<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1999
Commission file number 0-10619 Commission file number 333-34471-02
Hollywood Park, Inc. Hollywood Park Operating Company
(Exact Name of Registrant as Specified (Exact Name of Registrant as
in Its Charter) Specified in Its Charter)
Delaware Delaware
(State or Other Jurisdiction of (State or Other Jurisdiction of
Incorporation or Organization) Incorporation or Organization)
95-3667491 95-3667220
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
1050 South Prairie Avenue Inglewood, California 90301
(Address of Principal Executive Offices) (Zip Code)
(310) 419 - 1500
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrants: (1) have 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, and (2) have been subject to such filing
requirements for the past 90 days. Yes [ X ] No [_ ]
The number of outstanding shares of the Hollywood Park, Inc.'s common stock, as
of the date of the close of business on May 7, 1999: 25,846,012.
<PAGE>
HOLLYWOOD PARK, INC.
Table of Contents
Part I
<TABLE>
<CAPTION>
Hollywood Park, Inc.
--------------------
Item 1. Financial Information
<S> <C> <C>
Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998......................................... 1
Consolidated Statements of Operations for the three months ended March 31, 1999 and 1998....................... 2
Consolidated Statements of Cash Flows for the three months ended March 31, 1999 and 1998....................... 3
Notes to Consolidated Financial Statements..................................................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
General........................................................................................................ 14
Results of Operations.......................................................................................... 17
Liquidity and Capital Resources................................................................................ 18
Part II
Item 5. Other information................................................................................................. 22
Item 6.a Exhibits and Reports on Form 8K................................................................................... 22
Other Financial Information....................................................................................... 23
Signatures........................................................................................................ 25
</TABLE>
<PAGE>
Item 1. Financial Information
Hollywood Park, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
(unaudited)
Assets (in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $104,069 $43,934
Restricted cash 710 300
Short term investments 3,210 3,179
Other receivables, net 14,284 16,783
Prepaid expenses and other assets 16,385 15,207
Deferred tax assets 18,449 18,425
Current portion of notes receivable 2,320 2,320
------------ ------------
Total current assets 159,427 100,148
Notes receivable 17,598 17,852
Property, plant and equipment, net 602,331 602,912
Goodwill, net 96,342 97,098
Gaming license, Casino Magic Bossier City, net 36,045 36,446
Concession agreement, Casino Magic Argentina, net 7,354 7,591
Debt issuance costs, net 26,036 12,105
Other assets 16,914 17,187
------------ ------------
$962,047 $891,339
============ ============
- ------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $16,275 $20,970
Accrued interest 11,201 16,741
Accrued liabilities 44,596 46,541
Accrued compensation 17,628 17,819
Gaming liabilities 8,507 8,913
Racing liabilities 2,279 2,395
Current portion of notes payable 10,824 11,564
------------ -------------
Total current liabilities 111,310 124,943
Notes payable, less current maturities 605,885 527,619
Deferred tax liabilities 2,430 400
Other liabilities 3,649 3,649
------------ ------------
Total liabilities 723,274 656,611
Minority interests 3,646 3,752
Stockholders' Equity:
Capital stock --
Preferred - $1.00 par value, authorized 250,000 shares;
none issued and outstanding in 1999 and 1998 0 0
Common - $0.10 par value, authorized 40,000,000 shares;
25,800,069 issued and outstanding in 1999 and 1998 2,580 2,580
Capital in excess of par value 218,375 218,375
Retained earnings 14,471 10,338
Accumulated other comprehensive loss (299) (317)
------------ ------------
Total stockholders' equity 235,127 230,976
------------ ------------
$962,047 $891,339
============ ============
See accompanying notes to the consolidated financial statements.
</TABLE>
1
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Hollywood Park, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the three months
ended March 31,
-------------------------------------------------
1999 1998
--------- ---------
(in thousands, except per share data - unaudited)
<S> <C> <C>
Revenues:
Gaming $140,391 $55,349
Racing 9,779 9,869
Food and beverage 9,671 5,569
Hotel and recreational vehicle park 2,668 276
Truck stop and service station 2,988 2,823
Other income 6,501 4,271
-------- --------
171,998 78,157
-------- --------
Expenses:
Gaming 77,378 31,967
Racing 5,355 5,469
Food and beverage 11,655 7,513
Hotel and recreational vehicle park 1,340 127
Truck stop and service station 2,758 2,566
General and administrative 35,853 20,097
Other 2,454 1,736
Depreciation and amortization 13,367 6,555
REIT restructuring 0 469
-------- --------
150,160 76,499
-------- --------
Operating income 21,838 1,658
Interest expense 14,491 3,661
-------- --------
Income (loss) before minority interests and
income taxes 7,347 (2,003)
Minority interests 458 0
Income tax expense (benefit) 2,756 (769)
-------- --------
Net income (loss) $ 4,133 $ (1,234)
======== ========
=======================================================================================================
Per common share:
Net income (loss) - basic 0.16 (0.05)
Net income (loss) - diluted 0.16 (0.05)
Number of shares - basic 25,800 26,276
Number of shares - diluted 25,800 26,867
</TABLE>
- ------
See accompanying notes to the consolidated financial statements.
2
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Hollywood Park, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the three months
ended March 31,
--------------------------------
1999 1998
------------ -----------
(in thousands - unaudited)
<S> <C> <C>
Cash Flows from operating activities:
Net income (loss) $4,133 ($1,234)
Adjustments to reconcile net income (loss) to net cash provided
by (used for) operating activities:
Depreciation and amortization 13,367 6,555
Amortization of financing costs and bond premium 812 0
Minority interests (106) 0
(Gain) loss on sale or disposal of property, plant and equipment, net 103 (195)
(Increase) decrease in restricted cash (410) 158
Decrease in other receivables, net 2,499 2,355
(Increase) decrease in prepaid expenses and other assets (1,040) 1,197
(Increase) decrease in deferred tax assets (55) 1,522
Decrease in accounts payable (4,695) (1,005)
Decrease in accrued lawsuit settlement 0 (2,750)
Decrease in accrued interest (5,540) (2,675)
Decrease in accrued liabilities (1,945) (2,463)
(Decrease) increase in accrued compensation (191) 520
(Decrease) increase in gaming liabilities (406) 62
Decrease in racing liabilities (116) (3,539)
Increase (decrease) in deferred tax liabilities 2,030 (1,371)
-------- ----------
Net cash provided by (used for) operating activities 8,440 (2,863)
-------- ----------
Cash flows from investing activites:
Additions to propery, plant and equipment, net (11,281) (14,295)
Receipts from sale of property, plant and equipment, net 37 274
Principal collected on notes receivable 254 11
Purchase of short term investments 0 (2,098)
Payment to buy-out minority interest in Crystal Park LLC 0 (1,946)
-------- ----------
Net cash used in investing activities (10,990) (18,054)
-------- ----------
Cash flows from financing activites:
Proceeds from secured Bank Credit Facility 17,000 20,000
Payment of secured Bank Credit Facility (287,000) 0
Payment on secured notes payable 0 (1,479)
Payment of unsecured notes payable (2,006) 0
Proceeds from issuance of 9.25% Notes 350,000 0
Proceeds from unsecured notes payable 0 6
Common stock options excercised 0 1,023
Increase in debt issuance costs (15,309) 0
-------- ----------
Net cash provided by financing activites 62,685 19,550
-------- ----------
Increase (decrease) in cash and cash equivalents 60,135 (1,367)
Cash and cash equivalents at beginning of the period 43,934 23,749
-------- ----------
Cash and cash equivalents at the end of the period $104,069 $22,382
========= ==========
</TABLE>
- --------------
See accompanying notes to the consolidated financial statements.
3
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Hollywood Park, Inc.
Condensed Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
General Hollywood Park, Inc. (the "Company" or "Hollywood Park") is a
diversified gaming company that owns and/or operates eight casinos, two pari-
mutuel horse racing facilities, and two card club casinos at locations in
Nevada, Mississippi, Louisiana, California, Arizona and Argentina. Hollywood
Park owns and operates, through its Boomtown, Inc. ("Boomtown") subsidiary,
land-based, dockside and riverboat gaming operations in Verdi, Nevada ("Boomtown
Reno"), Biloxi, Mississippi ("Boomtown Biloxi") and Harvey, Louisiana ("Boomtown
New Orleans"), respectively. As of the Company's October 15, 1998 acquisition
of Casino Magic Corp. ("Casino Magic"), Hollywood Park owns and operates
dockside gaming casinos in the cities of Bay St. Louis and Biloxi, Mississippi
("Casino Magic Bay St. Louis" and "Casino Magic Biloxi"); riverboat gaming in
Bossier City, Louisiana ("Casino Magic Bossier City"); and is a 51% partner in
two land-based casinos in Argentina ("Casino Magic Argentina"). Hollywood Park
also owns two card club casinos in California, both located in the Los Angeles
metropolitan area. The Hollywood Park-Casino is operated by the Company, and
located on the same property as the Hollywood Park Race Track. The Crystal Park
Hotel and Casino (the "Crystal Park Casino") is owned by the Company and is
leased to an unaffiliated operator. The Company's premier thoroughbred racing
facilities include the Hollywood Park Race Track, which the Company has owned
for over 60 years, and Turf Paradise, Inc. ("Turf Paradise"), located in
Phoenix, Arizona. The Company is in the initial construction planning stages of
a hotel and casino resort in Indiana (the "Indiana Project"), after being
approved to receive the last available license to conduct riverboat gaming
operations on the Ohio River in September 1998.
