FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-24206
Penn National Gaming, Inc.
(Exact name of registrant in its charter)
Pennsylvania 23-2234473
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Penn National Gaming, Inc.
825 Berkshire Blvd. Suite 203
Wyomissing, PA 19610
610-373-2400
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title of Each Class Outstanding Shares as of November 13, 1996
Common Stock par value .01 per share 6,665,145
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION Page
Item 1. - Financial Statements
Consolidated Balance Sheets -
September 30, 1996 (unaudited) and December 31, 1995 3 - 4
Consolidated Statements of Income Nine Months Ended
September 30, 1996 and 1995 (unaudited) 5
Consolidated Statements of Income Three Months Ended
September 30, 1996 and 1995 (unaudited) 6
Consolidated Statement of Shareholders= Equity -
Nine months ended September 30, 1996 (unaudited) 7
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996
and 1995 (unaudited) 8
Notes to Consolidated Financial Statement 9 - 11
Item 2 - Managements Discussion and Analysis of Financial
Condition and Results of Operations 12 - 16
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 17
Item 6 - Exhibits and Reports on Form 8 - K 17
Part I. Financial Information
Item 1. Financial Statements
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
September 30, December 31,
1996 1995
-------------- --------------
(Unaudited)
Assets
Current
Cash $5,602 $7,514
Accounts and notes receivable 1,968 1,618
Prepaid expenses and other current assets 1,332 600
Deferred income taxes 62 104
------- -------
Total current assets 8,964 9,836
------- -------
Property, plant and equipment, at cost
Land and improvements 4,225 3,336
Building and improvements 8,740 8,651
Furniture, fixtures and equipment 5,660 4,696
Transportation equipment 322 309
Leasehold improvements 6,388 4,363
Leased equipment under capitalized lease 824 824
Construction in progress 1,059 255
------- -------
27,218 22,434
Less Accumulated depreciation and amortization 7,589 6,728
------- -------
Net property and equipment 19,629 15,706
------- -------
Other assets
Excess of cost over fair market value of net
assets acquired (net of accumulated amortization) 1,848 1,898
Prepaid Acquisition Costs 3,001 -
Miscellaneous 291 92
------- -------
Total other assets 5,140 1,990
------- -------
$33,733 $27,532
======= =======
See accompanying notes to consolidated financial statements
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
September 30, December 31,
1996 1995
------------- --------------
(Unaudited)
Liabilities and Shareholders' Equity
Current
Maturities of long-term debt and
captial lease obligation $222 $250
Accounts payable 1,868 1,395
Purses due horsemen 1,329 1,293
Uncashed pari-mutuel tickets 617 704
Accrued expenses 618 702
Customer deposits 515 315
Taxes, other than income taxes 328 246
Income Taxes 473 797
------- -------
Total current liabilities 5,970 5,702
------- -------
Long term liabilities
Long-term debt and capital lease obligations,
net of current maturities 80 140
Deferred income taxes 989 888
------- -------
Total long-term liabilities 1,069 1,028
------- -------
Commitments and contingencies
Shareholders' equity
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued - -
Common stock, $.01 par value, 10,000,000 shares
authorized; 6,665,145 and 6,472,500 issued and
outstanding 46 43
Additional paid in capital 14,304 12,821
Retained Earnings 12,344 7,938
------- -------
Total Shareholders' Equity 26,694 20,802
------- -------
$33,733 $27,532
======= =======
See accompanying notes to consolidated financial statements
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
Nine Months Ended
September 30,
1996 1995
------- --------
Revenues
Pari-mutuel revenues
Penn National races $14,495 $16,578
Import simulcasting 23,596 20,412
Export simulcasting 2,479 1,447
Admissions, programs and other racing revenues 3,403 2,978
Concession Revenues 2,501 2,478
------ ------
Total revenues 46,474 43,893
------ ------
Operating expenses
Purses, stakes and trophies 9,744 9,329
Direct salaries, payroll taxes and employee benefits 6,211 5,823
Simulcast expenses 6,920 6,905
Pari-mutuel taxes 3,954 3,773
Other direct meeting expenses 6,932 6,249
Off-track wagering concessions expenses 1,766 1,689
Other operating expenses 3,710 3,750
------ ------
Total operating expenses 39,237 37,518
------ ------
Income from operations 7,237 6,375
------ ------
Other income (expenses)
Interest (expense) (44) (55)
Interest income 229 201
Other - 4
------ ------
Total other income 185 150
