-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TtzJbc4tLtPWB55riXT+VnQHxraFQzjcwCIJwtWR2B2BAC9uQdyq/U6zH2QG2hy8 EmtsamobiUczrSWWIFwsTQ== /in/edgar/work/20000614/0000950144-00-007816/0000950144-00-007816.txt : 20000919 0000950144-00-007816.hdr.sgml : 20000919 ACCESSION NUMBER: 0000950144-00-007816 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000614 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAIR GROUNDS CORP CENTRAL INDEX KEY: 0000034236 STANDARD INDUSTRIAL CLASSIFICATION: [7948 ] IRS NUMBER: 720361770 STATE OF INCORPORATION: LA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07607 FILM NUMBER: 654817 BUSINESS ADDRESS: STREET 1: 1751 GENTILLY BLVD CITY: NEW ORLEANS STATE: LA ZIP: 70119 BUSINESS PHONE: 5049445515 MAIL ADDRESS: STREET 1: 1751 GENTILLY BLVD CITY: NEW ORLEANS STATE: LA ZIP: 70119 10-Q 1 0001.txt FAIR GROUNDS CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR QUARTER ENDED APRIL 30, 2000 COMMISSION FILE NUMBER O-7607 -------------- ------ FAIR GROUNDS CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) LOUISIANA 72-0361770 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1751 GENTILLY BLVD., NEW ORLEANS, LA 70119 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (504) 944-5515 -------------- NOT APPLICABLE - -------------------------------------------------------------------------------- (Former name, former address, and former fiscal year, if changed since last report) INDICATE BY A CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORT(S)), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. [X] Yes [ ] No 468,580 COMMON SHARES WERE OUTSTANDING AS OF JUNE 1, 2000. 2 FAIR GROUNDS CORPORATION INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheet, April 30, 2000 (Unaudited) and Balance Sheet, October 31, 1999 2 Statements of Operations and Retained Earnings for the Three Months Ended April 30, 2000 and 1999 (Unaudited) 4 Statements of Operations and Retained Earnings for the Six Months Ended April 30, 2000 and 1999 (Unaudited) 7 Statements of Cash Flows for the Six Months Ended April 30, 2000 and 1999 (Unaudited) 10 Notes to Financial Statements for the Six Months Ended April 30, 2000 and 1999 (Unaudited) 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 25 SIGNATURES 26
1 3 PART I FINANCIAL INFORMATION FAIR GROUNDS CORPORATION BALANCE SHEETS
(Unaudited) April 30, October 31, 2000 1999 ------------ ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $ 5,563,949 $ 8,488,808 Cash and cash equivalents - restricted 131,068 125,665 Accounts receivable 1,566,900 1,079,222 Mutuel settlements 274,598 181,630 Inventory 140,980 125,156 Prepaid expenses 911,700 468,165 Deferred Taxes 103,600 103,600 ------------ ------------ Total Current Assets 8,692,795 10,572,246 ------------ ------------ OTHER ASSETS 93,099 53,768 ------------ ------------ PROPERTY, PLANT AND EQUIPMENT Buildings and improvements 44,207,383 44,177,698 Land improvements 4,463,899 4,463,899 Automotive equipment 976,953 963,243 Machinery and equipment 2,732,873 2,696,449 Furniture and fixtures 425,202 405,352 ------------ ------------ Total 52,806,310 52,706,641 Less: accumulated depreciation and amortization (18,495,794) (17,667,397) ------------ ------------ Depreciable property - net 34,310,516 35,039,244 Land 3,286,281 3,286,281 ------------ ------------ Property, plant and equipment - net 37,596,797 38,325,525 ------------ ------------ TOTAL ASSETS $ 46,382,691 $ 48,951,539 ============ ============
(Continued) 2 4 FAIR GROUNDS CORPORATION BALANCE SHEETS (CONTINUED)
(Unaudited) April 30, October 31, 2000 1999 ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 500,000 $ 109,613 Accounts payable 351,818 849,288 Accrued liabilities: Deferred purses 1,514,186 8,104,835 Host track fees 613,203 432,721 Uncashed mutuel tickets 652,094 391,790 Other 635,710 543,183 Deferred revenues -- 282,970 Income taxes payable 1,436,885 4,932 ------------ ------------ Total Current Liabilities 5,703,896 10,719,332 ------------ ------------ DEFERRED INCOME TAXES 9,652,819 9,652,819 ------------ ------------ Total Liabilities 15,356,715 20,372,151 ------------ ------------ STOCKHOLDERS' EQUITY Capital stock - no par value; authorized 600,000 shares, 469,940 shares issued and 468,580 shares outstanding 1,525,092 1,525,092 Additional paid-in-capital 1,936,702 1,936,702 Retained earnings 27,599,707 25,153,119 ------------ ------------ Total 31,061,501 28,614,913 Less: treasury stock at cost, 1,360 shares (35,525) (35,525) ------------ ------------ Total Stockholders' Equity 31,025,976 28,579,388 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 46,382,691 $ 48,951,539 ============ ============
See accompanying notes to financial statements. 3 5 FAIR GROUNDS CORPORATION STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE THREE MONTHS ENDED APRIL 30, 2000 AND 1999 (UNAUDITED)
