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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 December 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 September 10, 1996
--------------------------- ---------------------------------
COMMON STOCK $.10 PAR VALUE 250,386 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
Part(s) where incorporated
--------------------------
Proxy Statement of the registrant to be filed December 18, 1996 III
The total number of pages in this report is 25.
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 Stick 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 ...................... 7-9
Item 8. Financial Statements and Supplementary Data ................ 10-22
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ...................... 23
PART III
Item 10. Directors and Executive Officers of the Registrant ........ 24
Item 11. Executive Compensation .................................... 24
Item 12. Security Ownership of Certain Beneficial Owners and
Management .............................................. 24
Item 13. Certain Relationships and Related Transactions ............ 24
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K ............................................. 24-25
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 Oneida Indian Nation's Turning Stone 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 222 persons during the fiscal year.
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 the period
ended December 31, 1995, $96,000 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.
The Company is a defendant in two actions claiming damages in connection with
wrongful death and injury claims. No estimate can yet be made of the potential
for liability or damages or the likely outcome of the litigation.
Item 4. Submission of Matters to a Vote of Securities Holders.
There are no matters that were submitted during the 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 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
-------------------------------------------
9 Months Ended Year Ended
December 31, 1995 March 31, 1995
Low - High Low - High
----------------- --------------
Quarter Ended June 30 $8.50 - 22.00 $17.50 - 20.50
Quarter Ended September 30 15.00 - 18.50 19.00 - 19.00
Quarter Ended December 31 7.75 - 22.00 19.00 - 21.00
Quarter Ended March 31 16.00 - 22.00
(b) Approximate Number of Equity Security Holders
Title of Class Number of Record Holders
------------------- ------------------------
Common stock, $.10 544
par value per share
(c) Dividends
There were no dividends paid during the 9 months ended December 31, 1995,
or the fiscal year ended March 31, 1995.
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
9 months ended
December 31, ----------- Years Ended March 31, -----------
OPERATING RESULTS 1995 1995 1994 1993 1992
---- ---- ---- ---- ----
Number of racing days 122 155 137 146 155
Operating revenues:
Pari-mutuel commissions and breakage $7,121,567 $7,415,272 $7,174,657 $7,741,035 $8,030,157
---------- ---------- ---------- ---------- ----------
Less payments to New York State 291,317 543,773 609,281 602,663 672,563
Breeders' Fund 271,316 267,838 234,553 266,416 302,700
Purses 223,586 320,981 363,010 418,211 490,004
---------- --------- ---------- --------- ---------
786,219 1,132,592 1,206,844 1,287,290 1,465,267
---------- --------- ---------- --------- ---------
Net pari-mutuel commissions and breakage 6,335,348 6,282,680 5,967,813 6,453,745 6,564,890
Admissions 123,522 240,667 251,313 232,956 300,533
Concessions and other revenues 679,410 1,134,225 982,459 846,758 954,698
---------- --------- ---------- --------- ---------
Total operating revenues 7,138,280 7,657,572 7,201,585 7,533,459 7,820,121
---------- --------- ---------- --------- ---------
Operating expenses:
Purses 2,378,086 2,583,262 2,239,368 2,366,657 2,479,171
Other 5,223,229 5,980,559 5,781,239 5,520,993 5,588,840
---------- --------- ---------- --------- ---------
Total operating expenses 7,601,315 8,563,821 8,020,607 7,887,650 8,068,011
---------- --------- ---------- --------- ---------
Loss from operations (463,035) (906,249) (819,022) (354,191) (247,890)
---------- --------- ---------- --------- ---------
Other income:
Commissions for capital improvements 140,985 192,488 199,735 205,256 231,818
Investment income 31,434 30,380 107,216 140,006 170,493
---------- --------- ---------- --------- ---------
Total other income 172,419 222,868 306,951 345,262 402,311
