MTR GAMING GROUP INC, 10-Q, 2000-11-14

MTR GAMING GROUP INC
10-Q, 2000-11-14
MISCELLANEOUS AMUSEMENT & RECREATION

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-Q

<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000

<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

COMMISSION FILE NO.: 0-20508

------------------------
MTR GAMING GROUP, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 84-1103135
(State or other jurisdiction (IRS Employer
of incorporation) Identification Number)
</TABLE>

STATE ROUTE 2 SOUTH, P.O. BOX 358, CHESTER, WEST VIRGINIA 26034
(Address of principal executive offices)

(304) 387-5712
(Registrant's telephone number, including area code)

------------------------

Indicate by check mark whether the Company: (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 Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes /X/ No / /

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

COMMON STOCK, $.00001 PAR VALUE
Class

Outstanding at November 9, 2000

22,083,501

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<PAGE>
MTR GAMING GROUP, INC.
INDEX FOR FORM 10-Q

<TABLE>
<CAPTION>
SECTION PAGE
------- --------
<S> <C>
PART I FINANCIAL INFORMATION

Item 1--Financial Statements................................ 3

Condensed and Consolidated Balance Sheets at September 30,
2000 and December 31, 1999................................ 3

Condensed and Consolidated Statements of Operations for the
Three Months and Nine months Ended September 30, 2000 and
1999...................................................... 4

Condensed and Consolidated Statements of Cash Flows for the
Nine months Ended September 30, 2000 and 1999............. 5

Notes to Condensed and Consolidated Financial Statements.... 6

Item 2--Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 8

Item 3--Quantitative and Qualitative Disclosures about
Market Risk............................................... 21

PART II OTHER INFORMATION

Item 1--Legal Proceedings................................... 22

Item 2--Changes in Securities............................... 22

Item 3--Defaults upon Senior Securities..................... 22

Item 4--Submission of Matters to a Vote of Securities
Holders................................................... 22

Item 5--Other Information................................... 22

Item 6--Exhibits and Reports on Form 8-K.................... 23

SIGNATURE PAGE.............................................. 24

Exhibit Index............................................... 25
</TABLE>

2
<PAGE>
PART 1
FINANCIAL INFORMATION

ITEM 1--FINANCIAL STATEMENTS

MTR GAMING GROUP, INC.

CONDENSED AND CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $11,870,000 $ 7,380,000
Restricted cash........................................... 509,000 891,000
Accounts receivable net of allowance for doubtful accounts
of $48,000 and $41,000.................................. 3,443,000 1,026,000
Deferred financing costs.................................. 541,000 244,000
Deferred income taxes..................................... 1,228,000 1,526,000
Income tax receivable..................................... 535,000 519,000
Other current assets...................................... 2,932,000 1,575,000
------------ -----------
Total current assets........................................ 21,058,000 13,161,000
------------ -----------
Property and equipment, net................................. 80,859,000 52,756,000

Other assets:
Excess of cost of investments over net assets acquired,
net of Accumulated amortization of $1,967,000 and
$1,778,000.............................................. 1,807,000 1,996,000
Deferred income taxes..................................... 579,000 0
Deferred financing costs, net of current portion.......... 1,986,000 977,000
Deposits and other........................................ 658,000 669,000
------------ -----------
$106,947,000 $69,559,000
============ ===========

LIABILITIES
Current liabilities:
Accounts payable.......................................... $ 444,000 $ 1,453,000
Other accrued liabilities................................. 6,081,000 1,746,000
Accrued interest.......................................... 340,000 0
Current deferred income taxes............................. 97,000 0
Current portion of capital leases......................... 2,903,000 561,000
Current portion of long-term debt......................... 153,000 7,982,000
------------ -----------
Total current liabilities................................... 10,018,000 11,742,000
------------ -----------

Long-term debt, less current portion........................ 49,388,000 26,409,000
Capital lease obligations, net of current portion........... 4,751,000 982,000
------------ -----------
Deferred income tax......................................... 851,000 717,000
------------ -----------
Total liabilities........................................... 65,008,000 39,850,000
Shareholders' equity:
Common Stock................................................ -- --
Paid in capital............................................. $37,482,000 $36,454,000
Shareholder receivable...................................... (1,131,000) (457,000)
Retained Earnings (Accumulated deficit)..................... 5,588,000 (6,288,000)
------------ -----------
Total shareholders' equity.................................. 41,939,000 29,709,000
------------ -----------
$106,947,000 $69,559,000
============ ===========
</TABLE>

3
<PAGE>
MTR GAMING GROUP, INC.

CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------------- -----------------------------
2000 1999 2000 1999
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues
Gaming.................................................. $42,648,000 $26,692,000 $111,061,000 $69,041,000
Parimutuel.............................................. 1,567,000 1,285,000 3,949,000 3,479,000
Food, beverage and lodging.............................. 4,574,000 3,214,000 11,557,000 7,705,000
Other................................................... 1,448,000 816,000 2,614,000 2,063,000
----------- ----------- ------------ -----------
Total revenues............................................ 50,237,000 32,007,000 129,181,000 82,288,000
----------- ----------- ------------ -----------
Costs of revenue
Cost of gaming terminals.................................. 24,743,000 15,583,000 64,272,000 40,449,000
Cost of parimutuel........................................ 1,691,000 1,391,000 4,378,000 4,027,000
Cost of food, beverage and lodging........................ 4,322,000 2,644,000 10,191,000 6,828,000
Cost of other revenues.................................... 1,365,000 970,000 2,351,000 1,898,000
----------- ----------- ------------ -----------
Total cost of revenues.................................... 32,121,000 20,588,000 81,192,000 53,202,000
----------- ----------- ------------ -----------
Gross Profit.............................................. 18,116,000 11,419,000 47,989,000 29,086,000
----------- ----------- ------------ -----------
Selling, general and administrative expenses:
Marketing and promotions.................................. 3,129,000 1,468,000 7,811,000 3,542,000
General and administrative................................ 5,226,000 3,496,000 14,181,000 9,627,000
Depreciation and amortization............................. 1,548,000 1,283,000 4,307,000 3,581,000
----------- ----------- ------------ -----------
Total selling, general and administrative expenses........ 9,903,000 6,247,000 26,299,000 16,750,000
----------- ----------- ------------ -----------
Operating income.......................................... 8,213,000 5,172,000 21,690,000 12,336,000
----------- ----------- ------------ -----------
Interest income........................................... 64,000 57,000 200,000 213,000
Interest expense.......................................... (750,000) (1,210,000) (2,337,000) (3,556,000)
----------- ----------- ------------ -----------
(686,000) (1,153,000) (2,137,000) (3,343,000)
----------- ----------- ------------ -----------
Income before income taxes................................ 7,527,000 4,019,000 19,553,000 8,993,000
Provision for income taxes................................ 2,503,000 1,405,000 6,844,000 3,145,000
----------- ----------- ------------ -----------
Net income................................................ $ 5,024,000 $ 2,614,000 $ 12,709,000 $ 5,848,000
=========== =========== ============ ===========
Net income per share (basic)
Net income after income taxes........................... $ 0.23 $ 0.12 $ 0.59 $ 0.28

Net income per share (assuming dilution)
Net income after income taxes........................... $ 0.18 $ 0.10 $ 0.48 $ 0.24

Weighted average number of shares outstanding:
Basic..................................................... 22,081,656 21,141,690 21,631,230 21,015,217
=========== =========== ============ ===========
Diluted................................................... 28,281,120 25,184,615 26,574,427 24,705,634
=========== =========== ============ ===========
</TABLE>

4
<PAGE>
MTR GAMING GROUP, INC.

CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 12,709,000 $ 5,848,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred financing cost amortization.................... 193,000 382,000
Depreciation and amortization........................... 4,307,000 3,581,000
Deferred income taxes................................... (50,000) 2,701,000
Income tax receivable................................... (16,000) 0
Changes in operating assets and liabilities
Accounts receivable net of allowance.................. (2,417,000) (11,000)
Other current assets.................................. (1,357,000) 40,000
Accounts payable and accrued liabilities.............. 3,666,000 3,772,000
------------ ------------
Net cash provided by operating activities................... 17,035,000 16,313,000
------------ ------------
Cash flows from investing activities:
Restricted cash........................................... 382,000 (1,192,000)
Notes receivable.......................................... (96,000)
Deposits and other........................................ 11,000 (108,000)
Capital expenditures...................................... (32,221,000) (15,475,000)
------------ ------------
Net cash used in investing activities....................... (31,828,000) (16,871,000)
------------ ------------
Cash flows used in financing activities
Shareholder receivable increase........................... (674,000) 0
Stock repurchase program.................................. (1,026,000) 0
Additional paid in capital................................ 1,221,000 (86,000)
Deferred financing cost................................... (1,499,000) 0
Net increase in long term debt and capitalized lease
obligations............................................. 21,261,000 866,000
------------ ------------
Cash provided by financing activities....................... 19,283,000 780,000
NET INCREASE IN CASH........................................ 4,490,000 222,000
Cash, Beginning of Period................................... 7,380,000 9,074,000
------------ ------------
Cash, End of Period......................................... $ 11,870,000 $ 9,296,000
============ ============
</TABLE>

5
<PAGE>
MTR GAMING GROUP, INC.

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--BASIS OF PRESENTATION

The accompanying unaudited condensed and consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) considered necessary for a fair
presentation have been included herein. Operating results for the nine months
ended September 30, 2000 are not necessarily indicative of the results that may
be expected for the year ended December 31, 2000. For further information, refer
to the consolidated financial statements and notes thereto included in the
Registrant's Annual Report on Form 10-K and Form 10-K/A for the year ended
December 31, 1999.

NOTE 2--ACCOUNTING PRINCIPLE

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative financial instruments and hedging activities.
In June 1999, FASB Statement No. 137, "Accounting for Derivative Instruments and
Hedging Activities: Deferral of Effective Date of the FASB Statement No. 133,"
was issued. This statement delays the effective date to all fiscal quarters of
all fiscal years beginning after June 15, 2000. This statement will be adopted
by the Company on January 1, 2001 and the effect on the consolidated financial
statements is unknown as of September 30, 2000.

NOTE 3--EQUITY TRANSACTIONS

In March of 2000, pursuant to various employment agreements, the Company
granted to various employees and its outside directors options to purchase, in
the aggregate, 270,000 shares of the Company's common stock. Also in March of
2000, the Board of Directors of the Company created the Company's 2000 Stock
Incentive Plan, for which the Company reserved 825,000 shares, of which 795,000
shares have been granted to various employees of the Company.

All of the options granted on March 13, 2000 are for a term of ten years
from the date of grant, and except for the grants to the Company's independent
directors provide for immediate vesting. All of such options are exercisable at
the price of $2.50 per share, the estimated fair market value of the Company's
common stock at the date of grant.

In July and September of 2000, the Company repurchased 150,000 shares of its
common stock in the open market for $985,965 pursuant to its approved
$3 million stock repurchase program. In October 2000, the Company repurchased
31,000 additional shares of its common stock in the open market for $197,897.

During the three months ended September 30, 2000, holders of previously
issued options and warrants to purchase the Company's common stock exercised
options and warrants to purchase a total of 255,000 shares of the Company's
common stock at prices ranging from $.5625 to $4.00 per share by delivery of
cash proceeds totaling $801,000.

6
<PAGE>
MTR GAMING GROUP, INC.

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4--INCOME TAXES

The Company accounts for its income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (Statement 109), Accounting for Income
taxes. Under Statement 109, an asset and liability method is used whereby
deferred tax assets and liabilities are determined based upon temporary
differences between bases used for financial reporting and income tax reporting
purposes. Income taxes are provided based on the enacted tax rates in effect at
the time such temporary differences are expected to reverse. A valuation
allowance is provided for certain deferred tax assets if it is more likely than
not that the Company will not realize tax assets through future operations. As
of September 30, 2000, the Company did not use a valuation allowance. The
Company and its subsidiaries file a consolidated federal income tax return.

NOTE 5--LINES OF CREDIT

In January of 2000, Mountaineer Park entered an $8 million discretionary
line of credit with PNC Leasing, LLC, pursuant to which Mountaineer Park has
borrowed $6,040,000 in connection with the leasing of gaming equipment.

In June of 2000, in contemplation of entering a $60 million amended and
restated syndicated non-reducing revolving line of credit led by Wells Fargo
Bank (the "Restated Facility"), the Company and Wells Fargo amended the Credit
Agreement ("the First Amendment"). On an interim basis (until August 1, 2000),
the First Amendment increased the credit facility from $28.5 million to
$38.5 million and deferred scheduled principal reduction payments in order to
accommodate the Company's plans for Phase I of the expansion at Mountaineer Park
(comprising construction of the arena, a 32,000 square foot expansion of the
Speakeasy Gaming Saloon to house approximately 550 additional slots,
improvements related to launching Mountaineer's export simulcast business, and
various projects (such as paving) to support the improvements. In July of 2000,
the Company and Wells Fargo again amended the Credit Agreement (the "Second
Amendment"). The Second Amendment extended the interim increase and deferral of
principal reductions until September 1, 2000.

On August 15, 2000, the Company entered into the Restated Facility. As
expected, this agreement increased the credit line to $60 million and eliminated
quarterly principal payments, providing instead for a $60 million balloon
payment at the end of the five-year term. As of September 30, 2000, the Company
had drawn $48,624,000 on the line of credit. On October 5, 2000, as required by
the Restated Facility, the Company entered into an Interest Rate Cap Agreement
with Wells Fargo Bank at a cost of $214,750. The agreement caps the Company's
interest rate under the Restated Facility at 7.5% (plus the applicable margin)
with respect to $30 million of principal. The cost of this interest rate hedge
product will be amortized over the term of the Cap Agreement, which expires on
December 31, 2003, and reported as interest expense.

7
<PAGE>
MTR GAMING GROUP, INC.

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--EARNINGS PER COMMON SHARE

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic and diluted earnings per common
share --net income available to common
stockholders:
Net income........................................... $ 5,024 $ 2,614 $12,709 $ 5,848
======= ======= ======= =======

Denominator:
Weighted average shares
Denominator for basic earnings per common share.... 22,082 21,142 21,631 21,015

Effect of dilutive securities:
Stock options and warrants......................... 6,199 4,043 4,943 3,691
Dilutive potential common shares................... 6,199 4,043 4,943 3,691

Denominator for diluted earnings per common share --
adjusted weighted average shares and assumed
conversions........................................ 28,281 25,185 26,574 24,706
======= ======= ======= =======
Basic earnings per common share...................... $ 0.23 $ 0.12 $ 0.59 $ 0.28
======= ======= ======= =======
Diluted earnings per common share.................... 0.18 0.10 0.48 0.24
======= ======= ======= =======
</TABLE>

8
<PAGE>
ITEM 2-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:

This document includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact included in this document, including, without
limitation, the statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Liquidity and Sources of
Capital" regarding the Company's strategies, plans, objectives, expectations,
and future operating results are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable at this time, it can give no assurance that such
expectations will prove to have been correct. Actual results could differ
materially based upon a number of factors including, but not limited to,
leverage and debt service, gaming regulation, licensing and taxation of gaming
operations, dependence on key personnel, competition, including competition from
legalization of new forms of gaming in the Company's target markets as well as
gaming over the Internet, no dividends, continued losses from horse racing,
costs associated with maintenance and expansion of Mountaineer Park's
infrastructure to meet the demands attending increased patronage, costs and
risks attending construction, expansion of operations, market acceptance of the
Company's Nevada Properties and maintenance of "grandfathered" status of those
properties, cyclical nature of business, limited public market and liquidity,
shares eligible for future sale, impact of anti-takeover measures, the Company's
common stock being subject to other risks detailed in the Company's Securities
and Exchange Commission filings.

