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 December 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
(State or other jurisdiction of incorporation or organization)
22-2332039
(I.R.S. Employer Identification 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
Common Stock, $ 2.00 par value
Outstanding at February 3, 1995
9,551,345
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND JUNE 30, 1994
ASSETS
<TABLE>
December 31,
1994 June 30,
(UNAUDITED) 1994
<CAPTION>
CURRENT ASSETS:
<S> <C> <C>
Cash $ 1,660,026 $ 2,683,361
Short-Term Investments 14,362,358 13,392,730
TOTAL CASH AND CASH EQUIVALENTS 16,022,384 16,076,091
Restricted Cash and Investments 269,224 2,690,072
Accounts Receivable - Net 1,168,206 937,921
Prepaid Expenses 374,712 907,654
Accrued Interest Receivable 417 44,439
Other Current Assets 34,335 7,703
TOTAL CURRENT ASSETS 17,869,278 20,663,880
LAND, BUILDINGS, EQUIPMENT AND LIVESTOCK:
Land and Buildings 52,238,239 52,133,715
Equipment 2,017,034 1,800,630
Livestock 10,000 187,951
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK 54,265,273 54,122,296
LESS: Accumulated Depreciation 949,650 801,031
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK - NET 53,315,623 53,321,265
OTHER ASSETS 1,605,838 448,266
TOTAL ASSETS $ 72,790,739 $ 74,433,411
</TABLE>
See Notes to Financial Statements.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND JUNE 30, 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
December 31,
1994 June 30,
(UNAUDITED) 1994
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts Payable and Accrued Expenses $ 1,922,769 $ 3,866,043
Notes Payable - Current Portion 15,000 40,000
TOTAL CURRENT LIABILITIES 1,937,769 3,906,043
DEFERRED INCOME 640,509 719,383
COMMITMENTS AND CONTINGENCIES 0 0
SHAREHOLDERS' EQUITY:
Series A (Convertible) Preferred Stock
$100.00 Par Value,
Authorized 500,000 Shares, Issued
and Outstanding,
362,448 and 362,443 Shares, Respectivel 36,244,775 36,244,275
Common Stock $2.00 Par Value, Authorized
25,000,000 Shares,
Issued and Outstanding, 9,551,337 and
and 9,551,255 Shares,
Respectively 19,102,673 19,102,509
Capital in Excess of Par 11,959,941 11,960,605
Retained Earnings (subsequent to
to June 30, 1993, date of quasi-
reorganization, total deficit eliminat 2,905,072 2,500,596
$102,729,936)
TOTAL SHAREHOLDERS' EQUITY 70,212,461 69,807,985
TOTAL LIABILITIES & SHAREHOLDERS' EQUIT$ 72,790,739 $ 74,433,411
See Notes to Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993
(UNAUDITED)
Six Months Ended
December 31,
1994
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Cash Received from Customers $ 17,114,809
Cash Paid to Suppliers and Employees (19,026,605)
Interest Received 406,725
Cash Received from Sale of Trading Securities 340,000
Change in Restricted Cash & Investments 2,420,848
NET CASH PROVIDED BY OPERATIONS 1,255,778
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Livestock 178,359
Proceeds from Sale of Equipment 8,500
Payment on Option to Purchase Freehold Racetrack (1,150,000)
Capital Expenditures (313,772)
Increase(Decrease) in Other Investment Activity (7,572)
NET CASH PROVIDED(USED) BY INVESTING ACTIVITIES (1,284,484)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments on Long Term Notes (25,000)
NET CASH USED BY FINANCING ACTIVITIES (25,000)
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS (53,707)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 16,076,091
CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD $ 16,022,384
</TABLE>
<TABLE>
Six Months Ended
December 31,
1993
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Cash Received from Customers $ 17,864,222
Cash Paid to Suppliers and Employees (19,191,756)
Interest Received 200,101
Cash Received from Sale of Trading Securities 1,125,000
Change in Restricted Cash & Investments 1,766,097
NET CASH PROVIDED BY OPERATIONS 1,763,664
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Livestock 391,612
Proceeds from Sale of Equipment 67,000
Payment on Option to Purchase Freehold Racetrac 0
Capital Expenditures (375,206)
Increase(Decrease) in Other Investment Activity 177,188
NET CASH PROVIDED(USED) BY INVESTING ACTIVITIES 260,594
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments on Long Term Notes (35,418)
NET CASH USED BY FINANCING ACTIVITIES (35,418)
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 1,988,840
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 15,337,655
CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD $ 17,326,495
See Notes to Financial Statements.
</TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993
(UNAUDITED)
<TABLE>
Three Months Ended
December 31,
1994 1993
<CAPTION>
REVENUES:
<S> <C> <C>
Revenue from Operations $ 10,516,821 $ 11,282,588
Investment Income Revenue 210,496 1,239,052
TOTAL REVENUES 10,727,317 12,521,640
EXPENSES:
Cost of Revenues 3,234,960 3,648,189
Operating Expenses 5,667,763 5,553,461
Depreciation & Amortization 144,156 132,017
General & Administrative Expenses 1,322,572 1,345,690
TOTAL EXPENSES 10,369,451 10,679,357
INCOME FROM OPERATIONS
BEFORE TAXES 357,866 1,842,283
LESS:Income Tax Expense 0 0
NET INCOME $ 357,866 $ 1,842,283
NET INCOME PER SHARE $ 0.04 $ 0.19
See Notes to Financial Statements.
</TABLE>
<TABLE>
Six Months Ended
December 31,
1994 1993
<CAPTION>
REVENUES:
<S> <C> <C>
Revenue from Operations $ 17,610,828 $ 18,743,653
Investment Income Revenue 702,703 1,359,588
TOTAL REVENUES 18,313,531 20,103,241
EXPENSES:
Cost of Revenues 4,513,337 4,737,004
Operating Expenses 10,300,015 10,236,958
Depreciation & Amortization 286,486 272,925
General & Administrative Expenses 2,809,216 2,482,703
TOTAL EXPENSES 17,909,054 17,729,590
INCOME FROM OPERATIONS
BEFORE TAXES 404,476 2,373,651
LESS:Income Tax Expense 0 0
NET INCOME $ 404,476 $ 2,373,651
NET INCOME PER SHARE $ 0.04 $ 0.25
See Notes to Financial Statements.
</TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
Common
Number of
Shares Amount
<CAPTION>
<S> <C> <C>
BALANCE - JUNE 30, 1994 9,551,255 $ 19,102,509
Shares Issued for Fractional Exchanges
With Respect to the
One-for-twenty Reverse Stock Split 82 164
effected on March 13, 1992
Net Income for the Six Months --- ---
Ended December 31, 1994
BALANCE - DECEMBER 31, 1994 9,551,337 $ 19,102,673
See Notes to Financial Statements.
</TABLE>
<TABLE>
Preferred
Number of
Shares Amount
<CAPTION>
<S> <C> <C>
BALANCE - JUNE 30, 1994 362,443 $ 36,244,275
Shares Issued for Fractional Exchanges
With Respect to the
One-for-twenty Reverse Stock Split 5 500
effected on March 13, 1992
Net Income for the Six Months --- ---
Ended December 31, 1994
BALANCE - DECEMBER 31, 1994 362,448 $ 36,244,775
See Notes to Financial Statements.
</TABLE>
<TABLE>
Capital
in Excess Retained
of Par Earnings
<CAPTION>
<S> <C> <C>
BALANCE - JUNE 30, 1994 $ 11,960,605 $ 2,500,596
Shares Issued for Fractional Exchanges
With Respect to the
One-for-twenty Reverse Stock Split (664) ---
effected on March 13, 1992
Net Income for the Six Months --- 404,476
Ended December 31, 1994
BALANCE - DECEMBER 31, 1994 $ 11,959,941 $ 2,905,072
See Notes to Financial Statements.
