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 September 30, 1995
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 incorporation or organization)
(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 Outstanding at November 3, 1995
Common Stock, $ 2.00 par value 9,551,424
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1995 AND JUNE 30, 1995
ASSETS
September 30,
1995 June 30,
(UNAUDITED) 1995
CURRENT ASSETS:
Cash $ 5,561,476 $ 4,167,811
Short-Term Investments 9,606,252 7,633,483
TOTAL CASH AND CASH EQUIVALENTS 15,167,728 11,801,294
Restricted Cash and Investments 1,534,047 2,151,411
Accounts Receivable - Net 2,564,589 2,285,792
Prepaid Expenses 834,643 1,143,007
Other Current Assets 28,399 22,795
TOTAL CURRENT ASSETS 20,129,406 17,404,299
LAND, BUILDINGS, EQUIPMENT AND LIVESTOCK:
Land and Buildings 75,385,172 74,296,090
Equipment 3,692,102 3,666,168
Livestock 17,517 17,517
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK 79,094,791 77,979,775
LESS: Accumulated Depreciation 1,895,492 1,570,024
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK - NET 77,199,299 76,409,751
OTHER ASSETS:
Deposits and Other Assets 388,708 392,531
Goodwill - Net 3,234,816 3,262,464
TOTAL OTHER ASSETS 3,623,524 3,654,995
TOTAL ASSETS $ 100,952,229 $ 97,469,045
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1995 AND JUNE 30, 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30,
1995 June 30,
(UNAUDITED) 1995
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses $ 8,584,312 $ 6,656,061
Notes and Mortgages Payable -
Current Portion 3,258,065 1,341,399
State Income Taxes Payable 61,400 115,600
TOTAL CURRENT LIABILITIES 11,903,777 8,113,060
DEFERRED INCOME 2,514,100 1,550,451
NOTES AND MORTGAGES PAYABLE -
Long Term Portion 14,478,331 15,599,097
COMMITMENTS AND CONTINGENCIES 0 0
SHAREHOLDERS' EQUITY:
Series A (Convertible) Preferred Stock
$100.00 Par Value,
Authorized 500,000 Shares, Issued and
Outstanding, 362,453 and 362,450
Shares Respectively 36,245,275 36,244,975
Common Stock $2.00 Par Value, Authorized
25,000,000 Shares,
Issued and Outstanding, 9,551,421 and
9,551,386 Shares, Respectively 19,102,841 19,102,771
Capital in Excess of Par 11,959,273 11,959,643
Retained Earnings (subsequent to
June 30, 1993, date of quasi-
reorganization, total deficit
eliminated $102,729,936) 4,748,632 4,899,048
TOTAL SHAREHOLDERS' EQUITY 72,056,021 72,206,437
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 100,952,229 $ 97,469,045
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
Preferred
Number of
Shares Amount
BALANCE - JUNE 30, 1995 362,450 $ 36,244,975
Shares Issued for Fractional Exchanges
With Respect to the One-for-twenty
Reverse Stock Split effected
on March 13, 1992 35 70
Net Loss for the Three Months Ended
September 30, 1995 --- ---
BALANCE - SEPTEMBER 30, 1995 362,453 $ 36,245,275
Common
Number of
Shares Amount
BALANCE - JUNE 30, 1995 9,551,386 $ 19,102,771
Shares Issued for Fractional Exchanges
With Respect to the One-for-twenty
Reverse Stock Split effected
on March 13, 1992 3 300
Net Loss for the Three Months Ended
September 30, 1995 --- ---
BALANCE - SEPTEMBER 30, 1995 9,551,421 $ 19,102,841
Capital
in Excess Retained
of Par Earnings
BALANCE - JUNE 30, 1995 $ 11,959,643 $ 4,899,048
Shares Issued for Fractional Exchanges
With Respect to the One-for-twenty
Reverse Stock Split effected
on March 13, 1992 (370) ---
Net Loss for the Three Months Ended
September 30, 1995 --- (150,416)
BALANCE - SEPTEMBER 30, 1995 $ 11,959,273 $ 4,748,632
Total
BALANCE - JUNE 30, 1995 $ 72,206,437
Shares Issued for Fractional Exchanges
With Respect to the One-for-twenty
Reverse Stock Split effected
on March 13, 1992 ---
Net Loss for the Three Months Ended
September 30, 1995 (150,416)
BALANCE - SEPTEMBER 30, 1995 $ 72,056,021
