SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
o 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 as specified 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 200
Wyomissing, PA 19610
(Address of principal executive offices)
610-373-2400
(Registrant's telephone number including area code:)
Not applicable
(Former name, former address, and former fiscal year,
if changed since last report)
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 ____
1
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ____ 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 Outstanding as of August 12, 1998
Common Stock par value .01 per share 15,155,830
This Report contains forward-looking statements that inherently involve risks
and uncertainties. The Company's actual result could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those discussed in this Quarterly Report and those discussed
in the Company's Annual Report on Form 10-K. References to "Penn National
Gaming" or the "Company" include Penn National Gaming, Inc. and its
subsidiaries.
2
Penn National Gaming, Inc. And Subsidiaries
INDEX
PART I - FINANCIAL INFORMATION Page
Item 1 - Financial Statements
Consolidated Balance Sheets -
June 30, 1998 (unaudited) and December 31, 1997 4-5
Consolidated Statements of Income -
Six Months Ended June 30, 1998
and 1997 (unaudited) 6-7
Consolidated Statements of Income -
Three Months Ended June 30, 1998 and
1997 (unaudited) 8-9
Consolidated Statement of Shareholders' Equity -
Six Months Ended June 30, 1998 (unaudited) 10
Consolidated Statements of Cash Flow -
Six Months Ended June 30, 1998
and 1997 (unaudited) 11-12
Notes to Consolidated Financial Statements 13-17
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 18-22
Item 3 - Changes in information about Market Risk 22
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 22
Item 6 - Exhibits and Reports on Form 8-K 23
Signature Page 24
Exhibit Index 25
3
Part I. Financial Information
Item 1. Financial Statements
PENN NATIONAL GAMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
June 30, December 31,
1998 1997
(Unaudited)
----------- ----------
Assets
Current assets
Cash and cash equivalents $ 23,492 $ 21,854
Accounts receivable 4,060 2,257
Prepaid expenses and other current assets 2,109 1,441
Deferred income taxes 419 469
Prepaid income taxes 880 3,003
--- -----
Total current assets 30,960 29,024
------ ------
Property, plant and equipment, at cost
Land and improvements 26,249 24,643
Building and improvements 66,845 56,298
Furniture, fixtures and equipment 16,006 13,847
Transportation equipment 479 490
Leasehold improvements 8,451 6,778
Leased equipment under capitalized lease 824 824
Construction in progress 230 11,288
--- ------
119,084 114,168
Less accumulated depreciation and amortization 13,301 11,007
------ ------
Net property, plant and equipment 105,783 103,161
------- -------
Other assets
Excess of cost over fair market value of net assets acquired
(net of accumulated amortization
of $1,695 and $1,389, respectively) 22,749 23,055
Deferred financing costs 2,896 3,014
Miscellaneous 837 624
--- ---
Total other assets 26,482 26,693
------ ------
$163,225 $158,878
======== ========
See accompanying notes to consolidated financial statement
4
PENN NATIONAL GAMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
June 30, December 31,
1998 1997
(Unaudited)
----------- -------------
Liabilities and shareholders' equity
Current liabilities
Current maturities of long-term debt and
capital lease obligations $ 189 $ 204
Accounts payable 7,093 7,405
Purses due horsemen 1,423 -
Uncashed pari-mutuel tickets 950 1,504
Accrued interest 334 326
Accrued expenses 1,848 2,427
Accrued salaries and wages 951 813
Customer deposits 703 470
Taxes, other than income taxes 806 649
--- ---
Total current liabilities 14,297 13,798
------ ------
Long term liabilities
Long-term debt and capital lease obligations,
net of current maturities 80,113 80,132
Deferred income taxes 11,264 11,092
------ ------
Total long-term liabilities 91,377 91,224
------ ------
Commitments and contingencies
Shareholders' equity
Preferred stock,$.01 par value,
authorized 1,000,000 shares; none issued - -
Common stock,$.01 par value,
authorized 20,000,000 shares;
15,155,830 and 15,152,580
issued and outstanding, respectively 152 152
Additional paid in capital 37,987 37,969
Retained earnings 19,412 15,735
------ ------
Total shareholders' equity 57,551 53,856
--------- ---------
$ 163,225 $ 158,878
========= =========
See accompanying notes to consolidated financial statements
5
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Six Months Ended
June 30,
1998 1997
-------------------------------
Revenues
Pari-mutuel revenues
Live races $ 12,928 $ 11,397
Import simulcasting 34,114 31,338
Export simulcasting 2,828 3,395
Gaming revenue 16,160 -
Admissions, programs and other racing revenue 4,427 2,824
Concession revenues 2,956 3,450
----- -----
Total revenues 73,413 52,404
------ ------
Operating expenses
Purses, stakes, and trophies 13,946 10,318
Direct salaries, payroll taxes and employee benefits 9,263 7,420
Simulcast expenses 6,896 5,881
Pari-mutuel taxes 4,589 4,419
Lottery taxes and administration 6,302 -
Other direct meet expenses 11,564 8,499
Off-track wagering concession expenses 3,453 2,640
Other operating expenses 5,021 3,775
Depreciation and amortization 2,841 1,660
----- -----
Total operating expenses 63,875 44,612
------ ------
Income from operations 9,538 7,792
----- -----
Other income (expenses)
Interest (expense) (4,243) (1,675)
Interest income 451 158
Other 30 (4)
-- --
Total other (expenses) (3,762) (1,521)
------ ------
Income before income taxes and
extraordinary item 5,776 6,271
Taxes on income 2,099 2,573
----- -----
See accompanying notes to consolidated financial statements
6
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
Six Months Ended
June 30,
1998 1997
----------------------------
Income before extraordinary item 3,677 3,698
Extraordinary Item
Loss of early extinguishment
of debt, net of income taxes
of $264 - 383
---- --- ---
Net income $ 3,677 $ 3,315
======= =======
Per share data
Basic
Income per share before extraordinary item $0.24 $0.24
Extraordinary item - 0.02
---- ----
Net income per share $0.24 $0.22
----- -----
Diluted
Income per share before extraordinary item $0.24 $0.24
Extraordinary item - 0.02
---- ----
Net income per share $0.24 $0.22
----- -----
Weighted average shares outstanding
Basic 15,154 15,126
------ ------
Diluted 15,558 15,319
------ ------
See accompanying notes to consolidated financial statements
7
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended
June 30,
1998 1997
--------------------------
Revenues
Pari-mutuel revenues
Live races $ 7,623 $ 7,028
Import simulcasting 17,763 16,541
Export simulcasting 1,502 2,272
Gaming revenue 9,004 -
Admissions, programs and other racing revenue 2,472 1,566
Concession revenues 1,694 2,177
----- -----
Total revenues 40,058 29,584
------ ------
Operating expenses
Purses, stakes, and trophies 7,639 6,116
Direct salaries, payroll taxes and employee benefits 4,904 4,174
Simulcast expenses 3,795 3,045
Pari-mutuel taxes 2,476 2,462
Lottery taxes and administration 3,371 -
Other direct meet expenses 6,122 5,121
Off-track wagering concession expenses 1,948 1,674
Other operating expenses 2,625 1,933
Depreciation and amortization 1,422 943
----- ---
Total operating expenses 34,302 25,468
------ ------
Income from operations 5,756 4,116
----- -----
Other income (expenses)
Interest (expense) (2,134) (775)
Interest income 250 72
Other 30 (4)
-- --
Total other (expenses) (1,854) (707)
------ ----
Income before income taxes 3,902 3,409
Taxes on income 1,435 1,395
----- -----
See accompanying notes to consolidated financial statements
8
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
Three Months Ended
June 30,
1998 1997
--------------------------
Net income $ 2,467 $ 2,014
======= =======
Per share data
Basic net income $0.16 $0.13
----- -----
Diluted net income $0.16 $0.13
----- -----
Weighted average shares outstanding
Basic 15,156 15,126
------ ------
Diluted 15,542 15,717
------ ------
See accompanying notes to consolidated financial statements
9
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Six Months Ended June 30, 1998
(In thousands, except share data)
(Unaudited)
Additional
Common Stock Paid-In Retained
------------
Shares Amounts Capital Earnings Total
------ ------- ------- -------- -----
Balance, January 1, 1998 15,152,580 $ 152 $ 37,969 $ 15,735 $ 53,856
Issuance of common stock 3,250 - 18 - 18
Net income for the six months
ended June 30, 1998 - - - 3,677 3,677
-- -- -- ----- -----
Balance, June 30, 1998 15,155,830 $ 152 $ 37,987 $ 19,412 $ 57,551
========== ====== ========= ========= =========
See accompanying notes to consolidated financial statements
10
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
1998 1997
--------------------------
Cash flows from operating activities $ 3,677 $ 3,315
Net income
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 2,841 1,660
Extraordinary item, loss on early extinguishment
of debt, before tax benefit - 647
Deferred income taxes 222 148
Decrease (increase) in:
Accounts receivable (1,803) 1,156
Prepaid expenses and other current assets (668) (2,286)
Prepaid income taxes 2,123 1,178
Miscellaneous other assets (213) (503)
Increase (decrease) in:
Accounts payable (312) 4,480
Purses due horsemen 1,423 458
Uncashed pari-mutuel tickets (554) (587)
Accrued expenses (579) (71)
Accrued interest 8 (152)
Accrued salaries and wages 138 306
Customers deposits 233 261
Taxes other than income taxes 157 (43)
--- ---
Net cash provided by operating activities 6,693 9,967
----- -----
Cash flows from investing activities
Expenditures for property, plant and equipment (4,932) (15,450)
Acquisition of business - (16,000)
Increase in prepaid acquisition costs - (176)
--- ----
Net cash (used in) investing activities (4,932) (31,626)
------ -------
See accompanying notes to consolidated financial statements
11
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
1998 1997
--------------------------
Cash flows from financing activities
Proceeds from sale of common stock 18 23,082
Tax benefit related to stock options exercised - 573
Proceeds of long-term debt - 16,500
Principal payments on long-term debt and capital lease
obligations (34) (19,136)
Increase in unamortized finance costs (107) (167)
---- ----
Net cash provided by (used in) financing activities (123) 20,852
---- ------
Net increase (decrease) in cash and cash equivalents 1,638 (807)
Cash and cash equivalents, at beginning of period 21,854 5,634
------ -----
Cash and cash equivalents, at end of period $ 23,492 $ 4,827
======== =======
See accompanying notes to consolidated financial statements
12
PENN NATIONAL GAMING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Financial Statement Presentation
The accompanying consolidated financial statements are unaudited and
include the accounts of Penn National Gaming, Inc., (Penn) and its wholly and
majority owned subsidiaries, (collectively the "Company"). All significant
intercompany transactions and balances have been eliminated. Certain prior
year amounts have been reclassified to conform to current year presentation.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) have been made which are necessary to present fairly the
financial position of the Company as of June 30, 1998 and the results of its
operations for the six and three month periods ended June 30, 1998 and 1997.