---------- --------- ---------- --------- ---------
Income (loss) before taxes on income (290,616) (683,381) (512,071) (8,929) 154,421
Provision (credit) for taxes on income 18,163 (11,770) (199,871) (19,690) 16,229
---------- --------- ---------- --------- ---------
Income (loss) before cumulative effect (308,779) (671,611) (312,200) 10,761 138,192
Cumulative effect (100,000)
---------- --------- ---------- --------- ---------
NET INCOME (LOSS) ($308,779) ($671,611) ($412,200) $10,761 $138,192
========== ========= ========== ========= =========
Per share of common stock:
Income (loss) before cumulative effect* ($1.23) ($2.68) ($1.25) $0.04 $0.55
Net income (loss)* ($1.23) ($2.68) ($1.65) $0.04 $0.55
Cash dividends $0.00 $0.00 $0.20 $0.65 $0.80
Shareholders' equity $10.26 $11.47 $14.17 $16.02 $16.64
* Based on weighted average shares outstanding
5
Item 6. Selected Financial Data (Continued)
9 months ended
December 31, ----------- Years Ended March 31, -----------
FINANCIAL CONDITION 1995 1995 1994 1993 1992
---- ---- ---- ---- ----
Number of racing days 122 155 137 146 155
Current assets $1,228,020 $1,582,667 $1,808,156 $2,562,208 $2,239,383
Marketable securities - due after
one year 270,770 248,722 651,341 561,098 1,179,915
Net property, plant and equipment 1,933,496 2,018,003 2,125,328 1,776,458 1,776,076
Other assets 576,462 572,942 577,618 590,432 654,562
---------- ---------- ---------- ---------- ----------
$4,008,748 $4,422,334 $5,162,443 $5,490,196 $5,849,936
========== ========== ========== ========== ==========
Current liabilities $ 508,558 $ 520,195 $ 582,391 $ 390,031 $ 511,802
Non-current liabilities 929,731 1,030,857 1,031,304 1,089,140 1,150,305
Shareholders' equity 2,570,459 2,871,282 3,548,748 4,011,025 4,187,829
---------- ---------- ---------- ---------- ----------
$4,008,748 $4,422,334 $5,162,443 $5,490,196 $5,849,936
========== ========== ========== ========== ==========
6
Item 7. Management's Discussion and Analysis
Results of Operations
Nine Months Ended December 31, 1995 as Compared to Fiscal Year Ended March 31,
1995
During the nine month period ended December 31, 1995, operating revenues
decreased by $519,292, compared with the fiscal year ended March 31, 1995. The
reduced operating revenues were the effect of the Company's change in year end,
resulting in a nine month transitional period. A portion of the decrease is due
to 33 less live racing days during the transitional period, offset by
significant increases in revenues, due to full-card simulcasting of both in
state and out of state harness and thoroughbred racing, over the entire
transitional period. Net corporate sponsorship of racing events decreased
$193,820 from the previous racing season, and are expected to diminish
significantly in the 1996 season.
The Comfort Suites hotel, located on the Raceway's property continues to benefit
the Company's operations. The hotel's mutuel operation provided nearly $9.4
million in total wagers during the transitional period, representing one third
of the Company's gross handle.
In addition to the Comfort Suites contribution to the Company's handle and
attendance, the hotel has presented additional opportunities for reducing
expenses, as the simulcasting operation is conducted exclusively in the hotel
lounge on Monday and Tuesday, eliminating the expense associated with opening
the Club House on these days.
Operating expenses decreased by $962,506 compared to the fiscal year ended March
31, 1995. The principal causes for the decrease were the reduction 33 days of
racing coupled with the shorter transitional period which eliminated three
months of fixed expenses.
The Omnibus Racing bill, originally passed in July, 1994, continues to generate
positive increases in the Company's simulcast operations. The bill, which lifted
several of the restrictions on receiving simulcast race signals and wagering on
out of state races, has allowed Vernon Downs to offer a variety of harness and
thoroughbred races from around the country. Over thirty different tracks were
received during the period ended December 31, 1995.
The Company continues to concentrate on the reduction of operating expenses.
Efforts such as the elimination of live race dates which have historically
proven to be unprofitable and the closing of the track's Grandstand during the
fall and winter, significantly reduced the related expenses. Negotiations with
collective bargaining units have produced concessions to both payroll and other
operational expenses.