The financial information included herein has been prepared in conformity with
generally accepted accounting principles as reflected in Hollywood Park's
consolidated Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, for the year ended December 31, 1998. This Quarterly
Report on Form 10-Q does not include certain footnotes and financial
presentations normally presented annually and should be read in conjunction with
the Company's 1998 Annual Report on Form 10-K.
The information furnished herein is unaudited; however, in the opinion of
management it reflects all normal and recurring adjustments necessary to present
a fair statement of the financial results for the interim periods. It should be
understood that accounting measurements at interim dates inherently involve
greater reliance on estimates than at year end. The interim racing results of
operations are not indicative of the results for the full year, due to the
seasonality of the Company's horse racing business.
Consolidation The consolidated financial statements presented herein include
the accounts of Hollywood Park and its subsidiaries. All inter-company
transactions have been eliminated.
Gaming License In May 1996, Casino Magic acquired Crescent City Capital
Development Corp., which included the Louisiana state gaming license to conduct
the gaming operations of Casino Magic Bossier City. Casino Magic allocated a
portion of the purchase price to the Louisiana state gaming license, which is
being amortized on a straight line basis, over twenty-five years.
4
<PAGE>
Concession Agreement In December 1994, Casino Magic acquired a twelve-year
concession agreement to operate the two Casino Magic Argentina casinos, and
capitalized the costs related to obtaining the concession agreement. The costs
are being amortized on a straight line basis, over the twelve-year life of the
concession agreement.
Goodwill The majority of goodwill is being amortized over 40 years, with the
balance being amortized over fifteen to twenty years.
Racing Revenues and Expenses The Company records pari-mutuel revenues,
admissions, food and beverage and other racing income associated with racing on
a daily basis, except for prepaid admissions, which were recorded ratably over
the racing season. Expenses associated with racing revenues were charged
against income in those periods in which racing revenues were recognized. Other
expenses were recognized as they occurred throughout the year.
Gaming Revenue and Promotional Allowances Gaming revenues at the Boomtown and
Casino Magic properties consisted of the difference between gaming wins and
losses, or net win from gaming activity, and at the Hollywood Park-Casino
consisted of fees collected from patrons on a per seat or per hand basis.
Revenues in the accompanying statements of operations exclude the retail value
of food and beverage, hotel rooms and other items provided to patrons on a
complimentary basis. The estimated cost of providing these promotional
allowances (which is included in gaming expenses) during the three months ended
March 31, 1999 and 1998 was approximately $11,436,000 and $3,906,000,
respectively (which for the three months ended March 31, 1998, does not include
promotional allowances for Casino Magic).
Accounting Pronouncements Start-Up Costs The Company's policy has been to
--------------
expense start-up costs as incurred. In April 1998, Statement of Position 98-5
Reporting on the Costs of Start-Up Activities was issued and was effective for
years after December 31, 1998. Statement of Position 98-5 required that start-
up activities and organizational costs be expensed as incurred. In the three
months ended March 31, 1999, the Company expensed $707,000 of pre-opening costs
associated with the Indiana Project. There were no similar costs in the three
months ended March 31, 1998.
Comprehensive Income Statement of Financial Accounting Standards No. 130,
- --------------------
Reporting Comprehensive Income ("SFAS 130") requires that the Company disclose
comprehensive income and its components. The objective of SFAS 130 is to report
a measure of all changes in equity of an enterprise that result from
transactions and other economic events of the period other than transactions
with owners. Comprehensive income is the sum of the following: net income
(loss) and other comprehensive income (loss), which is defined as all other
nonowner changes in equity.
The Company has recorded unrealized gains as other comprehensive income in the
accompanying financial statements. Comprehensive income was computed as
follows:
<TABLE>
<CAPTION>
For the three months ended
March 31,
-----------------------------
1999 1998
----------- -------------
(in thousands, unaudited)
<S> <C> <C>
Net income (loss) $4,133 ($1,234)
Other comprehensive income:
Unrealized gain on securities 18 75
----------- -------------
Comprehensive income (loss) $4,151 ($1,159)
=========== =============
</TABLE>
5
<PAGE>
Capitalized Interest During the three months ended March 31, 1999, and 1998,
the Company capitalized interest related to construction projects of
approximately $711,000 and $226,000, respectively.
Earnings Per Share Basic earnings per share were computed by dividing net
income (loss) attributable to (allocated to) common shareholders by the weighted
average number of common shares outstanding during the period. Diluted per
share amounts were similarly computed, but include the effect, when dilutive, of
the exercise of stock options.
Restricted Cash Restricted cash as of March 31, 1999 and December 31, 1998, was
for amounts due to horsemen for purses, stakes and awards.
Cash Flows Cash and cash equivalents consist of certificates of deposit and
investment grade commercial paper issued by major corporations and financial
institutions that are highly liquid and have original maturities of up to one
year, and maturities from date of acquisition of three months or less. Cash
equivalents are carried at cost, which approximates market value.
Estimates Financial statements prepared according to generally accepted
accounting principles require the use of management estimates, including
estimates used to evaluate the recoverability of property, plant and equipment,
to determine the fair value of financial instruments, to account for the
valuation allowance for deferred tax assets and to determine litigation related
obligations. Actual results could differ from these estimates.
Reclassifications Certain reclassifications have been made to the 1998 balances
to be consistent with the 1999 financial statement presentation.
Note 2 - Acquisition of Casino Magic Corp.
On October 15, 1998, Hollywood Park acquired Casino Magic, pursuant to the
February 19, 1998 Agreement of Merger among Casino Magic Corp., Hollywood Park,
Inc., and HP Acquisition II, Inc. (a wholly owned subsidiary of Hollywood Park)
(the "Casino Magic Merger"). Hollywood Park paid cash of approximately
$80,904,000 for Casino Magic's common stock. At the date of the acquisition,
Hollywood Park had purchased 792,900 common shares of Casino Magic on the open
market, at a total cost of approximately $1,615,000. Hollywood Park paid $2.27
per share for the remaining 34,929,224 shares of Casino Magic common stock
outstanding.
The Casino Magic Merger was accounted for under the purchase method of
accounting for a business combination. The Company has performed a preliminary
purchase price allocation and will finalize this allocation in 1999. The
purchase price of the Casino Magic Merger was allocated to identifiable assets
acquired and liabilities assumed based on their estimated fair values at the
date of acquisition. Based on financial analyses, which considered the impact
of general economic, financial and market conditions on the assets acquired and
the liabilities assumed were, when found to be necessary, written up or down to
their fair market values. The Casino Magic Merger generated approximately
$43,284,000 of excess acquisition cost over the recorded value of the net assets
acquired, all of which was allocated to goodwill, and is being amortized over 40
years. The amortization of this goodwill is not deductible for income tax
purposes.
6
<PAGE>
Note 3 - Short Term Investments
At of March 31, 1999, and December 31, 1998, short term investments consisted of
investments in equity securities of approximately $3,210,000 and $3,179,000,
respectively (inclusive of an unrealized gain of approximately $501,000 and
$407,000, respectively), which are presently being held as available-for-sale.
Note 4 - Property, Plant and Equipment
Property, plant and equipment held as of March 31, 1999, and December 31, 1998,
consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ -------------
(unaudited)
(in thousands)
<S> <C> <C>
Land and land improvements $141,527 $141,536
Buildings 393,365 393,200
Equipment 178,414 174,270
Vessels 76,613 76,605
Construction in progress 52,787 46,297
------------- -------------
842,706 831,908
Less accumulated depreciation 240,375 228,996
------------- -------------
$602,331 $602,912
============= =============
</TABLE>
Note 5 - Long Term Debt
Notes payable as of March 31, 1999, and December 31, 1998, consisted of the
following:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ -------------
(unaudited)
(in thousands)
<S> <C> <C>
Secured notes payable, Bank Credit Facility $ 0 $270,000
Hollywood Park Unsecured 9.25% Notes 350,000 0
Hollywood Park Unsecured 9.5% Notes 125,000 125,000
Casino Magic 13% Notes (a) 121,217 121,685
Secured notes payable, other 15,300 16,569
Unsecured notes payable 4,726 5,288
Capital lease obligations 466 641
------------- -------------
616,709 539,183
Less current maturities 10,824 11,564
------------- -------------
$605,885 $527,619
============= =============
</TABLE>
(a) Includes a write up to fair market value (net of amortization), as of the
October 15, 1998, acquisition of Casino Magic, of $8,342,000 and $8,810,000
as of March 31, 1999, and December 31, 1998, respectively, as required
under the purchase accounting method of accounting for a business
combination.