</TABLE>
<TABLE>
Total
<CAPTION>
<S> <C>
BALANCE - JUNE 30, 1994 $ 69,807,985
Shares Issued for Fractional Exchanges
With Respect to the
One-for-twenty Reverse Stock Split ---
effected on March 13, 1992
Net Income for the Six Months 404,476
Ended December 31, 1994
BALANCE - DECEMBER 31, 1994 $ 70,212,461
See Notes to Financial Statements.
</TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(1) EXERCISE OF OPTION TO PURCHASE FREEHOLD RACEWAY
On December 13, 1994, ITB exercised its option to acquire all of the
outstanding stock of Freehold Racing Association, Inc. ("FRA") and Atlantic
City Harness, Inc., ("ACH") the operating companies of Freehold Raceway, and
CIRCA 1850, Inc., a small real estate holding company, for $23 million,
subject to adjustment. The acquisition was approved by the New Jersey Racing
Commission. FRA and ACH will continue to hold the racing permits and conduct
the racing programs. The acquisition was completed on February 2, 1995 to be
effective as of January 1, 1995. (See Note 9)
Freehold Raceway, located in the western Monmouth county portion of New
Jersey, is the nation's oldest harness track. It is unique in that it
operates the only extended daytime harness pari-mutuel facility in the
country. FRA and ACH previously received approval from the New Jersey Racing
Commission to conduct 209 days of racing in 1995. Additionally, the track
hosts full-card simulcast betting on thoroughbred and harness racing from
numerous tracks throughout the country.
(2) INTEREST EXPENSE
Garden State Park Racetrack, Inc. is a wholly owned subsidiary of the
parent company, International Thoroughbred Breeders, Inc. 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 December 31, 1994, such advances totaled
$141,442,659 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 is computed at an
average prime lending rate between 7.25% and 8.50% during the periods. The
resulting interest owed to the parent company for the three and six months
ended December 31, 1994 by Garden State Park was $2,896,242 and $5,510,817,
respectively.
(3) INCOME TAX EXPENSE
Effective July 1, 1993, the Company adopted the provisions of Statement
of Financial Standards (SFAS) No. 109, Accounting for Income Taxes. This
Statement requires that deferred income taxes reflect the tax consequences on
future years of differences between the tax bases of assets and liabilities
and their financial reporting amounts. The effect of adoption of this
Statement on current and prior financial statements is immaterial. No
provision for income taxes has been made for the six month period ended
December 31, 1994, as the Company is in a net operating loss carryforward
position for tax purposes.
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.
The Company has a net operating loss carryforward of approximately
$161,500,000 at December 31, 1994, expiring in the years after June 30, 2001
through June 30, 2009. SFAS No. 109 requires the establishment of a deferred
tax asset for all deductible temporary differences and operating loss
carryforwards. Because of the uncertainty that the Company will generate
income in the future sufficient to fully or partially utilize these
carryforwards, however, any deferred tax asset is offset by an allowance of
the same amount pursuant to SFAS No. 109. Accordingly, no deferred tax asset
is reflected in these financial statements.
(4) COMMITMENTS AND CONTINGENCIES
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 ("NJSEA"). 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 casino gaming at the Meadowlands and
Garden State Park racetracks. ITB acquired options to purchase Atlantic City
Race Course and Freehold Raceway. The option on the Atlantic City Race Course
will expire on March 18, 1995, with an additional one year option available
for purchase at that time. The option to purchase Freehold Raceway was
exercised on December 13, 1994 (See Note 9). The Company is committed to an
approximate $23,000,000 purchase price for the Freehold Raceway (See Note 9,
Subsequent Events) and if the Atlantic City Race Course option is exercised,
the Company could be committed for up to an additional $20,000,000 to complete
the purchase of the Atlantic City Race Course. Assuming acceptance of the
Company's offer by the NJSEA, the exercise of the Atlantic City racetrack
option and adoption of the said constitutional amendment, the Company proposes
to construct interactive gaming complexes that combine racing, casino gaming
and entertainment on land presently used to stable and train horses at The
Meadowlands and Garden State Park. The ITB offer proposes that up to 12
casinos be constructed and operated in the current stable area of each
racetrack. The existing operating, licensed casino owners/operators in
Atlantic City, New Jersey would be offered the opportunity to own and operate
all of those casinos with the Company paid rent by the casino operators. The
plan does provide that tracks can operate casinos within racetrack structures.