The results of operations experienced for the six month period ended
June 30, 1998 are not necessarily indicative of the results to be experienced
for the fiscal year ended December 31, 1998.
The statements and related notes herein have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. The
accompanying notes should therefore be read in conjunction with the Company's
December 31, 1997 annual financial statements.
2. Wagering Information (in thousands)
Three months ended June 30, 1998
--------------------------------
Penn National Pocono Downs Charles Town Total
------------- ------------ ------------ -----
Pari-mutuel wagering in-state company live
races $ 21,605 $ 7,410 $ 5,524 $ 34,539
--------- --------- -------- ---------
Pari-mutuel wagering on simulcasting:
Import simulcasting from other racetracks 44,549 36,253 11,877 92,679
Export simulcasting to out of
Pennsylvania wagering facilities 42,964 7,188 - 50,152
------ ----- --- ------
87,513 43,441 11,877 142,831
------ ------ ------ -------
Total pari-mutuel wagering $ 109,118 $ 50,851 $ 17,401 $ 177,370
========= ========= ======== =========
13
Three months ended June 30, 1997
--------------------------------
Penn National Pocono Downs Charles Town Total
------------- ------------ ------------ -----
Pari-mutuel wagering in-state company live
races $ 25,084 $ 9,243 $ 4,640 $ 38,967
--------- -------- -------- ---------
Pari-mutuel wagering on simulcasting:
Import simulcasting from other racetracks 42,603 30,258 6,645 79,506
Export simulcasting to out of
Pennsylvania Wagering facilities 38,930 8,827 - 47,757
------ ----- --- -----
81,533 39,085 6,645 127,263
------ ------ ----- -------
Total pari-mutuel wagering $ 106,617 $ 48,328 $ 11,285 $ 166,230
========= ======== ======== =========
Six months ended June 30, 1998
------------------------------
Penn National Pocono Downs Charles Town Total
------------- ------------ ------------ -----
Pari-mutuel wagering in-state company live
races $ 41,214 $ 8,323 $ 9,643 $ 59,180
--------- -------- -------- ---------
Pari-mutuel wagering on simulcasting:
Import simulcasting from other racetracks 87,394 67,318 22,029 176,741
Export simulcasting to out of
Pennsylvania Wagering facilities 86,585 7,763 - 94,348
------ ----- --- ------
173,979 75,081 22,029 271,089
------- ------ ------ -------
Total pari-mutuel wagering $ 215,193 $ 83,404 $ 31,672 $ 330,269
========= ======== ======== =========
Six months ended June 30, 1997
------------------------------
Penn National Pocono Downs Charles Town Total
------------- ------------ ------------ -----
Pari-mutuel wagering in-state company live
races $ 47,574 $ 9,243 $ 4,640 $ 61,457
---------- ------------ --------- ----------
Pari-mutuel wagering on simulcasting:
Import simulcasting from other racetracks 85,843 59,510 6,645 151,998
Export simulcasting to out of
Pennsylvania Wagering facilities 76,361 8,827 - 85,188
------ ----- --- ------
162,204 68,337 6,645 237,186
------- ------ ----- -------
Total pari-mutuel wagering $ 209,778 $ 77,580 $ 11,285 $ 298,643
---------- ------------ --------- ----------
3. Commitments
At June 30, 1998, the Company was contingently obligated under letters
of credit with principal amounts aggregating $2,041,000. The $2,041,000
consists of $1,786,000 for the horsemen's account balances, $100,000 for
Pennsylvania pari-mutuel taxes and $155,000 for purses.
14
4. Supplemental Disclosures of Cash Flow Information
Cash paid during the six months ended June 30, 1998 and 1997 for
interest was $4,230,000 and $2,051,000 respectively.
Cash paid during the six months ended June 30, 1998 and 1997 for income
taxes was $1,476,000 and $629,000 respectively.
5. Potential Tennessee Development Project
In June 1997, the Company acquired twelve one-month options to
purchase approximately 100 acres of land in Memphis, Tennessee. Since such
time, the Company, through its subsidiary, Tennessee Downs, Inc.
("Tennessee Downs"), has pursued the development of a harness track and
simulcast facility on this option site, which is located in the northeastern
section of Memphis (The "Tennessee Development Project"). The Company
submitted an application to the Tennessee State Racing Commission (the
"Tennessee Commission") in October 1997 for an initial license for the
development and operation of a harness track and OTW facility at this site. A
land use plan for the construction of a 5/8-mile harness track, clubhouse and
grandstand area were approved in October 1997 by the Land Use Hearing Board for
the City of Memphis and County of Shelby. Tennessee Downs was determined to be
financially suitable by the Tennessee Commission and a public comment hearing
before the Tennessee Commission was held in November 1997. In December 1997,
the Company received the necessary zoning and land development approvals from
the Memphis City Council.
In April 1998, the Tennessee Commission granted a contingent license to
the Company which would expire on the earlier of (i) December 31, 2000 or (ii)
the Tennessee Commission's term on June 30, 1998, if such term is not extended
by the Tennessee legislature. On May 1, 1998, the Tennessee State Legislature
voted against extending the life of the Tennessee Commission, allowing the
Tennessee Commission's term to expire on June 30, 1998. The Tennessee
Commission held a meeting on May 29, 1998, at which it rejected the Company's
request: (i) to grant the Company an unconditional racing license; (ii) for
racing days for the periods ending December 31, 2000; and (iii) to operate a
temporary simulcast facility. On July 28, 1998, the Company filed for a
preliminary injunction and a declaratory ruling on the legal status of racing
in Memphis with the Chancery Court in Shelby County. As of August 12, 1998, the
Company has invested approximately $500,000 in the Tennessee Development
Project. The Company intends to continue its efforts to obtain an unconditional
racing license that would expire December 31, 2000. There can be no assurance
that the Company's efforts to obtain an unconditional racing license will be
successful.
