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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
(Mark One)
(X) Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (fee required) or
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required)
For the fiscal year ended March 31, 1995 Commission File Number 0-1607
MID-STATE RACEWAY, INC.
(Exact name of registrant as specified in its charter)
New York State 15-0555258
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
VERNON, NEW YORK 13476
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - (315) 829-2201
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK $.10 PAR VALUE PER SHARE
(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 and (2) has been subject to the filing
requirements for the past 90 days.
Indicate by check mark if disclosure of delinquent files pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ____
YES X NO
--- ---
State the aggregate market value of the voting stock held by non-affiliates
of the registrant as of a specified date within 60 days prior to the date of
filing.
Class Outstanding at May 12, 1995
----- ---------------------------
COMMON STOCK $.10 PAR VALUE 250,386 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
Part(s) where incorporated
--------------------------
Proxy Statement of the registrant to be filed June 26, 1995 III
The total number of pages in this report is 24.
1
TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT - 1995
MID-STATE RACEWAY, INC.
Page
----
Part I
Item 1. Business.................................................. 3
Item 2. Properties................................................ 3
Item 3. Legal Proceedings......................................... 3
Item 4. Submission of Matters to a Vote of Security Holders....... 3
PART II
Item 5. Market for the Registrant's Common Stock and Related
Security Holder Matters............................ 4
Item 6. Selected Financial Data................................... 5-6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 7-8
Item 8. Financial Statements and Supplementary Data............... 9
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 22
PART III
Item 10. Directors and Executive Officers of the Registrant....... 22
Item 11. Executive Compensation................................... 22
Item 12. Security Ownership of Certain Beneficial Owners and
Management......................................... 22
Item 13. Certain Relationships and Related Transactions........... 22
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K........................................... 20-22
2
PART I
Item 1. Business.
(a) Mid-State Raceway, Inc., known as Vernon Downs in Vernon, New York, is
licensed under and subject to the regulations of the Pari-Mutuel Revenue Law and
supervision of the New York Racing and Wagering Board to conduct harness racing
at its track and to simulcast racing from other tracks.
(b) The company is engaged in one business segment.
(c) Generally, Mid-State Raceway is not in competition with other harness
racing tracks in New York State for patrons. A thoroughbred race track, which
conducts a day-time racing meet is located about 110 miles from Vernon, New
York, and competes to some extent for the Vernon Downs customers primarily on
weekend dates.
Increased off-track wagering on thoroughbred and harness racing due to a
live television signal being sent into OTB shops in Central New York; the New
York State Lottery and the opening in July 1993, of the Oneida Indian Nation's
Turning Stone gaming casino, approximately 7 miles away in Verona, New York,
were the principal causes to affect Vernon's on-track daily averages of handle
and attendance.
Competition for good horses with the resultant attractive racing programs,
has increased in recent years, particularly from the metropolitan New York - New
Jersey area. However, entries in Vernon Downs early closing and stake events
continue at prior years' levels in both the number and quality of horses.
The Company employed 283 persons during the last fiscal year, of which 203
were engaged for the harness racing season only.
Item 2. Properties.
The Racing Plant is located in Vernon, Oneida County, New York. Since the
opening of the plant and related facilities in 1953, the Company has maintained
a policy of continuously improving and modernizing its facilities. In fiscal
1995 $593,000 was expended for equipment and renovations to the plant.
The plant can accommodate approximately 14,000 patrons, which includes
seating for 2,000 in the Grandstand and 1,700 in the Clubhouse. There are
parking facilities for approximately 5,900 automobiles.
The track is a 3/4 mile oval stone dust track with a 1/4 mile chute. The
track is illuminated by a metal-halide and quartz lighting system. Most races
are for a distance of one mile. The stables accommodate approximately 1,000
horses and are located adjacent to three exercise tracks and the main track.
Item 3. Legal Proceedings.
Mid-State Raceway is not involved in any legal proceedings, therefore, this
item is not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders.
There are no matters that were submitted during the fourth quarter
requiring a vote of securities holders, therefore, this item is not applicable.
3
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters.
(a) Price Range of Common Stock
The following table shows the range of closing bid prices for the Common
Stock in the over-the-counter market for the calendar quarters
indicated. The prices are based upon local quotes only, as the stock is
not listed or reported by NASDAQ.
Bid Prices
Year Ended March 31
-------------------------------
1995 1994
Low-High Low-High
---------- ----------
First Quarter ..................... $17.50-20.50 $17.25-21
Second Quarter .................... 19-19 17-23
Third Quarter ..................... 19-21 17.50-18
Fourth Quarter .................... 16-22 17.50-21
(b) Approximate Number of Equity Security Holders
Title of Class Number of Record Holders
-------------- ------------------------
Common stock, $.10 555
par value per share
(c) Dividends
Dividends Paid
Year Ended March 31,
----------------------
1995 1994
---- ----
First Quarter
Second Quarter ................ $.10
Third Quarter
Fourth Quarter ................ $.10
There are no restrictions on the payment of dividends on the Company's
Common Stock. Future payment of dividends will be within the discretion
of the Company's Board of Directors and will depend on earnings, capital
requirements and the operating and financial condition of the Company.
