<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 April 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from____________to___________
Commission File Number 0-1365
SCIOTO DOWNS, INC.
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(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
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(Address of principal executive offices) (Zip Code)
(614) 491-2515
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(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
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The number of common shares outstanding at April 30, 1997:
597,767, par value $1.05
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SCIOTO DOWNS, INC.
INDEX
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<CAPTION>
PAGES
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets as of April 30, 1997 (Unaudited), October 31, 1996,
and April 30, 1996 (Unaudited) 2-3
Statements of Operations for the three-month and
six-month periods ended April 30, 1997 and
1996 (Unaudited) 4
Statements of Cash Flows for the six-month periods ended
April 30, 1997 and 1996 (Unaudited) 5
Notes to the Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION 8
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 9
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCIOTO DOWNS, INC.
BALANCE SHEETS
as of April 30, 1997 (Unaudited), October 31, 1996, and April 30, 1996
(Unaudited)
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<CAPTION>
APRIL 30, APRIL 30,
ASSETS 1997 OCTOBER 31, 1996
(UNAUDITED) 1996 (UNAUDITED)
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<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 637,616 $ 621,591 $ 284,235
Accounts receivable 125 47,106 25,189
Prepaid expenses and other 94,796 36,453 94,443
Investment in joint venture 82,446 82,446 59,101
----------- ----------- -----------
Total current assets 814,983 787,596 462,968
----------- ----------- -----------
Property and equipment, at cost 19,261,935 19,238,836 19,131,995
Construction in progress (simulcasting equipment) 595,875 30,927
----------- ----------- -----------
19,857,810 19,269,763 19,131,995
Less accumulated depreciation 12,330,916 11,962,780 11,621,018
----------- ----------- -----------
Total property and equipment 7,526,894 7,306,983 7,510,977
Net deferred income taxes 158,705
----------- ----------- -----------
Total assets $ 8,341,877 $ 8,094,579 $ 8,132,650
=========== =========== ===========
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CONTINUED 2
<PAGE> 4
PART I. FINANCIAL INFORMATION
SCIOTO DOWNS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY APRIL 30, APRIL 30,
1997 OCTOBER 31, 1996
(UNAUDITED) 1996 (UNAUDITED)
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<S> <C> <C> <C>
Current liabilities:
Accounts payable, trade $ 23,223 $ 167,937 $ 35,962
Accounts payable, affiliates 397,458
Dividends payable 29,789
Short-term borrowings 538,500 415,000
Current maturities, term debt 100,000 100,000 3,186,735
Accrued expenses 196,006 205,308 211,825
Deferred revenue 96,900 101,200
Simulcast purse fund 459,400
Deferred income taxes 4,449
----------- ----------- -----------
Total current liabilities 1,811,487 503,034 3,955,171
----------- ----------- -----------
Minimum pension liability 89,877 89,877 78,566
----------- ----------- -----------
Net deferred income taxes 4,910 4,910
----------- -----------
Term debt, net of current maturities 2,970,277 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 850,766 1,856,343 1,475,533
Pension liability adjustment, net of taxes (48,295) (48,295) (39,475)
----------- ----------- -----------
Total stockholders' equity 3,465,326 4,470,903 4,098,913
----------- ----------- -----------
Total liabilities and stockholders' equity $ 8,341,877 $ 8,094,579 $ 8,132,650
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the unaudited financial
statements.
3
<PAGE> 5
SCIOTO DOWNS, INC.
STATEMENTS OF OPERATIONS
for the three-month and six-month periods ended April 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE-MONTH PERIODS FOR THE SIX-MONTH PERIODS
ENDED APRIL 30, ENDED APRIL 30,
-------------------------- ---------------------------
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Operating revenues:
Admissions $ 24,655 $ 30,120 $ 24,655 $ 30,120
Concessions, program, and other 16,828 37,899 22,701 44,856
Net simulcasting shared revenues 162,310 229,428
----------- ----------- ----------- -----------
Net 203,793 68,019 276,784 74,976
----------- ----------- ----------- -----------
Operating expenses:
Salaries and wages 135,361 121,218 246,181 234,822
Depreciation 190,466 171,000 368,136 342,000
Other operating and general
expenses 280,492 300,244 542,489 498,428
----------- ----------- ----------- -----------
606,319 592,462 1,156,806 1,075,250
----------- ----------- ----------- -----------
Loss from operations (402,526) (524,443) (880,022) (1,000,274)
Interest expense, net (65,156) (61,500) (125,555) (118,986)
----------- ----------- ----------- -----------
Loss before income tax benefit (467,682) (585,943) (1,005,577) (1,119,260)
Income tax benefit of operating loss 170,000 347,000
----------- ----------- ----------- -----------
Net loss $(467,682) $ (415,943) $(1,005,577) $ (772,260)
========== =========== =========== ===========
Net loss per common share $ (.79) $ (.70) $ (1.69) $ (1.30)
========== =========== =========== ===========
Weighted-average common
shares outstanding 595,767 595,767 595,767 595,767
========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the unaudited financial
statements.
4
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SCIOTO DOWNS, INC.
