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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996
SCIOTO DOWNS, INC.
COLUMBUS, OHIO
EMPLOYER I.D. NO. 31-4440550
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AMENDMENT NO. 1
TO
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
MARK ONE
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended October 31, 1996
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
to
For the transition period from
-----------------------------------------------
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
incorporation or organization) Identification Number)
6000 South High Street, Columbus, Ohio 43207
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (614) 491-2515
--------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ---------------------------- -----------------------------------------
- ---------------------------- -----------------------------------------
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FORM 10-K/A, CONTINUED
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
Common Stock
- -------------------------------------------------------------------------------
(Title of Class)
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 ninety (90) days.
YES X NO
-------- --------
The aggregate market value of the Registrant's voting stock held by
nonaffiliated stockholders as of December 20, 1996 was $3,399,200 or $14.00 per
share.
Registrant has only one class of shares outstanding, namely, common
shares. The number of common shares outstanding as of December 20, 1996 was
595,767.
Portions of the following documents are incorporated by reference:
1. Portions of the Annual Report to Stockholders for the year ended
October 31, 1996 are incorporated by reference in Part II.
2. Portions of Scioto Downs, Inc.'s definitive Proxy Statement furnished
to stockholders in connection with the Annual Meeting of Stockholders
to be held February 12, 1997 are incorporated by reference in Part
III.
The Exhibit index is on page 9.
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PART I
ITEM 1. BUSINESS
The Registrant's sole business is the ownership and operation of a
harness horse racing facility located at 6000 South High Street, Columbus, Ohio.
Racing operations at the South High Street facility started in 1959 and there
has been no material change in the method of conducting this business. In
addition to the racetrack itself, there are parking, grandstand, clubhouse and
eating facilities for Registrant's customers and barn and stable facilities for
the horses. Revenue is derived primarily from commissions on parimutuel wagering
(net of parimutuel taxes), admission fees to enter the facilities and
concessions, programs and parking. In 1996, commissions on parimutuel wagering
net of parimutuel taxes represented 61% of revenues, in 1995, 61% and in 1994
60%. In 1996, admissions represented 3% of revenues, in 1995 4% and in 1994 4%.
In 1996, revenues from concessions, parking and programs amounted to 12% of
revenues, in 1995 12% and in 1994 12%. During each off-season period in 1996,
1995 and 1994, the Registrant employed 17 persons. During the last three years,
average daily attendance has declined from 3,828 in 1994 to 3,606 in 1995 and to
3,295 in 1996. The number of races conducted during a live racing program varies
from 9 races during the week to 11 or 12 races on weekends. The nearest
racetrack competition is Beulah Park, a thoroughbred horse racetrack
approximately 6 miles away. Beulah Park typically conducts live racing from
November until the first weekend of May, during which time Registrant is not
open. During fiscal year 1996, there was only one day on which both tracks were
open. Registrant conducts its business pursuant to a permit issued annually by
the Ohio Racing Commission. All of the racing conducted by Registrant is
conducted in accordance with applicable Ohio statutes and the rules and
regulations of the Ohio Racing Commission. The Ohio Racing Commission regulates
and controls the forms of wagering that are permitted at the racetrack, the
procedures to be followed as to wagering, the wagering information to be
provided to the public, the number of races permitted during a racing program
and the days and time of day racing will be permitted. All persons who work at
the racetrack must be licensed by the Ohio Racing Commission. All owners,
trainers, drivers and other persons involved in the racing program must be
licensed by the Ohio Racing Commission. For the period covered by this report,
Registrant was issued a permit by the Ohio Racing Commission to conduct harness
racing at its facilities for a period of 61 days. Except on special occasions
such as Memorial Day, July 4 and Labor Day, Registrant conducts its racing at
night 6 days a week. The 61 day period in 1996 commenced May 6th and continued
through July 15th. Registrant then leased its facilities to Mid-America Racing
Association, Inc. for 54 days of racing, which period ended September 14, 1996.
