<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K/A
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 1999
Commission file number 0-106-619
Pinnacle entertainment, Inc.
(Formerly Hollywood Park, Inc.)
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
95-3667491
(IRS Employer Identification No.)
330 North Brand Boulevard, Suite 1100, Glendale, California 91203
(Address of Principal Executive Offices) (Zip Code)
(818) 662-5900
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Pinnacle entertainment, Inc.
Common Stock, $.10 par value
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. YES [X] NO [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates (therefore
excludes officers, directors and beneficial owners of 10% or more) of the
registrant at March 24, 2000, was $394,681,400 based on a closing price of
$20.00 per common share. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
The number of outstanding shares of the registrant's common stock, as of the
close of business on March 24, 2000: 26,271,678.
<PAGE>
PINNACLE ENTERTAINMENT, INC.
Table of Contents
<TABLE>
<S> <C>
Introduction to Annual Report on Form 10-K/A................................................... 1
Part II
Item 6. Selected Financial Data............................................................... 2
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................... 4
Forward-Looking Statements and Risk Factors................................ 4
Factors Affecting Future Operating Results................................. 4
Results of Operations...................................................... 7
Liquidity, Capital Resources and Other Factors Influencing Future Results.. 10
Item 8. Financial Statements and Supplementary Data........................................... 12
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...................... 41
Signatures..................................................................................... 49
</TABLE>
<PAGE>
Introduction to Form 10-K/A
In August 2000, Pinnacle Entertainment, Inc. (the "Company" or "Pinnacle
Entertainment") mailed its definitive proxy material for its 2000 annual
stockholders meeting (which proxy material includes a proposal to approve and
adopt the Agreement and Plan of Merger, dated as of April 17, 2000, as amended
by the letter agreement dated as of August 22, 2000 (as amended, the "Merger
Agreement"), by and among the Company, PH Casino Resorts, Inc. and Pinnacle
Acquisition Corporation). In connection with the preparation and revision of the
proxy statement, the Company added, or made modifications to, certain
information (specifically, the financial statements and the notes thereto, the
selected financial data table and management's discussion and analysis of
financial condition and results of operations) included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999 previously filed
with the Securities and Exchange Commission (the "SEC"). None of the additions
or modifications altered the financial condition or results of operations of the
Company for the periods in question. Consequently, the Company hereby amends its
Annual Report on Form 10-K for the fiscal year ended December 31, 1999
previously filed with the SEC to add and/or modify certain information in Items
6, 7, 8 and 14.
Updated information regarding recent developments, including information with
respect to the Merger Agreement and the condition therein related to the opening
of the Company's Belterra Casino Resort, is included in the Company's proxy
statement and other filings with the SEC and in press releases issued by the
Company.
1
<PAGE>
Part II
Item 6. Selected Financial Data.
-------------------------------
The following selected financial information for the years 1995 through 1999 was
derived from the consolidated financial statements of the Company. The
Hollywood Park Race Track and Hollywood Park-Casino were disposed of in
September 1999. The Company leased the Hollywood Park-Casino back from the
Churchill Downs California Company ("Churchill Downs"), a wholly owned
subsidiary of Churchill Downs Incorporated, and immediately subleased the
facility to an unaffiliated third party (see Note 3 to the Notes to Consolidated
Financial Statements). Casino Magic was acquired on October 15, 1998 and
Boomtown was acquired on June 30, 1997, with both acquisitions accounted for
under the purchase method of accounting for a business combination, and
therefore Casino Magic's and Boomtown's financial results were not included in
periods prior to their respective acquisitions. The Crystal Park Casino began
operations on October 25, 1996, under a lease with an unaffiliated third party.
As of March 31, 1996, Sunflower Racing, Inc.'s (a horse and greyhound racing
facility in Kansas) results of operations were no longer consolidated with the
Company's due to Sunflower Racing, Inc.'s May 17, 1996, filing for
reorganization under Chapter 11 of the Bankruptcy Code. The information set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations", the financial
statements and related notes thereto.
