<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A NO. 1
(Mark One)
[X] JOINT QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended
September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
----------- -----------
<TABLE>
<S> <C>
Commission File Number 1-9319 Commission File Number 1-9320
CALIFORNIA JOCKEY CLUB BAY MEADOWS OPERATING COMPANY
- - - --------------------------------------------------------- -----------------------------------------------------------
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
Delaware 94-0358820 Delaware 94-2878485
- - - --------------------------------------------------------- -----------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer (State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.) incorporation or organization) Identification No.)
94-0358820 94-2878485
- - - --------------------------------------------------------- -----------------------------------------------------------
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
2600 S. Delaware Street, San Mateo, California 94403 2600 S. Delaware Street, San Mateo, California 94402
- - - --------------------------------------------------------- -----------------------------------------------------------
(Address of principal executive offices) (Zip Code) (Address of principal executive offices) (Zip Code)
(415) 573-4514 (415) 574-7223
- - - --------------------------------------------------------- -----------------------------------------------------------
(Registrant's telephone number, including area code) (Registrant's telephone number, including area code)
Not Applicable Not Applicable
- - - --------------------------------------------------------- -----------------------------------------------------------
(Former name, former address and former fiscal year, if (Former name, former address and former fiscal year, if
changed since last report) changed since last report)
</TABLE>
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 .
--- ---
The number of shares outstanding of each registrant's classes of common stock,
par value $.01 per share, as of the close of business on November 8, 1996, was
as follows:
<TABLE>
<CAPTION>
Registrant Number of Shares
---------- ----------------
<S> <C>
California Jockey Club 5,763,257
Bay Meadows Operating Company 5,763,257
</TABLE>
- 1 -
<PAGE> 2
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
SEPARATE AND COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BAY MEADOWS
CALIFORNIA OPERATING
JOCKEY COMPANY AND
CLUB SUBSIDIARY ELIMINATIONS COMBINED
<S> <C> <C> <C> <C>
REVENUES:
Pari-mutuel revenue $ 32,241 $ 32,241
Producer fees 537 537
Admissions, programs, parking and other racing income 3,847 3,847
Concession sales 2,205 2,205
Rental of racing facility $ 3,835 1,299 $ (3,835) 1,299
Interest and dividend income 362 125 (4) 483
Other income 8 1,154 1,162
----------- ----------- ----------- -----------
Total 4,205 41,408 (3,839) 41,774
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Purses and incentive awards 13,189 13,189
Commissions paid to guest tracks 2,104 2,104
Direct operating costs 15,596 15,596
Cost of concession sales 729 729
Depreciation and amortization 694 629 1,323
Racing facility rental 3,853 (3,835) 18
Marketing 1,150 1,150
General and administrative expense 756 2,159 (4) 2,911
Legal 1,291 364 1,655
----------- ----------- ----------- -----------
Total 2,741 39,773 (3,839) 38,675
----------- ----------- ----------- -----------
INCOME BEFORE TAXES 1,464 1,635 3,099
INCOME TAX PROVISION 638 638
----------- ----------- ----------- -----------
NET INCOME $ 1,464 $ 997 $ -- $ 2,461
=========== =========== =========== ===========
PER SHARE AMOUNTS:
NET INCOME $ .25 $ .17 $ .42
=========== =========== ===========
DIVIDEND $ .40 $ .40
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,763,257 5,763,257 5,763,257
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
- 2 -
<PAGE> 3
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
SEPARATE AND COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BAY MEADOWS
CALIFORNIA OPERATING
JOCKEY COMPANY AND
CLUB SUBSIDIARY ELIMINATIONS COMBINED
<S> <C> <C> <C> <C>
REVENUES:
Pari-mutuel revenue $ 21,753 $ 21,753
Producer fees 424 424
Admissions, programs, parking and other racing income 3,530 3,530
Concession sales 1,749 1,749
Rental of racing facility $ 2,757 1,233 $ (2,757) 1,233
Interest and dividend income 355 129 (36) 448
Other income 7 1,065 (11) 1,061
----------- ----------- ----------- -----------
Total 3,119 29,883 (2,804) 30,198
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Purses and incentive awards 8,453 8,453
Commissions paid to guest tracks 1,385 1,385
Direct operating costs 12,747 12,747
Cost of concession sales 580 580
Depreciation and amortization 710 485 1,195
Racing facility rental 2,768 (2,757) 11
Marketing 874 874
General and administrative expense 215 1,837 (47) 2,005
Card club costs 97 615 712
Legal 84 204 288
----------- ----------- ----------- -----------
Total 1,106 29,948 (2,804) 28,250
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE TAXES 2,013 (65) 1,948
INCOME TAX BENEFIT 30 30
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 2,013 $ (35) $ -- $ 1,978
=========== =========== =========== ===========
PER SHARE AMOUNTS:
NET INCOME (LOSS) $ .35 $ (.01) $ .34
=========== =========== ===========
DIVIDEND $ .25 $ .25
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,758,458 5,758,458 5,758,458
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
- 3 -
<PAGE> 4
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
SEPARATE AND COMBINED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BAY MEADOWS
CALIFORNIA OPERATING
JOCKEY COMPANY AND
CLUB SUBSIDIARY ELIMINATIONS COMBINED
<S> <C> <C> <C> <C>
REVENUES:
Pari-mutuel revenue $ 8,707 $ 8,707
Producer fees 139 139
Admissions, programs, parking and other racing income 1,116 1,116
Concession sales 987 987
Rental of racing facility $ 1,225 869 $ (1,225) 869
Interest and dividend income 112 32 144
Other income 3 230 233
----------- ----------- ----------- -----------
Total 1,340 12,080 (1,225) 12,195
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Purses and incentive awards 3,550 3,550