------ ------
Income before income taxes 7,422 6,525
Taxes on income 3,016 2,680
------ ------
Net Income $4,406 $3,845
====== ======
Earnings per share $0.64 $0.59
====== ======
Weighted average number of common shares outstanding 6,877 6,522
====== ======
See accompanying notes to consolidated financial statements
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
Three Months Ended
September 30,
1996 1995
-------- --------
Revenues
Pari-mutuel revenues
Penn National races $4,823 $5,611
Import simulcasting 8,087 7,269
Export simulcasting 704 445
Admissions, programs and other racing revenues 1,356 1,187
Concession Revenues 900 918
------ ------
Total revenues 15,870 15,430
------ ------
Operating expenses
Purses, stakes and trophies 3,296 3,209
Direct salaries, payroll taxes and employee benefits 2,244 2,037
Simulcast expenses 2,240 2,364
Pari-mutuel taxes 1,323 1,335
Other direct meeting expenses 2,454 2,105
Off-track wagering concessions expenses 721 630
Other operating expenses 1,224 1,429
------ ------
Total operating expenses 13,502 13,109
------ ------
Income from operations 2,368 2,321
------ ------
Other income (expenses)
Interest (expense) (7) (25)
Interest income 76 62
Other - 4
------ ------
Total other income 69 41
------ ------
Income before income taxes 2,437 2,362
Taxes on income 992 963
------ ------
Net Income $1,445 $1,399
====== ======
Earnings per share $0.21 $0.21
====== ======
Weighted average number of common shares outstanding 6,997 6,522
====== ======
See accompanying notes to consolidated financial statements
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
(Unaudited)
Additional
Common Stock Paid-In Retained
Shares Amounts Capital Earnings Total
Balance, at
January 1, 1996 6,472,500 $ 43 $ 12,821 $ 7,938 $ 20,802
Issuance of common stock 192,645 3 1,483 - 1,486
Net income for the nine months
ended September 30, 1996
(unaudited) - - - 4,406 4,406
-------- ------- -------- -------- --------
Balance at
September 30, 1996
(unaudited) 6,665,145 $ 46 $ 14,304 $ 12,344 $ 26,694
========= ======== ======== ======== ========
See accompanying notes to consolidated financial statements
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(IN THOUSANDS)
(Unaudited)
Nine Months Ended
September 30,
1996 1995
------------ -----------
Cash flows from operating activities
Net Income $4,406 $3,845
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 911 648
Deferred income taxes 144 (2)
Decrease (Increase) in
Accounts and notes receivable (350) 16
Prepaid expenses (732) (263)
Miscellaneous other assets (197) (29)
Increase (decrease) in
Accounts payable 473 182
Purses due horsemen 36 701
Uncashed pari-mutuel tickets (88) 14
Accrued expenses (85) (539)
Customer deposits 200 205
Taxes other than income payable 81 132
Income taxes payable (324) 234
------ ------
Net cash provided by operating activities 4,475 5,144
------ ------
Cash flows from investing activities
Expenditures for property and equipment (4,784) (3,690)
Prepaid acquisition costs (3,001) -
------ ------
Net cash (used) by investing activities (7,785) (3,690)
Cash flows from financing activities
Proceeds of sale common stock 1,486 -
Principal payments on long-term debt and
capital lease obligations (88) (91)
------ ------
Net cash provided by (used) in financing activities 1,398 (91)
------ ------
Net increase in cash (1,912) 1,363
Cash, at beginning of period 7,514 5,502
------ ------
Cash, at end of period $5,602 $6,865
====== ======
See accompanying notes to consolidated financial statements
PENN NATIONAL GAMING , INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The consolidated financial statements include the accounts of Penn
National Gaming, Inc. and its wholly-owned subsidiaries, Mountainview
Thoroughbred Racing Association, Pennsylvania National Turf Club, Inc., Penn
National Speedway, Inc., Sterling Aviation, Inc., Penn National Holding Company,
Penn National Gaming of West Virginia, Inc., and PNGI Charles Town Gaming
Limited Liability Company (collectively, the "Company").
The financial information has been prepared in accordance with the
Company's customary accounting practices and, except for the Balance Sheet
at December 31, 1995, has not been audited. All significant intercompany
balances and transactions have been eliminated. In the opinion of management,
the information presented reflects all adjustments necessary for a fair
statement of interim results. All such adjustments are of a normal and recurring
nature. The foregoing interim results are not necessarily indicative of the
results of operations for the full year ending December 31, 1996.