Secured Notes Payable, Bank Credit Facility On October 14, 1998, the Company
executed the Amended and Restated Reducing Revolving Loan Agreement with a bank
syndicate lead by Bank of America National Trust and Savings Association NT&SA
("Bank of America") (the "Bank Credit Facility") for up to $300,000,000, with an
option to increase this amount to $375,000,000. The Bank Credit Facility also
provides for sub-facilities for letters of credit up to $30,000,000, and
7
<PAGE>
swing line loans of up to $10,000,000. Prior to the execution of the Bank Credit
Facility, the Company was operating with a former Bank Credit Facility which was
initially for $225,000,000, and was reduced to $100,000,000 with the August 1997
issuance of the 9.5% Hollywood Park Senior Subordinated Notes due 2007 (the
"9.5% Notes"). The Bank Credit Facility extended the maturity of the former Bank
Credit Facility to December 31, 2003, reduced interest and commitment fee rates,
and amended certain covenants, as compared to the former Bank Credit Facility.
The Bank Credit Facility was fully repaid on February 18, 1999, with the
issuance of the 9.25% Notes (described below) and therefore did not have any
borrowings outstanding as of March 31, 1999. The repayment of all borrowings
outstanding under the Bank Credit Facility does not reduce the size of the
bank's commitment to lend and, if Hollywood Park meets the relevant conditions
for borrowing, Hollywood Park could borrow the full amount available under the
Bank Credit Facility in the future.
Unsecured 9.25% Notes On February 18, 1999, Hollywood Park issued $350,000,000
aggregate principal amount of Series A 9.25% Senior Subordinated Notes due 2007
(the "Series A Notes"). On May 6, 1999, the Company completed a registered
exchange offer for the Series A Notes, pursuant to which all $350,000,000
principal amount of the Series A Notes were exchanged by the holders for
$350,000,000 aggregate principal amount of Series B 9.25% Senior Subordinated
Notes due 2007, of the Company (the "Series B Notes"), which were registered
under the Securities Act on Form S-4. The Series A Notes and the Series B Notes
are collectively referred to as the "9.25% Notes".
The 9.25% Notes are redeemable, at the option of the Company, in whole or in
part, on or after February 15, 2003, at a premium to face amount, plus accrued
interest, as follows: (a) February 15, 2003 at 104.625%; (b) February 15, 2004
at 103.083%; (c) February 15, 2005 at 101.542%; and (d) February 15, 2006 and
thereafter at 100%. The 9.25% Notes are unsecured obligations of Hollywood
Park, guaranteed by all other material restricted subsidiaries of Hollywood Park
excluding certain Casino Magic subsidiaries, principally Casino Magic of
Louisiana, Corp. and the Casino Magic Argentina subsidiaries.
Hollywood Park received net proceeds of approximately $339,900,000 from the
9.25% Note offering. Of these proceeds, Hollywood Park used $287,000,000 to
repay all outstanding borrowings under the Bank Credit Facility. The remaining
proceeds of approximately $52,900,000 are currently invested in various cash
equivalents and are expected to be used to fund Hollywood Park's capital
expenditures.
The indenture governing the 9.25% Notes contains certain covenants limiting the
ability of the Company and its restricted subsidiaries to incur additional
indebtedness, issue preferred stock, pay dividends or make certain
distributions, repurchase equity interests or subordinated indebtedness, create
certain liens, enter into certain transactions with affiliates, sell assets,
issue or sell equity interest in its subsidiaries, or enter into certain mergers
and consolidations.
Unsecured 9.5% Notes On August 6, 1997, Hollywood Park and Hollywood Park
Operating Company (a wholly owned subsidiary of Hollywood Park) co-issued
$125,000,000 aggregate principal amount of 9.5% Notes. The 9.5% Notes are
redeemable, at the option of Hollywood Park and Hollywood Park Operating
Company, in whole or in part, on or after August 1, 2002, at a premium to face
amount, plus accrued interest, as follows: (a) August 1, 2002 at 104.75%; (b)
August 1, 2003 at 102.375%; (c) August 1, 2004 at 101.188%; and (d) August 1,
2005 and thereafter at 100%. The 9.5% Notes are unsecured obligations of
Hollywood Park and Hollywood Park Operating Company, guaranteed by all other
material restricted subsidiaries of either Hollywood Park or Hollywood Park
Operating Company excluding certain Casino Magic
8
<PAGE>
subsidiaries, principally Casino Magic of Louisiana, Corp. and the Casino Magic
Argentina subsidiaries.
On January 29, 1999, Hollywood Park received the required number of consents to
modify selected covenants associated with the 9.5% Notes. Among other things,
the modifications lowered the required minimum consolidated coverage ratio for
debt assumption to 2.00:1.00 and increased the size of Hollywood Park's allowed
borrowings under the Bank Credit Facility from $100,000,000 to $350,000,000.
The Company paid a consent fee of $50.00 per $1,000 principal amount of the 9.5%
Notes, or a total cost of approximately $6,781,000, inclusive of transaction
related expenses.
The indenture governing the 9.5% Notes contains certain covenants that, among
other things, limit the ability of Hollywood Park, Hollywood Park Operating
Company and their restricted subsidiaries to incur additional indebtedness and
issue preferred stock, pay dividends or make other distributions, repurchase
equity interests or subordinated indebtedness, create certain liens, enter into
certain transactions with affiliates, sell assets, issue or sell equity
interests in their respective subsidiaries or enter into certain mergers and
consolidations.
Casino Magic 13% Notes On August 22, 1996, Casino Magic of Louisiana, Corp.
(owner of Casino Magic Bossier City), a wholly owned subsidiary of Jefferson
Casino Corporation, which is a wholly owned subsidiary of Casino Magic, issued
$115,000,000 in aggregate principal amount of 13% First Mortgage Notes (the
"Casino Magic 13% Notes"), with contingent interest at 5% of Casino Magic
Bossier City's adjusted consolidated cash flow (as defined under the indenture
governing these notes). The Casino Magic 13% Notes are secured by a first
priority lien and security interest in substantially all of the assets of Casino
Magic Bossier City, and Jefferson Casino Corporation guarantees the Casino Magic
13% Notes, and the guarantee is secured by all of the assets of Jefferson Casino
Corporation including all of the capital stock of Casino Magic of Louisiana,
Corp. The Casino Magic 13% Notes are redeemable, in whole or in part, on or
after August 15, 2000, at a premium to face amount, plus accrued interest, as
follows: (a) August 15, 2000, at 106.5%; (b) August 15, 2001, at 104.332%; and
(c) August 15, 2002, and thereafter at 102.166%.
On December 23, 1998, the Company completed the required post Casino Magic
Merger change of control purchase offer, whereby $2,125,000 in principal amount
of the Casino Magic 13% Notes were tendered, at a price of $1,010 for each
$1,000 of principal amount.
The indenture governing the Casino Magic 13% Notes contains certain covenants
limiting the ability of Casino Magic of Louisiana, Corp. and its subsidiaries to
engage in any line of business other than the current gaming operations of
Casino Magic Bossier City and incidental related activities, to borrow funds or
otherwise become liable for additional debt, to pay dividends, issue preferred
stock, make investments and certain types of payments, to grant liens on its
property, enter into mergers or consolidations, or to enter into certain
specified transactions with affiliates.
Other Information As of March 31, 1999, Casino Magic had various secured notes
payable totaling $12,800,000, primarily secured by various fixed assets at
Casino Magic Biloxi and Casino Magic Bossier City. The Company is currently
evaluating the various Casino Magic notes payable for early retirement. Casino
Magic also had unsecured notes payable totaling $1,683,000 and capital leases of
$415,000.
9
<PAGE>
Note 6 - Stock Options
Gaming Executive Options As discussed in the Annual Report on Form 10K, on
September 10, 1998, the Company granted 817,500 stock options (625,000 at an
exercise price of $10.1875 and 192,500 at an exercise price of $18.00) outside
of the Company's 1993 and 1996 Stock Option Plans to the new executive gaming
staff hired as of January 1, 1999. Of these grants, 613,125 (420,625 at an
exercise price of $10.1875 and 192,500 at an exercise price of $18.00) were made
subject to shareholder approval at the next shareholder meeting, which is to be
held May 25, 1999 (the "Measurement Date"). Accounting Principles Board Opinion
No. 25 requires that compensation be determined on the Measurement Date based on
the excess of the quoted market price over the exercise price of the stock and
charged over the service period of the executives in their employment agreements
or option vesting period, whichever is shorter.
Compensation related to these options through the quarter ended March 31, 1999
was immaterial.
Director Options and Proposed New Interpretation of APB Opinion No. 25 The
Financial Accounting Standards Board ("FASB") issued an Exposure Draft on March
31, 1999 in connection with a proposed new interpretation of APB Opinion No. 25.
The FASB Exposure Draft proposes that independent members of an entity's board
of directors are not employees and therefore stock compensation granted to
independent directors is excluded from the scope of APB Opinion No. 25. The
FASB has proposed that the effective date would be the issuance date of the new
interpretation (expected to be in September 1999) and that the interpretation
would cover events occurring after December 15, 1998.
On December 16, 1998, the Company issued 16,000 stock options to independent
members of its board of directors. If the Exposure Draft is adopted in its
present form, the Company will charge to expense the value of the 16,000 options
granted to the independent board of directors in the quarter of adoption of the
Exposure Draft.