2000 1999 ------------ ------------ REVENUES Pari-mutuel commissions $ 8,012,118 $ 8,525,023 Breakage 225,942 232,441 Uncashed mutuel tickets 98,637 90,847 ------------ ------------ Total 8,336,697 8,848,311 Less: pari-mutuel tax 1,021,208 1,020,115 ------------ ------------ Commission income 7,315,489 7,828,196 Host track fees 5,589,480 4,768,461 ------------ ------------ Total Mutuel Income 12,904,969 12,596,657 Concessions 823,931 868,971 Video poker (net) 472,087 446,060 Admissions (net of taxes) 249,718 277,838 Parking 23,957 25,994 Programs and forms 464,674 440,121 Miscellaneous 360,695 279,044 ------------ ------------ Total Operating Revenues 15,300,031 14,934,685 ------------ ------------ RACING EXPENSES Purses 5,671,517 5,434,563 Salaries and related taxes and benefits 2,821,966 2,487,827 Contracts and services 1,143,422 979,985 Host track fees 901,425 882,577 Depreciation 415,254 484,340 Cost of sales - concessions 268,898 329,754 Utilities 375,107 298,886 Repairs and maintenance 112,405 130,040 Programs, forms and other supplies 517,810 574,444 Advertising and promotion 493,424 278,008 Rent 201,107 85,955 Miscellaneous 218,547 242,716 ------------ ------------ Total Racing Expenses $ 13,140,882 $ 12,209,095 ------------ ------------
(Continued) 4 6 FAIR GROUNDS CORPORATION STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (CONTINUED) FOR THE THREE MONTHS ENDED APRIL 30, 2000 AND 1999 (UNAUDITED)
2000 1999 ------------ ------------ GENERAL AND ADMINISTRATIVE EXPENSES Salaries and related taxes and benefits $ 191,412 $ 896,257 Insurance 237,176 188,470 Property taxes 237,055 246,467 Legal, audit and director fees 187,010 329,023 Contracts and services 36,723 10,837 Office expenses 142,622 209,930 Miscellaneous 239,355 1,085,547 ------------ ------------ Total General and Administrative Expenses 1,271,353 2,966,531 ------------ ------------ NET INCOME (LOSS) FROM OPERATIONS 877,796 (240,941) OTHER INCOME (EXPENSE) Jazz and Heritage Festival Income 870,504 1,054,646 Interest expense (8,447) (520) Interest income 33,090 56,133 ------------ ------------ INCOME BEFORE PROVISION FOR INCOME TAXES AND EXTRAORDINARY ITEM 1,782,943 869,318 Provision for income taxes 659,689 521,353 ------------ ------------ INCOME BEFORE EXTRAORDINARY ITEM (per share - 1999 - $ .74, 1998 - $1.68) 1,123,254 347,965 Extraordinary item - gain from fire (net of $1,521,162 of taxes in 1999.) -- 2,267,118 ------------ ------------ NET INCOME (per share 1999 - $5.58, 1998 - $1.68) $ 1,123,254 $ 2,615,083 RETAINED EARNINGS, BEGINNING OF PERIOD $ 26,476,543 $ 25,446,820
(Continued) 5 7 FAIR GROUNDS CORPORATION STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (CONTINUED) FOR THE THREE MONTHS ENDED APRIL 30, 2000 AND 1999 (UNAUDITED)
2000 1999 ------------ ------------ DIVIDENDS PAID $ -- $ (468,580) ------------ ------------ RETAINED EARNINGS, END OF PERIOD $ 27,599,707 $ 27,593,323 ============ ============ CASH DIVIDENDS PER SHARE $ -- $ 1.00 ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 468,580 468,580 ============ ============
See accompanying notes to financial statements 6 8 FAIR GROUNDS CORPORATION STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE SIX MONTHS ENDED APRIL 30, 2000 AND 1999 (UNAUDITED)
2000 1999 ------------ ------------ REVENUES Pari-mutuel commissions $ 15,658,553 $ 16,054,094 Breakage 416,065 436,399 Uncashed mutuel tickets 154,122 174,024 ------------ ------------ Total 16,228,740 16,664,517 Less: pari-mutuel tax 1,949,207 1,947,761 ------------ ------------ Commission income 14,279,533 14,716,756 Host track fees 11,315,854 9,935,506 ------------ ------------ Total Mutuel Income 25,595,387 24,652,262 Concessions 1,679,434 1,750,315 Video poker (net) 909,447 879,124 Admissions (net of taxes) 530,440 573,967 Parking 53,904 56,628 Programs and forms 867,361 870,268 Miscellaneous 574,576 652,457 ------------ ------------ Total Operating Revenues 30,210,549 29,435,021 ------------ ------------ RACING EXPENSES Purses 11,277,103 10,811,614 Salaries and related taxes and benefits 5,213,460 4,672,647 Contracts and services 1,953,360 1,713,985 Host track fees 1,969,027 1,646,332 Depreciation 828,397 980,516 Cost of sales - concessions 591,302 570,145 Utilities 577,888 498,756 Repairs and maintenance 333,567 375,254 Programs, forms and other supplies 1,049,498 1,162,323 Advertising and promotion 942,977 731,697 Rent 309,531 164,713 Miscellaneous 376,879 458,809 ------------ ------------ Total Racing Expenses $ 25,150,019 $ 23,786,791 ------------ ------------
(Continued) 7 9 FAIR GROUNDS CORPORATION STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (CONTINUED) FOR THE SIX MONTHS ENDED APRIL 30, 2000 AND 1999 (UNAUDITED)