Included in the table is a presentation of earnings before interest, taxes,
depreciation, amortization and other non-recurring items ("EBITDA"). EBITDA is
not a measure of financial performance under generally accepted accounting
principles ("GAAP"), but is used by some investors to determine a company's
ability to service or incur indebtedness. EBITDA is not calculated in the same
manner by all entities and accordingly, may not be an appropriate measure for
performance. EBITDA should not be considered in isolation from, or as a
substitute for, net income (loss), cash flows from operations or cash flow data
prepared in accordance with GAAP. EBITDA is calculated by adding income taxes,
minority interests, net interest expense, depreciation and amortization and
other non-recurring items to net income (loss). Other non-recurring items
include: a) the gain (loss) on disposition of assets incurred in the years ended
December 31, 1999, 1998 and 1996, b) the impairment write-down of the Hollywood
Park-Casino in the year ended December 31, 1999, c) the pre-opening expenses for
Belterra Casino Resort incurred in the years ended December 31, 1999 and 1998,
d) the REIT restructuring expenses incurred in the years ended December 31, 1998
and 1997, and e) the lawsuit settlement incurred in the year ended December 31,
1995.
2
<PAGE>
Pinnacle Entertainment, Inc.
Selected Financial Data
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------- ----------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Gaming $ 557,526 $ 293,057 $137,659 $ 50,717 $ 26,656
Racing 55,209 66,871 68,844 71,308 79,862
Food and beverage 39,817 30,510 19,894 13,947 19,783
Other 54,305 36,529 21,731 7,253 4,271
------------ ------------- ----------- ----------- -----------
706,857 426,967 248,128 143,225 130,572
------------ ------------- ----------- ----------- -----------
Expenses:
Gaming 309,508 161,549 74,733 27,249 5,291
Racing 22,694 29,316 30,304 30,167 30,960
Food and beverage 46,558 38,860 25,745 19,573 24,749
General, administrative and other 174,030 118,397 77,370 43,962 54,735
Depreciation and amortization 51,924 32,121 18,157 10,695 11,384
(Gain) loss on disposition of assets (62,507) 2,221 0 11,412 0
Impairment write-down of Hollywood
Park-Casino 20,446 0 0 0 0
------------ ------------- ----------- ----------- -----------
562,653 382,464 226,309 143,058 127,119
------------ ------------- ----------- ----------- -----------
Operating income 144,204 44,503 21,819 167 3,453
Interest expense, net 57,544 22,518 7,302 942 3,922
------------ ------------- ----------- ----------- -----------
Income (loss) before income taxes and
minority interests 86,660 21,985 14,517 (775) (469)
Minority interests 1,687 374 (3) 15 0
Income tax expense 40,926 8,442 5,850 3,459 693
------------ ------------- ----------- ----------- -----------
Net income (loss) $ 44,047 $ 13,169 $ 8,670 ($4,249) ($1,162)
============ ============= =========== =========== ===========
============================================================================================================================
Dividends on convertible preferred stock $ 0 $ 0 $ 1,520 $ 1,925 $ 1,925
------------ ------------- ----------- ----------- -----------
Net income (loss) available to (allocated to)
common stockholders $ 44,047 $ 13,169 $ 7,150 ($6,174) ($3,087)
============ ============= =========== =========== ===========
Net income (loss) per common share:
Basic $1.70 $0.50 $0.33 ($0.33) ($0.17)
Diluted $1.67 $0.50 $0.32 ($0.33) ($0.17)
Other Data:
Earnings before interest, taxes, depreciation
amortization and other non-recurring
items (EBITDA) $ 157,087 $ 80,085 $ 42,459 $ 22,274 $ 20,925
Cash flows provided by (used in):
Operating activities $ 75,323 $ 38,112 $ 14,365 $ 13,677 $ 20,291
Investing activities (51,063) (136,532) (16,226) (19,895) (32,922)
Financing activities 54,868 118,498 9,609 (4,268) (2,085)
Capital expenditures 59,680 56,747 32,505 23,786 25,150
Balance Sheet Data:
Cash and cash equivalents $ 123,362 $ 44,234 $ 24,156 $ 16,408 $ 25,532
Short-term investments 123,428 3,179 0 4,766 6,447
Total assets 1,045,408 891,339 419,029 205,886 283,303
Current liabilities 145,008 128,592 57,317 35,364 74,951
Long term notes payable 618,698 527,619 132,102 282 15,629
Total liabilities 764,532 656,611 195,729 44,711 117,557
Minority interests 0 3,752 1,946 3,015 0
Stockholders' equity 280,876 230,976 221,354 158,160 165,746
</TABLE>
3
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations
-------------
The following discussion and analysis of financial condition, results of
operations, liquidity and capital resources should be read in conjunction with
the Company's audited Consolidated Financial Statements and the notes thereto.