10
<PAGE>
Note 7 - Consolidating Condensed Financial Information
Hollywood Park's subsidiaries (excluding non-material subsidiaries) have fully
and unconditionally guaranteed the payment of all obligations under the 9.25%
Notes and the 9.5% Notes. Separate financial statements and other disclosures
regarding the subsidiary guarantors are not included herein because management
has determined that such information is not material to investors. In lieu
thereof, the Company includes the following:
<TABLE>
<CAPTION>
Hollywood Park, Inc.
Consolidating Condensed Financial Information
As of and for the three months ended March 31, 1999 and 1998 and balance sheet as of December 31, 1998
Hollywood
Park
Operating (b) (c)
Hollywood Co. (a) Wholly Non Wholly
Park, Inc. (Co-Obligor Wholly Owned Owned Consolidating
Guarantor 9.5% Notes/ Owned Non- Non- And Hollywood
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating Park, Inc.
Obligor) 9.25% Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
---------- ------------ ------------ ------------- ------------ -------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
As of and for the three
Months ended
March 31, 1999
Balance Sheet
- -------------
Current assets $70,199 $ 4,581 $ 66,053 $ 12,811 $ 5,783 $ 0 $159,427
Property, plant and
equipment, net 64,894 21,062 423,302 91,566 1,507 0 602,331
Other non-current assets 44,671 9,964 40,129 40,592 7,354 57,579 200,289
Investment in subsidiaries 287,532 17,701 161,944 0 0 (467,177) 0
Inter-company 275,679 131,874 333,513 6,405 382 (747,853) 0
-------- -------- ---------- -------- ------- ------------ --------
$742,975 $185,182 $1,024,941 $151,374 $15,026 ($1,157,451) $962,047
======== ======== ========== ======== ======= ============ ========
Current liabilities $ 13,694 $ 10,683 $ 66,223 $ 17,294 $ 3,001 $ 415 $111,310
Notes payable, long term 358,550 125,228 9,183 112,924 0 0 605,885
Other non-current
liabilities 1,068 0 22,848 (9,454) 3,353 (11,736) 6,079
Inter-company 134,536 24,738 566,420 16,503 5,656 (747,853) 0
Minority interest 0 0 4,260 0 0 (614) 3,646
Equity (deficit) 235,127 24,533 356,007 14,107 3,016 (397,663) 235,127
-------- -------- ---------- -------- ------- ------------ --------
$742,975 $185,182 $1,024,941 $151,374 $15,026 ($1,157,451) $962,047
======== ======== ========== ======== ======= ============ ========
Statement of Operations
- -----------------------
Revenues:
Gaming $ 11,856 $ 0 $ 91,219 $ 32,398 $ 4,918 $ 0 $140,391
Racing 0 3,842 5,937 0 0 0 9,779
Food and beverage 1,226 0 7,457 648 340 0 9,671
Equity in subsidiaries 14,865 (138) 22,112 0 0 (36,839) 0
Other 1,294 915 9,073 806 69 0 12,157
-------- -------- ---------- -------- ------- ------------ --------
29,241 4,619 135,798 33,852 5,327 (36,839) 171,998
-------- -------- ---------- -------- ------- ------------ --------
Expenses:
Gaming 6,500 0 49,419 20,059 1,400 0 77,378
Racing 0 2,892 2,463 0 0 0 5,355
Food and beverage 2,429 0 8,188 736 302 0 11,655
Administrative and other 5,904 3,505 26,861 4,682 1,453 0 42,405
Depreciation and
amortization 1,121 1,030 8,584 1,889 372 371 13,367
-------- -------- ---------- -------- ------- ------------ --------
15,954 7,427 95,515 27,366 3,527 371 150,160
-------- -------- ---------- -------- ------- ------------ --------
Operating income (loss) 13,287 (2,808) 40,283 6,486 1,800 (37,210) 21,838
Interest expense 6,882 3,252 (231) 4,588 0 0 14,491
-------- -------- ---------- -------- ------- ------------ --------
Income (loss) before taxes 6,405 (6,060) 40,514 1,898 1,800 (37,210) 7,347
Minority interests 0 0 0 0 0 458 458
Income tax expense
(benefit) 2,243 0 10 0 503 0 2,756
-------- -------- ---------- -------- ------- ------------ --------
Net income (loss) $ 4,162 ($6,060) $ 40,504 $ 1,898 $ 1,297 ($37,668) $ 4,133
======== ======== ========== ======== ======= ============ ========
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Hollywood Park, Inc.
Consolidating Condensed Financial Information
As of and for the three months ended March 31, 1999 and 1998 and balance sheet as of December 31, 1998
Hollywood
Park
Operating (b) (c)
Hollywood Co. (a) Wholly Non Wholly
Park, Inc. (Co-Obligor Wholly Owned Owned Consolidating
Guarantor 9.5% Notes/ Owned Non- Non- And Hollywood
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating Park, Inc.
Obligor) 9.25% Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ------------ ------------ ------------- ------------- ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
For the three months
ended March 31, 1999
Statement of Cash Flows:
- ------------------------
Net cash provided by
(used in) operating
activities ($15,507) $ 6,798 $ 5,857 $ 10,227 $ 680 $ 385 $ 8,440
Net cash used in investing
activities (486) (193) (9,253) (915) (143) 0 (10,990)
Net cash provided by
(used in) financing
activities 70,423 (5,726) 6,249 (8,261) 0 0 62,685
For the three months
ended March 31, 1998
Statement of Operations
- -----------------------
Revenues:
Gaming $ 11,404 $ 0 $ 29,915 $ 0 $14,030 $ 0 $ 55,349
Racing 0 3,788 6,081 0 0 0 9,869
Food and beverage 1,063 0 3,343 0 1,163 0 5,569
Equity in subsidiaries (1,265) (56) 3,679 0 0 (2,358) 0
Inter-company 0 0 1,356 0 0 (1,356) 0
Other 887 878 4,925 0 680 0 7,370
--------- -------- ---------- -------- ------- -------- --------
12,089 4,610 49,299 0 15,873 (3,714) 78,157
--------- -------- ---------- -------- ------- -------- --------
Expenses:
Gaming 6,742 0 17,579 0 7,646 0 31,967
Racing 0 2,891 2,578 0 0 0 5,469
Food and beverage 2,362 0 3,711 0 1,440 0 7,513
Administrative and other 4,567 3,548 12,177 0 4,234 0 24,526
REIT restructuring 469 0 0 0 0 0 469
Depreciation and
amortization 1,125 1,001 3,530 0 882 17 6,555
--------- -------- ---------- -------- ------- -------- --------
15,265 7,440 39,575 0 14,202 17 76,499
--------- -------- ---------- -------- ------- -------- --------
Operating income (loss) (3,176) (2,830) 9,724 0 1,671 (3,731) 1,658
Interest expense 591 3,058 (79) 0 91 0 3,661
Inter-company interest 0 0 0 0 1,356 (1,356) 0
--------- -------- ---------- -------- ------- -------- --------
Income (loss) before taxes (3,767) (5,888) 9,803 0 224 (2,375) (2,003)
Income tax expense
(benefit) (2,577) 0 1,808 0 0 0 (769)
--------- -------- ---------- -------- ------- -------- --------
Net income (loss) ($1,190) ($5,888) $ 7,995 $ 0 $ 224 ($2,375) ($1,234)
========= ======== ========== ======== ======= ======== ========
Statement of Cash Flows:
- ------------------------
Net cash provided by
(used in) operating
activities $ (12,504) $ 1,142 $ 10,100 $ 0 $ 808 ($2,409) ($2,863)
Net cash used in
investing activities (8,025) (563) (9,147) 0 (319) 0 (18,054)
Net cash provided by
(used in) financing
activities 21,033 6 (1,677) 0 (198) 0 19,550
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Hollywood Park, Inc.
Consolidating Condensed Financial Information
As of and for the three months ended March 31, 1999 and 1998 and balance sheet as of December 31, 1998
Hollywood
Park
Operating (b) (c)
Hollywood Co. (a) Wholly Non Wholly
Park, Inc. (Co-Obligor Wholly Owned Owned Consolidating
Guarantor 9.5% Notes/ Owned Non- Non- And Hollywood
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating Park, Inc.