Statistical Comparison:
9 Months Ended December 31, 1995 vs. 9 Months Ended December 31, 1994
Nine Months Ended
December 31,
-------------------------------- INCREASE
1995 1994 (DECREASE)
-------------- --------------- ----------
GROSS HANDLE:
Live Harness $12,776,316 $17,015,329 ($4,329,013)
OTB & ITW 10,284,718 13,861,338 (3,576,620)
Thoroughbred Simulcast 5,483,834 4,218,068 1,265,766
Harness Simulcast 10,702,809 1,183,976 9,518,833
7
Item 7. Management's Discussion and Analysis (Continued)
Statistical Comparison:
9 Months Ended December 31, 1995 vs. 9 Months Ended December 31, 1994
Nine Months Ended
December 31,
-------------------------- INCREASE
1995 1994 (DECREASE)
---------- --------- ---------
DAILY AVERAGE:
Live Harness Handle $104,723 $122,412 ($17,689)
OTB & ITW Handle 84,301 99,722 (15,421)
Attendance 1,782 1,609 173
LIVE RACING DAYS 122 139 (17)
Year Ended March 31, 1995 as Compared to Year Ended March 31, 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 it's 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.
8
Item 7. Management's Discussion and Analysis (Continued)
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.
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 in excess of two to one.
9
UK Urbach Kahn & Werlin PC
&W CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and
Board of Directors of
Mid-State Raceway, Inc.
We have audited the accompanying balance sheet of Mid-State Raceway, Inc. as of
December31, 1995, and the related statements of operations, changes in
shareholders' equity and cash flows for the nine months then ended. 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 audit 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 audit provides 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
December31, 1995, and the results of its operations and its cash flows for the
nine months then ended in conformity with generally accepted accounting
principles.
URBACH KAHN & WERLIN PC
Albany, New York
September 10, 1996
10
Coopers
&Lybrand
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of
Mid-State Raceway, Inc.
We have audited the accompanying balance sheet of Mid-State Raceway, Inc. as of
March 31, 1995, and the related statements of income, shareholders' equity and
cash flows for the two years ended March 31, 1995 and 1994. 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 the results of its operations and its cash flows for the two
years ended March 31, 1995 and 1994, in comformity with generally accepted
accounting principles.
As described in the notes to the financial statements, the Company changed its
accounting for investments in certain securityes in 1995, and its accounting for
income taxes in 1994.
COOPERS & LYBRAND L.L.P.
Syracuse, New York
May 12, 1995
11
MID-STATE RACEWAY, INC.
BALANCE SHEETS
December 31, 1995 and March 31, 1995
December 31 March 31,
1995 1995
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 551,567 $ 619,662
Cash restriced for purses and uncashed winning tickets 141,629 156,893
Investments 8,775 394,964
Accounts receivable 333,073 145,481
Prepaid insurance, taxes and other expenses 171,293 162,339
Refundable income taxes 21,683 19,328
----------- -----------
Total current assets 1,228,020 1,498,667
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Land, Racing plant and equipment 12,159,787 12,063,816
Other properties 121,672 121,672
----------- -----------
12,281,459 12,185,488
Less accumulated depreciation 10,347,963 10,167,485
----------- -----------
1,933,496 2,018,003
----------- -----------
OTHER ASSETS
Investments 270,770 248,722
Cash restricted for future stake events purses 15,770 84,000
Deferred income taxes 426,032 447,661
Other assets 134,660 125,281
----------- -----------
847,232 905,664
----------- -----------
$ 4,008,748 $ 4,422,334
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 259,364 $ 249,134
Current portion of deferred retirement benefits 107,565 114,168
Uncashed winning tickets 58,229 --
Early closing and stake events purse funds 83,400 156,893
----------- -----------
Total current liabilities 508,558 520,195
----------- -----------
DEFERRED RETIREMENT BENEFITS 913,961 946,857
----------- -----------
FUTURE STAKE EVENTS PURSE FINDS 15,770 84,000
----------- -----------
SHAREHOLDERS' EQUITY
Common stock, par value $10 per share;
authorized 10,000,000 shares;
issued and outstanding 250,386 shares 25,039 25,039
Additional paid-in capital 225,347 225,347
Retained earnings 2,317,972 2,626,751
Unrealized gain (loss) on investments 2,101 (5,855)
----------- -----------
Total shareholders' equity 2,570,459 2,871,282
----------- -----------
$ 4,008,748 $ 4,422,334
=========== ===========
SEE NOTES TO FINANCIAL STATEMENTS.
