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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal year ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-9624
International Thoroughbred Breeders, Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-2332039
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
P.O. Box 1232 Cherry Hill, New Jersey 08034
(Address of principal executive offices)
Registrant's telephone number, including area code
(609) 488-3838
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, $2.00 par value
American Stock Exchange
Series A Convertible Preferred Stock, $100.00 par value
American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $2.00 par value
(Title of class)
Series A Convertible Preferred Stock, $100.00 par value
(Title of class)
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant at September 2, 1994 was approximately
$18,824,697 based upon the closing sales price for such stock on the American
Stock Exchange as reported by The National Quotation Bureau Incorporated.
Indicate the number of shares outstanding of each of the registrant's
classes of Common Stock, as of the latest practicable date.
9,551,319 shares of Common Stock, $2.00 par value outstanding
as of September 2, 1994
PART I
ITEM 1 - BUSINESS
(A) General Development of Business
International Thoroughbred Breeders, Inc., a Delaware corporation
incorporated October 31, 1980, is primarily engaged through its wholly owned
subsidiary, Garden State Race Track, Inc. in the ownership and operation of
the Garden State Park racetrack in Cherry Hill, New Jersey. It is also
engaged in the business of purchasing, owning, breeding, and selling of
thoroughbred horses used in thoroughbred (non-harness) racing and interests in
same. As used herein, the term the "Company" shall include International
Thoroughbred Breeders, Inc. and its wholly owned subsidiaries unless the
context otherwise requires.
During the year ended June 30, 1994, the Company realized after tax
income of $2,500,596 in comparison to a loss after taxes in the prior fiscal
year of $29,410,166. The change from a significant net loss to net income is
primarily the result of operating profits generated this fiscal year due to:
1) a significant decrease in depreciation expense as a result of the quasi-
reorganization at June 30, 1993; 2) reduced interest expense as a result of
the extinguishment of the debt on the Garden State Park racetrack; and 3)
operating profits before interest due parent generated by Garden State Park
and operating profits generated by the breeding segment. In addition, in
fiscal 1993, the Company recognized a net non-recurring loss of $25,866,599 as
a result of the sale of the Philadelphia Park mortgage note.
For the fiscal year ended June 30, 1994, Garden State Race Track, Inc.
realized income from operations of $818,718 before interest expense and taxes,
representing a change of $3,270,508 from a loss of $2,451,790 for the prior
fiscal year, primarily reflecting operating profits before interest due to the
parent.
(See PART II, ITEM 7 - "Management's Discussion and Analysis of
Financial Conditions and Results of Operations.")
Developments Since the Beginning of the Last Fiscal Year:
The conversion period for the Company's Series A Convertible Preferred
Stock concluded as of July 31, 1993.
As of September 27, 1993, the Company entered into development and
management agreements with Gale and Wentworth, Inc., a real estate company of
Florham Park, New Jersey, to develop as a retail shopping center an
approximate 56 acre portion of the property at the Garden State Park racetrack
which is presently unused for racing purposes. On March 21, 1994, the project
received preliminary and final site plan approval from the Cherry Hill
township planning board. Additional governmental approvals are necessary,
including approvals from the New Jersey Department of Transportation. No
assurances can be given that the approvals will be granted. Further, while
solicitation of tenants is underway, no assurances can be given that adequate
leases can be consummated with retail tenants if all governmental approvals
are obtained.
On June 2, 1994, the Board of Directors approved the adoption of an
employee stock option plan subject to stockholder approval. A block of
475,000 shares of common stock was reserved for options to be granted under
the plan. Under the plan, options to purchase the following number of shares
were granted; 275,000 to Arthur Winkler, president of the Company, 75,000 to
William H. Warner, treasurer of the Company, 75,000 to Richard E. Orbann,
general manager of Garden State Park and 50,000 to Christopher C. Castens,
secretary of the Company. These options, exercisable for a five year period
commencing on the date of stockholder approval at a price of $5.875, are non-
transferable and are only exercisable by the holder while he is employed by
the Company or a subsidiary of the Company. On March 21, 1994, the Board of
Directors granted non-transferable options, subject to stockholder approval,
to purchase 1,000,000 shares of common stock at prices ranging from $12 to $24
to Francis W. Murray, President of International Thoroughbred Gaming
Development Corporation, a recently formed wholly owned subsidiary of ITB.
These options are exercisable during a two-year period commencing on the date
of such stockholder approval and only while he is employed by the Company or a
subsidiary of the Company.
On October 20, 1993, the United States District Court for the District
of New Jersey signed an order granting preliminary approval to a proposed
partial settlement of the consolidated class action pending since 1986 against
the Company, its officers and directors and various other defendants alleging
various violations of federal securities laws and other statutes. Although
the Company believes this lawsuit is totally without merit, it has incurred
approximately $1,150,000 in legal expense in defending against the lawsuit and
would have been required to expend significant additional amounts to continue
the defense through trial. Therefore, in order to avoid further expense,
inconvenience and delay and to dispose of this expensive, burdensome and
protracted litigation, the Company executed the proposed partial Settlement
Agreement. The proposed partial settlement requires the Company to make a
$250,000 settlement payment and an additional payment of up to $150,000
contingent upon receipt of future amounts by the Company from its sale of the
Philadelphia Park mortgage note. If effectuated, the settlement would dispose
of all class claims made against the Company, its officers and directors and
all derivative claims made on behalf of the Company against all parties in the
litigation. As part of the proposed settlement, the Company's directors and
officers' liability insurance carrier will pay $3,125,000 plus an additional
$4,125,000 which latter amount is subject to reduction on a dollar for dollar
basis in the event of collections from certain non-settling defendants or in
the event of collection of any of the above described $150,000 contingency
payment. On April 12, 1994, an order was entered in the United States
District Court of New Jersey approving the settlement agreement and entering a
final judgement of dismissal of the plaintiffs claims against the Company and
the Director defendants in their capacity as officers and directors of the
Company associated with the proposed partial settlement of the consolidated
class action suit. Certain non-settling defendants have appealed the order
approving the settlement. In the event the settlement is upset on appeal, the
Company intends to continue to vigorously contest this lawsuit.
A settlement agreement containing certain contingencies was reached on
real estate tax appeals with the township of Cherry Hill for the racetrack
property. The original assessment of $88,203,100 was reduced to $72,000,000
effective as of January 1, 1994. This new assessment reduces the real estate
taxes on the racetrack property by approximately $488,000 per year based upon
current tax rates.
The Company announced on March 22, 1994, an offer to purchase The
Meadowlands Sports Complex and Monmouth Park for $1 Billion from the New
Jersey Sports and Exposition Authority. An alternative offer also was made to
purchase Monmouth Park and the Meadowlands Race Track improvements for $125
million and to enter into a long-term lease for the Meadowlands Race Track for
$50 million per year. The offer is subject, among other conditions, to
adoption by the voters of the State of New Jersey of an appropriate
constitutional amendment authorizing casino gaming at the Meadowlands and
Garden State Park racetracks. ITB has acquired options to purchase Atlantic
City Race Course and Freehold Raceway. The option on the Atlantic City Race
Course expires on March 18, 1995, with an additional one year option available
for purchase at that time. The option to purchase Freehold Raceway expires on
December 31, 1994. If these options are exercised, the Company could be
committed for up to an additional $43,000,000 in purchase prices. Assuming
acceptance of the Company's offer, the exercise of both racetrack options and
adoption of the said constitutional amendment, the Company proposes to
construct interactive gaming complexes that combine racing, casino gaming and
entertainment on land presently used to stable and train horses at The
Meadowlands and Garden State Park. The ITB offer proposes that up to 12
casinos be constructed and operated in the current stable area of each
racetrack. Atlantic City's existing operating, licensed casino
owners/operators would be offered the opportunity to own and operate all of
those casinos with the Company being paid rent by the casino operators. The
plan does provide that tracks can operate casinos within racetrack structures.
Monmouth Park and Atlantic City Race Course would serve as the backstretch and
training centers for The Meadowlands and Garden State Park respectively. The
Company also announced the formation of a wholly owned subsidiary,
International Thoroughbred Gaming Development Corporation (ITG), which will be
responsible for implementing the above project.
No assurances can be given that the Company's offer will be accepted or
that the constitutional amendment will be placed on the ballot or adopted.
Furthermore, even assuming such acceptance and adoption, no assurance can be
given that the Company will be able to obtain the required financing.
(B) Financial Information about Industry Segments
The Company is currently engaged in two industry segments. One segment
("Race Track"), includes its racetrack operations at Garden State Park in
Cherry Hill, New Jersey, accounting for approximately 91% of the Company's
total revenue in fiscal 1994. The other segment ("Thoroughbred Horse
Breeding"), accounting for approximately 1% of the Company's total revenue in
fiscal 1994, involves the business of purchasing, owning, breeding and selling
thoroughbred horses and interests in same. (See Note 16 of notes to the
Company's financial statements in PART II, ITEM 8 for financial information
concerning the Company's industry segments.)
(C) Narrative Description of Business
The Company is involved in the operation of Garden State Park racetrack
and in the purchase, ownership, breeding and selling of thoroughbred horses,
and interests in same, and activities incidental thereto. The following
discussion treats the two activities separately.
(1) RACE TRACK SEGMENT
(a) Garden State Park
. Ownership, Location and Property Description
Opened by the Company for racing on April 1, 1985, Garden State Park is
owned and operated by Garden State Race Track, Inc., a wholly owned subsidiary
of the Company. The Company purchased the racetrack site on March 15, 1983,
and through June 30, 1986 completed an extensive reconstruction of the racing
facility as well as the construction of a separate sales pavilion. Garden
State Park is situated on a tract of land (currently approximately 280 acres)
located in Cherry Hill, New Jersey.
The reconstructed grandstand and clubhouse is a 500,000 square foot,
seven level, steel frame, glass enclosed, fully heated and air-conditioned
facility with an adjacent multi-level glass covered thoroughbred paddock area.
The facility can accommodate a total capacity of 24,000, with seating for
approximately 9,500, and has three sit-down restaurants and 17 concession food
stands. The backstretch area includes 27 barns and stables capable of
accommodating approximately 1,500 horses, a harness paddock, a training track,
dormitories, cafeteria and recreation buildings for backstretch personnel, an
administration building, and other service buildings. Reconstruction also
included restoration of the main dirt and turf tracks, installation of
lighting for nighttime racing, paving of parking facilities that accommodate
approximately 11,500 automobiles, landscaping, fencing and other amenities
including furniture, fixtures and equipment.
During fiscal 1986, the Company completed construction of a 56,000
square foot, 1-1/2 story sales pavilion which has a seating capacity of
approximately 1,500. The Company uses the pavilion as a sales arena to conduct
horse auctions, for closed circuit television events (racing as well as other
sporting and non-sporting events), wagering, concerts, special events,
concessions and other conveniences.
. Operations
The Company is required to obtain and intends to annually renew
thoroughbred and harness racing permits issued by the New Jersey Racing
Commission in order to operate the racetrack facility.
RACING DATES - Garden State Park's racing dates are primarily nighttime
racing dates. For the fiscal year ended June 30, 1994, Garden State Park
conducted standardbred racing from September 8, 1993 through December 11, 1993
on a four night per week basis for a total of 55 racing dates. Although
Garden State Park received approval to conduct its 1994 Thoroughbred Meet on a
four night per week basis for 79 nights from January 13, 1994 through May 28,
1994, racing was only conducted for 62 of those nights due to severe weather
conditions that forced the cancellation of 17 scheduled race dates. The
Company has received approval and plans to run a 1994 Harness Meet at Garden
State Park on a four night per week basis. The meet, consisting of 51 racing
dates, is scheduled to run from September 7, 1994 through December 3, 1994.
ATTENDANCE AND HANDLES - The following summarizes average daily
attendance and wagering at Garden State Park and races simulcast to other
racing facilities during the past three fiscal years:
GARDEN STATE PARK
LIVE AND SIMULCASTING TO
DAILY AVERAGES
THOROUGHBRED MEETS 1994 1993 1992
Attendance 3,492 4,234 4,839
Live Handle 248,534 363,499 524,925
Simulcast Sending Signal
New Jersey Tracks 387,670 478,218 755,770
Atlantic City Casinos 39,830 1,038 0
Out-of-State Tracks 607,926 209,642 0
Combined Handles 1,283,960 1,052,397 1,280,695
Number of Live Race Days 62 74 98
DAILY AVERAGES
HARNESS MEETS 1993 1992 1991
Attendance 2,674 3,330 3,799
Live Handle 237,558 303,908 363,045
Simulcast Sending Signal
New Jersey Tracks 550,057 501,853 592,158
Atlantic City Casinos 33,228 0 0
Out-of-State Tracks 367,498 164,547 0
Combined Handles 1,188,340 970,308 955,203
Number of Live Race Days 55 53 55
SIMULCASTING - Simulcasting is the transmission of live horse racing by
television signal from one racetrack to another with pari-mutuel wagering
being conducted at the receiving track and a portion of the commission on the
handle being shared with the sending track. To date, the simulcasting
arrangements entered into by Garden State Park require the receiving track to
remit a percentage of the pari-mutuel handle at such track to the sending
track as commission. In addition, a portion of the handle at the receiving
track is remitted to the sending track in New Jersey to be used for purses. An
additional portion of the handle received at Garden State Park is also
required to be used for purses in the current live race meeting, or at the
next live race meeting conducted at the receiving track if none is in progress
at the time of simulcasting.
The following summarizes average handles experienced by Garden State
Park in connection with receiving simulcasts during the past three fiscal
years:
GARDEN STATE PARK
SIMULCASTING RECEIVED
AVERAGES DAILY SIMULCAST
# of # of # of
From Tracks: days 1994 days 1993 days 1992
New Jersey Tracks:
Atlantic City(T) 70 99,851 72 167,165 57 227,139
Freehold (S) 211 41,510 218 58,278 210 79,767
Meadowlands (T,S) 240 127,036 247 197,922 273 216,658
Monmouth (T) 72 105,056 73 162,107 73 204,891
Out-of-State (T,S) 362 233,320 348 168,133 0 0
TOTAL RECEIVING
HANDLE 362 138,262,608 348 143,825,377 307 103,802,515
(T)=Thoroughbred, (S)=Standardbred
PARI-MUTUEL POOL CONTRIBUTIONS - The Company is required to contribute
to the State of New Jersey's breeder award program. Until January 1, 1994
when the contribution requirement was effectively repealed, Garden State Park
was required by New Jersey State law to remit 1/2 of 1% of all pari-mutuel
pools annually to the State's General Fund. Pursuant to recently enacted
legislation, Garden State Park is required to increase its required
contributions to the State of New Jersey's horsemen and breeder award programs
by approximately one half of the savings in the elimination of the General
Fund requirement. The resulting net savings to Garden State Park was
approximately $143,000 for the current fiscal year.