Monmouth Park and Atlantic City Race Course would serve as the backstretch and
training centers for The Meadowlands and Garden State Park respectively.
The Company formed a wholly owned subsidiary, International Thoroughbred
Gaming Development Corporation (ITG), which is responsible for implementing
the above project. In addition to the funds expended during the last fiscal
year the Company is committed to approximately $775,000 in expenses, of which
$620,000 has been recognized during the first six months of the 1995 fiscal
year, related to the development of this project. The Company's financial
commitment could increase if circumstances warrant.
No assurances can be given that the Company's offer will be accepted or
that the constitutional amendment will be placed on the ballot or adopted.
Furthermore, even assuming such acceptance and adoption, no assurance can be
given that the Company will be able to obtain the required financing.
On August 16, 1986, a putative "class action" was filed against the
Company, its Garden State Race Track, Inc. subsidiary, First Jersey
Securities, Inc. ("First Jersey"), two other broker-dealers, Robert E.
Brennan, the Company's Chairman of the Board and principal stockholder, and
ten other present and former directors of the Company alleging various
violations of federal securities laws and other statutes. On July 8, 1987,
another putative "class action" was filed against the Company, First Jersey,
another broker-dealer, Robert E. Brennan, and six other present and former
directors of the Company alleging various violations of federal securities
laws and other statutes. During fiscal 1988, based upon a change of venue
motion which had been filed by the Company, the U.S. District Court
transferred both cases from the Southern District of New York to the District
of New Jersey. On June 7, 1988 a consolidated amended complaint was filed by
the plaintiffs in the two putative "class action" suits described above in
federal court in Trenton. This complaint was substantially similar to the
original suits filed separately except to name eleven current and former
directors as defendants. On July 27, 1989, based upon motions which had been
filed by the Company, the United States District Court, District of New Jersey
dismissed several, but not all, of the claims and allegations contained in the
consolidated amended complaint. 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 claims. 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. In order to avoid further expense, inconvenience
and delay and to dispose of this expensive, burdensome and protracted
litigation, the Company executed a proposed partial Settlement Agreement. The
proposed partial settlement required 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. 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.
An estimate of any potential loss cannot be made at this time.
(5) INVESTMENT INCOME REVENUE
Investment income revenue consists primarily of gains realized on
trading securities and interest on short term cash equivalent investments.
(6) NET INCOME (LOSS) PER SHARE
Income per share for the three and six month periods ended December 31,
1994 and 1993 is computed on the weighted average number of shares
outstanding. The Convertible Preferred Stock has not been included in the
computations because the conversion period has expired. The number of shares
used in the computations were 9,551,328 and 9,539,796 for the three months
ended December 31, 1994 and 1993, respectively and for the respective six
month periods were 9,551,314 and 9,544,622.
(7) OPINION OF MANAGEMENT
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
and six month periods ended December 31, 1994 are not necessarily indicative
of the results that may be expected for the year ended June 30, 1995. The
unaudited condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and footnotes thereto
included in the Company's Form 10-K for the year ended June 30, 1994.
(8) NEW AUTHORITATIVE PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting
by Creditors for Impairment of a Loan" is effective for fiscal years beginning
after December 15, 1994 and has been amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosure. The
Company does not have any loans that are subject to an impairment assessment
as defined by SFAS No. 114.
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", is effective for fiscal years beginning after December 15,
1993. The Company adopted SFAS 115 on June 30, 1994. The adoption of
SFAS No. 115 did not have a material effect on the financial statements.