Obligor) 9.25% Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
---------- ------------ ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1998
Balance Sheet
- -----------------------
Current assets $ 14,820 $ 2,574 $ 69,790 $ 17,726 $15,046 ($19,808) $100,148
Property, plant and
equipment, net 85,870 1,953 421,380 92,218 1,491 0 602,912
Other non-current assets 41,365 4,196 31,275 53,452 7,591 50,400 188,279
Investment in subsidiaries 279,442 17,839 174,141 0 0 (444,536) 0
Inter-company 252,556 144,569 303,855 0 5,012 (732,878) 0
--------- -------- ---------- -------- ------- ------------ --------
$ 674,053 $171,131 $1,000,441 $163,396 $29,140 ($1,146,822) $891,339
========= ======== ========== ======== ======= ============ ========
Current liabilities $ 11,048 $ 12,547 $ 75,529 $ 29,266 $ 5,604 ($9,051) $124,943
Notes payable, long term 279,018 125,228 10,042 118,349 0 (5,018) 527,619
Other non-current
liabilities 5,889 0 13,396 2,727 7,532 (25,495) 4,049
Inter-company 147,122 23,323 564,207 0 21,549 (756,201) 0
Minority interest 0 0 4,366 0 0 (614) 3,752
Equity 230,976 10,033 332,901 13,054 (5,545) (350,443) 230,976
--------- -------- ---------- -------- ------- ------------ --------
$ 674,053 $171,131 $1,000,441 $163,396 $29,140 ($1,146,822) $891,339
========= ======== ========== ======== ======= ============ ========
</TABLE>
(a) All of the subsidiaries mentioned in this footnote (a) became wholly owned
subsidiaries of the Company at different points in time, in some cases,
during the periods presented. All of such subsidiaries were guarantors on
both the 9.5% Notes and the 9.25% Notes. The following subsidiaries were
treated as guarantors for all periods presented: Turf Paradise, Inc.,
Hollywood Park Food Services, Inc., Hollywood Park Fall Operating Company,
and with respect to the 9.25% Notes, Hollywood Park Operating Company (it
is a co-obligor on the 9.5% Notes), HP Casino, Inc., HP/Compton, Inc., HP
Yakama, Inc., and HP Consulting, Inc., Boomtown, Inc., Boomtown Hotel &
Casino, Inc., Bay View Yacht Club, Inc., Louisiana - I Gaming, Louisiana
Gaming Enterprises, Inc., and Boomtown Hoosier, Inc. The following
subsidiaries were treated as guarantors for periods beginning on October
15, 1998, when the Casino Magic Merger was consummated: Casino Magic Corp.,
Mardi Gras Casino Corp., Biloxi Casino Corp., Bay St. Louis Casino Corp.,
Casino Magic Finance Corp., Casino Magic American Corp., and Casino One
Corporation. Crystal Park Hotel and Casino Development Company, LLC and
Mississippi - I Gaming L.P. were treated as wholly owned guarantors for
periods beginning in January 1998 and October 1998, respectively, when the
Company acquired the outstanding minority interests therein and they became
wholly owned subsidiaries.
(b) The following wholly owned subsidiaries were not guarantors on either the
9.5% Notes or the 9.25% Notes and became subsidiaries of the Company on
October 15, 1998, when the Casino Magic Merger was consummated: Jefferson
Casino Corporation, Casino Magic of Louisiana, Corp., and Casino Magic
Management Services, Corp.
(c) The following non-wholly owned subsidiaries were not guarantors on either
the 9.5% notes or the 9.25% Notes and became subsidiaries of the Company on
October 15, 1998, when the Casino Magic Merger was consummated: Casino
Magic Neuquen S.A. and its subsidiary, Casino Magic Support Services S.A.
(d) The following majority owned subsidiaries of the Company were guarantors on
both the 9.5% Notes and the 9.25% Notes and became subsidiaries on June 30,
1997, when the Boomtown Merger was consummated: Mississippi - I Gaming,
L.P. and Indiana Ventures LLC and its wholly owned subsidiaries,
Switzerland County Development Corp. and Pinnacle Gaming Development Corp.
Mississippi - I Gaming, L.P., a guarantor subsidiary, became a wholly owned
subsidiary in October 1998. In addition, Crystal Park Hotel and Casino
Development Company, LLC, a guarantor subsidiary, was a majority owned
subsidiary until January 1998, when it became a wholly owned subsidiary.
13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- -------------------------------------------------------------------------------
of Operations
- -------------
Forward Looking Statements and Risk Factors Except for the historical
information contained herein, the matters addressed in this Quarterly Report on
Form 10-Q may constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities and Exchange Act of 1934, as amended. Such forward-looking
statements are subject to a variety of risks and uncertainties that could cause
actual results to differ materially from those anticipated by the Company's
management. Factors that may cause actual performance of Hollywood Park to
differ materially from that contemplated by such forward-looking statements
include, among others: the failure to complete the sale transactions with
Churchill Downs Incorporated (discussed below); the failure to complete or
successfully operate planned expansion projects (including the Indiana Project);
the failure to obtain adequate financing to meet strategic goals; possible Year
2000 issues (discussed in more detail below); the failure to adequately
integrate Casino Magic into Hollywood Park's operations; the failure to obtain
or retain gaming licenses or regulatory approvals; severe weather conditions;
the failure to meet Hollywood Park's debt service obligations; and the
saturation of, or other adverse changes in, the gaming markets in which the
Company operates (particularly in the southeastern United States). The Private
Securities Litigation Reform Act of 1995 (the "Act") provides certain "safe
harbor" provisions for forward-looking statements. All forward-looking
statements made in this Quarterly Report on Form 10-Q are made pursuant to the
Act. For more information on the potential factors which could affect the
Company's financial results, please review the Company's filings with the
Securities and Exchange Commission, including the Company's Annual Report on
Form 10-K, for the year ended December 31, 1998, and the Company's Form S-4
Registration Statement dated March 26, 1999 and the discussion contained therein
under the caption "Risk Factors".
Churchill Downs Negotiations On May 6, 1999, the Company announced that it had
entered into a definitive agreement with Churchill Downs Incorporated
("Churchill Downs") to sell both the Hollywood Park Race Track and the Hollywood
Park-Casino. Churchill Downs will acquire 240 acres of the Company's 378 acres
of real estate related to the Hollywood Park racing operations. The relative
sales prices of the Hollywood Park Race Track and Hollywood Park-Casino,
totaling $140,000,000, are to be agreed upon prior to the closing of the
transaction. Churchill Downs will lease the Hollywood Park-Casino to the Company
for annual rental payments of $3,000,000 and the Company expects to sub-lease to
an unaffiliated third party operator. The sales are expected to close in the
third quarter of 1999, however, there are no assurances that the sale
transactions will be completed.
Casino Magic Acquisition On October 15, 1998, Hollywood Park acquired Casino
Magic, pursuant to the February 19, 1998 Agreement of Merger among Casino Magic
Corp., Hollywood Park, Inc., and HP Acquisition II, Inc. (a wholly owned
subsidiary of Hollywood Park) (the "Casino Magic Merger"). Hollywood Park paid
cash of approximately $80,904,000 for Casino Magic's common stock. At the date
of the acquisition, Hollywood Park had purchased 792,900 common shares of Casino
Magic, on the open market, at a total cost of approximately $1,615,000.
Hollywood Park paid $2.27 per share for the remaining 34,929,224 Casino Magic
common stock outstanding.
The Casino Magic Merger was accounted for under the purchase method of
accounting for a business combination. The Company has performed a preliminary
purchase price allocation and will finalize this allocation in 1999. The
purchase price of the Casino Magic Merger was allocated to identifiable assets
acquired and liabilities assumed based on their estimated fair values at the
14
<PAGE>
date of acquisition. Based on financial analyses, which considered the impact
of general economic, financial and market conditions on the assets acquired and
the liabilities assumed were, when found to be necessary, written up or down to
their fair market values. The Casino Magic Merger generated approximately
$43,284,000 of excess acquisition cost over the recorded value of the net assets
acquired, all of which was allocated to goodwill, and is being amortized over 40
years. The amortization of this goodwill is not deductible for income tax
purposes.
Gaming Management In January 1999, the Company strengthened its gaming
management team by hiring Paul Alanis as its President and Chief Operating
Officer and J. Michael Allen as Senior Vice President-Gaming Operations. Both
Mr. Alanis and Mr. Allen held similar positions with Horseshoe Gaming, Inc. Mr.
Alanis and Mr. Allen were hired to actively participate in the overall execution
of the Company's business and operating strategies including re-positioning the
Boomtown and Casino Magic properties and overseeing the construction and
operations of the Indiana Project.
Indiana Hotel and Casino Resort In September 1998, the Indiana Gaming
Commission approved the Company to receive the last available license to conduct
riverboat gaming operations on the Ohio River in Indiana. The application was
originally filed under a joint venture between the Company and Hilton Gaming
Corporation ("Hilton"). In May 1998, Hollywood Park paid Hilton approximately
$750,000 in exchange for Hilton's interest. Hollywood Park owns 97% of the
Indiana Project, with the remaining 3% held by a non-voting local partner.
The Indiana Project will be located in the City of Vevay, in Switzerland County,
which is approximately 35 miles southwest of Cincinnati, Ohio and will be the
gaming site most readily accessible to northern Kentucky, including the city of
Lexington.
The Company plans to spend between $160,000,000 and $165,000,000 in construction
costs (including land but excluding capitalized interest, pre-opening expenses,
organizational expenses and community grants) on the Indiana Project which will
include a new riverboat, a 300 room hotel, a golf course, convention center,
restaurants and related amenities. It is expected that the Indiana Project will
be completed in the third quarter of 2000; however there can be no assurance
that construction or other issues will not delay the opening.
Mississippi Anti-Gaming Initiative In 1998, two referenda were proposed which,
if approved, would have amended the Mississippi Constitution to ban gaming in
Mississippi and would have required all currently legal gaming entities to cease
operations within two years of the ban. A Mississippi State Circuit Court judge
ruled that the first of the proposed referenda was illegal because, among other
reasons, it failed to include required information regarding its anticipated
effect on government revenues. The Mississippi Supreme Court affirmed the
Circuit Court ruling, but only on procedural grounds. The second referendum
proposal included the same language on government revenues as the first
referendum and was struck down by another Mississippi State Circuit Court judge
on the same grounds as the first.
