<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended January 31, 2000 Commission File Number O-7607
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FAIR GROUNDS CORPORATION
------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Louisiana 72-0361770
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1751 Gentilly Blvd., New Orleans, LA 70119
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(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number including area code (504) 944-5515
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Not Applicable
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(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by a check mark whether the registrant (1) has filed all reports 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 report(s)), and (2) has been subject to such filing requirements
for the past 90 days.
[ ] Yes [X] No
468,580 Common Shares were outstanding as of March 1, 2000.
<PAGE> 2
FAIR GROUNDS CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet, January 31, 2000 (Unaudited)
and Balance Sheet, October 31, 1999 ...................................... 2
Statements of Operations and Retained
Earnings for the Three Months Ended
January 31, 2000 and 1999 (Unaudited) .................................... 4
Statements of Cash Flows for the Three
Months Ended January 31, 2000 and 1999
(Unaudited) .............................................................. 7
Notes to Financial Statements for the Three
Months Ended January 31, 2000 and 1999 (Unaudited)........................ 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................................... 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................... 20
Item 6. Exhibits and Reports on Form 8-K.......................................... 20
SIGNATURES .......................................................................... 21
</TABLE>
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PART I
FINANCIAL INFORMATION
<PAGE> 4
FAIR GROUNDS CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
January 31, October 31,
2000 1999
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,129,326 $ 8,488,808
Cash and cash equivalents
- restricted 131,068 125,665
Accounts receivable 4,358,327 1,079,222
Mutuel settlements 545,833 181,630
Inventory 156,264 125,156
Prepaid expenses 1,075,857 468,165
Deferred Taxes 103,600 103,600
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Total Current Assets 10,500,275 10,572,246
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OTHER ASSETS 59,017 53,768
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PROPERTY, PLANT AND EQUIPMENT
Buildings and improvements 44,207,383 44,177,698
Land improvements 4,463,899 4,463,899
Automotive equipment 976,953 963,243
Machinery and equipment 2,706,835 2,696,449
Furniture and fixtures 425,202 405,352
------------ ------------
Total 52,780,272 52,706,641
Less: accumulated depreciation
and amortization (18,080,540) (17,667,397)
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Depreciable property - net 34,699,732 35,039,244
Land 3,286,281 3,286,281
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Property, plant and
equipment - net 37,986,013 38,325,525
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TOTAL ASSETS $ 48,545,305 $ 48,951,539
============ ============
</TABLE>
(Continued)
2
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FAIR GROUNDS CORPORATION
BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
(Unaudited)
January 31, October 31,
2000 1999
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 1,048,075 $ 109,613
Accounts payable 218,408 849,288
Accrued liabilities:
Deferred purses 5,229,241 8,104,835
Host track fees 491,712 432,721
Uncashed mutuel tickets 581,458 391,790
Other 212,848 543,183
Deferred revenues 430,826 282,970
Income taxes payable 777,196 4,932
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Total Current Liabilities 8,989,764 10,719,332
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DEFERRED INCOME TAXES 9,652,819 9,652,819
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Total Liabilities 18,642,583 20,372,151
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STOCKHOLDERS' EQUITY
Capital stock - no par value;
authorized 600,000 shares,
469,940 shares issued and
468,580 shares outstanding 1,525,092 1,525,092
Additional paid-in-capital 1,936,702 1,936,702
Retained earnings 26,476,453 25,153,119
------------ ------------
Total 29,938,247 28,614,913
Less: treasury stock at cost,
1,360 shares (35,525) (35,525)
------------ ------------
Total Stockholders' Equity 29,902,722 28,579,388
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 48,545,305 $ 48,951,539
============ ============
</TABLE>
See accompanying notes to financial statements.
