FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-9624
International Thoroughbred Breeders, Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-2332039
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
P.O. Box 1232 Cherry Hill, New Jersey 08034
(Address of principal executive offices) (Zip Code)
(609) 488-3838
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
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 last 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the latest practicable date.
Class Outstanding at May 6, 1994
Common Stock, $ 2.00 par value 9,551,247
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
FORM 10-Q
QUARTERLY REPORT
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets
as of March 31, 1994 and June 30, 1993. . . . 1-2
Consolidated Statement of Shareholders' Equity
for the Nine Months ended March 31, 1994. . . 3
Consolidated Statements of Operations
for the Three Months and Nine Months ended
March 31, 1994 and March 31, 1993 . . . . . 4
Consolidated Statements of Cash Flows
for the Nine Months ended
March 31, 1994 and March 31, 1993. . . . . . 5
Notes to Financial Statements . . . . . . . . 6-9
Review Report by Independent
Certified Public Accountants. . . . . . .. .10-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 12-16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
<PAGE>
<TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1994 AND JUNE 30, 1993
ASSETS
<CAPTION>
March 31,
1994 June 30,
(UNAUDITED) 1993
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,592,121 $ 1,744,475
Short-Term Investments 15,139,503 13,593,180
TOTAL CASH AND CASH EQUIVALENTS 16,731,624 15,337,655
Restricted Cash and Investments 1,090,384 1,945,017
Accounts Receivable - Net 1,251,365 727,692
Prepaid Expenses 398,176 590,381
Accrued Interest Receivable 38,312 4,171
Other Current Assets 9,964 14,858
TOTAL CURRENT ASSETS 19,519,825 18,619,774
LAND, BUILDINGS, EQUIPMENT AND LIVESTOCK:
Land and Buildings 51,994,162 51,512,558
Equipment 1,662,763 1,529,394
Livestock 187,951 1,182,011
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK 53,844,876 54,223,963
LESS: Accumulated Depreciation 663,455 1,174,590
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK - NET 53,181,421 53,049,373
OTHER ASSETS:
Deposits and Other Assets 606,157 594,395
TOTAL OTHER ASSETS 606,157 594,395
TOTAL ASSETS $73,307,403 $72,263,542
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1994 AND JUNE 30, 1993
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
March 31,
1994 June 30,
(UNAUDITED) 1993
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses $ 3,974,774 $ 4,455,994
Notes Payable - Current Portion 25,000 35,418
TOTAL CURRENT LIABILITIES 3,999,774 4,491,412
DEFERRED INCOME 474,786 414,741
LONG-TERM LIABILITIES 25,000 50,000
COMMITMENTS AND CONTINGENCIES 0 0
SHAREHOLDERS' EQUITY:
Series A (Convertible) Preferred Stock
$100.00 Par Value, Authorized 500,000 Shares,
Issued and Outstanding, 362,437
and 441,664 Shares, Respectively 36,243,675 44,166,375
Common Stock $2.00 Par Value,
Authorized 25,000,000 Shares,
Issued and Outstanding, 9,551,233
and 9,511,415 Shares, Respectively 19,102,465 19,022,830
Capital in Excess of Par (June 30, 11,961,249 4,118,184
1993 reflects quasi-reorganization)
Retained Earnings (subsequent to June 30,
1993, date of quasi-reorganization, total
deficit eliminated $102,729,936) 1,500,454 0
TOTAL SHAREHOLDERS' EQUITY 68,807,843 67,307,389
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $73,307,403 $72,263,542
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 1994
(UNAUDITED)
<CAPTION>
Common
Number of
Shares Amount
<S> <C> <C>
BALANCE - JUNE 30, 1993 9,511,415 $ 19,022,830
Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse
Stock Split
effected on March 13, 1992 189 378