(9) SUBSEQUENT EVENTS
(a) On January 25, 1995 the Company agreed to modify certain terms of:
1) the asset purchase agreement dated October 12, 1990 relating to the sale of
its Philadelphia Park subsidiary; and 2) the agreement whereby the Company
assigned its rights under the purchase money mortgage and note it held on
Philadelphia Park. Under the terms of this modification, the Company is
released from all liability for environmental clean-up at Philadelphia Park to
the extent that such clean-up costs exceed $370,500 (previously the Company
had been responsible for up to $3.35 million in clean-up costs). In
consideration for this release, the Company has waived its right to: 1)
certain fees that it was entitled to receive under the asset purchase
agreement based upon a percentage of Philadelphia Park's handle when operating
in competition with Garden State Park; and 2) all future contingent payments
due the Company in connection with its sale of the Philadelphia Park mortgage
note based upon possible future profitable operations of Philadelphia Park.
The Company retains the right to receive an accounting from the assignee of
the Philadelphia Park mortgage note so that the Company may determine to what
extent, if any, an amount equal to the 1994 and 1995 contingent fees are
payable under the terms of the proposed partial settlement of the putative
"class action". (See Note 4)
(b) ITB completed its acquisition of all of the stock of FRA and ACH,
and CIRCA 1850, Inc. (See Note 1), from an unrelated party for a total of $23
million, including $17.8 million for the companies' stock and the
restructuring of approximately $5.2 million in long-term debt.
The purchase price of the stock was $17.8 million with approximately
$5.3 million paid in cash (exclusive of final adjustments) and the balance
financed by an eight year, $12.5 million note at eighty percent of the
prevailing prime rate, not to exceed six percent. The note is secured by a
mortgage on the land and buildings at Freehold Raceway and other collateral.
The transaction completed on February 2, 1995 was effective as of January 1,
1995.
At closing, $5.2 million of debt was retired with ITB and the seller
each advancing to FRA approximately $2.6 million. The seller and ITB received
from FRA promissory notes evidencing the indebtedness secured by mortgages on
the racetrack property and other collateral.
FRA and ACH will race 209 days in 1995, as previously approved by the
New Jersey Racing Commission. ACH's meet, which began on January 1, will
continue through May 30 while FRA will operate from August 17 through December
30.
The following unaudited pro forma combined results of operations account
for the acquisition as if it had occurred on July 1, 1992. The pro forma
results give effect to depreciation of fixed assets purchased, amortization of
goodwill, and interest expense.
<TABLE>
Unaudited Pro Forma Combined Results of Operations
Six Months Years ended
Ended Dec. 31 June 30,
1994 1993 1994 1993
<CAPTION>
<S> <C> <C> <C> <C>
Total revenues $ 36,350,388 $36,478,186 $ 73,421,902 $ 74,713,707
Net earnings 1,866,010 3,142,066 4,389,154 (28,975,624)
Net earnings per common share
.19 .33 .46 (3.05)
</TABLE>
The above pro forma statements do not purport to be indicative of the
financial position or results which actually would have occurred had the
acquisition been made on July 1, 1992 or subsequent to that date.
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FOR THE SIX MONTHS ENDED DECEMBER 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 accompanying condensed consolidated balance sheet
of International Thoroughbred Breeders, Inc., and subsidiaries as of December
31, 1994, and the related condensed consolidated statement of shareholders'
equity for the six month period then ended, the condensed consolidated
statements of operations for the three and six month periods ended December
31, 1994 and 1993, and the condensed consolidated statement of cash flows for
the six month periods ended December 31, 1994 and 1993. These financial
statements are the responsibility of the company's management.
We conducted our reviews 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 reviews, we are not aware of any material modifications
that should be made to the condensed consolidated financial statements
referred to above 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, 1994, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for the year then ended (not presented herein); and in our report
dated August 9, 1994, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of June 30, 1994,
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
February 2, 1995
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED DECEMBER 31, 1994
AND FOR THE SIX MONTHS ENDED DECEMBER 31, 1994
OPERATIONS
Total revenues for the three months ended December 31, 1994 decreased
$1,794,323 or 14% compared to the three months ended December 31, 1993. For
the six month period ended December 31, 1994, total revenues decreased
$1,789,710 or 9% in comparison to the same period last year. The decrease in
revenues primarily reflect: (1) a 5% decrease in revenues generated by the
racetrack segment of $1,132,825 in the first half of fiscal 1995 as compared
to the first half of fiscal 1994; and (2) a decrease in activity of $656,885
associated with the sale of trading securities which resulted in a decrease in
investment income. Management believes that the breeding operation has become
insignificant to the overall operation of the Company. Income before taxes
for breeding operations for the three and six month periods ended December
31,1994 was $33,554 and $70,866, respectively as compared to $206,246 and
$236,762 for the respective periods in fiscal 1994.