. Loans and Existing Contracts
In November, 1983, Garden State granted the exclusive right to operate
all food and retail services and to sell or rent all food products and
merchandise sold or rented at the racetrack facility to Servomation
Corporation, which company has since become Service America Corporation
("Service America"), an unaffiliated third party experienced in the business,
with principal offices in Stamford, Connecticut. The term of the agreement is
for the 15 year period commencing on opening day of the racetrack. Service
America agreed to invest $7,000,000 in the concession premises at the
racetrack facility. The investment is being depreciated on a straight line
basis over the term of the agreement, with Garden State paying Service America
an amount equal to the undepreciated balance (if any) upon termination and
thereby acquiring title to the improvements. As of June 30, 1994, the
undepreciated balance is approximately $2,700,000. The agreement contains a
schedule of varying percentages of adjusted gross sales of beverages, food and
other items which Service America is required to pay as concession fees to
Garden State on a monthly basis. In addition, Service America pays the Company
a percentage of net profits on the Garden State Park Phoenix Restaurant's
operations. Garden State Park is responsible for any net operating losses of
the restaurant. Service America has obtained a license to permit the sale of
alcoholic beverages at the racetrack. Garden State has a right of first
refusal to purchase same at the expiration of the agreement subject to
regulatory approval.
An agreement was signed in May, 1993, whereby the Company agreed to
permit the annual New Jersey State Fair to be held at Garden State Park for a
mutually determined number of days in July and/or August, until 1997 in
consideration of a percentage of the receipts from admissions, concessions,
parking and other amenities received by the operator of the Fair. Provisions
in the contract allow that either party could terminate the agreement with
notice, in certain circumstances. The Fair was held at Garden State Park in
1993 and 1994.
Garden State Park has a number of contractual arrangements including a
contract with American Totalisator Co., Inc. for the leasing of a parimutuel
system. Some of the other larger contracts with other entities are for video
equipment and manpower, and program printing. The Company regards these
contracts as typical for the industry.
(c) Segment Issues
. Competition
Garden State Park which is located in Cherry Hill, New Jersey faces
direct competition from year-round daytime thoroughbred racing at Philadelphia
Park in Bucks County, Pennsylvania as well as three off-track betting parlors
in the Philadelphia area operated by Philadelphia Park. (Up to three more
off-track betting parlors in the Philadelphia area may be opened by
Philadelphia Park. Whether these will be in competitive locations is unknown
at this time.) Garden State Park also faces competition from Atlantic City
Race Course (summer night thoroughbred racing); Freehold Raceway in Freehold,
New Jersey (day harness racing); and Delaware Park near Wilmington, Delaware
(day thoroughbred racing). Garden State Park also faces competition from
Monmouth Park and The Meadowlands although these tracks lie greater distances
from Garden State Park. Garden State Park simulcasts certain or all of its
racing to and receives simulcasting of certain or all of their racing from all
of the above racetracks. A state law enacted in 1992 permitting Garden State
Park, other New Jersey racetracks and the Atlantic City Casinos to receive
entire race cards from out-of-state tracks may have had and may in the future
have the effect of increasing the competition Garden State Park faces in the
state of New Jersey. Off-track wagering and full card simulcasting commenced
in the state of Maryland in April, 1993 and full card simulcasting commenced
in the state of Pennsylvania in May, 1993. This may have had and may in the
future have the effect of increasing the competition Garden State Park faces
from off-track betting parlors in the nearby Mid-Atlantic area. Competition
from off-track betting, casino gambling (in Atlantic City), various state
lotteries and other forms of gambling and entertainment including professional
and collegiate sporting events may also have had and may in the future have a
material adverse effect on racetrack attendance, wagering and thus
profitability at Garden State Park. From time to time, legislation has been
introduced in New Jersey and neighboring states which would further expand
gambling opportunities. Approval of such legislation could increase
competition for the Company in the future.
. Racing Industry
The Company's racetrack operations and the market for the Company's
thoroughbred horses is dependent upon continued governmental acceptance of
racing as a form of legalized gambling. As a form of gambling, racing could be
subjected at any time to restrictive regulation or banned entirely, although
in the opinion of management of the Company, the introduction and expansion of
off-track betting and/or pari-mutuel wagering in various jurisdictions in
recent years would tend to indicate that racing is gaining even greater
governmental acceptance and dependence as a source of revenue.
. Insurance Coverage
After experiencing, together with others in the racetrack industry,
several years of difficulty in obtaining various types of insurance, effective
August 10, 1987 the Company began to secure general liability insurance on its
racetrack subsidiaries through T.R.A. Insurance Company, Ltd. ("T.R.A."), a
Bermuda-based captive company which is primarily owned by racetracks that are
members of Thoroughbred Racing Associations of North America, Inc., the trade
association of thoroughbred racetracks which the Company's track subsidiary
has been a member of since its inception. Participation in the T.R.A.
insurance program required a capital investment by the Company of
approximately $165,000. During this fiscal year, the T.R.A. insurance program
ceased writing new insurance and the Company's investment was written off.
The Company has currently contracted through an insurance broker general
liability insurance, excess liability insurance, athletic participants
coverage, workers compensation, automobile damage and garagekeepers liability
insurance.
. Dependency on a Single Customer
During fiscal 1994, no single customer or group of customers accounted
for ten percent or more of the racetrack segment's revenues.
(2) THOROUGHBRED HORSE BREEDING SEGMENT
(a) Purchase of Horses
At June 30, 1994, the Company owned two thoroughbred broodmares, four
stallion shares in four thoroughbred stallions, various seasons, one yearling,
one other horse and a two thirds interest in one other horse. The net book
value of the livestock at June 30, 1994 was approximately $61,000.
(b) Breeding
As of the end of the current breeding season, one of the Company's two
broodmares was in foal and expected to deliver in 1995.
(c) Sale of Horses
The Company's thoroughbred horse breeding segment receives the bulk of
its revenues from sales of young horses (usually as yearlings or weanlings)
foaled from its broodmares, although some of such horses may be retained for
breeding purposes. The Company's stallion shares are generally owned pursuant
to agreements which prohibit sale without offering other owners of shares in
the stallion the right of first refusal; however, there is no such restriction
against the Company's sale or assignment of seasons in a stallion.
Generally, the Company believes it could sell most of its horses within
a year. In recent years, revenues and earnings from its breeding operation
have tended to be greater in the earlier part of the fiscal year than in the
later quarters. Most revenues from the sale of yearlings have come in the
first fiscal quarter, most revenues from the sale of weanlings and breeding
stock in the second fiscal quarter, and most revenues from the sale of
stallion seasons in the second and third fiscal quarters. In the fourth fiscal
quarter, which is the high point of the breeding season, there is very little
industry selling activity and in recent years, nominal sales revenues to the
Company. Most expenses, including depreciation, board and insurance, are
incurred evenly through the year.
The Company has entered into foal sharing agreements with regard to
thoroughbred horses with third parties including affiliated parties to the
extent such agreements do not conflict with the Company's operations.
(d) Insurance
The Company's wholly owned subsidiary, Olde English Equine Insurance
Agency, Inc., which was acquired in 1981, conducted a general insurance agency
business specializing in placing equine insurance until it assigned its
accounts to a third party insurance agency, Keystone National Insurance of
Cherry Hill, N.J. effective April 20, 1989. The Company currently receives 50%
of all commission earned on these accounts by Keystone. Currently this revenue
is immaterial.
(e) Maintenance, Fees and Other Expenses
The Company's horses are boarded at farms owned by others where breeding
and foaling takes place. Board includes housing, pasture, feed and
supervision. The average charge for maintaining a horse currently ranges from
$12 to $20 per day. At June 30, 1994, the Company was boarding its horses at
various locations in the United States and Europe. In addition, the Company
pays its own stud fees, insurance premiums, transportation costs, agents'
commissions, blacksmith and veterinary fees.
As a result of the Company's continuing bloodstock reduction program,
the reduced value of the current bloodstock does not warrant purchasing
insurance coverage at this time. Any of the Company's insurance coverage may
be altered from time to time at management's discretion.
(f) Conflicts of Interest
Actual or potential conflicts of interest exist between the Company on
the one hand and certain of its officers, directors and principal
stockholders.
Robert E. Brennan, Chairman of the Board, Chief Executive Officer, and a
principal stockholder of the Company, through Due Process Stables, Inc. ("Due
Process") which he owns together with members of his immediate family,
presently owns racehorses as well as various broodmares, the bulk of which
were purchased at auction, and several stallion shares purchased at auction
and privately, and may continue to purchase and sell racehorses, broodmares
and stallion shares. Mr. Brennan has agreed while a holder of record or
beneficially of at least 10% of the Company's outstanding Common Stock or
securities convertible into 10% of the Common Stock, to give the Company a
right of first refusal in connection with any private purchase by him of any
broodmares, stallion shares and stallion seasons and any private sale of any
broodmare or any thoroughbred racehorse he owns after it has become a breeding
animal. Mr. Brennan's racehorses have in the past, and may in the future, race
for purses offered at the Company's racetrack.
The Company has entered into various transactions with Due Process, Mr.
Brennan and his affiliates. Determination whether to enter into any such
transactions or whether to exercise any right of first refusal has in the
past, and in the future shall, in each case be made for the Company by Kerry
B. Fitzpatrick, (a Director of the Company) after consultation, where
appropriate, with the Company's research sources and after taking into
account, where appropriate, industry practice regarding commissions, available
broodmares, stallion shares and stallion seasons, bloodlines (genealogical)
analysis and where available, published prices for interests offered to be
purchased or sold. Approval of the Company's independent directors is also
obtained on all such transactions.
Situations may occur where the Company and Mr. Brennan or one of his
respective ventures may be competing to purchase or sell horses in the same
place at the same time. While such activities would primarily take place at
public auctions, there can be no assurance that conflicts of interest will not
arise.
Robert J. Quigley, a Director and formerly President of the Company and
President of Garden State Race Track, Inc., until his resignation in July
1992, has a partnership interest in one horse of racing age, one yearling, one
weanling and one broodmare. Horses in which Mr. Quigley has an interest have
in the past and may in the future race for purses offered at the Company's
racetrack.
Kerry B. Fitzpatrick, a Director and formerly Chief Executive Officer of
the Company, has agreed while affiliated with the Company not to purchase any
broodmares for his own account and to give the Company a right of first
refusal with respect to any private purchase by him of any stallion shares and
stallion seasons. Mr. Fitzpatrick has agreed to give the Company a right of
first refusal in connection with any private sale of any thoroughbred
racehorse he may own after it has become a breeding animal. Horses in which
Mr. Fitzpatrick has an interest have in the past and may in the future race
for purses offered at the Company's racetracks. Mr. Fitzpatrick currently does
not own any breeding or racing stock.
(g) Competition
The Company is an insignificant factor in the breeding and selling of
thoroughbred horses. There are several thoroughbred horse breeding farms and
entities both in the United States and overseas which have been in business
for many years and have substantially greater financial resources than the
Company. Since horse markets are international, and since auctions where the
Company has bought the bulk of its broodmares, stallions and interests therein
are internationally advertised, the Company competes in its transactions
involving thoroughbreds and interests therein with most, if not all, of the
major horse breeders in the United States and overseas.
(h) Dependence on a Single Customer
During fiscal 1994, no single customer or group of customers accounted
for a material portion of revenue to the Company.
(3) Research and Development
The Company does not spend material amounts on research and development
activities.
(4) Employees and Consultants
The Company directly employs approximately 530 persons during the
thoroughbred meet and 470 during the harness meet in connection with the
operation of Garden State Park. Personnel include pari-mutuel machine tellers,
security personnel, admissions, cleaning, maintenance, and parking personnel,
most of whom are presently represented by unions with which the Company has
entered into contracts. Non-union racing department officials and starters are
also employed during each meet.
In addition, the track employs approximately 63 persons on a full time
basis. This personnel provides information, media, marketing, executive,
administrative and clerical services and support for the track.
At June 30, 1994, the Company employed 7 full-time corporate executive,
administrative, and clerical personnel. The Company may also engage
consultants from time to time to provide advisory services.
ITEM 2 - PROPERTIES
The Company was under a lease obligation for office space on a portion
of one floor of a two-story office and commercial building at 525 Highway 33
East, Englishtown, New Jersey. This space was formerly used as its executive
and administrative offices. Following the relocation of the Company's
executive staff to the Garden State Park property, the Company entered into a
sub-lease arrangement with an unaffiliated party for a portion of the space
which provided $725 of income per month. The three year lease expired January
31, 1994.
The Company owns a condominium unit and ownership interest in the Ocala
Jockey Club in Reddick, Florida. The Ocala Jockey Club allows owners to board
and train horses at markedly reduced rates.
See PART I, ITEM 1, (C) "Narrative Description of Business" as to the
Company's Garden State Park properties.
ITEM 3 - LEGAL PROCEEDINGS
The Company, certain of its present and former directors, and certain
other parties including the Underwriter of the Company's four public offerings
from 1983 through 1986 (a broker-dealer firm owned by the Company's Chairman
of the Board and principal stockholder), were the defendants in two putative
class actions filed in August, 1986 and July, 1987 in the United States
District Court for the Southern District of New York. The complaint filed in
August, 1986 was also asserted derivatively against all defendants except the
Company. The essential allegations of the complaints in the two actions were
that the Company's prospectuses utilized in connection with the Company's said
four public offerings violated the federal securities laws by containing false
and misleading information and omitting to disclose other material
information, and that the defendants were liable therefor. The actions sought
judgements in amounts equal to approximately $200,000,000 representing the
gross proceeds of the Company's said four public offerings, as well as
punitive damages against all defendants and treble damages and attorneys' fees
against all defendants other than the Company. In fiscal 1988, the U.S.
District Court transferred both cases from the Southern District of New York
to the District of New Jersey. On June 7, 1988, a consolidated amended
complaint was filed by the plaintiffs in the two putative "class action" suits
described above, in the United States District Court in Trenton. This
complaint was substantially similar to the original suits filed separately
except to expand the number of current and former directors as defendants. On
July 27, 1989, based upon motions filed by the Company, the United States
District Court, District of New Jersey, dismissed some, but not all of the
claims asserted in the consolidated amended complaint.
The factual allegations underlying the remaining claims are that the
prospectuses issued in the Company's 1984, 1985 and 1986 public offerings
failed to disclose that (a) the profitability of Garden State, and by
extension, ITB, was directly dependent upon Garden State's betting handle and
attendance; (b) that Garden State's ability to attract customers and betting
dollars was limited by the demographics of the population of the Delaware
Valley area in which it was based; (c) that the reasonable market potential
for Garden State's attendance and betting handle were delimited by the
attendance and betting handle of the previous Garden State Park racetrack
("Old Garden State"); (d) that there is a direct ratio between the number of
days in a racing meet and the daily attendance and betting handle, i.e., the
longer the meet, the smaller the average daily attendance and betting handle;
(e) that based upon its costs of acquisition and construction, in order for
Garden State to "break even" on an operating basis, it needed an average on
track daily betting handle of at least $1.7 million based on a racing meet of
approximately 100 days; (f) that the Old Garden State had not achieved a $1.7
million average daily betting handle since 1971 when the racing meet was only
60 days; that the $1.7 million level was attained prior to the competition
from the casinos in nearby Atlantic City; that the Old Garden State's average
daily betting handle in 1977, its last year of operation, was less than $1.2
million; and that the average daily betting handle for the Old Garden State's
last five years of operation was $1.347 million; (g) that Garden State's
revenues would in large part be derived from harness racing meets which had
never been held at the Old Garden State; and (h) that both thoroughbred and
harness racing were experiencing steep declines in attendance and betting
handle both nationally and regionally over the years.