Exchange of Preferred Stock
for Common Stock 39,629 79,257
Net Income for the Nine Months
Ended March 31, 1994 --- ---
BALANCE - MARCH 31, 1994 9,551,233 $ 19,102,465
<CAPTION>
Preferred
Number of
Shares Amount
<S> <C> <C>
BALANCE - JUNE 30, 1993 441,664 $ 44,166,375
Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse
Stock Split
effected on March 13, 1992 30 3,000
Exchange of Preferred Stock
for Common Stock (79,257) (7,925,700)
Net Income for the Nine Months
Ended March 31, 1994 --- ---
BALANCE - MARCH 31, 1994 362,437 $ 36,243,675
<CAPTION>
Capital
in Excess Retained
of Par Earnings Total
<S> <C> <C> <C>
BALANCE - JUNE 30, 1993 $ 4,118,184 $ 0 $ 67,307,389
Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse
Stock Split
effected on March 13, 1992 (3,378) --- ---
Exchange of Preferred Stock
for Common Stock 7,846,443 --- ---
Net Income for the Nine Months
Ended March 31, 1994 --- 1,500,454 1,500,454
BALANCE - MARCH 31, 1994 $ 11,961,249 $ 1,500,454 $ 68,807,843
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
MARCH 31, 1994 AND 1993
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
REVENUES:
Revenue from Operations $ 8,628,778 $ 11,049,717
Investment Income Revenue 100,685 89,785
TOTAL REVENUES 8,729,463 11,139,502
EXPENSES:
Cost of Revenues 2,596,822 3,274,310
Operating Expenses 5,839,369 6,450,762
Depreciation & Amortization 133,842 1,448,753
General & Administrative Expenses 1,032,627 1,349,815
Interest Expense 0 0
TOTAL EXPENSES 9,602,660 12,523,640
INCOME(LOSS) FROM OPERATIONS BEFORE
TAXES, NON-OPERATING LOSS AND
EXTRAORDINARY ITEM (873,198) (1,384,138)
NON-OPERATING LOSS 0 (27,599,230)
INCOME(LOSS) BEFORE TAXES AND
EXTRAORDINARY ITEM (873,198) (28,983,368)
LESS:Income Tax Expense 0 0
INCOME(LOSS) BEFORE
EXTRAORDINARY ITEM (873,198) (28,983,368)
EXTRAORDINARY ITEM 0 1,732,631
NET INCOME(LOSS) $ (873,198) $(27,250,737)
PER SHARE:
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $ (0.09) $ (3.05)
NET INCOME(LOSS) $ (0.09) $ (2.87)
<CAPTION>
Nine Months Ended
March 31,
1994 1993
<S> <C> <C>
REVENUES:
Revenue from Operations $ 27,372,431 $ 27,263,446
Investment Income Revenue 1,460,273 3,293,133
TOTAL REVENUES 28,832,704 30,556,579
EXPENSES:
Cost of Revenues 7,333,826 6,703,653
Operating Expenses 16,076,327 17,120,896
Depreciation & Amortization 406,767 4,211,111
General & Administrative Expenses 3,515,330 3,905,233
Interest Expense 0 638,693
TOTAL EXPENSES 27,332,250 32,579,586
INCOME(LOSS) FROM OPERATIONS BEFORE
TAXES, NON-OPERATING LOSS AND
EXTRAORDINARY ITEM 1,500,454 (2,023,007)
NON-OPERATING LOSS 0 (27,599,230)
INCOME(LOSS) BEFORE TAXES AND
EXTRAORDINARY ITEM 1,500,454 (29,622,237)
LESS:Income Tax Expense 0 0
INCOME(LOSS) BEFORE
EXTRAORDINARY ITEM 1,500,454 (29,622,237)
EXTRAORDINARY ITEM 0 1,732,631
NET INCOME(LOSS) $ 1,500,454 $(27,889,606)
PER SHARE:
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $ 0.16 $ (3.38)
NET INCOME(LOSS) $ 0.16 $ (3.18)
Results from operations are materially affected as a result
of the quasi-reorganization effective June 30, 1993.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1994 AND 1993
(UNAUDITED)
<CAPTION>
Nine Months
March 31,
1994 1993
<S> <C> <C>
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Customers $ 26,372,439 $ 26,697,346
Cash Paid to Suppliers and Employees (27,010,330) (28,220,337)
Interest Received 301,132 213,627
Interest Paid 0 (638,693)
Change in Restricted Cash & Investments 854,633 632,800
NET CASH PROVIDED(USED) BY OPERATIONS 517,874 (1,315,257)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Livestock 469,364 223,091
Proceeds from Sale of Equipment 67,000 17,008
Decrease in Mortgage Receivable 0 27,264,042
Income Received on Investments 1,125,000 3,591,983
Capital Expenditures (738,089) (50,844)
Decrease in Other Investment Activity (11,762) 71,708