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
Three Months Ended
September 30, September 30
1995 1994
REVENUES:
Revenue from Operations $ 13,562,753 $ 7,094,007
Investment Income 192,365 492,207
TOTAL REVENUES 13,755,118 7,586,214
EXPENSES:
Cost of Revenues 3,678,809 1,278,377
Operating Expenses 7,454,597 4,632,252
Depreciation & Amortization 354,615 142,330
General & Administrative Expenses 2,101,294 1,486,644
Interest Expense 285,419 0
TOTAL EXPENSES 13,874,734 7,539,603
INCOME (LOSS) FROM OPERATIONS BEFORE TAXES (119,616) 46,611
Income Tax Expense 30,800 0
NET INCOME (LOSS) $ (150,416)$ 46,611
NET INCOME (LOSS) PER SHARE $ (0.02)$ 0.00
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
Three Months Ended
INCREASE (DECREASE) IN CASH AND September 30, September 30
CASH EQUIVALENTS 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Customers $ 14,242,608 $ 7,471,639
Cash Paid to Suppliers and Employees (11,003,376) (6,868,715)
Interest Received 125,135 190,674
Interest Paid (85,487) 0
Cash Used to Purchase Trading Securities (300,000) 0
Cash Received from Sale of Trading Securities 67,485 900,000
Change in Restricted Cash & Investments 617,364 102,697
NET CASH PROVIDED BY OPERATIONS 3,663,728 1,796,295
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Livestock 5,000 0
Proceeds from Sale of Equipment 0 7,000
Capital Expenditures (147,043) (140,826)
(Increase) Decrease in Other Investment
Activity 23,848 1,892
NET CASH USED BY INVESTING ACTIVITIES (118,195) (131,934)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments on Long Term Notes (179,100) (25,000)
NET CASH USED BY FINANCING ACTIVITIES (179,100) (25,000)
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,366,434 1,639,361
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 11,801,294 16,076,091
CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD $ 15,167,728 $ 17,715,451
Supplemental Schedule of Non-Cash Investing and Financing Activities:
During the three months ended September 30, 1995, Land and
Improvements at a total cost of $975,000 was financed through Long Term
Notes.
During the three months ended September 30, 1995, the Company
recorded an unrealized holding gain of $50,000 on trading securities.
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(1) OPINION OF MANAGEMENT
The accompanying unaudited 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
months ended September 30, 1995 are not necessarily indicative of the results
that may be expected for the year ended June 30, 1996. The unaudited
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, 1995.
(2) NOTES AND MORTGAGES PAYABLE
( A ) On February 2, 1995, the Company entered into an agreement with
the former owner of Freehold Raceway whereby the $12.5 million balance of the
purchase price of the Freehold Raceway was financed by an eight year
promissory note at 80% of the prevailing prime rate, adjusted on each
anniversary date, not to exceed 6%. Yearly principal and interest payments
during the first five (5) years commencing January 31, 1996 shall be paid
based upon a twenty (20) year principal amortization schedule. During each of
the next three (3) years, commencing January 21, 2001, yearly principal and
interest payments shall be based upon a ten (10) year amortization schedule.
On December 31, 2003, the entire unpaid principal balance, together with any
accrued interest, becomes due and payable. At January 31, 1995, the prime
rate was 8.5%, therefore interest due on the note for the first year shall be
calculated at 6%. The note is secured by a mortgage on the land and buildings
at Freehold Raceway and other collateral. At September 30, 1995, $625,000 of
the principal balance was classified as short term and $11,875,000 was
classified as long term.
