10-Q 1 l88905ae10-q.txt SCIOTO DOWNS, INC. 10-Q 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, 2001 ----------------------- 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 10, 2001: ------------- 595,767, par value $1.05 ------------------------ 2 SCIOTO DOWNS, INC. INDEX --------------------------------------------------------------------------------

PAGES ---------------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets at ~~January~~April 3130, 2001, October 31, 2000 and ~~January~~April 3130, 2000 1-2 Statements of Operations for the three-month and six-month periods ended ~~January~~April 3130, 2001 and 2000 3 Statements of Cash Flows for the ~~three~~ six-month periods ended ~~January~~April 3130, 2001 and 2000 4 Notes to Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-7 Item 3. Quantitative and Qualitative Disclosures about Market Risk 67 PART II. OTHER INFORMATION Item 1. Legal Proceedings 8 Item 2. Changes in Securities 8 Item 3. Defaults Upon Senior Securities 8 Item 4. Submission of Matters to a Vote of Security Holders 8 Item 5. Other Information 8 Item 6. Exhibits and Reports on Form 8-K 8 SIGNATURES 9

3 SCIOTO DOWNS, INC. BALANCE SHEETS AT APRIL 30, 2001 (UNAUDITED), OCTOBER 31, 2000 AND APRIL 30, 2000 (UNAUDITED) -------------------------------------------------------------------------------- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS

~~JANUARY~~APRIL 3130, OCTOBER 31, ~~JANUARY~~APRIL 3130, 2001 2000 2000 ------------ ------------ ------------ ~~(UNAUDITED) (UNAUDITED)~~ ASSETS Current assets: Cash and cash equivalents $ 1769,~~075,240~~942 $ 1,510,654 $ ~~475~~276,~~697~~604 Restricted cash ~~310~~1,~~963~~112,185 15,804 ~~624~~1,~~881~~023,649 Accounts receivable, net of allowance for doubtful accounts of $~~129~~1,~~098~~005, $129,098, and $127,864, respectively 1333,~~000~~778 176,443 ~~-- Accounts receivable-related party 25~~6,~~609~~875 ~~-- --~~ Prepaid expenses and other 2864,~~810~~320 22,202 5061,~~546~~402 Deferred income taxes 89174,000 -- 78179,~~000~~484 ------------ ------------ ------------ Total current assets 12,~~542~~154,~~622~~225 1,725,103 1,~~229~~548,~~124~~014 ------------ ------------ ------------ Property and equipment, at cost 20,~~452~~629,~~851~~986 20,324,120 20,~~207~~258,~~977~~859 Less accumulated depreciation (14,~~561~~714,~~493~~925) (14,456,387) (14,~~035~~173,~~264~~227) ------------ ------------ ------------ Total property and equipment, net 5,~~891~~915,~~358~~061 5,867,733 6,~~172~~085,~~713~~632 ------------ ------------ ------------ Accounts receivable - -related party, 32net of allowance for doubtful accounts of $227,~~107~~962 at April 30, 2001 21,413 -- ~~548~~411,~~013~~351 Other noncurrent assets 8862,~~524~~341 78,524 6090,812 ------------ ------------ ------------ Total assets $ 78,~~554~~153,~~611~~040 $ 7,671,360 $ 8,~~010~~135,~~662~~809 ============ ============ ============

CONTINUED -1- 4 SCIOTO DOWNS, INC. BALANCE SHEETS AT APRIL 30, 2001 (UNAUDITED), OCTOBER 31, 2000 AND APRIL 30, 2000 (UNAUDITED) --------------------------------------------------------------------------------