15
6. Subsidiary Guarantors
Summarized financial information as of June 30, 1998 and for three and
six months ended June 30, 1998 for Penn National Gaming, Inc. ("Parent"), the
Subsidiary Guarantors and Subsidiary Nonguarantors is as follows:
June 30, 1998
-------------
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
------- ---------- ------------- ------------ ------------
Current assets $ 17,076 $ 8,753 $ 5,598 $ (467) $ 30,960
Net property 416 61,878 43,489 - 105,783
Other assets 102,353 (306,342) 1,463 229,008 26,482
------- -------- ----- ------- ------
Total 119,845 (235,711) 50,550 228,541 163,225
------- -------- ------ ------- -------
Current liabilities 85 2,174 3,855 8,183 14,297
Long-term liabilities 80,024 (156,002) 52,037 115,318 91,377
Shareholders' equity 39,736 (81,883) (5,342) 105,040 57,551
------ -------- ------ ------- ------
Total $ 119,845 $ (235,711) $ 50,550 $ 228,541 $ 163,225
---------- ----------- ---------- ---------- ----------
Three months ended June 30, 1998
--------------------------------
Total revenues $ 2,862 $ 22,803 $ 13,697 $ 696 $ 40,058
Total operating expenses 1,097 20,420 12,089 696 34,302
----- ------ ------ --- ------
Income from operations 1,765 2,383 1,608 - 5,756
Other income (expenses) (1,390) 700 (1,164) - (1,854)
------ --- ------ ------
Income before income taxes 375 3,083 444 - 3,902
Taxes on income 94 1,341 - - 1,435
-- ----- -----
Net income $ 281 $ 1,742 $ 444 $ - $ 2,467
---------- ----------- ---------- ---------- -----------
Six months ended June 30, 1998
------------------------------
Total revenues $ 5,176 $ 42,425 $ 24,667 $ 1,145 $ 73,413
Total operating expenses 1,931 37,996 22,803 1,145 63,875
----- ------ ------ ----- ------
Income from operations 3,245 4,429 1,864 - 9,538
Other income (expenses) (2,777) 1,345 (2,330) - (3,762)
------ ----- ------ --- ------
Income before income taxes 468 5,774 (466) - 5,776
Taxes on income 26 2,073 - - 2,099
-- ----- --- --- -----
Net income $ 442 $ 3,701 $ (466) $ - $ 3,677
---------- ----------- ---------- ---------- ----------
Summarized financial information as of June 30, 1997 and for the three
and six months ended June 30, 1997, have not been presented. Separate
financial statements of the Subsidiary Guarantors and Subsidiary Nonguarantors
are not presented because management does not believe such statements are
material to investors.
16
7. Year 2000 Compliance
The Company is working directly and with its vendors to resolve the
potential impact of the year 2000 on the ability of the Company's computerized
information systems to accurately process information that may be date-
sensitive. Any of the Company's programs that recognize a date using "00" as
the year 1900 rather than the year 2000 could result in errors or system
failures. The Company utilizes a number of computer programs across its entire
operation. The Company has completed its assessment of the areas that must be
addressed and currently believes that costs of addressing this issue will not
have a material adverse impact on the Company's financial position. However,
if the Company and vendors upon which it relies are unable to address any
material issue in a timely manner, it would have a material financial impact on
the Company. In order to assure that this does not occur, the Company plans to
devote such resources as it deems necessary to resolve any significant year
2000 issues in a timely manner.
8. Subsequent Events
On July 7, 1998, the Company entered into an agreement with Ladbroke
Racing Management - Pennsylvania (Ladbroke) to purchase their Johnstown,
Pennsylvania OTW facility. The agreement provides for a purchase price of
$1,225,000 for the assignment of the facility lease and the sale of assets and
is subject to numerous contingencies, including approval by the Pennsylvania
State Racing Commission. Under the terms of the agreements, the Company will
sub-lease the facility from Ladbroke and operate the facility from September 1,
1998, the effective date of the agreement, through January 4, 1999, the closing
date of the agreement for $12,500 per month, at which time the Company will
assume full rights and ownership in the facility. The Johnstown facility will
replace the Company's proposed Altoona, Pennsylvania OTW facility upon receipt
of regulatory approval.
17
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Result of Operations
Three months ended June 30, 1998 compared to three months ended June 30, 1997
- -----------------------------------------------------------------------------
Total revenue increased by approximately $10.5 million or 35.4% from
$29.6 million for the three months ended June 30, 1997 to $40.1 million for the
three months ended June 30, 1998. Charles Town Races, which was purchased in
January of 1997 and began racing operations on April 30, 1997 and video lottery
machines operations on September 10, 1997, accounted for $10.8 million
(approximately $1.8 million of pari-mutuel revenues and $9.0 million of gaming
revenues) of the increase. Revenues at Penn National Race Course and its OTW
facilities decreased by approximately $400,000 due to decreased wagering on
Pennsylvania racing. Revenues at Pocono Downs and its OTW facilities increased
by approximately $100,000. The net increase was due to a full quarter of
operations for the new facilities at Hazleton and Carbondale offset by a
decrease in revenue at Allentown due to highway construction, a decrease in
revenue at the Wilkes-Barre racetrack due to the opening of the two new OTW
facilities and a decrease in revenue at the Erie OTW.
Total operating expenses increased by $8.8 million or 34.7% from $25.5
million for the three months ended June 30, 1997 to $34.3 million for the three
months ended June 30, 1998. Charles Town Races accounted for $8.6 million of
the increase due primarily to the video lottery operation and the opening of
the racing simulcast center. Penn National Race Course and its OTW facilities
had a decrease in operating expenses of approximately $600,000 due to the
decrease in revenues. Pocono Downs and its OTW facilities had an increase of
approximately $100,000 due to a full period of operations at Hazleton and
Carbondale offset by decreases at its other facilities. Corporate expenses
increased by $158,000 due to the hiring of additional staff for OTW facility
management, human resource management and the leasing of additional office
space. Depreciation and amortization increased by $479,000 or 50.1% from
$943,000 for the three months ended June 30, 1997 to $1,422,000 for the three
months ended June 30, 1998. The increase was due primarily to depreciation
associated with new facilities for Charles Town Gaming (September 1997),
Charles Town Simulcast Facility (January 1998), Hazleton OTW (March 1998) and
Carbondale OTW (March 1998).
Income from operations increased by approximately $1.6 million or
39.8% from $4.1 million for the three months ended June 30, 1997 to $5.8
million for the three months ended June 30, 1998 due to the factors described
above.
Other expenses for the three months ended June 30, 1998 consisted of
$1.9 million in net interest expense (primarily due to the 10 5/8% Senior Notes
issued December 1997) compared to $.7 million in net interest expense for the
three months ended June 30, 1997.
Income tax expense increased approximately $40,000 or 2.9% from
$1,395,000 for the three months ended June 30, 1997 to $1,435,000 for the three
months ended June 30, 1998 due to the increase in net income for the period.
18
Net income increased approximately $453,000 or 22.5% from $2.0 million
for the three months ended June 30, 1997 to $2.5 million for the three months
ended June 30, 1998 due to the factors described above.
Six months ended June 30, 1998 compared to six months ended June 30, 1997
- -------------------------------------------------------------------------
Total revenue increased by approximately $21.0 million or 40.1% from
$52.4 million for the six months ended June 30, 1997 to $73.4 million for the
six months ended June 30, 1998. Charles Town Races, which was purchased in
January, 1997 and began racing operations on April 30, 1997 and video lottery
machines operations on September 10, 1997, accounted for $21.7 million
(approximately $5.5 million of pari-mutuel revenues and $16.2 million of gaming
revenues) of the increase. Revenues at Penn National Race Course and its OTW
facilities decreased by approximately $1.1 million due to a decrease in
revenues at its Chambersburg OTW facility resulting from the opening of the
Charles Town Facility, competition in the Reading area from Philadelphia Park
facilityand decreased wagering on Pennsylvania racing. Revenue increased at
the Williamsport OTW due to a full period of operations in 1998 compared to
five months in 1997. Revenues at Pocono Downs and its OTW facilities increased
by approximately $300,000. This was due to the opening of new facilities in
Hazleton and Carbondale offset by a decrease in revenue at Allentown caused by
construction, a decrease in revenue at the Wilkes-Barre racetrack due to an
opening of the two new OTW facilities and a decrease in revenue at the Erie OTW
facility.
Total operating expenses increased by $19.3 million or 43.2% from
$44.6 million for the six months ended June 30, 1997 to $63.9 million for the
six months ended June 30, 1998. Charles Town Races accounted for $18.7 million
of the increase due primarily to the video lottery operation and the opening of
the racing simulcast center. Penn National Race Course and its OTW facilities
had a decrease in operating expenses of approximately $1.1 million due to the
decrease in revenues. Pocono Downs and its OTW facilities had an increase of
approximately $200,000 due to three months of operations at Hazleton and
Carbondale offset by decreases at its other facilities. Corporate expenses
increased by $282,000 due to the hiring of additional office staff for OTW
facility management, human resource management and the leasing of additional
office space. Depreciation and amortization increased by $1.1 million or 71.1%
from $1.7 million for the six months ended June 30, 1997 to $2.8 million for
the six months ended June 30, 1998. The increase was due primarily to
depreciation associated with new facilities for Charles Town Gaming (September
1997), Charles Town Simulcast Facility (January 1998), Hazleton OTW (March
1998) and Carbondale OTW (March 1998).
Income from operations increased by approximately $1.7 million or
22.4% from $7.8 million for the six months ended June 30, 1997 to $9.5 million
for the six months ended June 30, 1998 due to the factors described above.
Other expenses for the six months ended June 30, 1998 consisted of
$3.8 million in net interest expense (primarily due to the 10 5/8% Senior Notes
issued December 1997) compared to $1.5 million in net interest expense for the
six months ended June 30, 1997.
19
Income tax expense decreased approximately $474,000 or 18.4% from
$2,573,000 for the six months ended June 30, 1997 to $2,099,000 for the six
months ended June 30, 1998 due to the decrease in income for the period.