NET CASH PROVIDED(USED) BY INVESTING ACTIVITIES 911,513 31,116,987
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of Common Stock 0 8,993,829
Principal Payments on Long Term Notes (35,418) (24,895,132)
NET CASH PROVIDED(USED) BY FINANCING ACTIVITIES (35,418) (15,901,303)
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALE 1,393,969 13,900,427
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 15,337,655 1,792,155
CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD $ 16,731,624 $ 15,692,582
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE> INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Unaudited
(1) INTEREST EXPENSE
All interest expense of the subsidiaries is considered expense of the
parent company. The parent company is due interest on funds it has
advanced to Garden State Park for the purchase, construction and equipping
of the racetrack and funding its operations as needed. As of March 31,
1994, such advances totaled $131,765,585 to Garden State Park, in addition
to initial capitalization of $86,130,000 provided by the net proceeds of
the Company's preferred stock offering in July, 1983. The interest on
these advances was computed at an average prime lending rate between 6% and
6.14% during the periods. The resulting interest owed to the parent
company for the three and nine months ended March 31, 1994 by Garden State
Park was $2,083,608 and $6,067,805, respectively.
(2) INCOME TAX EXPENSE
For the nine months ended March 31, 1994, the Company incurred a tax
loss of approximately $4,438,000. A difference of $5,938,454 to the
Company's financial income of $1,500,454 is the result of permanent
differences (primarily tax depreciation of $6,345,000) due to the quasi-
reorganization. Therefore, the Company did not make a provision for income
taxes for the period.
When the Company incurs income taxes in the future, any future income
tax benefits resulting from the utilization of net operating losses and
other carryforwards existing at June 30, 1993 to the extent resulting from
the quasi-reorganization, will be excluded from the results of operations
and credited to paid in capital. (See Note 5)
Effective July 1, 1993, the Company adopted FAS 109 Accounting for
Income Taxes. The Company has a deferred tax asset of approximately
$64,400,000 arising from a net operating loss carryforward of $161,000,000.
However, due to the uncertainty that the Company will generate income in
the future sufficient to fully or partially utilize these carryforwards,
this net operating loss carryforward is offset by an allowance of
$64,400,000. The effect of adoption on current and prior financial
statements is immaterial.
(3) PREFERRED STOCK CONVERSION
The conversion period for the company's Series A Convertible Preferred
Stock concluded as of July 31, 1993.
(4) PRIOR YEAR INFORMATION
During the third quarter of fiscal 1993, the Company incurred a non-
operating loss of $27,599,230 as a result of the sale of Philadelphia Park
racetrack mortgage. A portion of the proceeds was used to retire the debt
on the Garden State Park racetrack. As a result of the early debt
extinguishment at a discount, the Company realized an extraordinary item of
$1,732,631.
<PAGE>
<PAGE> INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Unaudited
(5) QUASI-REORGANIZATION
The Company adjusted its June 30, 1993 balance sheet to fair value and
transferred the accumulated deficit of $102,729,936 to Capital in Excess of
Par in accordance with quasi-reorganization accounting principles. The
effect of the quasi-reorganization will be that current and future
operations will reflect depreciation and amortization which is more
consistent with current value. Current and future operating statements
will not be comparable to those ending through June 30, 1993.