3
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FAIR GROUNDS CORPORATION
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
For the Three Months Ended January 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
REVENUES
Pari-mutuel commissions $ 7,646,435 $ 7,529,071
Breakage 190,123 203,958
Uncashed mutuel tickets 55,485 83,177
----------- -----------
Total 7,892,043 7,816,206
Less: pari-mutuel tax 927,999 927,646
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Commission income 6,964,044 6,888,560
Host track fees 5,726,374 5,167,045
Total Mutuel Income 12,690,418 12,055,605
Concessions 855,503 881,344
Video poker (net) 437,360 433,064
Admissions(net of taxes) 280,722 296,129
Parking 29,947 30,634
Programs and forms 402,687 430,147
Miscellaneous 213,881 373,413
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Total Operating Revenues 14,910,518 14,500,336
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RACING EXPENSES
Purses 5,605,586 5,377,051
Salaries and related taxes
and benefits 2,391,494 2,184,820
Contracts and services 809,938 734,000
Host track fees 794,602 763,755
Depreciation 413,143 510,410
Cost of sales - concessions 322,404 240,391
Utilities 202,781 255,654
Repairs and maintenance 221,162 245,214
Programs, forms and other
supplies 531,688 587,879
Advertising and promotion 449,553 453,689
Rent 108,454 78,758
Miscellaneous 158,332 146,075
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Total Racing Expenses $12,009,137 $11,577,696
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</TABLE>
(Continued)
4
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FAIR GROUNDS CORPORATION
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(CONTINUED)
For the Three Months Ended January 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and related taxes
and benefits $ 325,010 $ 307,013
Insurance 154,160 227,611
Property taxes 245,150 233,403
Legal, audit and director fees 147,422 107,624
Contracts and services 25,234 53,457
Office expenses 130,103 126,338
Miscellaneous 105,217 105,071
------------ ------------
Total General and
Administrative Expenses 1,132,296 1,160,517
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NET INCOME FROM OPERATIONS 1,769,085 1,762,123
OTHER INCOME (EXPENSE)
Interest expense (2,129) (9,789)
Interest income 6,427 13,387
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND EXTRAORDINARY ITEM 1,773,383 1,765,721
Provision for income taxes 656,152 653,317
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INCOME BEFORE EXTRAORDINARY ITEM
(per share - 2000 - $2.38,
1999 - $2.37) 1,117,231 1,112,404
EXTRAORDINARY ITEM - gain from fire
(net of $121,044 and $72,150 of income
taxes in 2000 and 1999, respectively) 206,103 122,850
------------ ------------
NET INCOME (per share
2000 - $2.82, 1999 - $2.64) $ 1,323,334 $ 1,235,254
RETAINED EARNINGS, BEGINNING OF
PERIOD $ 25,153,119 $ 24,211,566
RETAINED EARNINGS, END OF PERIOD $ 26,476,453 $ 25,446,820
============ ============
</TABLE>
5
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FAIR GROUNDS CORPORATION
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(CONTINUED)
For the Three Months Ended January 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CASH DIVIDENDS PER SHARE $ NONE $ NONE
======= =======
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 468,580 468,580
======= =======
</TABLE>
See accompanying notes to financial statements
6
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FAIR GROUNDS CORPORATION
STATEMENTS OF CASH FLOWS
For the Three Months Ended January 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,323,334 $ 1,235,254
----------- -----------
Adjustments to reconcile net income
to net cash used for
operating activities:
Extraordinary item -
gain from fire (327,147) (195,000)
Depreciation 413,143 496,176
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable (3,643,308) (3,504,809)
Inventory (31,108) (54,333)
Prepaid expenses (607,691) (1,220,236)
Restricted cash (5,403) (7,447)
Increase (decrease) in:
Accounts payable and
accrued liabilities (902,224) (954,752)
Deferred revenue 147,856 (128,519)
Deferred purses (2,875,594) (1,100,038)
Income taxes payable 772,264 725,469
Uncashed mutuel tickets 189,668 103,645
Contracts Payable -- (58,732)
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Total adjustments (6,869,544) (5,898,576)
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Net cash used for operating
activities (5,546,210) (4,663,322)
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from litigation
settlement 327,147 195,000
Capital expenditures (73,631) (126,802)
Decrease(Increase) in deposits (5,249) 3,650
----------- -----------
Net cash provided by investing
activities 248,267 71,848
----------- -----------
</TABLE>
(Continued)
7
<PAGE> 10
FAIR GROUNDS CORPORATION
STATEMENTS OF CASH FLOWS (CONTINUED)
For the Three Months Ended January 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Loan proceeds $ -- $ 200,627
Principal repayments on loans (61,535) (78,943)
Advances from third party 1,000,000 1,000,000
----------- -----------
Net cash provided by
financing activities 938,463 1,121,684
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NET DECREASE IN CASH
AND CASH EQUIVALENTS (4,359,482) (3,469,790)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 8,488,808 7,577,730
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 4,129,326 $ 4,107,940
=========== ===========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 2,129 $ 9,798
=========== ===========
Income taxes paid $ -- $ --
=========== ===========
</TABLE>
8
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FAIR GROUNDS CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2000 AND 1999
(UNAUDITED)
NOTE 1 - COMMITMENTS AND CONTINGENCIES
Fire Related Litigation
The Company has been a party to a number of legal proceedings which
arose as a result of the December 1993 fire or in connection with the
Company's efforts to collect insurance proceeds after the fire. The
following is a brief description of the Traveler's litigation that was
concluded during the first quarter of fiscal 2000 and certain other
pending litigation.