4
Item 6. Selected Financial Data
Years Ended March 31,
----------------------------------------------------------
OPERATING RESULTS 1995 1994 1993 1992 1991
Number of racing days 155 137 146 155 155
Operating revenues:
Pari-mutuel commissions and breakage .......... $7,415,272 $7,174,657 $7,741,035 $8,030,157 $8,361,381
---------- ---------- ---------- ---------- ----------
Less payments to New York State ............... 543,773 609,281 602,663 672,563 725,397
Breaders' Fund ................................ 267,838 234,553 266,416 302,700 320,651
Purses ........................................ 320,981 363,010 418,211 490,004 532,675
---------- ---------- ---------- ---------- ----------
1,132,592 1,206,844 1,287,290 1,465,267 1,578,723
---------- ---------- ---------- ---------- ----------
Net pari-mutuel commissions and breakage ........ 6,282,680 5,967,813 6,453,745 6,564,890 6,782,658
Admissions ...................................... 240,667 251,313 232,956 300,533 371,192
Concessions and other revenues .................. 1,134,225 982,459 846,758 954,698 1,007,236
---------- ---------- ---------- ---------- ----------
Total operating revenues .................... 7,657,572 7,201,585 7,533,459 7,820,121 8,161,086
---------- ---------- ---------- ---------- ----------
Operating expenses:
Purses ........................................ 2,583,262 2,239,368 2,366,657 2,479,171 2,948,465
Other ......................................... 5,980,559 5,781,239 5,520,993 5,588,840 5,467,708
---------- ---------- ---------- ---------- ----------
Total operating expenses .................... 8,563,821 8,020,607 7,887,650 8,068,011 8,416,173
---------- ---------- ---------- ---------- ----------
Income (loss) from operations ............... (906,249) (819,022) (354,191) (247,890) (255,087)
---------- ---------- ---------- ---------- ----------
Other income:
Commission for capital improvements ........... 192,488 199,735 205,256 231,818 246,858
Investment income ............................. 30,380 107,216 140,006 170,493 202,024
---------- ---------- ---------- ---------- ----------
Total other income .......................... 222,868 306,951 345,262 402,311 448,882
---------- ---------- ---------- ---------- ----------
Income (loss) before taxes on income ........ (683,381) (512,071) (8,929) 154,421 193,795
Provision (credit) for taxes on income .......... (11,770) (199,871) (19,690) 16,229 13,724
---------- ---------- ---------- ---------- ----------
Income (loss) before cumulative effect ...... (671,611) (312,200) 10,761 138,192 180,071
Cumulative effect ............................... (100,000)
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) ........................... $ (671,611) $ (412,200) $ 10,761 $ 138,192 $ 180,071
========== ========== ========== ========== ==========
Per share of common stock:
Income (loss) before cumulative effect* ....... ($ 2.68) ($ 1.25) $ 0.04 $ 0.55 $ 0.71
Net income (loss)* ............................ ($ 2.68) ($ 1.65) $ 0.04 $ 0.55 $ 0.71
Cash dividends ................................ $ 0.00 $ 0.20 $ 0.65 $ 0.80 $ 0.95
Shareholders' equity .......................... $11.47 $14.17 $16.02 $16.64 $16.89
- --------
* Based upon weighted average shares outstanding
5
Item 6. Selected Financial Data (Continued)
Years Ended March 31,
----------------------------------------------------------
FINANCIAL CONDITION 1995 1994 1993 1992 1991
Number of racing days 155 137 146 155 155
Current assets................................... $1,582,667 $1,808,156 $2,562,208 $2,239,383 $1,560,602
Marketable securities - due after one year....... 248,722 651,341 561,098 1,179,915 1,733,818
Net property, plant and equipment................ 2,018,003 2,125,328 1,776,458 1,776,076 1,950,806
Other assets..................................... 572,942 577,618 590,432 654,562 654,830
---------- ---------- ---------- ---------- ----------
$4,422,334 $5,162,443 $5,490,196 $5,849,936 $5,900,056
========== ========== ========== ========== ==========
Current liabilities.............................. $ 520,195 $ 582,391 $ 390,031 $ 511,802 $ 469,375
Non-current liabilities.......................... 1,030,857 1,031,304 1,089,140 1,150,305 1,147,143
Shareholders' equity............................. 2,871,282 3,548,748 4,011,025 4,187,829 4,283,538
---------- ---------- ---------- ---------- ----------
. $4,422,334 $5,162,443 $5,490,196 $5,849,936 $5,900,056
========== ========== ========== ========== ==========
TWO YEAR QUARTERLY COMPARISONS - PER SHARE
FOR THE FISCAL YEARS 1995 AND 1994
Dividends Paid
--------------- Low-High Bid Low-High Bid
Quarter Ended 1995 1994 1995 1994
---- ---- ------------- -----------
June 30 ............... $17.50-20.50 $17.25-21
September 30 .......... $.10 19-19 17-23
December 31 ........... 19-21 17.50-18
March 31 .............. $.10 16-22 17.50-21
The Stock is traded in the over-the-counter market.