This lease generated 5.1% of total revenue in 1996. This lease is on file with
the Commission. During 1996, major racing programs conducted at Registrant's
facilities included the Little Brown Jug Preview, the Scarlet O'Hara, the Pink
Bonnet, the Ohio Sires Stakes events and Ohio Fair stakes events. Other forms of
competition faced by Registrant during its summer racing schedule include, in
addition to the normal summer events, professional baseball (minor league in
Columbus and major league in Cincinnati and Cleveland), outdoor music concerts
and other similar entertainment events. In November of 1996, Ohio voters
defeated a Constitutional amendment that would have permitted riverboat gambling
in Ohio. The sites authorized by the amendment were located primarily in
northern Ohio and in southern Ohio along the Ohio river. Land-based casinos
would have not been authorized by the amendment. Riverboat gambling has been
approved in Indiana and land-based casinos have been approved in Michigan. These
are recent developments and at the present time there is not sufficient
information to determine if these new gambling opportunities will have any
noticeable effect upon the wagering conducted at Registrant's facility.
Legalized gambling in the form of the Ohio lottery has been in existence for
many years and has had an adverse effect upon wagering at Registrant's facility.
In 1996, the Ohio legislature approved legislation which permits full card
simulcasting at racetracks in Ohio. This legislation enables Ohio racetracks to
bring in to their facilities vis television day and night full race programs
conducted at racetracks located outside the State of Ohio. As a result of this
legislation, during its regular racing meet from May to July, Registrant, in
addition to its regular live racing program in the evening will show at its
facility via television during the day and night races being conducted at other
tracks in Ohio and tracks outside of Ohio. Customers at Registrant's facility
will be able to wager on all of these races. As a result of this legislation,
Registrant and its nearest racetrack competitor Beulah Park could be open year
round conducting both live racing and bringing racing in from out of state in
competition with each other. This situation would not be advantageous to either
track and, as a result, Registrant and Beulah Park entered into an agreement to
not be open at the same time and to share simulcasting revenues. Pursuant to
this agreement, Beulah Park will operate from the middle of September to the
first of May while Registrant is closed. During that period of time revenues
derived from simulcasting at Beulah Park at night when it is not conducting live
racing will, after deduction of certain expenses, be shared with Scioto Downs.
During the period that Registrant is open from May through the middle of
September while Beulah Park is closed, revenues derived by Registrant from
simulcasting during the afternoon hours when it is not conducting live racing
will, after deduction of certain expenses, be shared with Beulah Park. The
tracks will not be open at the same time and therefore will not be simulcasting
races to each other. Overall, it is anticipated that, as a result of full card
simulcasting, wagering on live racing will decline but that the additional
wagering on simulcast races will more than offset the decline in wagering on
live racing. No live racing or full card simulcasting has been conducted at
Registrant's facilities since September 14, 1996. The 1997 racing season will
commence May 3, 1997. During the racing season, Registrant's has employed
approximately 350 people, most all of whom are parimutuel clerks employed only
during the racing meet. As a result of full card simulcasting and Registrant
being open both in the afternoons and evenings, it is anticipated that
additional people will be employed during the 1997 racing season. As a part of
the full card simulcast racing program, Registrant will be sending its live
races via television to all other tracks in Ohio and as many facilities outside
the State of Ohio that it can contract with to receive the signal, which could
be as many as 15 to 20 facilities. Registrant will receive a percentage (in most
instances 3%) of the amount wagered on its races at these other facilities
outside the State of Ohio.
2
<PAGE> 5
Registrant from full card simulcasting conducted in the afternoons on days it is
conducting live racing in the evening and on days it is not conducting live
racing, will be shared with Beulah Park. Revenues derived by the Registrant from
simulcasting during the evening hours when the Registrant is conducting live
racing will be retained by the Registrant. On days that it is conducting live
racing in the afternoon, Beulah Park will conduct full card simulcasting in the
evening. Revenues derived by Beulah Park from full card simulcasting conducted
in the evenings on days it is conducting live racing in the afternoon and on
days when it is not conducting live racing, will be shared with the Registrant.