The extraordinary item in 1997 consisted of a loss on the early
extinquishment of debt in the amount of $383,000 net of income taxes. The
Company used approximately $19 million of the $23 million in proceeds from the
February 1997 equity offering to reduce long-term debt, resulting in a write-
off of $647,000 for fees associated with the early extinquishment of debt.
Net income increased approximately $362,000 or 10.9% from $3.3 million
for the six months ended June 30, 1997 to $3.7 million for the six months ended
June 30, 1998 due to the factors described above.
Liquidity and Capital Resources
- -------------------------------
Historically, the Company's primary sources of liquidity and capital
resources have been cash flow from operations, borrowings from banks and
proceeds from issuance of equity securities.
Net cash provided from operating activities for the six months ended
June 30, 1998 ($6.7 million) consisted of net income and non-cash expenses
($6.7 million), an increase in purses due horsemen ($1.4 million), income taxes
payable ($2.1 million), a decrease in accounts receivable ($1.8 million) and
a decrease in other changes in working capital ($1.7 million).
Cash flows used in investing activities ($4.9 million) consisted of
renovation and refurbishment of the Charles Town facility and race track
surface ($1.1 million) and $3.8 million in capital expenditures, including
approximately $3.2 million for the completion of the Hazleton and Carbondale
OTW facilities.
Cash flows from financing activities ($123,000) consisted principally of
additional financing fees associated with the sale of Senior Notes in December
1997.
The Company is subject to possible liabilities arising from the
environmental condition at the landfill adjacent to Pocono Downs. Specifically,
the Company may incur expenses in connection with the landfill in the future.
Such expenses may not be reimbursed by the four municipalities that are parties
to the settlement agreement. The Company is unable to estimate the amount, if
any, that it may be required to expend.
During the balance of 1998, the Company anticipates capital expenditures
of approximately $3.5 million to purchase the Johnstown OTW facility and the
construction of one additional OTW facility. For the existing racetracks and
OTW facilities at Penn National Race Course and Pocono Downs, the Company plans
to spend an additional $500,000 and $350,000, respectively, on building
improvements and equipment. The Company anticipates expending approximately
$.5 million on the refurbishment of the Charles Town Entertainment Complex
(excluding the cost of Gaming Machines). If approval of the Tennessee license
beyond June 30, 1998 is ultimately received, the Company anticipates expending
$9.0 million to complete the first phase of the project.
20
The Company entered into a credit facility in December 1997 (the "Credit
Facility") with Bankers Trust Company, as agent. The Credit Facility provides
for, subject to certain terms and conditions, a $12.0 million revolving credit
facility and has a five-year term from its closing. The Credit Facility, under
certain circumstances, requires the Company to make mandatory prepayments and
commitment reductions and to comply with certain covenants, including financial
ratios and maintenance tests. In addition, the Company may make optional
prepayments and commitment reductions pursuant to the terms of the Credit
Facility. Borrowings under the Credit Facility will accrue interest, at the
option of the Company, at either a base rate plus an applicable margin of up to
2.0% or a eurodollar rate plus an applicable margin of up to 3.0%. The Credit
Facility contains certain covenants that, among other things, restrict the
ability of the Company and its subsidiaries to dispose of assets, incur
additional indebtedness, incur guarantee obligations, repay indebtedness or
amend debt instruments, pay dividends, create liens on assets, make
investments, make acquisitions, engage in mergers or consolidations, make
capital expenditures, or engage in certain transactions with subsidiaries and
affiliates and otherwise restrict corporate activities. The Credit Facility is
secured by the assets of the Company and certain of its subsidiaries and
guaranteed by all subsidiaries, except the Charles Town Joint Venture. In
addition, the Credit Facility requires the Company to comply with certain
financial ratios and maintenance tests. As of December 31, 1997, the Company
would not have been in compliance with certain covenants under the Credit
Facility had the bank group not granted a waiver, through March 30, 1998, of
certain defaults regarding minimum consolidated net worth, consolidated cash
interest coverage ratio and minimum leverage ratio. At the end of the first
quarter, the Company was in technical default of certain required ratios, which
defaults were waived and ratios were adjusted. On June 30, 1998, the Company
was in compliance with all applicable ratios. As of August 11, 1998, the
Company had not drawn any portion of the Credit Facility (although a $2.0
million letter of credit was issued against such Credit Facility) and had
adequate capital resources even without consideration of the Credit Facility.
A portion of the net proceeds of the offering of the 10 5/8% Senior Notes
was used to repay amounts outstanding immediately prior to the offering under a
pre-existing credit facility. The Company currently estimates that excess
proceeds from the offering, cash generated from operations and available
borrowings under the Credit Facility will be sufficient to finance its current
operations, planned capital expenditure requirements and the costs associated
with the Tennessee development project. There can be no assurance, however,
that the Company will not be required to seek additional capital through public
or private financing, including equity financing, in addition to that available
from the foregoing sources. There can be no assurance that adequate funding
will be available as needed or, if available, on terms acceptable to the
Company.
21
Item 3. Changes in Information About Market Risk
All of the Company's debt obligations at June 30, 1998, were fixed rate
obligations and Management, therefore, does not believe that the Company has
any material market risk from its debt obligations.
Part II. Other Information
Item 1. Legal Proceedings
In December 1997, Amtote International, Inc. ("Amtote"), filed an action
against the Company and the Charles Town Joint Venture in the United States
District Court for the Northern District of West Virginia. In its complaint,
Amtote (i) states that the Company and the Charles Town Joint Venture allegedly
breached certain contracts with Amtote and its affiliates when it entered into
a wagering services contract with a third party (the "Third Party Wagering
Services Contract"), and not with Amtote, effective January 1, 1998, (ii)
sought preliminary and injunctive relief through a temporary restraining order
seeking to prevent the Charles Town Joint Venture from (a) entering into a
wagering services contract with a party other than Amtote and (b) having a
third party provide such wagering services, (iii) seeks declaratory relief that
certain contracts allegedly bind the Charles Town Joint Venture to retain
Amtote for wagering services through September 2004 and (iv) seeks unspecified
compensatory damages, legal fees and costs associated with the action and other
legal and equitable relief as the Court deems just and appropriate. On December
24, 1997, a temporary restraining order was issued, which prescribes
performance under the Third Party Wagering Contract. On January 14, 1998, a
hearing was held to rule on whether a preliminary injunction should be issued
or whether the temporary restraining order should be lifted. On February 20,
1998, the temporary restraining order was lifted by the court and the Company
terminated Amtote Agreement and proceeded under the Third Party Wagering
Services Contract. Amtote is contuning its litigation against the Company
for monetary damages. The Company believes that this action, and any
resolution thereof, will not have any material adverse impact upon its
financial condition, results, or the operations of either the Charles Town
Joint Venture or the Company.
22
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.77 Purchase Agreement dated July 7, 1998, between
Ladbroke Racing Management and Mountainview
Thoroughbred Racing Association.
(b) Reports on Form 8-K
None
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Penn National Gaming, Inc.
August 14, 1998 By: /s/ Robert S. Ippolito
- --------------- --------------------------
Date Robert S. Ippolito,
Chief Financial Officer,
Secretary/Treasurer
24
EXHIBIT INDEX
Exhibit Nos. Description of Exhibits Page No.
Purchase Agreement dated July 7, 1998, between
Ladbroke Racing Management and Mountainview
Thoroughbred Racing Association. 26-39
EXHIBIT #10.77
AGREEMENT
AGREEMENT (this "Agreement") made and entered to this 7th day of
July, 1998, by and between LADBROKE RACING MANAGEMENT - PENNSYLVANIA, a
Pennsylvania general partnership located in Washington County, Pennsylvania,
(referred to herein as "LADBROKE") and MOUNTAINVIEW THOROUGHBRED RACING
ASSOCIATION, a Pennsylvania corporation located in Grantville, Pennsylvania
(referred to herein as "MOUNTAINVIEW"). LADBROKE and MOUNTAINVIEW are
individually referred to herein as a "Party" and collectively as the "Parties".
BACKGROUND
LADBROKE operates, pursuant to Section 218 of the Pennsylvania
Racehorse Industry Reform Act of 1981, as amended (the "Act"), a non-primary
facility located in Richland Township, Cambria County, Pennsylvania (the
"Johnstown Facility") under a lease agreement dated October 14, 1991 between
LADBROKE and University Park Associates (the "Landlord") pertaining to that
certain premises located in Johnstown, Pennsylvania described in the lease
agreement attached hereto as Exhibit "A" (the "Lease").
LADBROKE desires to transfer to MOUNTAINVIEW all of its right, title
and interest in and to the lease agreement as well as all improvements,
furniture, fixtures and equipment located thereon.