The Company realized net income from operations of $404,476 and $357,866
for the respective six and three month period ended December 31, 1994 as
compared to net income from operations of $2,373,651 and $1,842,283 for the
comparable periods in fiscal 1994. The decrease of $1,969,175 in net income
for the six month period just ended primarily resulted from: 1) a decrease in
net income from the racetrack segment of approximately $650,000; 2) increased
corporate expenses of approximately $620,000 associated with the development
of casino gaming within racetrack structures, via the Company's newly
established wholly owned subsidiary, International Thoroughbred Gaming
Development Corporation ("ITG"); 3) reduced income generated by the breeding
segment; and 4) the decrease in investment revenue of approximately $650,000.
Depreciation expense for the six and three months ended December 31,
1994 was $286,486 and $144,156 as compared to $272,925 and $132,017 for the
comparable periods in the last fiscal year.
During the three and six months ended December 31, 1994, Garden State
Park realized income of $557,014 and $852,917, respectively before income tax
and interest due the parent company of $2,896,242 and $5,510,817 for the
respective three and six month periods.
Quarterly and year-to-date net income at Garden State Park for the
current fiscal year as compared to the net losses for last year are as
follows:
<TABLE>
Net Income Net
Fiscal 1995 Fiscal 1994 Decrease
<CAPTION>
<S> <C> <C> <C>
1st Quarter $ 295,903 $ 728,745 $ (432,842)
2nd Quarter 557,014 774,393 (217,379)
Year-to-Date $ 852,917 $1,503,138 $ (650,221)
</TABLE>
<PAGE>
During the three months ended December 31, 1994, Garden State Park's
revenue decreased $523,046 or 5% when compared to the same period last year,
primarily reflecting the net effect of: 1) a 21% decrease in revenues
generated from the simulcasting of Garden State Park races into other New
Jersey racetracks; 2) a 16% decrease in revenues generated from the simulcast
of other New Jersey racetracks into Garden State Park; 3) a 16% decrease in
revenues generated by live on-track racing; partially offset by 4) a 65%
increase in revenues generated from the simulcasting of the live races to
out-of-state racetracks and the Atlantic City Casinos. Expenses decreased
$305,667 or 3% for the three months ending December 31, 1994 when compared to
the same period last year. The decrease in revenues and expenses primarily
accounted for the racetrack realizing net income from operations of $557,014
for the three months ended December 31, 1994 as compared to income of $774,393
during the three months ended December 31, 1993.
During the six months ended December 31, 1994 Garden State's revenue
decreased $849,147 or 5% when compared to the same period last year, primarily
reflecting the net effect of: 1) decreased revenues generated by simulcasting
to and from the other New Jersey racetracks; 2) decreased revenues generated
by live on-track racing; and 3) the increased revenues generated by
out-of-state simulcasting as discussed above. Expenses decreased $198,926
or 1% forthe six months ending December 31, 1994 when compared to the
same period last year. As a result of decreased revenues and expenses,
Garden State Park realized income of $852,917 for the first half of fiscal
1995 as compared to income of $1,503,138 for the first half of fiscal 1994.
Garden State Park's 1994 Standardbred (Harness) Racing Meet began
September 7, 1994 and ran 55 dates on a four night per week basis until
December 10, 1994.
On-track wagering during the 1994 Harness Meet, through December 10,
1994, averaged $207,747 over 55 dates of live racing. During the 1993 Harness
Meet in fiscal 1994, on-track wagering averaged $237,558 over 55 dates of live
racing.