On October 20, 1993, the United States District Court for the District
of New Jersey signed an order granting preliminary approval to a proposed
partial settlement of the consolidated class action pending since 1986 against
the Company, its officers and directors and various other defendants alleging
various violations of federal securities laws and other statutes. Although
the Company believes this lawsuit is totally without merit, it has incurred
approximately $1,150,000 in legal expense in defending against the lawsuit and
would have been required to expend significant additional amounts to continue
the defense through trial. Therefore in order to avoid further expense,
inconvenience and delay and to dispose of this expensive, burdensome and
protracted litigation, the Company executed the proposed partial Settlement
Agreement. The proposed partial settlement required the Company to make a
$250,000 settlement payment and an additional payment of up to $150,000
contingent upon receipt of future amounts by the Company from its sale of the
Philadelphia Park mortgage note. If effectuated, the settlement would dispose
of all class claims made against the Company, its officers and directors and
all derivative claims made on behalf of the Company against all parties in the
litigation. As part of the proposed settlement, the Company's directors and
officers' liability insurance carrier will pay $3,125,000 plus an additional
$4,125,000 which latter amount is subject to reduction on a dollar for dollar
basis in the event of collections from certain non-settling defendants or in
the event of collection of any of the above described $150,000 contingency
payment. On April 12, 1994, an order was entered approving the settlement
agreement and entering a final judgement of dismissal of the plaintiffs
claims against the Company and the Director defendants in their capacity as
officers and directors of the Company.
Certain non-settling defendants have appealed to the order approving the
settlement. In the event the settlement is upset on appeal, the Company
intends to continue to vigorously contest this lawsuit.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted by the Company to a vote of its security
holders during the quarter ended June 30, 1994.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
(A) Market Information
The Company's Common Stock has been traded on the American Stock
Exchange since April 4, 1985, under the symbol "ITB". The following table
indicates the high and low sales prices for such stock on the American Stock
Exchange on a quarterly basis for the two years ended June 30, 1994, based
upon information supplied by the American Stock Exchange.
AMERICAN STOCK EXCHANGE
Sales Price
Quarter Ended: High Low
September 30, 1992 4.00 1.88
December 31, 1992 3.63 2.25
March 31, 1993 6.00 2.63
June 30, 1993 5.88 4.00
September 30, 1993 5.75 4.00
December 31, 1993 5.88 4.50
March 31, 1994 8.25 4.75
June 30, 1994 7.25 4.88
(B) Holders
As of June 30, 1994, the number of record holders of the Company's
Common Stock was 34,847.
(C) Dividends
The Company has not paid any dividends on its Common Stock since its
inception. Anticipated capital requirements of the Company make it unlikely
that any dividends will be declared in the foreseeable future on the Company's
Common Stock. Furthermore, 25% of "net racetrack earnings" (as defined in Note
15 of the Company's financial statements, Item 8) from the Company's Garden
State Park racetrack facility are required to be paid by the Company in
dividends on its Series A Convertible Preferred Stock and thus would not be
available for payment as dividends on the Common Stock.
Item 6 - SELECTED FINANCIAL DATA
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
Years Ended June 30,
1994 1993
Revenue from Operations $ 37,334,236 $ 38,478,067
Investment Income Revenue 3,343,274 3,394,805
Total Revenue $ 40,677,510 $ 41,872,872
Income(Loss) from Continuing Operations $ 2,500,596 $ (3,543,567)
Net Income (Loss) $ 2,500,596 $ (29,410,166)
Net Income (Loss) from Continuing
Operations per Common Share $ 0.26 $ (0.40)
Working Capital (Deficiency) $ 16,757,837 $ 14,128,362
Total Assets $ 74,433,411 $ 72,263,542
Short Term Debt $ 40,000 $ 35,418
Long-Term Debt $ -0- $ 50,000
Shareholders' Equity $ 69,807,985 $ 67,307,389
Cash Dividends Per Share $ -0- $ -0-
Weighted Average Number of Shares 9,547,900 8,950,025
Common Shares Outstanding 9,551,255 9,511,415
(1) Total Assets and Shareholders' Equity for June 30, 1993 reflect the
effects of the quasi-reorganization. The 1994 statement of operations
is not comparable to prior years. (See Note 3 of notes to the Campany's
financial statements in PART II, ITEM 8.)
(2) The rights offering in August, 1992 materially affects the comparability
of the loss per share data.
(3) The weighted average number of shares, the per share data and the common
shares outstanding have been restated for all periods to reflect the
one-for-twenty reverse stock split effected on March 13, 1992.
(4) One of the Company's two racetracks was sold in the fiscal year ended
June 30, 1991 which materially affects the comparability of a portion
of the information reflected in the above data.
Item 6 - SELECTED FINANCIAL DATA
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
Years Ended June 30,
1992 1991 1990
Revenue from Operations $ 39,505,622 $ 67,657,622 $ 91,566,947
Investment Income Revenue 5,610,502 3,725,168 561,249
Total Revenue $ 45,116,124 $ 71,382,790 $ 92,128,196
Income(Loss) from Continuing Operations $ (7,266,183)$ (10,977,558)$ (12,799,513)
Net Income (Loss) $ (6,466,152)$ 4,288,480 $ (8,505,695)
Net Income (Loss) from Continuing
Operations per Common Share $ (1.49)$ (2.16)$ (2.63)
Working Capital (Deficiency) $ (2,098,249)$ 2,434,656 $ (12,717,003)
Total Assets $ 204,235,883 $ 211,083,683 $ 226,607,291
Short Term Debt $ 2,900,896 $ 3,883,608 $ 20,732,305
Long-Term Debt $ 24,885,264 $ 24,920,282 $ 22,565,953
Shareholders' Equity $ 171,203,740 $ 177,669,892 $ 173,381,412
Cash Dividends Per Share $ -0- $ -0- $ -0-
Weighted Average Number of Shares 4,868,001 5,090,256 4,867,220
Common Shares Outstanding 4,869,046 4,867,507 4,867,370
(1) Total Assets and Shareholders' Equity for June 30, 1993 reflect the
effects of the quasi-reorganization. The 1994 statement of operations
is not comparable to prior years. (See Note 3 of notes to the Campany's
financial statements in PART II, ITEM 8.)
(2) The rights offering in August, 1992 materially affects the comparability
of the loss per share data.
(3) The weighted average number of shares, the per share data and the common
shares outstanding have been restated for all periods to reflect the
one-for-twenty reverse stock split effected on March 13, 1992.
(4) One of the Company's two racetracks was sold in the fiscal year ended
June 30, 1991 which materially affects the comparability of a portion
of the information reflected in the above data.
ITEM 7 - MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
FISCAL YEAR 1994 VS. FISCAL YEAR 1993
(A) Liquidity and Capital Resources
The Company's working capital, on a consolidated basis, as of June 30,
1994, was $16,757,857. The Company's working capital position increased
$2,629,475 for this fiscal year as compared to the fiscal year ended June 30,
1993 primarily as a result of a positive cash flow from operations and gains
realized from trading securities. The Company is committed to a minimum of
$550,000 in expenses related to the pursuit of expanding casino development
under the direction of the newly created International Thoroughbred Gaming
Development Corporation subsidiary.
(1) Racetrack Segment
The working capital of the racetrack segment increased $708,616,
before interest due to the parent, as a primary result of earnings for the
year. The Company is committed to spending approximately $330,000 in
connection to the development of the 56 acre parcel of racetrack property as a
retail shopping center.
(2) Thoroughbred Horse Breeding Segment
At June 30, 1994, the Company owned two thoroughbred broodmares, four
stallion shares in four thoroughbred stallions, one season, one yearling, one
other horse and a two thirds interest in one other horse.
The sale of a broodmare or stallion share, reduces the producing assets
of the Company and would have an effect on future earnings; the sale of foals
would not. During fiscal 1993 and 1994, the Company continued a reduction of
its bloodstock holdings begun during fiscal 1986 in response to what
management believed to be a long term downturn in the bloodstock market and
the continuing need to raise cash for the operating requirements of the
racetracks. The Company plans to continue its bloodstock reduction program in
fiscal 1995.
(B) Operations
During the year ended June 30, 1994, the Company realized after tax
income of $2,500,596 in comparison to a loss after taxes in the prior fiscal
year of $29,410,166. The change from a significant net loss to net income is
primarily the result of: 1) a significant decrease in depreciation expense as
a result of the quasi-reorganization at June 30, 1993; 2) reduced interest
expense as a result of the extinguishment of the debt on the Garden State Park
racetrack; 3) operating profits before interest due parent generated by Garden
State Park and operating profits generated by the breeding segment. Total
revenues decreased by approximately 3% from $41,872,872 in fiscal 1993 to
$40,667,510 in fiscal 1994 primarily as a net result of increased revenues
generated by Garden State Park during the first half of the fiscal year
reduced by a decrease in revenues generated by Garden State Park during the
second half of fiscal 1994. Total expenses decreased $7,239,524 or 16% from
$45,416,439 in fiscal 1993 to $38,176,915 in fiscal 1994 primarily as a result
of decreased depreciation and interest expense as discussed above.
During the year ended June 30, 1994, the Company realized investment
income of $3,343,274. This represents a decrease of $51,531 from the 1993
investment income of $3,394,805. The decrease is primarily the net result of
the elimination of mortgage interest as a result of the sale of the mortgage
note held on Philadelphia Park and the increase in short term investment gains
realized from trading securities. (See Note 7 of the accompanying financial
statements.)
(1) Racetrack Segment
During the year ended June 30, 1994, the racetrack segment realized
income of $818,718 before taxes as compared to a loss of $2,451,790 before
taxes for the prior fiscal year. For purposes of segment discussion, interest
expense of $628,068 for the prior fiscal year associated primarily with the
mortgage on the racetrack is recognized as a corporate expense, not that of
the racetrack segment.
During the current fiscal year (July 1, 1993 to June 30, 1994) Garden
State Park ran its ninth standardbred (harness) meet from September 8, 1993
through December 11, 1993 (55 dates) and its tenth thoroughbred meet from
January 13, 1994 through May 28, 1994 (62 dates). During these race meetings,
Garden State Park simulcasts its live racing to out-of-state racetracks in
addition to other racetracks in New Jersey. Simulcasting of the live race
meetings into certain Atlantic City casinos was also conducted during the
year. Simulcasting into the racetrack from out-of-state racetracks and New
Jersey racetracks continues throughout the fiscal year.
During the fiscal year ended June 30, 1994, Garden State Park realized
operating income of $818,718 before interest and income taxes compared to a
loss during the fiscal year ended June 30, 1993 of $4,184,421. The change
from operating losses to operating income for the racetrack primarily reflect
the effect of the quasi-reorganization which significantly reduced
depreciation expense by approximately $5,000,000. Operating expenses
decreased $1,260,597 or 5% primarily as a result of a reduction in the cost of
outside service contracts. General and administrative expenses were reduced
by $782,604 or 18% primarily as a result of a cost reduction program in effect
for the year.
The 1993 (fiscal 1994) Harness Meet (55 days) resulted in operating
income of approximately $1,146,000, compared with the 1992 Harness Meet's (53
days) operating losses of approximately $951,000. The change primarily
reflects the significant decrease in depreciation expense as discussed above.
In addition, the racetrack experienced decreases in the average daily
attendance and handle which reduced revenues generated by live racing offset
by increased revenues generated by the simulcasting out of these races to New
Jersey and out-of-state racetracks and the Atlantic City casinos. Daily
on-track attendance and wagering at the track's 1993 Harness Meet, averaged
2,674 and $237,558, respectively, as compared to 3,330 and $303,908,
respectively, during the 1992 Harness Meet.
Although Garden State Park received approval to conduct its 1994
Thoroughbred Meet on a four night per week basis for 79 nights from January
13, 1994 through May 28, 1994, racing was only conducted for 62 of those
nights due to severe weather conditions that forced the cancellation of 17 of
those scheduled race dates. The 1994 Thoroughbred Meet (62 days) had an
operating loss of approximately $360,000 compared to the 1993 Thoroughbred
Meet (74 days), which had an operating loss of approximately $1,272,000. This
decrease in operating losses also primarily reflects the significantly reduced
depreciation expense as discussed above. Daily on-track attendance and
wagering at Garden State Park's 1994 Thoroughbred Meet averaged 3,492 and
$248,534, respectively. During the 1993 Thoroughbred Meet, attendance and
on-track wagering averaged 4,234 and $363,499, respectively.
During the fiscal year ended June 30, 1994 the track realized income of
approximately $35,000 during the non-racing periods between meets as compared
to a loss of approximately $1,961,000 in the prior fiscal year. The change
was primarily due to the significantly decreased depreciation expense during
this fiscal year as compared to last.
Simulcasting, both to and from other New Jersey racetracks as well as
out-of-state racetracks and casinos, accounted for approximately 75% of
revenue at Garden State Park during fiscal 1994 and 1993.
(2) Thoroughbred Horse Breeding Operations
Revenues and expenses from breeding operations for the current fiscal
year ended June 30, 1994 were approximately 1% of total revenues and expenses
of the Company for the period.
Revenues from breeding operations for the fiscal years ended June 30,
1994 and 1993 were $573,323 and $273,499, respectively, representing an
increase of $299,824 primarily of the increased value of the breeding stock
sold during comparable periods.
As a result of the Company having a lower cost basis in the breeding
stock sold during the 1994 fiscal year as compared to fiscal 1993, the cost of
revenues generated by the breeding segment in the current fiscal year was
$166,649, representing a $130,229 or 44% decrease in comparison to last fiscal
year. Operating and depreciation expenses for the current fiscal year were
$167,370 representing a $162,034 or 49% decrease from the prior fiscal year
due to the number of animals owned during the periods being significantly
reduced.
The breeding segment realized income before taxes of $171,336 as
compared to a loss before taxes of $429,697 for the prior fiscal year,
primarily reflecting the increase in revenues and decrease in expenses during
fiscal 1994 as discussed above.
FISCAL YEAR 1993 VS. FISCAL YEAR 1992
(A) Liquidity and Capital Resources
Insofar as the racetrack subsidiary is dependent upon the parent company
for capital resources, the discussion of liquidity and capital resources with
respect to the racetrack segment is presented on a consolidated rather than a
segmented basis.