Effective September 1, 1998, or such later date as required by any
regulatory authority (the "Effective Date"), LADBROKE will cease operating the
Johnstown Facility and relinquish any rights it has to conduct pari-mutuel
wagering at the facility pursuant to the Act. LADBROKE desires that
MOUNTAINVIEW sublease from LADBROKE and operate the Johnstown Facility from the
Effective Date until the Closing Date (hereinafter defined), pending the final
closing of the transactions contemplated hereby.
MOUNTAINVIEW is authorized to conduct pari-mutuel wagering in
Pennsylvania pursuant to the Act and to operate non-primary locations.
MOUNTAINVIEW desires to operate the Johnstown Facility pursuant to the terms
and provisions hereof and the Act.
NOW, THEREFORE, intending to be legally bound hereby, and in
consideration of the mutual agreements and covenants contained hereinafter, the
parties agree as follows:
1. The Assignment
1.1 LADBROKE agrees to assign and transfer to MOUNTAINVIEW as of
and on the Closing Date all LADBROKE's right, benefit and interest in and under
the Lease, including LADBROKE's leasehold estate, furniture, fixtures,
equipment, inventories and leasehold improvements which are located on the
premises described in the Lease and described on Schedule 1.1 attached hereto
(collectively the "Assets") and all benefit and advantage to be derived
therefrom, to have and to hold the same for its remaining term and all renewals
thereof. MOUNTAINVIEW shall pay LADBROKE for all inventories, including
food, beverages and paper supplies and excluding any other items such as small
ware (which shall have been transferred to MOUNTAINVIEW on the Effective Date)
within five business days after the Effective Date based on an inventory
thereof taken by the Parties at the close of business on the day before the
Effective Date and priced at the lower of cost or market.
1.2 MOUNTAINVIEW agrees to assume all of LADBROKE's obligations
and liabilities under the Lease due or accruing on and after the Closing Date,
including, without limitation, the prompt payment, performance, discharge and
satisfaction, in accordance with its terms, of all covenants, obligations and
liabilities of the tenant due or accruing on and after the Closing Date and,
as of the Effective Date, those obligations set forth on Schedule 1.2 hereto
accruing on and after the Effective Date.
25
1.3.1 As consideration for the assignment of the Lease and
the sale of the Assets to MOUNTAINVIEW, MOUNTAINVIEW
agrees to pay to LADBROKE, in immediately available
funds, on the Closing Date (hereinafter defined) the
sum of One Million Two Hundred Twenty Five Thousand
($1,225,000) Dollars of which $925,000 shall be paid
from the Escrow Fund (described in the Escrow
Agreement attached hereto as Exhibit "B" (the
"Escrow Agreement")) and $300,000 shall be paid on
the Closing Date by check. LADBROKE and
MOUNTAINVIEW agree to execute and deliver the Escrow
Agreement by not later than the Effective Date and
MOUNTAINVIEW shall deliver to the Escrow Agent (as
defined in the Escrow Agreement) on the Effective
Date the amount of $925,000 to secure payment of
such sum.
1.3.2 All real estate taxes, charges and assessments
relating to the Johnstown Facility and payable by
LADBROKE pursuant to the Lease shall be pro rated on
a per diem basis as of midnight of the day before
the Effective Date disregarding any discount or
penalty and on the basis of the fiscal year of the
authority levying the same. If any of the same have
not been finally assessed, as of such date, for the
current fiscal year of the taxing authority, then
the same shall be adjusted not later than thirty
days after the Effective Date based upon the most
recently issued bills therefor, and shall be
readjusted immediately when and if final bills are
issued; but if on the day before the Effective Date
the Johnstown Facility shall be affected by any
special assessment, then all installments of such
assessment which are to become due and payable after
the day before the Effective Date shall be paid and
delivered by MOUNTAINVIEW. On the Effective Date,
LADBROKE shall assign to MOUTAINVIEW the deposit
being held by the Landlord under the Lease and
MOUNTAINVIEW shall pay the amount of such deposit to
LADBROKE.
1.3.3 Charges for water, electricity, sewer rental, gas,
and all other utilities relating to the Johnstown
Facility and payable by LADBROKE pursuant to the
Lease shall be pro rated on a per diem basis as of
midnight of the day before the Effective Date,
disregarding any discount or penalty on the basis of
the fiscal year or billing period of the authority,
utility or other person levying or charging for the
same. If the consumption of any of the foregoing is
measured by meters, then in lieu of apportionment as
aforesaid, LADBROKE shall, not earlier than the day
before the Effective, Date obtain a reading of each
such meter and LADBROKE (or the owner of the
Johnstown Facility) shall pay all charges thereunder
through the date of the meter readings. If there is
no such meter or if the bills for any of the
foregoing have not been issued prior to Effective
Date, the charges therefor shall be adjusted not
later than thirty days after the Effective Date on
the basis of charges for the prior period for which
bills were issued and shall be further adjusted when
the bills for the current period are issued.
1.4 On the Effective Date and at the Closing, LADBROKE and
MOUNTAINVIEW shall execute and deliver such instruments and documents as their
respective counsel determine are reasonably necessary and appropriate in order
to effect the transactions described in this Section 1.
1.5 LADBROKE represents and warrants to MOUNTAINVIEW as follows,
which representations and warranties shall be true and correct on and as of the
date hereof and, if applicable, on and as of the Effective Date and the Closing
Date:
26
1.5.1 Washington Trotting Association, Inc. is a
corporation duly organized, validly
existing and in good standing under the
laws of the Commonwealth of Pennsylvania.
LADBROKE is a validly existing general
partnership formed under the laws of the
Commonwealth of Pennsylvania and of which
Washington Trotting Association, Inc. and
Mountain Laurel Racing, Inc. are the only
partners.
1.5.2 LADBROKE has the full partnership power and
authority to own, lease and operate its
assets, property and business, and to carry
on the business as and where such business
is now conducted.
1.5.3 LADBROKE has the full legal right and power
and all authority to enter into, execute,
deliver and perform this Agreement, and all
other instruments and documents executed
and delivered pursuant hereto or thereto.
The execution, delivery and performance of
this Agreement (and all other documents
required to effect the transactions
contemplated hereby) and the consummation
of the transactions contemplated herein
have been duly authorized by all necessary
action by LADBROKE. This Agreement and
each document contemplated by this
Agreement is and will be the valid and
legally binding obligation of LADBROKE,
enforceable against LADBROKE in accordance
with its terms.
1.5.4 LADBROKE's operation of the Johnstown
Facility complies in all material respects
with all applicable laws (including, but
not limited to, the Act and the rules and
regulations thereunder), except where the
failure to so comply would not have a
material adverse effect on the operation of
the Johnstown Facility.
1.5.5 Except as set forth in Schedule 1.5.5,
LADBROKE has obtained, and maintains in
full force and effect, all permits and
licenses which are necessary for the
conduct of the Johnstown Facility,
including simulcasting operations, with
pari-mutuel wagering with no restrictions
not applying to all Pennsylvania licensees.
Except as set forth in Schedule 1.5.5,
LADBROKE knows of no basis to believe that
LADBROKE is in material default, nor has
received any notice of any claim of
default, with respect to any such permit or
license or any notice of any other claim
relating to any such permit or license.
1.5.6 Except as set forth in Schedule 1.5.6, no
consent is required in connection with the
execution, delivery and performance by
LADBROKE of this Agreement or the
consummation of the transactions
contemplated hereby.
1.5.7 LADBROKE is not a party to any contract
pertaining to the Johnstown Facility
(including the Lease) except as set forth
on Schedule 1.5.7 hereto, a true and
correct copy of each of which has been
delivered to MOUNTAINVIEW. Each of such
contracts which is to be assumed by
MOUNTAINVIEW hereunder is in full force and
effect, LADBROKE is not in breach of any
material provision thereof nor has it
received any notice from a party thereto
that a breach will occur upon the happening
of an event or the passage of time, and
LADBROKE does not know of any material
breach of any thereof by any other party
thereto.
27
1.5.8 LADBROKE, alone, has a leasehold interest
to the Johnstown Facility, pursuant to the
Lease, free and clear of all mortgages,
liens, claims, judgments, encumbrances,
subleases, subtenancies, licenses, security
interests, covenants, conditions,
restrictions, right of way, easements,
encroachments and any other matters
affecting title, except only the items set
forth in Schedule 1.5.8 attached hereto
(together, the "Permitted Exceptions"). No
default or breach exists under the Lease
or, to LADBROKE's knowledge, under any of
the covenants, conditions, restrictions,
rights-of-way or easements, if any,
affecting all or any portion of the
Johnstown Facility. To LADBROKE's
knowledge, there is no pending
condemnation, expropriation, eminent
domain, or similar proceeding affecting all
or any portion of the Johnstown Facility.
LADBROKE has not received any written
notice of any of the same and has no
knowledge that any such proceeding is
contemplated.