Travelers Litigation
On May 14, 1994, the Company filed an action in the 24th Judicial
Court in the State of Louisiana against Travelers Indemnity Company of
Illinois ("Travelers") and others. The Company contended that the
insurance policy provided by Travelers provided the Company with
blanket coverage in the amount of $24.2 million in excess of the $10
million of underlying coverage and, accordingly, that Travelers was
liable for the difference between $24.2 million and the amount
previously paid by Travelers (approximately $9.5 million), plus
statutory penalties of 10% of the amount not paid, interest,
attorney's fees and costs. The Company further contended that the
insurance agent and the insurance broker who arranged for the
insurance were liable to the Company for any damages sustained because
the amount of coverage is less than that claimed by the Company.
Travelers' position is that its liability under such policy is limited
to the amount which it had previously paid. In November 1996, the
Company entered into a joint settlement with the
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FAIR GROUNDS CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2000 AND 1999
(UNAUDITED)
NOTE 1 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
insurance agent and broker, whereby the Company received a total of
$10 million from those parties. The settlement also included a "Mary
Carter" provision whereby the insurance agent and broker became
entitled to share in certain recoveries that the Company might
eventually obtain on its remaining claims against Travelers. Upon
adjudication of the remaining claims, the Company was awarded $327,147
in attorneys fees, penalties and interest which has been paid by
Travelers. Under the Mary Carter provision, the Company is entitled to
retain the full amount of such payment and the case has now been
concluded. This recovery of $206,103 (net of $121,044 of income taxes)
is shown as an extraordinary item on the Company's statement of
operations for the fiscal quarter ending January 31, 2000.
Other Litigation
In 1996, a suit was filed in U.S. District Court in Baton Rouge by
Livingston Downs Racing Association ("Livingston") naming the Company
and other defendants in an antitrust/civil RICO suit alleging the
Company participated in a conspiracy to prevent the plaintiff from
entering the live racing, off-track betting and video poker markets.
The Company filed a motion for summary judgment in late 1998, but that
motion has not been decided by the U.S. District Court. Livingston had
previously filed a series of other legal actions against the Company
which were resolved in the Company's favor. Management believes that
Livingston's claims in this case are without merit. However, there is
no assurance that the Company will successfully defend all of
Livingston's claims. Because the amount in question has not yet been
determined but could be substantial and because there is no assurance
that
10
<PAGE> 13
FAIR GROUNDS CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2000 AND 1999
(UNAUDITED)
NOTE 1 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
there will be insurance coverage or that it will be adequate, as
discussed below, the failure of the Company to prevail in this lawsuit
could have a material adverse effect on the Company's operations,
financial condition and cash flows.
In a declaratory judgment action related to the Livingston suit
brought by insurers for the Company and several of its affiliates,
which case has been consolidated with the suit filed by Livingston, on
January 14, 1999 the U. S. District Court granted the Company's motion
for summary judgment, finding that coverage exists under certain of
the Company's insurance policies for claims asserted by Livingston and
that the insurers have a duty to defend. The insurers have filed a
motion for new trial that is pending in the U. S. District Court.
There is no assurance that the motion for new trial will be denied or,
if denied, that the decision of the U. S. District Court will be
affirmed on appeal or that the insurance policies will provide
sufficient coverage to indemnify the Company fully.