(1) Racetrack Segment
The Company's working capital as of June 30, 1993, was $14,128,362. A
rights offering in August of 1992 provided the Company with approximately
$9,000,000 for working capital. As a result of selling the Philadelphia Park
mortgage in January of 1993 for $27,000,000 in cash and non-cumulative
contingent payments which may be paid to the Company, the Company was able to
pay $21,600,000 to satisfy, in full, the existing notes and mortgage on Garden
State Park. The Company's working capital position increased $16,226,611 for
this fiscal year as compared to the fiscal year ended June 30, 1992 primarily
as a net result of these three events. The Company had no material commitments
for capital expenditures as of June 30, 1993.
(2) Thoroughbred Horse Breeding Segment
At June 30, 1993, the Company owned seven thoroughbred broodmares, eight
stallion shares in seven thoroughbred stallions, various seasons, three foals,
six yearlings, one other horse, and a two thirds interest in one other horse.
The sale of a broodmare or stallion share, reduces the producing assets
of the Company and would have an effect on future earnings; the sale of foals
would not. During fiscal 1992 and 1993, the Company continued a reduction of
its bloodstock holdings begun during fiscal 1986 in response to what
management believed to be a long term downturn in the bloodstock market and
the continuing need to raise cash for the operating requirements of the
racetracks. The Company continued its bloodstock reduction program in fiscal
1994.
(B) Operations
During the year ended June 30, 1993, the Company incurred after
depreciation and taxes a loss of $29,410,166 in comparison to a loss after
depreciation and taxes in the prior fiscal year of $6,466,152 primarily as a
result of: (1) the sale of the Philadelphia Park mortgage which produced a net
non-operating loss of $27,599,230; (2) reduced interest income as a result of
the sale of the mortgage; and (3) although cash flow was positive, the high
cost of depreciation resulted in continued losses at Garden State Park which
was offset by a $1,732,631 extraordinary gain. Total revenues decreased by
approximately 7% from $45,116,124 in fiscal 1992 to $41,872,872 in fiscal 1993
primarily as a result of reduced investment interest income as a result of the
sale of the Philadelphia Park mortgage. Operating losses decreased 51% or
$3,682,616 from $7,266,183 in fiscal 1992 to $3,543,567 in fiscal 1993. The
decrease in operating losses primarily reflect the net effect of: (1)
significantly decreased operating losses generated by the racetrack segment in
fiscal 1993; (2) the net effect of decreased revenues and expenses generated
by the breeding segment during comparable periods in fiscal 1993 and 1992;
offset by (3) decreased interest income as a result of the sale of the
Philadelphia Park mortgage.
During the year ended June 30, 1993, the Company realized investment
income of $3,394,805. This represents a decrease of $2,215,697 from the 1992
interest income of $5,610,502 and is primarily the result of decreased
interest income as a result of the sale of the Philadelphia Park mortgage.
(1) Racetrack Segment
During the year ended June 30, 1993, the racetrack segment lost
$2,451,790 before taxes as compared to a loss of $8,261,681 before taxes for
the prior fiscal year. For purposes of segment discussion, interest expense of
$628,068 for the 1993 fiscal year and $1,679,748 for the prior fiscal year
associated primarily with the mortgage on the racetrack is recognized as a
corporate expense, not that of the racetrack segment.
. Garden State Park
During the 1993 fiscal year (July 1, 1992 to June 30, 1993) Garden State
Park ran its eighth standardbred (harness) meet from September 9, 1992 through
December 12, 1992 (53 dates) and its ninth thoroughbred meet from January 15,
1993 through May 29, 1993 (74 dates). Garden State Park also sent and received
simulcasting (live racing telecasts) from out-of-state racetracks in addition
to other racetracks in New Jersey during its live race meetings. Simulcasting
into the racetrack from out-of-state racetracks and New Jersey racetracks
continued throughout the non-racing periods in the 1993 fiscal year.
During the fiscal year ended June 30, 1993, Garden State Park incurred
an operating loss of $4,184,421 before interest and income taxes compared to a
loss during the fiscal year ended June 30, 1992 of $9,061,713 primarily
reflecting significantly decreased losses incurred during the year primarily
as a result of the net effect of: (1) increased revenues generated by the
addition of full card out-of-state simulcasting into the racetrack made
possible by a new law which became effective in the first quarter of the
fiscal year; (2) decreased revenues generated as a result of the reduced
number of live racing days during the Harness and Thoroughbred meets; and (3)
an overall reduction in expenses.
The 1992 (fiscal 1993) Harness Meet (53 days) resulted in operating
losses of approximately $951,000, compared with the 1991 Harness Meet's (55
days) operating losses of approximately $1,857,000. The decrease in operating
losses primarily reflect decreases in the average daily attendance and handle
offset by increased revenues generated by the addition of the full card
simulcasting as discussed above. Daily on-track attendance and wagering at the
track's 1992 Harness Meet, averaged 3,330 and $303,908, respectively, as
compared to 3,799 and $363,045, respectively, during the 1991 Harness Meet.
The 1993 Thoroughbred Meet (74 days) had an operating loss of
approximately $1,272,000 compared to the 1992 Thoroughbred Meet (98 days),
which had an operating loss of approximately $4,259,000. The decrease in
operating losses primarily reflects the net effect of a decrease of 24 days in
the number of live racing days in fiscal 1993 as compared to live racing days
in fiscal 1992 offset by increased revenues generated by the addition of full
card simulcasting as discussed above. Daily on-track attendance and wagering
at Garden State Park's 1993 Thoroughbred Meet averaged 4,234 and $363,499,
respectively. During the 1992 Thoroughbred Meet, attendance and on-track
wagering averaged 4,839 and $524,925, respectively.
During the fiscal year ended June 30, 1993 the track continued to
sustain operating losses during the non-racing periods between meets. Such
losses were reduced in fiscal 1993 to approximately $1,961,000 as compared to
$2,943,000 in fiscal 1992.
Simulcasting, both to and from other New Jersey racetracks as well as
out-of-state racetracks, accounted for approximately 75% of revenue at Garden
State Park during fiscal 1993 as compared to 53% for fiscal 1992. Net proceeds
to Garden State Park from simulcasting revenue after direct expenses average
3% to 4% of handle. In addition, the track keeps approximately 50% of the
purse money generated from this wagering to help to offset purse expenses paid
to horsemen.
(2) Thoroughbred Horse Breeding Operations
Revenues and expenses from breeding operations for the fiscal year ended
June 30, 1993 were approximately 1% and 2% of total revenues and expenses,
respectively, of the Company for the period.
Revenues from breeding operations for the fiscal years ended June 30,
1993 and 1992 were $273,499 and $815,725, respectively, representing a
decrease of $542,226 or 67% primarily of the breeding stock available for sale
and sold during comparable periods being significantly reduced in value as a
result of the Company's continuing effort to reduce its bloodstock holdings.
As a result of the Company having a lower cost basis in the breeding
stock sold during the 1993 fiscal year as compared to fiscal 1992, the cost of
revenues generated by the breeding segment in the 1993 fiscal year was
$296,878, representing a $490,068 or 62% decrease in comparison to last fiscal
year. Operating and depreciation expenses for the current fiscal year were
$329,404 representing a $242,786 or 58% decrease from the prior fiscal year
due to the number of animals owned during the periods being significantly
reduced.
The loss before taxes from breeding operations for the 1993 fiscal year
in comparison to fiscal 1992 was $429,697 and $658,711, respectively,
primarily reflecting the decrease in revenues and expenses during fiscal 1993
as discussed above.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached.
ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements on accounting and financial disclosure
between the Company and its independent public accountants.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
International Thoroughbred Breeders, Inc.
and Subsidiaries
We have audited the accompanying consolidated balance sheets of
International Thoroughbred Breeders, Inc. and its wholly-owned subsidiaries as
of June 30, 1994 and 1993 and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the three years
in the period ended June 30, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of International Thoroughbred Breeders, Inc. and its wholly-owned subsidiaries
as of June 30, 1994 and 1993, and the results of their operations and their
cash flows for each of the three years in the period ended June 30, 1994, in
conformity with generally accepted accounting principles.
MORTENSON AND ASSOCIATES, P.C.
Certified Public Accountants
Cranford, New Jersey
August 9, 1994
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1994 AND 1993
ASSETS
June 30, June 30,
1994 1993
CURRENT ASSETS:
Cash $ 2,683,361 $ 1,744,475
Short-Term Investments 13,392,730 13,593,180
TOTAL CASH AND CASH EQUIVALENTS 16,076,091 15,337,655
Restricted Cash and Trading Investments 2,690,072 1,945,017
Accounts Receivable - Net 937,921 727,692
Prepaid Expenses 907,654 590,381
Accrued Interest Receivable 44,439 4,171
Other Current Assets 7,703 14,858
TOTAL CURRENT ASSETS 20,663,880 18,619,774
LAND, BUILDINGS, EQUIPMENT AND LIVESTOCK:
Land and Buildings 52,133,715 51,512,558
Equipment 1,800,630 1,529,394
Livestock 187,951 1,182,011
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK 54,122,296 54,223,963
LESS: Accumulated Depreciation 801,031 1,174,590
TOTAL LAND, BUILDINGS, EQUIPMENT
AND LIVESTOCK - NET 53,321,265 53,049,373
OTHER ASSETS 448,266 594,395
TOTAL ASSETS $ 74,433,411 $ 72,263,542
See Notes to Financial Statements.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1994 AND 1993
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, June 30,
1994 1993
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses $ 3,866,043 $ 4,455,994
Notes Payable - Current Portion 40,000 35,418
TOTAL CURRENT LIABILITIES 3,906,043 4,491,412
DEFERRED INCOME 719,383 414,741
LONG-TERM LIABILITIES 0 50,000
COMMITMENTS AND CONTINGENCIES 0 0
SHAREHOLDERS' EQUITY:
Series A (Convertible) Preferred Stock $100.00 Par Value,
Authorized 500,000 Shares, Issued and Outstanding,
362,443 and 441,664 Shares, Respectively 36,244,275 44,166,375
Common Stock $2.00 Par Value, Authorized 25,000,000 Shares,
Issued and Outstanding, 9,551,255 and 9,511,415 Shares,
Respectively 19,102,509 19,022,830
Capital in Excess of Par (June 30, 1993 reflects
quasi-reorganization) 11,960,605 4,118,184
Retained Earnings (subsequent to June 30, 1993, date of
quasi-reorganization, total deficit
eliminated $102,729,936) 2,500,596 0
TOTAL SHAREHOLDERS' EQUITY 69,807,985 67,307,389
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 74,433,411 $ 72,263,542
See Notes to Financial Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
Years Ended June 30,
1994 1993
REVENUES:
Revenue from Operations $ 37,334,236 $ 38,478,067
Investment Income Revenue 3,343,274 3,394,805
TOTAL REVENUES 40,677,510 41,872,872
EXPENSES:
Cost of Revenues 10,416,610 9,970,694
Operating Expenses 22,088,521 23,308,378
Depreciation & Amortization 544,344 5,601,887
General & Administrative Expenses 5,127,440 5,896,787
Interest Expense 0 638,693
TOTAL EXPENSES 38,176,915 45,416,439
INCOME(LOSS) FROM OPERATIONS BEFORE
TAXES, NON-OPERATING INCOME(LOSS) AND
EXTRAORDINARY ITEM 2,500,596 (3,543,567)
NON-OPERATING INCOME(LOSS) 0 (27,599,230)
INCOME(LOSS) BEFORE TAXES AND
EXTRAORDINARY ITEM 2,500,596 (31,142,797)
LESS:Income Tax Expense 0 0
INCOME(LOSS) BEFORE
EXTRAORDINARY ITEM 2,500,596 (31,142,797)
EXTRAORDINARY ITEM:
Gain on Extinguishment of Debt 0 1,732,631
NET INCOME(LOSS) $ 2,500,596 $ (29,410,166)
PER SHARE:
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $ 0.26 $ (3.48)
NET INCOME(LOSS) $ 0.26 $ (3.29)
Results from operations are materially affected as a result of the
quasi-reorganization effective June 30, 1993.
See Notes to Financial Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
Years Ended June 30,
1992
REVENUES:
Revenue from Operations $ 39,505,622
Investment Income Revenue 5,610,502
TOTAL REVENUES 45,116,124
EXPENSES:
Cost of Revenues 12,464,187
Operating Expenses 26,566,616
Depreciation & Amortization 5,764,109
General & Administrative Expenses 5,907,647
Interest Expense 1,679,748
TOTAL EXPENSES 52,382,307
INCOME(LOSS) FROM OPERATIONS BEFORE
TAXES, NON-OPERATING INCOME(LOSS) AND
EXTRAORDINARY ITEM (7,266,183)
NON-OPERATING INCOME(LOSS) 800,031
INCOME(LOSS) BEFORE TAXES AND
EXTRAORDINARY ITEM (6,466,152)
LESS:Income Tax Expense 0
INCOME(LOSS) BEFORE
EXTRAORDINARY ITEM (6,466,152)
EXTRAORDINARY ITEM:
Gain on Extinguishment of Debt 0
NET INCOME(LOSS) $ (6,466,152)
PER SHARE:
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $ (1.33)
NET INCOME(LOSS) $ (1.33)
Results from operations are materially affected as a result of the
quasi-reorganization effective June 30, 1993.
