% at June 30,
2000) 475,000 475,000
Notes payable to an insurance company, maturing October 2000,
and January 2001, bearing interest at 7.10% and 8.70%, with
monthly payments of $25,628 and $7,477, respectively,
including interest 150,625 -
Installment loans and capitalized leases collateralized by
certain vehicles, machinery and equipment, maturing at
various dates through September 2000, at interest rates
ranging from 8.125% to 10.5% 13,985 51,543
Note payable to Ryan Incorporated Central, bearing monthly
interest at 10%, payable in six equal monthly payments
commencing January 1, 2000 - 142,735
------------ ------------
27,329,918 27,749,278
Less current maturities 789,918 15,974,278
Current maturities - related parties - 8,800,000
------------ ------------
26,540,000 2,975,000
Less long-term debt - related parties 8,175,000 1,225,000
------------ ------------
Long-term debt, including capital lease obligations $18,365,000 $ 1,750,000
============ ============
</TABLE>
In August 2000 the Company entered into an agreement with CD Entertainment
Ltd., an affiliate of the Chairman and CEO of the Company, to refinance the $15
million in loans from PNC Bank that came due on June 30, 2000. The refinanced
former PNC debt and the Company's existing debt to related parties will be
consolidated into a $25.7 million credit facility with a term of five years and
an interest rate of LIBOR plus 3%. The Company plans to draw on the credit
facility's available balance to payoff the $1.85 million Norglass debt and
provide supplemental short-term working capital. Under the terms of the Credit
facility, principal payments of $1 million each are due on June 30, 2002, 2003
and 2004 with the balance due on June 30, 2005. In addition, the Company has
agreed to make an additional annual principal payment commencing in 2002
contingent upon the Company's annual cash flow. The Company's racetrack
property and the racing centers located in Richmond, Hampton and Brunswick,
Virginia will serve as collateral for loan. Additionally, Holdings will pledge
its limited partnership interest in Colonial Downs and its shares of Stansley
Racing Corp. to CD Entertainment. This collateral package is identical to that
provided to PNC for the PNC Credit Facility with the additional deeds of trust
on the racing centers. The maturities of long-term debt reflect the terms of
the new refinancing agreement with CD Entertainment Ltd.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
GENERAL
The Company, through its subsidiaries, holds the only licenses to own and
operate a racetrack (the "Track") and Racing Centers in Virginia. The Company
currently operates Racing Centers in Chesapeake, Richmond, Hampton, and Alberta,
Virginia, and may open two additional Racing Centers if suitable opportunities
are identified and referenda are passed.
The Company's revenues are comprised of (i) pari-mutuel commissions from
wagering on races broadcast from out-of-state racetracks to the Company's Racing
Centers and the Track using import simulcasting; (ii) wagering at the Track and
the Company's Racing Centers on its live races; (iii) admission fees, program
and racing form sales, and certain other ancillary activities; (iv) commissions
from food and beverage sales and concessions; and (v) fees from wagering at
out-of-state locations on races run at the Track using export simulcasting.
The following table sets forth certain operating results as a percentage of
total revenues for the periods indicated:
(Percentage of Net Revenues)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------- ----------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Pari-mutuel and simulcasting commissions 94.8% 92.6% 94.7% 93.4%
Other 5.2% 7.4% 5.3% 6.6%
------- ------- ------- -------
Total revenues 100.0% 100.0% 100.0% 100.0%
Direct operating expenses:
Purses, fees, and pari-mutuel taxes 41.5% 36.5% 41.0% 32.6%
Simulcast and other direct expenses 36.2% 39.8% 35.4% 36.6%
------- ------- ------- -------
Total direct operating expenses 77.7% 76.3% 76.4% 69.2%
Selling, general, and administrative expenses 11.8% 19.0% 11.6% 17.5%
Depreciation and amortization 6.1% 5.7% 6.1% 5.7%
------- ------- ------- -------
Earnings (loss) from operations 4.4% (1.0)% 5.9% 7.6%
Interest income (expense), net (9.2) % (13.2)% (9.7) % (11.2)%
------- ------- ------- -------
Net loss (4.8) % (14.2)% (3.8) % (3.6)%
</TABLE>
Total Revenues. Total revenues for the three and six months ended June 30,
2000 decreased $258,000 (3.6%) and $383,000 (2.7%), respectively, from the
corresponding periods of the prior year. Revenues declined because the Company
conducted live standardbred racing during one month in 1999, and did not conduct
live racing in the three and six month periods ended June 30, 2000.
