Colonial Downs Holdings, Inc. Reports
1998 2nd Quarter Results
NEW KENT, Va.--(BUSINESS WIRE)--Aug. 13,
1998--Colonial Downs Holdings, Inc. (NASDAQ: NMS: CDWN) which holds the only license to
own and operate a pari-mutuel horseracing course and satellite racing centers in Virginia, today
reported results of operations for the second quarter ended June 30, 1998. The Company reported
a net loss for the second quarter of 1998 of $1,927,000 or $.27 per share compared to earnings of
$473,000 or $.07 per share for the same period in 1997. Total revenue in the second quarter of
1998 was $7,768,000 compared to $5,044,000 in the second quarter of 1997 an increase of 54%.
For the six months ended June 30, 1998, the Company reported a net loss of $2,879,000, or $.40
per share compared with earnings of $1,228,000 or $.17 per share for the same period in 1997.
Revenues for the first six months of 1998 were $14,540,000, up 39% from $10,461,000 in 1997.
Results for the second quarter reflect a net loss as a result of expenses incurred during the
Company's inaugural harness meet and depreciation and interest expense related to the grandstand
and its construction that it did not incur in the second quarter of 1997. In addition, the Company had
interest income from the invested IPO proceeds in 1997 which it did not have in 1998. Three of the
Company's four Racing Centers continue to be profitable. The Richmond Racing Center is more
profitable than it was in the same six month period in 1997. The Chesapeake Racing Centers' profit
is slightly below the profit generated during the same six month period a year ago. However, this
decrease is directly attributed to the Hampton Racing Center that opened in December 1997. The
Hampton Racing Center continues to be profitable. The Brunswick Racing Center continues to
improve and operated on a break-even cashflow basis for two of the three months during the second
quarter.
Jeffrey P. Jacobs, Chairman, President and Chief Executive Officer of the Company said, ''I am
obviously disappointed with our second quarter results. However, they were not unanticipated. As I
have stated for several months, we need to make fundamental changes in our relationships and cost
structure in order for racing to grow and thrive in Virginia. Our plan to put Colonial Downs on a
profitable basis is as follows: First, through arbitration, arrange a clarification of the management fee
with Maryland Jockey Club that will allow both parties to be profitable; second, work with the
Virginia Racing Commission and the horsemen groups to determine the optimum number of racing
days and purse structure that will produce quality, competitive and profitable racing; third, continue
to aggressively challenge internal cost structures; and finally, it is imperative that we open racing
centers in Northern Virginia. If we are able to work together with other parties to make these
changes and modifications, we expect that 1999 will mark the financial turnaround of Colonial
Downs. If we are unable to make these adjustments on a cooperative basis, we will have to explore
other, more drastic options in order to preserve the future of Colonial Downs.''
Colonial Downs' inaugural harness meet opened on April 24 and concluded on July 5, 1998. Over
the 43 day period, 60,000 patrons visited the Colonial Downs Racecourse. During the meet, more
than $7 million dollars was wagered on Colonial Downs races by patrons locally and via simulcast
outlets around the country. Horsemen were very pleased with the track's facilities. The unique
one-turn mile for harness racing produced fast times at Colonial Downs. The meet produced 255
new lifetime speed marks, five sub 1:50 minute miles and the second-fastest mile of all time for
winning horses that competed in the track's 382 races. Colonial Downs paid more than $2 million in
purse money to horsemen, jockeys and owners during the harness meet. Harness racing will resume
on November 7, 8, 14, and 15 as Colonial Downs hosts the 1998 Breeders Crown Championships.
Colonial Downs' second thoroughbred meet will commence on September 7th. This season will
consist of 25 days of racing that will end on October 11th. The weekly live race format will be
Thursday through Monday with post times at 7 pm on Thursdays and Fridays, 1 pm on Saturdays
and Sundays, and 4 pm on Mondays. The much anticipated turf course, the largest in North
America, will be ready and should attract quality horses from all over the United States and Canada.
The purses for the meet will be more than $3.7 million. The highlight of the meet will be the first
annual Virginia Derby on October 3rd. The purse for the Derby alone will be $250,000. General
admission will be free and the Company is expecting a capacity crowd for the October 3rd event.
In related news,
The arbitration proceeding with the Maryland Jockey Club continues regarding the
management fee agreement. Resolution of the Maryland Jockey Club arbitration is expected
within the next 60 to 90 days.
The arbitration proceeding with the general contractor, Norglass, Inc., also continues.
Arguments before the arbitration panel are expected to commence before the end of the year.
An affiliate of Mr. Jacobs has agreed to loan the Company $1,000,000 to meet liquidity
needs over the next six months. The loan will have a term of one year and bear interest at
8.5% payable upon maturity. The principal and accrued interest are convertible into Class B
common shares of the Company at a conversion price of $2.50 per share.
Terms of the $20 million interest-only refinancing of Colonial Downs debt are still being
determined. Earlier this year, Mr. Jacobs, Chairman and CEO, offered to personally
guarantee this credit facility in order to minimize liquidity issues during Colonial Downs' initial
years of operation. No refinancing has yet been secured and there can be no assurances that it
will be secured.
Colonial Downs will host the Breeders Crown Championships during the first two weekends
of November, which will be broadcast on ESPN2. Several events are planned around the
championships including a charity ball, a 5-mile run, and a NovemberFest, as well as world
championship racing. Over $ 3.5 million in purse money will be awarded over the four-day
event. |