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 3O, 1994, 1993 AND 1992
Common Preferred
Number of Number of
Shares Amount Shares
BALANCE - JUNE 30, 1991 4,867,506 $ 9,735,013 445,612
Exchange of Preferred Stock for
Common Stock 130 259 (259)
Shares Issued for Fractional Exchanges
in the one-for-twenty
Reverse Stock Split of March 13, 1992 1,410 2,820 18
Net (Loss) for the Year Ended June 30, 1992 --- --- ---
BALANCE - JUNE 30, 1992 4,869,046 9,738,092 445,371
Sale of Common Stock From Rights Offering (7) 4,640,103 9,280,206 ---
Shares Issued for Fractional Exchanges With
Respect to the One-for twenty Reverse
Stock Split effected on March 13, 1992 278 556 251
Exchange of Preferred Stock for Common Stock 1,988 3,976 (3,958)
Quasi-reorganization (3)
Revaluation adjustments, net --- --- ---
Transfer to additional capital --- --- ---
Net (Loss) for the Year Ended June 30, 1993 --- --- ---
BALANCE - JUNE 30, 1993 9,511,415 19,022,830 441,664
Shares Issued for Fractional Exchanges With
Respect to the One-for-twenty Reverse Stock
Split effected on March 13, 1992 211 422 36
Exchange of Preferred Stock for Common Stock 39,629 79,257 (79,257)
Net Income for the Year Ended June 30, 1994 --- --- ---
BALANCE - JUNE 30, 1994 9,551,255 $ 19,102,509 362,443
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 3O, 1994, 1993 AND 1992
Capital
in Excess
Amount of Par
BALANCE - JUNE 30, 1991 $ 44,561,175 $ 190,227,322
Exchange of Preferred Stock for Common Stock (25,900) 25,641
Shares Issued for Fractional Exchanges
in the One-for-twenty Reverse Stock Split
of March 13, 1992 1,800 (4,620)
Net (Loss) for the Year Ended June 30, 1992 --- ---
BALANCE - JUNE 30, 1992 44,537,075 190,248,343
Sale of Common Stock From Rights Offering (7) --- (286,377)
Shares Issued for Fractional Exchanges
With Respect to the One-for-twenty Reverse
Stock Split effected on March 13, 1992 25,100 (25,656)
Exchange of Preferred Stock for Common Stock (395,800) 391,824
Quasi-reorganization (3)
Revaluation adjustments, net --- (83,480,014)
Transfer to additional capital --- (102,729,936)
Net (Loss) for the Year Ended June 30, 1993 --- ---
BALANCE - JUNE 30, 1993 44,166,375 4,118,184
Shares Issued for Fractional Exchanges
With Respect to the One-for-twenty Reverse
Stock Split effected on March 13, 1992 3,600 (4,022)
Exchange of Preferred Stock for Common Stock (7,925,700) 7,846,443
Net Income for the Year Ended June 30, 1994 --- ---
BALANCE - JUNE 30, 1994 $ 36,244,275 $ 11,960,605
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 3O, 1994, 1993 AND 1992
Retained
Earnings Total
BALANCE - JUNE 30, 1991 $ (66,853,618)$ 177,669,892
Exchange of Preferred Stock for Common Stock --- ---
Shares Issued for Fractional Exchanges
in the One-for-twenty Reverse Stock Split
of March 13, 1992 --- ---
Net (Loss) for the Year Ended June 30, 1992 (6,466,152) (6,466,152)
BALANCE - JUNE 30, 1992 (73,319,770) 171,203,740
Sale of Common Stock From Rights Offering (7) --- 8,993,830
Shares Issued for Fractional Exchanges
With Respect to the One-for-twenty Reverse
Stock Split effected on March 13, 1992 --- ---
Exchange of Preferred Stock for Common Stock --- ---
Quasi-reorganization (3)
Revaluation adjustments, net --- (83,480,014)
Transfer to additional capital 102,729,936 0
Net (Loss) for the Year Ended June 30, 1993 (29,410,166) (29,410,166)
BALANCE - JUNE 30, 1993 0 67,307,389
Shares Issued for Fractional Exchanges
With Respect to the One-for-twenty Reverse
Stock Split effected on March 13, 1992 --- ---
Exchange of Preferred Stock for Common Stock --- ---
Net Income for the Year Ended June 30, 1994 2,500,596 2,500,596
BALANCE - JUNE 30, 1994 $ 2,500,596 $ 69,807,985
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
Years Ended June 30,
1994 1993 1992
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Customers $ 36,888,487 $ 38,497,194 $ 38,318,408
Cash Paid to Suppliers and Employees (38,174,512) (39,474,874) (43,219,894)
Interest Received 420,460 311,251 298,650
Interest Paid 0 (638,693) (1,679,748)
Cash Received from Sale of
Trading Securities 2,882,546 0 0
Change in Restricted Cash & Investments (745,055) (386,739) 376,649
NET CASH PROVIDED(USED) BY OPERATIONS 1,271,926 (1,691,860) (5,905,935)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Livestock 473,164 233,154 786,163
Proceeds from Sale of Equipment 67,000 42,879 10,600
Proceeds from Sale of Land at GSP 0 0 1,300,000
Decrease in Mortgage Receivable 0 27,264,042 2,000,000
Proceeds Received from Investments 0 3,591,983 0
Capital Expenditures (1,019,886) (300,285) (534,707)
Decrease in Other Investment Activity (18,349) 11,758 136,701
NET CASH PROVIDED(USED) BY
INVESTING ACTIVITIES (498,071) 30,843,530 3,698,757
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of Common Stock 0 8,993,830 0
Principal Payments on Long Term Notes (35,418) (24,600,000) (1,051,687)
NET CASH PROVIDED(USED)
BY FINANCING ACTIVITIES (35,418) (15,606,170) (1,051,687)
NET INCREASE(DECREASE) IN CASH AND
CASH EQUIVALENTS 738,436 13,545,500 (3,258,865)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 15,337,655 1,792,155 5,051,020
CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD $ 16,076,091 $ 15,337,655 $ 1,792,155
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
Years Ended June 30,
1994 1993 1992
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
NET INCOME(LOSS) $ 2,500,596 $ (29,410,166)$ (6,466,152)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 544,344 5,601,887 5,764,109
(Gain)Loss on Disposal of Investment 164,478 0 0
(Gain)Loss on Sale of Buildings & Equipment (8,000) 2,136 20,962
(Gain) on Sale of Livestock (330,534) 52,042 (53,944)
Non Operating (Income)Loss 0 27,599,230 (800,031)
Interest Income on Mortgage Note 0 (3,079,383) 0
Extraordinary Item 0 (1,732,631) 0
Changes in Assets and Liabilities -
(Increase)Decrease in Restricted
Cash & Investments (745,055) (386,739) 376,649
(Increase)Decrease in Accounts Receivable (222,198) 99,682 120,415
(Increase) in Mortgage Receivable 0 264,042 (7,920,000)
(Increase) in Other Assets 146,129 (34,979) (77,635)
(Increase) in Notes Payable 0 0 (36,158)
(Increase)Decrease in Accrued Interest (40,268) 512,600 2,567,400
(Increase)Decrease in Inventory 7,155 2,720 (6,314)
(Increase)Decrease in Prepaid Expenses (211,835) (11,806) (31,319)
Increase(Decrease) in Account Payable
and Accrued Expenses (837,528) (1,365,974) 646,979
Increase(Decrease) in Deferred Income 304,642 195,477 (10,897)
TOTAL ADJUSTMENTS (1,228,670) 27,718,306 560,217
NET CASH PROVIDED(USED) BY
OPERATING ACTIVITIES $ 1,271,926 $ (1,691,860)$ (5,905,935)
Supplemental schedule of noncash investing and financing activities:
Non-Cash Investing Activity in the fiscal year ended June 30, 1993 -
See Note 3 for information on quasi-reorganization.
See Notes to Financial Statements.
INTERNATIONAL THOROUGHBRED BREEDERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Consolidation - The accounts of all wholly owned subsidiaries are
included in the consolidated financial statements. All material intercompany
transactions have been eliminated.
(B) Classifications - Certain prior year amounts have been reclassified
to conform with the current year's presentation.
(C) Allowance for Bad Debts - The Company recognizes bad debts on the
allowance method. Bad debt allowance for fiscal years ended June 30, 1994 and
1993 was $20,000.
(D) Revenue Recognition - The Company recognizes the revenues associated
with horse racing at Garden State Park as they are earned. Costs and expenses
associated with horse racing revenues are charged against income in those
periods in which the horse racing revenues are recognized. Other costs and
expenses are recognized as they actually occur throughout the year. Deferred
income primarily consists of prepaid purse income.
(E) Sale of Stallion Season - Income from a stallion season (stud fee)
sold on a no-guarantee basis is taken into revenue immediately.
(F) Cost of Stallion Season - The cost of a stallion season (stud fee)
purchased is capitalized and is the basis of the resulting foal.
(G) Deferred Taxes - Deferred taxes arise from the recognition of
certain items of expense for tax purposes in years different than those in
which they are recognized in the financial statements.
(H) Cash Flows - For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.
(I) Concentration of Credit Risk - As of June 30, 1994, financial
instruments which potentially subject the Company to concentrations of credit
risk are cash equivalents and receivables arising primarily from event
planning customers whose credit is routinely evaluated. The Company places
its cash investments with high credit quality financial institutions and
currently invests primarily in U.S. government obligations that have
maturities of less than 3 months. The amount on deposit in any one
institution that exceeds federally insured limits is subject to
credit risk. The Company believes no significant concentration of credit risk
exists with respect to these cash investments.
(2) INVESTMENTS
Short term investments, classified as cash equivalents, consist of
interest bearing certificates of deposit, repurchase agreements and
commercial paper, whose cost approximates fair value.
Other investments consist of trading securities whose carrying amount is
a reasonable estimate of fair value. Fair value is determined by reference
to quoted market prices. There was no unrealized gain or loss on trading
securities as of June 30,1994, as cost approximates fair value. The basis
on which cost was determined in computing realized gains or losses on trading
securities was the specific identification method.
(3) QUASI-REORGANIZATION
The Company, with the approval of the Board of Directors, adjusted its
June 30, 1993 balance sheet to fair value and transferred the accumulated
deficit of $102,729,936 to Capital in Excess of Par in accordance with quasi-
reorganization accounting principles. The quasi-reorganization reflects
management's judgment that because of increased competition from the gaming
industry and the decline of racing in the last few years, the adjustment to
fair value of racetrack buildings and equipment and livestock was appropriate.
The effect of the quasi-reorganization is that future operations will
reflect depreciation and amortization which is more consistent with current
value. Future operating statements will not be comparable with those for years
ending through June 30, 1993. Any future income tax benefits resulting from
the utilization of net operating loss and other carryforwards existing at June
30, 1993 and temporary differences resulting from the quasi-reorganization,
will be excluded from the results of operations and credited to Capital in
Excess of Par.
(4) LAND, BUILDINGS, EQUIPMENT AND LIVESTOCK
For the fiscal year ended June 30, 1994 livestock, equipment, land and
buildings were carried at their adjusted fair value in accordance with
accounting principals applicable to quasi-reorganization (See Note 3).
Depreciation is being computed over the estimated remaining useful lives using
the straight-line method. A summary of livestock, equipment, land and
buildings and depreciation recorded for the fiscal year ended June 30, 1994,
is as follows:
Class Adjusted Depreciation Accumulated
Basis Charges Depreciation
June 30, 1994
Land $38,000,000 $N/A $N/A
Building &
Improvements 14,133,715 427,048 537,646
(A)
Furniture
Fixtures
Machinery &
Equipment 1,800,630 109,046 136,387
Broodmares
& Other Horses 56,954 0 0
(B)
Stallion
Shares 130,997 8,250 126,998
Totals 54,122,296 544,344 801,031
For the fiscal year ended June 30, 1993, the cost basis and accumulated
depreciation of livestock, equipment, land and buildings were adjusted to fair
value in accordance with accounting principals applicable to quasi-
reorganization. (See Note 3). A summary of livestock, property and equipment
and depreciation recorded for the fiscal year ended June 30, 1993, as adjusted
for the quasi-reorganization, is as follows:
June 30, 1992 Additions and
Class Cost at Cost Other Changes
Land $ 15,501,242 $ 0 $ 0
Buildings & Improvements (A) 150,498,650 5,610 (111)
Furniture, Fixtures,
Machinery & Equipment 14,924,182 214,091 (196,087)
Broodmares & Other Horses (B) 1,253,834 80,584 (407,619)
Stallion Shares 1,707,748 0 (1,000,500)
TOTALS $ 183,885,656 $ 300,285 $ (1,604,317)
June 30, 1993
Quasi- Adjusted
Class Reorganization Basis
Land $ 22,498,758 $ 38,000,000
Buildings & Improvements (A) (136,991,591) 13,512,558
Furniture, Fixtures,
Machinery & Equipment (13,412,792) 1,529,394
Broodmares & Other Horses (B) (58,036) 868,763
Stallion Shares (394,000) 313,248
TOTALS $ (128,357,661)$ 54,223,963
Accumulated Retirements
Depreciation Depreciation and
Class June 30, 1992 Charged Other Changes
Land $ N/A $ N/A $ N/A
Buildings & Improvements (A) 32,852,540 4,566,783 10,424
Furniture, Fixtures,
Machinery & Equipment 6,658,337 831,429 3,302
Broodmares & Other Horses (B) 868,980 43,119 (228,800)
Stallion Shares 1,404,653 70,724 (1,024,252)
TOTALS $ 41,784,510 $ 5,502,055 $ (1,239,326)
Quasi- Accumulated
Class Reorganization Depreciation
Land $ N/A $ N/A
Buildings & Improvements (A) (37,319,149) 110,598
Furniture, Fixtures,
Machinery & Equipment (7,399,251) 93,816
Broodmares & Other Horses (B) 0 678,299
Stallion Shares (159,247) 291,878
TOTALS $ (44,877,647)$ 1,174,591
(A) Included property not yet placed in service costing $439,694 and $292,141
as of June 30, 1994 and 1993, respectively, on which no depreciation was
taken.
(B) Includes horses costing $56,952 and $242,997 as of June 30, 1994 and 1993,
respectively, on which no depreciatin was taken since the horses were either
not yet placed in breeding service or were being held for resale.
The depreciable life of buildings & improvements is based on a 15 to 40 year
life. Furniture, fixtures, machines and equipment is being depreciated over a
5 to 15 year period and livestock is being depreciated between 2 and 10 years.
(5) NOTES AND MORTGAGES PAYABLE
Notes and Mortgages Payable are summarized below:
June 30, 1994 June 30, 1993
Current Long-Term Current Long-Term
Garden State Park:
Notes $40,000 0 $35,418 $50,000
Totals $40,000 0 $35,418 $50,000
(6) COMMITMENTS AND CONTINGENCIES
The Company announced on March 22, 1994, an offer to purchase The
Meadowlands Sports Complex and Monmouth Park for $1 Billion from the New
Jersey Sports and Exposition Authority. An alternative offer also was made to
purchase Monmouth Park and The Meadowlands Race Track improvements for $125
million and to enter into a long-term lease for the Meadowlands Race Track for
$50 million per year. The offer is subject, among other conditions, to
adoption by the voters of the State of New Jersey of an appropriate
constitutional amendment authorizing the casino gaming at the Meadowlands and
Garden State Park racetracks. ITB has acquired options to purchase Atlantic
City Race Course and Freehold Raceway. The option on the Atlantic City Race
Course expires on March 18, 1995, with an additional one year option available
for purchase at that time. The option to purchase Freehold Raceway expires on
December 31, 1994. If these options are exercised, the Company could be
committed for up to $43,000,000 in purchase prices. Assuming acceptance of
the Company's offer, the exercise of both racetrack options and adoption of
the said constitutional amendment, the Company proposes to construct
interactive gaming complexes that combine racing, casino gaming and
entertainment on land presently used to stable and train horses at The
Meadowlands and Garden State Park. The ITB offer proposes that up to 12
casinos be constructed and operated in the current stable area of each
racetrack. Atlantic City's existing operating, licensed casino
owners/operators would be offered the opportunity to own and operate all of
those casinos with the Company paid rent by the casino operators. The plan
does provide that tracks can operate casinos within racetrack structures.
Monmouth Park and Atlantic City Race Course would serve as the backstretch and
training centers for The Meadowlands and Garden State Park respectively. The
Company also announced the formation of a wholly owned subsidiary,
International Thoroughbred Gaming Development Corporation (ITG), which will be
responsible for implementing the above project. The Company is committed to
approximately $550,000 in expenses related to the development of this project.