A suit was filed in 1996 by the Louisiana Horsemen's Benevolent and
Protective Association ("LHBPA"), an association of horsemen organized
to promote the dissemination of information on issues critical to
horsemen and the exchange of ideas and information, against the
Company, the State of Louisiana, and all other pari-mutuel wagering
facilities operating in Louisiana. The LHBPA is seeking a larger
portion of video poker proceeds on the grounds that the State of
11
<PAGE> 14
FAIR GROUNDS CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2000 AND 1999
(UNAUDITED)
NOTE 1 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Louisiana and the horse racing tracks in Louisiana have misinterpreted
a Louisiana statute specifying the amount of revenues from video poker
machines at pari-mutuel wagering facilities that are to be used as
purse supplements. A motion for summary judgement seeking dismissal of
this action was filed in April 1999 and is pending before the court.
Management believes that the Company is in compliance with the
Louisiana statute and the guidelines established by the Louisiana
State Police Gaming Division, which regulates compliance with the
State of Louisiana video poker law, and that the Company has
sufficient defenses to all claims. However, there is no assurance that
the Company will successfully defend the LHBPA's claims. Because the
amount in question could be substantial, the failure by the Company to
prevail in this lawsuit could have a material adverse effect on the
Company's operations, financial condition and cash flows.
Except as described above, there are no material pending legal
proceedings, other than ordinary routine litigation incidental to its
business, to which the Company is a party or of which any of its
property is the subject.
12
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FAIR GROUNDS CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JANUARY 31, 2000 AND 1999
(UNAUDITED)
NOTE 2 - ADVANCE
In January 2000, the Company received a non-interest bearing advance
of $1,000,000 from Video Services, Inc., to be repaid in full in six
equal monthly installments beginning in February 2000. The advance is
included in notes payable in the January 31, 2000 financial
statements.
13
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JANUARY 31, 2000 AND 1999
Revenues. During the fiscal quarters ended January 31, 2000 and 1999, the
Company derived its pari-mutuel income by conducting live racing 48 and 47 days,
respectively, during each fiscal quarter and in the operation of its tele-tracks
for off-track wagering. During each such fiscal quarter, the Company operated
tele-tracks in New Orleans at the Fair Grounds Race Course and on Bourbon
Street, and at locations in Jefferson, Lafourche, St. Bernard and St. John
Parishes, Louisiana. Through Finish Line Management Corporation, an affiliated
company, the Company operated tele-track facilities in Terrebonne, St. Tammany,
and Jefferson Parishes, Louisiana.
For the fiscal quarter ended January 31, 2000, the Company reported total
in-state pari-mutuel wagering of $31,590,453 compared to $32,521,065 in fiscal
1999.
Comparative pari-mutuel wagering and attendance figures for the quarters ended
January 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Pari-mutuel wagering:
On-track handle $ 13,874,787 $ 14,285,631
Off-track handle 17,715,666 18,235,434
------------ ------------
Total in-state wagering $ 31,590,453 $ 32,521,065
============ ============
Out-of-state simulcast handle $184,337,287 $164,697,790
============ ============
Total On Track Attendance 129,634 133,729
============ ============
</TABLE>
The Company believes that the $410,844, or 2.9%, decrease in on-track handle and
the $519,768, or 2.9%, decrease in off-track handle are primarily due to the
increased competition locally from the land base casino which opened in October
1999 and other simulcast signals competing with the Company's signal. The
$19,639,497, or 11.9%, increase in out-of-state handle is primarily due to the
continued high quality of live racing at the Fair Grounds Race Course. In
addition, due to occasional bad weather in other parts of the country, the
Company's races became alternates when certain tracks were unable to race, thus
increasing the Company's simulcasting and out-of-state handle. During the
quarter ended January 31, 2000, the Company experienced
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<PAGE> 17
significant handle increases from California. California accounted for
approximately 43% of the out-of-state handle increase.
As a result of the total handle increase, the Company's total operating revenues
increased $410,182, or 2.8%, from the prior comparable fiscal quarter. This
included increases of $117,364, or 1.6%, in pari-mutuel commissions, $559,329,
or 10.8%, in host track fees, and $1,296, or .3%, in net video poker revenues.