2000 1999 ------------ ------------ GENERAL AND ADMINISTRATIVE EXPENSES Salaries and related taxes and benefits $ 516,422 $ 1,203,270 Insurance 391,336 416,081 Property taxes 482,205 479,870 Legal, audit and director fees 334,432 436,647 Contracts and services 61,957 64,294 Office expenses 272,725 336,268 Miscellaneous 344,572 1,190,618 ------------ ------------ Total General and Administrative Expenses 2,403,649 4,127,048 ------------ ------------ NET INCOME FROM OPERATIONS 2,656,881 1,521,182 OTHER INCOME (EXPENSE) Jazz and Heritage Festival Income 870,504 1,054,646 Interest expense (10,576) (10,309) Interest income 39,517 69,520 ------------ ------------ INCOME BEFORE PROVISION FOR INCOME TAXES AND EXTRAORDINARY ITEM 3,556,326 2,635,039 Provision for income taxes 1,315,841 1,174,670 ------------ ------------ INCOME BEFORE EXTRAORDINARY ITEM (per share - 2000 - $4.78, 1999 - $3.12) 2,240,485 1,460,369 Extraordinary item - gain from fire (net of $121,044 and $1,593,312 206,103 2,389,968 of taxes in 2000 and 1999, ------------ ------------ respectively) NET INCOME (per share 2000 - $5.22, 1999 - $8.22) $ 2,446,588 $ 3,850,337 RETAINED EARNINGS, BEGINNING OF PERIOD $ 25,153,119 $ 24,211,566
8 10 FAIR GROUNDS CORPORATION STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (CONTINUED) FOR THE SIX MONTHS ENDED APRIL 30, 2000 AND 1999 (UNAUDITED)
2000 1999 ------------ ------------ DIVIDENDS PAID $ -- $ (468,580) ------------ ------------ RETAINED EARNINGS, END OF PERIOD $ 27,599,707 $ 27,593,323 ============ ============ CASH DIVIDENDS PER SHARE $ -- $ 1.00 ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 468,580 468,580 ============ ============
See accompanying notes to financial statements 9 11 FAIR GROUNDS CORPORATION STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED APRIL 30, 2000 AND 1999 (UNAUDITED)
2000 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,446,588 $ 3,850,337 ------------ ------------ Adjustments to reconcile net income to net cash used for operating activities: Extraordinary item - gain from fire (327,147) (3,983,280) Depreciation 828,397 980,516 Change in assets and liabilities: (Increase) decrease in: Accounts receivable (580,646) (761,680) Inventory (15,824) (9,172) Prepaid expenses (443,535) (1,377,816) Restricted cash (5,403) (7,447) Increase (decrease) in Accounts payable and accrued liabilities (224,461) (1,236,287) Deferred revenue (282,970) (275,701) Deferred purses (6,590,649) (6,548,857) Income taxes payable 1,431,953 2,197,143 Uncashed mutuel tickets 260,304 177,262 Contracts Payable -- (58,732) ------------ ------------ Total adjustments (5,949,981) (10,904,051) ------------ ------------ Net cash used for operating activities (3,503,393) (7,053,714) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from litigation settlement 327,147 3,983,280 Capital expenditures (99,669) (262,830) Decrease (Increase) in deposits (39,331) 5,651 ------------ ------------ Net cash provided by investing activities 188,147 3,726,101 ------------ ------------
(Continued) 10 12 FAIR GROUNDS CORPORATION STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE SIX MONTHS ENDED APRIL 30, 2000 AND 1999 (UNAUDITED)
2000 1999 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Loan proceeds $ -- $ 200,627 Principal repayments on loans (109,613) (111,536) Advances from third party 1,000,000 1,000,000 Repayments to third party (500,000) (500,000) Dividends Paid -- (468,580) ------------ ------------ Net cash provided by financing activities 390,387 120,511 ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (2,924,859) (3,207,102) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,488,808 7,577,730 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,563,949 $ 4,370,628 ============ ============ SUPPLEMENTAL DISCLOSURES: Interest paid $ 10,576 $ 10,309 ============ ============ Income taxes paid $ 100,000 $ 1,112,000 ============ ============
11 13 FAIR GROUNDS CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED APRIL 30, 2000 AND 1999 (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION The accompanying Financial Statements have been prepared in accordance with the instructions to Form 10-Q and reflect all adjustments which management believes necessary (which adjustments are of a normal recurring nature) to present fairly the results for the periods stated. The Company's business is seasonal, and interim results are not necessarily indicative of results which may be expected for any other interim period or for the year as a whole. For further information refer to the Financial Statements and footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1999. NOTE 2 - COMMITMENTS AND CONTINGENCIES Fire Related Litigation The following is a brief description of the Traveler's Litigation that arose as a result of the December 1993 fire and in connection with the Company's efforts to collect insurance proceeds after the fire and that was concluded during the first six months of fiscal 2000: On May 14, 1994, the Company filed an action in the 24th Judicial Court in the State of Louisiana against Travelers Indemnity Company of Illinois ("Travelers") and others. The Company contended that the insurance policy provided by Travelers provided the Company with blanket coverage in the amount of $24.2 million in excess of the $10 million of underlying coverage, and, accordingly, that Travelers was liable for the difference between $24.2 million and the amount previously paid by Travelers (approximately $9.5 million), plus statutory penalties of 10% of the amount not paid, interest, attorney's