RESULTS OF OPERATIONS

The Company, through wholly owned subsidiaries, owns and operates the
Mountaineer Racetrack and Gaming Resort ("Mountaineer Park") in Chester, West
Virginia, the Ramada Inn and Speedway Casino in North Las Vegas, Nevada (the
"Speedway Property"), and the Ramada Inn and Speakeasy Casino in Reno, Nevada
(the "Reno Property" or, collectively with the Speedway Property, the "Nevada
Properties").

Particularly in light of the four-phase expansion of Mountaineer Park, the
Company anticipates that Mountaineer Park, particularly gaming operations, will
continue to be the dominant factor in the Company's financial condition. Results
for the three and nine months ended September 30, 2000--with respect to both
revenues and pre-opening promotional and general and administrative
expenses--reflect Mountaineer Park's mid-August launching of export simulcast
operations, the opening of an arena, and the 32,000 square foot expansion of the
Speakeasy Gaming Saloon with the attendant substantial increase in gaming
positions.

The Company earned revenues for the respective nine-month and three-month
periods in 2000 and 1999 as shown below:

Gaming................................. $42,648,000 $26,692,000 $111,061,000 $69,041,000
Parimutuel............................. 1,567,000 1,285,000 3,949,000 3,479,000
Food, beverage and lodging............. 4,574,000 3,214,000 11,557,000 7,705,000
Other.................................. 1,448,000 816,000 2,614,000 2,063,000
----------- ----------- ------------ -----------
Total revenues....................... 50,237,000 32,007,000 129,181,000 82,288,000
=========== =========== ============ ===========
</TABLE>

9
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 2000, COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999

For the third quarter of 2000, the Company's total revenues increased by
$18.2 million, or 57%, over the same period in 1999. Approximately
$13.9 million of the increase was produced by gaming operations at Mountaineer
Park. Mountaineer Park's revenue from parimutuel commissions increased by
$282,000; its lodging revenues remained relatively consistent; food and beverage
revenues increased by $818,000 or 42.7% from $1.9 million to $2.7 million; and
other revenues at Mountaineer Park increased by $544,000 or 67.6%. The Nevada
Properties contributed $3.4 million in gross revenue, with $2.0 million from
gaming, $729,000 from lodging, $642,000 from food and beverage, and $28,000 from
other revenues in the third quarter of 2000.

GAMING OPERATIONS

Revenues from gaming operations increased by $16.0 million, or 59.8%, from
$26.7 million in 1999 to $42.6 million in 2000. The August 11, 2000 opening of
the 32,000 square foot Downtown Chicago Gaming Room in Mountaineer Park's
Speakeasy Gaming Saloon, with its additional 550 slot machines (a 41% increase
in the number of gaming positions), drove the $13.9 million increase in gaming
revenues in West Virginia. Management believes that the following factors also
contributed to the overall increase in gaming revenues: (1) the introduction of
400 coin drop slot machines at Mountaineer Park in November of 1999; (2) the
commencement of gaming operations at the Nevada Properties in October of 1999
(resulting in $2.0 million in gaming revenues); and (3) the continued aggressive
marketing of all of the Company's properties.

In the third quarter of 2000, the average daily win per coin drop machine
was $306 compared to $232 for ticket terminals. For the same period, average
daily net win for the track-based machines was $162 compared to $316 earned on
the Lodge-based terminals for a facility-wide average of $263 per machine per
day. At the end of the third quarter of 2000, Mountaineer Park operated a total
of 1,905 slots with 1,344 in the Lodge (617 coin drop and 727 ticket) and 561 in
the racetrack buildings (205 coin drop and 356 ticket). A summary of gaming
revenue for the three months ended September 30, 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
-------------------------------
2000 1999
------------- ------------
<S> <C> <C>
Total gross wagers............................. $ 306,385,000 $ 94,510,000
Less patron payouts............................ (264,037,000) $(67,818,000)
------------- ------------
Table games revenue............................ 300,000 --
------------- ------------
Revenue--Gaming operations..................... $ 42,648,000 $ 26,692,000
------------- ------------
Average daily net win per terminal (WVa)....... $ 266 $ 223
============= ============
</TABLE>

Management views the third quarter increase in gaming revenues at
Mountaineer Park significant for two reasons. First, the $13.9 million increase
in 2000 over the third quarter of 1999 followed a $5.9 million increase in 1999
over the third quarter of 1998. In other words, the third quarter of 2000
represents a 52% increase in gaming revenue in West Virginia over what had
itself been a record third quarter in 1999. Second, management believes that the
gains achieved thus far from the completion of Phase I of Mountaineer Park's
expansion reflect primarily the amelioration of overcrowding during peak
periods. Management expects additional significant gains in gross gaming
revenues and net win per-day-per-machine upon the completion of Phase II's
hotel, spa, gaming, and convention facilities together with an integrated
marketing program to drive slot revenues during mid-week and daytime periods.

10
<PAGE>
Since October 1, 1999, the Company has operated gaming at its Nevada
Properties. The Speedway Property had gaming revenues of $1.3 million for the
three months ended September 30, 2000. This is a $100,000 increase in gaming
revenues in comparison to the second quarter of 2000. This increase is seen as
significant since it occurred during a traditionally slower period in the Las
Vegas market. The Reno Property's gaming revenues were $745,000 for the third
quarter, a 44% increase over the prior quarter.

PARIMUTUEL OPERATIONS

Parimutuel commissions revenue is a function of wagering handle, which means
the total amount wagered without regard to predetermined deductions, with a
higher commission earned on a more exotic wager, such as a trifecta, than on a
single horse wager, such as a win, place, or show bet. In parimutuel wagering,
patrons bet against each other rather than against the operator of the facility
or with pre-set odds. The total wagering handle is composed of the amounts
wagered by each individual. The total amounts wagered form a pool of funds from
which winnings are paid based on odds determined solely by the wagering
activity. The racetrack acts as a stakeholder for the wagering patrons and
deducts from the amounts wagered a "take-out" or gross commission, from which
the racetrack pays state and county taxes and racing purses. The Company's
parimutuel commission rates are fixed as a percentage of the total wagering
handle or total amounts wagered. Mountaineer Park's parimutuel revenues for the
three months ended September 30, 2000 and 1999 are summarized below:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Simulcast racing parimutuel handle................ $ 6,051,000 $ 5,517,000
Live racing parimutuel handle..................... 5,346,000 6,288,000
Less patrons' winning tickets..................... (8,999,000) (9,336,000)
----------- -----------
2,398,000 2,469,000
Less:
State and county parimutuel tax................... (130,000) (137,000)
Purses and Horsemen's Association................. (1,004,000) (1,047,000)
----------- -----------
Revenues--parimutuel commissions.................. $ 1,264,000 $ 1,285,000
Revenues--export simulcast fees................... 303,000 0
----------- -----------
Revenue--parimutuel............................... $ 1,567,000 $ 1,285,000
=========== ===========
</TABLE>

Revenues from parimutuel operations increased by $282,000, or 21.9% over the
third quarter of 1999. Simulcast handle increased by $534,000 to $6.1 million,
while live racing handle decreased by 15.0% or $942,000 from $6.3 million in
1999 to $5.3 million in 2000. Management attributes the decrease in live handle
to (i) the fact that Mountaineer Park completed seven fewer race meets in the
third quarter of 2000 than in the third quarter of 1999; and (ii) a decrease in
attendance for live racing following a scheduling change (all evening races to
facilitate successful export simulcast operations). Management also believes
that patrons will adjust to the change in racing times, and that the prospect of
broader betting pools resulting from export simulcasting will ultimately improve
attendance and live racing handle.