The Company's financial commitment could increase if circumstances
warrant.
No assurances can be given that the Company's offer will be accepted or
that the constitutional amendment will be placed on the ballot or adopted.
Furthermore, even assuming such acceptance and adoption, no assurance can be
given that the Company will be able to obtain the required financing.
The Company has lease contracts for various equipment and maintenance
contracts at Garden State Park. The majority of these contracts are based upon
the daily average of the pari-mutuel wagers accepted during the Company's
racing meets with a minimum per day. The minimum rental payments for the next
five years are based on 130 racing dates at Garden State Park, annually. The
following summarizes the commitments on all contracts:
Year Ended June 30:
1995 $1,950,720
1996 1,018,551
1997 932,939
1998 450,000
1999 -0-
Subsequent to June 30,
1999 -0-
As of June 30, 1994, the Company had entered into various agreements for
the purchase of stallion seasons, as a contingent liability, for $7,517.
Payments are generally due September 1 or October 1, 1994, provided the mares
bred to the stallions involved are in foal at the applicable due date.
Racing dates at Garden State Park are awarded each year at the
discretion of the State Racing Commission.
On August 16, 1986, a putative "class action" was filed against the
Company, its Garden State Race Track, Inc. subsidiary, First Jersey
Securities, Inc. ("First Jersey"), two other broker-dealers, Robert E.
Brennan, and ten other present and former directors of the Company alleging
various violations of federal securities laws and other statutes. On July 8,
1987, another putative "class action" was filed against the Company, First
Jersey, another broker-dealer, Robert E. Brennan, and six other present and
former directors of the Company alleging various violations of federal
securities laws and other statutes. During fiscal 1988, based upon a change of
venue motion which had been filed by the Company, the U.S. District Court
transferred both cases from the Southern District of New York to the District
of New Jersey. On June 7, 1988 a consolidated amended complaint was filed by
the plaintiffs in the two putative "class action" suits described above in
federal court in Trenton. This complaint was substantially similar to the
original suits filed separately except to name eleven current and former
directors as defendants. On July 27, 1989, based upon motions which had been
filed by the Company, the United States District Court, District of New Jersey
dismissed several, but not all, of the claims and allegations contained in the
consolidated amended complaint. On October 20, 1993, the United States
District Court for the District of New Jersey signed an order granting
preliminary approval to a proposed partial settlement of the claims. Although
the Company believes this lawsuit is totally without merit, it has incurred
approximately $1,150,000 in legal expense in defending against the lawsuit and
would have been required to expend significant additional amounts to continue
the defense through trial. In order to avoid further expense, inconvenience
and delay and to dispose of this expensive, burdensome and protracted
litigation, the Company executed a proposed partial Settlement Agreement. The
proposed partial settlement required the Company to make a $250,000
settlement payment and an additional payment of up to $150,000 contingent upon
receipt of future amounts by the Company from its sale of the Philadelphia
Park mortgage note. If effectuated, the settlement would dispose of all class
claims made against the Company, its officers and directors and all derivative
claims made on behalf of the Company against all parties in the litigation.
As part of the proposed settlement, the Company's directors and officers'
liability insurance carrier will pay $3,125,000 plus an additional $4,125,000
which latter amount is subject to reduction on a dollar for dollar basis in
the event of collections from certain non-settling defendants or in the event
of collection of any of the above described $150,000 contingency payment. On
April 12, 1994, an order was entered approving the settlement agreement and
entering a final judgement of dismissal of the plaintiffs claims against the
Company and the Director defendants in their capacity as officers and
directors of the Company. Certain non-settling defendants have appealed to
the order approving the settlement. In the event the settlement is upset on
appeal, the Company intends to continue to vigorously contest this lawsuit.
An estimate of any potential loss cannot be made at this time. (See Part I,
Item 3 Legal Proceedings.)
When the Company sold Philadelphia Park in November, 1990, pursuant to
ERISA, the purchaser (Greenwood Racing Inc.) assumed the unfunded vested
liability to the Sports Arena Employees' Local 137 Retirement Fund (the
"Fund") that was attributable to the operation of Philadelphia Park from its
inception as Keystone Park on November 4, 1974, through January 1, 1990. Under
law, through December 31, 1995, ITB is secondarily liable to the Fund, in the
event Greenwood or its successor terminate Philadelphia Park racing operations
on or before that date. ITB would be obliged to pay the liability in the event
Greenwood or any successor to Greenwood is unable to do so. The unfunded
vested liability as of December 31, 1993, the date of the most recent
actuarial report, could be as high as $1,807,000 and, as of the date of the
report, that is the amount for which ITB may be secondarily liable. The amount
for which ITB will be secondarily liable in future years (1994-1995) will vary
and cannot now be determined.
(7) INVESTMENT INCOME REVENUES
Investment income revenue consists primarily of gains realized on
trading securities.
(8) PRIOR YEAR INFORMATION
During the third quarter of fiscal 1993, the Company incurred a non-
operating loss of $27,599,230 as a result of the sale of Philadelphia Park
racetrack mortgage. A portion of the proceeds was used to retire the debt on
the Garden State Park racetrack. As a result of the early debt extinguishment
at a discount, the Company realized an extraordinary item of $1,732,631.
(9) ACQUISITIONS AND DISPOSITIONS
. Fiscal 1994
In the fiscal year ended June 30, 1994 approximately $461,780 in
equipment, furniture and fixtures was acquired in connection with improvements
and replacements necessary to maintain operations. In addition, $394,715 of
capital was used for the continuation of real estate development at the
racetrack and approximately $45,000 was used in connection with improvements
of racetrack property.
. Fiscal 1993
On January 22, 1993, the Company sold its interest in the purchase
money, non-recourse mortgage note held on Philadelphia Park for $27,000,000 in
cash. In addition, non-cumulative contingent payments of up to a maximum
aggregate amount of $10,000,000 may be paid to the Company for the next seven
years. These payments will be up to $2,000,000 with respect to each calendar
year from 1993 through 1995 and of up to $1,000,000 with respect to each
calendar year from 1996 through 1999 in the event Greenwood and its
subsidiaries achieve certain "Adjusted Earnings". The principal balance due at
the time of the sale was $55,655,958. The Company incurred a $28,655,958, non-
operating loss as a result of the sale. Deferred income tax expense of
$1,056,728 was also eliminated as a result of this transaction. Consequently,
the Company incurred a net $27,599,230 non-operating loss. (See Note 10.)
. Fiscal 1992
The Company realized $800,031 of non-operating income from the sale of
approximately four acres of land at Garden State Park to New Jersey Transit
Corporation ("NJT") for $1,300,000. Of the $1,116,687 net cash proceeds
received, after closing adjustments, $1,016,687 was used to reduce the
mortgage debt of Garden State Park.
(10) INCOME TAXES
Effective July 1, 1993, the Company adopted the provisions of Statement
of Financial Standards (SFAS) No. 109, Accounting for Income Taxes. This
Statement requires that deferred income taxes reflect the tax consequences on
future years of differences between the tax bases of assets and liabilities
and their financial reporting amounts. The effect of adoption of this
Statement on current and prior financial statements is immaterial. No
provision for income taxes has been made for the year ended June 30, 1994, as
the Company is in a net operating loss carryforward position for tax purposes.
When the Company incurs income taxes in the future, any future income
tax benefits resulting from the utilization of net operating losses and other
carryforwards existing at June 30, 1993 to the extent resulting from the
quasi-reorganization, will be excluded from the results of operations and
credited to paid in capital. (See Note 3)
The Company has a net operating loss carryforward of approximately
$161,860,000 at June 30, 1994, expiring in the years after June 30, 2001
through June 30, 2009. SFAS No. 109 requires the establishment of a deferred
tax asset for all deductible temporary differences and operating loss
carryforwards. Because of the uncertainty that the Company will generate
income in the future sufficient to fully or partially utilize these
carryforwards, however, any deferred tax asset is offset by an allowance of
the same amount pursuant to SFAS No. 109. Accordingly, no deferred tax asset
is reflected in these financial statements.
The following summarizes the operating tax loss carry forwards by year of
expiration.
AMOUNT EXPIRATION DATE OF
TAX LOSS CARRYFORWARD
$47,776,318 7/1/2001
$26,421,817 7/1/2002
$19,899,773 7/1/2003
$15,617,154 7/1/2004
$11,781,307 7/1/2005
$40,364,250 7/1/2006 through 7/1/2009
11) EARNINGS (LOSS) PER SHARE
The earnings (loss) per share for the fiscal years ended June 30, 1994,
1993 and 1992 was computed by dividing the earnings (loss) applicable to
common stock by the weighted average number of common shares outstanding
during each fiscal year (9,547,900 shares, 8,950,025 shares and 4,868,001
shares, respectively). The convertible preferred stock and dilutive stock
options are assumed converted when dilutive. The conversion period for the
Series A Convertible Preferred Stock concluded as of July 31, 1993, therefore
the Convertible Preferred Stock has not been included in the 1994 computation.
(12) QUARTERLY FINANCIAL DATA (UNAUDITED)
The following quarterly financial data is unaudited, but in the opinion
of management includes all necessary adjustments for a fair presentation of
the interim results.
4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter
Fiscal 1994
Revenues $9,961,805 $8,628,778 $11,282,588 $7,461,065
Gross Profit $6,879,022 $6,031,956 $7,634,399 $6,372,250
(Approximate)
Net Profit\
(Loss) $1,000,142 $(873,198) $1,842,283 $531,368
Net Profit\(Loss)
Per Share $ .10 $ (.09) $ .19 $ .06
4th 3rd 2nd 1st
Quarter Quarter Quarter Quarter
Fiscal 1993
Revenues $11,214,620 $11,049,718 $9,438,277 $6,775,452
Gross Profit $7,947,579 $7,775,408 $6,958,847 $5,825,539
(Approximate)
Net Profit\(Loss) $(1,520,561) $(27,250,736) $(117,248) $(521,621)
Net Profit\(Loss)
Per Share $(.16) $(3.05) $(.01) $(.07)
(13) PENSION PLAN
The Company has a deferred compensation plan pursuant to section 401(k)
of the Internal Revenue code for all its non-union full time employees
(approximately 70), who have completed one year of service. The Company's
basic contribution under the plan is 4% of each covered employee's
compensation for such calendar year. In addition, the Company contributes up
to an additional 50% of the first 4% of compensation contributed by any
covered employee to the plan (an employee's maximum contribution is $9,240
factored for inflation annually). The Company's expense totaled $126,159,
$148,897 and $135,848 for the fiscal years ending June 30, 1994, 1993 and
1992, respectively. All contributions are funded currently.
(14) INCENTIVE STOCK OPTIONS
On June 2, 1994, the Board of Directors approved the adoption of an
employee stock option plan subject to stockholder approval. A block of
475,000 shares of common stock was reserved for options to be granted under
the plan. Under the plan, options to purchase the following number of shares
were granted; 275,000 to Arthur Winkler, president of the Company, 75,000 to
William H. Warner, treasurer of the Company, 75,000 to Richard E. Orbann,
general manager of Garden State Park and 50,000 to Christopher C. Castens,
secretary of the Company. These options, exercisable for a five year period
commencing on the date of stockholder approval at a price of $5.875, are non-
transferable and are only exercisable by the holder while he is employed by
the Company or a subsidiary. On March 21, 1994, the Board of Directors
granted non-transferable options, subject to stockholder approval, to purchase
1,000,000 shares of common stock at prices ranging from $12 to $24 to Francis
W. Murray, President of International Thoroughbred Gaming Development
Corporation, a recently formed wholly owned subsidiary of ITB. These options
are exercisable during a two-year period commencing on the date of such
stockholder approval and only while he is employed by the Company or a
subsidiary.
(15) DIVIDENDS
The Company is required to pay to the holders of the Company's Series A
(Convertible) Preferred Stock a cash dividend from any earnings of Garden
State Park. The conversion period for the Company's Series A Convertible
Preferred Stock concluded as of July 31, 1993. The applicable percentage of
Garden State Park's "net racetrack earnings" (net after income tax, less an
annual management fee due the parent company of one-half of 1% of the gross
betting handle as computed by the Company's auditors) shall be 25% of such
earnings (if any) for each year. No dividends have been paid in the past. A
dividend will not be paid for the year ended June 30, 1994, since Garden State
Park did not produce "net racetrack earnings."
Below are the calculations of Garden State Park's profits (or losses) as
defined for the Preferred Stock for the past three fiscal years.
June 30,
1994 1993 1992
Net After Tax Income (Loss) $ 818,718 $(2,451,790) $(8,261,681)
Less:
Management Fee 833,692 934,395 876,060
Interest on
Advance from Parent 8,291,562 8,492,569 9,033,893
Defined Profit (Loss)--
"Net Racetrack
Earnings (Loss)" $(8,306,536) $(11,878,755) $(18,171,634)
(16) SEGMENTED INFORMATION AND RECONCILIATION
The Company's operations are classified in two principal industry
segments:
1. Thoroughbred Horse Breeding - includes the purchasing, owning,
breeding, leasing and selling of thoroughbred horses used in thoroughbred
racing.
2. Racetrack - includes the operations of Garden State Park in Cherry
Hill, NJ
(16) SEGMENTED INFORMATION AND RECONCILIATION (Continued)
Years Ended June 30,
Revenues: 1994
Racetracks $ 36,946,109
Thoroughbred Horse Breeding 573,323
Totals 37,519,432
Corporate Revenue 3,158,077
Total Revenues $ 40,677,510
Operating Earnings/(Loss): Racetracks $ 818,718
Thoroughbred Horse Breeding 171,366
Totals 990,054
Corporate Income/(Loss) 1,510,540
Earnings/(Loss) Before Income Taxes
and Extraordinary Item $ 2,500,596
Identifiable Assets: Racetrack $ 59,929,658
Thoroughbred Horse Breeding 379,955
Totals 60,309,613
Corporate Assets 14,123,798
Total Identifiable Assets $ 74,433,411
Depreciation & Amortization Expense:
Racetrack $ 514,204
Thoroughbred Horse Breeding 29,815
Totals 544,019
General Corporate Depreciation
& Amortization 326
Total Depreciation & Amortization Expense $ 544,344
Capital Expenditures: Racetracks $ 960,474
Corporate 59,412
Total Capital Expenditures $ 1,019,886
Years Ended June 30,
Revenues: 1993
Racetracks $ 38,290,332
Thoroughbred Horse Breeding 273,499
Totals 38,563,831
Corporate Revenue 3,309,041
Total Revenues $ 41,872,872
Operating Earnings/(Loss): Racetracks $ (4,184,421)
Thoroughbred Horse Breeding (429,697)
Totals (4,614,118)
Corporate Income/(Loss) (26,528,679)
Earnings/(Loss) Before Income Taxes
and Extraordinary Item $ (31,142,797)
Identifiable Assets: Racetrack $ 59,047,595
Thoroughbred Horse Breeding 1,101,634
Totals 60,149,229
Corporate Assets 12,114,313
Total Identifiable Assets $ 72,263,542
Depreciation & Amortization Expense:
Racetrack $ 5,394,510
Thoroughbred Horse Breeding 141,029
Totals 5,535,539
General Corporate Depreciation
& Amortization 66,348
Total Depreciation & Amortization Expense $ 5,601,887
Capital Expenditures: Racetracks $ 100,472
Corporate 199,813
Total Capital Expenditures $ 300,285
Years Ended June 30,
Revenues: 1992
Racetracks $ 38,804,334
Thoroughbred Horse Breeding 815,725
Totals 39,620,059
Corporate Revenue 5,496,065
Total Revenues $ 45,116,124
Operating Earnings/(Loss): Racetracks $ (8,261,681)
Thoroughbred Horse Breeding (658,712)
Totals (8,920,393)
Corporate Income/(Loss) 2,454,240
Earnings/(Loss) Before Income Taxes
and Extraordinary Item $ (6,466,152)
Identifiable Assets: Racetrack $ 145,584,953
Thoroughbred Horse Breeding 1,359,514
Totals 146,944,467
Corporate Assets 57,291,416
Total Identifiable Assets $ 204,235,883
Depreciation & Amortization Expense:
Racetrack $ 5,461,128
Thoroughbred Horse Breeding 300,611
Totals 5,761,739
General Corporate Depreciation
& Amortization 2,370
Total Depreciation & Amortization Expense $ 5,764,109
Capital Expenditures: Racetracks $ 158,360
Corporate 376,347
Total Capital Expenditures $ 534,707
Commission income from wagering accounts for 89% of total racetrack revenue.