Direct Operating Expenses. As a percentage of revenues, direct operating
expenses increased 1.4% and 7.2% for the three and six months ended June 30,
2000, respectively, from the corresponding periods of the prior year. The
increase in operating expenses is primarily due to an increase in purse expense
resulting from the new agreement with the Virginia Horsemen's Benevolent and
Protective Association, Inc. (the "VaHBPA"). Purse expenses were approximately
$200,000 and $1,000,000 higher and other direct expenses were $306,000 and
<PAGE>
$276,000 lower for the three and six months ended June 30, 2000, respectively,
than for the corresponding periods of the prior year. The decrease in other
direct expenses is due to no live racing being conducted during the three and
six months ended June 30, 2000 versus one month of live racing during the
corresponding periods of the prior year.
Selling, General and Administrative Expenses (SG&A). As a percentage of
revenues, SG&A decreased 7.2% and 5.9% from 19.0% and 17.5% to 11.8% and 11.6%
for the three and six months ended June 30, 2000, respectively, from the
corresponding periods of the prior year. The decrease in SG&A as a percentage
of revenues for the three and six months ended June 30, 2000 was primarily due
primarily to reductions in professional, consulting and legal fees of
approximately $338,000 and $673,000, respectively, and a reduction in live
racing related expenses of approximately $178,000 and $239,000, respectively,
from the corresponding periods of the prior year. Other racing center and
corporate SG & A costs increased $37,000 for the three month period and
decreased $24,000 for the six month period ended June 30, 2000, as compared to
the prior year.
Interest Expense, Net. Interest expense, net of interest income, decreased
$318,000 and $255,000 for the three and six months ended June 30, 2000,
respectively, from the corresponding periods of the prior year. The decrease in
interest expense was primarily the result of the provision for interest of
$285,000 recorded in June 1999 relating to the Norglass arbitration award.
Net Earnings (Loss). Net loss for the three and six months ended June 30,
2000 was $328,000 and $515,000, respectively, compared to net loss of $1,031,000
and $516,000 for the corresponding periods of the prior year.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's consolidated financial statements are presented on the going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.
In January 1999, the Company negotiated an agreement with PNC Bank, N.A.
("PNC"), which restructured the principal payments of the Credit Agreement dated
June 26, 1997. Under the agreement, in lieu of making principal payments on the
due dates, the guarantors were required to deliver to PNC letters of credit in
the face amount of future principal payments. The letters of credit have an
expiration date of July 31, 2000. Guarantors of the debt posted letters of
credit totaling $3.5 million, in lieu of the Company making the principal
payments due December 31, 1998 through June 30, 2000.
<PAGE>
In August 2000, the Company entered into an agreement with CD Entertainment
Ltd., an affiliate of the Chairman and CEO of the Company, to refinance the $15
million in loans from PNC that came due on June 30, 2000. The refinanced former
PNC debt and the Company's existing debt to related parties will be consolidated
into a $25.7 million credit facility with a term of five years and an interest
rate of LIBOR plus 3%. The Company plans to draw on the credit facility's
available balance to payoff the $1.85 million Norglass debt and provide
supplemental short-term working capital. Under the terms of the credit
facility, principal payments of $1 million each are due on June 30, 2002, 2003
and 2004 with the balance due on June 30, 2005. In addition, the Company has
agreed to make an additional annual principal payment commencing in 2002
contingent upon the Company's annual cash flow.
During 1999 and 1998, the Company incurred aggregate net losses of
approximately $6,400,000 and has a working capital deficit of $2,725,000 at June
30, 2000. The Company's continued existence is dependent upon its ability to
refinance or renew maturing debt and obtain adequate working capital to support
its operations until they become profitable. The Company has been and continues
to be largely dependent on the financial support of its principal stockholder,
as evidenced by the previously discussed refinance agreement.
The financial statements do not include any adjustments to reflect the
Possible future effects on the recoverability and classification of assets or
the amounts and classifications of liabilities that may result from the possible
inability of the company to continue as a going concern. The Report of
Independent Certified Public Accountants ("Accountants' Report") included in the
annual financial statements in the Company's form 10-K for the year ended
December 31, 1999 contains a qualification that raises substantial doubt about
the Company's ability to continue as a going concern primarily due to
significant debt coming due in 2000. The Company is in the process of
refinancing the debt referred to in the Accountants' Report as noted above.
Cash Flows. After adjusting the net loss of $515,000 for non-cash items
such as depreciation and amortization, $334,000 in cash was provided. The
increase in horsemen's deposits and accrued liabilities provided $1,379,000 of
cash. This was offset by increases in accounts receivable and other assets, and
the net decrease in accounts payable and accrued liabilities resulting in cash
provided by operating activities of $1,279,000. Investing activities consisting
of capital expenditures and the repayment of a note related to the construction
of the track utilized $232,000 of cash. Financing activities consisting of
principal payments on long-term debt, net of borrowings, used $277,000 of cash.