2. Wagering Information (In Thousands):
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Pari-mutuel wagering in Pennsylvania
on Penn National races $23,095 $26,863 $69,200 $79,235
Pari-mutuel wagering on simulcasting
Import simulcasting from other
Pennsylvania racetracks 6,255 6,860 17,704 22,018
Import simulcasting from out of
Pennsylvania racetracks 35,189 30,998 105,191 84,646
Export simulcasting to out of
Pennsylvania wagering facilities 24,440 14,913 84,228 48,327
------ ------- ------ ------
65,884 52,771 207,123 154,991
------ ------- ------- -------
Total pari-mutuel wagering $88,979 $79,634 $276,323 $234,226
======= ======= ======== ========
PENN NATIONAL GAMING , INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Commitments
The Company has a $4,200,000 credit facility with a commercial bank. The
facility provides for a working capital line of credit in the amount of
$2,500,000 at various interest rates and a letter of credit facility for
$1,700,000. The credit facility is unsecured and contains typical financial
covenants such as tangible net worth, debt to tangible net worth and debt
coverage ratio. At September 30, 1996, the Company was contingently obligated
under the letter of credit facility with face amounts aggregating $1,436,000.
The $1,436,000 consists of $1,336,000 relating to the horsemen's account
balances and $100,000 for Pennsylvania pari-mutuel taxes. All letters of credit
expire December 31, 1996.
In February 1996, the Company entered into an agreement to purchase land
for its proposed Williamsport OTW facility. The agreement provides for a
purchase price of $555,000 and is subject to numerous contingencies including
approval form the Pennsylvania State Horse Racing Commission. On May 22, 1996
the Company received Phase I approval from the Pennsylvania State Horse Racing
Commission for the Williamsport OTW facility.
On February 26, 1996, the Company entered into a joint venture agreement
with Bryant Development Company, the holder of an option to purchase the Charles
Town Race Track in Jefferson County, West Virginia for a purchase price of $18
million. In connection with the joint venture agreement, Bryant assigned the
option to the joint venture. The Company holds an 80% interest in the joint
venture with Bryant Development holding the remainder. In November 1996 the
joint venture entered into an amended and restated option agreement with respect
to the Charles Town Race track subject to substantially the same economic terms
and conditions as the original option. On November 5, 1996, the voters of
Jefferson County, West Virginia approved a referendum permitting
installation of video lottery terminals at the Charles Town Race Track, and
thereafter, the joint venture exercised its option to purchase Charles Town
Race Track. The Company intends to fund its 80% interest in the joint venture
operations through additional borrowing and the Company's available working
capital.
In March 1996, the Company took an assignment of an agreement to purchase
land for its proposed Downingtown OTW facility. The agreement provides for a
purchase price of $1,696,000, is subject to numerous contingencies including
approval from the Pennsylvania State Horse Racing Commission, and expired by its
terms on July 31, 1996. The Company submitted an application to the Pennsylvania
State Horse Racing Commission for approval of the Downingtown OTW facility, but
such application has not yet been approved. On July 31, 1996, Penn National
extended its right to purchase the property for another six months.
PENN NATIONAL GAMING , INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On September 13, 1996, the Company entered into a definite agreement to
acquire the assets of Pocono Downs, Inc., the owner of the Pocono Downs
standardbred horse racing facility and two off-track wagering (OTW) facilities
for $47 million. The company intends to finance the acquisition with cash on
hand and bank debt. Settlement for the acquisition is expected to occur on or
before November 30, 1996.
On September 24, 1996, the Company entered into a second agreement to
purchase land for its proposed Downingtown OTW facility. The agreement provides
for a purchase price of $1,400,000 and is subject to numerous contingencies
including approval from the Pennsylvania State Horse Racing Commission. As of
November 13, 1996, the Company has not amended its Downingtown application for
this new proposed location.
4. Supplemental Disclosures of Cash Flow Information
Cash paid during the nine months ended September 30, 1996 and 1995 for
interest was $44,000 and $55,000 respectively.
Cash paid during the nine months ended September 30, 1996 and 1995 for
income taxes was $3,196,000 and $2,475,000 respectively.
5. Notes Receivable
On May 13, 1996, the Company loaned $400,000 to a unrelated company in
Downingtown. The note bears at a rate of 10% per annum and matures on May 13,
1997.