fees and costs. The Company further contended that the insurance agent and the 12 14 NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED APRIL 30, 2000 AND 1999 (UNAUDITED) NOTE 2 - COMMITMENTS AND CONTINGENCIES (CONTINUED) insurance broker who arranged for the insurance were liable to the Company for any damages sustained because the amount of coverage is less than that claimed by the Company. Travelers' position is that its liability under such policy is limited to the amount which it had previously paid. In November 1996, the Company entered into a joint settlement with the insurance agent and broker, whereby the Company received a total of $10 million from those parties. The settlement also included a "Mary Carter" provision whereby the insurance agent and broker became entitled to share in certain recoveries that the Company might eventually obtain on its remaining claims against Travelers. The litigation against Travelers was concluded in January 2000 and the Company was awarded an additional $327,147 in attorneys fees, penalties and interest which was paid by Travelers. Under the Mary Carter provision, the Company was entitled to retain the full amount of such payment. This recovery of $206,103 (net of $121,044 of income taxes) is shown as an extraordinary item on the Company's statement of operations for the six months ended April 30, 2000. Other Litigation In 1996, a suit was filed in U.S. District Court in Baton Rouge by Livingston Downs Racing Association ("Livingston") naming the Company and other defendants in an antitrust/civil RICO suit alleging the Company participated in a conspiracy to prevent the plaintiff from entering the live racing, off-track betting and video poker markets. The Company filed a motion for summary judgment in late 1998, but that motion has not been decided by the U.S. District Court. Livingston had previously filed a series of other legal actions against the Company which were resolved in the Company's favor. Management believes that Livingston's claims in this case are without merit. However, there is no assurance that the Company will successfully defend all of Livingston's claims. Because the amount in question has not yet been determined but could be substantial and because there is no assurance that there will be insurance coverage or that it will be adequate, as discussed below, the failure of the Company to prevail in this lawsuit could have a material adverse effect on the Company's operations, financial condition and cash flows. 13 15 NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED APRIL 30, 2000 AND 1999 (UNAUDITED) NOTE 2 - COMMITMENTS AND CONTINGENCIES (CONTINUED) In a declaratory judgment action related to the Livingston suit brought by insurers for the Company and several of its affiliates, which case has been consolidated with the suit filed by Livingston, on January 14, 1999 the U. S. District Court granted the Company's motion for summary judgment, finding that coverage exists under certain of the Company's insurance policies for claims asserted by Livingston and that the insurers have a duty to defend. The insurers have filed a motion for new trial that is pending in the U. S. District Court. There is no assurance that the motion for new trial will be denied or, if denied, that the decision of the U. S. District Court will be affirmed on appeal or that the insurance policies will provide sufficient coverage to indemnify the Company fully. A suit was filed in 1996 by the Louisiana Horsemen's Benevolent and Protective Association ("LHBPA"), an association of horsemen organized to promote the dissemination of information on issues critical to horsemen and the exchange of ideas and information, against the Company, the State of Louisiana, and all other pari-mutuel wagering facilities operating in Louisiana. The LHBPA is seeking a larger portion of video poker proceeds on the ground that the State of Louisiana and the horse racing tracks in Louisiana have misinterpreted a Louisiana statute specifying the amount of revenues from video poker machines at pari-mutuel wagering facilities that are to be used as purse supplements. A motion for summary judgment seeking dismissal of this action was filed in April 1999 and is pending before the court. Management believes that the Company is in compliance with the Louisiana statute and the guidelines established by the Louisiana State Police Gaming Division, which regulates compliance with the State of Louisiana video poker law, and that the Company has sufficient defenses to all claims. However, there is no assurance that the Company will successfully defend the LHBPA's claims. Because the amount in question could be substantial, the failure by the Company to prevail in this lawsuit could have a material adverse effect on the Company's operations, financial condition and cash flows. 