1.5.9 The zoning classification for the Johnstown
Facility is commercial and permits the use
of the Johnstown Facility as a non-primary
location with pari-mutuel wagering and food
and beverage service, entertainment and
appurtenant parking, and to LADBROKE's
knowledge, the Johnstown Facility complies
in all material respects with all relevant
zoning laws and ordinances affecting the
Johnstown Facility. No variance, special
use permits or special exceptions were
issued for the construction or present use
of the Johnstown Facility by LADBROKE. To
LADBROKE's knowledge, there are no existing
material violations of, and LADBROKE has
not received any written notice, request,
violation, order, claim, citation, penalty
assessment, investigation or proceeding
under, any laws with respect to the
Johnstown Facility.
1.5.10 Intentionally omitted
1.5.11 To LADBROKE's knowledge, no portion of the
Johnstown Facility is subject to or is
affected by any special assessment whether
or not secured by a lien on the Johnstown
Facility and, to LADBROKE's knowledge, no
such assessment has been proposed.
1.5.12 With respect to the Johnstown Facility,
since LADBROKE has been a tenant thereof,
LADBROKE has not done or caused to be done
nor does LADBROKE know of any of the
following: (i) released, spilled, leaked,
discharged, disposed of, pumped, poured,
emitted, emptied, injected, leached, dumped
or otherwise allowed to escape ("Released")
any hazardous, toxic or polluting
substances or wastes, including petroleum
products and radioactive materials
("Hazardous Substances") at, upon, under or
within the Johnstown Facility; (ii)
installed any underground storage tanks,
radon, asbestos materials, PCBs or urea
formaldehyde insulation at the Johnstown
Facility; (iii) used the Johnstown Facility
for treatment, storage, recycling, or
disposal of Hazardous Substances; and (iv)
permitted any Hazardous Substances to be
present at the Johnstown Facility excepting
commercially reasonable quantities thereof
in proper storage containers, as are
necessary for the construction or operation
of the Johnstown Facility ("Permitted
Substances") in compliance with all laws.
28
1.5.13 The Johnstown Facility and the operations
thereon are not the subject of any pending
or to LADBROKE's knowledge threatened
investigation, inquiry or proceeding by any
governmental authority relating to
environmental matters and except as set
forth on Schedule 1.5.13 (true and correct
copies of which have been provided to
MOUNTAINVIEW), there have been no
environmental inspections, reviews,
studies, audits, tests or other analyses
conducted by or on behalf of LADBROKE, or
LADBROKE's knowledge by or on behalf of
anyone else, of the Johnstown Facility or
in connection with compliance with laws,
rules, and regulations at the Johnstown
Facility.
2. Lease and Operation of the Johnstown Facility
2.1 On the date hereof, effective as of the Effective Date,
LADBROKE and MOUNTAINVIEW shall execute and deliver the Sublease Agreement in
the form of Exhibit "C" attached hereto and the Equipment Lease Agreement in
the form of Exhibit "D" attached hereto.
2.2 LADBROKE agrees to cease conducting operations at the
Johnstown Facility on the Effective Date and MOUNTAINVIEW shall operate the
Johnstown Facility under its own name and racing license from the Effective
Date to the Closing Date pursuant to the Equipment Lease Agreement and
Sublease Agreement. From and after the Effective Date, LADBROKE shall not
direct market (by any form of communication) those customers of the Johnstown
Facility listed on the customer list referenced in subsection 5.2.4 below.
MOUNTAINVIEW will not use the Names "Ladbroke", "Triumphs" or "The Ultimate
Sports Bar" in connection with the operation or marketing of the Johnstown
Facility and will change, at MOUNTAINVIEW's cost, all signs or materials at the
Johnstown Facility containing such names as follows:
2.2.1 On the Effective Date, change all exterior signs
bearing the names "Ladbroke", "Triumphs", or "The
Ultimate Sports Bar" and change all interior signs
bearing "Ladbroke" or "Triumphs"; and
2.2.2 On or before the Closing Date, change all other
interior signs.
2.3 MOUNTAINVIEW shall favorably consider hiring all employees of
the Johnstown Facility presently employed there by LADBROKE as of the Effective
Date (except the General Manager) and shall use its best efforts to hire such
number of such employees so that the number not hired (laid off) does not
exceed fifty.
2.4 From the Effective Date to the Closing Date, MOUNTAINVIEW
shall perform the following obligations and duties at its costs and expense:
2.4.1 Supervision and maintenance of the operations of the
Johnstown Facility, conduct of pari-mutuel wagering,
food and beverage service, marketing, administrative
and management information systems and procedures of
the Johnstown Facility;
2.4.2 Providing all necessary employees and independent
contractors, each of whom shall, if necessary, be
licensed under the Act;
2.4.3 Compliance with all laws and regulations affecting
the operations of the Johnstown Facility including
preparation and filing of required regulatory
reports;
29
2.4.4 Placement and maintenance of insurance on such risks
incident to the operations of the Johnstown Facility
as appropriate; and
2.4.5 Providing all necessary agreements from its horsemen
required to conduct pari-mutuel wagering, intrastate
simulcasting and interstate simulcasting at the
Johnstown Facility.
2.5 MOUNTAINVIEW agrees that, except as otherwise consented to in
writing by LADBROKE, which consent shall not be unreasonably withheld,
MOUNTAINVIEW shall:
2.5.1 Operate the business of the Johnstown Facility in
all material respects only in the ordinary and usual
course;
2.5.2 Use its best efforts to maintain the fixtures and
improvements on the Johnstown Facility owned or
leased by LADBROKE; and
2.5.3 Use its best efforts to preserve intact the goodwill
of the Johnstown Facility and maintain satisfactory
relationships with patrons and others having
business relationships with the Johnstown Facility.
2.6 The parties shall file all applications or other documents,
and shall cooperate in taking all actions, necessary to transfer effective as
of the Effective Date, the Liquor License presently issued to LADBROKE for use
at the Johnstown Facility to MOUNTAINVIEW or, if agreeable to the Parties, to
issue to MOUNTAINVIEW a new Liquor License, effective as of the Effective Date,
for use at the Johnstown Facility.
2.7 So long as MOUNTAINVIEW operates the Johnstown Facility,
MOUNTAINVIEW shall be responsible for paying for all of the expenses (including
payments due under the Lease) incurred by it with respect to the operation of
the Johnstown Facility and MOUNTAINVIEW shall receive all proceeds from the
conduct of pari-mutuel wagering, admission charges, parking charges, food and
beverage services charges and other revenues developed at or with respect to
the Johnstown Facility from the Effective Date until the Closing Date or
termination of this Agreement.
To the extent any of the provisions of this Section 2 are inconsistent with the
provisions of the Sublease Agreement or the Equipment Lease Agreement, the
provisions of the latter two agreements shall prevail and control.
3. MOUNTAINVIEW represents, warrants and covenants to LADBROKE as of the date
hereof and the Closing Date as follows:
3.1 Mountainview Thoroughbred Racing Association is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and MOUNTAINVIEW has the full corporate power and
authority to own its assets, conduct its business as and where such business is
presently conducted, and to enter into this Agreement and the transactions
contemplated thereby.
3.2 MOUNTAINVIEW's execution, delivery and performance of this
Agreement, and the consummation by MOUNTAINVIEW of the transactions
contemplated hereby, (a) have been duly authorized by all necessary corporate
action of MOUNTAINVIEW, (b) do not constitute a violation of or default under
MOUNTAINVIEW's Articles of Incorporation or bylaws or any material contract or
agreement to which MOUNTAINVIEW is a party or by which MOUNTAINVIEW is bound,
(c) do not constitute a violation of any law, rule or regulation, or judgment
or order, applicable to MOUNTAINVIEW, and (d) do not require the consent of,
notice to or filing with any person except as set forth on Schedule 3.2 hereof.
This Agreement constitutes the valid and legally binding agreement of
MOUNTAINVIEW, enforceable against MOUNTAINVIEW in accordance with its terms.
30
4. Closing. The final consummation of the transactions contemplated by
Section 1 of this Agreement (the "Closing") shall take place on the "Closing
Date". The term "Closing Date" shall mean January 4, 1999 or such other date
as the Parties may agree in writing. The Closing shall take place at the
offices of Eckert Seamans Cherin & Mellott, LLC, 600 Grant Street, 42nd Floor,
Pittsburgh, Pennsylvania, commencing at 10:00 a.m., on the Closing Date, or at
such other time or place as the parties may agree in writing.
5. MOUNTAINVIEW's Conditions to Closing. Each and every obligation of
MOUNTAINVIEW to complete the Closing is subject to the satisfaction of the
following conditions (any one or more of which may be waived in writing by
MOUNTAINVIEW):
5.1 MOUNTAINVIEW shall have received, at its expense, a marked-up
title insurance commitment issued by a title insurer selected by MOUNTAINVIEW
and licensed to do business in the Commonwealth of Pennsylvania, on ALTA
Owner's Policy Form B, as amended from time to time (containing a
non-imputation endorsement), requiring the title insurer to insure LADBROKE's
leasehold interest to the Johnstown Facility and the assignment thereof to
MOUNTAINVIEW free of any exception which could materially interfere with
MOUNTAINVIEW's ability to operate the Johnstown Facility as it is now
operated.