Commissions paid to guest tracks 505 505
Direct operating costs 5,022 5,022
Cost of concession sales 361 361
Depreciation and amortization 235 296 531
Racing facility rental 1,231 (1,225) 6
Marketing 414 414
General and administrative expense 515 838 1,353
Legal 1,100 53 1,153
----------- ----------- ----------- -----------
Total 1,850 12,270 (1,225) 12,895
----------- ----------- ----------- -----------
LOSS BEFORE TAXES (510) (190) (700)
INCOME TAX BENEFIT 92 92
----------- ----------- ----------- -----------
NET LOSS $ (510) $ (98) $ -- $ (608)
=========== =========== =========== ===========
NET LOSS PER SHARE $ (.09) $ (.02) $ (.11)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,763,257 5,763,257 5,763,257
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
- 4 -
<PAGE> 5
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
SEPARATE AND COMBINED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BAY MEADOWS
CALIFORNIA OPERATING
JOCKEY COMPANY AND
CLUB SUBSIDIARY ELIMINATIONS COMBINED
<S> <C> <C> <C> <C>
REVENUES:
Pari-mutuel revenue $ 9,839 $ 9,839
Producer fees 215 215
Admissions, programs, parking and other racing income 1,257 1,257
Concession sales 801 801
Rental of racing facility $ 1,353 608 $ (1,353) 608
Interest and dividend income 126 47 (36) 137
Other income 3 291 (7) 287
----------- ----------- ----------- -----------
Total 1,482 13,058 (1,396) 13,144
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Purses and incentive awards 3,879 3,879
Commissions paid to guest tracks 610 610
Direct operating costs 5,168 5,168
Cost of concession sales 274 274
Depreciation and amortization 229 167 396
Racing facility rental 1,359 (1,353) 6
Marketing 422 422
General and administrative expense 67 692 (43) 716
Card Club costs 86 451 537
Legal 49 49
----------- ----------- ----------- -----------
Total 431 13,022 (1,396) 12,057
----------- ----------- ----------- -----------
INCOME BEFORE TAXES 1,051 36 1,087
INCOME TAX PROVISION 16 16
----------- ----------- ----------- -----------
NET INCOME $ 1,051 $ 20 $ -- $ 1,071
=========== =========== =========== ===========
NET INCOME PER SHARE $ .18 $ .01 $ .19
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,763,257 5,763,257 5,763,257
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
- 5 -
<PAGE> 6
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,533 $ 7,307
Securities available for sale (at fair value) 1,825 1,187
Securities held to maturity (at cost) 4,933 7,077
Amounts held on deposit for Thoroughbred horse owners 2,070 3,056
Accounts receivable (net of allowance for doubtful accounts of
$77 in 1996 and $82 in 1995) 870 2,442
Prepaid expenses 874 377
-------- --------
Total current assets 21,105 21,446
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land 691 691
Land held for sale 2,930 1,954
Racing plant 23,972 23,906
Tennis facility 308 308
Equipment and leasehold improvements 11,461 10,088
-------- --------
Total 39,362 36,947
Accumulated depreciation and amortization (21,967) (20,759)
-------- --------
Property, plant and equipment - net 17,395 16,188
-------- --------
OTHER ASSETS (net of accumulated amortization of
$1,260 in 1996 and $1,221 in 1995) 113 223
-------- --------
DEFERRED INCOME TAXES 81 78
-------- --------
TOTAL ASSETS $ 38,694 $ 37,935
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,179 $ 4,676
Accrued liabilities 1,308 1,530
Accrued purses 483 1,014
Due to Thoroughbred horse owners 2,070 3,056
Income taxes payable 623 75
Note Payable 4,000
Uncashed pari-mutuel tickets and vouchers 3,130 4,477
-------- --------
Total current liabilities 14,793 14,828
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value, authorized 10,000,000 shares;
issued and outstanding 5,763,257 shares 116 116
Additional paid in capital 18,385 18,385
Retained earnings 4,973 4,817
Unrealized gain (loss) on securities available for sale 427 (211)
-------- --------
Total stockholders' equity 23,901 23,107
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 38,694 $ 37,935
======== ========
</TABLE>
See Notes to Financial Statements.
- 6 -
<PAGE> 7
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
COMBINED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(IN THOUSANDS) (UNAUDITED)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,461 $ 1,978
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,323 1,195
Changes in operating assets and liabilities:
Accounts receivable 1,572 352
Amounts held on deposit for Thoroughbred horse owners 986 529
Income taxes receivable and payable 545 (340)
Prepaid expenses and other current assets (501) (711)
Accounts payable (1,497) (919)
Accrued liabilities (73) 399
Accrued purses (531) (721)
Due to Thoroughbred horse owners (986) (529)
Uncashed pari-mutuel tickets and vouchers (1,347) 475
-------- --------
Net cash provided by operating activities 1,952 1,708
-------- --------
INVESTING ACTIVITIES:
Purchase of securities held to maturity (9,931) (10,430)
Maturities of securities held to maturity 12,075 13,191
Purchase of property, plant and equipment (2,565) (2,142)
-------- --------
Net cash (used in) provided by investing activities (421) 619
-------- --------
FINANCING ACTIVITIES:
Proceeds from note payable - bank 4,000
Dividends (2,305) (1,441)
Stock options exercised 123
-------- --------
Net cash provided by (used in) financing activities 1,695 (1,318)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 3,226 1,009
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,307 9,356
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,533 $ 10,365
======== ========
</TABLE>
See Notes to Financial Statements.
- 7 -
<PAGE> 8
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
SEPARATE AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BAY MEADOWS
CALIFORNIA OPERATING
JOCKEY COMPANY AND
CLUB SUBSIDIARY ELIMINATIONS COMBINED
<S> <C> <C> <C> <C>
Balance at January 1, 1996 $ 21,878 $ 1,229 $ 23,107
Net income 1,464 997 2,461
Dividends ($.40/share) (2,305) (2,305)
Unrealized gain on securities
available for sale 638 638
-------- -------- --------
Balance at September 30, 1996 $ 21,675 $ 2,226 $ 23,901
======== ======== ========
</TABLE>
See Notes to Financial Statements.