Effective June 4, 1996, the joint venture entered into a Loan and Security
Agreement with Charles Town Races, Inc. The Loan and Security Agreement provides
for a working capital line of credit in the amount of $1,250,000 and will reduce
the purchase price under the option by $1.60 for each dollar borrowed. As of
November 13, 1996, Charles Town Races, Inc. borrowed $1,155,000 of the available
credit.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Three months ended September 30, 1996 compared to three months ended September
30, 1995
Total revenue increased by approximately $440,000 or 2.9% from $15.4
million for the three months ended September 30, 1995 to $15.9 million for the
three months ended September 30, 1996. The increase was attributable to an
increase in import and export simulcasting revenues, offset in part by a
decrease in pari-mutuel revenues on Penn National races, and to the opening of
the Lancaster OTW facility on July 11, 1996. The increase in export simulcasting
revenues of $259,000 or 58% from $445,000 to $704,000 resulted from the
Company's races being broadcast to additional out-of-state locations. The
decrease in pari-mutuel revenues on Penn National races was due to increased
import simulcasting revenue from wagering on other race tracks at Penn National
facilities. For the quarter, Penn National scheduled and ran 52 live race days
in 1996 and 1995.
Total operating expenses increased by approximately $393,000 or 3.1%from
$13.1 million for the three months ended September 30, 1995 to $13.5 million for
the three months ended September 30, 1996. The increase in operating expenses
resulted from an increase in purses, stakes and trophies, pari-mutuel taxes, and
simulcast expenses resulting from an increase in revenue from import
simulcasting and three months of operating expenses for the Lancaster OTW
facility.
Income from operations increased by approximately $47,000 or 2.0% from
$2.32 million to $2.37 million due to the factors described above.
Net income from operations increased by approximately $46,000 or 3.3% from
$1,399,000 for the three months ended September 30, 1995 to $1,445,000 for the
three months ended September 30, 1996. Income tax expense increased from
$963,000 to $992,000 due to the increase in income for the period.
Three months ended September 30, 1995 compared to three months ended September
30, 1994.
Total revenues increased by approximately $2.4 million or 18.8% from $13.0
million to $15.4 million in the three months ended September 30, 1995. The
increase was attributable to an increase in import and export simulcasting
revenue, admissions, programs and other racing revenues and concession revenues,
offset by a decrease in pari-mutuel revenues on Penn National races. The
increase in import simulcasting revenues, admissions, programs and other racing
revenues was mainly attributable to the opening of the York OTW facility in
March 1995. The increase in export simulcasting resulted from the Company's
races being broadcast to additional out-of-state locations. The decrease in
pari-mutuel revenues on Penn National races was a result of the Company
scheduling less race days in the three months ended September 30, 1995,
partially offset by the opening of the York OTW facility.
Total operating expenses increased by approximately $1.8 million or 16.0%
from $11.3 million to $13.1 million in the three months, ended September 30,
1995. The increase was primarily due to the opening of the York OTW facility in
March 1995, and an increase in corporate overhead due to a number of factors
including the following, expansion of the Company's Wyomissing office, certain
expenses relating to the Company being public and payment of severance
compensation to the Company's former president. This was offset by a decrease in
simulcast expenses because of a decrease in wagering on Penn National races at
other Pennsylvania race tracks.
Income from operations increased by approximately $631,000 or 37.3% from
$1.7 million to $2.3 million in the three months ended September 30, 1995,
reflecting the factors described above.
Net income increased by $414,000 or 42% from $985,000 to $1.4 million for
the three months ended September 30, 1995 due to the factors described above.
Nine months ended September 30, 1996 compared to nine months ended September 30,
1995
Total revenue increased by approximately $2.6 million or 5.9% from $43.9
million for the nine months ended September 30, 1995 to $46.5 million for the
nine months ended September 30, 1996. The increase was attributable to an
increase in import and export simulcasting revenues, offset in part by a
decrease in pari-mutuel revenues on Penn National races. Revenues also increased
due to the opening of the Lancaster OTW facility on July 11, 1996. The increase
in export simulcasting revenues of $1.0 million or 71.2% from $1.5 million to
$2.5 million resulted from the Company's races being broadcast to additional
out-of-state locations. The decrease in pari-mutuel revenues on Penn National
races was due to increased import simulcasting revenue from wagering on other
race tracks at Penn National facilities. For the nine month period in 1996, Penn
National was scheduled to run 165 live race days but canceled 11 days in the
first quarter due to weather. In the comparable period in 1995, Penn National
ran 154 live race days.