5.2 LADBROKE shall have delivered to MOUNTAINVIEW, on or before
the Closing Date (or Effective Date if so indicated below), the following,
which shall be in form and substance acceptable to MOUNTAINVIEW and
MOUNTAINVIEW's counsel:
5.2.1 Assignment and Assumption of Lease Agreement
substantially in the form of Exhibit "E" hereto (the
"Assigment of Lease")
5.2.2 Nondisturbance Agreement from the Mortgagee of the
Landlord and Estoppel Certificate from the Landlord,
each in customary form and to the extent required by
the Lease;
5.2.3 Consent to Sublease from the Landlord (prior to the
Effective Date);
5.2.4 List of all customers of the Johnstown Facility
maintained by LADBROKE (prior to the Effective
Date);
5.2.5 Prior to the Effective Date, all consents of the
Pennsylvania Horse Racing Commission and Harness
Racing Commission required under the Act, and from
the Pennsylvania Liquor Control Board. MOUNTAINVIEW
agrees to cooperate with LADBROKE to obtain such
consents as soon as practicable after the date
hereof;
5.2.6 Payment of $300,000 to compensate MOUNTAINVIEW for
costs incurred by it in its Altoona non-primary
facility which MOUTAINVIEW is terminating, and
5.2.7 All such further instruments and documents which may
be reasonably requested by MOUNTAINVIEW or its
counsel to effectuate and carry out any provision of
this Agreement and the transactions contemplated
hereby.
5.3 No proceeding shall have been instituted or threatened and be
pending in writing to restrain or prevent the carrying out of the transactions
contemplated hereby or to seek material damages in connection with such
transactions, or would have a material adverse affect on the Johnstown
Facility.
6. LADBROKE's Conditions to Closing. Each and every obligation of LADBROKE to
complete the Closing is subject to the satisfaction of the following conditions
(any one or more of which may be waived in writing by LADBROKE):
31
6.1 Proceedings. No proceeding shall have been instituted or
threatened in writing, and be pending, to restrain or prevent the carrying out
of the transactions contemplated hereby.
6.2 Delivery of Documents. MOUNTAINVIEW shall have executed
and/or delivered to LADBROKE on or before the Closing Date (or Effective Date,
if so indicated below):
6.2.1 The consideration provided in Sections 1.3.1 hereof;
6.2.2 An Assignment of Lease;
6.2.3 Prior to the Effective Date, all consents of the
Pennsylvania Horse Racing Commission and Harness
Racing Commission required under the Act and from
the Pennsylvania Liquor Control Board. LADBROKE
agrees to cooperate with MOUNTAINVIEW to obtain such
consents as soon as practicable after the date
hereof; and
6.2.4 All such further documents that may be reasonably
requested by LADBROKE or their counsel, in order to
effectuate and carry out any provision of this
Agreement and the transaction provided herein.
7. Indemnification
7.1 LADBROKE shall indemnify and hold harmless MOUNTAINVIEW (and
its respective successors, assigns, directors and officers) from and against
any and all losses, costs (including reasonable legal fees and related
expenses), damages, claims and liabilities arising out of or caused by,
directly or indirectly, any or all of the following:
7.1.1 Any misrepresentations, breach or failure of any
warranty, representation or certification made by
LADBROKE in this Agreement or pursuant hereto;
7.1.2 Any failure or refusal by LADBROKE to satisfy or
perform any term or condition of this Agreement to
be satisfied or performed by LADBROKE;
7.1.3 Any obligation relating to the operation of the
Johnstown Facility imposed upon, or collected from,
MOUNTAINVIEW with respect to any period ending
before the Effective Date. Any such deficiency or
adjustment shall be subject to indemnification under
this section 7.1 notwithstanding that the same may
be assessed against, imposed upon or collected from
MOUNTAINVIEW; and
7.1.4 Any liability or obligation of LADBROKE not
disclosed in this Agreement (including the Schedules
and Exhibits hereto) and any liability incurred by
LADBROKE with respect to the Johnstown Facility, or
the operation thereof, and not required to be
assumed by MOUNTAINVIEW hereunder, after the
Effective Date with respect to period prior to the
Effective Date.
7.2 MOUNTAINVIEW shall indemnify and hold harmless LADBROKE (and
its respective successors, assigns, directors and officers) from and against
any and all losses, costs (including reasonable legal fees and related
expenses), damages, claims and liabilities arising out of or caused by,
directly or indirectly, any or all of the following:
32
7.2.1 Any misrepresentations, breach or failure of any
warranty, representation or certification made by
MOUNTAINVIEW in this Agreement or pursuant hereto;
7.2.2 Any failure or refusal by MOUNTAINVIEW to satisfy or
perform any term or condition of this Agreement to
be satisfied or performed by MOUNTAINVIEW; and
7.2.3 Any obligation relating to the operation of the
Johnstown Facility imposed upon, or collected from
LADBROKE with respect to any period ending after the
Effective Date (unless this Agreement is terminated
pursuant to Section 9 hereof, in which event such
period shall end on the date of such termination)
unless such obligation is not assumed by
MOUNTAINVIEW hereunder. Any such deficiency or
adjustment shall be subject to indemnification under
this Section notwithstanding that the same may be
assessed against, imposed upon or collected from
LADBROKE.
7.3 All claims for indemnification hereunder shall be writing and
shall set forth in reasonable detail the basis for the claim. Claims for
indemnification shall be made no later than eighteen months after the Closing
Date.
7.4 An indemnified party under Section 7.1 or 7.2 hereof shall
give prompt written notice to the indemnifying party (when and to the extent
that the indemnified party has actual knowledge thereof) of any condition,
event or occurrence or the commencement of any action, suit or proceeding for
which indemnification may be sought, and the indemnifying party, through
counsel reasonable satisfactory to the indemnified party, shall assume the
defense thereof or other indemnification obligation with respect thereto;
provided, however, that any indemnified party shall be entitled to participate
in any such action, suit or proceeding with counsel of its own choice but at
its own expense. In any event, if the indemnifying party fails to assume the
defense within a reasonable time, the indemnified party may assume such defense
or other indemnification obligation and the reasonable fees and expenses of its
attorneys will be covered by the indemnity provided for in Section 7.1 and 7.2
hereof, as the case may be. No action, suit or proceeding for which
indemnification may be sought shall be compromised or settled in any manner
which might adversely affect the interests of the indemnified party without the
prior written consent of such indemnified party (which shall not be
unreasonably withheld). Notwithstanding anything in this Section 7.4 to the
contrary, the indemnifying party shall not, without the written consent of the
indemnified party, (i) settle or compromise any action, suit or proceeding or
consent to the entry of any judgment which does not include as an unconditional
term thereof the delivery by the claimant or plaintiff to the indemnified party
of a written release from all liability in respect of such action, suit or
proceeding, or (ii) settle or compromise any action, suit or proceeding in any
manner that may materially and adversely affect the indemnified party other
than as a result of money damages or other money payments. The provisions of
this Section 7 shall survive termination of this Agreement.
7.5 No indemnification shall be sought under this Section 7
unless and until losses suffered by the Party seeking indemnification exceed
$10,000 and then only for the amount in excess of such amount. The amount
payable by either Party as indemnification under this Section 7 shall not
exceed $925,000.
8. Covenants and Agreements. The parties hereto covenant and agree as follows:
8.1 LADBROKE, for itself and any of its affiliates, agrees not to
establish, own, lease, manage or operate, directly or indirectly, any
non-primary location (as defined in the Act) for a period of 14 years from the
Effective Date within thirty five air miles of (1) the Johnstown Facility, (2)
MOUNTAINVIEW's proposed Altoona, Pennsylvania non-primary facility or (3) the
existing Erie, Pennsylvania non-primary location operated by an affiliate of
MOUNTAINVIEW. Notwithstanding the foregoing and without being in violation or
breach thereof, LADBROKE may continue to operate its existing Greensburg,
Pennsylvania non-primary location (the "Greensburg Facility") at its present
place of operation or relocate the Greensburg Facility within four miles of its
present place of operation. In addition, LADBROKE agrees, for a period of 14
years from the Effective Date, not to establish the non-primary location made
available to it upon the transfer of the Johnstown Facility hereunder at or on
a site east of Greensburg, Pennsylvania. Except as expressly provided herein,
this Agreement shall not be construed to otherwise prohibit or restrict the
establishment, ownership, leasing, management, operation or relocation of a
LADBROKE non-primary location.
33
8.2 MOUNTAINVIEW, for itself and any of its affiliates, agrees
not to establish, own, lease, manage or operate, directly or indirectly, any
non-primary location (as defined in the Act) for a period of 14 years from the
Effective Date within thirty five air miles of LADBROKE's (1) existing New
Castle, Pennsylvania non-primary location or (2) proposed Seven Springs,
Pennsylvania non-primary location but only, in the case of Seven Springs, if a
phase one application for such facility has been approved by the Pennsylvania
Harness Racing Commission with eighteen months of the Effective Date.