12
MID-STATE RACEWAY, INC.
STATEMENTS OF OPERATIONS
Nine Months Ended December 31, 1995 and Years Ended
March 31, 1995 and 1994
For the Nine For the Years Ended
Months Ended ---------------------------------
December 31, 1995 March 31, 1995 March 31,1994
122 Racing Days 155 Racing Days 137 Racing Day
---------------- --------------- --------------
Operating revenues
Net pari-mutuel commissions and breakage
from wagering
Vernon Downs Harness $ 2,201,200 $ 3,014,863 $ 3,250,150
Off-track betting 1,109,876 1,468,874 1,481,915
Simulcasting 3,024,272 1,798,943 1,235,748
----------- ----------- -----------
6,335,348 6,282,680 5,967,813
Admissions 123,522 240,667 251,313
Concessions 223,782 456,715 508,839
Corporate sponsors 354,208 548,028 333,170
Other revenues 101,420 129,482 140,450
----------- ----------- -----------
Total operating revenues 7,138,280 7,657,572 7,201,585
----------- ----------- -----------
Operating expenses
Purses 2,378,086 2,583,262 2,239,368
Payroll 1,467,316 1,897,334 2,005,496
Taxes, other than Income 287,151 394,347 422,803
Outside services and rentals 518,764 672,252 566,190
Utilities 248,441 403,292 398,557
Simulcasting expenses 1,260,726 788,405 768,868
Depreciation 180,478 254,794 231,401
Other expenses 1,260,353 1,570,135 1,387,924
----------- ----------- -----------
Total operating expenses 7,601,315 8,563,821 8,020,607
----------- ----------- -----------
Loss from operations (463,035) (906,249) (819,022)
----------- ----------- -----------
Other income
Commissions for capital Improvements 140,985 192,488 199,735
Investment Income 31,434 30,380 107,216
----------- ----------- -----------
Total other income 172,419 222,868 306,951
----------- -----------
Loss before provision (credit) for federal and
state income taxes (290,616) (683,381) (512,071)
----------- ----------- -----------
Provision (credit) for federal and state income
taxes
Currently payable 1,838 2,676 (113,871)
Deferred 16,325 (14,446) (86,000)
----------- ----------- -----------
18,163 (11,770) (199,87l)
----------- ----------- -----------
Loss before cumulative effect of accounting
principle change (308,779) (571,611) (312,200)
Cumulative effect of accounting principle change
for income taxes -- -- (100,000)
-----------
Net loss $ (308,779) $ (671,611) $ (412,200)
=========== =========== ===========
Loss per weighted average share:
Loss before cumulative effect $ (1.23) $ (2.68) $ (1.25)
----------- ----------- -----------
Cumulative effect (0.40)
-----------
Net (loss) $ (1.23) $ (2.68) $ (1.65)
=========== =========== ===========
Cash dividends per share $ 0.00 $ 0.00 $ 0.20
=========== =========== ===========
SEE NOTES TO FINANCIAL STATEMENTS.