(6) RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
(7) COMMITMENTS AND CONTINGENCIES
On October 20, 1993, the United States District Court for the District
of New Jersey signed an order granting preliminary approval to a proposed
partial settlement of the consolidated class action pending since 1986
against the Company, its officers and directors and various other
defendants alleging various violations of federal securities laws and other
statutes. Although the Company believes this lawsuit is totally without
merit, it has incurred approximately $1,150,000 in legal expense in
defending against the lawsuit and would have been required to expend
significant additional amounts to continue the defense through trial.
Therefore, in order to avoid further expense, inconvenience and delay and
to dispose of this expensive, burdensome and protracted litigation, the
Company executed the proposed partial Settlement Agreement. The proposed
partial settlement requires the Company to make a $250,000 settlement
payment and an additional payment of up to $150,000 contingent upon receipt
of future amounts by the Company from its sale of the Philadelphia Park
mortgage note. If effectuated, the settlement would dispose of all class
claims made against the Company, its officers and directors and all
derivative claims made on behalf of the Company against all parties in the
litigation. As part of the proposed settlement, the Company's directors and
officers' liability insurance carrier will pay $3,125,000 plus an
additional $4,125,000 which latter amount is subject to reduction on a
dollar for dollar basis in the event of collections from certain
non-settling defendants or in the event of collection of any of the above
described $150,000 contingency payment. On April 12, 1994, an order was
entered approving the settlement agreement and entering a final judgement
of dismissal of the plaintiffs claims against the Company and the Director
defendants in their capacity as officers and directors of the Company. (See
Note 11)
Certain non-settling defendants have appealed the order approving
the settlement. In the event the settlement is upset on appeal, the
the Company intends to continue to vigorously contest this lawsuit.
As of September 27, 1993, the Company entered into development and
management agreements with Gale and Wentworth, Inc., a real estate company
<PAGE>
<PAGE> INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Unaudited
(7) COMMITMENTS AND CONTINGENCIES (Continued)
of Florham Park, New Jersey, to develop an approximate 50 acre portion of
the property at the Garden State Park racetrack which is presently unused
for racing purposes as a retail shopping center. On March 21, the project
received preliminary and final site plan approval from the Cherry Hill
township planning board. Construction is scheduled to commence following
the New Jersey Department of Transportation approvals related to the
project, which approvals are not assured.
A settlement agreement containing certain contingencies has been
reached on real estate tax appeals with the township of Cherry Hill for the
racetrack property. The original assessment of $88,203,100 has been
reduced to $72,000,000 effective as of January 1, 1994. This new
assessment would reduce the real estate taxes on the racetrack property by
approximately $415,000 per year based upon current tax rates.
The Company announced on March 22, 1994, an offer to purchase The
Meadowlands Sports Complex and Monmouth Park for $1 Billion from the New
Jersey Sports and Exposition Authority. An alternative offer also was made
to purchase Monmouth Park and The Meadowlands Race Track improvements for
$125 million and to enter into a long-term lease for the Meadowlands Race
Track for $50 million per year. The offer is subject, among other
conditions, to adoption by the voters of the State of New Jersey of an
appropriate constitutional amendment authorizing the extension of riverboat
casino gaming to the Meadowlands and Garden State Park racetrack
properties. ITB has acquired options to purchase Atlantic City Race Course
and Freehold Raceway.
Assuming acceptance of the Company's offer and adoption of the said
constitutional amendment, the Company proposes to construct interactive
gaming complexes that combine racing, riverboats and entertainment on land
presently used to stable and train horses at The Meadowlands and Garden
State Park. The ITB offer proposes that riverboat casinos be constructed
and moored at "ports of call" located on man-made lakes. Atlantic City's
existing operating, licensed casino owners/operators would be offered the
opportunity to own and operate all of the riverboat casinos at each
location. Monmouth Park and Atlantic City Race Course will serve as the
backstretch and training centers for The Meadowlands and Garden State Park
respectively.