Forward-Looking Statements and Risk Factors
Except for the historical information contained herein, the matters addressed in
this Annual Report on Form 10K/A 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
Pinnacle Entertainment, Inc.'s management. Factors that may cause actual
performance of Pinnacle Entertainment, Inc. to differ materially from that
contemplated by such forward-looking statements include, among others: the
failure to complete pending asset sale transactions (discussed below); the
failure to complete (on time or otherwise) or successfully operate planned
expansion and development projects (including the Belterra Casino Resort); the
failure to obtain adequate financing to meet strategic goals; the failure to
obtain or retain gaming licenses or regulatory approvals; increased competition
by casino operators who have more resources and have built or are building
competitive casino properties; severe weather conditions; the failure to meet
Pinnacle Entertainment, Inc.'s debt service obligations; and other adverse
changes in the gaming markets in which Pinnacle Entertainment, Inc. 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 Annual Report on Form 10K are made pursuant to the Act.
Factors Affecting Future Operating Results
Sales of Hollywood Park Race Track and Hollywood Park-Casino On September 10,
1999, the Company completed the dispositions of the Hollywood Park Rack Track
and Hollywood Park-Casino to Churchill Downs for $117,000,000 cash and
$23,000,000 cash, respectively. Churchill Downs acquired the race track, 240
acres of related real estate and the Hollywood Park-Casino. The Company then
entered into a 10-year leaseback of the Hollywood Park-Casino at an annual lease
rate of $3,000,000 per annum, with a 10-year renewal option. The Company then
subleased the facility to a third party operator for a lease payment of
$6,000,000 per year. The sublease is for a one-year period, at which time the
Company and sub lessee will negotiate the terms of any sublease extension.
The disposition of the Hollywood Park Race Track and related real estate was
accounted for as a sale and resulted in a pre-tax gain of $61,522,000. The
disposition of the Hollywood Park-Casino was accounted for as a financing
transaction and therefore not recognized as a sale for accounting purposes as
the Company subleased the Hollywood Park-Casino to a third-party operator.
During the third quarter of 1999, under the provisions of SFAS No. 121, the
Company determined that it would not be able to recover the net book value of
the Hollywood Park-Casino on an undiscounted cash flow basis. The Company
recorded an impairment write-down of the long-lived assets comprising the
Hollywood Park-Casino of $20,446,000 representing the difference between its net
book value of approximately $43,400,000 and estimated fair value. Fair value
was determined based on an independent appraisal. Due to competitive conditions
in the California casino market, sublease rentals were projected to decline over
the ten year lease term. The pre-tax gain on the sale of the race track is
included in "(Gain) loss on disposition of assets, net" in the accompanying
Consolidated Statements of Operations. Pursuant to accounting guidelines, the
Company recorded a long-term debt obligation of $23,000,000 for the Hollywood
Park-Casino (see Note 9). The Hollywood Park-Casino building will continue to
be depreciated over its estimated useful life. The estimated tax liability on
the sales transactions to Churchill Downs is approximately $22,000,000.
4
<PAGE>
Condensed results of operations for the Hollywood Park Race Track and the
Hollywood Park-Casino for the years ended December 31, 1999, 1998 and 1997 were:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
1999 (a) 1998 1997
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
Revenues $ 86,235 $ 114,751 $ 121,799
Expenses 73,019 103,760 107,775
------------ ------------ ------------
Operating income 13,216 10,991 14,024
Interest expense (b) 0 0 0
------------ ------------ ------------
Income before income taxes $ 13,216 $ 10,991 $ 14,024
============ ============ ============
</TABLE>
(a) Operating results through the sales date of September 10, 1999.