Total operating expenses increased by approximately $1.7 million or 4.9%
from $37.5 million for the nine months ended September 30, 1995 to $39.2 million
for the nine months ended September 30, 1996. The increase in operating expenses
resulted from an increase in purses, stakes and trophies, pari-mutuel taxes, and
simulcast expenses resulting from an increase in revenue from import
simulcasting, nine months of operating expenses for the York OTW facility in
1996 compared to six months of expenses in 1995, and three months of operating
expenses for the new Lancaster OTW facility.
Income from operations increased by approximately $0.9 million or 13.5%
from $6.4 million to $7.2 million due to the factors described above.
Net income from operations increased by approximately $561,000 or 14.6%
from $3,845,000 for the nine months ended September 30, 1995 to $4,406,000 for
the nine months ended September 30, 1996. Income tax expense increased from
$2,680,000 to $3,016,000 due to the increase in income for the period.
Nine months ended September 30, 1995, compared to nine months ended September
30, 1994.
Total revenues increased by approximately $10.3 million or 30.6% from
$33.6 million to $43.9 million in the nine months ended September 30, 1995. The
increase was attributable to an increase in import and export simulcasting
revenues, admissions, programs and other racing revenues, and concession
revenues. The increase in revenues primarily resulted from the opening of the
Chambersburg and York OTW facilities in April, 1994 and March, 1995,
respectively, and an increase of approximately $589,000 or 68.6% from $858,000
to $1.5 million in export simulcasting revenues due to the Company's races being
broadcast to additional out-of-state locations. This was offset by a decrease in
pari-mutuel revenues on Penn National's races due to a decrease in number of
live race days in 1995.
Total operating expenses increased by approximately $6.9 million or 22.6%
from $30.6 million to $37.5 million in the nine months ended September 30, 1995.
The increase, which was in substantially all categories of operating expenses
was caused primarily by the opening of the Chambersburg and York OTW facilities
in April, 1994 and March, 1995, respectively and an increase in corporate
overhead due to a number of factors including the following, expansion of the
Company's Wyomissing office, certain expenses relating to the Company being
public and payment of severance compensation to the Company's former president.
The decrease in management fees was a result of the management fees being
discontinued when the Company completed the May, 1994 initial public offering.
Income from operations increased by approximately $3.4 million or 112.9%
from $3.0 million to $6.4 million in the nine months ended September 30, 1995,
reflecting the factors described above.
Net income increased by approximately $2.1 million or 119.3% from $1.7
million to $3.8 million in the nine months ended September 30,1995 due to the
factors described above. Income tax expenses increased from $755,000 to $2.7
million which was attributable to the increase in income for the period.
Liquidity and Capital Resources
Historically, the Company's primary sources of liquidity and capital
resources have been cash flow from operations and borrowing from banks and
related parties. During the nine months ended September 30, 1996, the Company's
cash position decreased by approximately $1.9 million from $7.5 million at
December 31, 1995 to $5.6 million as a result of expenditures for improvements
and equipment at the race track, construction of the Lancaster OTW facility, the
start of construction for the Williamsport OTW facility, and prepaid acquisition
costs.
Net cash provided from operating activities totaled approximately $4.5
million for the nine months ended September 30, 1996 of which $5.3 million came
from net income and non-cash expenses.
Cash flows used in investing activities totaled approximately $7.8
million. Capital expenditures totaled $4.8 million for improvements and
equipment at the race track, the construction of the Lancaster OTW facility, and
the start of construction for the Williamsport facility. Prepaid acquisition
costs totaled $1.9 million for Charles Town Race Track and $1.1 million for
Pocono Downs.
Cash flows from financing activities totaled approximately $1,486,000 from
the exercise of warrants and the issuance of 192,645 shares of common stock.
The Company has a $4,200,000 credit facility with a commercial bank. The
facility provides for a working capital line of credit in the amount of
$2,500,000 at various interest rates and a letter of credit facility for
$1,700,000. The credit facility is unsecured and contains typical financial
covenants such as tangible net worth, debt to tangible net worth and debt
coverage ratio. At September 30, 1996, the Company was contingently obligated
under the letter of credit facility with face amounts aggregating $1,436,000.
