<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, 1998
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.
------------------------------------------------------------
(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 June 15, 1998:
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 April 30, 1998 (Unaudited),
October 31, 1997, and April 30, 1997 (Unaudited) 2-3
Statements of Operations for the three-month and six-month
periods ended April 30, 1998 and 1997 (Unaudited) 4
Statements of Cash Flows for the six-month periods ended
April 30, 1998 and 1997 (Unaudited) 5
Notes to the Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCIOTO DOWNS, INC.
BALANCE SHEETS
as of April 30, 1998 (unaudited) and 1997 (unaudited) and October 31, 1997
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31, APRIL 30,
ASSETS 1998 1997 1997
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 612,625 $ 924,176 $ 637,616
Accounts receivable, affiliate 2,324 283,866 125
Prepaid expenses and other 47,643 59,815 94,796
Investment in joint venture 95,089 95,089 82,446
Deferred income taxes 367,000
----------- ----------- -----------
Total current assets 1,124,681 1,362,946 814,983
----------- ----------- -----------
Property and equipment, at cost 20,009,893 19,916,643 19,261,935
Construction in progress
(simulcasting equipment) 595,875
----------- ----------- -----------
20,009,893 19,916,643 19,857,810
Less accumulated depreciation 13,041,364 12,691,406 12,330,916
----------- ----------- -----------
Total property and equipment, net 6,968,529 7,225,237 7,526,894
----------- ----------- -----------
Total assets $ 8,093,210 $ 8,588,183 $ 8,341,877
=========== =========== ===========
</TABLE>
Continued 2
<PAGE> 4
SCIOTO DOWNS, INC.
BALANCE SHEETS, CONTINUED
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31, APRIL 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997 1997
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Current liabilities:
Accounts payable, trade $ 189,201 $ 178,016 $ 23,223
Accounts payable, affiliates 397,458
Dividends payable 29,789
Short-term borrowings 538,500
Current maturities, term debt 284,206 253,548 100,000
Accrued expenses 181,970 181,403 196,006
Deferred revenue 148,111 96,900
Simulcast purse fund 477,428 85,746 459,400
----------- ----------- -----------
Total current liabilities 1,280,916 728,502 1,811,487
----------- ----------- -----------
Minimum pension liability 105,121 105,121 89,877
Net deferred income taxes 28,994 28,994 4,910
Term debt, net of current maturities 3,068,525 3,242,001 2,970,277
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 1,006,579 1,880,490 850,766
Pension liability adjustment,
net of taxes (59,780) (59,780) (48,295)
----------- ----------- -----------
Total stockholders' equity 3,609,654 4,483,565 3,465,326
----------- ----------- -----------
Total liabilities and
stockholders' equity $ 8,093,210 $ 8,588,183 $ 8,341,877
=========== =========== ===========
</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 six-month periods ended April 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE-MONTH PERIODS SIX-MONTH PERIODS
ENDED APRIL 30, ENDED APRIL 30,
---------------------- --------------------------
1998 1997 1998 1997
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Operating revenues:
Simulcasting revenues $ 61,211 $ 162,310 $ 75,856 $ 229,428
Other operating revenues 22,511 41,483 27,769 47,356
--------- --------- ----------- -----------
83,722 203,793 103,625 276,784
Operating expenses:
Salaries and wages 120,233 135,361 240,020 246,181
Depreciation 174,978 190,466 349,958 368,136
Other operating and
general expenses 362,839 280,492 601,273 542,489
--------- --------- ----------- -----------
658,050 606,319 1,191,251 1,156,806
--------- --------- ----------- -----------
Loss from operations (574,328) (402,526) (1,087,626) (880,022)
Interest expense, net (87,417) (65,156) (153,285) (125,555)
--------- --------- ----------- -----------
Loss before income
tax benefit (661,745) (467,682) (1,240,911) (1,005,577)
Income tax benefit 196,000 0 367,000 0
--------- --------- ----------- -----------
Net loss $(465,745) $(467,682) $ (873,911) $(1,005,577)
========= ========= =========== ===========
Net loss per common share -
basic and diluted $ (.78) $ (.79) $ (1.47) $ (1.69)
========= =========== =========== ===========
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. 4
<PAGE> 6
SCIOTO DOWNS, INC.
STATEMENTS OF CASH FLOWS
for the six-month periods ended April 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(873,911) $(1,005,577)
--------- -----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 349,958 368,136
Deferred income taxes (367,000)
Changes in current assets
and liabilities:
Accounts receivable 281,542 46,981
Prepaid expenses and other 12,172 (58,343)
Accounts payable 11,185 252,744
Deferred revenue 148,111 96,900
Accrued expenses 567 (9,302)
Simulcast purse fund 391,682 459,400
--------- -----------
Total adjustments 828,217 1,156,516
--------- -----------
Net cash (used in) provided by
operating activities (45,694) 150,939
--------- -----------
Cash flows from investing activities:
Purchase of property and equipment (93,250) (23,099)
Additions to construction in progress
(simulcasting equipment) (564,948)
--------- -----------
Net cash used in investing activities (93,250) (588,047)
--------- -----------
Cash flows from financing activities:
Payments on term debt (142,818) (55,578)
Dividends paid (29,789) (29,789)
Proceeds from short-term borrowings 538,500
--------- -----------
Net cash (used in) provided by
financing activities (172,607) 453,133
--------- -----------
Net (decrease) increase in cash and
cash equivalents (311,551) 16,025
Cash and cash equivalents, beginning of year 924,176 621,591
--------- -----------
Cash and cash equivalents, end of period $ 612,625 $ 637,616
========= ===========
</TABLE>
The accompanying notes are an integral part of the 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 1997 Form 10-K for
additional disclosures, including a summary of the Company's accounting
policies.