Revenues from export simulcasting of Mountaineer Park's live racing, which
began August 11, 2000 and thus constitutes a new source of revenue, totaled
$303,000. Although it would be premature to discuss export simulcasting in terms
of trends, management notes that to date this new business has exceeded
expectations. When export simulcasting began on August 11, 2000, 87 sites
carried Mountaineer's broadcast. Since then, the number has grown to 140 sites.
The first week of export simulcasting averaged a handle of $279,000. This amount
has grown by 28% to $356,000. On

11
<PAGE>
October 22, 2000, Mountaineer Park had its first daily export handle over
$500,000. Additional sites represent not only additional revenue at a modest
incremental cost, but also the opportunity for the Company to promote all of its
properties to parimutuel wagering fans across the country.

Mountaineer Park paid average daily live purses of $115,900 in the third
quarter of 2000, a 35.1% increase over the $85,800 average for the corresponding
period of 1999.

FOOD, BEVERAGE AND LODGING OPERATIONS

Food, beverage and lodging revenues accounted for a combined increase of
42.3% to $4.6 million for the three months ended September 30, 2000 compared to
$3.2 million for the same period in 1999. Company wide, restaurant, bar and
concession facilities produced $1.3 million of the revenue increase, while
lodging revenues increased $62,000, a 5.4% increase over the same period in
1999. Food and beverage revenues increased $818,000 to $2.7 million at
Mountaineer Park in the third quarter of 2000. Management believes the
conversion of the trackside buffet to the more popular deli setup and increases
in the number of patrons visiting the resort resulted in the growth in this
area.

The increase in revenue for food, beverage and lodging for the Nevada
Properties was $552,000 with $481,000 of the increase coming from food and
beverage. The Speedway Property's food and beverage revenues increased by
$294,000 to $369,000, while the Reno Property had an increase of $187,000 for
the same period. The increases at both Nevada Properties are attributable to the
commencement of gaming operations and the Grand Opening celebrations, which
drove customer traffic for food and beverage as well.

OTHER OPERATING REVENUES

Other revenues increased by $632,000 to $1.4 million for the three months
ended September 30, 2000 compared to the same period in 1999. Other operating
revenues are primarily derived from the sale of special event tickets, programs,
lottery tickets, admission fees, check cashing fees, golf and ATM services. The
increase is attributable to (i) the August 2000 opening of Mountaineer Park's
new event center, The Harv, which hosts more events and has greater seating
capacity than the grandstand arena; (ii) a 33.3% increase in ATM fees as a
result of adding six machines to accommodate Mountaineer Park's expansion; and
(iii) a one-time $178,000 refund for overpayment of prior years' franchise tax.

OPERATING COSTS

The Company's $18.2 million increase in revenues resulted in higher total
costs, as directly related expenses increased by $11.5 million to $32.1 million
in the third quarter of 2000 compared to the same period in 1999. Approximately
$9.2 million of the increase in operating costs is attributable to gaming
operations ($7.7 million for taxes, fees and other direct costs at Mountaineer
Park; $1.5 million for the Nevada Properties). Parimutuel direct cost increased
by $300,000, while cost of lodging and food and beverage increased by
$1.7 million. Of the 63.5% increase in the cost of food and beverage and
lodging, $907,000 can be attributed to the Nevada Properties. The cost of other
income increased by $395,000 in 2000 to $1.4 million. The increases in other
income can be attributed to the opening of The Harv and the cost of the related
entertainment.

12
<PAGE>
Operating costs and gross profits earned from operations for the
three-months ended September 30, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Operating Costs
Gaming operations................................. $24,743,000 $15,583,000
Parimutuel........................................ 1,691,000 1,391,000
Lodging, food and beverage........................ 4,322,000 2,644,000
Other revenues.................................... 1,365,000 970,000
----------- -----------
Total Operating Costs........................... $32,121,000 $20,588,000
=========== ===========
Gross profit (Loss)
Gaming operations................................. $17,905,000 $11,109,000
Parimutuel........................................ (124,000) (106,000)
Lodging, food and beverage........................ 252,000 570,000
Other revenues.................................... 83,000 (154,000)
----------- -----------
Total Gross Profit.............................. $18,116,000 $11,419,000
=========== ===========
</TABLE>

GAMING OPERATING COSTS

Company wide, costs of gaming revenues increased by $9.2 million, a 58.8%
increase corresponding to the 59.8% increase in gaming revenues. Costs of gaming
revenue in West Virginia increased by $7.7 million or 49.3% to $23.3 million for
the three months ended September 30, 2000, reflecting an increase in statutory
expenses directly related to the 52.1% increase in gaming revenues. Such
expenses accounted for $7.6 million of the total cost increase. Gaming machine
lease expense decreased $193,000 due to capitalizing of lease expense for
certain new equipment (this amount is now included in depreciation expense;
thus, the decrease in gaming operating cost does not affect net income). Wages
and benefits increased for the three months ending September 30, 2000 by
$453,000 due to increases in personnel to staff the new Downtown Chicago gaming
room and the additional personnel required for coin drop slot operations
compared to ticketed machines. For the quarter ending September 30, 2000, the
Nevada Properties incurred $1.5 million in gaming costs, compared to none in the
third quarter of 1999, when the Company did not operate gaming in Nevada.

After payment of a State Administrative Fee of up to 4% of revenues,
Mountaineer Park is obligated to make payments from the remaining gaming
revenues to certain funds administered by the West Virginia Lottery Commission
as follows: State Tax 30%, Horsemen's Purse Fund 15.5%, Tourism Promotion 3%,
Hancock County Tax 2%, Stakes Races 1%, Miscellaneous State Projects 1% and
Employee Pension Fund 0.5%. Assessments paid to the Employee Pension Fund are
returned by the Lottery Commission to a defined contribution pension plan
administered by Mountaineer Park for the sole benefit of Mountaineer Park's
employees. Assessments paid to the Horsemen's Purse Fund are returned by the
Lottery Commission to bank accounts administered by Mountaineer Park for the
sole benefit of horse owners who race at Mountaineer Park. These funds are used
exclusively to pay purses for thoroughbred races run at Mountaineer Park, in
amounts determined by Mountaineer Park in accordance with its agreement with the
Horsemen's Benevolent and Protective Association. Taxes and assessments paid to
all of these funds are included in "Costs of Gaming Terminals" in the
Consolidated Statement of Operations. The State of West Virginia annually
reconciles the State Administrative Fee, and the amount not utilized by the
State is refunded every year to Mountaineer Park on June 30th, the end of the
State's fiscal year.

