<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, 1998
----------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-1365
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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
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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 September 10, 1998:
595,767, par value $1.05
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SCIOTO DOWNS, INC.
INDEX
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PAGES
<S> <C> <C>
PART I.FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets as of July 31, 1998 (unaudited), October 31, 1997, and
July 31, 1997 (unaudited) 2-3
Statements of Operations for the three-month and nine-month periods ended
July 31, 1998 and 1997 (unaudited) 4-5
Statements of Cash Flows for the nine-month periods ended
July 31, 1998 and 1997 (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
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1
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PART I.FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCIOTO DOWNS, INC.
BALANCE SHEETS
as of July 31, 1998 (unaudited), October 31, 1997, and July 31, 1997 (unaudited)
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<CAPTION>
ASSETS JULY 31, 1998 OCTOBER 31, JULY 31, 1997
(Unaudited) 1997 (Unaudited)
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<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,811,064 $ 924,176 $ 632,837
Accounts receivable, affiliate 404,066 283,866 192,003
Accounts receivable, trade 49,883 401,033
Prepaid expenses and other 43,339 59,815 87,475
Investment in joint venture 95,089 95,089 82,446
----------- ----------- -----------
Total current assets 2,403,441 1,362,946 1,395,794
----------- ----------- -----------
Property and equipment, at cost 20,030,893 19,916,643 19,909,362
Less accumulated depreciation 13,216,343 12,691,406 12,506,339
----------- ----------- -----------
Total property and equipment 6,814,550 7,225,237 7,403,023
----------- ----------- -----------
Total assets $ 9,217,991 $ 8,588,183 $ 8,798,817
=========== =========== ===========
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CONTINUED
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCIOTO DOWNS, INC.
BALANCE SHEETS
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<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY JULY 31, 1998 OCTOBER 31, JULY 31, 1997
(Unaudited) 1997 (Unaudited)
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<S> <C> <C> <C>
Current liabilities:
Accounts payable, trade $ 553,245 $ 8,440
Accounts payable, affiliates $ 263,762
Purses payable 454,542 92,825
Dividends payable 29,789
Current maturities, term debt 277,505 253,548 232,647
Accrued expenses 245,946 181,403 202,371
---------- ---------- ----------
Total current liabilities 1,531,238 728,502 536,283
---------- ---------- ----------
Minimum pension liability 105,121 105,121 89,877
---------- ---------- ----------
Net deferred income taxes 28,994 28,994 140,910
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Term debt, net of current maturities 3,050,604 3,242,001 3,457,478
---------- ---------- ----------
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 1,898,959 1,880,490 2,059,709
Pension liability adjustment, net of taxes (59,780) (59,780) (48,295)
---------- ---------- ----------
Total stockholders' equity 4,502,034 4,483,565 4,674,269
---------- ---------- ----------
Total liabilities and stockholders' equity $9,217,991 $8,588,183 $8,798,817
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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SCIOTO DOWNS, INC.
STATEMENTS OF OPERATIONS
for the three-month and nine-month periods ended July 31, 1998 and 1997
(unaudited)
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<CAPTION>
FOR THE THREE-MONTH PERIODS FOR THE NINE-MONTH PERIODS
ENDED JULY 31, ENDED JULY 31,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Operating revenues:
Pari-mutuel commissions and breakage $6,108,475 $6,031,728 $6,108,475 $6,031,728
Less pari-mutuel taxes 924,072 915,345 924,072 915,345
---------- ---------- ---------- ----------
5,184,403 5,116,383 5,184,403 5,116,383
Exported signal revenue 201,545 212,594 201,545 212,594
Admissions 184,829 124,770 184,829 149,425
Simulcasting shared revenue 19,034 75,856 248,462
Concessions, program, parking, and other 634,327 659,246 662,096 681,947
Entry fees and purse monies added by
others 550,963 552,406 550,963 552,406
Rental income from leased facilities 106,621 102,261 106,621 102,261
Pari-mutuel tax abatement earned 253,392 246,113 253,392 246,113
---------- ---------- ---------- ----------
7,116,080 7,032,807 7,219,705 7,309,591
---------- ---------- ---------- ----------
Operating expenses:
Purses 3,050,817 2,788,627 3,050,817 2,788,627
Salaries and wages 843,321 876,258 1,083,341 1,122,439
Simulcasting fees 619,595 533,987 619,595 533,987
Simulcasting shared expense 178,569 178,569
Depreciation 174,979 175,852 524,937 543,988
Other operating and general expenses 1,040,593 1,052,427 1,641,866 1,594,916
---------- ---------- ---------- ----------
5,729,305 5,605,720 6,920,556 6,762,526
---------- ---------- ---------- ----------
Income from racing operations 1,386,775 1,427,087 299,149 547,065
Interest expense, net 68,606 52,372 221,891 177,927
---------- ---------- ---------- ----------
Income before income tax
expense 1,318,169 1,374,715 77,258 369,138
</TABLE>
4
CONTINUED
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SCIOTO DOWNS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE-MONTH PERIODS FOR THE NINE-MONTH PERIODS
ENDED JULY 31, ENDED JULY 31,
--------------------------- --------------------------
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Income tax expense $396,000 $ 136,000 $ 29,000 $136,000
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Net income $922,169 $1,238,715 $ 48,258 $233,138
======== ========== ======== ========
Net income per common share -
basic and diluted $ 1.55 $ 2.08 $ 0.08 $ 0.39
======== ========== ======== ========
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
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SCIOTO DOWNS, INC.