The $1,436,000 consists of $1,336,000 relating to the horsemen's account
balances and $100,000 for Pennsylvania pari-mutuel taxes. All letters of credit
expire December 31, 1996.
On February 26, 1996, construction began on the Lancaster OTW facility.
The construction costs totaled approximately $2.4 million and were funded from
the Company's cash reserves. The Lancaster OTW facility opened July 11,1996.
On February 26, 1996, the Company entered into a joint venture agreement
with Bryant Development Company, the holder of an option to purchase the Charles
Town Race Track in Jefferson County, West Virginia for a purchase price of $18
million. In connection wi
h the joint venture agreement, Bryant assigned the
option to the joint venture. The Company holds an 80% interest in the joint
venture with Bryant Development holding the remainder. In November 1996 the
joint venture entered into an amended and restated option agreement with respect
to the track subject to substantially the same economic terms and conditions. On
November 5, 1996, the voters of Jefferson County, West Virginia approved a
referendum permitting installation of video lottery terminals at the Charles
Town Race Track, and thereafter, the joint venture exercised its option to
purchase Charles Town Race Track. The Company intends to fund its 80% interest
in the joint venture operations through additional borrowing and the Company's
available working capital.
Effective June 4, 1996, the joint venture entered into a Loan and Security
Agreement with Charles Town Races, Inc. The Loan and Security Agreement provides
for a working capital line of credit in the amount of $1,250,000 and will reduce
the purchase price under the option by $1.60 for each dollar borrowed. As of
November 13, 1996, Charles Town Races, Inc. borrowed $1,155,000 of the available
credit.
On May 13, 1996, the Company loaned $400,000 to a unrelated company in
Downingtown. The note bears at a rate of 10% per annum and matures on May 13,
1997.
On September 13, 1996, the Company entered into a definite agreement to
acquire the assets of Pocono Downs, Inc., the owner of the Pocono Downs
standardbred horse racing facility and two off-track wagering (OTW) facilities
for $47 million. The company intends to finance the acquisition with cash on
hand and bank debt. Settlement for the acquisition is expected to occur on or
before November 30, 1996.
On October 24, 1996, the Company received a loan commitment from a
commercial bank for $75 million to finance the Pocono Downs acquisition and the
Company's share of the option exercise price for the purchase and subsequent
renovation of Charles Town Race Track. The loan contemplated by the commitment
will be structured as follows: ( i ) an amortizing $47.0 million term loan for
the purchase of Pocono Downs, ( ii ) an amortizing $23.0 million term loan for
the purchase and renovation of Charles Town Race Track, and ( iii ) a $5.0
million working capital revolver which includes a letter of credit facility of
$3.0 million. The commitment provides for various interest rates and will
contain numerous financial and other covenants.
The Company believes that the cash on hand, cash generated from
operations, and the above credit facilities will be sufficient to fund its
anticipated future cash requirements.
Part II. Other Information
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.53 Agreement dated September 24, 1996 between the Company and Fred
V. Schubert to purchase land for the Company's Downingtown OTW..
10.54 Purchase Agreement dated September 13, 1996 between the Company and
the Estate of Joseph B. Banks for the purchase of Pocono Downs Race
Track and two OTW facilities.
10.55 Loan Commitment Letter dated October 15, 1996 between the
Company and Bankers Trust Company.
10.56 Amended and Restated option agreement dated as of February 17,
1995 between PNGI Charles Town Gaming Limited Liability Company
(The Joint Venture) and Charles Town Racing Limited Partnership
and Charles Town Races, Inc..
(b) Current reports on Form 8-K
None
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Penn National Gaming, Inc.
By: /s/ Robert S. Ippolito
Robert S. Ippolito Chief Financial Officer ,Secretary/Treasurer
Date: November 13, 1996
EXHIBIT INDEX
Exhibit Nos. Description of
Exhibits Page No.
10.53 Agreement dated September 24, 1996 between the Company
and Fred V. Schubert to purchase land for the Company's
Downingtown OTW.
10.54 Purchase Agreement dated September 13, 1996 between
the Company and the Estate of Joseph B. Banks for the
purchase of Pocono Downs Race Track and two related
OTW facilities.
10.55 Loan Commitment Letter dated October 15, 1996 between
the Company and Bankers Trust Company.
10.56 Amended and Restated option agreement dated as of
February 17, 1995 between the PNGI Charles Town
Gaming Limited Liability Company (The joint venture)
and Charles Town Racing Limited Partnership and
Charles Town Races, Inc.