13
<PAGE>
Statutory costs and assessments for the respective three-month periods are
as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Employee Pension Fund............................. $ 201,000 $ 130,000
Horsemen's Purse Fund............................. 6,240,000 4,020,000
----------- -----------
SUBTOTAL........................................ $ 6,441,000 $ 4,150,000

State of West Virginia............................ $12,078,000 $ 7,780,000
Tourism Promotion Fund............................ 1,208,000 778,000
Hancock County.................................... 805,000 519,000
Stakes Races...................................... 403,000 259,000
Misc. State Projects.............................. 403,000 259,000
----------- -----------
$21,338,000 $13,745,000
=========== ===========
</TABLE>

PARIMUTUEL OPERATING COSTS

Costs (the individual components of which are detailed below) of parimutuel
commissions increased by $300,000, or 21.6%, from $1.4 million in the third
quarter of 1999 to $1.7 million in the third quarter of 2000. The costs directly
related to the export simulcast accounted for $122,000 of this increase. The
other major source of the cost increase was the $132,000 increase in import
simulcast costs for host tracks, which is consistent with the increase in
simulcast wagering. Purse expense (consisting of statutorily determined
percentages of live racing handle) decreased by $93,000 to $525,000 in the third
quarter of 2000, which is consistent with the decrease in live handle and the
number of race days conducted.

FOOD, BEVERAGE AND LODGING OPERATING COSTS

Direct expenses of food, beverage and lodging operations increased from
$2.6 million for the third quarter of 1999 to $4.3 million for the same period
in 2000. Of the $1.7 million increase, $906,000 is attributable to the Nevada
Properties.

The Nevada Properties reported an operating loss from food, beverage and
lodging of $133,000 for the three months ended September 30, 2000, compared to a
$222,000 gross profit for the same period in 1999. This decrease in
profitability can be attributed to food and beverage specials aimed at driving
casino traffic.

Mountaineer Park's gross profit for food, beverage and lodging for the third
quarter of 2000 was $385,000, compared to $349,000 in 1999. Cost of food and
beverage as a percentage of sales increased by 2% in comparison to the prior
year. This increase in costs can be tied to higher meat costs in 2000.

COSTS OF OTHER OPERATING REVENUES

Costs of other revenues consisting primarily of non-core businesses such as
special event ticket sales, racing programs, check cashing and golf increased by
$395,000 from $970,000 in the third quarter of 1999 to $1,365,000 in the third
quarter of 2000. These increases can be tied to the opening of The Harv and the
accompanying increase in the number of special events held during the quarter.

MARKETING AND PROMOTIONS EXPENSE

Company wide, marketing expenses increased in the third quarter of 2000 to
$3.1 million from $1.5 million. Of the $1.6 million increase in marketing and
promotions, $556,000 is attributable to the Nevada Properties. Marketing and
promotions expenses at Mountaineer Park increased from

14
<PAGE>
$1.4 million for the third quarter of 1999 to $2.5 million for the same period
in 2000. The increase is attributable primarily to: (1) the Grand Opening of The
Harv and the six special events held in the third quarter ($474,000);
(2) increased prizes for members of Mountaineer Park's Frequent Player Club
($402,000); (3) Management's decision to provide free non-alcoholic beverages to
gaming patrons ($449,000); and (4) an increase in salaries and related employee
benefits.

GENERAL AND ADMINISTRATIVE EXPENSES, AND INTEREST

General and administrative expense for the third quarter increased by
$1.7 million, or 49.5%, from $3.5 million in 1999 to $5.2 million in 2000.
General and administrative expense for the third quarter of 2000 was 10.4% of
gross sales compared to 10.9% for the third quarter of 1999. The dollar increase
in general and administrative expense is attributable primarily to:
(1) pre-opening expenses associated with export simulcasting, The Harv and the
Downtown Chicago Gaming Room; (2) increase in costs of security, surveillance,
housekeeping and maintenance staff to accommodate Mountaineer Park's larger
crowds and expanded facilities; (3) increases in compensation and benefits; and
(4) additional general and administrative costs of $448,000 generated by the
Nevada Properties.

In the third quarter of 2000, the Company incurred $750,000 of interest
expense compared to $1.2 million in the third quarter of 1999. The decrease in
interest expense is attributable to the Company's December, 1999 refinancing and
the August, 2000 amendment and restatement of the credit facility, which reduced
the Company's interest rate from 13% to approximately 9%.

DEPRECIATION AND AMORTIZATION EXPENSE

Depreciation and amortization expenses increased 20.7%, or $265,000, to
$1.5 million for the three months ended September 30, 2000. This increase
reflects the $14.1 million increase in fixed assets other than for construction
in progress and the use of capital leasing of new gaming devices. Depreciation
for the Nevada Properties was $474,000 for the third quarter of 2000.

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999

Total revenues increased from $82.3 million in the first nine months of 1999
to $129.2 million in 2000, an increase of $46.9 million or 57.0%. Of this
increase, 89.6%, or $42.0 million, can be attributed to gaming operations.
Parimutuel commissions increased by $470,000 for the nine months ended
September 30, 2000. Food, beverage, lodging and other operations accounted for
$4.4 million of the increase in revenues for this period.

GAMING OPERATIONS

A summary of the gaming operations revenues for the nine months ended
September 30, 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
--------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Total gross wagers............................ $ 742,692,000 $ 244,701,000
Less patron payouts........................... (632,275,000) (175,660,000)
------------- -------------
Table games revenue........................... 644,000 --
------------- -------------
Revenues--Gaming operations................... $ 111,061,000 $ 69,041,000
============= =============
Average daily net win per terminal (WVa)...... $ 267 $ 195
============= =============
</TABLE>

15
<PAGE>
Revenues from gaming operations increased by 60.9% from $69.0 million in the
first nine months of 1999 to $111.1 million in 2000. Management attributes the
increase to the following factors: (1) the August 2000 addition of 550 machines
in the Downtown Chicago Gaming Room at Mountaineer Park; (2) extensive
advertising; (3) the introduction of coin drop slots at Mountaineer Park;
(4) expanded gaming hours and facilities trackside at Mountaineer Park; and
(5) the contribution of gaming revenues from the Nevada Properties
($4.6 million).

PARIMUTUEL OPERATIONS

Mountaineer Park's parimutuel revenues for the nine months ended
September 30, 2000 and 1999 are summarized below:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Simulcast racing parimutuel handle.............. $ 17,833,000 $ 16,212,000
Live racing parimutuel handle................... 15,143,000 15,622,000
Less patrons' winning tickets................. (26,056,000) (25,190,000)
------------ ------------
6,920,000 6,644,000

Less
State and county parimutuel tax............... (375,000) (374,000)
Purses and Horsemen's Association............. (2,899,000) (2,791,000)
------------ ------------
Revenues--parimutuel commissions................ $ 3,646,000 $ 3,479,000

Revenues--export simulcast fees................. 303,000 0
------------ ------------
Revenue--parimutuel............................. $ 3,949,000 $ 3,479,000
============ ============
</TABLE>

Revenues from parimutuel operations increased by $470,000, or 13.5% over the
first nine months of 2000. Simulcast handle increased by $1.6 million, or 10%,
to $17.8 million, while live racing handle decreased by 3.1%, or $479,000, from
$15.6 million in 1999 to $15.1 million in 2000. Management attributes the
decrease in live handle to a decrease in the number of live race meets and a
decrease in attendance for live racing following an August 2000 scheduling
change (all evening races to facilitate successful export simulcast operations).