(b) No interest expense was specifically identified for these operations.
Pending Casino, Race Track and Land Sales Assets held for sale at December 31,
1999 consisted of the following, and excluded the related goodwill and deferred
income taxes associated with such assets:
<TABLE>
<CAPTION>
Net Property
Plant &
Equipment Other Total
------------- ------------- -------------
(in thousands)
<S> <C> <C> <C>
Two casinos in Mississippi $ 115,731 $ 5,876 $ 121,607
Turf Paradise Race Track in Arizona 10,873 4,359 15,232
Other (primarily undeveloped land in California) 17,810 0 17,810
------------- ------------- -------------
$ 144,414 $ 10,235 $ 154,649
============= ============= =============
</TABLE>
Sales transactions for these assets were pending or the properties were actively
being marketed as of December 31, 1999. There are no assurances these
transactions will close or the anticipated cash proceeds and after tax gains as
described below will be achieved. Until the sales transactions are completed,
the Company continues to operate the race track and casinos held for sale. In
addition, certain liabilities will be assumed by the buyers of these assets.
Such liabilities, consisting primarily of accrued liabilities and accounts
payable, have been classified as "Liabilities to be assumed by buyers of assets
held for sale" on the accompanying Consolidated Balance Sheets. Goodwill net of
amortization at December 31, 1999 includes approximately $13,331,000 related to
the pending race track and casino sales. The after tax cash proceeds generated
by these sales will be used to retire long-term debt, make capital improvements
to existing properties or acquire new properties and for general corporate
purposes.
Casinos in Mississippi On December 10, 1999, the Company announced it had
----------------------
entered into definitive agreements with subsidiaries of Penn National Gaming,
Inc. ("Penn National") to sell its Casino Magic Bay St. Louis, Mississippi, and
Boomtown Biloxi, Mississippi, casino operations for $195,000,000 in cash.
Subsidiaries of Penn National will purchase all of the operating assets and
certain liabilities and related operations of the Casino Magic Bay St. Louis and
Boomtown Biloxi properties, including the 590 acres of land at Casino Magic Bay
St. Louis and the leasehold rights at Boomtown Biloxi. The transactions are
subject to certain closing conditions, including approval by the Mississippi
Gaming Commission, the purchaser completing the necessary financing and
termination of the Hart-Scott-Rodino waiting period. The Company estimates the
transactions will close in the second quarter of 2000 and generate an after tax
gain of approximately $32,300,000.
5
<PAGE>
Race Track in Arizona On December 30, 1999, the Company announced the signing
---------------------
of a letter of intent under which the Company will sell its Turf Paradise horse
racing facility located in Phoenix, Arizona to a private investor. In February
2000, the Company announced the signing of a definitive agreement for the sale
of Turf Paradise for $53,000,000 in cash. The agreement includes the horse
racing operations and all 275 acres at the Phoenix, Arizona property. Pinnacle
Entertainment anticipates closing the transaction in the second quarter of 2000.
The after tax gain from such sale is expected to be approximately $23,000,000.
Other On July 15, 1999, the Company announced it had entered into an agreement
-----
to sell 42 acres of the 139 acres retained in the Churchill Downs transaction
for approximately $24,000,000 in cash. In March 2000, the Company completed the
sale (see Note 20 to the Notes to Consolidated Financial Statements). The
Company anticipates an after tax gain of approximately $13,800,000 from this
sale. On November 4, 1999, the Company announced it had entered into an
agreement for the sale of the remaining 97 acres for approximately $63,000,000
in cash. On February 7, 2000, the Company elected to terminate such agreement
and has begun discussions with other buyers. The Company expects to close the
sale of this property for cash by the end of 2000, which will result in a gain.
The Company owns other land parcels in Missouri, which it is actively trying to
sell.