The Company also announced the formation of a wholly owned subsidiary,
International Thoroughbred Gaming Development Corporation (ITG), which will
be responsible for implementing the above project.
(8) NET INCOME (LOSS) PER SHARE
Net income/loss per share for the three months and nine months ended
March 31, 1994 and 1993 is computed on the weighted average number of
shares outstanding. Convertible Preferred Stock has not been included in
the 1993 computation since their inclusion as a common stock equivalent
would result in anti-dilution. The conversion period for the Series A
<PAGE>
<PAGE> INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Unaudited
(8) NET INCOME (LOSS) PER SHARE (Continued)
Convertible Preferred Stock concluded as of July 31, 1993, therefore the
Convertible Preferred Stock has not been included in the 1994 computation.
The number of shares used in the computations were 9,551,220 and 9,547,832
for the respective three and nine month periods ended at March 31, 1994 and
9,509,401 and 8,764,191 for the respective three and nine month periods
ended March 31, 1993.
(9) OPINION OF MANAGEMENT
In the opinion of management, these interim financial statements
reflect all adjustments consisting only of normal recurring accruals which
are necessary to present a fair statement of the results of operations for
the interim periods presented. These statements should be read in
conjunction with the Summary of Significant Accounting Policies and notes
contained in the Company's Annual Report (Form 10-K) for the year ending
June 30, 1993.
(10) NEW AUTHORITATIVE PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 106, "Employers Accounting for
Postretirement Benefits Other Than Pensions," Financial Accounting
Standards No. 107, "Disclosure about Fair Value of Financial Investments,"
and Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Companies are required to adopt the new methods of accounting within the
next year. However, the adoption of the new statements is not expected to
have a material impact on the Company's financial position or results of
operations. The Company currently does not have postretirement benefits.
The Financial Accounting Standards No. 107 and No. 109 were adopted on July
1, 1993.
(11) SUBSEQUENT EVENTS
In connection with its offer to purchase the Meadowlands Sports
Complex and Monmouth Park or, in the alternative, to purchase certain
improvements and enter into a long-term lease for the Meadowlands
Racetrack, the Company has engaged the investment banking firm of
Ladenburg, Thalmann & Co. Inc. to act as its financial advisor.
On April 12, 1994, an order was entered in the United States District
Court of New Jersey approving the settlement agreement and entering a final
judgement of dismissal of the plaintiffs claims against the Company and the
Director defendants in their capacity as officers and directors of the
Company associated with the proposed partial settlement of the consolidated
class action suit. Certain non-settling defendants have appealed the
order approving the settlement. In the event the settlement is upset on
appeal, the Company intends to continue to vigorously contest this
lawsuit. (See Note 7)
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FOR THE NINE MONTHS ENDED MARCH 31, 1994 AND 1993
An independent accountant has reviewed the financial information
herein in accordance with standards established by the American Institute
of Certified Public Accountants. All adjustments and additional
disclosures proposed by said independent accountants have been reflected in
the data presented.
<PAGE>
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
International Thoroughbred Breeders, Inc.
and Subsidiaries
We have reviewed the Consolidated Balance Sheet as of March 31, 1994
and the Consolidated Statements of Shareholders' Equity, Operations, and
Cash Flows of International Thoroughbred Breeders, Inc. and Subsidiaries
for the three month and nine month periods ended March 31, 1994 and 1993.
These financial statements are the responsibility of the company's
management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the Consolidated Balance Sheet as of June 30, 1993, and
the related Consolidated Statements of Operations, Statement of
Shareholders' Equity, and Cash Flows for the year then ended (not presented
herein); and have issued our report thereon dated October 6, 1993. We
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of June 30, 1993, is fairly stated in all
material respects in relation to the Consolidated Balance Sheet from which
it has been derived.
