Colonial Downs Holdings Reports Profit for 1st Quarter 1999
NEW KENT, Va. --(BUSINESS WIRE)--April 19, 1999--Colonial Downs
Holdings, Inc. (NASDAQ/NMS: CDWN) which through its subsidiaries
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 first quarter ended March 31, 1999.
The Company reported earnings for the first quarter of 1999 of
$515,000 or $0.07 per share compared to a net loss of $952,000 or $.13
per share for the same period in 1998. Total revenue in the first
quarter of 1999 was $7,024,000 compared to $6,772,000 in the first
quarter of 1998, an increase of 4%.
The dramatically improved results for the first quarter are the
direct result of management and marketing initiatives implemented
during 1998 and carried through into 1999 as well as reduction in the
accrual of thoroughbred purses from wagering at the Company's racing
centers. The management initiative is a strategy developed in the
spring of 1998 to put Colonial Downs on a profitable basis by January
1999 even though the Company only has four satellite racing centers
operating. The basis of the plan included re-negotiating several large
contracts and implementing numerous operating efficiencies.
As a result of this strategy, net income before purse expenses
for the racing centers improved by approximately $900,000 over the
first quarter of 1998. All of the racing centers were profitable in
the first quarter of 1999. The new contract with the Maryland Jockey
Club accounted for approximately $200,000 of this improvement while
other operating efficiencies and cost savings resulted in a $700,000
improvement. Some of the areas that contributed to the $700,000
improvement were reductions in personnel costs, printing costs and
making food and beverage operations profitable. Overall, the net
expenses relating to the track and corporate overhead increased by
approximately $125,000. This was largely due to an increase of
approximately $285,000 in professional fees, primarily relating to the
Norglass construction arbitration, being offset by other cost savings
achieved. On an overall company basis, personnel costs were reduced by
25% from the prior year and utilities and facility operating expenses
were reduced by 29%. Net interest expense increased approximately
$160,000 as the Company is carrying more debt in the first quarter of
1999 than it did in the first quarter of 1998.
The Company guaranteed minimum thoroughbred purses of $4.5
million for each of the first two thoroughbred meets to ensure that
Colonial Downs would begin racing with quality thoroughbred racing. To
satisfy this obligation, Colonial Downs contributed 5.25% of handle
wagered on thoroughbred races at its racing centers to the
thoroughbred purse account. Colonial Downs' contract with the
thoroughbred horsemen expired on December 31, 1998. Although
negotiations are on-going, no new agreement has been reached. For
1999, Colonial Downs has budgeted a total of $3.1 million for live
racing related expenses. Of this amount, $2.1 million will be expensed
in 1999 and the remaining $1.0 million will come from funds already on
deposit and the repayment of a loan from the thoroughbred purse
account. Therefore, purse expenses for the first quarter of 1999 of
$550,000 are approximately $860,000 less than the prior year. If
thoroughbred purse expense in the first quarter of 1999 had been
accounted for in accordance with the previous thoroughbred contract
which expired December 31, 1998, as was done in the first quarter of
1998, the Company would have reported a net loss of $0.05 per share.
The Company contributed 5% of all standardbred handle generated at the
racing centers to the standardbred purse account and will continue to
do so through August 4, 1999, the expiration date of the standardbred
agreement.
Colonial Downs is committed to growing live racing in Virginia.
However, live racing can only grow if Colonial Downs, the track
operator, can operate profitably. Therefore, until additional racing
centers can be opened, the track is limited in what it can spend on
live racing by what is generated from the racing centers.
The marketing initiative focused initially on the Richmond market
and included a comprehensive targeted mass marketing campaign
utilizing outdoor advertising, radio, print, and promotions at the
racing center. This initiative concentrated on cultivating new
customers and focusing on the core business. Handle in the Richmond
racing center for the first quarter was up 4.25% compared to the same
period in 1998. The Company intends to expand this marketing
initiative to the Hampton and Chesapeake markets in the second quarter
of 1999.
Jeffrey P. Jacobs, Chairman and Chief Executive Officer of the
Company, said, "I am quite pleased with our first quarter results.
They demonstrate that management has seized the initiative and acted
aggressively to turn the company around. We will continue to search
for ways to improve profitability both within the current structure
and in new markets. We have done everything that we can to generate
funds for live racing given the limitations of having only four racing
centers. We stand ready to work with all parties interested in the
success of this native industry during its start up years to grow
racing; however, we can only do this to the extent that Colonial Downs
can operate profitably. I am hopeful that this fundamental business
truth will be recognized and respected."
Colonial Downs' second harness meet will commence on May 31 and
conclude on August 4, 1999. The Company will host races on Monday,
Tuesday, and Wednesday afternoons. |