$303,000 in revenues from export simulcasting, which commenced on
August 11, 2000, accounted for the majority of the increase in parimutuel
revenues. Management expects export simulcasting to have a greater impact on the
performance of parimutuel operations as more outlets broadcast Mountaineer
Park's signal and when the Company generates such revenues for an entire
reporting period. Mountaineer Park paid average daily live purses of $102,700 in
the first nine months of 2000, a 23.3% increase over the $83,325 average for the
corresponding period of 1999.

16
<PAGE>
FOOD, BEVERAGE AND LODGING OPERATIONS

Food, beverage and lodging revenues accounted for a combined increase of
50.0% to $11.6 million for the nine months ended September 30, 2000 compared to
$7.7 million for the same period in 1999. Company wide, restaurant, bar and
concession facilities produced $3.5 million of the revenue increase, while lodge
revenues increased $323,000, an 11.9% increase over the same period in 1999.
Food and beverage revenues increased $2.4 million to $7.0 million at Mountaineer
Park in the third quarter of 2000. Management believes the conversion of the
trackside buffet to the more popular deli setup and increases in the number of
patrons visiting the resort resulted in the growth in this area.

Revenues from food, beverage and lodging for the Nevada Properties increased
by $1.4 million, with $1.2 million of the increase attributable to food and
beverage. The increase is attributable to the Company taking over gaming
operations in October of 1999 and promoting the properties.

Company wide, lodging revenues increased by $323,000 for an 11.9% increase
over the first nine months of 1999. Of the increase in lodging revenues,
$247,000 can be attributed to the Nevada Properties.

OTHER OPERATING REVENUES

Other revenues increased by $551,000 to $2.6 million for the nine months
ended September 30, 2000 compared to the same period in 1999. Other operating
revenues are primarily derived from the sale of lottery tickets, check cashing
fees, golf, special event admissions and ATM service fees. The increase is
attributable primarily to: (i) ticket sales for special events at The Harv,
which hosts more events and has greater seating capacity than the grandstand
arena ($160,000 increase); (ii) an increase in ATM fees as a result of adding
six machines to accommodate Mountaineer Park's expansion ($185,000 increase);
and (iii) a one-time $178,000 refund for overpayment of prior years' franchise
tax.

OPERATING COSTS

Operating costs and gross profit earned from operations for the nine-months
ended September 30, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Operating Costs:
Gaming operations............................... $64,272,000 $40,449,000
Pari-mutuel..................................... 4,378,000 4,027,000
Lodging, food and beverage...................... 10,191,000 6,828,000
Other revenues.................................. 2,351,000 1,898,000
----------- -----------
Total Operating Costs......................... $81,192,000 $53,202,000
=========== ===========
Gross Profit (Loss)
Gaming operations............................... $46,789,000 $28,592,000
Pari-mutuel..................................... (429,000) (548,000)
Lodging, food and beverage...................... 1,366,000 877,000
Other revenues.................................. 263,000 165,000
----------- -----------
Total Gross Profit............................ $47,989,000 $29,086,000
=========== ===========
</TABLE>

The Company's 57.0% increase in revenues resulted in higher total costs, as
expenses increased by 52.6% to $81.2 million in the first nine months of 2000.
Gross profit increased by 65.0% from $29.1 million for the first nine months of
1999 to $48.0 million for the same period in 2000.

17
<PAGE>
GAMING OPERATING COSTS

Company wide, costs of gaming revenues increased by $23.8 million, a 58.9%
Increase, corresponding to the 60.9% increase in gaming revenues. Costs of
gaming revenues for Mountaineer Park increased by $20.5 million, or 50.7%, to
$60.9 million for the nine months ended September 30, 2000, reflecting the
$19.2 million increase in statutory expenses directly related to the 54.2%
increase in gaming revenues and the increase in the number of gaming positions.
Lease expense for gaming devices decreased by $938,000 as a result of
capitalized lease arrangements for new equipment. Salary and related benefits
increased by $995,0000 for the nine months ended September 30, 2000. For the
same period, the Nevada Properties incurred $3.3 million in costs associated
with gaming, compared to $0 for the first nine months of 1999, when the Company
had no gaming operations in Nevada.

Statutory costs and assessments for the respective nine-month periods are as
follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Employees Pension Fund............................ $ 526,000 $ 345,000
Horsemen's Purse Fund............................. 16,310,000 10,681,000
----------- -----------
SUBTOTAL........................................ 16,836,000 $11,026,000
State of West Virginia............................ 31,568,000 20,673,000
Tourism Promotion Fund............................ 3,157,000 2,067,000
Hancock County.................................... 2,105,000 1,378,000
Stakes Races...................................... 1,052,000 689,000
Miscellaneous State Projects...................... 1,052,000 689,000
----------- -----------
$55,770,000 $36,522,000
=========== ===========
</TABLE>

PARIMUTUEL OPERATING COSTS

Costs of parimutuel commissions increased by $351,000 to $4.4 million for
the first nine months of 2000 from $4.0 million for the same period in 1999.
Fees associated with simulcast operations increased by $326,000 in 2000 as a
result of the increase in simulcast handle ($204,000 increase in fees) and the
commencement of export simulcasting ($122,000 in new expenses). Parimutuel
commissions revenue is reported net of these expenses in the Consolidated
Statement of Operations.

FOOD, BEVERAGE AND LODGING OPERATING COSTS

Direct expenses of food, beverage and lodging operations increased from
$6.8 million for the nine months ending September 30, 1999 to $10.2 million for
the same period in 2000. Of the $3.4 million increase, $1.9 million is
attributable to the Nevada properties and the commencement of gaming operations.

Company wide, the food and beverage operations earned a gross profit of
$641,000 for the first nine months of 2000 compared to $97,000 for the same
period in 1999, an increase of $544,000. Lodging operations earned a gross
profit of $725,000 for the first nine months of 2000 compared to $780,000 for
the same period in 1999, a decrease of $55,000.

The Nevada Properties' gross profit (loss) from food, beverage and lodging
operations was ($137,000) for the nine months ended September 30, 2000, compared
to $350,000 for the same period in 1999. This decrease in profitability can be
attributed to food and beverage specials aimed at driving casino traffic and the
increase in staffing for the Grand Openings and continued operation of those
properties.

18
<PAGE>
Mountaineer Park's gross profit for food, beverage and lodging was
$1.5 million for the first nine months of 2000, compared to $528,000 in 1999.
$1.2 million of the gross profit is attributable to food and beverage. This
increase in profitability is directly tied to the $2.4 increase in sales at this
facility along with a greater efficiency in uses of labor and supplies. Also,
food costs for January of 1999 (50% of sales) were affected by excessive
spoilage related to inclement weather. During the first nine months of 2000,
food costs were reduced to 39% of sales compared to 44% for the same period of
1999.

COSTS OF OTHER OPERATING REVENUES

Costs of other revenues increased by $453,000 from $1.9 million for the nine
months ended September 30, 1999 to $2.4 million for the nine months ended
September 30, 2000. This increase can be attributed primarily to the opening of
The Harv.

MARKETING AND PROMOTIONS EXPENSE

Company wide, marketing and promotional expenses for the first nine months
of 2000 increased by $4.3 million to $7.8 million, or 6% of total revenues in
2000 compared to 4.3% in 1999. The increase is attributable primarily to the
following factors: (1) doubling of the number of members of Mountaineer Park's
Player's Club and increases in prize giveaways through this promotion
($1.1 million increase); (2) Management's decision to provide free soft drinks
and coffee to gaming patrons ($1.1 million); (3) increases in advertising and
direct mail for new promotions such as "Millionaire Madness" and the opening of
The Harv ($396,000); (4) increases in salaries and benefits ($221,000); and
(5) the Grand Openings of the Nevada Properties and continued promotion of those
properties ($1.8 million increase).