On March 22, 1999, another such referendum was filed with the Mississippi
Secretary of State. This most recent proposal was declared null and void by the
Hinds County Mississippi Circuit Court on May 6, 1999, primarily for its lack of
a government revenue statement; such declaration maybe appealed by the
proponents of the proposal. Any such referendum must be approved by the
Mississippi Secretary of State and signatures of approximately 98,000 registered
voters must be gathered and certified in order for such a proposal to be
included on a statewide ballot for consideration by the voters. The next
election, for which the proponents could attempt such a proposal on the ballot,
would be November 2000. It is likely at some point that a revised initiative
will be filed which would adequately address the issues regarding the effect on
15
<PAGE>
government revenues of prohibition of gaming in Mississippi. However, while it
is too early in the process for the Company to make any predictions with respect
to whether such a referendum will appear on a ballot or the likelihood of such a
referendum being approved by the voters, if such a referendum were passed and
gaming were prohibited in Mississippi, it would have a materially adverse effect
on the Company.
Hollywood Park-Casino The Hollywood Park-Casino is located in Inglewood,
California adjacent to the Hollywood Park Race Track. By law, a California card
club may neither bank card games nor offer certain of the familiar card games
permitted in Nevada and other traditional gaming jurisdictions, and thus does
not participate in the wagers made or in the outcome of any of the games played.
As of January 1, 1998's enactment of Senate Bill 8, Hollywood Park was able to
operate the Hollywood Park-Casino indefinitely. Under the previous law, as of
January 1, 1999, Hollywood Park would not have been able to operate the
Hollywood Park-Casino and would have had to lease the property. Should the
Company consummate the transactions with Churchill Downs, it anticipates it will
lease the casino back from Churchill Downs and then sublease to an unrelated
third party operator.
Crystal Park Hotel and Casino As of February 1, 1999, rent was scheduled to
increase to $350,000 per month, but, in present market conditions, it is
expected that the rent will be continued at the $100,000 level rather than
increase as scheduled in the lease.
Hollywood Park Race Track In September 1998, legislation was passed (effective
January 1, 1999) which removed prior restrictions and allows the Company to
increase the number of simulcast races it can accept from out of state race
tracks. The new legislation also provides annual license fee (or tax) relief on
pari-mutuel wagers made on thoroughbred races in California.
The impact that the new legislation will have on the Hollywood Park Race Track
is subject to a number of factors and assumptions, and thus is difficult to
estimate.
Year 2000 The Company is actively evaluating and resolving any potential impact
of the Year 2000 problem on the processing of date-sensitive information by its
information systems, and the information systems of vendors upon whom the
Company is dependent. The Year 2000 problem exists because computer systems and
applications were historically designed to use two digit fields (rather than
four) to designate a year, and date sensitive systems may not properly recognize
2000, which could result in miscalculations or system failures.
Hollywood Park has established a Year 2000 project team composed of individuals
from each business unit and each corporate function to identify and mitigate
Year 2000 issues, with respect to the Company's information systems, products,
facilities, suppliers and customers.
Internal Computer Systems The Company believes that its various financial
reporting software and associated hardware are Year 2000 compatible. The
Company has identified the following software and hardware applications that
will need to be upgraded or replaced at an estimated cost of $2,000,000: (a)
point of sale cash register systems; (b) personal computer networks; and (c)
gaming patron player tracking systems. This cost estimate is based on numerous
assumptions, including the assumption that the Company has already identified
the most significant Year 2000 issues. There can be no guarantee that these
assumptions are accurate, and actual results could differ materially from those
anticipated.
External Computer Systems Both the Hollywood Park and the Turf Paradise Race
Tracks lease pari-mutuel wagering software and associated hardware, though from
different providers, which are essential to operations. The Year 2000 project
team met with each provider of the pari-
16
<PAGE>
mutuel wagering systems during the three months ended March 31, 1999 and each
provider assured the Company their systems were Year 2000 compatible at such
time. The Company does not have an alternative software system to handle pari-
mutuel wagering, and if the pari-mutuel wagering service providers have mis-lead
the Company regarding their Year 2000 readiness, or discover unanticipated Year
2000 issues, this would have a materially adverse effect on the Company's
operations.
The Company cannot be assured that its Year 2000 program will be effective, or
that estimates about timing and costs of completing the Year 2000 program will
be accurate, or that third party suppliers will timely resolve any or all Year
2000 problems with their systems. Any failure of a third party supplier to
timely resolve their Year 2000 issues could result in material disruption of the
Company's business. Such disruption could have a materially adverse effect on
Hollywood Park's business, financial condition and results of operations.
Results of Operations
On October 15, 1998, Hollywood Park acquired Casino Magic, and accounted for the
acquisition under the purchase method of accounting for a business combination.
As required under the rules of the purchase method of accounting for a business
combination, Casino Magic's results of operations were not consolidated with
those of Hollywood Park, prior to the acquisition date, thus generating
significant variances when comparing 1999's financial results with those of
1998.
Three months ended March 31, 1999 compared to the
-------------------------------------------------
three months ended March 31, 1998
---------------------------------
Total revenues for the three months ended March 31, 1999, increased by
$93,841,000, or 120.1%, as compared to the three months ended March 31, 1998.
Approximately $86,953,000 of the increase was due to the timing of the Casino
Magic acquisition. Gaming revenues increased by $85,042,000, or 153.6%, with
$80,312,000 of the increase due to the timing of the Casino Magic acquisition
and the balance primarily due to increases at Boomtown New Orleans and Boomtown
Biloxi. Gaming revenues at Boomtown New Orleans increased by $2,679,000,
primarily due to the new larger riverboat which was placed in service in
February 1998. Gaming revenues at Boomtown Biloxi increased by $1,549,000,
primarily due to an increase of approximately 5% of patrons visiting the
property compared with the same period in 1998 due to new marketing programs.
Food and beverage sales increased by $4,102,000, or 73.7%, with $2,872,000 of
the increase due to the timing of the Casino Magic acquisition and the balance
of the increase attributed to increases at each of the Boomtown properties. At
Boomtown Reno, food and beverage revenues increased by $464,000, primarily due
to the hotel and casino expansion project, which opened in December 1998. At
Boomtown Biloxi, food and beverage revenues increased by $362,000, primarily due
to the increase in the number of patrons visiting the property. At Boomtown New
Orleans, food and beverage revenues increased by $219,000, primarily due to the
opening of the adult oriented arcade in July 1998. Hotel and recreational
vehicle park revenues increased by $2,392,000, with $2,129,000 of the increase
due to the timing of the Casino Magic acquisition and the balance due to the
hotel expansion at Boomtown Reno. Truck stop and service station revenue
increased by $165,000, or 5.8%, primarily due to increased fuel prices at
Boomtown Reno. Other income increased by $2,230,000, or 52.2%, with $1,640,000
due to the timing of the Casino Magic acquisition and the balance primarily due
to interest earned on notes receivable and the excess funds generated from the
9.25% Notes issued in February 1999.
Total operating expenses for the three months ended March 31, 1999, increased by
$73,661,000, or 96.3%, as compared to the three months ended March 31, 1998.
Approximately $69,881,000 of the increase was due to the timing of the Casino
Magic
17
<PAGE>
acquisition. Gaming expenses increased $45,411,000 (inclusive of $46,287,000 due
to the Casino Magic acquisition, offset by a net decrease in gaming expenses at
Boomtown Reno resulting from a reduction in marketing program costs and an
increase at Boomtown New Orleans). Food and beverage expenses increased by
$4,142,000, or 55.1%, with $2,915,000 of the increase due to the timing of the
Casino Magic acquisition, and the balance a result of the corresponding
increases in food and beverage sales at each of the Boomtown properties. Hotel
and recreational vehicle park increased $1,213,000, with $973,000 of the
increase due to the timing of the Casino Magic acquisition, and the balance due
to the hotel expansion at Boomtown Reno. Truck stop and service station expenses
increased by $192,000, or 7.5%, due to increases in fuel costs at Boomtown Reno.
General and administrative expenses increased by $15,756,000, or 78.4%, with
$12,845,000 of the increase due to the timing of the Casino Magic acquisition.
The balance of the increase in general and administrative expenses is due to
costs associated with the proposed transaction with Churchill Downs, and the
additional gaming management team. Other expenses increased by $718,000, or
41.4%, with $681,000 of the increase due to the timing of the Casino Magic
acquisition. REIT restructuring costs decreased by $469,000, because the Company
abandoned its plans to pursue a Real Estate Investment Trust Structure, and thus
no costs were incurred in 1999. Depreciation and amortization expenses increased
by $6,812,000, or 103.9%, with $6,180,000 of the increase due to the timing of
the Casino Magic acquisition and the balance due to the depreciation on the
expansion projects at Boomtown New Orleans and Boomtown Reno. Interest expense
increased by $10,830,000, or 295.8%, with $4,882,000 of the increase due to the
timing of the Casino Magic acquisition and the balance due primarily to interest
on the Bank Credit Facility borrowings and on the 9.25% Notes issued in February
1999.