13
MID-STATE RACEWAY, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Nine Months Ended December 31, 1995 and
Years Ended March 31, 1995 and 1994
Common Stock
Issued and Additional Unrealized Gain
Outstanding Paid-In Retained (Loss) on
Shares Amount Capital Earnings Ivestments Total
------ -------- ---------- ---------- ---------------- ----------
Balances at March 31, 1993 250,386 $250,356 $3,760,639 $4,011,025
Net loss for the year (412,200) (412,200)
Cash dividends (50,077) (50,077)
------- -------- -------- ---------- ------- ----------
Balances at March 31,1994 250,386 250,386 3,298,362 3,548,748
Unrealized loss on investments
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
investments (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
------- -------- -------- ---------- ------- ----------
Balances at March 31,1995 250,386 25,039 2,626,751 (5,855) 2,871,282
Net loss for the year (308,779) (308,779)
Change in unrealized gain
(loss) on investments 7,956 7,956
------- -------- -------- ---------- ------- ----------
Balances at December 31, 1995 250,386 $ 25,039 $225,347 $2,317,972 $2,101 $2,570,459
======= ======== ======== ========== ======= ==========
SEE NOTES TO FINANCIAL STATEMENTS.
14
MID-STATE RACEWAY, INC.
STATEMENTS OF CASH FLOWS
Nine Months Ended December 31, 1995 and
Years Ended March 31, 1995 and 1994
For the Nine For the Years Ended
Months Ended -----------------------------------
December 31, 1995 March 31, 1995 March 31, 1994
122 Racing Days 155 Racing Days 137 Racing Days
----------------- --------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (308,779) $ (671,611) $ (412,200)
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation 180,478 254,794 231,401
Net amortization/accretion of invest-
ments 697 1,826 (181)
Deferred retirement benefits (39,499) 3,909 34,863
Deferred income taxes 16,325 (14,446) 14,000
Changes in:
Restricted cash 83,494 34,880 (5,848)
Accounts receivable (187,592) (23,421) (7,736)
Prepaid expenses (8,954) 5,155 38,066
Other assets (9,379) 23,026 (1,186)
Accounts payable 10,230 (31,672) 93,813
Purse funds (141,723) (34,880) 5,848
Uncashed winning tickets 58,229 -- --
Refundable income taxes (2,355) 93,313 (33,723)
----------- ----------- -----------
Net cash used in operating
activities (348,828) (359,127) (42,883)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investment
securities -- -- 2,703,487
Purchase of investment securities -- -- (1,883,194)
Proceeds from maturities of held-to-maturity
investment securities -- 1,249,715 --
Proceeds from maturities of available-for-sale
investment securities 556,000 -- --
Purchase of available-for-sale investment
securities (179,295) (449,642) --
Purchase of properties and equipment (95,972) (147,469) (580,271)
----------- ----------- -----------
Net cash provided by investing
activities 280,733 652,604 240,022
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid -- -- (50,077)
----------- ----------- -----------
Net cash used in financing activities -- -- (50,077)
----------- ----------- -----------
Net increase in cash and cash equivalents (68,095) 293,477 147,062
Cash at beginning of year 619,662 326,185 179,123
----------- ----------- -----------
Cash at end of year $ 551,567 $ 619,662 $ 326,185
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid (received) during the year for:
Income taxes $ 2,274 $ (92,000) $ (80,000)
=========== =========== ===========
Gross change in net unrealized loss on
investment securities available-for-sale $ 13,260 $ (9,759) $ --
=========== =========== ===========
SEE NOTES TO FINANCIAL STATEMENTS.
15
MID-STATE RACEWAY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS:
Mid-State Raceway, Inc. (the "Company"), known as Vernon Downs,
operates a harness racing track in Vernon, New York. The
Company is licensed by the New York Racing and Wagering Board
to conduct harness racing at its track and to simulcast racing
from other tracks.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported assets
and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
CHANGE IN FISCAL YEAR:
In 1995 the Company changed its fiscal year end to December 31 from
March 31. Consequently, the statements of operations, changes in
shareholders' equity, and cash flows for the period ended
December 31, 1995 present the activities for nine months.
INVESTMENT SECURITIES:
Effective April 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") 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.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment 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
Equipmment 3 to 20 years
16
MID-STATE RACEWAY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED
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 nine months ended December31, 1995 and the years ended
March 31, 1995 and 1994 amount to $44,080, $66,726, and $89,298,
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 $51,925, $125,325,
and $63,527 for the nine months ended December 31, 1995 and the
years ended March 31, 1995 and 1994, respectively. The deferred
compensation plan's projected benefit obligation approximates
the accrued liability.