- 8 -
<PAGE> 9
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
SEPARATE AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BAY MEADOWS
CALIFORNIA OPERATING
JOCKEY COMPANY AND
CLUB SUBSIDIARY ELIMINATIONS COMBINED
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $ 21,970 $ 748 $ 22,718
Net income (loss) 2,013 (35) 1,978
Dividends ($.25/share) (1,441) (1,441)
Stock options exercised 119 4 123
Unrealized loss on securities
available for sale (25) (25)
-------- -------- --------
Balance at September 30, 1995 $ 22,636 $ 717 $ 23,353
======== ======== ========
</TABLE>
See Notes to Financial Statements.
- 9 -
<PAGE> 10
CALIFORNIA JOCKEY CLUB
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS) (UNAUDITED)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,378 $ 989
Securities available for sale (at fair value) 1,825 1,187
Securities held to maturity (at cost) 4,933 7,077
Accounts receivable 9 7
Receivable from Bay Meadows Operating Company 1,369 569
-------- --------
Total current assets 9,514 9,829
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land 691 691
Land held for sale 2,930 1,954
Racing plant 23,972 23,906
Tennis facility 308 308
Equipment 456 456
-------- --------
Total 28,357 27,315
Accumulated depreciation (15,691) (14,997)
-------- --------
Property, plant and equipment - net 12,666 12,318
-------- --------
TOTAL ASSETS $ 22,180 $ 22,147
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 179 $ 129
Accrued liabilities 326 140
-------- --------
Total current liabilities 505 269
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value, authorized 10,000,000 shares;
issued and outstanding 5,763,257 shares 58 58
Additional paid in capital 17,597 17,597
Retained earnings 3,593 4,434
Unrealized gain (loss) on securities available for sale 427 (211)
-------- --------
Total stockholders' equity 21,675 21,878
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 22,180 $ 22,147
======== ========
</TABLE>
See Notes to Financial Statements.
- 10 -
<PAGE> 11
CALIFORNIA JOCKEY CLUB
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(IN THOUSANDS) (UNAUDITED)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,464 $ 2,013
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 694 710
Changes in operating assets and liabilities:
Accounts receivable (2) 48
Receivable from Bay Meadows Operating Company (800) (3,041)
Prepaid expenses and other assets 26
Accounts payable 50 56
Accrued liabilities 186 42
-------- --------
Net cash provided by (used in) operating activities 1,592 (146)
-------- --------
INVESTING ACTIVITIES:
Purchase of securities held to maturity (9,931) (10,430)
Maturities of securities held to maturity 12,075 13,191
Purchase of property, plant and equipment (1,042) (682)
-------- --------
Net cash provided by investing activities 1,102 2,079
-------- --------
FINANCING ACTIVITIES:
Dividends (2,305) (1,441)
Stock options exercised 119
-------- --------
Net cash used in financing activities (2,305) (1,322)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 389 611
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 989 412
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,378 $ 1,023
======== ========
</TABLE>
See Notes to Financial Statements.
- 11 -
<PAGE> 12
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,155 $ 6,318
Amounts held on deposit for Thoroughbred horse owners 2,070 3,056
Accounts receivable (net of allowance for doubtful accounts
of $77 in 1996 and $82 in 1995) 861 2,435
Prepaid expenses and other current assets 874 377
-------- --------
Total current assets 12,960 12,186
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Equipment and leasehold improvements 11,005 9,631
Accumulated depreciation and amortization (6,276) (5,761)
-------- --------
Property, plant and equipment - net 4,729 3,870
-------- --------
OTHER ASSETS (net of accumulated amortization of
$1,260 in 1996 and $1,221 in 1995) 113 223
-------- --------
DEFERRED INCOME TAXES 81 78
-------- --------
TOTAL ASSETS $ 17,883 $ 16,357
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,000 $ 4,547
Accrued liabilities 982 1,390
Accrued purses 483 1,014
Due to Thoroughbred horse owners 2,070 3,056
Payable to California Jockey Club 1,369 569
Income taxes payable 623 75
Note payable 4,000
Uncashed pari-mutuel tickets and vouchers 3,130 4,477
-------- --------
Total current liabilities 15,657 15,128
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock .01 par value authorized 10,000,000
shares; issued and outstanding:
5,763,257 shares 58 58
Additional paid in capital 788 788
Retained earnings 1,380 383
-------- --------
Total stockholders' equity 2,226 1,229
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,883 $ 16,357
======== ========
</TABLE>
See Notes to Financial Statements.
- 12 -
<PAGE> 13
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(IN THOUSANDS) (UNAUDITED)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 997 $ (35)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 629 485
Changes in operating assets and liabilities:
Accounts receivable 1,574 304
Amounts held on deposit for Thoroughbred horse owners 986 529
Income taxes receivable and payable 545 (340)
Prepaid expenses and other assets (501) (737)
Accounts payable (1,547) (975)
Accrued liabilities (259) 357
Accrued purses (531) (721)
Due to Thoroughbred horse owners (986) (529)
Payable to California Jockey Club 800 3,041
Uncashed pari-mutuel tickets and vouchers (1,347) 475
------- -------
Net cash provided by operating activities 360 1,854
------- -------
NET CASH USED IN INVESTING ACTIVITIES - Purchase of
property, plant and equipment (1,523) (1,460)
------- -------
FINANCING ACTIVITIES:
Proceeds from note payable - bank 4,000
Stock option exercised 4
------- -------
Net cash provided by financing activities 4,000 4
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 2,837 398
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,318 8,944
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,155 9,342
======= =====
</TABLE>
See Notes to Financial Statements.
- 13 -
<PAGE> 14
CALIFORNIA JOCKEY CLUB AND BAY MEADOWS
OPERATING COMPANY AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
- - - --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements include condensed unaudited
financial statements of California Jockey Club ("Cal Jockey") and Bay
Meadows Operating Company ("Bay Meadows") on a combined basis and for each
company individually. All significant affiliate and intercompany balances
and transactions have been eliminated on the combined financial statements.
