<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1997
--------------------
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________
Commission File Number 0-1365
---------------
SCIOTO DOWNS, INC.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 31-4440550
- -----------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6000 SOUTH HIGH STREET, COLUMBUS, OHIO 43207
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(614) 491-2515
- -----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _____
------
The number of common shares outstanding at July 31, 1997:
595,767, par value $1.05
----------------------------------
<PAGE> 2
SCIOTO DOWNS, INC.
INDEX
PAGES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets as of July 31, 1997 (unaudited), October 31, 1996,
and July 31, 1996 (unaudited) 2-3
Statements of Operations for the three-month and nine-month periods
ended July 31, 1997 and 1996 (unaudited) 4-5
Statements of Cash Flows for the nine-month periods ended July 31,
1997 and 1996 (unaudited) 6
Notes to the Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-9
PART II. OTHER INFORMATION 10
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 11
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
SCIOTO DOWNS, INC.
BALANCE SHEETS
at July 31, 1997 (unaudited), October 31, 1996, and July 31, 1996 (unaudited)
<TABLE>
<CAPTION>
ASSETS July 31, 1997 October 31, July 31, 1996
(Unaudited) 1996 (Unaudited)
------------- ----------- -------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 632,837 $ 621,591 $ 624,517
Accounts receivable, affiliate and other 192,003 47,106 176,389
Simulcast settlement account 401,033
Prepaid expenses and other 87,475 36,453 79,097
Investment in joint venture 82,446 82,446 59,101
----------- ----------- -----------
Total current assets 1,395,794 787,596 939,104
----------- ----------- -----------
Property and equipment, at cost 19,909,362 19,269,763 19,240,774
Less accumulated depreciation 12,506,339 11,962,780 11,792,018
----------- ----------- -----------
Total property and equipment 7,403,023 7,306,983 7,448,756
----------- ----------- -----------
Total assets $ 8,798,817 $ 8,094,579 $ 8,387,860
=========== =========== ===========
</TABLE>
CONTINUED
2
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCIOTO DOWNS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY July 31, 1997 October 31, July 31, 1996
(Unaudited) 1996 (Unaudited)
------------- ----------- -------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable, trade $ 8,440 $ 167,937
Purses payable 92,825 $ 197,118
Dividends payable 29,789
Current maturities, term debt 232,647 100,000 3,155,287
Accrued expenses 202,371 205,308 170,166
Deferred income taxes 1,952
----------- ----------- -----------
Total current liabilities 536,283 503,034 3,524,523
----------- ----------- -----------
Minimum pension liability 89,877 89,877 78,566
----------- ----------- -----------
Net deferred income taxes 140,910 4,910 113,792
----------- ----------- -----------
Term debt, net of current maturities 3,357,478 3,025,855
----------- -----------
Stockholders' equity:
Common stock, $1.05 par value; issued and
outstanding, 595,767 shares 625,555 625,555 625,555
Capital in excess of par value 2,037,300 2,037,300 2,037,300
Retained earnings 2,059,709 1,856,343 2,047,599
Pension liability adjustment, net of taxes (48,295) (48,295) (39,475)
----------- ----------- -----------
Total stockholders' equity 4,674,269 4,470,903 4,670,979
----------- ----------- -----------
Total liabilities and stockholders' equity $ 8,798,817 $ 8,094,579 $ 8,387,860
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 5
SCIOTO DOWNS, INC.
STATEMENTS OF OPERATIONS
for the three-month and nine-month periods ended July 31, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
For the Three-Month Periods For the Nine-Month Periods
Ended July 31, Ended July 31,
--------------------------- --------------------------
1997 1996 1997 1996
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Operating revenues:
Pari-mutuel commissions and breakage $ 6,031,728 $ 4,375,622 $ 6,031,728 $ 4,375,622
Less pari-mutuel taxes 915,345 771,643 915,345 771,643
-------------- ------------- -------------- --------------
5,116,383 3,603,979 5,116,383 3,603,979
Exported signal revenue 212,594 212,594
Admissions 124,770 149,870 149,425 179,990
Simulcasting shared revenues 19,034 248,462
Concessions, program and other 659,246 610,926 681,947 655,782
Entry fees and purse monies added by
others 552,406 764,004 552,406 764,004
Rental income from leased facilities 102,261 94,139 102,261 94,139
Pari-mutuel tax abatement earned 246,113 187,557 246,113 187,557
-------------- ------------- -------------- --------------
7,032,807 5,410,475 7,309,591 5,485,451
-------------- ------------- -------------- --------------
Operating expenses:
Purses 2,788,627 2,517,117 2,788,627 2,517,117
Salaries and wages 876,258 704,060 1,122,439 938,882
Simulcasting shared expense 178,569 178,569
Depreciation 175,852 171,000 543,988 513,000
Other operating and general expense 1,586,414 1,086,769 2,128,903 1,585,197
-------------- ------------- -------------- --------------
5,605,720 4,478,946 6,762,526 5,554,196
-------------- ------------- -------------- --------------
Income (loss) from racing operations 1,427,087 931,529 547,065 (68,745)
Interest expense, net 52,372 59,702 177,927 178,688
-------------- ------------- -------------- --------------
Income (loss) before income tax
benefit (expense) 1,374,715 871,827 369,138 (247,433)
</TABLE>
CONTINUED
4
<PAGE> 6
SCIOTO DOWNS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three-Month Periods For the Nine-Month Periods
Ended July 31, Ended July 31,
--------------------------- --------------------------
1997 1996 1997 1996
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Income tax (expense) benefit $ (136,000) $ (270,000) $ (136,000) $ 77,000
------------- ----------- ----------- ----------
Net income (loss) $ 1,238,715 $ 601,827 $ 233,138 $ (170,433)
============= =========== =========== ==========
Net income (loss) per common share $ 2.08 $ 1.01 $ 0.39 $ (0.29)
============= =========== =========== ==========
Dividends per common share $ 0.05 $ 0.05 $ 0.05 $ 0.05
============= =========== =========== ==========
Weighted-average common shares
outstanding 595,767 595,767 595,767 595,767
============= =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 7
SCIOTO DOWNS, INC.