LOSS PER SHARE:
Loss 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 the nine months ended December 31, 1995 and the
years ended March 31, 1995 and 1994.
INCOME TAXES:
During fiscal 1994, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
Accordingly, the Company 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 affect 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.
REVENUE RECOGNITION:
The Company recognizes revenue for commissions from wagering,
corporate sponsors, admissions, and commissions for capital
improvements when the related racing event is run. Investment
income is recognized on the accrual basis.
17
MID-STATE RACEWAY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES, CONTINUED
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.
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 March31, 1994
to 10,000,000 shares at March 31, 1995.
NOTE 2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
December 31, March 31,
1995 1995
----------- ---------
Land, racing plant, and equipment
Land 77,802 $ 77,802
Land improvements 929,931 929,931
Buildings and improvements 5,682,906 5,682,906
Race plant structures 1,235,065 1,235,065
Equipment 4,219,946 4,126,375
Construction in progress 14,137 11,737
----------- -----------
12,159,787 12,063,816
Other properties
Land 121,672 121,672
------------ -----------
Total properties 12,281,459 12,185,488
Less accumulated depreciation 10,347,963 10,167,485
----------- -----------
$ 1,933,496 $ 2,018,003
----------- -----------
Note 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 this change was not material to fiscal 1994.
18
MID-STATE RACEWAY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3 INCOME TAXES, CONTINUED
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:
December 31, 1995 March 31, 1995
---------------------- ----------------------
Temporary Tax Temporary Tax
Difference Effect Difference Effect
---------- -------- ---------- --------
Deferred compensation $1,022,000 $380,008 $1,061,000 $394,701
Net operating loss carryforwards 1,255,000 427,000 848,000 288,000
Earnings of unconsolidated subsidiaries (50,000) (18,730) (41,000) (15,212)
Miscellaneous (615) (246) 8,000 3,172
---------- -------- ---------- --------
2,226,385 788,032 1,876,000 670,661
Less valuation allowance -- (362,000) -- (223,000)
---------- -------- ---------- --------
$2,226,385 $426,032 $1,876,000 $447,661
========== ======== ========== ========
The Company owns certain assets whose market values are
significantly greater than their book values. The Company has not
recorded a valuation allowance against certain of its deferred tax
assets on the basis of its available tax planning strategies
including the potential for sale of the above noted assets at
gains significant enough to enable realization of certain tax
benefits. The net operating loss carryforward will expire at
various dates through December 31, 2010.
A reconciliation of the provision (credit) for income taxes to the
statutory amount is as follows:
For the Nine Months ------------For the Years Ended------------
Ended December 31, March 31, March 31,
1995 1995 1994
------------------- ------------------- --------------------
Amount % Amount % Amount %
--------- ----- --------- ----- --------- -----
Statutory federal income tax ($ 99,000) (34.0) ($232,000) (34.0) ($174,104) (34.0)
--------- ----- --------- ----- --------- -----
Variances from statutory rate
Add state income tax,
net of federal tax
benefit 4,193 1.4 4,800 0.7 (3,000) (0.6)
Increase in valuation
allowance 139,000 47.8 223,000 32.7
Prior year's tax 7,000 1.0
Less reduction for
Tax exempt income (4,000) (0.6) (13,600) (2.7)
Decrease in deferred
compensation
accrual (13,430) (4.6)
Other (12,600) (4.4) (10,570) (1.5) (9,167) (1.7)
--------- ----- --------- ----- --------- -----
Effective tax (credit) $ 18,163 6.2 $ 11,770 (1.7) ($199,871) (39.0)
========= ===== ========= ===== ========= =====
19
MID-STATE RACEWAY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4. MARKETABLE SECURITIES
As discussed more fully in Note 1, the Company adopted SFAS
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
December 31 and March 31, 1995 are as follows:
December 31, 1995 March 31, 1995