Revenue from admissions, parking, program and food concession accounts for 8%
of racetrack revenues and the remaining 3% of revenues is from outside events.
(17) INTEREST EXPENSE
All interest expense of the subsidiaries is considered expense of the
parent company. In addition to the interest paid each year to third party
lenders, the parent company is due interest on funds it has advanced to Garden
State Park for the purchase, construction and equipping of the racetrack and
funding operations as needed. As of June 30, 1994, such advances totalled
$131,786,417 to Garden State Park, in addition to initial capitalization of
$86,130,000 provided by the net proceeds of the Company's preferred stock
offering in July, 1983. The interest on the advance of $131,786,417 is
computed at the average prime lending rate as published from time to time by
the "Wall Street Journal", Eastern Edition, which during the fiscal year
averaged between 6% and 7.25% for the year. The resulting interest owed and
paid to the parent company for the fiscal year ended June 30, 1994 by Garden
State Park totals $8,291,562.
(18) NEW AUTHORITATIVE PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting
for Certain Investments in Debt and Equity Securities", is effective for
fiscal years beginning after December 15, 1993. The Company adopted SFAS 115
on June 30, 1994. (See Note 2) The adoption of SFAS No. 115 did not have a
material effect on the financial statements.
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires that the fair value of all financial instruments, including
marketable securities, be disclosed. SFAS No. 107 is effective for fiscal
years ended after December 15, 1992, except for entities with less than $150
million in total assets; for those entities, the effective date is three years
later (See Note 2). The Company adopted SFAS 107 in fiscal 1993. The
adoption of SFAS No. 107 did not have a material effect on the financial
statements.
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" is
effective for fiscal years beginning after December 15, 1994. The Company
does not have any loans that are subject to an impairment assessment as
defined by SFAS No. 114.
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions", is effective for fiscal years beginning after December 15,
1992. SFAS No. 112, "Employers' Accounting for Postemployment Benefits, is
effective for fiscal years beginning after December 15, 1993. The Company
does not provide postretirement or postemployment benefits as defined by SFAS
Nos. 106 and 112.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTARY SCHEDULES
To the Board of Directors and Stockholders
of International Thoroughbred Breeders, Inc.
and Subsidiaries
Our audit of the Consolidated Financial Statements of International
Thoroughbred Breeders, Inc. and Subsidiaries presented in the preceding
section of this report were made for the purpose of forming an opinion on such
financial statements taken as a whole. We have also examined the supplemental
schedules V, VI and X. The supplemental schedules are presented for purposes
of complying with the Securities and Exchange Commission's rules and
regulations under the Securities Exchange Act of 1934 and are not otherwise a
required part of the consolidated financial statements. The supplemental
schedules have been subjected to the auditing procedures applied in the audits
of the consolidated financial statements.
In our opinion, the schedules referred to above fairly state in all
material respects the financial data required to be set forth therein in
relation to the consolidated financial statements taken as a whole.
MORTENSON AND ASSOCIATES, P.C.
Certified Public Accountants
Cranford, New Jersey
August 9, 1994
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
SCHEDULE V
PROPERTY, PLANT, EQUIPMENT AND LIVESTOCK
Balance at
Beginning Additions
Classification of Period at Cost Retirements
For the Year Ended June 30, 1992:
Land $ 15,721,902 $ 0 $ 220,660
Buildings & Improvements 150,516,273 127,465 145,090
Furniture, Fixtures,
Machinery & Equipment 14,829,825 249,449 104,363
Broodmares & Other Horses (2) 6,829,166 157,793 3,052,692
Stallion Shares (2) 4,523,618 0 1,990,870
Assets Not Used in Operations 0 0 0
Cash in Trust for Property
Construction 0 0 0
TOTALS $ 192,420,786 $ 534,707 $ 5,513,675
For the Year Ended June 30, 1993(1):
Land $ 15,501,242 $ 0 $ 0
Buildings & Improvements 150,498,650 5,610 0
Furniture, Fixtures,
Machinery & Equipment 14,924,182 214,091 176,035
Broodmares & Other Horses (2) 1,253,834 80,584 282,619
Stallion Shares (2) 1,707,748 0 900,500
Assets Not Used in Operations 0 0 0
Cash in Trust for Property
Construction 0 0 0
TOTALS $ 183,885,657 $ 300,285 $ 1,359,154
For the Year Ended June 30, 1994:
Land $ 38,000,000 $ 0 $ 0
Buildings & Improvements 13,512,558 621,157 0
Furniture, Fixtures,
Machinery & Equipment 1,529,394 398,729 123,886
Broodmares & Other Horses (2) 868,763 0 138,010
Stallion Shares (2) 313,248 0 182,251
Assets Not Used in Operations 0 0 0
Cash in Trust for Property
Construction 0 0 0
TOTALS $ 54,223,963 $ 1,019,886 $ 444,147
(1) During the fiscal year ended June 30, 1993, the costs and accumulated
depreciation for Land, Buildings & Improvements, Furniture, Fixtures,
Machinery & Equipment and Livestock were adjusted in accordance with
quasi-reorganization accounting principals.
(2) During the fiscal years ended June 30, 1992, 1993 and 1994 the costs and
and accumulated depreciation associated with fully depreciation livestock
were written off.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
SCHEDULE V
PROPERTY, PLANT, EQUIPMENT AND LIVESTOCK
Other Balance at
Changes Close
Classification Add/(Deduct) of Period
For the Year Ended June 30, 1992:
Land $ 0 $ 15,501,242
Buildings & Improvements 0 150,498,650
Furniture, Fixtures,
Machinery & Equipment (50,727) 14,924,182
Broodmares & Other Horses (2) (2,680,433) 1,253,834
Stallion Shares (2) (825,000) 1,707,748
Assets Not Used in Operations 0 0
Cash in Trust for Property
Construction 0 0
TOTALS $ (3,556,161)$ 183,885,657
For the Year Ended June 30, 1993(1):
Land $ 22,498,758 $ 38,000,000
Buildings & Improvements (136,991,702) 13,512,558
Furniture, Fixtures,
Machinery & Equipment (13,432,844) 1,529,394
Broodmares & Other Horses (2) (183,036) 868,763
Stallion Shares (2) (494,000) 313,248
Assets Not Used in Operations 0 0
Cash in Trust for Property
Construction 0 0
TOTALS $ (128,602,824)$ 54,223,963
For the Year Ended June 30, 1994:
Land $ 0 $ 38,000,000
Buildings & Improvements 0 14,133,715
Furniture, Fixtures,
Machinery & Equipment (3,607) 1,800,631
Broodmares & Other Horses (2) (673,800) 56,953
Stallion Shares (2) 0 130,998
Assets Not Used in Operations 0 0
Cash in Trust for Property
Construction 0 0
TOTALS $ (677,407)$ 54,122,296
(1) During the fiscal year ended June 30, 1993, the costs and accumulated
depreciation for Land, Buildings & Improvements, Furniture, Fixtures,
Machinery & Equipment and Livestock were adjusted in accordance with
quasi-reorganization accounting principals.
(2) During the fiscal years ended June 30, 1992, 1993 and 1994 the costs and
and accumulated depreciation associated with fully depreciation livestock
were written off.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
SCHEDULE VI
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT, EQUIPMENT AND LIVESTOCK
Additions
Balance at Charged to
Beginning Costs and
Classification of Period Expenses Retirements
For the Year Ended June 30, 1992:
Buildings & Improvements $ 28,291,866 $ 4,611,453 $ 50,779
Furniture, Fixtures,
Machinery & Equipment 5,948,424 826,340 69,564
Broodmares & Other Horses (2) 6,158,598 106,882 2,721,067
Stallion Shares (2) 3,660,433 170,096 1,600,876
TOTALS $ 44,059,319 $ 5,714,771 $ 4,442,285
For the Year Ended June 30, 1993(1):
Buildings & Improvements $ 32,852,540 $ 4,566,783 $ 0
Furniture, Fixtures,
Machinery & Equipment 6,658,336 831,429 128,823
Broodmares & Other Horses (2) 863,980 43,119 110,720
Stallion Shares (2) 1,404,653 70,724 806,750
TOTALS $ 41,779,509 $ 5,512,055 $ 1,046,293
For the Year Ended June 30, 1994:
Buildings & Improvements $ 110,598 $ 427,048 $ 0
Furniture, Fixtures,
Machinery & Equipment 93,816 109,046 62,868
Broodmares & Other Horses (2) 678,299 0 4,500
Stallion Shares (2) 291,878 8,250 173,130
TOTALS $ 1,174,590 $ 544,344 $ 240,498
(1) During the fiscal year ended June 30, 1993, the costs and accumulated
depreciation for Land, Buildings & Improvements, Furniture, Fixtures,
Machinery & Equipment and Livestock were adjusted in accordance with
quasi-reorganization accounting principals.
(2) During the fiscal years ended June 30, 1992, 1993 and 1994 the costs and
and accumulated depreciation associated with fully depreciation livestock
were written off.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
SCHEDULE VI
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT, EQUIPMENT AND LIVESTOCK
Other Balance at
Changes Close
Classification Add/(Deduct) of Period
For the Year Ended June 30, 1992:
Buildings & Improvements $ 0 $ 32,852,540
Furniture, Fixtures,
Machinery & Equipment (46,864) 6,658,336
Broodmares & Other Horses (2) (2,680,433) 863,980
Stallion Shares (2) (825,000) 1,404,653
TOTALS $ (3,552,297)$ 41,779,509
For the Year Ended June 30, 1993(1):
Buildings & Improvements $ (37,308,725)$ 110,598
Furniture, Fixtures,
Machinery & Equipment (7,267,126) 93,816
Broodmares & Other Horses (2) (118,080) 678,299
Stallion Shares (2) (376,749) 291,878
TOTALS $ (45,070,680)$ 1,174,590
For the Year Ended June 30, 1994:
Buildings & Improvements $ 0 $ 537,646
Furniture, Fixtures,
Machinery & Equipment (3,607) 136,387
Broodmares & Other Horses (2) (673,799) 0
Stallion Shares (2) 0 126,998
TOTALS $ (677,406)$ 801,031
(1) During the fiscal year ended June 30, 1993, the costs and accumulated
depreciation for Land, Buildings & Improvements, Furniture, Fixtures,
Machinery & Equipment and Livestock were adjusted in accordance with
quasi-reorganization accounting principals.
(2) During the fiscal years ended June 30, 1992, 1993 and 1994 the costs and
and accumulated depreciation associated with fully depreciation livestock
were written off.
INTERNATIONAL THOUROGHBRED BREEDERS, INC.
AND SUBSIDIARIES
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
June 30, June 30, June 30,
1994 1993 1992
Depreciation and Amortization
of Intangible Assets $ -0- $ * $ *
Taxes Other Than
Payroll and Income $ 2,478,262 $ 2,455,450 $ 3,189,281
Rents $ * $ * $ *
Advertising $ 457,897 $ 436,794 $ 806,322
Royalty Expense $ -0- $ -0- $ -0-
* Less than 1% of total sales.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(A) Identification of Directors and Officers
The directors and/or executive officers of the Company are:
Name Age Position Position with
held since Company
Robert E.Brennan(1)(2) 50 December, 1982 Chairman of the Board
April, 1988 Chief Executive Officer
Arthur Winkler (2)(5) 50 September, 1987 Director
April, 1988 Vice President
July, 1992 Chief Operating Officer
President
William H. Warner 49 December, 1992 Treasurer
Christopher C. Castens 43 April, 1987 Secretary
(5)
Charles Dees, Jr. 55 April, 1988 Director
(3)(4)(5)(6)
Joseph K. Fisher 47 March, 1985 Director
(1)(3)
Kerry B. Fitzpatrick 54 October, 1980 Director
(2)(4)
Ronald J. Riccio 48 March, 1985 Director
(1)(3)(4)(6)
Robert J. Quigley 65 October, 1980 Director
(4)
(1) Member of Audit Committee
(2) Member of Executive Committee
(3) Member of Related Party Transactions Committee
(4) Member of Executive Compensation Committee
(5) Member of Litigation Committee
(6) Member of Stock Option Committee
The Audit Committee and the Executive Committee were established in
March, 1985 and the Related Party Transactions Committee in February, 1986.
The Litigation Committee was established in October, 1992, and the Executive
Compensation Committee was established in May, 1993.
The Audit Committee periodically confers with the Company's independent
auditors concerning the Company's accounting systems and the maintenance of
its books and records, reviews the scope of the audit of the Company's
financial statements and the results thereof and performs other services.
The Litigation Committee reviews litigation matters of the Company on a
periodic basis.
The Executive Committee, subject to the limitations of the Delaware
Corporation Law (which without an enabling resolution from the Board of
Directors, prohibits the Committee from authorizing a dividend, issuing stock
or merging the Company), possesses all other powers of the Board of Directors
in the management and direction of the business and affairs of the Company.
The Related Parties Transactions Committee meets periodically to review
and approve any related party transactions considered and/or accepted by the
Company's management.
The Executive Compensation Committee reviews and recommends actions
regarding executive compensation.
The Stock Option Committee is responsible for the administration of the
employee stock option plan.
(B) Business Experience and Principal Occupations of Directors and
Executive Officers During Past Five Years
The following is a brief account of the business experience of each of
the Company's executive officers and directors during the past five years.