These increases were partially offset by decreases of $13,835, or 6.8%, in
breakage, $27,692, or 33.3%, in uncashed mutuel tickets, $25,841, or 2.9%, in
concessions revenue, $15,407, or 5.2%, in admissions revenues, $687, or 2.2%, in
parking revenue, $27,460, or 6.4%, in program and forms revenue, and $159,532,
or 42.7%, in miscellaneous revenue. The decreased revenues are mainly
attributable to the 3% decrease in on-track attendance during the current year
fiscal quarter. The decrease in miscellaneous revenue is due to significantly
less promotional fee revenue being collected in the first quarter of 2000 than
in the comparable period in fiscal 1999.
Racing Expenses. Total racing expenses for the quarter ended January 31, 2000
increased $431,441, or 3.7%, over the prior comparable fiscal quarter, partially
as a result of the overall increased pari-mutuel activities. These included an
increase of $228,535, or 4.2%, in purses. Other increases included salaries and
related taxes and benefits, contracts and services, host track fees, cost of
sales - concessions, and rent.
These increases were partially offset by decreases in depreciation, utilities,
repairs and maintenance, programs, forms and other supplies, and advertising and
promotions.
The increase in concession costs in the current fiscal quarter was due to the
timing of certain expenses, with certain invoices for concessions being included
in the second quarter in fiscal 1999 and invoices for similar concession
expenses being included in the first quarter in the current fiscal year.
The increase in rent is due to the increased monthly rent at the Bourbon Street
tele-track location.
Depreciation decreased in the current year fiscal quarter due to many of the
tele-track's leasehold improvements becoming fully depreciated in the prior
fiscal year.
15
<PAGE> 18
General and Administrative Expenses. General and administrative expenses
decreased by $28,221, or 2.4%, in the current year fiscal quarter primarily as a
result of decreases in insurance and contracts and services, partially offset by
increases in salaries and related benefits, and legal, audit and director fees.
The Company's insurance premiums in the first quarter of 2000 were reduced from
the level of premiums for the comparable fiscal 1999 quarter. Legal fees
increased in the current year fiscal quarter as a result of the on-going
litigation discussed elsewhere herein.
Extraordinary Item. During the fiscal quarter ended January 31, 2000, the
Company received settlement payments in connection with the fire-related
litigation previously reported in the aggregate amount of $327,147. These
proceeds are reported net of $121,044 of related taxes. In the prior year
comparable fiscal quarter, the Company received insurance settlements of
$195,000, which were reported net of $72,150 of taxes.
Income Taxes. For the fiscal quarter ended January 31, 2000, the income tax
provision was $656,152 compared to $653,317 in the comparable quarter in fiscal
1999. The difference between periods reflects changes in pre-tax income between
the respective periods.
Net Income. The Company reported net income of $1,323,334 for the fiscal quarter
ended January 31, 2000, compared to net income of $1,235,254, for the quarter
ended January 31,1999.
LIQUIDITY AND CAPITAL RESOURCES
General
Cash and cash equivalents decreased $4,359,482 during the three months ended
January 31, 2000, compared to a decrease of $3,469,790 during the three months
ended January 31, 1999. The decrease in cash equivalents in fiscal 2000 was the
result of cash used in operating activities of $5,546,210, partially offset by
cash provided by investing activities of $248,267, and cash provided by
financing activities of $938,463.
Cash used in operations was primarily due to the payment of horseman's purses
and other related racing payments. Cash provided
16
<PAGE> 19
by investing was the result of proceeds from a fire litigation settlement
previously discussed. Cash provided by financing is due to the $1.0 million
advance from the Company's video poker operator received in January 2000.
On April 14, 1998, the Company entered into a working capital line of credit
agreement with Bank One. The line of credit was for $2.5 million with interest
at 8% on amounts outstanding. A new credit agreement, with substantially the
same terms, was entered into with First Bank and Trust in November 1999. No
amounts were drawn or outstanding on the Bank One line of credit or the First
Bank line of credit during the fiscal quarter ended January 31, 2000.
The Company believes that the combination of existing cash, cash from future
operations, funds available under its working capital line of credit, and the
Company's capacity to incur short-term and long-term indebtedness, if necessary,
will be sufficient to fund the Company's cash requirements for the foreseeable
future including the Company's net deferred tax liability.