( B ) On February 2, 1995, the Company and the seller of Freehold
Raceway each advanced to Freehold Raceway $2,584,549 to retire the $5.2
million existing debt on Freehold Raceway. The seller and ITB received from
Freehold Raceway promissory notes evidencing the indebtedness secured by
mortgages on the racetrack property and other collateral. Equal monthly
principal installments of $18,750 beginning on March 1, 1995 shall be paid to
the seller together with accrued interest. Interest shall be calculated at
80% of the prime rate at January 31 of each year. The first year interest
payments shall be calculated at 6.8%. At September 30, 1995, $225,000 of the
principal balance was classified as short term and $2,209,549 was classified
as long term.
( C ) On August 24, 1994, Freehold Raceway renewed a two (2) year note
payable to Marine Midland Bank in the amount of $2,345,000. Twenty three
principal payments of $40,000 are to be paid monthly together with interest
calculated at the prime rate computed on the basis of a 360 day year for the
actual number of days elapsed. On August 20, 1996, the entire unpaid
principal balance, scheduled to be $1,405,000 if no extension is negotiated,
together with any accrued interest, becomes due and payable. At September 30,
1995, $1,805,000 of the principal balance was classified as short term. The
Company is in the process of negotiating a refinancing of this note.
(D) On July 21, 1995, Freehold Raceway completed the purchase of a 4.659
acre section of land, previously leased for parking space, from an unrelated
party. The purchase price was $975,000 with $400,000 plus accrued interest of
$6,720 to be paid in cash on January 2, 1996 and the balance financed by a
three year $575,000 note at an eight percent per annum rate. The note,
secured by a purchase money mortgage on the land, is payable in three yearly
principal installments of $191,666 commencing July 31, 1996 plus accrued
interest. At September 30, 1995, $591,666 of the principal balance was
classified as short term and $383,334 was classified as long term.
(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.
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 a
quasi-reorganization of the Company's assets effective June 30, 1993, will be
excluded from the results of operations and credited to paid in capital.
Freehold Raceway incurred a state income tax liability for the three
months ended September 30, 1995 and does not have the benefit of any state
income tax loss carryforwards to offset this liability. A provision of
$30,800 was made for this liability.
A reconciliation of income tax expense at the Federal statutory rate to income
tax expense at the Company's effective rate is as follows:
<TABLE>
Three Months ended September 30,
1995 1994
<CAPTION>
<S> <C> <C>
Income Taxes at the Federal Statutory Rate $0 $7,000
Utilization of Tax Depreciation 0 (7,000)
State Income Tax - Net of
Federal Tax Benefit 30,800 0
Provisions for Income Taxes $30,800 $0
</TABLE>
At June 30, 1993, the Company went through a quasi-reorganization in
accordance with generally accepted accounting principles. The effect of the
quasi-reorganization was to decrease asset values for financial reporting, but
not for Federal income tax purposes. Accordingly, depreciation expense for
Federal income tax purposes continues to be based on amounts that do not
reflect the accounting quasi-reorganization.
The Company has a net operating loss carryforward of approximately
$166,650,000 at September 30, 1995, 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's wholly owned subsidiary, International Thoroughbred
Gaming Development Corporation (ITG), is responsible for implementing the
development of casino gaming business opportunities. In addition to the
funds expended during the last two fiscal years of approximately $1,150,000
the Company is committed to approximately $900,000 in expenses, related to the
development of the above described project and other casino gaming business
opportunities. The Company's financial commitment could increase if
circumstances warrant.
(5) INVESTMENT INCOME
Investment income consists of interest income and realized and
unrealized gains on trading securities. In computing the realized gain, cost
was determined under the specific identification method.