The accompanying condensed unaudited financial statements should be read in
conjunction with the companies' 1995 Annual Report. Net income per share is
computed as net income divided by weighted average shares outstanding.
Certain prior year amounts have been reclassified to conform to the 1996
presentation.
In the opinion of management, all adjustments (consisting of only recurring
adjustments) considered necessary for a fair presentation of the financial
condition and results of operations for Cal Jockey and Bay Meadows
individually, have been included in the financial statements. The results
of operations for the nine months ended September 30, 1996, are not
indicative of the results that may be expected for the year ending December
31, 1996, because of the seasonal nature of the operations.
2. PROPERTY, PLANT AND EQUIPMENT
At September 30, 1996, land held for sale includes $2,439,000 in
costs incurred to develop the land including zoning and engineering
costs. No assurance can be given that such activities will ultimately
result in the development or sale of such land.
3. LEASE AGREEMENT
Due to a disagreement between Cal Jockey and Bay Meadows as to the
applicable rent owed with respect to the racecourse properties, the
companies accrue rent at a rate equivalent to the prior year. In the event
the parties reach agreement on the applicable rent owed, the accrued rent
may be adjusted accordingly. However, such an adjustment is not expected
to have a material affect on the financial statements.
4. COMMITMENTS AND CONTINGENCIES
On August 18, 1996, Cal Jockey entered into an agreement with Hudson Bay
Partners, LP relating to the proposed reorganization and $300.0 million
financing transaction. Under the terms of this agreement, Cal Jockey is
required to pay Hudson Bay a termination fee in the amount of $2.9 million
in the event the Cal Jockey Board of Directors receives a higher
unsolicited offer which it accepts. Subsequently, this agreement was
terminated on October 31, 1996.
5. SUBSEQUENT EVENT
On October 31, 1996 Cal Jockey and Bay Meadows entered into a binding
acquisition agreement with Patriot American Hospitality, Inc. ("Patriot
American"). The acquisition agreement was approved unanimously by the
Boards of Patriot American, Cal Jockey, and Bay Meadows and is subject to
approval by the shareholders of Patriot and the paired shareholders of Cal
Jockey and Bay Meadows. Pursuant to the acquisition agreement, the
shareholders of Cal Jockey and Bay Meadows will have the option to receive,
for each of their paired shares, either $33.00 in cash or .9635 shares of
common stock of Patriot American as reconstituted following the merger.
Pursuant to the acquisition agreement, Patriot American has advanced $2.9
million to Cal Jockey for payment of the breakup fee due upon termination
of the prior formation agreement with Hudson Bay Partners, LP. Patriot
American will be entitled to receive a $5 million termination fee, and the
repayment of the $2.9 million advance for the Hudson Bay termination fee in
the event the Cal Jockey and Bay Meadows boards of directors receive a
higher unsolicited offer which they accept.
Management does not expect the consummation of this transaction to affect
the proposed land sales.
- 14 -
<PAGE> 15
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
Bay Meadows has been allocated 115 live racing days for the year ending December
31, 1996 versus 108 live racing days for calendar year 1995. Of these days, Bay
Meadows conducted 91 days of live racing in the nine months ended September 30,
1996 versus 57 days in the same period in 1995. Historically, Bay Meadows and
California Jockey Club have derived a major portion of their revenues from the
live racing meet. Accordingly, revenues and operating profits are expected to
be lower in the fourth quarter for 1996 as compared to the fourth quarter of
1995.
On October 31, 1996 Cal Jockey and Bay Meadows entered into a binding
acquisition agreement with Patriot American Hospitality, Inc. ("Patriot
American"). The acquisition agreement was approved unanimously by the Boards of
Patriot American, Cal Jockey, and Bay Meadows and is subject to approval by the
shareholders of Patriot and the paired shareholders of Cal Jockey and Bay
Meadows. Pursuant to the acquisition agreement, the shareholders of Cal Jockey
and Bay Meadows will have the option to receive, for each of their paired
shares, either $33.00 in cash or .9635 shares of common stock of Patriot
American as reconstituted following the merger.
Pursuant to the acquisition agreement, Patriot American has advanced $2.9
million to Cal Jockey for payment of the breakup fee due upon termination of the
prior formation agreement with Hudson Bay Partners, LP. Patriot American will be
entitled to receive a $5 million termination fee, and the repayment of the $2.9
million advance for the Hudson Bay termination fee in the event the Cal Jockey
and Bay Meadows boards of directors receive a higher unsolicited offer which
they accept.
Management does not expect the consummation of this transaction to affect the
proposed land sales.
California Jockey Club
Results of Operations: Nine Months Ended September 30, 1996
Compared with Nine Months Ended September 30, 1995
Total revenues for Cal Jockey increased $1,086,000 (35%) for the nine months
ended September 30, 1996, compared to the same period in the prior year. Rental
income derived from the leasing of its racing facility is based on pari-mutuel
wagering at Bay Meadows and increased $1,078,000 as a result of 31 more racing
days in the first nine months of 1996 than in the same period in 1995.
Expenses for the nine months ended September 30, 1996, increased $1,635,000
(148%), primarily as a result of legal fees incurred in 1996. Legal fees
increased from $84,000 for the nine months ended September 30, 1995 to
$1,291,000 for the nine months ended September 30, 1996. Such fees include
$616,000 incurred in legal services related to a proxy contest with dissident
shareholders and $220,000 in legal services related to a potential transaction
with Hudson Bay Partners, LP, such transaction which has been terminated.
General and administrative expenses increased primarily due to the proxy
contest and annual meeting.
Results of Operations: Quarter Ended September 30, 1996
Compared with Quarter Ended September 30, 1995
Total revenues for Cal Jockey decreased $142,000 (10%) for the quarter ended
September 30, 1996, compared to the same quarter of the prior year. Rental
income derived from the leasing of its racing facility decreased $128,000 (9%).