Liquidity and Capital Resources
Hollywood Park's principal source of liquidity as of March 31, 1999, was cash
and cash equivalents of $104,069,000. Cash and cash equivalents increased by
$60,135,000 during the three months ended March 31, 1999. Net cash of
$8,440,000 was provided by operating activities. Net cash of $10,990,000 was
used in investing activities, with cash of $11,281,000 used for capital
improvements. Net cash of $62,685,000 was provided by financing activities. In
February 1999, the Company issued the 9.25% Notes, for net proceeds of
approximately $339,900,000, of which $287,000,000 was used to repay the Bank
Credit Facility.
Cash and cash equivalents decreased by $1,367,000 during the three months ended
March 31, 1998. Net cash of $2,863,000 was used for operating activities,
including the payment of $2,750,000 for a settlement of a lawsuit. Net cash of
$18,054,000 was used in investing activities. Cash of $14,295,000 was used to
purchase capital assets, including amounts spent for the Boomtown Reno and
Boomtown New Orleans construction projects, and for the Yakama expansion. Cash
was used for short term investing and the Company also, through its wholly owned
subsidiary HP Casino, Inc., used cash of $1,946,000 to acquire the remaining
minority interest in Crystal Park LLC. Net cash provided by financing
activities was $19,550,000, which included short term borrowings of $20,000,000
under the Company's Bank Credit Facility.
Bank Credit Facility On October 14, 1998, the Company executed the Amended and
Restated Reducing Revolving Loan Agreement with a bank syndicate lead by Bank of
America National Trust and Savings Association NT&SA ("Bank of America") (the
"Bank Credit Facility") for up to $300,000,000, with an option to increase this
amount to $375,000,000. The Bank Credit Facility also provides for sub-
facilities for letters of credit up to $30,000,000, and swing line loans of up
to $10,000,000. Prior to the execution of the Bank Credit Facility, the Company
was operating with a former Bank Credit Facility which was initially for
$225,000,000, and was reduced to $100,000,000 with the August 1997 issuance of
the 9.5% Hollywood Park Senior
18
<PAGE>
Subordinated Notes due 2007 (the "9.5% Notes"). The Bank Credit Facility
extended the maturity of the former Bank Credit Facility to December 31, 2003,
reduced interest and commitment fee rates, and amended certain covenants, as
compared to the former Bank Credit Facility. The Bank Credit Facility was fully
repaid on February 18, 1999, with the issuance of the 9.25% Notes (described
below) and therefore did not have any borrowings outstanding as of March 31,
1999. The repayment of all borrowings outstanding under the Bank Credit Facility
does not reduce the size of the bank's commitment to lend and, if Hollywood Park
meets the relevant conditions for borrowing, Hollywood Park can borrow the full
amount available under the revolving Bank Credit Facility in the future.
9.25% Notes On February 18, 1999, Hollywood Park issued $350,000,000 aggregate
principal amount of Series A 9.25% Senior Subordinated Notes due 2007 (the
"Series A Notes"). On May 6, 1999, the Company completed a registered exchange
offer for the Series A Notes, pursuant to which all $350,000,000 principal
amount of the Series A Notes were exchanged by the holders for $350,000,000
aggregate principal amount of Series B 9.25% Senior Subordinated Notes due 2007,
of the Company (the "Series B Notes"), which were registered under the
Securities Act on Form S-4. The Series A Notes and the Series B Notes are
collectively referred to as the "9.25% Notes".
The 9.25% Notes are redeemable, at the option of the Company, in whole or in
part, on or after February 15, 2003, at a premium to face amount, plus accrued
interest, as follows: (a) February 15, 2003 at 104.625%; (b) February 15, 2004
at 103.083%; (c) February 15, 2005 at 101.542%; and (d) February 15, 2006 and
thereafter at 100%. The 9.25% Notes are unsecured obligations of Hollywood
Park, guaranteed by all other material restricted subsidiaries of Hollywood Park
excluding certain Casino Magic subsidiaries, principally Casino Magic of
Louisiana, Corp. and the Casino Magic Argentina subsidiaries.
Hollywood Park received net proceeds of approximately $339,900,000 from the
9.25% Note offering. Of these proceeds, Hollywood Park used $287,000,000 to
repay all outstanding borrowings under the Bank Credit Facility. The remaining
proceeds of approximately $52,900,000 are currently invested in various cash
equivalents and are expected to be used to fund Hollywood Park's capital
expenditures.
The indenture governing the 9.25% Notes contains certain covenants limiting the
ability of the Company and its restricted subsidiaries to incur additional
indebtedness, issue preferred stock, pay dividends or make certain
distributions, repurchase equity interests or subordinated indebtedness, create
certain liens, enter into certain transactions with affiliates, sell assets,
issue or sell equity interest in its subsidiaries, or enter into certain mergers
and consolidations.
9.5% Notes On August 6, 1997, Hollywood Park and Hollywood Park Operating
Company (a wholly owned subsidiary of Hollywood Park) co-issued $125,000,000
aggregate principal amount of 9.5% Notes. The 9.5% Notes are redeemable, at the
option of Hollywood Park and Hollywood Park Operating Company, in whole or in
part, on or after August 1, 2002, at a premium to face amount, plus accrued
interest, as follows: (a) August 1, 2002 at 104.75%; (b) August 1, 2003 at
102.375%; (c) August 1, 2004 at 101.188%; and (d) August 1, 2005 and thereafter
at 100%. The 9.5% Notes are unsecured obligations of Hollywood Park and
Hollywood Park Operating Company, guaranteed by all other material restricted
subsidiaries of either Hollywood Park or Hollywood Park Operating Company
excluding certain Casino Magic subsidiaries, principally Casino Magic of
Louisiana, Corp. and the Casino Magic Argentina subsidiaries.
On January 29, 1999, Hollywood Park received the required number of consents to
modify selected covenants associated with the 9.5% Notes. Among other things,
the modifications
19
<PAGE>
lowered the required minimum consolidated coverage ratio for debt assumption to
2.00:1.00 and increased the size of Hollywood Park's allowed borrowings under
the Bank Credit Facility from $100,000,000 to $350,000,000. The Company paid a
consent fee of $50.00 per $1,000 principal amount of the 9.5% Notes, or a total
cost of approximately $6,781,000, inclusive of transaction related expenses. The
consent fee is included in debt issuance costs and is being amortized over the
remaining term of the 9.5% Notes.
The indenture governing the 9.5% Notes contains certain covenants that, among
other things, limit the ability of Hollywood Park, Hollywood Park Operating
Company and their restricted subsidiaries to incur additional indebtedness and
issue preferred stock, pay dividends or make other distributions, repurchase
equity interests or subordinated indebtedness, create certain liens, enter into
certain transactions with affiliates, sell assets, issue or sell equity
interests in their respective subsidiaries or enter into certain mergers and
consolidations.
Casino Magic 13% Notes On August 22, 1996, Casino Magic of Louisiana, Corp.
(owner of Casino Magic Bossier City), a wholly owned subsidiary of Jefferson
Casino Corporation, which is a wholly owned subsidiary of Casino Magic, issued
$115,000,000 in aggregate principal amount of 13% First Mortgage Notes (the
"Casino Magic 13% Notes"), with contingent interest at 5% of Casino Magic
Bossier City's adjusted consolidated cash flow (as defined under the indenture
governing these notes). The Casino Magic 13% Notes are secured by a first
priority lien and security interest in substantially all of the assets of Casino
Magic Bossier City, and Jefferson Casino Corporation guarantees the Casino Magic
13% Notes, and the guarantee is secured by all of the assets of Jefferson Casino
Corporation including all of the capital stock of Casino Magic of Louisiana,
Corp. The Casino Magic 13% Notes are redeemable, in whole or in part, on or
after August 15, 2000, at a premium to face amount, plus accrued interest, as
follows: (a) August 15, 2000, at 106.5%; (b) August 15, 2001, at 104.332%; and
(c) August 15, 2002, and thereafter at 102.166%.
On December 23, 1998, the Company completed the required post Casino Magic
Merger change of control purchase offer, whereby $2,125,000 in principal amount
of the Casino Magic 13% Notes were tendered, at a price of $1,010 for each
$1,000 of principal amount.
The indenture governing the Casino Magic 13% Notes contains certain covenants
limiting the ability of Casino Magic of Louisiana, Corp. and its subsidiaries to
engage in any line of business other than the current gaming operations of
Casino Magic Bossier City and incidental related activities, to borrow funds or
otherwise become liable for additional debt, to pay dividends, issue preferred
stock, make investments and certain types of payments, to grant liens on its
property, enter into mergers or consolidations, or to enter into certain
specified transactions with affiliates.
Other Debt As of March 31, 1999, Casino Magic had various secured notes payable
totaling $12,800,000, primarily secured by various fixed assets at Casino Magic
Biloxi and Casino Magic Bossier City. The Company is currently evaluating the
various Casino Magic notes payable for early retirement. Casino Magic also had
unsecured notes payable totaling $1,683,000 and capital leases of $415,000.
Other Information As of March 31, 1999, the Company has invested approximately
$3,210,000 (inclusive of an unrealized gain of approximately $501,000) in equity
securities, which are presently being held as available-for-sale.