Management determines the appropriate classification of its investments
in debt and equity securities at the time of purchase and reevaluates such
determination at each balance sheet date. Trading securities are securities
bought and held principally for the purpose of selling them in the near term
and are reported at fair value, with unrealized gains and losses included in
operations for the current year.
Investment income for the three months ended September 30, 1995 includes
an unrealized holding gain of $50,000 on trading securities. For the three
months ended September 30, 1994, there were no unrealized holding gains or
losses. Interest income for the three months ended September 30, 1995 and
1994 was $142,365 and $492,207, respectively.
(6) RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
(7) NET INCOME (LOSS) PER SHARE
Net Income (loss) per share for the three months ended September 30,
1995 and 1994 is computed on the weighted average number of shares
outstanding. The conversion period for the Convertible Preferred Stock
concluded as of July 31, 1993, therefore the Convertible Preferred Stock has
not been included in the computations. The number of shares used in the
computations were 9,551,394 and 9,551,301 at September 30, 1995 and 1994,
respectively.
(8) PRO FORMA INFORMATION
On February 2, 1995, ITB completed the purchase of all of the
outstanding stock of Freehold Racing Association ("FRA") and Atlantic City
Harness, Inc., ("ACH") the operating companies of Freehold Raceway, and CIRCA
1850, Inc., a small real estate holding company, (herein and after
collectively referred to as Freehold Raceway) from an unrelated party.
The following unaudited pro forma combined results of operations for the
three months ended September 30, 1994 account for the acquisition as if it had
occurred on July 1, 1994. The pro forma results give effect to depreciation
of fixed assets purchased, amortization of goodwill, and interest expense.
<TABLE>
Pro Forma Combined Results of Operations
For The Three Months Ended September 30,
1994
<CAPTION>
<S> <C>
Total Revenues $13,599,575
Net Earnings (Loss) 221,020
Net Earnings (Loss)
Per Common Share $0.02
Weighted Average Number of
Shares Outstanding 9,551,301
</TABLE>
These pro forma amounts may not be indicative of results that actually
would have occurred if the combination had been in effect on the dates
indicated or which may be obtained in the future.
(9) NEW AUTHORITATIVE PRONOUNCEMENTS
Statement of Financial Accounting Standards (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. (See Note 3) The adoption of SFAS No. 115 did not have a
material effect on the financial statements.
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" is
effective for fiscal years beginning after December 15, 1994. The Company
does not have any loans that are subject to an impairment assessment as
defined by SFAS No. 114.
SFAS No. 121, "Accounting For the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" is effective for fiscal years
beginning after December 15, 1995. The Company will adopt SFAS 121 on July 1,
1996. The adoption of SFAS No. 121 will not have a material effect on the
financial statements.
(10) SUBSEQUENT EVENTS
On November 2, 1995, Robert E. Brennan resigned as Chairman of the Board
and Chief Executive Officer of the Company. Mr. Brennan resigned these
positions at the urging of the Company's Board of Directors based on actions
taken by New Jersey regulatory authorities which oversee the casino and horse
racing industries in the state. The New Jersey Division of Gaming Enforcement
filed a complaint with the New Jersey Casino Control Commission seeking to
prohibit the Company's two racetracks, Garden State Park ("Garden State") and
Freehold Raceway ("Freehold") from conducting industry business with any
casino licensees. Garden State and Freehold currently receive revenues from
parimutuel wagering on races, including their own, simulcast to certain of the
Atlantic City casinos. The Division based its complaint on the fact that Mr.
Brennan, who is also a principal shareholder of the Company, had been found in
a June 1995 decision by Judge Richard Owen of the United States District Court
for the Southern District of New York to be "liable for violating federal
securities laws in the years 1982 to 1985." None of the alleged securities
law violations involved the Company, its securities, or its operations. The
Division claimed that Mr. Brennan's participation in the Company's racetrack
subsidiaries "would be inimical to the policies of the Casino Control Act" and
according to the Division, this disqualified him and the Company's two New
Jersey racetracks from continued licensure with the Casino Control Commission.