6
Item 7. Management's Discussion and Analysis of Results of Operations
Fiscal year 1995 as Compared to Fiscal Year 1994
During fiscal 1995, operating revenues increased by $455,987. A portion of
the increase is due to an additional 18 racing days during the year, while the
majority of the increase in revenues were substantially due to the addition of
wagering on full-card simulcasting of both in state and out of state harness
racing, in conjunction with the Company's live harness racing, beginning in
July.
Operating expenses increased by $457,462 from on-track harness racing and
$85,752 from simulcasting races as a guest track, for a total increase of
$543,214. The principal cause for these increases was the additional 18 days of
racing.
Several new developments were undertaken during the middle to later part of
the racing season which have had a positive impact on operations. Among them are
New York State's passing of the "Omnibus" Racing bill in July, 1994 which
produced two direct benefits for the Company. The bill reduced the New York
State pari-mutuel tax rate, effective September 1, 1994, saving the Company
approximately $86,000 during the seven month period ending March 31, 1995. The
bill also allows for full card out of state simulcasting, thus providing
additional products on which the track's patrons may wager.
In an effort to increase attendance and handle, the Company's marketing
plan has been changed to focus on a personalized, direct mail approach. The
efforts thus far have yielded positive results.
The Comfort Suites at Vernon Downs, a 175-room hotel located on the
Company's property, has been a benefit to operations. Since its opening in
October, 1994, the facility has provided a boost to on-track handle and
attendance through both wagering directly at the hotel and in rooms, as well as
providing the track with an additional source for patrons.
The operating results of fiscal 1995 have forced management to continue to
focus on reduction of operating expenses. The race dates for the 1995 racing
season have been rearranged to eliminate certain dates which have historically
proven to be unprofitable and replaced them with weekend racing in the early
fall and late winter. The grandstand was closed during the fall of 1994 and the
winter of 1995, significantly reducing the related expenses. The opening of the
grandstand in only the "Summer Season" is expected to continue to provide
similar benefits in the future.
Fiscal Year 1994 as Compared with Fiscal Year 1993
During fiscal 1994, operating revenues declined $217,682 from on-track
harness facing and $114,192 from simulcasting races as a guest track for a total
net decrease of $331,874. Increased off-track wagering on thoroughbred and
harness racing, due to a live television signal being sent into
Off-Track-Betting shops in Central New York: the New York State Lottery and the
opening in July 1993 of the Oneida Indian Nations Turning Stone gaming casino,
approximately seven (7) miles away in Verona, New York, were the principal
causes for this decline.
Operating expenses increased by $70,897 from on-track harness racing and
$62,060 from simulcasting races as a guest track for a total increase of
$132,957. The principal causes were increases in advertising costs, employee
health, welfare and retirement expenses, real estate and payroll taxes, heat,
light, power and water costs, and the cost of up-linking our races to Off-Track
Betting shops and other race tracks.
7
In an effort to increase attendance at the track, the Company during the
fiscal year ending March 31, 1995, has continued with many of the same
promotions which were successful last year: Namely, Winners Circle passes,
obtaining corporate sponsors of races and participation in the United States
Trotting Association marketing and advertising promotions. Vernon Downs
continues to up-link and send their races to off-track betting shops and other
tracks, and will continue simulcasting of thoroughbred and other harness racing
on a year-round basis. The above promotions, together with the simulcasting and
the construction of a Comfort Suites hotel on the track grounds, should
contribute to better results for fiscal 1995. In addition, we are hopeful in
obtaining passage of new legislation to reduce the State tax on pari-mutuel
wagering and for approval to operate a simulcast teletheater in Syracuse, New
York which would improve future operations.
Liquidity and Capital Resources
Anticipated cash flows from operations, and proceeds from investing
activities are expected to provide adequate funds to support future financing
activities. The Company continues to maintain a favorable working capital
position with a current ratio of three to one.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There were no changes in or disagreements with accounting and financial
disclosure, therefore, this item is not applicable.
8
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Mid-State Raceway, Inc.
We have audited the accompanying balance sheets of MID-STATE RACEWAY, INC.
as of March 31, 1995 and 1994, and the related statements of income,
shareholders' equity and cash flows for each of the three years ended March 31,
1995, 1994 and 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
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 financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mid-State Raceway, Inc. as
of March 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years ended March 31, 1995, 1994 and 1993, in conformity
with generally accepted accounting principles.
As described in the notes to the financial statements, the Company changed
its accounting for investments in certain securities in 1995, and its accounting
for income taxes in 1994.
COOPERS & LYBRAND L.L.P.
Syracuse, New York
May 12, 1995
9
MID-STATE RACEWAY, INC.