In June 1999, the Company entered into a three-year contract (which is
renewable for an additional three year term) with the Virginia Horsemen's
Benevolent and Protective Association (the "VaHBPA") to provide for thoroughbred
purses. Under the contract, $3,125,000 was guaranteed to be available for
purses for the 1999 thoroughbred meet. Of this amount, $1,500,000 is considered
to be an advance of purse money due in years 2000 and 2001. In years 2000 and
2001, the Company is required to pay 5 1/4% of the handle generated on simulcast
thoroughbred racing to the thoroughbred purse account. The advance will be
repaid by the VaHBPA in an annual amount of $750,000 plus interest at
approximately the prime rate from the 5 1/4% that is contributed to the purse
account in years 2000 and 2001.
In August 2000, the Company entered into an agreement with the Virginia
Harness Horse Association (the "VHHA") to provide for standardbred purses.
Under the contract, which expires December 31, 2001, the Company is required to
pay 5% of the handle generated on simulcast standardbred to the standardbred
purse account. The purse contribution increases to 6% of simulcast standardbred
handle in excess of $75 million and 7% in excess of $150 million.
<PAGE>
EBITDA is a widely accepted financial indicator of a company's ability to
service and incur debt. The Company's EBITDA for the first six months of fiscal
year 2000 and 1999 was approximately $1.7 million and $1.9 million,
respectively. The decrease in EBITDA is primarily due to lower income before
interest and income taxes due to the changes in revenues, operating expenses and
selling, general and administrative expenses discussed in "Results of
Operations" above. EBITDA should not be considered in isolation from or as a
substitute for net income or cash flow measures prepared in accordance with
generally accepted accounting principles or as a measure of a company's
profitability or liquidity. EBITDA is defined as the sum of income before
interest, income taxes, and depreciation and amortization.
<PAGE>
SEASONALITY AND THE EFFECT OF INCLEMENT WEATHER
Revenues and expenses relating to the Track may be higher during scheduled
live racing than at other times of the year. In addition, weather conditions
such as those from the snow storm in the Northeast in January 2000, sometimes
cause cancellation of outdoor horse races or curtail attendance, both of which
reduce wagering. Attendance and wagering at both outdoor races and indoor
Racing Centers also may be adversely affected by certain holidays and
professional and college sports seasons as well as other recreational
activities. Conversely, attendance and wagering may be favorably affected by
special racing events which stimulate interest in horse racing, such as the
Triple Crown races in May and June and the Breeders' Cup in November. As a
result, the Company's revenues and net income may fluctuate from quarter to
quarter. Given that a substantial portion of the Company's Track expenses are
fixed, the loss of scheduled racing days could have a material adverse affect on
the Company's profitability. The Company believes that simulcasting diminishes
the effect of inclement weather on wagering.
IMPACT OF YEAR 2000
Currently, the Company has experienced no negative effects as a result of
the Year 2000 conversion. However, there can be no assurance that during the
fiscal year ending December 31, 2000 that no such disturbances will occur.
<PAGE>
FORWARD LOOKING INFORMATION
The statements contained in this report which are not historical facts,
including, but not limited to, statements found under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" above,
are forward looking statements that involve a number of risks and uncertainties.
The actual results of the future events described in such forward looking
statements in this report could differ materially from those contemplated by
such forward looking statements. Among the factors that could cause actual
results to differ materially are the risks and uncertainties discussed in the
report, including without limitations the portions of such statements under the
caption referenced above, and the uncertainties set forth from time to time in
the Company's other public reports and filings and public statements. Such
risks include but are not limited to acts by parties outside the control of the
Company, including the Maryland Jockey Club, horsemen associations, the Virginia
Racing Commission, political trends, the effects of adverse general economic
conditions, the approval of future Racing Centers by referenda and/or the
Commission and governmental regulation.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Most of the Company's debt obligations at June 30, 2000 were either fixed
rate obligations or variable rate obligations which provide the Company various
options in determining the rate of interest. Management does not believe that
the Company has any material market risk from its debt obligations.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Mechanic Lien Litigation. In Baker Roofing Company v. Colonial Downs
-------------------------- ----------------------------------------
Holdings, Inc., et al. (New Kent County Circuit Court Case No. CH98-76), a
------------------------
roofing subcontractor seeks payment of $137,790.10 and its subcontractor in turn
--
seeks payment of $40,541.32 in NCI Building Components v. Baker Roofing Company,
-------------------------------------------------
et al. (New Kent County Circuit Court Case No. CH98-78). The Company is
------
contesting these matters and is seeking a final resolution to all pending
claims.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibit 27 - Financial Data Schedule
B. Reports on Form 8-K - The Company filed a Current Report on
Form 8-K during the three months ended
June 30, 2000 relating to long-term
refinancing of its current debt
maturities.
<PAGE>
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, thereunto duly authorized.
COLONIAL HOLDINGS, INC.
By: /s/ Ian M. Stewart
----------------------------------------
Ian M. Stewart, President
and Chief Financial Officer
August 14, 2000