STATEMENTS OF CASH FLOWS
for the six-month periods ended April 30, 1997 and 1996
(Unaudited)
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<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,005,577) $(772,260)
----------- ---------
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization 368,136 350,736
Change in accounts receivable 46,981 45,871
Change in prepaid expenses and other (58,343) (25,229)
Change in accounts payable 252,744 (131,430)
Change in deferred revenue 96,900 101,200
Change in accrued expenses (9,302) 3,110
Change in simulcast purse fund 459,400
Change in deferred income taxes (347,000)
----------- ---------
Total adjustments 1,156,516 (2,742)
----------- ---------
Net cash provided by (used in) operating activities 150,939 (775,002)
----------- ---------
Cash flows from investing activities:
Purchase of property and equipment, net (23,099) (53,084)
Additions to construction in progress (simulcasting equipment) (564,948)
----------- ---------
Net cash used in investing activities (588,047) (53,084)
----------- ---------
Cash flows from financing activities:
Payments on term debt (55,578) (60,676)
Dividends paid (29,789) (29,789)
Proceeds from short-term borrowings 538,500 415,000
----------- ---------
Net cash provided by financing activities 453,133 324,535
----------- ---------
Net increase (decrease) in cash and cash equivalents 16,025 (503,551)
Cash and cash equivalents, beginning of year 621,591 787,786
----------- ---------
Cash and cash equivalents, end of period $ 637,616 $ 284,235
=========== =========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 129,736 $ 113,536
=========== =========
</TABLE>
The accompanying notes are an integral part of the unaudited financial
statements.
5
<PAGE> 7
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.
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. 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 reclassifications of prior period amounts have been made in the
financial statements to conform to the April 30, 1997 presentation.
2. LOSS PER SHARE:
Net loss per share is derived by dividing net loss by the weighted
average number of shares outstanding during the period.
3. INCOME TAXES:
No tax benefit has been recorded as it is not expected to be realized by
the Company.
4. SHORT-TERM FINANCING AGREEMENT:
During February 1997, the Company obtained a note agreement for a maximum
borrowing of $700,000 to finance the installation of simulcasting
equipment. Interest is calculated at the prime rate (8.5% at April 30,
1997) and is due monthly. The outstanding principal balance and any
unpaid interest is due on July 1, 1997. The note is collateralized by all
equipment, machinery, and furniture and fixtures identified in the terms
of the note agreement. As of April 30, 1997, the outstanding principal
balance was $538,500.
5. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards 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 date presented after the effective date.
The Company will adopt FAS 128 effective with its 1998 year end. The
adoption of FAS 128 on the Company's earnings per share will have no
impact.
6
<PAGE> 8
PART I. FINANCIAL INFORMATION
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SCIOTO DOWNS, INC.
THREE-MONTH PERIOD ENDED APRIL 30, 1997 COMPARED TO THE THREE-MONTH PERIOD
ENDED APRIL 30, 1996
The net loss from operations before tax benefit was $467,682 which decreased
$118,261 from the three months ended April 30, 1996. The decrease is primarily
due to the additional revenue derived from the Beulah Park agreement for sharing
simulcasting revenue of $162,310. Total operating revenues increased by $135,774
over the three month period ended April 30, 1996, primarily due to the revenue
derived from the Beulah Park agreement. Total operating expenses increased
$13,857 due to increases in salaries of $14,143 and depreciation of $19,466
offset by a decrease of $19,752 in other operating and general expenses.
Interest expense increased by $3,656 due to new borrowings on the simulcasting
equipment construction line.
SIX-MONTH PERIOD ENDED APRIL 30, 1997 COMPARED TO THE SIX-MONTH PERIOD
ENDED APRIL 30, 1996
The net loss from operations before tax benefit was $1,005,577 which decreased
$113,683 from the six months ended April 30, 1996. The decrease is attributable
to the Beulah Park agreement for sharing simulcasting revenue of $229,428. Total
operating revenues increased by $201,808 due to the revenue derived from the
Beulah Park agreement in 1997. Total operating expenses increased $81,556 due
primarily to increases in salaries of $11,359, depreciation of $26,136 and other
operating and general expenses of $44,061. Interest expense increased by $6,569
due to new borrowings on the simulcasting equipment construction line.
LIQUIDITY AND CAPITAL RESOURCES
The simulcasting equipment installation project was completed on May 1, 1997 at
a total cost of $595,875. The Company financed the project with a combination of
internal funds of $57,375 and $538,500 from a short-term financing agreement
with its principal financial institution. The terms of the loan are similar to a
line of credit agreement, with the available credit line set at $700,000 and an
interest rate set at the prime rate. The Company intends to convert the
short-term obligation into long-term debt in the third quarter of 1997. Cash
provided by operating activities was $150,939 for the six months ended April 30,
1997 as compared to a use of cash of $775,002 for the six months ended April 30,
1996. The increase in cash provided by operating activities was primarily a
result of $459,400 in funds received from the simulcasting purse fund, $384,174
for changes in the timing of disbursements for accounts payable and noncash
deferred income tax decreases of $347,000, offset by an increase in the net loss
of $233,317 and changes in other operating activities of $31,316.
7
<PAGE> 9
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 April 30, 1997.
8
<PAGE> 10
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: June 13, 1997 BY:_____________________________
Robert S. Steele, President
DATE: June 13, 1997 BY:_____________________________
Cyril J. Elbert, Controller
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1997
<PERIOD-END> APR-30-1997
<CASH> 637,616
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 814,983
<PP&E> 19,857,810
<DEPRECIATION> 12,330,916
<TOTAL-ASSETS> 8,341,877
<CURRENT-LIABILITIES> 1,811,487
<BONDS> 0
0
0
<COMMON> 625,555
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,341,877
<SALES> 0
<TOTAL-REVENUES> 203,793
<CGS> 0
<TOTAL-COSTS> 606,319
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,156
<INCOME-PRETAX> (467,682)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (467,628)
<EPS-PRIMARY> (.79)
<EPS-DILUTED> (.79)
</TABLE>