---------------------------------------- ------------------------------------------
Gross Unrealized Gross Unrealized
Amortized ---------------- Amortized ----------------
Cost Gain Loss Market Cost Gain Loss Market
-------- ------ ------ -------- -------- ------ ------- --------
Securities Held-to-Maturity $ -- $ -- $ -- $ -- $394,964 $ -- $ 1,209 $393,755
-------- ------ ------ -------- -------- ------ ------- --------
Municipal bonds
Total Held-to-Maturity $ -- $ -- $ -- $ -- $394,964 $ -- $ 1,209 $393,755
======== ====== ====== ======== ======== ====== ======= ========
Securities Available-for-Sale
Municipal bonds $272,115 $ 237 $1,582 $270,770 $243,552 $ -- $12,630 $230,922
Other 3,929 4,846 -- 8,775 14,929 2,871 -- 17,800
-------- ------ ------ -------- -------- ------ ------- --------
Total Available-for-Sale $276,044 $5,083 $1,582 $279,545 $258,481 $2,871 $12,630 $248,722
======== ====== ====== ======== ======== ====== ======= ========
The carrying value and estimated market value of investment
securities at December 31, 1995 by contractual maturity are shown
below:
Available for Sale
-----------------------
Estimated
Carrying Market
Value Value
-------- ---------
Due in one year or less $ 3,929 $ 8,775
Due in one through five years 272,115 270,770
-------- --------
$276,044 $279,545
======== ========
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.
NOTE 5. LEASES
The Company leases certain equipment for use during each racing
season including an agreement for pari-mutuel totalisator
equipment and services.
20
MID-STATE RACEWAY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5. LEASES, CONTINUED
The total rent expense for the nine months ended December31, 1995
and the years ended March 31, 1995 and 1994 amounted to $566,786,
$604,127, and $495,813 of which $311,038, $259,751, and $195,820
was paid on the totalisator contract for the respective years.
The current totalisator lease agreement expires on May31, 2000.
Under the agreement, rents charged for the equipment and services
are dependent upon the number of live racing meets held and the
number of tracks simulcasted. Future rental charges are dependent
upon future live racing and simulcast events.
NOTE 6. COMMISSION FOR CAPITAL IMPROVEMENTS
On July 26, 1983, legislation was passed permitting Upstate New
York 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
December 31, 1995 under this program exceed total commissions
received by $339,442 and are recoverable in future years as
sufficient commissions are generated.
NOTE 7. INVESTMENT INCOME
Investment income consisted of the following for the nine months
ended December31, 1995 and years ended March 31, 1995 and 1994:
December 31, March 31, March 31,
1995 1995 1994
------------ ------- --------
Interest and dividends $22,054 $53,407 $106,030
Equity in earnings (loss) of
Syracuse Mile, Inc. (an
insignificant subsidiary) 9,380 (23,027) 1,186
------- ------- --------
$31,434 $30,380 $107,216
======= ======= ========
NOTE 8. BUSINESS OPERATIONS
Mid-State Raceway, Inc., known as Vernon Downs, located in Vernon,
New York, is licensed under and subject to 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.
21
MID-STATE RACEWAY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 8. BUSINESS OPERATIONS, CONTINUED
During the nine months ended December 31, 1995 and the years ended
March 31, 1995 and 1994, the Company received a total of $382,000,
$634,400, and $422,000 (before expenses), respectively, for
corporate sponsorship of races. Various companies affiliated with
the Company's majority shareholder purchased an aggregate of
$148,000, $76,500, and $92,000 (before expenses) of these
sponsorships in each of the respective periods.
NOTE 9. RECLASSIFICATION
Certain amounts in prior years have been reclassified for
comparative purposes.
NOTE 10. HOTEL LEASE
During fiscal year 1994, the Company as lessor entered into a
lease agreement with a partnership 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 the 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 1994. The Company also operates pari-mutuel
wagering on the hotel premises. Net pari-mutuel commissions and
breakage from wagering on these premises approximated $1,597,000
for the nine months ended December 31, 1995 ($263,000 for the year
ended March 31, 1995).