No live racing has been conducted at Registrant's facilities since September 14,
1996. The 1997 racing season will commence May 3, 1997. During the racing
season, Registrant employs approximately 350 people, most of whom are
pari-mutuel clerks employed only during the racing meet.
ITEM 2. PROPERTIES
Registrant's place of business is located at 6000 South High Street,
Columbus, Ohio. Registrant owns in fee approximately 173 acres of land at this
location. Situated thereon are the physical facilities necessary for the
operation of a harness horse racing business, including the race track,
grandstand with a capacity of 10,000, and enclosed clubhouse buildings with a
capacity of 1,500 for customers, in which are located eating and pari-mutuel
wagering facilities, barns, a paddock, and related facilities for the horses,
drivers, and trainers. In addition, a substantial (approximately 6,000-space)
parking area is provided for customers. These facilities are used fully during
the racing season, which covered 115 days commencing in May and ending in
mid-September.
3
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ITEM 3. LEGAL PROCEEDINGS
Registrant is not a party to any material pending legal proceedings
other than routine litigation incidental to its business, most of which is
covered by insurance.
Registrant has no knowledge of any material pending legal proceedings
to which any director, officer or affiliate of the Registrant, any owner of
record or beneficiary of more than five percent of the voting securities of the
Registrant, or any associate of any such director, officer or security holder is
a party adverse to the Registrant or has a material interest adverse to the
Registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
4
<PAGE> 7
PART II
The following items are incorporated herein by reference from the indicated
pages of the Annual Report to Stockholders for the fiscal year ended October 31,
1996:
ANNUAL REPORT TO
STOCKHOLDERS PAGES
Item 5. MARKET FOR THE REGISTRANT'S
COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 15
Item 6. SELECTED FINANCIAL DATA 14
Item 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 12-14
Item 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA 4-11
Item 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE Not applicable
5
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PART III
ITEMS 10, 11, 12 and 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT;
EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT; AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information called for by Items 10, 11, 12 and 13 is incorporated
herein by reference to the definitive Proxy Statement of the Registrant dated
January 20, 1997, relating to the Annual Meeting of Stockholders to be held on
February 12, 1997.
6
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
SCIOTO DOWNS, INC.
Index to Financial Statements and Financial Statement Schedules
<TABLE>
<CAPTION>
REFERENCE PAGE
-------------------
FORM 10-K ANNUAL REPORT
ANNUAL REPORT TO STOCKHOLDERS
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<S> <C> <C>
(a) 1. Financial Statements
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Data incorporated by reference from the attached
1996 Annual Report to Stockholders of Scioto Downs, Inc.:
Report of Independent Accountants on Financial
Statements 12
Balance Sheets as of October 31, 1996 and 1995 4
Statements of Operations for the years ended October
31, 1996, 1995 and 1994 5
Statements of Stockholders' Equity for the years ended
October 31, 1996, 1995 and 1994 6
Statements of Cash Flows for the years ended October
31, 1996, 1995 and 1994 7
Notes to the Financial Statements 8-11
(a) 2. Financial Statement Schedules
--------------------------------------------------------------
Financial statement schedules are omitted because they are not
required or are not applicable.
(a) 3. Exhibits
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See Index to Exhibits at Page 9.
(b) Reports on Form 8-K
--------------------------------------------------------------
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
(c) See Index to Exhibits at Page 9.
(d) Not applicable or not required
(e) Not applicable.
</TABLE>
7
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
--------------------------------
By /s/ Robert S. Steele
--------------------------------
President & Chief Operating
Officer and a Director
--------------------------------
Title
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant, and in the capacities and on the dates indicated.