Mr. Brennan has denied committing any violations of the federal securities
laws and is currently appealing Judge Owen's decision.
The Division subsequently indicated a willingness to seek to resolve the
complaint provided that Mr. Brennan resign as Chairman of the Board and a
director of the Company and provided further that Mr. Brennan enter into an
agreement which would place his approximately 30% of the outstanding shares of
the Company's common stock into an irrevocable dispositive trust, which would
provide for the liquidation of all such shares if the United States Court of
Appeals for the Second Circuit affirms Judge Owen's decision.
The Company was also advised by the New Jersey Racing Commission, which
annually grants permits for the conduct of parimutuel racing at Garden State
and Freehold, that the Racing Commission is considering the issuance of a
Notice of Intention to suspend or revoke the permits held by Garden State and
Freehold based on Judge Owen's decision. At a subsequent meeting, a
representative of the Racing Commission indicated that the previously
described proposed resolution by the Division regarding Mr. Brennan would be
presented to the Racing Commission for its consideration. The Racing
Commission is currently engaged in discussions with the Company and with Mr.
Brennan seeking to resolve this matter.
George E. Norcross III and Roger Bodman have been elected to the
Company's Board of Directors filling the vacancies created by the resignation
of Mr. Brennan and an earlier unrelated resignation of another board member
and Robert J. Quigley has been elected to serve the balance of Mr. Brennan's
term as Chairman of the Board.
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Independent accountants have 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.
Review Report of Independent Accountant's
The Board of Directors and Shareholders
International Thoroughbred Breeders, Inc.
We have reviewed the accompanying consolidated balance sheet of
International Thoroughbred Breeders, Inc., and subsidiaries as of September
30, 1995, and the related consolidated statement of shareholders' equity for
the three month period then ended, and the consolidated statements of
operations, and cash flows for the three month periods ended September 30,
1995 and 1994. 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 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, 1995, 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 September 25, 1995, 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, 1995, 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, New Jersey
October 27, 1995
[Except for Note 10
as to which the date is
November 8, 1995.]
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
OPERATIONS
Total revenues for the three months ended September 30, 1995 and 1994
were $13,755,118 and $7,586,214 respectively. This increase of approximately
81% is primarily the net result of the purchase of Freehold Raceway in
January, 1995, which significantly increased racetrack revenues.
For the first quarter of fiscal 1996, the Company realized a loss from
operations of $119,616 as compared to income of $46,611 for the corresponding
year. The change of $166,227 from net income to net loss for the three months
ended September 30, 1995 primarily resulted from: 1) the net increased income
generated by the purchase of Freehold Raceway; reduced by 2) a decrease in net
income generated by Garden State Park; and 3) interest expense of $285,419
associated with the mortgages on Freehold Raceway.
Depreciation expense for the quarters ended September 30, 1995 and 1994
was $354,615 and $142,230, respectively, reflecting a $212,285 increase
during comparable periods primarily associated with the purchase of Freehold
Raceway.
Garden State Park:
During the three months ended September 30, 1995, Garden State Park's
revenue decreased $729,475 or 10%, from $7,125,039 to $6,395,564 for the
corresponding three month periods in fiscal 1995, primarily reflecting the net
effect of: 1) a decrease in revenues generated from live racing and
simulcasting to and from other New Jersey tracks; partially offset by 2)
increased revenues generated by the simulcasting of Garden State Park's live
races to out-of-state racetracks and casinos. Expenses before interest due to
parent decreased $499,885 or 7% for the three months ending September 30,
1995 when compared to the same period last year primarily reflecting an
overall cost reduction program in effect. Garden State Park experienced at
its current live Harness Meet an 8% decrease in average daily handle during
the first quarter of fiscal 1996 as compared to the first quarter of fiscal
1995. As a result of the decreased revenues and expenses, Garden State Park
realized income from operations, before interest due the parent company, of
$66,313 as compared to income of $295,903 in the same quarter last fiscal
year.