14 16 NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED APRIL 30, 2000 AND 1999 (UNAUDITED) NOTE 2 - COMMITMENTS AND CONTINGENCIES (CONTINUED) Except as described above, there are no material pending legal proceedings, other than ordinary routine litigation incidental to its business, to which the Company is a party or of which any of its property is the subject. NOTE 3 - ADVANCE In January 2000, the Company received a non-interest bearing advance of $1,000,000 from Video Services, Inc., to be repaid in full in six equal monthly installments beginning in February 2000. The outstanding balance of the advance is included in notes payable in the April 30, 2000 financial statements. 15 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS COMPARISON OF THE THREE MONTHS ENDED APRIL 30, 2000 AND 1999 Revenues. During the fiscal quarters ended April 30, 2000 and 1999, the Company derived its pari-mutuel income by conducting live racing 40 and 41 days, respectively, during each fiscal quarter and in the operation of its tele-tracks for off-track wagering. During each such fiscal quarter, the Company operated tele-tracks in New Orleans at the Fair Grounds Race Course and on Bourbon Street, and at locations in Jefferson, Lafourche, St. Bernard and St. John Parishes, Louisiana. Through Finish Line Management Corporation, an affiliated company, the Company operated tele-track facilities in Terrebonne, St. Tammany, and Jefferson Parishes, Louisiana. For the fiscal quarter ended April 30, 2000, the Company reported total in-state pari-mutuel wagering of $39,864,877 compared to $40,852,671 in fiscal 1999. Comparative pari-mutuel wagering and attendance figures for the quarters ended April 30, 2000 and 1999 are as follows:
2000 1999 ------------ ------------ Pari-mutuel wagering: On-track handle $ 12,261,402 $ 13,126,751 Off-track handle 27,603,475 27,725,920 ------------ ------------ Total in-state wagering $ 39,864,877 $ 40,852,671 ============ ============ Out-of-state simulcast handle $182,130,314 $156,644,135 ============ ============ Total On-Track Attendance 150,388 163,551 ============ ============
The Company believes that the $865,349, or 6.6%, decrease in on-track handle and the $122,445, or .44%, decrease in off-track handle are primarily due to the increased competition locally from the land-based casino which opened in October 1999 and from other simulcast signals competing with the Company's signal. The $25,486,179, or 16.3%, increase in out-of-state handle is primarily due to the continued high 16 18 quality of racing at the Fair Grounds Race Course. In addition, due to occasional bad weather in other parts of the country, the Company's races became alternates when certain tracks were unable to race, thus increasing the Company's simulcasting. Also, during the quarter ended April 30, 2000, the Company experienced significant handle increases from California, as the Company's races became one of the two featured simulcast signals in that state starting in January 2000. Primarily as a result of the out-of-state handle increase, the Company's total operating revenues increased $365,346, or 2.4%, from the comparable quarter in the prior fiscal year, including an increase of $821,019, or 17.22%, in host track fees. In addition, net video poker revenues increased by $26,027, or 5.8%. These increases were partially offset by decreases of $512,905, or 6%, in pari-mutuel commissions; $6,499, or 2.8%, in breakage; $45,040, or 5.2%, in concessions revenue; $28,120, or 10.1%, in admissions revenues; and $2,937, or 7.8%, in parking revenue. The decreased revenues are mainly attributable to the decrease in on-track attendance and handle during the quarter ended April 30, 2000. Louisiana has recently enacted legislation that will permit the Company to accept telephone and Internet wagers. While the Company is optimistic about the long term benefits of such wagering, the Company has not yet installed systems to accept such wagering, and the Company does not anticipate generating revenue from such sources in the current fiscal year. Racing Expenses. Total racing expenses for the quarter ended April 30, 2000, increased $931,787, or 7.6%, over the prior comparable fiscal quarter, primarily as a result of the increased out-of-state pari-mutuel activities. These included an increase of $236,954, or 4.4%, in purses. Other increases included salaries and related taxes and benefits, contracts and services, host track fees, utilities, advertising and promotions, and rent. These increases were partially offset by decreases in depreciation, repairs and maintenance, programs, forms and other supplies, cost of sales-concessions, and miscellaneous expenses. 