BALANCE SHEETS
MARCH 31, 1995 AND 1994
-----------
ASSETS 1995 1994
----------- -----------
Current assets
Cash ................................................. $ 619,662 $ 326,185
Cash segregated for payment of purses ................ 240,893 275,773
Marketable securities ................................ 394,964 804,003
Accounts receivable .................................. 145,481 122,060
Prepaid insurance, taxes and other expenses .......... 162,339 167,494
Income tax refundable ................................ 19,328 112,641
----------- -----------
Total current assets ................................. 1,582,667 1,808,156
Marketable securities - due after one year ............. 248,722 651,341
----------- -----------
Properties
Land, racing plant and equipment ..................... 12,062,906 11,930,766
Other properties ..................................... 121,672 121,672
----------- -----------
12,184,578 12,052,438
Less accumulated depreciation ........................ 10,166,575 9,927,110
----------- -----------
2,018,003 2,125,328
Deferred income taxes .................................. 447,661 429,311
Other assets ........................................... 125,281 148,307
----------- -----------
$ 4,422,334 $ 5,162,443
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable ..................................... $ 249,134 $ 280,806
Current deferred retirement expense .................. 114,168 104,385
Early closing and stake events purse funds ........... 156,893 197,200
----------- -----------
Total current liabilities ............................ 520,195 582,391
Deferred retirement expense ............................ 946,857 952,731
Future stake events purse funds ........................ 84,000 78,573
----------- -----------
1,551,052 1,613,695
----------- -----------
Shareholders' equity
Common stock, par value $.10 per share at
March 31, 1995; $1.00 per share at
March 31, 1994; authorized 10,000,000
shares at 3/31/95; authorized 612,000
shares at 3/31/94; 250,386 shares
issued and outstanding in 1995 and 1994 ............ 25,039 250,386
Additional paid-in-capital ............................ 225,347
Retained earnings .................................... 2,626,751 3,298,362
Unrealized loss on marketable securities ............. (5,855)
----------- -----------
Total shareholders' equity ........................... 2,871,282 3,548,748
----------- -----------
$ 4,422,334 $ 5,162,443
=========== ===========
The accompanying notes are an integral part of the financial statements.
10
MID-STATE RACEWAY, INC.
STATEMENTS OF INCOME
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
-----------
1995 1994 1993
---------- ---------- ----------
155 137 146
Racing Days Racing Days Racing Days
Operating revenues
Net pari-mutuel commissions
and breakage from wagering
Vernon Downs harness ......................... $3,014,863 $3,250,150 $3,704,632
Off-track betting ............................ 1,468,874 1,481,915 1,407,755
Simulcasting ................................. 1,798,943 1,235,748 1,341,358
---------- ---------- ----------
6,282,680 5,967,813 6,453,745
Admissions ....................................... 240,667 251,313 232,956
Concessions ...................................... 456,715 508,839 694,112
Corporate sponsors ............................... 548,028 333,170
Other revenues ................................... 129,482 140,450 152,646
---------- ---------- ----------
Total operating revenues .................... 7,657,572 7,201,585 7,533,459
---------- ---------- ----------
Operating expenses
Purses ........................................... 2,583,262 2,239,368 2,366,657
Payroll .......................................... 1,897,334 2,005,496 1,965,627
Taxes, other than income ......................... 394,347 422,803 364,648
Outside services and rentals ..................... 672,252 566,190 559,756
Utilities ........................................ 403,292 398,557 387,032
Simulcasting expenses ............................ 788,405 768,868 738,518
Depreciation ..................................... 254,794 231,401 212,527
Other expenses ................................... 1,570,135 1,387,924 1,292,885
---------- ---------- ----------
Total operating expenses .................... 8,563,821 8,020,607 7,887,650
---------- ---------- ----------
Loss from operations ........................ (906,249) (819,022) (354,191)
---------- ---------- ----------
Other income
Commissions for capital improvements ............. 192,488 199,735 205,256
Investment income ................................ 30,380 107,216 140,006
---------- ---------- ----------
Total other income .......................... 222,868 306,951 345,262
---------- ---------- ----------
Loss before provision for federal and state
income taxes .............................. (683,381) (512,071) (8,929)
---------- ---------- ----------
Provision (credit) for federal and state income taxes
Currently payable ................................ 2,676 (113,871) (40,749)
Deferred ......................................... (14,446) (86,000) 21,059
---------- ---------- ----------
(11,770) (199,871) (19,690)
---------- ---------- ----------
(Continued)
11
MID-STATE RACEWAY, INC.
STATEMENTS OF INCOME (Continued)
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
-----------
1995 1994 1993
--------- -------- --------
155 137 146
Racing Days Racing Days Racing Days
Income (loss) before cumulative effect
of accounting principle change ................... ($671,611) ($312,200) $ 10,761
Cumulative effect of accounting
principle change for income taxes ................ (100,000)
--------- -------- --------
NET INCOME (LOSS) .......................... ($671,611) ($412,200) $ 10,761
========= ======== ========
Earnings per weighted average share:
Income (loss) before cumulative effect ........... ($2.68) ($1.25) $0.04
Cumulative effect ................................ (.40)
--------- -------- --------
NET INCOME (LOSS) .......................... ($2.68) ($1.65) $0.04
===== ===== =====
Cash dividends per share ........................... $0.00 $0.20 $0.65
===== ===== =====
The accompanying notes are an integral part of the financial statements.