GENERAL AND ADMINISTRATIVE AND INTEREST EXPENSES

General and administrative expenses for the periods being compared increased
by $4.6 million, or 47.3%, from $9.6 million to $14.2 million. Expressed as a
percentage of total sales, general and administrative costs were 11% of total
revenues for the first nine months of 2000 compared to 12% of total revenues for
the same period in 1999. The reason for the dollar increase in general and
administrative costs was twofold. First, with respect to operations, the
increases are due primarily to: (1) pre-opening expenses associated with export
simulcasting, The Harv and the Downtown Chicago Gaming Room; (2) increase in
costs of security, surveillance, housekeeping and maintenance staff to
accommodate Mountaineer Park's larger crowds and expanded facilities;
(3) increases in compensation and benefits; and (4) additional general and
administrative costs of $1.2 million generated by the Nevada Properties. Second,
with respect to implementation of the Company's business strategy to acquire
other middle-market, lower priced (ranging from approximately $5 million to
$50 million) gaming and/or parimutuel businesses, professional fees and travel
expenses related to evaluating acquisition and financing opportunities incurred
by the Company increased by approximately $453,000 during the first nine months
of 2000.

In the first nine months of 2000, the Company incurred $2.3 million of
interest expense compared to $3.6 million in the first nine months of 1999. The
decrease in interest expense is attributable to the Company's refinancing, which
reduced both the interest rate and principal for the first half of the year.

DEPRECIATION AND AMORTIZATION EXPENSE

Depreciation and amortization expenses increased by 20.3%, or $726,000, to
$4.3 million for the nine months ended September 30, 2000. This increase
reflects the increased capitalization of improvements completed at Mountaineer
Park's facilities. Depreciation for the Nevada Properties was $1.4 million for
the first nine months of 2000.

19
<PAGE>
CASH FLOWS

The Company's operations produced $17,035,000 in cash flow in the nine
months ended September 30, 2000, compared to $16,313,000 produced in the first
nine months of 1999. Current year non-cash expenses included $4.3 million of
depreciation and amortization and $200,000 for the amortization of deferred
financing costs.

The Company invested $29.7 million in capital improvements at Mountaineer
Park during the first nine months of 2000 compared to $10.5 million in 1999. The
Company also invested $2.5 million in capital assets related to the Nevada
Properties during the first nine months of 2000.

LIQUIDITY AND SOURCES OF CAPITAL

The Company's working capital balance as of September 30, 2000 was
$11,040,000 and its unrestricted cash balance was $11,870,000.

Racing purses are paid from funds contributed by the Company to bank
accounts owned by the horse owners who race at Mountaineer Park. At
September 30, 2000, the balances in these accounts exceeded purse obligations by
$4.1 million. This amount is available for payment of future purse obligations
at the discretion of the Company and in accordance with the terms of its
agreement with the HBPA.

On December 27, 1999, the Company entered a $30,000,000 five-year senior
secured reducing, revolving credit facility with Wells Fargo Bank, N.A. On that
date, the Company drew the full $30 million available under the Wells Fargo loan
and used the proceeds, combined with approximately $5.3 million of the Company's
cash, to prepay amounts previously borrowed from Madeleine LLC from 1996 through
1998 and to pay the costs and fees related to the transaction.

In June of 2000, in contemplation of entering an amended and restated
$60 million syndicated non-reducing revolving line of credit led by Wells Fargo
Bank (the "Restated Facility"), the Company and Wells Fargo amended the Credit
Agreement ("the First Amendment"). On an interim basis (until August 1, 2000),
the First Amendment increased the credit facility from $28.5 million to
$38.5 million and deferred scheduled principal reduction payments in order to
accommodate the Company's plans for Phase I of the expansion at Mountaineer Park
(comprising construction of the arena, a 32,00 square foot expansion of the
Speakeasy Gaming Saloon to house approximately 550 additional slots,
improvements related to launching Mountaineer's export simulcast business, and
various projects (such as paving) to support the improvements). In July of 2000,
the Company and Wells Fargo again amended the Credit Agreement (the "Second
Amendment"). The Second Amendment extended the interim increase and deferral of
principal reductions until September 1, 2000.

On August 15, 2000, the Company entered into the Amended and Restated Credit
Agreement with Wells Fargo. As expected, the credit facility was increased to
$60 million. The loan was funded by a consortium of four banks led by Wells
Fargo. The new credit agreement has no required principal repayments until the
end of the term, August 15, 2005.

At September 30, 2000, the outstanding principal balance of the Wells Fargo
loan was $48,624,000.

The original Credit Agreement permitted the Company to finance separately up
to $8 million of additional senior indebtedness for the purchase or lease of
gaming equipment as well as up to $15 million of subordinated debt for capital
improvements. In January of 2000, pursuant to the carve out for equipment
financing, Mountaineer Park entered an $8 million discretionary line of credit
with PNC Leasing, LLC, pursuant to which Mountaineer Park has borrowed
$6.04 million. The Restated Facility has eliminated the carve out for
subordinated debt and increased the amount of permitted equipment financing to
$13 million.

20
<PAGE>
On October 5, 2000, as required by the Restated Facility, the Company
entered into an Interest Rate Cap Agreement with Wells Fargo Bank at a cost of
$214,750. The agreement caps the Company's interest rate under the Restated
Facility at 7.5% (plus the applicable margin) with respect to $30 million of
principal. The cost of this interest rate hedge product will be amortized over
the term of the Cap Agreement, which expires on December 31, 2003, and reported
as interest expense.

CAPITAL IMPROVEMENTS. The Company is in the process of implementing
Mountaineer Park's previously announced four-phase expansion plan. The
four-phase plan includes approximately tripling the hotel room capacity, adding
50,000 square feet of additional gaming rooms which will hold an additional
1,100 slot machines, an arena, a spa, additional parking, a convention center, a
championship golf course, and an equestrian center, housing and a shopping
village. The expansion project will be completed in phases as cash flow and
available lines of credit permit and is estimated to cost approximately
$60 million through Phase II.

Phase I of the expansion, which includes a 32,000 square foot expansion of
the Speakeasy Gaming Saloon, the construction of an arena and additional parking
lots, was substantially completed in August of 2000 at a total cost of
approximately $16.2 million exclusive of gaming equipment. The Company has
likewise begun infrastructure improvements for Phase II and expects to open the
health spa in December of 2000.

The Company has also recently completed the purchase and installation of a
backup power supply ($1.3 million) and additional surveillance equipment
($450,000). The Company has spent $1.7 million and anticipates spending
approximately an additional $500,000 for capital improvements related to
development of export simulcasting at Mountaineer Park during 2000.

Pursuant to the Restated Credit Facility with Wells Fargo Bank, the Company
must spend between 2% and 6% of its gross operating revenue for maintenance of
its facilities.

On June 22, 1999, Mountaineer Park entered into agreements to purchase for
$583,000 approximately 287.65 acres of real property (including two buildings)
previously subject to an October 7, 1997 option and located adjacent to its
Hancock County, West Virginia operation. Mountaineer Park had paid $100,000 for
an irrevocable option. Subject to resolution of certain title issues,
Mountaineer Park intends to close the purchases, which call for payment of
$200,000 cash at closing and delivery of a term note bearing interest at 9%
payable over five years.

On July 31, 2000 Mountaineer Park purchased for a total of $56,000 (plus
closing costs) two parcels of real property (one including a residence)
aggregating approximately 7.5 acres. Management intends to use the parcels,
which are adjacent to the Woodview Golf Course, for expansion of the course.