Robert E. Brennan has been principally engaged for the past five years
as the sole stockholder (and until September, 1986, as Chief Executive Officer
and Chairman of the Board) of the investment banking firm of First Jersey
Securities, Inc. ("First Jersey"). He is presently also a director of First
Jersey. Mr. Brennan is also the controlling stockholder and a director of FJS
Properties, Inc., the Managing General Partner of FJS Properties Fund I, LP, a
publicly owned limited partnership formed to acquire, own and operate real
estate investments. Mr. Brennan was elected a director and Chairman of the
Board of the Company in December, 1982 and Chief Executive Officer in April of
1988. Mr. Brennan is Chairman of the Board of Regents of Seton Hall
University.
Arthur Winkler is an attorney who served as an Assistant Commissioner of
the New Jersey Department of Education from March, 1979, until August, 1980
and as House Counsel at the New Jersey Sports and Exposition Authority (The
Meadowlands) from August, 1980, until July, 1983. He joined the Company in
July, 1983 and served as Director of Administration for the Garden State Park
subsidiary until his resignation in October, 1986. In October, 1986 Mr.
Winkler became President and Chief Executive Officer of Winkler Capital
Management, Inc., Lawrenceville, New Jersey. He currently retains this
position although that company is no longer actively conducting business. In
May 1987, Mr. Winkler became an associate of the Flemington, N. J. law firm of
Schaff, Motiuk, Gladstone, Moeller and Ligorano. In March, 1988, when Mr.
Winkler rejoined the Company, he resigned as an associate of the law firm and
became "of counsel" to said law firm. That relationship terminated on November
1, 1990. He was elected Director of the Company in September, 1987 and Vice
President and Chief Operating Officer of the Company in April, 1988. Effective
July 1992, Mr. Winkler succeeded Robert J. Quigley as President of the Company
as well as its Garden State Park subsidiary.
William H. Warner is a certified public accountant and was employed as
an audit manager by Mortenson and Associates, P.C., the Company's auditors,
for the five years preceding his joining the Company in September, 1983.
Christopher C. Castens is an attorney who was admitted to practice law
in 1978. He had served as house counsel and assistant to the executive vice
president of Harness Tracks of America for five years prior to joining the
Company in December, 1986 as house counsel.
Dr. Charles R. Dees, Jr. is currently Vice President of Institutional
Advancement at Fairleigh Dickinson University. Dr. Dees had been principally
engaged during the preceding five years as Vice Chancellor for University
Affairs at Seton Hall University in South Orange, New Jersey. He is not
actively engaged in the business of the Company.
Joseph K. Fisher has been principally engaged for the past five years as
President and Chief Executive Officer of Fisher and Company, a New York City
advertising agency. He is not actively engaged in the business of the
Company.
Kerry B. Fitzpatrick was principally engaged as chief executive of
Southlake (NJ) Thoroughbred Services, a thoroughbred management and consulting
firm and as managing general partner of the Southlake (NJ) Stable, a
thoroughbred racing stable, in 1980 prior to his election as President and
Chief Executive Officer of the Company. Mr. Fitzpatrick was elected to the
Board of Trustees of the Pennsylvania Horse Breeders Association for a three
year term commencing May of 1986. Mr. Fitzpatrick devoted all of his working
time to the business of the Company until his resignation as President and
Chief Executive Officer in the third quarter of fiscal 1988 for medical
reasons. He continues to serve as a Director of the Company and is on a paid
disability leave of absence but remains available to the Company for
consultation.
Robert J. Quigley was General Manager-Racing for the New Jersey Sports
and Exposition Authority (The Meadowlands) for more than the preceding five
years until May, 1983 when he commenced to serve on a full-time salaried basis
as Vice President of the Company and President and Chief Executive Officer of
its Garden State Park subsidiary. He was also the President and Chief
Executive Officer of the Company's subsidiaries which owned and operated
Philadelphia Park. In April, 1988, Mr. Quigley was elected President of the
Company. Effective July 1992, Mr. Quigley resigned his positions to become
president and chief operating officer of Retama Park Association, Inc.,
engaged in constructing a new racetrack facility in San Antonio, Texas. Mr.
Quigley continues to serve as a member of the Company's board of directors.
Ronald J. Riccio is currently Dean of the School of Law at Seton Hall
University, a position he assumed effective July 1, 1988. He was principally
engaged for the preceding five years as a practicing attorney and a member of
the New Jersey law firm of Robinson, Wayne, Levin, Riccio and LaSala. He is
not actively engaged in the business of the Company.
ITEM 11 - EXECUTIVE COMPENSATION
(A) Cash Compensation of Officers and Directors
The following tables disclose compensation received for the three fiscal
years ended June 30, 1994 by the Company's President at the end of the 1994
fiscal year and each executive officer of the Company at the end of the 1994
fiscal year whose aggregate cash compensation in fiscal 1994 exceeded $100,000
(all such executive officers, including the President, are collectively
referred to herein as the "Named Executive Officers").
Summary Compensation Table
Annual Compensation
Name and Long-Term All Other
Principal Position Year Salary Bonus Compensation Compensation
($) ($) Awards ($)(b)
Options/SARs
(#)
Arthur Winkler 1994 141,827 0 0 9,627
President 1993 125,000 0 0 9,408
1992 100,449 0 0 7,882
(a) In June 1994, Mr. Winkler was awarded options to purchase 275,000 shares
of common stock. These options are subject to shareholder approval which is
expected to be sought during fiscal 1995.
(b) Consists of life insurance premiums paid by the Company with respect to
certain term life insurance payable on the officer's death to beneficiaries
designated by him and further, includes amounts contributed by the Company to
the officer's account under the Company's 401(k) plan. Amounts attributable to
such term life insurance are as follows:
1994 $ 1,764
1993 $ 1,764
1992 $ 1,764
Amounts contributed by the Company to the Company's 401(k) plan on
behalf of the named executive officer are as follows:
1994 $ 7,863
1993 $ 7,644
1992 $ 6,118
Compensation of Directors
For the fiscal year ended June 30, 1994, the Company paid $25,000 in
directors fees to each of four directors, namely Mr. Quigley, Dr. Dees and
Messrs. Fisher, and Riccio.
(B) Employees Retirement Plan
During fiscal 1985, the Company adopted an employee retirement and
savings profit sharing plan for its non-union employees (as of June 30, 1993
approximately 70) pursuant to Section 401(k) of the Internal Revenue Code. The
Company made a contribution with respect to fiscal 1993 and 1994 of $148,897
and $126,159, respectively.
The Company's basic contribution under the Plan is 4% of each covered
employee's compensation for such calendar year. In addition, commencing in
fiscal 1986, the Company contributed up to an additional 50% of the first 4%
of compensation contributed by any covered employee to the Plan (or up to an
additional 2% of compensation). Funds in the Plan become fully vested in six
years or in the event of the employee's death and can be withdrawn upon early
retirement (attainment of age 59 1/2 and completion of 10 years of service),
normal retirement (attainment of age 65) or separation from the Company.
(C) Other Compensation
See PART III, ITEM 13 - "Certain Relationships and Related Transactions"
for information on other related party activity.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 30, 1994, the number of
shares of the Company's Common Stock and Series A Preferred Stock owned
beneficially to the knowledge of the Company, by each beneficial owner of more
than 5% of such Common Stock and Series A Preferred Stock, by each director
owning shares and by all Officers and Directors of the Company as a group. The
percentages have been calculated on the basis of treating as outstanding for
purposes of computing the percentage ownership of a particular individual, all
shares of the Company's Common Stock or Series A Preferred Stock outstanding
as of such date. A convertibility provision with respect to the preferred
stock expired on July 31, 1993.
Series A Convertible
Common Stock Preferred Stock
Amount and Amount and
Nature of Nature of
Name and Address Beneficial Percent Beneficial Percent
Beneficial Owner Ownership of Class Ownership of Class
5% Owners
Robert J. Quigley 4,329,846 shs 45.3% 0 0
Retama Park (1)(2)
P.O. Box 600
San Antonio, TX 78292
Robert E. Brennan 4,324,016 shs 45.3% 0 0
50 Broadway (2)
New York, NY 10004
Ronald Riccio 1,090,731 shs 11.4% 0 0
Seton Hall University (3)
Newark, NJ 07102
Other Directors
Joseph K. Fisher 800 shs -% 0 0
Kerry B. Fitzpatrick 1,274 shs -% 0 0
Arthur Winkler 121 shs -% 0 0
All Officers and
Directors as a Group 5,423,096 shs 56.8% 0 0
(1)(2)(3)(4)
(1) Includes 5,830 shares of Common Stock which are owned of record and
beneficially by Mr. Quigley.
(2) Includes 4,324,016 shares of Common Stock owned of record by Robert
E. Brennan. Mr. Brennan has given Mr. Quigley an irrevocable proxy expiring on
December 31, 1994 to vote such shares, and has also agreed not to sell,
assign, hypothecate, pledge or transfer any of such shares during the period
the proxy is in effect without Mr. Quigley's consent.
(3) Includes 1,090,731 shares of Common Stock which are owned of record
by Mr. Riccio as the sole trustee of The Family Investment Trust. The grantor
of the Trust is Mr. Brennan and the sole beneficiaries are the three adult
sons of Mr. Brennan. Mr.Brennan disclaims beneficial ownership of the shares
owned by The Family Investment Trust.
(4) Includes 324 shares of Common Stock owned of record and beneficially
by two officers.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A company operated by the family of Kevin Quigley, son of Robert J.
Quigley, former President and Director of the Company, maintains the stable
area cafeteria and stable area refreshment stand in the recreation hall at
Garden State Park making food and beverage service available for purchase by
stable employees. Although Kevin Quigley's company has made investments in the
smallwares and some equipment and pays all direct costs in connection with
such operations, it uses kitchen equipment permanently installed and owned by
Service America at a cost of approximately $445,000, without charge. (Title to
this equipment will automatically pass to Garden State Park in the year 2000).
These facilities provide three meals per day at prices that are below the
outside market prices for the benefit of licensed stable area employees in a
restrictive area not opened to the public. These facilities are required to
promote good relationships with the horsemen. These operations are customary
for racetracks in the industry. The Company believes these arrangements are in
its best interest as it believes it is the most economical method to service
the stable employees at the track without significant expense or risk to the
Company. Effective August 18, 1992, Kevin Quigley became an employee of Garden
State Park and devotes 100% of his time to this position.
In management's opinion, the Company's transactions with related parties
as described in this section were in the Company's best interests and were
made on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(A) Exhibits
Exhibit Incorporated by
Number Description of Exhibit Reference to
9.1 Robert E. Brennan irrevocable proxy
through December 31, 1994 to Robert J.
Quigley.
11.1 Computation of Earnings per Share
22 Subsidiaries - The following table indicates the wholly
owned subsidiaries of International Thoroughbred
Breeders, Inc. and their states of incorporation. All of
such subsidiaries are wholly owned.
State of
Name Incorporation
International Thoroughbred Breeders Management, Inc. New Jersey
Olde English Equine Insurance Agency, Inc. New Jersey
Garden State Race Track, Inc. New Jersey
Colonial Racing Club, Inc. Pennsylvania
Philadelphia Turf Club, Inc. Pennsylvania
International Thoroughbred Gaming Development, Corporation New Jersey
(B) Financial Statements
Report of independent certified public accountants.
Consolidated Balance Sheets as of June 30, 1994 and 1993.
Consolidated Statements of Operations for the Years Ended June 30, 1994,
1993 and 1992.
Consolidated Statements of Shareholders' Equity for the Years Ended June
30, 1994, 1993 and 1992.
Consolidated Statements of Cash Flows for the Years Ended June 30, 1994,
1993 and 1992.
Notes to Financial Statements.
Report of Independent Certified Public Accountants on Supplementary
Schedules.
Supplementary Schedules.
(C) Reports on Form 8-K
The Company did not file any reports on Form 8-K with respect to the
quarter ended June 30, 1994.
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, ROBERT E. BRENNAN,
a Stockholder of INTERNATIONAL THOROUGHBRED BREEDERS, INC., a Delaware
corporation ("ITB"), does hereby constitute and appoint ROBERT J. QUIGLEY as
his true and lawful agent and proxy, to vote for the undersigned in the
undersigned's place and stead with respect to all shares of ITB's common stock
presently owned by the undersigned as well as any shares of ITB's common stock
which may be purchased or in any manner acquired by the undersigned hereafter
to December 31, 1994 with respect to all matters upon which the undersigned
may vote or otherwise act as a Stockholder of ITB.
The undersigned acknowledges that this proxy is coupled with an interest
in ROBERT J. QUIGLEY, that this proxy shall be irrevocable from the date
hereof through the close of business on December 31, 1994 and is binding upon
the undersigned, his heirs and distributees.
The undersigned hereby represents that he presently is the owner of
4,324,016 shares of ITB common stock and that he will not prior to the close
of business on December 31, 1994, sell, assign, hypothecate, pledge or
transfer any of said shares of ITB common stock he presently owns, or any
additional shares of ITB common stock purchased, or in any other manner
acquired by the undersigned hereafter and prior to said date, without your
prior written consent.
IN WITNESS WHEREOF, the undersigned has placed his hand and seal as of
the 30th day of June, 1994.
By/s/Robert E. Brennan
Robert E. Brennan
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
EXHIBIT 11.1
EARNINGS (LOSS) PER SHARE
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
1994 1993 1992
Average shares outstanding disregarding
dilutive outstanding stock options,
and preferred shares during each year 9,547,900 8,950,025 4,868,001
Dilutive stock options --- 0 0
Assumed conversion of
Series A Convertible Preferred Stock --- --- ---
Shares Outstanding 9,547,900 8,950,025 4,868,001
Net Income (Loss) $ 2,500,596 $ (29,410,166)$ (6,466,152)
Net Income (Loss) per Share $ 0.26 $ (3.29)$ (1.33)
This computation is submitted in accordance with Regulation S-K,
Item 601(b)(11)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
(Registrant)
By/s/Arthur Winkler
Arthur Winkler, President and
Director
Date: September 6, 1994
By/s/William H. Warner
William H. Warner, Treasurer, Principal
Financial Officer and Accounting Officer
Date: September 6, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By/s/Robert E. Brennan By/s/Arthur Winkler
Robert E. Brennan, Chairman of Arthur Winkler, President
the Board and Chief Executive and Director
Officer
Date: September 6, 1994
Date: September 6, 1994
By/s/Charles R. Dees, Jr. By/s/Ronald J. Riccio
Charles R. Dees, Jr., Director Ronald J. Riccio, Director
Date: September 6, 1994 Date: September 6, 1994
By/s/Joseph K. Fisher By/s/Robert J. Quigley
Joseph K. Fisher, Director Robert J. Quigley, Director
Date: September 6, 1994 Date: September 6, 1994
By/s/Kerry B. Fitzpatrick
Kerry B. Fitzpatrick, Director
Date: September 6, 1994