17 19 The decrease in concessions costs in the current fiscal year quarter was due to the timing of certain expenses, with certain invoices for concessions being included in the second quarter in fiscal 1999 and invoices for similar concession expenses being included in the first quarter in the current fiscal year. The increase in rent in the quarter ended April 30, 2000 is due to the increased monthly rent at the Bourbon Street tele-track location, as well as rent payments, beginning in February 2000, for a new tele-track location to be opened in Hanrahan, Louisiana. Depreciation decreased in the second quarter of 2000 due to many of the tele-tracks's leasehold improvements becoming fully depreciated in the prior fiscal year. General and Administrative Expenses. General and administrative expenses decreased by $1,695,178, or 57.1%, in the second quarter of the current fiscal year primarily as a result of decreases in salaries and related taxes and benefits, legal, audit and director fees, office expenses and miscellaneous expenses. In the quarter ended April 30, 1999, certain members of management were paid bonuses as authorized by the Board of Directors. No bonuses were authorized or paid in the second quarter of the current fiscal year. Legal, audit and director fees decreased in the quarter ended April 30, 2000 as a result of the conclusion prior to the quarter of most of the fire-related litigation. Office expenses decreased in the second quarter of the current fiscal year as a result of a change in the expense classification of the Company's pari-mutuel fiber optic telephone charges. In the comparable quarter in the prior fiscal year these charges were included in office expenses. In the second quarter of the current fiscal year, the charges are classified as contracts and services and are included in racing expenses. In the second quarter in fiscal 1999, miscellaneous expenses included a guarantee fee of approximately $988,000 paid in connection with a pledge of assets and guarantee of corporate indebtedness. No guarantee fee was paid in the second quarter of the current fiscal year. Other Income (Expense). Other income decreased in the second quarter of the current fiscal year by $215,112, or 18 20 19.4%, compared to the second quarter of fiscal 1999 primarily as a result of a $184,142 decrease in Jazz and Heritage Festival income. This decrease was attributable to a timing difference, with three days of the 2000 Jazz and Heritage Festival falling in the second quarter of the current fiscal year compared to five days of the 1999 Jazz and Heritage falling in the second quarter of fiscal 1999. Extraordinary Items. During the quarter ended April 30, 1999, the Company received settlement payments in connection with the fire-related litigation in the aggregate amount of $3,788,280. These proceeds were reported net of $1,521,162 of related taxes. The Company received no fire insurance settlements in the second quarter of fiscal 2000. Income Taxes. For the quarter ended April 30, 2000, the income tax provision was $659,689 compared to $521,353 in the comparable quarter in fiscal 1999. The difference between periods reflects changes in pre-tax income between the respective periods. Net Income. The Company reported net income of $1,123,254 for the quarter ended April 30, 2000, compared to net income of $2,615,083 for the quarter ended April 30, 1999. COMPARISON OF THE SIX MONTHS ENDED APRIL 30, 1999 AND 1998 Revenues. During the six months ended April 30, 2000 and 1999, the Company derived its pari-mutuel income by conducting 88 live racing days during each fiscal period and in the operation of its tele-tracks for off-track wagering. During each such period, the Company operated tele-tracks in New Orleans at the Fair Grounds Race Course and on Bourbon Street, and at locations in Jefferson, Lafourche, St. Bernard and St. John Parishes, Louisiana. Through Finish Line Management Corporation, an affiliated company, the Company operated tele-track facilities in Terrebonne, St. Tammany, and Jefferson Parishes, Louisiana. For the six months ended April 30, 2000, the Company reported total in-state pari-mutuel wagering of $78,851,604 compared to $78,537,304 in the comparable period in fiscal 1999. Comparative pari-mutuel wagering and attendance figures for 19 21 the six months ended April 30, 2000 and 1999 are as follows:
2000 1999 ------------ ------------ Pari-mutuel wagering: On-track handle $ 26,136,189 $ 27,412,562 Off-track handle 51,715,415 51,124,742 ------------ ------------ Total in-state wagering $ 77,851,604 $ 78,537,304 ============ ============ Out-of-state simulcast handle $366,467,601 $321,342,925 ============ ============ Total On-Track Attendance 310,912 336,466 ============ ============
The Company believes that the $1,276,373, or 4.7%, decrease in on-track handle is primarily due to the increased competition locally from the land based casino which opened in October 1999, and from other simulcast signals competing with the Company's signal. There was no material change in the off-track handle between the two periods. The $45,124,676, or 14%, increase in out-of-state handle is primarily due to the continued high quality of racing at the Fair Grounds Race Course. Due to occasional bad weather in other parts of the country, the Company's races became alternates when certain tracks were unable to race, thus increasing the Company's simulcasting. In addition, during the six months ended April 30, 2000, the Company experienced significant handle increases from California, as the Company's races became