Management believes that except as set forth above, its cash balances, cash
flow from operations, and available lines of credit will be sufficient to cover
contemplated capital improvements.

OUTSTANDING OPTIONS AND WARRANTS. As of September 30, 2000, there were
outstanding options and warrants to purchase 8,335,607 shares of the Company's
common stock. Of this amount, warrants to purchase 1,757,813 shares are held by
the Company's prior lender whose exercise rights are subject to a statutory
ownership limitation not to exceed 5% of the Company's outstanding voting shares
without prior approval of the West Virginia Lottery Commission. If all such
options and warrants were exercised, the Company would receive proceeds of
approximately $14.5 million.

DEFERRED INCOME TAX BENEFIT. Based upon the pretax income of $19.6 million
earned for the nine months ended September 30, 2000, Management believes that
the Company will be able to utilize its $3.5 million (as of December 31, 1999)
of federal net operating loss tax carry forwards. The utilization of federal net
operating losses may be subject to certain limitations.

21
<PAGE>
COMMITMENTS AND CONTINGENCIES. The Company has various commitments
including those under various consulting agreements, operating leases, and the
Company's pension plan and union contract. The Company has also entered into
employment agreements with certain employees for periods ranging from one to
five years. Compensation under the employment agreements consists of cash
payments and stock option commitments, and in some instances commitments to fund
deferred compensation plans. The Company anticipates cash payments in the amount
of $5.3 million over the next three years under the employment agreements. In
addition, the Company is faced with certain contingencies involving litigation
and environmental remediation and monitoring. The Company is also committed,
upon completion of a gaming software installation, to make a final payment of
$458,000 on a $1.7 million contract.

The Company believes that cash generated from operations and available lines
of credit will be sufficient to meet all of the Company's currently anticipated
commitments and contingencies.

ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company holds no material market risk sensitive financial instruments or
interest therein, and held none at September 30, 2000. The Company's loans,
payables, or receivables to or from others (including loans, payables or
receivables to or from its subsidiaries or joint ventures) and the interest
thereon, are all expressed as dollar obligations and payable in dollars. The
Company's exposure to market risk for changes in interest rates relates
primarily to the Company's long-term debt obligation pursuant to its credit
agreement. The table below presents the Company's credit agreements for which
fair value is subject to changing market interest rates:

As of September 30, 2000

ESTIMATED CASH INFLOW (OUTFLOW) BY YEAR OF PRINCIPAL MATURITY

<TABLE>
<CAPTION>
IN THOUSANDS 2000 2001 2002 2003 2004 THEREAFTER FAIR VALUE VALUE
------------ -------- -------- -------- -------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Credit Agreement Based on Libor plus
margin............................. 0 0 0 0 0 48,624 48,624 48,624
</TABLE>

On October 5, 2000 the Company entered into an Interest Rate Cap Agreement
for $30 million of capital. This agreement caps the interest rate at 7.5% plus
applicable margin.

22
<PAGE>
PART II
OTHER INFORMATION

ITEM 1--LEGAL PROCEEDINGS

There is incorporated by reference the information appearing under the
caption "Legal Proceedings" in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999.

ITEM 2--CHANGES IN SECURITIES

Not Applicable

ITEM 3--DEFAULTS UPON SENIOR SECURITIES

Not Applicable

ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

The annual meeting of shareholders of the Company was held on August 23,
2000 for the purpose of (i) electing directors of the Company, (ii) approving
the adoption of the Company's 2000 Stock Incentive Plan, and (iii) ratifying the
appointment of the Company's independent public accounts for the year ending
December 31, 2000. Proxies for the meeting were solicited pursuant to
Regulation 14A of the Securities Exchange Act of 1934 and there was no
solicitation in opposition.

(a) The following directors were elected by the following vote:

<TABLE>
<CAPTION>
FOR WITHHELD
---------- --------
<S> <C> <C>
Edson R. Arneault...................................... 18,474,632 224,142

Robert L. Ruben........................................ 18,488,432 210,342

Robert A. Blatt........................................ 18,481,782 216,992

James V. Stanton....................................... 18,526,582 172,192

William D. Fugazy, Jr.................................. 18,519,262 179,512
</TABLE>

(b) The proposal to approve the adoption of the Company's 2000 Stock
Incentive Plan:

<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- --------- --------
<S> <C> <C>
17,565,626 1,122,198 10,950
</TABLE>

(c) The proposal to ratify the appointment of the independent public
accountants for the year ending December 31, 2000 was approved by the following
vote:

<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- -------- --------
<S> <C> <C>
18,544,672 140,222 13,880
</TABLE>

ITEM 5--OTHER INFORMATION

Not Applicable

23
<PAGE>
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

<TABLE>
<S> <C>
3.1 Restated Certificate of Incorporation for Winners
Entertainment, Inc. dated August 17, 1993 (incorporated by
reference to the Company's Form 10-K for the fiscal year
ended December 31, 1993).

3.2 Certificate of Amendment of Restated Certificate of
Incorporation of Winner's Entertainment, Inc. dated October
10, 1996 (incorporated by reference to the Company's report
on Form 8-K filed November 1, 1996).

3.3 Amended Bylaws of the Company (incorporated by reference to
the Company's report on Form 8-K filed February 20, 1998).

10.12 Amended and Restated Credit Agreement, entered as of
August 15, 2000 by MTR Gaming Group, Inc., Mountaineer
Park, Inc., Speakeasy Gaming of Las Vegas, Inc., and
Speakeasy Gaming of Reno, Inc. as Borrowers and Wells Fargo
Bank, N.A., PNC Bank, N.A., National City Bank of
Pennsylvania, N.A. and the Bank of Scotland as Lenders
(incorporated by reference to the Company's report on
Form 8-K filed August 17, 2000).

27.1 Financial Data Schedule (filed herewith).

99.1 First Amendment to 2000 Stock Incentive Plan, adopted by the
Company's Board of Directors on August 23, 2000 (filed
herewith). (Note that the 2000 Stock Incentive Plan is filed
as Exhibit B to the Company's Proxy Statement filed
July 24, 2000).
</TABLE>

(b) Reports on Form 8-K

During the three months ended September 30, 2000 the Company filed the
following reports on Form 8-K:

On August 17, 2000, the Company filed a current report on Form 8-K under
Item 5 thereof reporting that on August 16, 2000 the Company and its operating
subsidiaries had entered the Amended and Restated Credit Agreement with Wells
Fargo Bank, N.A.

On September 8, 2000, the Company filed a current report on Form 8-K under
Item 4 thereof reporting that effective September 6, 2000 the Company had
changed independent auditors from BDO Seidman LLP to Ernst & Young LLP.

24
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1933, the Company has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.

<TABLE>
<S> <C> <C>
MTR GAMING GROUP, INC.

DATE: November 14, 2000 By: /s/ EDSON R. ARNEAULT
-----------------------------------------
Edson R. Arneault
CHAIRMAN, PRESIDENT, AND
CHIEF EXECUTIVE OFFICER

By: /s/ MARY JO NEEDHAM
-----------------------------------------
Mary Jo Needham
CHIEF FINANCIAL OFFICER
</TABLE>

25
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO.
----------- --------
<C> <S> <C>
3.1 Restated Certificate of Incorporation for Winners
Entertainment, Inc. dated August 17, 1993................... *

3.2 Certificate of Amendment of Restated Certificate of
Incorporation of Winner's Entertainment, Inc. dated October
10, 1996.................................................... *

3.3 Amended Bylaws of the Company............................... *

27.1 Financial Data Schedule.....................................

------------------------

* Incorporated by Reference