NOTE 11. CONTINGENCIES
The Company is a defendant in two actions claiming damages in
connection with wrongful death and injury claims. No estimate can
yet be made of the potential for liability or damages or the
likely outcome of the litigation.
22
ITEM 9. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
On April 17, 1996, Coopers & Lybrand, LLP, the firm of accountants previously
engaged to audit Registrant's financial statements, resigned. The resignation
was unilateral and was first communicated orally without explanation. The
resignation was confirmed in a letter of the same date received by facsimile and
regular mail. The resignation was not requested or prompted by Registrant.
The day after the resignation, it was publicly announced that Richard C.
Breeden, a partner with the firm of Coopers & Lybrand, LLP, was a candidate for
appointment as trustee in a Chapter 11 bankruptcy proceeding involving Bennett
Funding Group, Inc. and two related companies, all owned by Patrick Bennett and
members of his family. Patrick Bennett was, at the time, owner with his wife of
54 percent of the outstanding common stock of Registrant.
Coopers & Lybrand, LLP's reports on Registrant's financial statements for the
past two years contained no adverse opinion or disclaimer of opinion, nor were
they qualified or modified for any reason.
During Registrant's two most recent fiscal years and the subsequent interim
period up to the date of the resignation there were no disagreements with
Coopers & Lybrand of the character described in paragraph (a)(1)(iv) nor any
reportable events of the character described in paragraph (a)(i)(v) of
Regulation ss.229.304, Item 304, except as follows: Coopers & Lybrand, LLP
advised Registrant of the need to expand significantly the scope of its audit
for the reason discussed in Item 5 of Form 8-K dated April 8, 1996, and due to
Coopers & Lybrand, LLP's resignation, such expanded work was not completed.
The Board of Directors ratified Urbach Kahn & Werlin PC, Certified Public
Accountants as independent auditors for the period ended December 31, 1995 at
the Board of Directors meeting on May 23, 1996, subject to the receipt of a
letter of engagement. On May 29, 1996 such letter of engagement was received and
the services of Urbach Kahn & Werlin PC, Certified Public Accountants were
retained.
23
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 December 16,
1996.
Item 13. Certain Relationships and Related Transactions.
The information required by Item 13 is incorporated by reference to Notes 8 and
10 of the financial statements included in this Form 10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements Page
----
Included in Part II, Item 8 of this report
Independent Auditors' Reports 10 - 11
Balance Sheets, December 31, 1995 and March 31, 1995 12
Statements of Operations,
Nine Months Ended December 31, 1995, and Years Ended
March 31, 1995 and 1994 13
Statements of Changes in Shareholders' Equity,
Nine Months Ended December 31, 1995, and Years Ended
March 31, 1995 and 1994 14
Statements of Cash Flows,
Nine Months Ended December 31, 1995, and Years Ended
March 31, 1995 and 1994 15
Notes to Financial Statements 16 - 22
2. Financial Statement Schedules
Schedules 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 December 31, 1995.
24
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 19th day of November, 1996.
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 November 19, 1996
Frank O. White, Jr. Officer and Director
/s/ JAMES J. MORAN
__________________________________ Vice President, November 19, 1996
James J. Moran Secretary and Director
/s/ THOMAS P. HEGEMAN
__________________________________ Treasurer - (Principal November 19, 1996
Thomas P. Hegeman Financial and Accounting Officer)
/s/ DAVID H. BROWN
__________________________________ Assistant to the November 19, 1996
David H. Brown President and Director
/s/ DOUGLAS BURCH
__________________________________ Director November 19, 1996
Douglas Burch
/s/ CARL J. EILENBERG
__________________________________ Director November 19, 1996
Carl J. Eilenberg
/s/ ROBERT W. JAQUINT
__________________________________ Director November 19, 1996
Robert W. Jaquint
/s/ JAMES E. RAYMONDA
__________________________________ Director November 19, 1996
James E. Raymonda
/s/ FRANK O. WHITE
__________________________________ Director November 19, 1996
Frank O. White
/s/ JEROME M. WILSON
__________________________________ Director November 19, 1996
Jerome M. Wilson
25