STATEMENTS OF CASH FLOWS
for the nine-month periods ended July 31, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 233,138 $ (170,433)
------------ -------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 543,988 539,188
Change in accounts receivable, affiliates and other (144,897) (105,329)
Change in prepaid expenses and other (51,451) (27,335)
Change in simulcast settlement account (401,033)
Change in accounts and purses payable (66,672) 29,726
Change in accrued expenses (2,937) (38,549)
Change in deferred income taxes 136,000 (77,000)
------------ -------------
Total adjustments 12,998 320,701
------------ -------------
Net cash provided by operating activities 246,136 150,268
------------ -------------
Cash flows used in investing activities:
Purchases of property and equipment, net (639,599) (161,863)
------------ -------------
Cash flows provided by (used in) financing activities:
Proceeds from borrowings 538,500
Payments on term debt (74,230) (92,124)
Cash dividends paid (59,561) (59,550)
------------ -------------
Net cash provided by (used in) financing activities 404,709 (151,674)
------------ -------------
Net increase (decrease) in cash and cash equivalents 11,246 (163,269)
------------ -------------
Cash and cash equivalents, beginning of year 621,591 787,786
------------ -------------
Cash and cash equivalents, end of period $ 632,837 $ 624,517
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 8
SCIOTO DOWNS, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION:
The information furnished reflects all adjustments which are, in the
opinion of management, necessary to present a fair statement of the
results for the interim periods on a basis consistent with that of prior
periods. All such adjustments are of a normal recurring nature.
The accompanying unaudited financial statements are presented in
accordance with the requirements of Form 10-Q and, consequently, do not
include all the disclosures normally required by generally accepted
accounting principles or those normally made in Scioto Downs, Inc.'s
(the Company) annual Form 10-K filing. All adjustments that are
necessary for a fair statement of results for the interim period are
normal and recurring. Reference should be made to the Company's 1996
Form 10-K for additional disclosures, including a summary of the
Company's accounting policies.
The year-end condensed balance sheet was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles.
Certain items have been reclassified in the accompanying financial
statements for prior periods to conform with the presentation in the
current period.
2. INCOME (LOSS) PER SHARE:
Net income (loss) per share is derived by dividing net income (loss) by
the weighted average number of shares outstanding during the period.
3. INCOME TAXES:
Income taxes have been recorded at July 31, 1997 at the anticipated
annualized effective tax rate. The Company expects to utilize net
operating loss carryforwards to offset tax liabilities at October 31,
1997.
7
<PAGE> 9
SCIOTO DOWNS, INC.
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
4. TERM NOTE AGREEMENT:
The Company entered into a three-year term note with its principal
financial institution on July 1, 1997 to replace its existing note
agreement entered into in February 1997. The existing note was obtained
to finance the installation of simulcasting equipment. The note
agreement calls for a three-year amortization of the principal at a
fixed rate of 8.17%. The Company is required to make monthly payments of
principal and interest.
The aggregate amount of the required annual principal payments at July
31, 1997 is as follows:
Remainder of fiscal year 1997 $ 22,714
1998 152,404
1999 181,237
2000 182,145
--------------
Total $ 538,500
==============
5. NEW ACCOUNTING PRONOUNCEMENTS:
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per
Share (FAS 128). FAS 128 is effective for financial statements issued
for periods ending after December 15, 1997, including interim periods.
Early adoption is not permitted and the statement requires restatement
of all prior-period earnings per share data presented after the
effective date. The Company will adopt FAS 128 in the first quarter of
fiscal year 1998. The adoption of FAS 128 will have no impact on the
Company's earnings per share.
In June 1997 the FASB issued SFAS No. 130, Reporting Comprehensive
Income (FAS 130). FAS 130 is effective for financial statements issued
for periods beginning after December 15, 1997, with earlier application
encouraged. The Company intends to adopt FAS 130 in fiscal year 1998.
In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments
of an Enterprise and Related Information (FAS 131). FAS 131 is effective
for financial statements issued for periods beginning after December 15,
1997, with earlier application encouraged. The Company intends to adopt
FAS 131 in fiscal year 1999.
