James L. Gagliano: Thank you, Chairman Phipps, and good morning, everyone. Today I want to begin a report of The Activities of The Jockey Club by explaining why an organization, a breed registry at its core, leads or supports so many activities and why it provides a broad range of essential industry services.

In a nutshell, our efforts are always focused on the improvement of Thoroughbred breeding and racing. We're advocating for the horse with our equine welfare and safety programs. We're advocating for the sport with our clean competition and our marketing initiatives, and we're advocating for the business with our technology and our customer services.

We've certainly seen evidence of that over the years and you'll certainly see more of it throughout the course of today's agenda. In fact, the planning and hosting of this conference every year is one very good example. Over many years, a number of important initiatives have traced their roots to the round table conference.

The Bruskin Report in 1986 on the marketing of the sport. The first McKinsey Report in 1991 on drug testing, the creation of the NTRA, recommendations from the Thoroughbred Safety Committee, and of course, last year's McKinsey Study.

I'd invite each of you to take a look at that history when you have a chance. We have transcripts dating back to 1990 on The Jockey Club website, and we're in the process of printing our digitized copies back to 1953. Apparently jockeys spurs and horses wearing goggles were the issue of the day.

As is a custom each year, The Jockey Club announced the 2013 projected foal crop at 24,700, which is the same number we predicted for 2012, and a cause for optimism that the decline is subsiding. We've also revised downward the projections for 2010 and 2011 by 1,500 foals a piece, as the registrations have not quite met our expectations.

So here's a quick look at the recent trends, all of which can be found in further detail on The Jockey Club website. After holding steady in the 36,000 to 38,000 range from 2002 to 2007, the number of registered foals declined to 35,200 in 2008 and has fallen more sharply in recent years as shown on the screen. By the time the books are closed on the 2012 crop, we'll have one-third fewer foals than we did just seven years ago.

We'll certainly continue to monitor and report on these trends, can you be sure.

Before I touch on some of the recent activities of our commercial companies, I want to briefly mention our two charitable foundations. The Grayson Jockey Club Research Foundation, traditionally the nation's leading source of private funding for equine research, has allocated $845,000 for 16 research projects in 2012. They'll cover a broad spectrum of issues including foal pneumonia, laminitis, vitamin D's role in immunity, and stem cell therapy. Since 1983, the foundation has provided nearly $20 million for 283 specific projects at 40 universities.

In October, Grayson and The Jockey Club will again underwrite and organize the fourth Welfare and Safety of the Racehorse Summit at Keeneland. We view this event as our industry's think tank on matters of safety and welfare.

Our other charity is The Jockey Club Safety Net Foundation, which provides assistance to needy individuals and their families. In 2012, it will distribute more than 400,000 in grants to recipients in 35 states.

Since 1989, The Jockey Club has operated commercial companies that serve various parts of the industry. I'll start with The Jockey Club Information Systems' Equineline, which is the global source for pedigrees and race records and the leader in the development of mobile products.

The Equineline sales catalog iPad app was launched in June 2011, and today 20 sales companies from nine countries are using it with more than 36,000 catalogs from 120 sales having been downloaded. That is potentially saving some serious printing costs for the sales companies and definitely a lot of trees.

Our InCompass subsidiary provides consulting services to racetracks. New projects include our Race Scheduling Tool, which was recommended by McKinsey & Company, and a Condition Book Matrix.

First, the Race Scheduling Tool. It was designed by the McKinsey quantitative analysts who used a database of hundreds of thousands of past races, attempting to help racetrack managers to develop the optimum order in which to card races and schedule races to avoid overlaps. We'll offer this software free of charge to all racetracks.

The second of InCompass' exciting developments is the Condition Book Matrix. Replacing the traditional pencil, pen and poster boards that most racing secretaries have used for years, this new tool will electronically illustrate how successful a potential race has been relative to field size and handle generation. It will automatically provide racing officials with a census of nearby eligible horses, which will help close entries sooner and with bigger fields.

Equibase, the partnership between The Jockey Club and TRA, continues to engage tens of thousands of fans each day in the promotion of racing. In most objective rankings, Equibase.com leads all other websites and daily users.

This past April, building on the popular stat central area of Equibase.com, Equibase introduced owner profiles, which consolidate and present racing statistics for individual owners, partnerships, stables and syndicates.

Equibase also introduced a one-of-a-kind handicapping tool specifically designed for iPads called IPPs by Equibase. This app allows a handicapper to mark up an electronic program as if handicapping with a paper program.

The Jockey Club Technology Services, the organization that manages our technological infrastructure, has overseen much of this product development. As a top-tier network operation center with a staff of more than 40 software and hardware professionals, this company recently redesigned its disaster recovery solution to make sure all of our mission critical applications are up and running 24/7.

As I stated earlier, The Jockey Club advocates for the horse during its racing career and afterward. Over the past year, we've enhanced our Thoroughbred Connect service and introduced the immensely popular Thoroughbred Incentive Program. We continue to support the TCA and TRF with our retirement checkoff program and through donations by our commercial companies.

The Jockey Club is also one of the driving forces of the formation of the Thoroughbred Aftercare Alliance, which will serve as the accrediting body for aftercare facilities and as a fund-raising body to support many of them.

With the expectation that other responsible organizations will join us, The Jockey Club is committed to the development of a permanent funding mechanism for aftercare. And I think everyone in this room and everyone who makes his or her living in this industry would agree we owe it to the horse.

In a few minutes, you'll hear a lot about the various projects we've been developing based upon the recommendations from last year's McKinsey study. This is yet another example of the industry support that we're able to provide with the profits from our commercial subsidiaries.

With its array of companies, resources and its commitment, we believe The Jockey Club is ideally suited to take on this role. We can provide the best possible services to our respective customers. We can reach out to new fans. We can attract new owners. We can procure sponsorships and television programming. But I assure you, those marketing efforts will be seriously and dangerously compromised if we do not reform our medication policies, improve our drug testing standards and our penalty systems.

In the second half of today's program you'll hear about The Jockey Club's Reformed Racing Medication Rules. They feature a new categorization of medications and work clearly to define regulatory limits and significantly stronger penalties. As you are no doubt aware, we are actively promoting their adoption.

Today is the closing day of the 30^th Olympiad and an excellent time to pause and reflect about the advancements of clean and fair competition in other sports and disciplines. We now recognize the tremendous value that professional sports leagues and even amateur competitions like the Olympics place on the integrity of their competition.

As you'll hear from Mr. Tygart, they whole heartedly believe that integrity is a vital component if competition-based entertainment is to survive and to thrive, and we do too.

The Jockey Club, through every one of its activities, will continue to advocate for the horse, the sport, and the business, and we welcome your support. Thank you.