MORTENSON AND ASSOCIATES, P.C.
Certified Public Accountants
Cranford, NJ
April 21, 1994
<PAGE>
<PAGE> INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1994
AND FOR THE NINE MONTHS ENDED MARCH 31, 1994
OPERATIONS
Total revenues for the three and nine month periods ended March 31,
1994 decreased $2,410,039 and $1,723,875 or 22% and 6% respectively in
comparison to the same periods last fiscal year. These decreases are
primarily the result of: (1) severe weather conditions which negatively
impacted live racing and simulcasting at Garden State Park by forcing the
cancellation of 17 out of 45 scheduled days during the third quarter
significantly reduced operating revenues generated by the racetrack segment
during the periods (see Garden State Park operations); and (2) decreased
investment income due to the sale during the third quarter of last fiscal
year of the mortgage note receivable held on the Philadelphia Park
racetrack. Total expenses for the three and nine month periods were
significantly reduced primarily as a result of the decrease in the number
of live racing days and an overall reduction in operating expenses.
For the third quarter of fiscal 1994, the Company's net loss from
operations decreased $510,940 or 37% (from a net loss of $1,384,138 to a
net loss from operations of $873,198 before taxes) over the corresponding
quarter of fiscal 1993. The decrease in net loss for the three month
period reflects the net effect of decreased revenues and expenses
associated with the decreased number of live racing days and an overall
reduction in operating expenses as discussed above. The Company realized
net income from operations of $1,500,454 for the nine month period ended
March 31, 1994 as compared to a net loss from operations of $2,023,007
before non-operating and extraordinary item for the comparable periods in
fiscal 1993. The change of $3,523,461 from net losses to net income for
the nine month period just ended primarily resulted from: (1) operating
profits before interest due to the parent generated by Garden State Park
and operating profits from the breeding segment for the nine month period;
reduced by (2) decreased investment income as a result of the sale of the
note held on Philadelphia Park.
Depreciation expense for the nine and three months ended March 31,
1994 was $406,767 and $133,842 as compared to $4,211,111 and $1,448,753 for
the comparable periods in the last fiscal year. The significant decreases
of $3,804,344 and $1,314,911 were primarily due to the quasi-reorganization
of the Company's assets at June 30, 1993 which reduced the assets to fair
values. (See Note 5)
Garden State Park
Garden State Park incurred a loss of $820,407 before interest due to
the parent Company for the three months ended March 31, 1994 as compared to
a loss of $931,621 for the comparable period in fiscal year 1993. For the
nine month period just ended, Garden State Park realized income of $682,731
before interest due to the parent compared to a loss of $3,178,068 for the
comparable period in fiscal 1993.
<PAGE>
<PAGE> INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1994
AND FOR THE NINE MONTHS ENDED MARCH 31, 1994
Garden State Park (Continued)
Quarterly and year-to-date net operating income and losses at Garden
State Park for the current fiscal year as compared to the net losses for
last year are as follows:
Net Loss Net Loss
Fiscal 1993 Fiscal 1992 Decrease
1st Quarter $728,745 $(1,274,657) $(2,003,402)
2nd Quarter 774,393 (971,790) (1,746,183)
3rd Quarter (820,407) (931,621) (111,214)
Year-to-Date $682,731 $(3,178,068) (3,860,799)
During the fiscal quarter ended March 31, 1994, Garden State's revenue
significantly decreased $2,396,058 or 21% from $11,004,262 for the third
quarter of fiscal 1993 to $8,608,204 for the comparable quarter in fiscal
1994, primarily reflecting the net effect of: (1) severe weather
conditions which negatively impacted live racing and simulcasting during
the quarter, as compared to the same period in fiscal 1993 which
consequently decreased revenues generated by live on track racing and the
simulcasting out of these races to other racetracks; and (2) a 4% decrease
in simulcast receiving revenues for the comparable periods. A significant
52% decrease in revenues from the 1994 live thoroughbred meet during the
quarter was primarily the result of the forced cancellation of 17 out of 45
of Garden State Park's scheduled thoroughbred race days due to the severe
weather conditions which affected the northeastern portion of the United
States during most of the three month period. In addition, the simulcast
receiving revenues were severely reduced due to the adverse weather
condition which forced the cancellation of races scheduled to be received
from New Jersey racetracks and other racetracks in the affected areas.