The rental income decrease was primarily the result of 25 days of live racing in
the current quarter compared with 27 live racing days in the third quarter of
1995.
Expenses for the quarter ended September 30, 1996, increased $1,419,000 (329%),
compared to the same quarter of the prior year primarily due to legal fees
related to a proxy contest with dissident shareholders and the potential
transaction with Hudson Bay Partners, LP, such transaction which has been
terminated.
Liquidity and Capital Resources
The liquid assets (cash and marketable securities) of Cal Jockey decreased to
$8,136,000 at September 30, 1996, from $9,253,000 at December 31, 1995. This
decrease was primarily due to a decrease of $2,144,000 in securities held to
maturity as a result of maturities and use of the proceeds for the settlement
of general and administrative as well as legal costs. Partially, offsetting
this decrease was an increase in the fair market value of securities available
for sale. Receivables from Bay Meadows Operating Company increased $800,000
due to rental of the racing facility. Accounts payable and accrued liabilities
increased $236,000, primarily as a result of additional legal fees incurred
during 1996.
Cal Jockey anticipates that funds generated internally and its cash reserves
will be sufficient to meet its liquidity requirements for the foreseeable
future.
- 15 -
<PAGE> 16
Bay Meadows Operating Company and Subsidiary
Results of Operations: Nine Months Ended September 30, 1996
Compared with Nine Months Ended September 30, 1995
Total revenues for Bay Meadows increased $11,525,000 (39%) for the nine months
ended September 30, 1996 compared with the same period in 1995. This was due to
an increase in pari-mutuel revenues of $10,488,000. Pari-mutuel revenues
increased due primarily to an additional 31 more live racing days in the first
nine months of 1996 compared to the same period in 1995.
Other revenues were positively impacted by the same factors which affected
pari-mutuel revenues. Admissions, program, parking and other racing income
increased $317,000, and concession sales increased $456,000.
Total costs and expenses increased $9,825,000 (33%) for the nine months ended
September 30, 1996, compared with the same period in the prior year. This was
due to increases in expenses associated with higher operating revenues,
including (i) purses and incentive awards ($4,736,000), (ii) commissions paid to
guest locations ($719,000), (iii) direct operating costs ($2,849,000) and (iv)
racing facility rental ($1,085,000).
Results of Operations: Quarter Ended September 30, 1996
Compared with Quarter Ended September 30, 1995
Total revenues for Bay Meadows decreased $978,000 (7%) for the quarter ended
September 30, 1996 compared with the same quarter in 1995. This decrease is
primarily due to the two fewer racing days.
Total costs and expenses decreased $752,000 (6%) for the three months ended
September 30, 1996, compared with the same period in the prior year. This was
primarily due to decreases in expenses associated with lower operating revenues,
including (i) purses and incentive awards ($329,000), (ii) commissions paid to
guest locations ($105,000), and (iii) direct operating expenses ($146,000).
Liquidity and Capital Resources
The liquid assets (cash and cash equivalents) of Bay Meadows increased to
$9,155,000 at September 30, 1996, from $6,318,000 at December 31, 1995. Cash
and cash equivalents increased $2,837,000 primarily due to collection of
accounts receivable (accounts receivable decreased $1,574,000). Notes payable
increased $4,000,000 due to borrowings used to settle other liabilities.
Accordingly, there was a $1,955,000 decrease in accounts payable and accrued
liabilities, $1,347,000 decrease in uncashed pari-mutuel tickets and vouchers,
and a $531,000 decrease in accrued purses.
Bay Meadows is dependent on Cal Jockey's assistance in securing a bank line of
credit for its working capital needs throughout the year. Bay Meadows received a
signed commitment to extend its $6,000,000 bank line of credit through June 1,
1998. As of September 30, 1996 there were $4,000,000 of borrowings outstanding
under this bank line of credit. On October 10, 1996, Cal Jockey revoked its
guarantee as to further borrowings by Bay Meadows under the line of credit. The
bank subsequently notified Bay Meadows that, as a result, it would not be
permitted to draw down any further amounts under the line of credit. Despite its
inability to draw down further amounts under the line of credit, Bay Meadows
believes that it has sufficient cash and investment resources such that Cal
Jockey's revocation of its guarantee with regard to future borrowings has not
had an adverse effect on Bay Meadows' operations and will not adversely affect
Bay Meadows' operations in the forseeable future. Bay Meadows anticipates that
it may be required to borrow or seek an alternative source of additional funds
to ensure liquidity after that date if its inability to draw on the letter of
credit continues through June 1, 1997.
As of September 30, 1996, Bay Meadows' current liabilities exceeded its current
assets by $2,697,000. The current ratio (current assets to current liabilities)
was .83 to 1 at September 30, 1996, compared to .81 to 1 at December 31, 1995.
- 16 -
<PAGE> 17
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Volkman, et al. v. California Jockey Club, et al.
On or about July 3, 1996, plaintiff shareholders sued Cal Jockey and its
directors, seeking an order directing Cal Jockey to hold its annual meeting of
stockholders earlier than the date then set by Cal Jockey. A judgment so
directing Cal Jockey has been entered, and the meeting was held on August 30,
1996. Cal Jockey does not intend to appeal, and has reached an agreement in
principal to settle the matter in its entirety in return for payment of certain
fees and expenses incurred by the plaintiffs.
California Jockey Club v. Bay Meadows Operating Company, et al.
On August 13, 1996, Cal Jockey filed a complaint in the United States District
Court for the Northern California District of California against Bay Meadows and
its President, Mr. Liebau as well as the California Jockey Club Shareholders
Committee (the "Shareholders Committee"), a group of stockholders supporting a
slate of nominees to the Board of Directors of Cal Jockey in opposition to those
nominated by Cal Jockey management. The complaint alleged violations of the
federal securities laws by reason of the defendants' failure to make required
filings and disclosures in connection with the Shareholders Committee's efforts
elect directors in opposition to those of Cal Jockey's management. The complaint
sought to compel the defendants to make the required disclosures and to enjoin
them from soliciting or voting proxies. Cal Jockey sought expedited discovery,
which was denied on August 21, 1996. By agreement of the parties, the time for
the defendants to answer or otherwise move with respect to the complaint has
been extended indefinitely. On November 7, 1996, Cal Jockey, with the consent of
Bay Meadows, requested that the case be placed on inactive status through an
order of administrative closure and stay. Bay Meadows believes this suit is
without merit.