12
MID-STATE RACEWAY, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
-----------
Common Stock
Issued and Unrealized
Outstanding Additional Loss on
--------------------- Paid-In- Retained Marketable
Shares Amount Capital Earnings Securities Total
------- -------- ---------- ---------- ---------- ----------
Balance at March 31, 1992 ........... 251,692 $251,692 $3,936,137 $4,187,829
Net income for the year ............. 10,761 10,761
Cash dividends ...................... (162,751) (162,751)
Purchase of common stock ............ (1,306) (1,306) (23,508) (24,814)
------- -------- ---------- ----------
Balance at March 31, 1993 ........... 250,386 250,386 3,760,639 4,011,025
Net loss for the year ............... (412,200) (412,200)
Cash dividends ...................... (50,077) (50,077)
------- -------- ---------- ----------
Balance at March 31, 1994 ........... 250,386 250,386 3,298,362 3,548,748
Unrealized loss on marketable
securities upon adoption of
SFAS No. 115 on April 1, 1994
(see Note 1) ...................... $(3,468) (3,468)
Net loss for the year ............... (671,611) (671,611)
Increase in unrealized loss
on marketable securities .......... (2,387) (2,387)
Effect of change in common stock
par value to $.10 per share from
$1.00 per share ................... (225,347) $225,347
------- -------- -------- ---------- ------- ----------
TOTAL AT MARCH 31, 1995 ......... 250,386 $ 25,039 $225,347 $2,626,751 $(5,855) $2,871,282
======= ======== ======== ========== ======= ==========
13
MID-STATE RACEWAY, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1995, 1994 AND 1993
-----------
1995 1994 1993
----------- ----------- -----------
155 137 146
Racing Days Racing Days Racing Days
Cash flows from operating activities
Net income (loss) ....................................... ($ 671,611) ($ 412,200) $ 10,761
---------- ---------- --------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation ........................................ 254,794 231,401 212,527
Net amortization/accretion of marketable
securities ........................................ 1,826 ( 181) ( 11,324)
Deferred retirement expense ......................... 3,909 34,863 ( 61,840)
Deferred income taxes ............................... ( 14,446) 14,000 21,059
(Increase) decrease in segregated cash .............. 34,880 ( 5,848) 23,350
(Increase) decrease in accounts receivable .......... (23,421) ( 7,736) 29,116
(Increase) decrease in prepaid expenses ............. 5,155 38,066 ( 53,729)
(Increase) decrease in other assets ................. 23,026 (1,186) ( 12,081)
Increase (decrease) in accounts payable ............. (31,672) 93,813 ( 42,594)
Increase (decrease) in purse funds .................. ( 34,880) 5,848 ( 23,350)
(Increase) decrease in federal and
New York State taxes on income ................... 93,313 ( 33,723) ( 41,630)
---------- ---------- --------
Total adjustments .................................... 312,484 369,317 39,504
----------- ---------- --------
Net cash provided by (used in) operating
activities ......................................... ( 359,127) ( 42,883) 50,265
----------- ---------- --------
Cash flows from investing activities
Proceeds from maturities of marketable securities ....... 1,249,715 2,703,487 568,963
Purchases of marketable securities ...................... ( 449,642) ( 1,883,194) ( 284,187)
Purchase of properties and equipment .................... ( 147,469) ( 580,271) ( 212,908)
----------- ---------- --------
Net cash provided by investing activities ............ 652,604 240,022 71,868
----------- ---------- --------
Cash flows from financing activities
Purchases of common stock ............................... ( 24,814)
Dividends paid .......................................... ( 50,077) ( 162,751)
---------- --------
Net cash used in financing activities ................ (50,077) ( 187,565)
---------- --------
Net increase (decrease) in cash and cash
equivalents ........................................ 293,477 147,062 ( 65,432)
Cash and cash equivalents at beginning of year ............ 326,185 179,123 244,555
----------- ---------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR ............. $ 619,662 $ 326,185 $179,123
=========== ========== ========
Supplemental disclosures of cash flow information
Cash paid (received) during the year for:
Income taxes .......................................... ($ 92,000) ($ 80,000) $ 22,000
Gross change in net unrealized loss on
securities available for sale ....................... ( 9,759)
The accompanying notes are an integral part of the financial statements.
14
MID-STATE RACEWAY, INC.
NOTES TO FINANCIAL STATEMENTS
-----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Marketable Securities
Effective April 1, 1994 the Company adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities. As required by this pronouncement, the
Company has classified its investments in securities as
held-to-maturity or available-for-sale. Held-to-maturity securities
are those for which the Company has the positive intent and ability to
hold to maturity, and are reported at cost, adjusted for amortization
of premiums and accretion of discounts. Securities not classified as
held-to-maturity are classified as available-for-sale and reported at
fair value, with net unrealized gains and losses reflected as a
separate component of shareholders' equity, net of the applicable
income tax effect. None of the Company's investment securities have
been classified as trading securities. The effect of this change in
accounting as of April 1, 1994 was to decrease investment securities
by $5,780 and shareholders' equity by $3,468, net of deferred taxes of
$2,312.