Impact of Inflation
To date, inflation has not had a material effect in the Company's operations.
YEAR 2000 COMPLIANCE
A significant part of the Company's operations are dependent on computer systems
and applications. These systems are either owned by the Company or are provided
under contract by third party technology or other service providers. If these
systems were not year 2000 compliant, the Company could have experienced system
failures or miscalculations leading to disruption of business operations.
Through the second week of year 2000, the Company has not experienced any
significant problems associated with the year 2000 issue, although it is
possible that year 2000 problems could develop at a later date. The Company has
not incurred any costs associated with year 2000 compliance since January 1,
2000.
FORWARD-LOOKING STATEMENTS
The statements in this Quarterly Report that are forward-looking are based upon
current expectations, and actual results may differ materially. Therefore, the
inclusion of such forward-looking information should not be regarded as a
representation
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by the Company that the objectives or plans of the Company will be achieved.
Such statements include, but are not limited to, the Company's expectations
regarding the source of funds for payment of its deferred tax liability and the
adequacy of its cash, cash equivalents and borrowings available under its new
working capital line of credit to fund the Company's future cash requirements.
Words such as "anticipates," "believes," "expects," "intends," "estimated" and
variations of such words and similar expressions are intended to identify such
forward-looking statements. Forward-looking statements contained herein involve
numerous risks and uncertainties, and there are a number of factors that could
cause actual results to differ materially including, but not limited to, the
following: changing economic, market and business conditions, the ability of the
Company to compete effectively for top horses and trainers necessary to field
high-quality horse racing; the ability of the Company to grow its share of the
interstate simulcast market; a substantial change in allocation of live racing
days; the impact of competition from alternative gaming (including casinos and
lotteries) and other sports and entertainment options in those markets in which
the Company operates; and the Company's success in attracting new patrons and
generating additional revenue for purses.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company utilizes an overnight sweep arrangement pursuant to which available
funds are invested in daily repurchase agreements, which are collateralized by
the U.S. government or agency securities. The Company also has deposits in U.S.
Treasury money market funds, which are short-term in nature and guaranteed by
the U.S. government. Because of the short-term duration of the financial
instruments held by the Company, management does not believe that its financial
instruments are materially sensitive to changes in interest rates.
18
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PART II
OTHER INFORMATION
19
<PAGE> 22
Item 1. Legal Proceedings.
For a description of material developments during the three months ended January
31, 2000 in the Company's legal proceedings see Note 1, "Commitments and
Contingencies," in the Notes to Financial Statements which are set forth in Part
I of this Form 10-Q and incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 Financial Data Schedule (Filed electronically only)
20
<PAGE> 23
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.
FAIR GROUNDS CORPORATION
----------------------------------
(Registrant)
Date: March 15, 2000 By: /s/ Bryan G. Krantz
----------------------- -------------------------------
President
Date: March 15, 2000 By: /s/ Gordon M. Robertson
----------------------- -------------------------------
Chief Financial Officer
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FAIR GROUNDS
CORPORATION FINANCIAL STATEMENTS AS AT AND FOR THE QUARTER ENDED JANUARY 31,
2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 4,260
<SECURITIES> 0
<RECEIVABLES> 4,358
<ALLOWANCES> 0
<INVENTORY> 156
<CURRENT-ASSETS> 10,500
<PP&E> 52,780
<DEPRECIATION> 18,081
<TOTAL-ASSETS> 48,545
<CURRENT-LIABILITIES> 8,990
<BONDS> 0
0
0
<COMMON> 1,525
<OTHER-SE> 28,413
<TOTAL-LIABILITY-AND-EQUITY> 48,545
<SALES> 12,690
<TOTAL-REVENUES> 14,911
<CGS> 0
<TOTAL-COSTS> 12,009
<OTHER-EXPENSES> 1,132
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 1,773
<INCOME-TAX> 656
<INCOME-CONTINUING> 1,117
<DISCONTINUED> 0
<EXTRAORDINARY> 206
<CHANGES> 0
<NET-INCOME> 1,323
<EPS-BASIC> 2.82
<EPS-DILUTED> 2.82
</TABLE>