8
<PAGE> 10
SCIOTO DOWNS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Management Discussion and Analysis of Financial Condition and Results of
Operations and other parts of this Report contain forward-looking statements
that involve risks and uncertainties. The Company's actual results in 1997 and
future periods may differ significantly from the prospects discussed in the
forward-looking statements.
THREE-MONTH PERIOD ENDED JULY 31, 1997 COMPARED TO THE
THREE-MONTH PERIOD ENDED JULY 31, 1996
Income from racing operations before taxes was $1,374,715, which is an increase
of $502,888, or 57.7%. The increase is due to the additional revenue derived
from full card simulcasting. Simulcasting commission and breakage was
$3,625,522 compared to live racing commission and breakage of $2,406,206, which
represents a net increase in total commissions and breakage of $1,656,106.
Additional revenue of $212,594 was derived from the exported signal of Scioto
Downs' live races to other racetracks and off-track betting parlors. Total
revenues increased $1,622,332 due primarily to the revenue derived from full
card simulcasting. Operating expenses increased $1,126,774 due to increases in
purse expense, salaries, and other operating expenses. The purse expense
increased due to the increase in pari-mutuel commissions during the three month
period as purse expense is based upon a percentage of commissions earned net of
taxes during live racing days. Wages and salaries increased by $172,198 as the
racetrack is open additional hours as a result of simulcasting. Other operating
expense increased by $499,645 due to increases in utilities, program printing,
and simulcasting expenses.
NINE-MONTH PERIOD ENDED JULY 31, 1997
COMPARED TO THE NINE-MONTH PERIOD ENDED JULY 31, 1996
Income from racing operations before taxes was $369,138 which is an increase of
$616,571 or 249.2%. The increase is attributable to the additional revenue
derived from full card simulcasting. Simulcasting commission and breakage was
$3,625,522 compared to live racing commission and breakage of $2,406,206, which
represents a net increase in total commissions and breakage of $1,656,106.
Additional revenue of $212,594 was derived from the exported signal of Scioto
Downs' live races to other racetracks and off-track betting parlors. Total
revenues increased $1,824,140 due primarily to the revenue derived from full
card simulcasting. Operating expenses increased $1,208,330 due to increases in
purse expense, salaries, and other operating expenses. The purse expense
increased due to the increase in pari-mutuel commissions during the nine month
period as purse expense is based upon a percentage of commissions earned net of
taxes during live racing days. Wages and salaries increased by $183,557 as the
racetrack is open additional hours as a result of simulcasting. Other operating
expense increased by $543,706 due to increases in utilities, program printing,
and simulcasting expenses.
9
<PAGE> 11
SCIOTO DOWNS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
LIQUIDITY AND CAPITAL RESOURCES
The simulcasting equipment installation project was completed in May 1997 at a
cost of $595,875. The Company financed the project with a combination of
internal funds of $57,375 and $538,500 from a term note agreement with its
principal financial institution. The terms of the loan were agreed upon in July
1997 with a principal amount of $538,500 at an interest rate of 8.17% for three
years. Cash provided by operating activities was $246,136 for the nine months
ended July 31, 1997 as compared to cash provided by operations of $150,268 for
the nine months ended July 31, 1996. The increase of $95,868 in cash provided
by operating activities was primarily a result of increase in net income of
$403,571 and deferred income taxes of $213,000 offset by use of cash of
$401,033 from the simulcasting settlement account, which is used to settle
wagering performed at other betting facilities, offset by other changes in
operating assets and liabilities.
The racing season at Scioto Downs annually falls within the third quarter
ending in July. The majority of rental income from leasing the racing facility
to Mid-America Racing Association is earned during the fourth quarter of the
year ending in October.
10
<PAGE> 12
PART II. OTHER INFORMATION
SCIOTO DOWNS, INC.
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter ended July 31, 1997.
11
<PAGE> 13
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.
SCIOTO DOWNS, INC.
----------------------------
Registrant
DATE: 9/15/97 BY: /s/ Robert S. Steele
-------------------- ---------------------------
Robert S. Steele, President
DATE: 9/15/97 BY: /s/ Cyril J. Elbert
-------------------- ---------------------------
Cyril J. Elbert, Controller
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1997
<EXCHANGE-RATE> 1
<CASH> 632,837
<SECURITIES> 0
<RECEIVABLES> 192,003
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,395,794
<PP&E> 19,909,362
<DEPRECIATION> 12,506,339
<TOTAL-ASSETS> 8,798,817
<CURRENT-LIABILITIES> 536,283
<BONDS> 0
0
0
<COMMON> 625,555
<OTHER-SE> 4,048,714
<TOTAL-LIABILITY-AND-EQUITY> 8,798,817
<SALES> 267,498
<TOTAL-REVENUES> 7,309,591
<CGS> 173,526
<TOTAL-COSTS> 6,762,526
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 177,927
<INCOME-PRETAX> 369,138
<INCOME-TAX> 136,000
<INCOME-CONTINUING> 233,138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 233,138
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</TABLE>