one of the two featured simulcasts signals in that state starting in January 2000. Primarily as a result of the out-of-state handle increase, the Company's total operating revenues increased $775,528, or 2.6%, from the comparable period in the prior fiscal year, including an increase of $1,380,348, or 13.9%, in host track fees. In addition, net video poker revenues increased by $30,323, or 3.5%. These increases were partially offset by decreases of $395,541, or 2.5%, in pari-mutuel commissions; $20,334, or 4.7%, in breakage; $70,881, or 4%, in concessions revenue; $43,527, or 7.6%, in admissions revenues; and $2,724, or 4.8%, in parking revenue. The decreased revenues are mainly attributable to the decrease in on-track attendance and handle during the current fiscal year period. Racing Expenses. Total racing expenses for the six months ended April 30, 2000 increased $1,363,228, or 5.7%, over the 20 22 comparable period in the prior fiscal year, primarily as a result of the increased out-of-state pari-mutuel activities. The increase in racing expenses was attributable to an increase of $465,489, or 4.3%, in purses, as well as increases in salaries and related taxes and benefits, contracts and services, host track fees, utilities, advertising and promotions, and rent, partially offset by decreases in depreciation, repairs and maintenance, programs, forms and other supplies, and miscellaneous expenses. The increase in rent was due to the increased monthly rent at the Bourbon Street tele-track location, as well as rent payments, beginning in February 2000, for a new tele-track location to be opened in Hanrahan, Louisiana. Depreciation decreased in the current fiscal year period due to many of the tele-track's leasehold improvements becoming fully depreciated in the prior fiscal year. General and Administrative Expenses. General and administrative expenses decreased by $1,723,399, or 41.7%, in the current fiscal year period primarily as a result of decreases in salaries and related taxes and benefits, legal, audit and director fees, office expenses and miscellaneous expenses. During the six months ended April 30, 1999, certain members of management were paid bonuses as authorized by the Board of Directors. No bonuses were authorized or paid in the current fiscal year period. Legal, audit and director fees decreased in the current fiscal year period as a result of the conclusion prior to the period of most of the fire-related litigation. Office expenses decreased in the current fiscal year period as a result of a change in the expense classification of the Company's pari-mutuel fiber optic telephone charges. In the prior fiscal year period, these charges were included in office expenses, while in the current fiscal year period, the charges are classified as contracts and services and are included in racing expenses. In the fiscal 1999 period, miscellaneous expenses included a guarantee fee of approximately $988,000 paid in connection with a pledge of assets and guarantee of corporate indebtedness. No guarantee fee was paid in the current fiscal year period. Other Income (Expense). Other income decreased in the six months ended April 30, 2000 by $214,412, or 19.2%, compared 21 23 to the first six months of fiscal 1999 primarily as a result of a $184,142 decrease in Jazz Heritage Festival income. The decrease in Jazz and Heritage Festival income was attributable to a timing difference, with three days of the 2000 Jazz and Heritage Festival falling in the first six months of the current fiscal year compared to five days of the 1999 Jazz and Heritage Festival falling in the comparable period in fiscal 1999. Extraordinary Items. During the six months ended April 30, 1999, the Company received settlement payments in connection with the fire-related litigation in the aggregate amount of $3,983,280. These proceeds were reported net of related taxes. In the comparable period in the current fiscal year, the Company received $327,147 in connection with the fire-related litigation, which is shown net of $121,044 of related taxes. Income Taxes. For the six months ended April 30, 2000, the income tax provision was $1,315,841, compared to $1,174,670 in the comparable period in fiscal 1999. The difference between periods reflects changes in pre-tax income between the respective periods. Net Income. The Company reported net income of $2,446,588 for the six months ended April 30, 2000 compared to net income of $3,850,337 for the six months ended April 30, 1999. LIQUIDITY AND CAPITAL RESOURCES General Cash and cash equivalents decreased $2,924,859 during the six months ended April 30, 2000, compared to a decrease of $3,207,102 during the six months ended April 30, 1999. The decrease in cash and cash equivalents in fiscal 2000 was the result of cash used in operating activities of $3,503,393, partially offset by cash provided by investing activities of $188,147 and cash provided by financing activities of $390,387. Cash used in operations was primarily due to the payment of horseman's purses and other