~~JANUARY~~APRIL 3130, OCTOBER 31, ~~JANUARY~~APRIL 3130, 2001 2000 2000 ----------- ----------- ----------- ~~(unaudited) (unaudited)~~ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable, trade $ ~~227~~297,~~863~~175 $ 45,391 $ 66214,~~182~~865 Accounts payable, related party -- 78,078 -- Current maturities, term debt ~~140~~145,~~094~~376 135,832 130,~~917~~612 Accrued expenses ~~346~~377,~~872~~702 339,901 ~~208~~244,~~766~~667 Deferred revenue 167,475 -- 163,243 Purses payable and simulcast purse fund ~~380~~1,~~212~~227,242 69,614 ~~666~~1,~~698~~047,735 ----------- ----------- ----------- Total current liabilities 12,~~095~~214,~~041~~970 668,816 1,~~072~~801,~~563~~122 ----------- ----------- ----------- Minimum pension liability 136,025 136,025 186,770 Deferred income taxes 33,541 33,541 30,637 Term debt, net of current maturities 2,~~740~~701,~~537~~074 2,777,089 2,~~876~~845,~~397~~651 Stockholders' equity: Common stock, $1.05 par value per share, issued and outstanding,: 595,767 shares 625,555 625,555 625,555 Capital in excess of par value of ~~common~~ stock 2,037,300 2,037,300 2,037,300 Retained earnings ~~976~~494,~~388~~351 1,482,810 1725,~~298,208~~542 Accumulated other comprehensive loss (89,776) (89,776) (116,768) ----------- ----------- ----------- Total stockholders' equity 3,~~549~~067,~~467~~430 4,055,889 3,~~844~~271,~~295~~629 ----------- ----------- ----------- Total liabilities and stockholders' equity $7 8,~~554~~153,~~611~~040 $ 7,671,360 $ 8,~~010~~135,~~662~~809 =========== =========== ===========

The accompanying notes are an integral part of these financial statements. -2- 5 SCIOTO DOWNS, INC. STATEMENTS OF OPERATIONS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED APRIL 30, 2001 AND 2000 (UNAUDITED) --------------------------------------------------------------------------------

FOR THE THREE-MONTH FOR THE SIX-MONTH PERIODS ENDED PERIODS ENDED APRIL 30, APRIL 30, -------------------------- -------------------------- 2001 2000 2001 2000 ----------- ----------- ----------- ----------- OPERATING REVENUES Pari-mutuel commissions and breakage $ ~~539~~2,~~243~~315,522 $ --68,891 $ 2,854,765 $ 68,891 Less pari-mutuel taxes 74324,~~572~~867 -- 399,439 -- ----------- ----------- ~~464,671~~----------- ----------- ~~Operating~~1,990,655 68,891 2,455,326 68,891 Other operating revenues 167,075 ~~other~~4,958 53220,~~556~~631 3843,~~917~~875 ----------- ----------- ~~518~~----------- ----------- 2,~~227~~157,730 3873,~~917~~849 ~~Operating~~2,675,957 ~~expenses:~~112,766 ----------- ----------- ----------- ----------- OPERATING EXPENSES Purses ~~207~~882,~~547~~998 -- 1,090,545 -- Salaries and wages ~~187~~325,~~442~~690 ~~114~~140,~~372~~063 513,132 254,435 Simulcasting fees 89377,~~259~~648 -- 466,907 -- Depreciation ~~131~~153,~~490~~431 ~~132~~137,~~687~~963 284,921 270,650 Other operating and general ~~expense~~expenses ~~462~~980,~~878~~710 ~~268~~425,~~174~~030 1,443,588 693,204 ----------- ----------- 1----------- ----------- 2,~~078~~720,~~616~~477 ~~515~~703,~~233~~056 3,799,093 1,218,289 ----------- ----------- ----------- ----------- Loss from operations (~~560~~562,~~389~~747) (~~476~~629,~~316~~207) ~~Gain~~(1,123,136) on(1,105,523) ~~disposal~~Other ofincome ~~assets~~42,486 346,~~526~~012 -- Net interest expense (3846,~~559~~776) (4644,~~088~~944) ~~----------~~(85,335) ~~---------~~(91,032) =========== =========== =========== =========== Net loss before income tax benefit (~~595~~567,~~422~~037) (~~522~~674,~~404~~151) (1,162,459) (1,196,555) Income tax benefit 8985,000 78101,484 174,000 179,484 ----------- ----------- ----------- ----------- Net loss $ (~~506~~482,~~422~~037) $ (~~444~~572,~~404~~667) $ (988,459) $(1,017,071) =========== =========== =========== =========== Net loss per common share - -basic and diluted $ (.8581) $ (.7596) $ (1.66) $ (1.71) =========== =========== =========== =========== Weighted average common shares outstanding--basic and diluted 595,767 595,767 595,767 595,767 =========== =========== =========== ===========