--------------------------------
Date: January 15, 1997 By /s/ Robert S.Steele
--------------------------------
President & Chief Operating
Officer and a Director
--------------------------------
Title
--------------------------------
Date: January 15, 1997 By /s/ LaVerne A. Hill
--------------------------------
Vice President and a Director
--------------------------------
Title
--------------------------------
Date: January 15, 1997 By /s/ William C.Heer
--------------------------------
Treasurer and a Director
--------------------------------
Title
--------------------------------
Date: January 15, 1997 By /s/ John J.Chester
--------------------------------
Director
--------------------------------
Title
--------------------------------
Date: January 15, 1997 By /s/ John F.Fissell
--------------------------------
Director
--------------------------------
Title
--------------------------------
Date: January 15, 1997 By /s/ Cyril J. Elbert
--------------------------------
Controller
--------------------------------
Title
8
<PAGE> 1
ITEM 7.
1996 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
OVERVIEW
The following should be read in conjunction with the Selected Financial Data
and the Financial Statements of the company, including the respective notes
thereto, all of which are included herein.
GENERAL
The Company's operations are limited by the race dates assigned to it by the
Ohio State Racing Commission. In Ohio, each permit holder may be granted 61 race
days within a specified time period. The entire racing season at Scioto Downs
commencing in May and ending in September was divided between Scioto Downs, 61
days, and Mid-America Racing Association, 54 days. As a result, the entire
racing season for the Company falls within the third quarter ending July 31st.
The majority of rental income form leasing the facility to Mid-America is earned
during the fourth quarter ending October 31st.
RESULTS OF OPERATIONS
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
Revenue from pari-mutuel commissions and breakage decreased by 6.7% or
$315,096 due to poor weather experienced during the first part of the racing
season. Admissions income decreased by 9.0% or $17,710 due to a decrease in
attendance. Pari-mutuel taxes decreased 8.4% or $70,868 due to the decrease in
the pari-mutuel handle. Consequently, purse expense decreased $86,376 since, by
agreement with the horsemen, purses are calculated based on commissions net of
pari-mutuel taxes. Entry fees and purse monies added by others decreased by
11.9% or $106,008, due to a lower number of horses entered in stake events
during the current race meet. Concession, programs and other decreased primarily
due to the decrease in attendance. Rental income and tax abatement pass through
from Mid-America decreased by $3,807 and $13,715, respectively, due to a
decrease in handle for Mid-America in 1996.
Interest expense is a result of debt required to finance the construction
of the clubhouse enclosure and draws on the line of credit for operations
during the off season. The decrease of $9,472 is a result
25
<PAGE> 2
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995 -- CONTINUED
of the increase in the prime lending rate on the line of credit, offset by
recurring payments for principal reductions of debt. Other operating and general
expenses decreased by 1.7% or $18,565 due to a reduction in the simulcasting
expense in the current year.
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
Revenues from pari-mutuel commissions and breakage increased slightly at .1%
or $30,320 despite a 5.8% decrease in attendance as a result of increased
wagering from simulcasting two to four races per night in the 1995 season. Thus,
per capita (average wagering per person) increased 6.3% form $94.46 in 1994 to
$100.44 in 1995. Admissions income decreased by $6,684 due to a decrease in
attendance. Pari-mutuel taxes decreased $234,022 or 21.7% due mainly to a new
state tax law. Consequently, purse expense increased $104,161 since, by
agreement with the horseman, purses are calculated based on commissions net of
pari-mutuel taxes. Entry fees and purse monies added by others increased by
$76,413 due to a higher number of horses entered in stake events during the
current race meet. Concessions, program, and other decreased primarily due to
the decrease in attendance. Rental income and tax abatement pass through from
Mid-America decreased by $10,783 and $6,633, respectively, due to a decrease in
handle for Mid-America in 1995.
Interest expense is a result or debt required to finance the construction of
the clubhouse enclosure. The decrease of $33,223 is a result of the reduced
principal balance of the debt.
Other operating and general expenses increased by $144,304 or 14.9% for
1995, primarily as a result of increased simulcasting expenses of $82,593 and
minor increases in utilities, and other miscellaneous expenses.
FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993
Total revenues remained constant with only a .1% decrease while operating
expenses also held steady with a 2.2% increase. A slight decrease in overall
attendance of 639 or .3% from 1993 and a large increase in passes with free
admission, resulted in a decrease of $23,719 in admissions revenue. Rental
income and tax abatement pass through from Mid-America decreased by $42,273 and
$16,317, respectively, due to a decrease in handle for Mid-America in 1994 with
6 less racing days. Purse awards paid increased by $22,736 as a direct result of
higher entry fees and purse monies added by others. Other operating and general
expenses increased by $63,489 primarily as a result of simulcast expense,
heating fuel cost and group sales advertising increasing $23,260, $10,202 and
$14,140, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Clubhouse enclosure project was completed prior to the 1991 racing
season at a total cost of approximately $5,316,000. The Company financed the
project with a combination of internal funds of $1,641,000 and a $3,675,000 loan
with its principle financial institution (see note 8 to the financial statements
for further details). During 1996, 1995 and 1994, the Company invested $204,286,
$200,312, and $198,224, respectfully, in the purchases of property and
equipment. During 1996, 1995 and 1994 the Company utilized its $1,000,000 line
of credit to provide working capital during the off season and anticipates
having to draw upon the line during the off season in 1997. In addition, the
Company continued to generate positive cash flow from operations during 1996,
1995 and 1994 $219,206, $478,356, and $484,672, respectfully. Cash provided by
operating activities decreased during 1996 due to an increase in the net loss as
a result of poor weather conditions. Positive cash flow is anticipated to
continue from operations in future years along with liquidity. The Company's
ability to generate sufficient cash to meet its needs, on both a long-term and
short-term basis, is anticipated to continue based on the Company's stable
current ratios of 1.57, 1.92 (excluding the balloon portion of long-term debt)
and 1.88 as of October 31, 1996, 1995 and 1994, respectfully, and other
long-term plans. During 1996, 1995 and 1994, the Company has paid cash dividends
despite a net loss that is due principally to depreciation and other noncash
items as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Equity in earnings of joint venture $ (23,345) $ (15,705) $ (21,018)
Cumulative effect of change in
accounting for income taxes (41,000)
Depreciation and amortization 732,139 728,526 753,346
Deferred income taxes (185,000) (106,000) (104,000)
--------- --------- ---------
$ 523,794 $ 605,821 $ 587,328
========= ========= =========
</TABLE>
In October 1996, the Company refinanced the five-term loan with the same
financial institution. The revised term loan agreement calls for a fifteen-year
amortization of the principal at a fixed rate of 8.15% and interest, with a
minimum annual principal reduction of $100,000. A balloon payment for the
remaining principal is due in November 2001.
26
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RECENT DEVELOPMENTS AND OUTLOOK
The Ohio General Assembly passed legislation authorizing "full card
simulcasting". This will allow an unlimited number of race tracks to be
simulcast at a track or parlor during the track's race meet dates. This will
enable crossbreed simulcasting; thus Scioto will show thoroughbreds as well as
harness from other race tracks. This legislation will provide for increased
utilization of current facilities and an opportunity to increase handle by
offering additional diversified product. The Company has estimated a cost of
$750,000 for the installation of the necessary equipment for providing the
simulcast product to its customers. The Company intends to finance the
installation and equipment through a loan with its principle financial
institution.
During September 1996, the Company entered into an agreement with Beulah
Park to share revenues derived from full card simulcasting. Revenues are derived
by the Company from full card simulcasting conducted in the afternoons on days
it is conducting live racing in the evening, and, on days it is not conducting
live racing, will be shared with Beulah Park. Revenues derived by the Company
from simulcasting during the evening hours when the Company is conducting live
racing will be retained by the Company. On days that it is conducting live
racing in the afternoon, Beulah Park will conduct full card simulcasting in the
evening. Revenues derived by Beulah Park from full card simulcasting conducted
in the evenings on days it is conducting live racing in the afternoon, and, on
days when it is not conducting live racing, will be shared with the Company.
27