related racing payments. Cash provided by investing was the result of proceeds from a 22 24 fire-related litigation settlement previously discussed. Cash provided by financing is the net of the $1 million advance from the Company's video poker operator received in January 2000 less debt repayments made through April 30, 2000. In November 1999, the Company entered into a working capital line of credit agreement with First Bank and Trust. The line of credit is for $2.5 million with a variable interest rate on amounts outstanding. No amounts were drawn or outstanding on the line of credit during the six months ended April 30, 2000. The Company believes that the combination of existing cash, cash from future operations, funds available under its working capital line of credit, and the Company's capacity to incur short-term and long-term indebtedness, if necessary, will be sufficient to fund the Company's cash requirements for the foreseeable future. The Company has a deferred tax liability of approximately $9.65 million at April 30, 2000 arising from fire insurance and other litigation settlements that is to be paid over approximately 38 years. The Company currently anticipates payment of that liability with funds obtained through the sources outlined above. Impact of Inflation To date, inflation has not had a material effect on the Company's operations. Year 2000 Compliance A significant part of the Company's operations are dependent on computer systems and applications. These systems are either owned by the Company or are provided under contract by third party technology or other service providers. The Company has not experienced any significant problems associated with the year 2000 issue, although it is possible that year 2000 problems could develop at a later date. FORWARD-LOOKING STATEMENTS The statements in this quarterly Report that are forward-looking are based upon current expectations, and actual 23 25 results may differ materially. Therefore, the inclusion of such forward-looking information should not be regarded as a representation by the Company that the objectives or plans of the Company will be achieved. Such statements include, but are not limited to, the Company's expectations regarding the source of funds for payment of its deferred tax liability, the benefits of telephone and Internet wagering, and the adequacy of its cash, cash equivalents and borrowings available under its new working capital line of credit to fund the Company's future cash requirements. Words such as "anticipates," "believes," "expects," "intends," "estimated" and variations of such words or similar expressions are intended to identify such forward-looking statements. Forward-looking statements contained herein involve numerous risks and uncertainties, and there are a number of factors that could cause actual results to differ materially including, but not limited to, the following: changing economic, market and business conditions, the ability of the Company to compete effectively for top horses and trainers necessary to field high-quality horse racing; the ability of the Company to maintain and, as opportunities are presented, grow its share of the interstate simulcast market; a substantial change in allocation of live racing days; the impact of competition from alternative gaming (including casinos and lotteries) and other sports and entertainment options in those markets in which the company operates; and the Company's success in attracting new patrons and generating additional revenue for purses. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company utilizes an overnight sweep arrangement pursuant to which available funds are invested in daily repurchase agreements, which are collateralized by the U.S. government or agency securities. The Company also has deposits in U.S. Treasury money market funds, which are short-term in nature and guaranteed by the U.S. government. Because of the short-term duration of the financial instruments held by the Company, management does not believe that its financial instruments are materially sensitive to changes in interest rates. 24 26 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Exhibit 27 Financial Data Schedule (Filed electronically only) (For SEC use only) 25 27 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. FAIR GROUNDS CORPORATION ----------------------------------- (Registrant) Date: June 13, 2000 By: /s/ Bryan G. Krantz ---------------------- ----------------------------------- President Date: June 13, 2000 By: /s/ Gordon M. Robertson ----------------------- ----------------------------------- Chief Financial Officer 26 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF FAIR GROUNDS CORPORATION FOR THE SIX MONTHS ENDED APRIL 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS OCT-31-2000 NOV-01-1999 APR-30-2000 5,695 0 1,567 0 141 8,693 52,806 18,496 46,383 5,704 0 0 0 1,525 29,501 46,383 25,595 30,211 0 25,150 2,404 0 10 3,556 1,316 2,240 0 206 0 2,447 5.22 5.22
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