Notwithstanding the foregoing and without being in violation or breach thereof,
MOUNTAINVIEW may operate the Johnstown Facility at its present place of
operation or relocate the Johnstown Facility within four miles of its present
place of operation. Except as expressly provided herein, this Agreement shall
not be construed to otherwise prohibit or restrict the establishment,
ownership, leasing, management, operation or relocation of a MOUNTAINVIEW
non-primary location.
8.3 There are attached hereto as Exhibit "F" a series of maps
which identify, with particularity, the restrictions set forth in Sections 8.1
and 8.2 above. If the maps are inconsistent with the provisions of subsections
8.1 and 8.2 above, the provisions of such subsections shall prevail and
control.
8.4 From the date hereof through the Effective Date, LADBROKE
shall allow, during normal business hours, the employees, attorneys,
accountants, and other representatives of MOUNTAINVIEW free and full access to
the files, books and records of LADBROKE pertaining to the operation of the
Johnstown Facility, including, without limitation, title documents, leases,
insurance policies, accounts, financial statements, employee files, and all
other relevant operating data. The employees of MOUNTAINVIEW may interview
and meet with management and other employees of LADBROKE and shall have access
to the operating properties of the Johnstown Facility upon coordination of the
same with the general manager of the Johnstown Facility. MOUNTAINVIEW's
investigation shall not affect, limit, eliminate or modify the warranties and
representations of LADBROKE hereunder.
8.5 LADBROKE shall promptly notify MOUNTAINVIEW of any
proceedings, which, after the date hereof and on or prior to the Effective
Date, are threatened or commenced against LADBROKE, against any officer,
partner, employee, consultant, agent or shareholder with respect to the affairs
of LADBROKE, and in each case which in any way could affect the operation of
the Johnstown Facility.
8.6 LADBROKE and MOUNTAINVIEW, and their respective officers and
directors, will use their best efforts to ensure that all closing conditions
are satisfied.
8.7 Between the date hereof and the Closing Date, neither Party
shall issue any press release concerning this Agreement, or divulge the
existence or provisions hereof to any person (except their respective officers,
directors, employees and consultants) without the prior written permission
from the Chairman or CFO of MOUNTAINVIEW in the case of LADBROKE or a Vice
President of LADBROKE in the case of MOUNTAINVIEW, except as shall be required
by law or necessary to obtain the consents or approvals required to consummate
the transactions contemplated hereby.
9. Termination. This Agreement shall be terminated:
9.1 At any time by the written agreement of the Parties;
9.2 By MOUNTAINVIEW or LADBROKE at any time, and upon five day's
prior notice, in its sole and absolute discretion, if the Closing is not
completed on or before January 4, 1999 and such failure is not the fault of the
Party seeking to terminate; or
34
9.3 If either Pennsylvania Racing Commission finally determines
that it will not grant a consent necessary to consummate the transaction
contemplated hereby or the Pennsylvania Liquor Control Board denies the
transfer of the liquor license or the grant of a new liquor license as
described in Section 2.6 hereof.
10. Miscellaneous.
10.1 Any notice or other communication required or which may be
given hereunder shall be in writing and either delivered personally to the
addressee, telecopied to the addressee or mailed, certified or registered mail
or express mail; postage prepaid, or sent by a nationally recognized courier
service (which provides a receipt of delivery), services charges prepaid, and
shall be deemed given if delivered personally or telecopied, when so delivered
personally or telecopied, if by certified or registered mail, four days after
the date of mailing or if express mailed or sent by a nationally recognized
courier service, two days after the date of mailing, as follows:
If to MOUNTAINVIEW:
Peter M. Carlino
Chairman and Chief Executive Officer
Penn National Gaming, Inc.
825 Berkshire Boulevard, Suite 200
Wyomissing, PA 19610
Facsimile No.: (610) 376-2842
With a copy to:
Robert P. Krauss, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson, LLP
1735 Market Street
Philadelphia, PA 19103
Facsimile No.: (215) 994-1111
If to LADBROKE:
Randy Edmonds
General Manager
Ladbroke Racing Pennsylvania, Inc.
P.O. Box 499
Meadow Lands, PA 15347
Facsimile No.: (724) 225-9347
35
With a copy to:
Stuart A. Williams, Esquire
Eckert Seamans Cherin & Mellott, LLC
600 Grant Street
42nd Floor
Pittsburgh, PA 15219
Facsimile No.: (412) 566-6099
and to such other address or addresses as MOUNTAINVIEW or LADBROKE, as
the case may be, may designate to the other by notice as set forth above.
10.2 This Agreement may be amended, modified, superseded,
canceled, renewed or extended, and the terms and conditions hereof may be
waived, only by a written instrument signed by all the parties or, in the case
of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies which any party may otherwise have at law or in equity. The rights
and remedies of any party arising out of or otherwise in respect of any
inaccuracy in or breach of any representation, warranty, covenant or agreement
contained in this Agreement shall in no way be limited by the fact that the
act, omission, occurrence, or other state of facts upon which any claim of any
such inaccuracy or breach is based may also be the subject matter of any other
representation, warranty, covenant or agreement contained in this Agreement
(or in any other agreement between the parties) as to which there is no
inaccuracy or breach.
10.3 All of the terms and provisions of this Agreement shall be
binding upon, inure to the benefit of and be enforceable by each of the parties
hereto and their respective successors and permitted assigns. This Agreement,
together with the Schedules and Exhibits hereto, contains the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior or contemporaneous agreements or understandings
with respect to such subject matter.
10.4 This Agreement and the rights and obligations of the parties
hereto shall not be assigned by any party to any one or more Person, except
MOUNTAINVIEW may assign and/or delegate any or all of its rights and
obligations hereunder to an Affiliate (as defined in the Securities Exchange
Act of 1934, as amended) of MOUNTAINVIEW; provided that no such assignment
and/or delegation shall relieve MOUNTAINVIEW from any of MOUNTAINVIEW's
liability hereunder. Nothing in this Agreement, unless otherwise expressly
provided, is intended to confer upon any Person, other than the parties hereto
and their successors and permitted assigns, any rights or remedies under or by
reason of this Agreement.
10.5 If any provision of this Agreement shall be determined by a
court of competent jurisdiction to be invalid or unenforceable, such
determination shall not affect the remaining provisions of this Agreement, all
of which shall remain in full force and effect.
10.6 Other than for claims seeking equitable relief, any claim,
controversy, demand, dispute or difference between or among the parties hereto
arising out of, or by virtue of, or in connection with, or relating to this
Agreement shall be submitted and settled by arbitration before the American
Arbitration Association in Harrisburg, Pennsylvania. The parties agree to bear
joint and equal responsibility for all fees, abide by any decision rendered as
final and binding, and waive the right to submit any dispute to a public
tribunal for a jury or non-jury trial. Judgments upon any award may be entered
in any court of competent jurisdiction.
36
10.7 This Agreement shall be governed and construed in accordance
with the laws of the Commonwealth of Pennsylvania applicable to agreements
made, delivered and to be performed entirely within the Commonwealth of
Pennsylvania.
10.8. This Agreement may be executed in two or more counterparts,
each or which shall be deemed an original but all of which together shall
constitute one and the same instrument.
10.9 In the event of any default hereunder by LADBROKE or
MOUNTAINVIEW, in addition to all other remedies available at law or in equity,
the remedy of specific performance shall be available.
10.10 Whether or not the transactions contemplated by this
Agreement shall be consummated, each party shall pay its own expenses incident
to preparing for, entering into and carrying into effect this Agreement and the
transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
Ladbroke Racing Management-Pennsylvania
By: Mountain Laurel Racing, Inc.
General Partner
By:/s/ John Swiatek
----------------------------
John Swiatek, Vice President
and
By: Washington Trotting Association, Inc.
By:/s/ John Swiatek
----------------------------
John Swiatek, Vice President
Mountainview Thoroughbred Racing
Association
By:/s/ William J. Bork
-------------------------------
William J. Bork, Vice President
Mountain Laurel Racing, Inc. and Washington Trotting Association, Inc. hereby
join this Agreement for the sole and limited purpose of performing the
provisions of Sections 1.1., 2.6, 5.2.4, 5.2.5, and 6.2.3 hereof, to the extent
applicable to either or both of them.
Mountain Laurel Racing, Inc. Washington Trotting Association, Inc.
By:/s/ John Swiatek By:/s/ John Swiatek
---------------------------- ----------------------------
John Swiatek, Vice President John Swiatek, Vice President
5
1000
6-MOS
DEC-31-1998
JAN-1-1998
JUN-30-1998
23,492
0
4,060
0
0
30,960
119,084
13,301
163,225
14,297
0
0
0
152
57,399
163,225
73,413
73,413
63,875
63,875
5,021
0
4,243
5,776
2,099
3,677
0
0
0
3,677
.24
.24