B. Properties
Properties are carried at cost less accumulated depreciation computed
by the straight-line and accelerated methods.
The estimated useful life of the various classes of assets on which
current provisions were based are as follows:
Land improvements ................ 5 to 20 years
Buildings and improvements ....... 10 to 40 years
Other structures ................. 15 to 31-1/2 years
Equipment ........................ 3 to 20 years
C. Retirement Plans
The Company sponsors a number of retirement plans that cover
substantially all employees. One group of union employees are covered
under an industry-wide union pension plan. The other group of union
employees are covered under a defined contribution individual account
retirement severance plan which is funded currently. The total
contribution under both plans for the years ended March 31, 1995, 1994
and 1993 amounted to $66,726, $89,298 and $95,678, respectively.
The remaining employees are covered by a defined contribution
currently funded individual account retirement plan or an unfunded
deferred compensation plan. The total expense charged to operations
for these plans amounted to $125,325, $63,527 and ($19,426) for the
respective years. The deferred compensation plan's projected benefit
obligation approximates the accrued liability.
15
MID-STATE RACEWAY, INC.
NOTES TO FINANCIAL STATEMENTS
-----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Earnings Per Share
Earnings per share of common stock has been calculated based on the
weighted average shares outstanding during each year. The weighted
average number of common shares outstanding was 250,386 during 1995
and 1994, and 250,451 during 1993.
E. Income Taxes
During fiscal 1994, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
Accordingly, the Company has changed its method of accounting for
income taxes from the deferred method used in prior years to the
method prescribed by SFAS No. 109. Under SFAS No. 109, deferred income
taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws
and statutory tax rates applicable to the periods in which the
differences are expected to effect taxable income. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is
the tax payable for the period and the change during the period in
deferred tax assets and liabilities. Prior years' financial statements
have not been restated for the accounting change (see Note 3).
F. Revenue Recognition
With the exception of Off Track Betting revenue the Company recognizes
most revenue for commissions and wagering, corporate sponsors,
admissions, and commissions for capital improvements when the related
racing event is run. Off Track Betting - out of region commissions are
recognized as received. Investment income is recognized on the accrual
basis.
G. Cash Flows
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, cash in banks, money market funds, certificates
of deposit and repurchase agreements with original maturities of not
more than ninety days.
H. Par Value of Common Stock
The Company decreased its common stock par value from $1.00 at
March 31, 1994 to $.10 per share at March 31, 1995. The Company also
increased shares authorized from 612,000 at March 31, 1994 to
10,000,000 shares at March 31, 1995.
16
MID-STATE RACEWAY, INC.
NOTES TO FINANCIAL STATEMENTS
-----------
2. PROPERTIES
Properties at March 31 consisted of the following:
1995 1994
----------- -----------
Land, racing plant and equipment
Land ............................... $ 77,802 $ 77,802
Land improvements .................. 929,931 927,215
Buildings and improvements ......... 5,682,906 5,666,117
Race plant structures .............. 1,235,065 1,212,892
Equipment .......................... 4,125,556 4,035,094
Construction in progress ........... 11,646 11,646
----------- -----------
12,062,906 11,930,766
Other properties
Land ............................... 121,672 121,672
----------- -----------
Total properties ............... 12,184,578 12,052,438
Less accumulated depreciation ...... 10,166,575 9,927,110
----------- -----------
$ 2,018,003 $ 2,125,328
=========== ===========
3. INCOME TAXES
In fiscal year 1994, the Company adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. Under the provisions of
SFAS No. 109, the Company elected not to restate prior years and has
determined that the cumulative effect was a reduction in previously
provided deferred tax assets of $100,000. The effect of the change was not
material to fiscal 1994.
The types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that give rise to a
significant portion of the deferred tax liability and deferred tax asset
and their approximate tax effects are as follows at March 31, 1995 and
1994:
1995 1994
-------------------------- --------------------------
Temporary Tax Temporary Tax
Difference Effect Difference Effect
---------- ------ ---------- ------
Deferred compensation ................... $1,061,000 $394,701 $1,057,000 $394,261
Net operating loss carryforwards ........ 848,000 288,000 191,000 65,000
Earnings of unconsolidated
subsidiaries .......................... ( 41,000) ( 15,212) ( 64,000) ( 23,872)
Miscellaneous ........................... 8,000 3,172 (16,000) ( 6,078)
---------- -------- ---------- --------
1,876,000 670,661 1,168,000 429,311
Less valuation allowance ................ ( 223,000)
---------- -------- ---------- --------
$1,876,000 $447,661 $1,168,000 $429,311
========== ======== ========== ========
17
MID-STATE RACEWAY, INC.
NOTES TO FINANCIAL STATEMENTS
-----------
3. INCOME TAXES (Continued)
The Company owns certain assets whose market values are significantly
greater than their book values. The Company has not recorded a valuation
allowance against certain of its deferred tax assets on the basis of its
available tax planning strategies including the potential for sale of the
above noted assets at gains significant enough to enable realization of
certain tax benefits. The net operating loss carryforward will expire on
March 31, 2009.