Property Resources, Inc. v. Bay Meadows Operating Company, et al.
On August 16, 1996, Property Resources, Inc. ("PRI"), a subsidiary of Franklin
Fund, Inc., sued Bay Meadows, all of its directors, and others, for intentional
interference with PRI's contract with Cal Jockey for the sale of real property
on which Bay Meadows' stables are located. PRI sought a temporary restraining
order, which would have prevented Bay Meadows and its management from talking to
its stockholders, Cal Jockey, San Mateo city officials, or the press about a
wide range of topics, including on-site stabling of horses at Bay Meadows. On
August 15, 1996, the San Mateo County Superior Court denied PRI's request for
the temporary restraining order. On November 7, 1996, the San Mateo Superior
dismissed PRI's remaining claims with leave to amend. Bay Meadows believes this
suit is without merit.
Patty Misskelly v. Bay Meadows Operating Company and Frank Trigeiro, et al.
The plaintiff, a former accounts receivable clerk, has filed suit against Bay
Meadows in the Federal District Court alleging gender and age discrimination.
The plaintiff was terminated by Bay Meadows after her position was eliminated as
part of a restructuring of the accounting department. In her suit, the plaintiff
seeks unspecified damages. Bay Meadows believes that this suit is without merit
and does not believe that it will have a material adverse impact on Bay
Meadows' results of operations.
- 17 -
<PAGE> 18
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On August 30, 1996, California Jockey Club ("Cal Jockey") held its
Annual Stockholders Meeting. The results of the annual meeting was as
follows:
Election of Directors: Cal Jockey's stockholders elected the following
individuals to serve as directors for an additional term as follows:
James P. Conn 4,129,640
David M. Gjerdrum 5,287,900
James M. Harris 4,129,640
Kjell H. Qvale 4,129,640
Ronald J. Volkman 5,304,618
Appointment of Auditors: Cal Jockey's stockholders ratified the
appointment of Deloitte & Touche, LLP as Cal Jockey's independent
auditors for the 1996 fiscal year as follows:
FOR 4,362,660 Votes
AGAINST 108,153 Votes
ABSTAIN 187,914 Votes
Mandatory Retirement Age Stockholder Proposal: Cal Jockey's stockholders
rejected a stockholder proposal to establish a mandatory retirement age
of 72 for the board of directors as follows:
FOR 1,855,147 Votes
AGAINST 2,704,353 Votes
ABSTAIN 69,226 Votes
(b) On August 30, 1996, Bay Meadows Operating Company ("Bay Meadows") held a
Special Meeting of Stockholders. At that meeting, the Stockholders
approved resolutions authorizing the Bay Meadows Board of Directors to
continue to conduct Bay Meadows' racing operations in a way
substantially similar to the manner in which they are presently
conducted and to pursue the expeditious development of stabling for 900
horses on or contiguous to the Bay Meadows Racecourse. The resolutions
were approved by Bay Meadows' stockholders as follows:
FOR 2,889,104 Votes 71.87%
AGAINST 1,046,457 Votes 26.03%
ABSTAIN 84,593 Votes 2.10%
- 18 -
<PAGE> 19
As previously reported, Bay Meadows held its 1996 Annual Meeting of
Stockholders (the "Annual Meeting") on July 12, 1996 at which the
Bay Meadows stockholders (1) elected five directors to serve until
the 1997 Annual Meeting or until their successors have been elected
and qualified and (2) ratified the Bay Meadows Board of Directors'
selection of Deloitte & Touche, LLP as independent public accountants
for Bay Meadows for the 1996 fiscal year.
The nominees and the number of votes each received were as follows:
Nominee Votes Received
-------------------------------------------------
Eugene F. Barsotti, Jr. 3,293,451
John C. Harris 3,229,861
F. Jack Liebau 3,271,398
Lee R. Tucker 3,173,617
Anthony J. Zidich 3,184,079
Greg S. Gunderson 3,917,302
The five nominees receiving the highest number of votes, Messrs. Barsotti,
Gunderson, Harris, Liebau and Zidich, were elected as directors. A total of
547,805 shares abstained from voting on the election of directors.
The Bay Meadows stockholders ratified the appointment of Deloitte & Touche, LLP
with 3,702,423 shares voting for the ratification, 55,573 voting against and
65,076 abstaining.
On August 6, 1996, the Bay Meadows Board of Directors expanded the size of the
Board from five to six and appointed Mr. Tucker to the newly created vacancy.
ITEM 5. OTHER INFORMATION
California Jockey Club
The Franklin Agreement
On May 31, 1995, Cal Jockey entered into an Agreement of Purchase and Sale with
Property Resources, Inc. ("Property Resources"), a subsidiary of Franklin
Resources, Inc. (the "Franklin Agreement"), providing for the sale of
thirty-three acres of the barn and stable area (the "Stable Area"). On August
18, 1996 the Franklin Agreement was amended. A copy of the Sixth Amendment is
attached to this Form 10-Q as Exhibit 20.01 and is incorporated herein by
reference. (The Fifth Agreement, entered into after the Form 10-K filing for the
year ending December 31, 1995, dealt with extensions of time for Cal Jockey to
resolve various title matters. A copy of the Fifth Amendment is attached to this
Form 10-Q as Exhibit 20.02 and is incorporated herein by reference).