Garden State Park's 1995 Standardbred (Harness) Racing Meet began
September 8, 1995 and is scheduled to run 53 dates on a four night per week
basis until December 9, 1995.
On-track wagering during the current Harness Meet, through September
30th, averaged $207,620 over 14 dates of live racing. During the 1994 Harness
Meet in the same quarter of fiscal 1995, on-track wagering averaged $225,754
over 15 dates of live racing.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
The following summarizes the average handle associated
with the simulcast activity at Garden State Park during the
first three months of fiscal 1996 and fiscal 1995.
July 1 thru September 30,
FISCAL 1996
Number Average
of Days Handle
SIMULCAST OF GARDEN STATE
PARK RACES TO:
In-State Tracks and Casinos (S) 14 $ 432,086
Out-Of-State Tracks (S) 14 846,257
SIMULCAST OF RACES TO GARDEN
STATE PARK FROM:
Monmouth Park (T) 48 $ 70,985
Atlantic City Racetrack (T) 38 46,048
The Meadowlands (T) 20 82,152
Freehold Racetrack (S) 36 30,963
The Meadowlands (S) 31 78,870
Out-Of-State Tracks (T,S) 92 217,568
T=Thoroughbred Races S=Standardbred (Harness) Races
July 1 thru September 30,
FISCAL 1995
Number Average
of Days Handle
SIMULCAST OF GARDEN STATE
PARK RACES TO:
In-State Tracks and Casinos (S) 15 $ 473,308
Out-Of-State Tracks (S) 15 658,532
SIMULCAST OF RACES TO GARDEN
STATE PARK FROM:
Monmouth Park (T) 49 $ 86,378
Atlantic City Racetrack (T) 40 69,464
The Meadowlands (T) 19 101,305
Freehold Racetrack (S) 38 36,086
The Meadowlands (S) 31 101,713
Out-Of-State Tracks (T,S) 92 202,589
T=Thoroughbred Races S=Standardbred (Harness) Races
Freehold Raceway:
The Company completed the outstanding stock acquisition 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 to be effective for operations as of January 1, 1995.
Revenues and expenses of Freehold Raceway for the three month period ended
September 30, 1995 were $7,169,350 and $6,383,281 respectively. Freehold
Raceway realized net income of $786,069 for the three months ended September
30, 1995.
The following tables compare the results of operations of Freehold
Raceway for the three month periods under appropriate ownership. No
assurances can be given that the prior results of operations are indicative of
the results which actually would have occurred had the acquisition been made
on July 1, 1994 or subsequent to that date.
<TABLE>
Three Months Ended September 30,
1995 1994
Freehold under ITB Freehold Under
Ownership Prior Ownership
<S> <C> <C>
Revenues $7,169,350 $6,299,761
Expenses 6,383,281 5,803,455
Income
Before Taxes
and Interest $ 786,069 $496,306
</TABLE>
Revenues have increased primarily as a result of an increase in the
number and popularity of the simulcast signals received from out-of-state
racetracks. Expenses have increased primarily as a result of the increased
costs associated with the increased number of the simulcast signals received.
Net income has increased primarily as a result of the net effect of increased
revenues and expenses.
During Fiscal 1996, Freehold Raceway will race under two separate
identities. FRA will race 101 days from August 17, 1995 thru December 30,
1995. ACH has applied to the New Jersey Racing Commission to race 112 days
from January 1, 1996 through June 1, 1996.
The following table summarizes the average live on-track handle for the
three month fiscal period.
<TABLE>
FISCAL 1996 FISCAL 1995
Number Average Number Average
of Days Handle Of Days Handle
<CAPTION>
<S> <C> <C> <C> <C>
FRA - July 1 thru
Sept. 30(3 Months) 36 $ 308,624 38 $ 335,476
</TABLE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
The following summarizes the average handle associated
with the simulcast activity at Freehold Raceway during
the three months ended September 30, 1995 and 1994.