The accompanying notes are an integral part of these financial statements. -3- 6 SCIOTO DOWNS, INC. STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED APRIL 30, 2001 AND 2000 (UNAUDITED) --------------------------------------------------------------------------------

2001 2000 CASH FLOWS ~~FROM~~USED IN OPERATING ACTIVITIES: Net loss $ (~~506~~988,~~422~~459) $ (~~444~~1,~~404~~017,071) Adjustments to reconcile net loss to net cash ~~used~~provided inby operating activities: Depreciation ~~131~~and amortization 284,~~490~~921 ~~132~~270,~~687~~650 ~~Gain~~Provision for losses on ~~disposal~~related ofparty ~~assets~~accounts (3receivable 227,~~526)~~962 -- Deferred income taxes (89174,000) (78179,~~000~~484) ~~Changes~~Gain inon disposal of assets and ~~liabilities:~~settlement ~~Accounts~~(62,197) ~~receivable~~-- ~~144,047~~Changes ~~53,614~~in ~~Accounts~~current ~~receivable,~~assets ~~related~~and ~~party~~liabilities: Accounts receivable (38106,~~320~~710) ~~(64~~119,~~359)~~042 Prepaid expenses and other (625,~~608~~935) (1223,~~761~~617) Accounts payable ~~and~~173,706 ~~purses~~29,323 ~~payable~~Deferred ~~and~~revenue ~~simulcast purse fund 493~~167,~~070~~475 ~~200~~163,~~823~~243 ~~Accounts~~Accrued ~~payable~~expenses 37,801 ~~related party~~ (7820,~~078~~402) --Purses ~~Accrued~~payable ~~expenses~~and ~~6,971~~simulcast ~~(56,303)~~purse ~~Other~~fund ~~assets~~1,157,628 ~~(10~~701,~~000)~~218 -- ---------- ----------- Net cash provided by ~~(used in)~~ operating activities 43692,~~624~~192 ~~(268~~42,~~703)~~902 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Net ~~increase in~~ restricted cash receipts (~~295~~1,~~159~~096,381) (~~336~~735,~~290~~058) Purchase of equipment (~~155~~273,~~115~~578) (97147,~~084~~964) Proceeds from sale of equipment 3,526 -- Investment in joint venture -- (30,000) ----------- ----------- Net cash used in investing activities (~~446~~1,~~748~~366,433) (~~433~~913,~~374~~022) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: ~~Dividends paid -- (29,788)~~ Payments on term debt (3266,~~290~~471) (2758,~~899~~950) Dividends paid -- (29,787) ----------- ----------- Net cash used in financing activities (3266,~~290~~471) (5788,~~687~~737) ----------- ----------- Net decrease in cash and cash equivalents (~~435~~740,~~414~~712) (~~759~~958,~~764~~857) Cash and cash equivalents, beginning of period 1,510,654 1,235,461 ----------- ----------- Cash and cash equivalents, end of period $1 769,~~075,240~~942 $ ~~475~~276,~~697~~604 =========== ===========