The Sixth Amendment effected a number of changes to the provisions governing
off-site improvements and City of San Mateo approvals (the "Entitlements"). In
terms of the off-site improvements, certain provisions now make clear that
Property Resources' obligation to contribute to the costs of off-site
improvements is included in the purchase price. Moreover, Cal Jockey may assign
the construction contracts for the off-site improvements to Property Resources
as of the close of escrow in which event
- 19 -
<PAGE> 20
the purchase price will be adjusted to reflect the off-off-site improvements
which have been completed at that time. If Cal Jockey exercises this option it
must provide security for its obligation to pay its share of the off-site
improvement costs.
In any event, Property Resources will pay 44% of the cost of the off-site
improvements with the exception of the retention ponds, as to which Property
Resources agrees to pay $100,000 of the first $700,000, and 33% of the costs
over $700,000. Under the Sixth Amendment, the parties no longer have any right
to terminate the Franklin Agreement based upon the cost of the off-site
improvements.
Turning to the Entitlements provision, the Entitlements timetable has been
adjusted to reflect current estimates of the time required to obtain the
Entitlements. Assuming all other conditions precedent are satisfied or waived,
escrow is to close 330 days following the date on which Cal Jockey obtains the
Entitlements.
Additional conditions precedent to Property Resources' obligation to close
escrow include the City of San Mateo issuing grading, foundation and/or building
permits to Property Resources notwithstanding that the off-site improvements are
not completed, and issuing certificates of occupancy to Property Resources for
not less than 660,000 square feet of office space notwithstanding that
construction of the off-ramp from Highway 101 may not be completed.
The remaining important changes effected by the amendment are the elimination of
the cap at 50,000 square feet on Cal Jockey's permitted office space
construction in the 40 acre training track area (the "Training Track Area"), and
the provision for an alternative Land Use Program. In addition, as long as the
Entitlements procurement date is not delayed, Property Resources consents to the
construction of one or more barns containing up to 210 stalls in the race track
area.
The Iacocca Agreement
In December of 1995, Cal Jockey entered into an Agreement of Purchase and Sale
with Lee Iacocca & Associates, Inc. (as amended, the "Iacocca Agreement")
providing for the sale of the "Training Track Area." Effective June 28, 1996,
such agreement was amended. ("Third Amendment"). A copy of the Third Amendment
is attached to this Form 10-Q as Exhibit 20.03 and is incorporated herein by
reference. (Two prior amendments dealt with extensions of the purchaser's due
diligence period and acknowledgment that neither party had any claims against
the other. These amendments are attached to this Form 10-Q as Exhibits 20.04 and
20.05 and are incorporated herein by reference). In the Third Amendment, Lee
Iacocca & Associates, Inc. assigned its rights under the prior agreement to
Airdial Company LLC, a newly formed limited liability company ("Airdial"), the
members of which include some of the principals involved with Lee Iacocca &
Associates, Inc.
Many of the changes effected by the Third Amendment relate to off-site
improvements and Entitlements. The provisions describing the purchase price now
make clear that Airdial's obligation to share in the cost of the off-site
improvements is included as part of the purchase price. Airdial agrees to pay
53.33% of the off-site improvements with the exception of the retention ponds,
as to which Airdial agrees to pay $156,000 of the first $700,000 and 39.6% of
any costs exceeding $700,000. Under the Third Amendment, the parties no longer
have any right to terminate the Iacocca Agreement based upon the cost of the
off-site improvements.
Cal Jockey now has the right to assign to Airdial the payment obligations from
the off-site improvement contracts or instead to delegate the improvement
contracts themselves to Airdial, as of the close of
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<PAGE> 21
escrow. If Cal Jockey chooses to do the latter, it must provide security for its
share of the off-site improvements cost. In either event the purchase price is
adjusted to reflect the off-site improvements which have been completed as of
the close of escrow. If Cal Jockey elects not to assign the contracts to either
Airdial or Property Resources, Airdial may itself elect to assume the obligation
to complete the off-site improvements, which would trigger Cal Jockey's
obligation to provide security.
In terms of Entitlements, the Third Amendment eliminates provisions requiring a
purchase price adjustment based on Cal Jockey failing to obtain all of the
Entitlements. However, if the Entitlements are not obtained by December 31,
1997, either party may terminate the Iacocca Agreement provided that Airdial can
avoid such termination by agreeing to close escrow on or before March 31, 1998
and, unless Cal Jockey or the purchaser of the Stable Area is proceeding with
the development of the Stable Area, agreeing to pay for all of the costs of the
off-site improvements necessary to develop the Stable Area.
The amendment also includes new conditions precedent to Airdial's obligation to
close escrow. One such condition precedent is the completion of those off-site
improvements required by the City of San Mateo for the issuance of a building
permit. In addition, the City of San Mateo must not add conditions prior to
issuing a building permit other than the normal nondiscretionary conditions such
as permit fees and submission of construction drawings. Finally, Airdial's
obligation to close escrow is not triggered if the estimated cost to Airdial of
constructing improvements for the Training Track Area does exceed $9.0 million,
and is not triggered unless Airdial obtains a tentative subdivision map of the
Training Track Area on terms and conditions acceptable to Airdial in its
reasonable discretion.
In terms of the remaining important changes effected by the amendment, the $1.0
million credit will now be deposited in two stages, $500,000 after the 60-day
due diligence period and the balance within three days after Cal Jockey obtains
the Entitlements. Finally, Cal Jockey now reserves the option to surcharge the
Training Track Area, or in the alternative, to delegate this responsibility to
Airdial. In the latter case, Cal Jockey would lend Airdial 100% of the costs of
surcharging the Training Track Area, secured by a deed of trust on the surcharge
materials, plans, specifications, and other intangible rights therein. The loan
would bear interest at 2% above the prime rate and would be due and payable upon
the close of escrow.
Indemnification Agreements
On August 18, 1996, in the interest of attracting and retaining qualified
directors and officers, Cal Jockey entered into Indemnification Agreements with
directors James P. Conn, Marylin K. Gunderson, James M. Harris, Brian M.