July 1 thru September 30,
FISCAL 1996
Number Average
of Days Handle
SIMULCAST OF FREEHOLD
RACEWAY RACES TO:
In-State Tracks and Casinos (S) 36 $ 185,215
Out-Of-State Tracks (S) 36 401,418
SIMULCAST OF RACES TO
FREEHOLD RACEWAY FROM:
Atlantic City Racetrack (T) 38 $ 37,932
The Meadowlands (T) 20 54,932
Garden State Park (S) 14 82,474
The Meadowlands (S) 30 154,363
Out-Of-State Tracks (T,S) 81 173,991
T=Thoroughbred Races S=Standardbred (Harness) Race
July 1 thru September 30,
FISCAL 1995
Number Average
of Days Handle
SIMULCAST OF FREEHOLD
RACEWAY RACES TO:
In-State Tracks and Casinos (S) 38 $ 197,726
Out-Of-State Tracks (S) 38 296,850
SIMULCAST OF RACES TO
FREEHOLD RACEWAY FROM:
Atlantic City Racetrack (T) 38 $ 54,072
The Meadowlands (T) 20 60,179
Garden State Park (S) 16 82,080
The Meadowlands (S) 28 155,632
Out-Of-State Tracks (T,S) 80 136,951
T=Thoroughbred Races S=Standardbred (Harness) Race
LIQUIDITY AND FINANCIAL RESOURCES
The Company's working capital as of September 30, 1995 was $8,225,629
which represents a decrease of $9,070,029 from the first quarter of fiscal
1995. The decrease from September 30, 1994 is primarily the net result of: 1)
the utilization of approximately $7,900,000 in cash associated with the
purchase of Freehold racetrack; 2) a decrease of $1,566,542 as a result of the
effect on the Company's working capital of current liabilities exceeding
current assets for the Freehold Raceway operation at September 30, 1995; and
3) increased cash flows from operations. Working capital decreased $1,065,609
from June 30, 1995 primarily as a result of: 1) the reclassification of
$1,325,000 from long term notes payable to current (See Note 1-C); 2) an
increase in short term debt as a result of the purchase of land at Freehold
Raceway (See Note 2-D); partially offset by 3) increased cash flows from
operations.
The Company is committed to a minimum of $900,000 in additional expenses
related to the pursuit of casino development and other related projects. A
money mortgage note previously executed by Freehold Raceway has a balloon
payment of $1,405,000 due on August 20, 1996 if no extension is negotiated.
(See Note 1-B)
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.
The Company did not file any reports on 8-K with respect to the quarter
ended September 30, 1995.
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.
/s/Arthur Winkler
President and Director
November 8, 1995
/s/William H. Warner
Treasurer, Principal Financial and
Accounting Officer
November 8, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 15,167,728
<SECURITIES> 290,000
<RECEIVABLES> 2,584,589
<ALLOWANCES> 20,000
<INVENTORY> 0
<CURRENT-ASSETS> 20,129,406
<PP&E> 79,094,791
<DEPRECIATION> 1,895,492
<TOTAL-ASSETS> 100,952,229
<CURRENT-LIABILITIES> 11,903,777
<BONDS> 0
<COMMON> 19,102,841
0
36,245,275
<OTHER-SE> 16,707,905
<TOTAL-LIABILITY-AND-EQUITY> 100,952,229
<SALES> 13,562,753
<TOTAL-REVENUES> 13,755,118
<CGS> 3,678,809
<TOTAL-COSTS> 11,133,406
<OTHER-EXPENSES> 2,741,328
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 285,419
<INCOME-PRETAX> (119,616)
<INCOME-TAX> 30,800
<INCOME-CONTINUING> (150,416)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (150,416)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