Expenses for the third quarter of fiscal 1994 were $9,428,611 as compared
to $11,935,883 in the comparable quarter of fiscal 1993. The decrease of
$2,507,272 or 21% was primarily the result of: (1) a significant decrease
in depreciation and amortization primarily as a result of the
quasi-reorganization at June 30, 1993 which adjusted the racetrack's assets
to market value; (2) a net decrease in operating expenses primarily as a
result of the continuation of a cost reduction program initiated in fiscal
1993; and (3) decreased costs associated with decreased live operations
during the comparable periods. The net effect of decreased revenues and
expenses primarily accounted for the track's net loss of $820,407 for the
three months ended March 31, 1994, a decreased loss of $111,252 from a loss
of $931,621 during the three months ended March 31, 1993.
During the nine months ended March 31, 1994 Garden State's revenue
decreased $110,229 or less than 1% when compared to the same period last
year, primarily reflecting; (1) a significant increase in revenues
generated from the simulcasting of the live races to out-of-state
racetracks in addition to the simulcasting into the Atlantic City Casinos
during the first half of fiscal 1994 as a result of the expansion of full
card simulcasting; (2) increases in revenues generated from simulcasting
<PAGE>
<PAGE> INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1994
AND FOR THE NINE MONTHS ENDED MARCH 31, 1994
Garden State Park (Continued)
of Garden State Park races into other New Jersey racetracks during the
first six months of this year; offset by (3) the significant decrease in
revenues due to the cancellation of a number of racing activities during
the third quarter as discussed above. Expenses decreased $3,971,027 or 13%
for the nine months ending March 31, 1994 when compared to the same period
last year primarily as a result of the decreases in depreciation and
amortization and racetrack operating expenses as discussed above. Garden
State Park realized income before interest due to the parent of $682,731
for the nine month period ended March 31, 1994 as compared to a loss of
$3,178,068 for the nine months ended March 31, 1993.
Average daily on-track attendance and wagering during the current
thoroughbred meet (which started January 13th), through March 31st,
averaged 3,279 and $238,866, respectively, over 28 dates of live racing.
During the 1993 Thoroughbred Meet attendance and on-track wagering averaged
4,194 and $358,408, respectively, over 39 dates of live racing.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1994
AND FOR THE NINE MONTHS ENDED MARCH 31, 1994
Garden State Park (Continued)
The following summarizes the average handle associated with the
simulcast activity at Garden State Park during the first nine months of
both fiscal 1994 and 1993.