Condensed results of operations for the Casino Magic Bay St. Louis and Boomtown
Biloxi casinos and the Turf Paradise horse racing facility for the years ended
December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------
1999 1998 (a) 1997 (b)
------------ ------------- -------------
<S> <C> <C> <C>
(in thousands)
Revenues $174,380 $100,014 $46,655
Expenses 145,066 86,051 40,479
-------------- -------------- --------------
Operating income 29,314 13,963 6,176
Interest expense (income), net 86 339 (153)
-------------- -------------- --------------
Income before income taxes $ 29,228 $ 13,624 $ 6,329
============== ============== ==============
</TABLE>
(a) Includes the results of Casino Magic Bay St. Louis from October 15,
1998 (see Note 5 to the Notes to Consolidated Financial Statements).
(b) Includes the results of Boomtown Biloxi from June 30, 1997 (see Note 5
to the Notes to Consolidated Financial Statements).
Expansion & Development Belterra 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 for the
Belterra Casino Resort. Pinnacle Entertainment owns 97% of the Belterra Casino
Resort (currently under construction), with the remaining 3% held by a non-
voting local partner.
In July 1999, the Company broke ground on the Belterra Casino Resort and is
continuing on schedule for an opening in August 2000. The project is located in
Switzerland County, Indiana, which is approximately 35 miles southwest of
Cincinnati, Ohio and will be the gaming site most readily accessible to major
portions of northern and central Kentucky, including the city of Lexington.
The Company plans to spend approximately $200,000,000 ($30,635,000 of which has
been spent as of December 31, 1999) in total costs (including land, capitalized
interest, pre-opening expenses, organizational expenses and community grants) on
the Belterra Resort and Casino, which will feature a 15-story, 308-room hotel, a
cruising riverboat casino with approximately 1,800 gaming positions, an 18-hole
championship golf course, a 1,500 seat entertainment facility, four restaurants,
retail areas and other amenities.
6
<PAGE>
In October 1999, the Company acquired the Ogle Haus Inn, a 54-room hotel
operation in the city of Vevay, for $2,500,000. The Company is utilizing the
facility principally for the Belterra pre-opening operations, including housing
various key management staff, converting rooms into offices and training hotel
and food and beverage employees. Operational costs of the Ogle Haus Inn, as
well as all other pre-opening costs of Belterra Resort and Casino, are being
expensed as incurred. After completion of Belterra, the Ogle Haus will be
operated as a hotel and restaurant facility and will provide overflow capacity
for Belterra.
Lake Charles In November 1999, the Company filed an application for the
------------
fifteenth and final gaming license to be issued by the Louisiana Gaming Control
Board. The Company was one of five applicants for such license. The Company's
application is seeking approval to operate a cruising riverboat casino, hotel
and golf course resort complex in Lake Charles, Louisiana. The Louisiana Gaming
Control Board has not awarded such license and there are no assurances such
license will be issued to the Company or any other applicant.
In connection with such submittal, Pinnacle Entertainment has entered into an
option agreement with the Lake Charles Harbor and Terminal District to lease
225-acres of unimproved land from the District upon which such resort complex
would be constructed. The initial lease option is for a six-month period ending
January 2000, with three six-month renewal options, at a cost of $62,500 per
six-month option. If the lease option is exercised, the annual rental payment
would be $815,000, with a maximum annual increase of 5%. The term of the lease
would be for a total of up to 70 years, with an initial term of 10 years and six
consecutive renewal options of 10 years each. The lease would require the
Company to develop certain on-and off- site improvements at the location. If
awarded the license by the Louisiana Gaming Control Board, the Company
anticipates building a resort similar in design and scope to the Belterra Casino
Resort currently under construction in Indiana.
California Card Clubs By California state law, a corporation may operate a
gambling enterprise in California only if every officer, director and
shareholder holds a state gambling license. Only 5% or greater shareholders of
a publicly traded racing association, however, must hold a state gambling
license. As a practical matter, therefore, public corporations that are not
qualified racing associations may not operate gambling enterprises in
California. As a result, the Hollywood Park-Casino, since September 10, 1999
(see sales of California track and casino above), and the Crystal Park Hotel and
Casino, are leased to, and operated by, an unrelated third party.