The Company holds a promissory note for up to $3,500,000 from Paul Alanis, for
which as of March 31, 1999, the Company has lent $3,386,000 (which includes
approximately $154,000 of accrued interest). Mr. Alanis used the funds to
purchase 300,000 shares of the Company's
20
<PAGE>
common stock. Interest on the promissory note is the prime interest rate, but
not more than 10%. The principal amount of the promissory note, along with any
accrued interest is due in full, no later than December 31, 1999. The promissory
note is secured by Mr. Alanis' interest in Horseshoe Gaming LLC, which has an
approximate value in excess of $3,500,000.
As consideration for the sale of its Las Vegas property, Boomtown received two
promissory notes receivable from the former lessor of Boomtown's Las Vegas
property, totaling approximately $8,465,000. The first note is for $5,000,000,
bearing interest at Bank of America's reference rate plus 1.5% per year, with
annual principal payments of $1,000,000 plus accrued interest commencing on July
1, 1998 and at March 31, 1999, had an outstanding balance of $4,000,000. The
second note is for approximately $3,465,000, bearing interest at Bank of
America's reference rate plus 0.5% per year, with the principal and accrued
interest payable, in full, on July 1, 2000.
Capital Commitments The Company was approved to receive the last available
gaming license to own and operate a riverboat casino on the Ohio River in
Indiana. The Indiana Project is expected to cost between $160,000,000 and
$165,000,000 (including land but excluding capitalized interest, pre-opening
expenses, organizational expenses and community grants) and is expected to be
completed in the third quarter of 2000. The Company believes that the Bank
Credit Facility, the unused proceeds from the 9.25% Note offering, and available
future cash flow will be sufficient to fund the construction of the Indiana
Project; however, there can be no assurance that additional funds will not be
required to complete anticipated projects.
General Hollywood Park is continually evaluating future growth opportunities in
the gaming industry, as well as the sale of other assets not employed in the
gaming industry. Hollywood Park expects that funding for the Indiana Project,
payment of interest on the 9.5% Notes, 9.25% Notes and the Casino Magic 13%
Notes, payment of notes payable, and normal and necessary capital expenditure
needs will come from existing cash and cash equivalent balances generated from
operating activities and borrowings from the Bank Credit Facility. In the
opinion of management, these resources will be sufficient to meet Hollywood
Park's anticipated cash requirements for the foreseeable future and in any event
for at least the next twelve months.
21
<PAGE>
Part II
Other Information
Item 5. Other Information
- -------------------------
On April 1, 1999, Bruce C. Hinckley was appointed Senior Vice President, Chief
Financial Officer and Treasurer.
Item 6.a Exhibits
- -----------------
Exhibit
Number Description of Exhibit
- ------- ----------------------
27.1 Financial Data Schedule
____
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed January 19, 1999, to report
the January 14, 1999, press release announcing that the Company was
commencing a consent solicitation to amend the 9.5% Notes.
A Current Report on Form 8-K was filed March 2, 1999, to report the
February 23, 1999, press release announcing the Company's financial
results for the quarter and the year ended December 31, 1998.
22
<PAGE>
Hollywood Park, Inc.
Calculation of Earnings Per Share
<TABLE>
<CAPTION>
For the three months ended March 31,
---------------------------------------------------
Basic Diluted (a)
--------------------- -----------------------
1999 1998 1999 1998
--------------------- -----------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Average number of common shares outstanding 25,800 26,276 25,800 26,276
Average common shares due to assumed conversion of
stock options 0 0 405 591
-------- -------- -------- -------
Total shares 25,800 26,276 26,205 26,867
======== ======== ======== ========
Net income (loss) allocated to shareholders $4,133 ($1,234) $4,133 ($1,234)
======== ======== ======== ========
Net income (loss) per share $0.16 ($0.05) $ 0.16 ($0.05)
======== ======== ======== ========
- ---------------------------
(a) When the computed dilluted values are anit-dilutive, the basic per share values are presented on the face of the consolidated
statements of operations.
</TABLE>
<PAGE>
Hollywood Park, Inc.
Selected Financial Data by Property
<TABLE>
<CAPTION>
For the three months ended March 31,
----------------------------------------------
1999 1998
----------------------------------------------
(in thousands, except per share - unaudited)
<S> <C> <C>
Revenues:
Hollywood Park, Inc. - Casino Division $14,025 $13,211
Crystal Park and HP Yakama, Inc. 589 300
Boomtown Reno 14,142 13,436
Boomtown New Orleans 25,721 22,695
Boomtown Biloxi 17,799 15,873
Casino Magic Bay St. Louis 22,963 0
Casino Magic Biloxi 24,631 0
Casino Magic Bossier City 33,852 0
Casino Magic Argentina 5,327 0
Hollywood Park Race Track 5,465 5,478
Turf Paradise, Inc. 6,786 6,810
Hollywood Park, Inc. - Corporate 698 354
--------- ---------
171,998 78,157
--------- ---------
Expenses:
Hollywood Park, Inc. - Casino Division 11,839 11,707
Crystal Park and HP Yakama, Inc. 26 46
Boomtown Reno 13,198 14,299
Boomtown New Orleans 17,269 15,796
Boomtown Biloxi 14,086 13,354
Casino Magic Bay St. Louis 16,753 0
Casino Magic Biloxi 17,587 0
Casino Magic Bossier City 25,477 0
Casino Magic Argentina 3,155 0
Hollywood Park Race Track 7,184 7,242
Turf Paradise, Inc. 4,205 4,374
Hollywood Park, Inc. - Corporate 5,307 2,657
--------- ---------
136,086 69,475
--------- ---------
Non-recurring expenses:
REIT Reorganization/Strategic Merger 0 469
Indiana - pre-opening costs 707 0
Depreciation and amortization:
Hollywood Park, Inc. - Casino Division 665 698
Crystal Park and HP Yakama, Inc. 485 510
Boomtown Reno 1,659 1,469
Boomtown New Orleans 1,425 1,191
Boomtown Biloxi 993 882
Casino Magic Bay St. Louis 1,438 0
Casino Magic Biloxi 1,739 0
Casino Magic Bossier City 1,889 0
Casino Magic Argentina 372 0
Hollywood Park Race Track 1,090 1,065
Turf Paradise, Inc. 295 296
Hollywood Park, Inc. - Corporate 1,317 444
--------- ---------
13,367 6,555
--------- ---------
Operating income (loss):
Hollywood Park, Inc. - Casino Division 1,521 806
Crystal Park and HP Yakama, Inc. 78 (256)
Boomtown Reno (715) (2,332)
Boomtown New Orleans 7,027 5,708
Boomtown Biloxi 2,720 1,637
Casino Magic Bay St. Louis 4,772 0
Casino Magic Biloxi 5,305 0
Casino Magic Bossier City 6,486 0
Casino Magic Argentina 1,800 0
Hollywood Park Race Track (2,809) (2,829)
Turf Paradise, Inc. 2,286 2,140
Hollywood Park, Inc. - Corporate (5,926) (2,747)
REIT Reorganization/Strategic Merger 0 (469)
Indiana - pre-opening costs (707) 0
--------- ---------
21,838 1,658
--------- ---------
Interest expense 14,491 3,661
--------- ---------
Income (loss) before minority interest and income tax expense 7,347 (2,003)
--------- ---------
Minority interest - Casino Magic Argentina 458 0
Income tax expense (benefit) 2,756 (769)
--------- ---------
Net income (loss) $ 4,133 $(1,234)
========= =========
Per common share:
Net income (loss) - basic $ 0.16 $ (0.05)
Net income (loss) - diluted $ 0.16 $ (0.05)
Number of shares:
Basic 25,800 26,276
Diluted 25,800 26,867
</TABLE>
24
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
Hollywood Park, Inc.
(Registrant)
By: /s/ R.D. Hubbard
______________________________ Dated: May 12, 1999
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Bruce C. Hinckley
______________________________ Dated: May 12, 1999
Bruce C. Hinckley
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Hollywood Park Operating Company
(Registrant)
By: /s/ R.D. Hubbard
______________________________ Dated: May 12, 1999
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Bruce C. Hinckley Dated: May 12, 1999
______________________________
Bruce C. Hinckley
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
25
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<CIK> 0000356213
<NAME> HOLLYWOOD PARK, INC.
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 104,069,000
<SECURITIES> 3,210,000
<RECEIVABLES> 34,202,000
<ALLOWANCES> 2,465,153
<INVENTORY> 0
<CURRENT-ASSETS> 159,427,000
<PP&E> 842,706,000
<DEPRECIATION> 240,375,000
<TOTAL-ASSETS> 962,047,000
<CURRENT-LIABILITIES> 111,310,000
<BONDS> 616,709,000
0
0
<COMMON> 2,580,000
<OTHER-SE> 232,547,000
<TOTAL-LIABILITY-AND-EQUITY> 962,047,000
<SALES> 12,659,000
<TOTAL-REVENUES> 171,998,1000
<CGS> 14,413,000
<TOTAL-COSTS> 136,793,000
<OTHER-EXPENSES> 13,825,000
<LOSS-PROVISION> 75,000
<INTEREST-EXPENSE> 14,491,000
<INCOME-PRETAX> 6,889,000
<INCOME-TAX> 2,756,000
<INCOME-CONTINUING> 4,133,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,133,000
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