The year-end 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, 1998 presentation.
2. LOSS PER SHARE:
Net loss per share for both basic and diluted is derived by dividing net loss
by the weighted average number of shares outstanding during the period.
3. INCOME TAXES:
The Company has recorded a deferred income tax benefit at the anticipated
effective tax rate for fiscal year 1998.
6
<PAGE> 8
SCIOTO DOWNS, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. 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 1998 and
future periods may differ significantly from the prospects discussed in the
forward-looking statements.
GENERAL
Due to the seasonal nature of the business, the Company experiences net
operating losses during the first two quarters of the fiscal year. In addition,
the Company used this same time to perform routine repairs and maintenance and
facility improvements. During the first and second quarters of 1998, the Company
continued to service the debt on the Clubhouse and the recently purchased
simulcasting equipment via internal funds, which affects the liquidity and cash
flow of the Company.
The racing season at Scioto Downs annually falls within the third quarter,
ending in July. The majority of rental income from leasing the facility to
Mid-America Racing Association is earned during the fourth quarter of the year,
ending in October.
THREE-MONTH PERIOD ENDED APRIL 30, 1998 COMPARED TO THE
THREE-MONTH PERIOD ENDED APRIL 30, 1997
The net loss from operations before income tax benefit was $661,745 which
increased $194,063 from the three months ended April 30, 1997. Simulcasting
revenues decreased by $101,099. The decrease is due primarily to a change in the
agreement with Beulah Park. Under the new agreement, Beulah Park pays reduced
shared revenues to Scioto Downs during the three months ended April 30, 1998.
Scioto Downs, however, will no longer pay amounts to Beulah Park during its
racing season because of the modified agreement. Other operating and general
expense increased by $82,347 due mainly to an increase in professional services
of approximately $61,000. Net interest expense increased by $22,261 which is due
to the simulcasting equipment financing. The Company recorded an income tax
benefit of $196,000 for the three months ended April 30, 1998 as the Company
projects it will record net income for the year ended October 31, 1998. The
benefit has been recorded at the anticipated effective tax rate for the fiscal
year 1998. No income tax benefit was recorded for the three months ended April
30, 1997 as the Company had historically experienced net losses.
SIX-MONTH PERIOD ENDED APRIL 30, 1998 COMPARED TO THE
SIX-MONTH PERIOD ENDED APRIL 30, 1997
The net loss from operations before income tax benefit was $1,240,911 which
increased $235,334 from the six months ended April 30, 1997. Simulcasting
revenue decreased by $153,572. The decrease is due primarily to a change in the
agreement with Beulah Park. Under the new agreement, Beulah Park pays reduced
shared revenues to Scioto Downs during the six months ended April 30,
7
<PAGE> 9
SCIOTO DOWNS, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
1998. Scioto Downs, however, will no longer pay amounts to Beulah Park during
its racing season because of the modified agreement. Other operating and general
expense increased by $58,784 due mainly to an increase in professional services
of approximately $82,000, which was offset by a decrease in repairs and
maintenance expense of approximately $22,000. Net interest expense increased by
$27,730 which is due to the simulcasting equipment financing. The Company
recorded an income tax benefit of $367,000 for the six months ended April 30,
1998 as the Company projects it will record net income for the year ended
October 31, 1998. The benefit has been recorded at the anticipated effective tax
rate for fiscal year 1998. No income tax benefit was recorded for the six months
ended April 30, 1997 as the Company had historically experienced net losses.
8
<PAGE> 10
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, 1998.
9
<PAGE> 11
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 15 , 1998 BY: /s/ Robert S. Steele
------------------------ -------------------------------------
Robert S. Steele, President
DATE: June 15 , 1998 BY: /s/ Robert E. Suchy
------------------------ -------------------------------------
Robert E. Suchy, Controller
10
<PAGE> 12
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Scioto Downs, Inc.
We have made a review of the accompanying balance sheets of Scioto Downs,
Inc. as of April 30, 1998 and 1997, the related statements of operations for the
three-month and six-month periods then ended, and the related statements of cash
flows for the six-month periods then ended. These unaudited financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
Columbus, Ohio
June 8, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> APR-30-1998
<CASH> 612,625
<SECURITIES> 0
<RECEIVABLES> 2,324
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,124,681
<PP&E> 20,009,893
<DEPRECIATION> 13,041,364
<TOTAL-ASSETS> 8,093,210
<CURRENT-LIABILITIES> 1,280,916
<BONDS> 0
0
0
<COMMON> 625,555
<OTHER-SE> 2,984,099
<TOTAL-LIABILITY-AND-EQUITY> 8,093,210
<SALES> 0
<TOTAL-REVENUES> 103,625
<CGS> 0
<TOTAL-COSTS> 1,191,251
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (1,087,626)
<INTEREST-EXPENSE> 153,285
<INCOME-PRETAX> (1,240,911)
<INCOME-TAX> 367,000
<INCOME-CONTINUING> (873,911)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (873,911)
<EPS-PRIMARY> (1.47)
<EPS-DILUTED> (1.47)
</TABLE>