By law, a California card club may neither bank card games nor offer certain of
the casino games permitted in Nevada and other traditional gambling
jurisdictions, and thus does not participate in the wagers made or in the
outcome of any of the games played.
Year 2000 The Company has not experienced any disruption due to the Year 2000
issue. The Year 2000 issue exists because computer systems and applications
were historically designed to use two digit fields (rather than four) to
designate a year, which could result in miscalculations or system failures.
Costs incurred prior to December 31, 1999 to mitigate the Year 2000 issue were
approximately $1,028,000. The Company cannot be assured there will not be Year
2000 issues in the future.
Results of Operations
On October 15, 1998, the Company 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 the Company prior to the acquisition date, thus generating significant
variances when comparing 1999's financial results with those of 1998 and 1997.
In addition, the results of operations of the Hollywood Park Race Track and
Hollywood Park-Casino, which were disposed of on September 10, 1999, are
included in the results of operations only until that date. Future revenue and
operating results will be materially reduced due to the sale of these assets, as
well as by the
7
<PAGE>
future sale of assets, which are classified as held for sale at December 31,
1999 on the Consolidated Balance Sheets (see discussion above).
Year ended December 31, 1999, compared to the year ended December 31, 1998
--------------------------------------------------------------------------
Total revenues increased by $279,890,000, or 65.6%, for the year ended December
31, 1999, as compared to the year ended December 31, 1998. Contribution to
total revenue from Casino Magic was approximately $280,723,000 in 1999 compared
to $63,621,000 in 1998. This increase is primarily attributed to the timing of
the Casino Magic acquisition. The 1998 results include operations from the five
Casino Magic casinos from the October 15, 1998, acquisition date to December 31,
1998, whereas their results are included in all of 1999. Gaming revenues
increased by $264,469,000, or 90.2%, with $260,806,000 of the increase due to
Casino Magic. The remaining net increase is due to increases at each of the
Boomtown properties, offset by a decrease in gaming revenue at the Hollywood
Park-Casino (due to the September 10, 1999, disposition discussed above).
Boomtown Reno gaming revenues increased by $6,765,000, primarily attributed to
the remodeling completed in 1999, enhanced marketing programs and unusually warm
weather in the fourth quarter 1999 which provided increased visitor counts to
the casino. Boomtown New Orleans gaming revenue increased by $9,778,000,
primarily attributed to updated marketing and advertising programs in 1999 as
well as a new slot machine mix for the casino floor. Similar increases are not
expected in 2000 particularly in light of the opening of a larger land-based
casino in New Orleans by a competitor in late October 1999. Boomtown Biloxi
gaming revenue increased by $1,137,000, primarily due to a growth in the Biloxi
gaming market brought about by the opening of a larger casino hotel in the
second quarter 1999, as well as expansions by other competitors, and by the
success of the buffet marketing. Racing revenue decreased by $11,662,000, or
17.4%, including a decrease of $12,220,000 from the sale of the Hollywood Park
Race Track (discussed above). Turf Paradise revenue increased by $558,000,
primarily due to increase sale of the racing signal to out of state locations.
Food and beverage revenue increased by $9,307,000, or 30.5%, with $9,045,000 of
the increase due to Casino Magic. The remaining net increase is due to
increases at Boomtown Reno and Boomtown Biloxi, offset by decreases at the
Hollywood Park Race Track and Hollywood Park-Casino. Boomtown Reno food and
beverage revenues increased by $1,561,000, primarily due to the improvements
completed in 1999 and the higher visitor counts. Boomtown Biloxi food and
beverage revenues increased by $2,189,000, primarily due to an aggressive
marketing program focusing on the property's buffet. Hotel and recreational
vehicle revenues increased by $8,661,000, or 281.6%, with $6,821,000 of the
increase due Casino Magic. The remaining increase is due primarily to the hotel
room addition and room renovation at Boomtown Reno. Truck stop income increased
by $3,145,000, or 21.7%, due primarily to the increased traffic flow at the
Boomtown Reno property, and increased fuel prices. Other income increased by
$5,970,000, or 31.5%, with $4,051,000 of the increase due to Casino Magic. The
remaining increase is primarily due to the lease rent income earned by the
Hollywood Park-Casino (see discussion above).