STATEMENTS OF CASH FLOWS
for the nine-month periods ended July 31, 1998 and 1997 (unaudited)
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<CAPTION>
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 48,258 $ 233,138
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Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 524,937 543,988
Change in accounts receivable, affiliate (120,200) (144,897)
Change in accounts receivable, trade (49,883) (401,033)
Change in prepaid expenses and other 16,476 (51,451)
Change in accounts and purses payable 744,025 (66,672)
Change in accrued expenses 64,543 (2,937)
Change in deferred income taxes 136,000
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Total adjustments 1,179,898 12,998
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Net cash provided by operating activities 1,228,156 246,136
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Cash flows used in investing activities:
Purchases of property and equipment, net (114,250) (639,599)
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Cash flows (used in) provided by financing activities:
Proceeds from borrowings 538,500
Payments on term debt (167,440) (74,230)
Cash dividends paid (59,578) (59,561)
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Net cash (used in) provided by financing activities (227,018) 404,709
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Net increase in cash and cash equivalents 886,888 11,246
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Cash and cash equivalents, beginning of period 924,176 621,591
---------- ---------
Cash and cash equivalents, end of period $1,811,064 $ 632,837
========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
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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. 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 items have been reclassified in the accompanying financial
statements for prior periods to conform with the presentation in the
current period.
7
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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 uses 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 simulcasting equipment
via internal funds, which affects the liquidity and cash flow of the Company.
The entire racing season at Scioto Downs falls within the third quarter ending
July 31st. The majority of rental income from leasing the facility and the
simulcasting equipment to Mid-America Racing Association is earned during the
fourth quarter ending October 31st.
THREE-MONTH PERIOD ENDED JULY 31, 1998 COMPARED TO THE
THREE-MONTH PERIOD ENDED JULY 31, 1997
Income from racing operations before taxes was $1,386,775, which is a decrease
of $40,312, or 2.8%. The decrease was derived from a rise in operating expenses
of $123,585, offset by an increase in operating revenues of $83,273.
Operating revenues increased due to an increase in net pari-mutuel commissions
and breakage of $68,020, or 1.3%. This increase in net pari-mutual commissions
and breakage is attributable to additional simulcasting handle, along with an
increase in admissions of $60,059 due to fewer free passes and free admission
racing nights.
Operating expenses increased primarily due to an increase in purse expense of
$262,190, offset by a reduction in salaries and wages of $32,937, resulting from
the employment of fewer pari-mutuel clerks. Simulcasting shared expense
decreased $178,569 as a result of a change in the simulcasting agreement with
Beulah Park. Simulcasting fees increased $85,608 due to an increase in the total
handle of imported races into the facility. Interest expense increased $16,234
with the addition of the sumulcasting equipment note entered in July 1997.
8
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SCIOTO DOWNS, INC
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
NINE-MONTH PERIOD ENDED JULY 31, 1998
COMPARED TO THE NINE-MONTH PERIOD ENDED JULY 31, 1997
Income from racing operations before taxes was $299,149 which is a decrease of
$247,916, or 45.3%. The decrease was derived from a rise in operating expenses
of $158,030 and a decrease in operating revenues of $89,886.
Operating revenues decreased due to a change in the simulcasting agreement with
Beulah Park whereby the Company receives revenue, net of expenses, in the
current year. In fiscal year 1997, simulcasting shared revenue, net of expenses,
was $69,893 compared to $75,856 in 1998. Concessions, program, parking and other
decreased $19,851 due mainly to a decrease in income from concessionaire
operations.
Operating expenses increased primarily due to an increase in purse expense of
$262,190, offset by a reduction in salaries and wages of $39,098 resulting from
the employment of fewer pari-mutuel clerks. Other operating and general expenses
increased $46,950 due mainly to increases in legal, accounting, office supplies
and other miscellaneous expense items. Interest expense increased $43,964 with
the addition of the sumulcasting equipment note entered in July 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $1,228,156 for the nine months ended
July 31, 1998 as compared to cash provided by operations of $246,136 for the
nine months ended July 31, 1997. The increase of $982,020 in cash provided by
operating activities was primarily a result of increases in accounts and purses
payable of $810,697 and accrued expenses of $67,480, offset by other changes in
operating assets and liabilities.
9
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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, 1998.
10
<PAGE> 12
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: BY:
---------------------- -----------------------------
Robert S. Steele, President
DATE: BY:
---------------------- -----------------------------
Robert E. Suchy, Controller
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JUL-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,811,064
<SECURITIES> 0
<RECEIVABLES> 49,883
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,403,441
<PP&E> 20,030,893
<DEPRECIATION> 13,216,343
<TOTAL-ASSETS> 9,217,991
<CURRENT-LIABILITIES> 1,531,238
<BONDS> 0
0
0
<COMMON> 625,555
<OTHER-SE> 3,876,479
<TOTAL-LIABILITY-AND-EQUITY> 9,217,991
<SALES> 239,399
<TOTAL-REVENUES> 7,219,705
<CGS> 153,451
<TOTAL-COSTS> 6,920,556
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 221,891
<INCOME-PRETAX> 77,258
<INCOME-TAX> 29,000
<INCOME-CONTINUING> 48,258
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,258
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