Herrara, Richard E. Perazzo, and Kjell H. Qvale (the "Indemnitees"). Under the
Indemnification Agreements (a form of which is attached to this Form 10-Q as
Exhibit 10.14 and is incorporated herein by reference), Cal Jockey agrees to
idemnify the Indemnitees to the fullest extent permitted by law against all
expenses, judgments, penalties, fines and amounts paid in settlement in any
legal proceeding related to the fact that they are or were a director or
officer of Cal Jockey.
Public Storage Inc. Agreement
On July 18, 1996, Cal Jockey entered into an agreement to sell the property of
the Sundown Tennis Club to Public Storage Inc. for $2.2 million. Public Storage
Inc. intends to convert the land into mini-storage units. The sale of the
property is subject to City of San Mateo approval. Accordingly, no assurances
can be given that such sale will be consummated.
Bay Meadows Operating Company
Severance Agreements
On August 30, 1996, in the interest of encouraging the continuous employment of
key management personnel, Bay Meadows entered into Severance Agreements with
certain officers including F. Jack Liebau, President; Eugene F. Barsotti, Jr.,
Vice President - Racing; Sharon Kelly, Vice President - Marketing; Michael
Scalzo, Vice President - Operations; Frank Trigeiro, Chief Financial Officer and
Vice President - Finance; and Nathaniel Wess, Vice President. These agreements,
which expire on December 31, 1997, become effective if there is a Change in
Control of Bay Meadows followed by a termination by the officer of his or her
employment for Good Reason. In that event, officers other than Mr. Liebau and
Mr. Barsotti become entitled to a lump sum payment equal to the sum of the
officer's current annual base salary plus the officer's bonus received during
the previous 12 months or during 1996, whichever is greater; Mr. Liebau and Mr.
Barsotti are instead entitled to twice the sum of their current annual base
salary plus the bonus received during the previous 12 months or during 1996,
whichever is greater. The Severance Agreements also provide that Bay Meadows
will, at each officer's option, either continue to make contributions to the
officer's retirement plan through January 1, 1998 or pay to the officer a lump
- 21 -
<PAGE> 22
sum equal to the actuarial equivalent of the additional retirement pension to
which the officer would have been entitled had the officer continued service
under such retirement plan for an additional two years.
Indemnification Agreements
On August 30, 1996, in the interest of attracting and retaining qualified and
experienced directors and officers, Bay Meadows entered into Indemnity
Agreements with directors Eugene F. Barsotti, Jr., Greg S. Gunderson, John C.
Harris, F. Jack Liebau, Lee Tucker and Anthony J. Zidich and Chief Financial
Officer Frank Trigeiro (the "Indemnitees"). Under the Indemnity Agreements, Bay
Meadows agrees to indemnify the Indemnitees to the fullest extent permitted by
law against judgments and legal expenses relating to lawsuits or claims brought
against any of them and relating to the fact that they are or were directors or
officers of Bay Meadows. The Indemnity Agreements also provide that Bay Meadows'
indemnification obligations will be secured by a standby letter of credit in the
amount of $1,000,000 naming each of the Indemnitees as beneficiaries.
Status of the Master Lease
The Master Lease Agreement pursuant to which Bay Meadows leases the Racecourse
Properties from Cal Jockey expired on March 31, 1996. Prior to the expiration of
the lease, Cal Jockey and Bay Meadows had discussions regarding the extension of
the Master Lease Agreement. The companies now have conflicting views concerning
the status of the Master Lease Agreement's extension. Cal Jockey believes, based
on the absence of an executed lease and applicable laws, among other things,
that no lease exists and that Bay Meadows is a tenant at will. Bay Meadows
believes, based partly on its understanding of certain corporate action taken by
Cal Jockey and statements of Cal Jockey's President and Chairman, that the
Master Lease Agreement has been extended for an additional three years with an
increase in rent but otherwise substantially on the same terms as the previous
lease. Notwithstanding this position, the companies have agreed to accrue rent
at a rate equivalent to the prior year. In the event the parties reach
agreement on the applicable rent owed, the accrued rent will be adjusted
accordingly.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT EXHIBIT
NUMBER
- - - ------- ------------------------------------------------------------------
27.1 Financial Data Schedule (California Jockey Club)
27.2 Financial Data Schedule (Bay Meadows Operating Company)
27.3 Financial Data Schedule (Combined Companies)
- 22 -
<PAGE> 23
(b) Reports on Form 8-K
On August 8, 1996, Cal Jockey filed a report on Form 8-K
disclosing pursuant to Item 5 the decision of two Cal Jockey directors, Marylin
K. Gunderson and Richard E. Perazzo, not to stand for re-election.
On August 22, 1996, Cal Jockey filed a report on Form 8-K
disclosing pursuant to Item 5 (i) Cal Jockey's legal complaint against Bay
Meadows, which was filed on August 13, 1996, and (ii) a potential transaction
with Hudson Bay Partners, L.P.
On October 31, 1996, Cal Jockey and Bay Meadows filed a report
on Form 8-K disclosing pursuant to Item 5 an acquisition agreement with Patriot
American Hospitality, Inc.
- 23 -
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrants have duly caused this report to be signed on their
behalf by the undersigned, thereunto duly authorized.
DATED: December 13, 1996
CALIFORNIA JOCKEY CLUB
/s/ James M. Harris
-------------------------------------------
James M. Harris
President and Treasurer
(Principal Executive and Financial Officer)
BAY MEADOWS OPERATING COMPANY
/s/ Frank Trigeiro
-------------------------------------------
Frank Trigeiro
Vice President-Finance and Chief Financial
Officer
(Principal Financial Officer)
- 24 -
<PAGE> 25
EXHIBIT EXHIBIT INDEX
NUMBER
- - - ------- ------------------------------------------------------------------
27.1 Financial Data Schedule (California Jockey Club)
27.2 Financial Data Schedule (Bay Meadows Operating Company)
27.3 Financial Data Schedule (Combined Companies)
- 25 -
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> CALIFORNIA JOCKEY CLUB AND BAY MEADOWS OPERATING COMPANY
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