The following summarizes the average handle associated with the
simulcast activity at Garden State Park during the first six months of both
fiscal 1995 and 1994.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED DECEMBER 31, 1994
GARDEN STATE PARK SUMMARY OF AVERAGE
HANDLES ASSOCIATED WITH SIMULCASTING
<TABLE>
July 1 thru December 31,
FISCAL 1995 FISCAL 1994
Number Average Number Average
of DaysHandle of DaysHandle
SIMULCAST OF GARDEN STATE
<CAPTION>
PARK RACES TO:
<S> <C> <C> <C> <C> <C>
Monmouth Park (S) 55 24,446 55 21,958
Freehold Racetrack (S) 55 83,228 55 83,757
The Meadowlands (S) 55 348,849 55 444,343
Out-Of-State Tracks (S) 55 658,699 55 367,498
Atlantic City Casinos (S) 55 35,578 55 33,228
SIMULCAST OF RACES TO GARDEN
STATE PARK RACES FROM:
Monmouth Park (T) 49 86,378 49 110,920
Atlantic City Racetrac (T) 40 69,464 48 117,337
The Meadowlands (T) 69 106,952 68 132,925
Freehold Racetrack (S) 109 34,353 114 41,576
The Meadowlands (S) 37 95,697 38 138,201
Out-Of-State Tracks (T,S) 183 218,306 183 213,356
T=Thoroughbred Races S=Standardbred (Harness) Rac
</TABLE>
Garden State Park's 1995 Thoroughbred Meet began January 13, 1995 and is
scheduled to run through May 27, 1995. Racing was conducted three times a
week during the month of January and is scheduled for four nights a week
during the remainder of the meet, for a total of 76 racing dates. 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 49 night harness meet from September 8 through December 3, 1995.
LIQUIDITY AND FINANCIAL RESOURCES
Consolidated and Racetrack Segment
The Company's working capital as of December 31, 1994 was $15,931,509
which represents a decrease of $826,328 from the first half of fiscal 1994.
This decrease is primarily the net result of the net effect of; 1) the
utilization of cash of $1,150,000 towards the purchase of the Freehold
racetrack (See Notes 1 and 9); and 2) positive cash flow from operations.
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 4. Submission of Matters to a Vote of Security Holders
(a) The Registrant's Annual Meeting of Stockholders was held on Tuesday,
December 20, 1994.
(b) At said meeting, the following seven individuals were elected to
serve as directors until the next annual meeting of stockholders and until
their successors are elected and qualified.
Robert E. Brennan
Charles R. Dees, Jr.
Joseph K. Fisher
Kerry B. Fitzpatrick
Robert J. Quigley
Ronald J. Riccio
Arthur Winkler
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
Exhibit Incorporated by
Number Description of Exhibit Reference to
Notice, Proxy Statement and Form of Proxy
21.1 Previously Filed for the Registrant's Annual
Meeting of Stockholders to be held on
December 20, 1994.
(B) Reports on Form 8-K:
The Company did not file any reports on 8-K with respect to
the quarter ended December 31, 1994.
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.
February 2, 1995
/s/Arthur Winkler
Arthur Winkler
President and Director
February 2, 1995
/s/William H. Warner
William H. Warner
Treasurer, Principal Financial and
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000320573
<NAME> CHRISTINE E. RICE
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 16,022,384
<SECURITIES> 0
<RECEIVABLES> 1,188,206
<ALLOWANCES> 20,000
<INVENTORY> 0
<CURRENT-ASSETS> 17,869,278
<PP&E> 54,265,273
<DEPRECIATION> 949,650
<TOTAL-ASSETS> 72,790,739
<CURRENT-LIABILITIES> 1,937,769
<BONDS> 0
<COMMON> 19,102,673
0
36,244,775
<OTHER-SE> 14,865,013
<TOTAL-LIABILITY-AND-EQUITY> 72,790,739
<SALES> 17,610,828
<TOTAL-REVENUES> 18,313,531
<CGS> 4,513,337
<TOTAL-COSTS> 14,813,352
<OTHER-EXPENSES> 3,095,702
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 404,476
<INCOME-TAX> 0
<INCOME-CONTINUING> 404,476
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 404,476
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