A reconciliation of the provision for income taxes to the statutory amount
is as follows:
Year Ended March 31
-------------------------------------------------------------------
1995 1994 1993
----------------- ----------------- -------------------
Amount % Amount % Amount %
-------- ---- -------- ---- -------- -----
Statutory federal income tax ........ ($232,000) (34.0) ($174,104) (34.0) ($ 3,035) ( 34.0)
Variances from statutory rate
Add state income tax, net
of federal tax benefit .......... 4,800 0.7 ( 3,000) 0.6) 2,078 24.1
Operating loss carryfoward ........ 223,000 32.7
Prior year's tax .................. 7,000 1.0 10,263 114.9
Less reduction for
Tax exempt income ............... ( 4,000) ( 0.6) (13,600) ( 2.7) ( 28,388) (317.9)
Surtax credit ................... ( 3,973) ( 44.5)
Other ........................... ( 10,570) ( 1.5) ( 9,167) 1.7) 3,365 37.6
-------- ---- -------- ---- -------- -----
Effective tax rate .............. ($ 11,770) ( 1.7) ($199,871) (39.0) ($ 19,690) (219.8)
======== ==== ======== ==== ======== =====
4. MARKETABLE SECURITIES
As discussed more fully in Note 1, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" effective April 1, 1994.
The amortized cost, gross unrealized gains, gross unrealized losses, and
market values for current marketable securities and marketable securities
maturing in greater than one year at March 31, 1995 is as follows:
Gross Unrealized
Amortized ---------------------
Securities Held to Maturity Cost Gain Loss Market
--------------------------- --------- -------- --------- --------
Municipal bonds ............. $394,965 $ -- $ 1,209 $393,756
-------- -------- -------- --------
Total held to maturity .... $394,965 $ -- $ 1,209 $393,756
======== ======== ======== ========
Gross Unrealized
Amortized ---------------------
Securities Held to Maturity Cost Gain Loss Market
--------------------------- --------- -------- --------- --------
Municipal bonds ............. $243,552 $ -- $ 12,630 $230,922
Other ..................... 14,929 2,871 -- 17,800
-------- -------- -------- --------
Total available for sale $258,481 $ 2,871 $ 12,630 $248,722
======== ======== ======== ========
18
MID-STATE RACEWAY, INC.
NOTES TO FINANCIAL STATEMENTS
-----------
4. MARKETABLE SECURITIES (Continued)
All available-for-sale securities mature between one and five years with
the exception of a security with an amortized cost of $11,000 which
approximates its market value and matures in the year 2000.
The carrying value and market values of the marketable securities portfolio
at March 31, 1994 is as follows:
Gross Unrealized
Amortized ----------------------
Cost Gain Loss Market
---------- ------- ------- ----------
Municipal bonds .................... $1,326,498 $14,358 $15,321 $1,325,535
Commercial Paper ................... 124,917 -- -- 124,917
Other .............................. 3,929 2,271 -- 6,200
---------- ------- ------- ----------
Total marketable securities ...... $1,455,344 $16,629 $15,321 $1,456,652
========== ======= ======= ==========
The carrying value and estimated market value of marketable securities at
March 31, 1995 by maturity are shown below:
Held to Maturity Available for Sale
----------------------- ------------------------
Estimated Estimated
Carrying Market Carrying Market
Value Value Value Value
-------- ---------- --------- ---------
Due in one year or less ................... $394,965 $393,756 $ 11,000 $ 11,000
Due between one through five years ........ 247,481 237,722
-------- -------- -------- --------
$394,965 $393,756 $258,481 $248,722
======== ======== ======== ========
Market value equals quoted market price, if available. If a quoted market
price is not available, market value is estimated using quoted market
prices for similar securities.
5. LEASES
The Company leases certain equipment for use during each racing season
including an agreement for pari-mutuel totalisator equipment and services.
A five-year agreement was reached in the year ended March 31, 1989 for the
racing seasons 1989 through 1993. The agreement was extended through 1995.
Under the agreement, the minimum daily charge for this equipment and
service is $1,500 for racing seasons 1989 through 1992, and $1,300 for
racing seasons 1993 through 1995.
The total rent expense for the years ended March 31, 1995, 1994 and 1993
amounted to $328,466, $298,236 and $313,351 of which $217,620, $197,532 and
$239,820 was paid on the totalisator contract for the respective years.
19
MID-STATE RACEWAY, INC.
NOTES TO FINANCIAL STATEMENTS
-----------
6. COMMISSION FOR CAPITAL IMPROVEMENTS
On July 26, 1983, legislation was passed permitting Upstate harness tracks
to apply for an increase of 1% of on-track regular and multiple bet pools
and 1/2 of 1% from OTB regular and multiple bet pools. Under the law and
subject to the approval of the New York State Racing and Wagering Board,
these additional funds must be used exclusively for capital improvements.