<TABLE>
July 1 thru March 31,
FISCAL 1994 FISCAL 1993
Number Average Number Average
of Days Handle of Days Handle
<S><C> <S> <C> <C> <C> <C> <C>
LIVE RACING AT GARDEN
STATE PARK LIVE
THOROUGHBRED 28 238,866 39 358,408
HARNESS 55 237,558 53 303,908
SIMULCASTING OF GARDEN STATE PARK
TO
MONMOUTH (T) 28 54,412 37 78,240
FREEHOLD (T) 28 30,718 39 40,113
ATLANTIC CITY (T) 0 0 39 48,429
MEADOWLANDS (T) 28 314,990 39 359,214
OUT-OF-STATE TRACK (T) 28 579,536 39 204,011
A.C. CASINOS (T) 28 42,344 0 0
MONMOUTH (S) 55 21,958 0 0
FREEHOLD (S) 55 83,757 52 105,829
ATLANTIC CITY (S) 0 0 53 31,691
MEADOWLANDS (S) 55 444,343 52 373,375
OUT-OF-STATE TRACK (S) 55 367,498 53 164,547
A.C. CASINOS (S) 55 33,228 0 0
SIMULCASTING OF GARDEN STATE PARK
FROM
MONMOUTH (T) 49 110,920 49 175,176
ATLANTIC CITY (T) 48 117,337 49 185,868
MEADOWLANDS (T) 68 132,925 69 214,520
FREEHOLD (S) 168 40,261 169 59,935
MEADOWLANDS (S) 101 124,638 109 191,101
OUT-OF-STATE TRACK (T,S) 271 227,509 254 148,216
(T)=Thoroughbred Races (S)=Standardbred (Harness) Races
</TABLE>
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1994
AND FOR THE NINE MONTHS ENDED MARCH 31, 1994
Garden State Park (Continued)
Garden State Park's 1994 Thoroughbred Meet began January 13, 1994 and
is scheduled to run through May 28, 1994. Racing will be conducted at
night on all dates included in the schedule.
The Company has received approval from the New Jersey Racing
Commission to run a 51 night harness meet from September 7 through December
3, 1994.
Breeding Operations
Revenues for the three months ended March 31, 1994 and 1993 were
$56,593 and $56,757, respectively. Revenues for the nine months ended
March 31, 1994 and 1993 were $560,558 and $242,145, respectively,
representing an increase of $318,576. The increase in the comparable nine
month period was primarily a result of the increased value of the breeding
stock sold during periods.
The cost of revenues generated by the breeding segment in the third
quarter of fiscal 1994 was $2,987, a decrease of $149,068 over the same
quarter last fiscal year and on a fiscal year-to-date basis was $166,648
representing a $127,755 decrease over last fiscal year-to-date primarily as
a result of the reduced cost of bloodstock sold during comparable periods.
Operating and depreciation expenses for the three and nine months ended
March 31, 1994 were reduced $21,639 and $152,024 due to the number of
animals owned during the periods being significantly reduced. Total
expenses for the breeding segment for the three months, ended March 31,
1994 and 1993 were $10,464 and $201,863 respectively, and $308,183 and
$606,456 for the respective nine months then ended.
The breeding operations realized income of $46,129 and $252,375 before
taxes for the three and nine months ended March 31, 1994 as compared to a
loss of $145,106 and $364,311 for the comparable periods in fiscal 1993
primarily as a result of the increased revenues and decreased expenses
generated in this fiscal year from the bloodstock sales discussed above.
LIQUIDITY AND FINANCIAL RESOURCES
Consolidated and Racetrack Segment
The Company's working capital as of March 31, 1994 was $15,520,051
which represents an increase of $1,486,397 from the nine months ended March
31, 1993. This increase is primarily the result of positive cash flow from
operations since the third quarter of fiscal 1993.
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1994
AND FOR THE NINE MONTHS ENDED MARCH 31, 1994
Breeding Segment
At March 31, 1994, the Company owned 2 thoroughbred broodmares, 4
stallion shares in 4 thoroughbred stallions, various seasons, one yearling
and one other horse and a two thirds interest in one other horse.
During fiscal 1994 the Company plans to continue a reduction of its
bloodstock holdings begun during fiscal 1986 in response to what management
believed to be a long term downturn in the bloodstock market.
INFLATION
To date, inflation has not had a material effect on the Company's
operations.
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 6. Reports on Form 8-K
The Company did not file any reports on 8-K with respect to the
quarter ended December 31, 1993.
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
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.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
May 9, 1994 /s/Arthur Winkler
Arthur Winkler
President and Director
May 9, 1994 /s/William H. Warner
William H. Warner
Treasurer, Principal Financial and
Accounting Officer