The accompanying notes are an integral part of these financial statements. -4- 7 SCIOTO DOWNS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED APRIL 30, 2001 AND 2000 (UNAUDITED) -------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION The financial 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 report on Form 10-K. Reference should be made to the Company's 2000 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. 2. INCOME TAXES The Company's estimated annual effective tax rate differs from the statutory rate due to the application of surtax exemptions. 3. COMMITMENTS AND CONTINGENCIES At October 31, 2000, the Company had an outstanding receivable from its former concessionaire of $127,864. The Company was in dispute with the former concessionaire and had fully reserved the receivable as of October 31, 2000. During the second quarter ended April 30, 2001, the Company reached a settlement agreement with the concessionaire. The settlement resulted in the receipt of equipment from the concessionaire and forgiveness by the Company of the outstanding receivable. The Company recognized a gain on settlement of $58,670 at April 30, 2001. 4. RELATED-PARTY ACCOUNTS RECEIVABLE At April 30, 2001, the Company had an outstanding receivable from Mid-America Racing Association, Inc., a related party, of $227,962. This amount has been fully reserved as of April 30, 2001 due to uncertainty of its collectibility. -5- 8 SCIOTO DOWNS, INC. OTHER INFORMATION -------------------------------------------------------------------------------- PART I. FINANCIAL INFORMATION, CONT. 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 2000 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 period to perform routine repairs and maintenance and facility improvements. During the first and second quarters of 2001, the Company continued to service the debt on the Clubhouse and the simulcasting equipment with funds generated during the 2000 racing season and the 2001 simulcasting season. 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, Inc. is earned during the fourth quarter of the year, ending in October. Beginning January 1, 2001, the Company commenced year-round simulcasting. In addition, the Company terminated its simulcasting agreement with Beulah Park in September 2000. Thus, no revenue will be earned related to this agreement. THREE MONTHS ENDED APRIL 30, 2001 COMPARED TO THREE MONTHS ENDED APRIL 30, 2000 Year-round simulcasting resulted in an increase in pari-mutuel commissions and breakage, pari-mutuel taxes, purses and simulcasting. Purse expense represents payments into the simulcast purse fund. Other operating revenues include program sales, rental income and part-mutual tax abatement. Salaries and wages increased by $185,627 to $325,690 for the three months ended April 30, 2001 from $140,063 for the three months ended April 30, 2000. The increase was due primarily to additional staffing needed for year-round simulcasting. Operating and general expense increased by $555,680 due mainly to increases in utilities, real estate and personal property taxes, and repairs and maintenance, as well as in advertising and tote rental due to year-round simulcasting. Operating and general expenses for the three months ended April 30, 2001 also includes a reserve of approximately $228,000 for estimated uncollectible amounts due from Mid-America Racing Association, Inc. pursuant to its lease with the Company. The income tax benefit decreased to $85,000 from $101,484 for the three months ended April 30, 2001 and 2000, respectively, as a result of the decrease in net loss before taxes. The Company provides for income taxes based on the estimated annual effective tax rate. -6- 9 SCIOTO DOWNS, INC. OTHER INFORMATION -------------------------------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2001 COMPARED TO SIX MONTHS ENDED APRIL 30, 2000 Year-round simulcasting resulted in an increase in pari-mutuel commissions and breakage, pari-mutuel taxes, purses and simulcasting. Purse expense represents payments into the simulcast purse fund. Salaries and wages increased by $258,697 to $513,132 for the six months ended April 30, 2001 from $254,435 for the six months ended April 30, 2000. The increase was due primarily to additional staffing needed for year-round simulcasting. Operating and general expense increased by $750,384 due mainly to increases in utilities, real estate and personal property taxes, and repairs and maintenance, as well as in advertising and tote rental due to year-round simulcasting. Operating and general expenses for the six months ended April 30, 2001 also includes a reserve of approximately $228,000 for estimated uncollectible amounts due from Mid-America Racing Association, Inc. pursuant to its lease with the Company. Included in the prior-year general expense is a recovery of approximately $54,000 in simulcasting purse pool funds from the Ohio Racing Commission. The income tax benefit decreased to $174,000 from $179,484 for the six months ended April 30, 2001 and 2000, respectively, as a result of the decrease in net loss before taxes. The Company provides for income taxes based on the estimated annual effective tax rate. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. -7- 10 SCIOTO DOWNS, INC. OTHER INFORMATION -------------------------------------------------------------------------------- PART II. OTHER INFORMATION 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, 2001. -8- 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 14, 2001 BY: /s/ Edward T. Ryan ------------------- -------------------------- Edward T. Ryan, President DATE: June 14, 2001 BY: /s/ Richard J. Fiore ------------------- -------------------------- Richard J. Fiore Chief Financial Officer -9-

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