The Company elected to increase such commissions effective September 14,
1983. Expenditures for capital improvements through March 31, 1995 under
this program exceed total commissions received by $383,546 and are
recoverable in future years as sufficient commissions are generated.
7. INVESTMENT INCOME
Investment income consisted of the following:
1995 1994 1993
------- -------- --------
Interest and dividends ............ $53,407 $106,030 $127,926
Equity in earnings (loss)
of Syracuse Mile, Inc. (an
insignificant subsidiary) ....... ( 23,027) 1,186 12,080
------- -------- --------
$30,380 $107,216 $140,006
======= ======== ========
8. BUSINESS OPERATIONS
Mid-State Raceway, Inc., known as Vernon Downs in Vernon, New York, is
licensed under and subject to the regulations of the Pari-Mutuel Revenue
Law and supervision of the New York State Racing and Wagering Board to
conduct harness racing at its track and to simulcast racing from other
tracks.
During 1995 and 1994, the Company received a total of $634,400 and $422,000
(before expenses), respectively, for Corporate Sponsorship of races.
Various companies affiliated with the majority shareholder purchased an
aggregate of $76,500 and $92,000 (before expenses) of these sponsorships in
1995 and 1994, respectively.
9. RECLASSIFICATION
Certain amounts of prior years have been reclassified for comparative
purposes.
20
MID-STATE RACEWAY, INC.
NOTES TO FINANCIAL STATEMENTS
-----------
10. HOTEL LEASE
During fiscal year 1994, the Company entered into a lease agreement with a
partnership, as leasee, that includes the Company's majority shareholder.
The Company has leased for an initial period of twenty years a certain
portion of their property for the purpose of permitting the partnership to
construct, own, and operate a hotel. Anytime during the lease or any
renewal period of the lease, the Company may elect to assume all of
lessee's duties, obligations, rights and responsibilities under the lease.
Lease payments during the initial twenty year period will be $10,000 per
year. Construction of the hotel by the partnership was completed in October
of 1994. The Company also operates pari-mutuel wagering on the hotel
premises. The amount wagered on these premises for the period October, 1994
to March 31, 1995 amounted to approximately $1,165,900 producing
commissions of approximately $263,000 for fiscal 1995.
21
PART III
The information required by Items 10, 11, and 12 relating to directors and
executive officers of Mid-State Raceway, Inc. is incorporated by reference to
pages 2 through 9 of the Company's definitive Proxy Statement dated June 26,
1995.
Item 13. Certain Relationships and Related Transactions.
The information required by Item 13 is incorporated by reference to Note 7 of
the financial statements included in this Form 10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Page
----
(a) 1. Financial Statements
Included in Part II, Item 8 of this report
Report of Independent Certified Public Accountants .......... 9
Balance Sheets, March 31, 1995 and 1994 ..................... 10
Statements of Income, Years Ended March 31, 1995, 1994
and 1993 .................................................. 11-12
Statements of Shareholders' Equity, Years Ended March 31,
1995, 1994 and 1993 ....................................... 13
Statements of Cash Flows, Years Ended March 31, 1995,
1995 and 1993 ............................................. 14
Notes to Financial Statements ..................................... 15-19
(a) 2. Financial Statement Schedules
Schedules other than those listed above have been omitted because they are not
required, not applicable or the required information is shown in the financial
statements or notes thereto.
(b) Reports on Form 8-K
None were filed for the quarter ended March 31, 1995
22
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 in the Village of Vernon,
State of New York, on the 22nd day of June 1995.
MID-STATE RACEWAY, INC.
BY /s/ FRANK O. WHITE, JR.
------------------------------------
Frank O. White, Jr.
President and Chief Executive Officer
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.
Signature Title Date
- --------- ----- ------
/s/ FRANK O. WHITE, JR. President, Chief Executive June 22, 1995
- ------------------------- Officer and Director
Frank O. White, Jr.
/s/ JAMES J. MORAN Vice President, June 22, 1995
- ------------------------- Secretary and Director
James J. Moran
/s/ CARL J. EILENBERG Director June 22, 1995
- -------------------------
Carl J. Eilenberg
/s/ SALVATORE P. GIUFRE Director June 22, 1995
- -------------------------
Salvatore P. Giufre
/s/ ROBERT W. JAQUINT Director June 22, 1995
- -------------------------
Robert W. Jaquint
/s/ DICK MAC PHERSON Director June 22, 1995
- -------------------------
Dick Mac Pherson
/s/ JAMES E. RAYMONDA Director June 22, 1995
- -------------------------
James E. Raymonda
/s/ FRANK O. WHITE Director June 22, 1995
- -------------------------
Frank O. White
(Continued)
23
SIGNATURES (Continued)
Signature Title Date
- --------- ----- ------
- -------------------------- Director
Jerome M. Wilson
/s/ THOMAS P. HEGEMAN Treasurer - (Principle June 22, 1995
- -------------------------- Financial and Accounting Officer)
Thomas P. Hegeman
/s/ DAVID H. BROWN Assistant to the June 22, 1995
- -------------------------- President and Director
David H. Brown
24