Total operating expenses increased by $180,189,000, or 47.1%, for the year ended
December 31, 1999, as compared to the year ended December 31, 1998. Excluding
any gain (loss) on the disposition of assets, operating expenses increased by
$224,471,000, or 59.0%, during the year ended December 31, 1999, as compared to
the year ended December 31, 1998. Contribution to total operating expenses in
1999 from Casino Magic was $229,788,000 compared to $54,582,000 in 1998. Gaming
expenses increased by $147,959,000, or 91.6%, including $153,897,000 due to
Casino Magic, and decreases at Boomtown Reno and the Hollywood Park-Casino (due
to the disposition discussed above), offset by increases at Boomtown New
Orleans. Boomtown Reno gaming expenses decreased by $1,561,000, primarily due
to improved marketing programs in 1999 including the elimination of the costly
fun flight program and by management changes. Boomtown New Orleans gaming
expenses increased by $4,782,000, primarily due to the corresponding increase in
gaming revenue, including the improved marketing programs. Racing expenses
decreased by $6,622,000, or 22.6%, including a decrease in Hollywood Park Race
Track racing expenses of $6,807,000 due to the sale of the race track discussed
above and an increase in racing expenses at Turf Paradise of $185,000 primarily
attributed to the increased racing revenues. Food and beverage expenses
increased by $7,698,000, or 19.8%, including an increase of $9,457,000 due to
Casino Magic and a decrease of $4,662,000 due to the dispositions of the
Hollywood Park Race Track and Hollywood Park-Casino. Boomtown
8
<PAGE>
Reno food and beverage expenses increased by $1,750,000, consistent with the
overall increase in food and beverage revenue. Boomtown Biloxi food and beverage
expenses increased by $1,175,000, also primarily due to the increase in revenue
and volume at the buffet. Hotel and recreational vehicle expense increased by
$4,710,000, or 388.3%, with $3,499,000 due to the addition of Casino Magic and
the remainder due to the additional hotel operations at Boomtown Reno. Truck
stop expenses increased by $3,017,000, or 22.7%, primarily due to the increased
volume at the Boomtown Reno property and fuel costs. General and administrative
expenses increased by $40,200,000, or 42.5%, with $36,095,000 due to the
addition of Casino Magic and increased casino management. Depreciation and
amortization increased by $19,803,000, or 61.7%, including $20,338,000 due to
Casino Magic, offset by a reduction in depreciation and amortization expenses
from the disposition of the Hollywood Park Race Track in September 1999
(discussed above). Pre-opening costs for the Belterra Casino Resort increased by
$2,199,000, or 267.8%, consistent with the development of the project. The gain
on disposition of assets of $62,507,000 is primarily related to the disposition
of the Hollywood Park Race Track and the impairment write-down of $20,446,000
relates to the Hollywood Park-Casino. Other expenses increased by $5,507,000, or
65.5%, including $6,502,000 due to the Casino Magic acquisition, offset by a
reduction in other expenses from the dispositions of the Hollywood Park Race
Track and Hollywood Park-Casino in September 1999 (discussed above). Net
interest expense increased by $35,026,000, or 155.6%, with $14,502,000 of the
increase due primarily to the debt assumed in the Casino Magic acquisition and
the remaining increase due to the 9.25% Notes issued in February 1999. Income
tax expense increased by $32,484,000, or 384.8%, with approximately $22,000,000
of the increase attributed to the dispositions of the track and casino.
Year ended December 31, 1998, compared to the year ended December 31, 1997
--------------------------------------------------------------------------
On October 15, 1998, and on June 30, 1997, the Company acquired Casino Magic and
Boomtown, respectively, and accounted for each 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 and
Boomtown's results of operations were not consolidated with those of the
Company's, prior to their respective acquisition dates, thus generating
significant variances when comparing 1998's financial results with those of
1997. Boomtown's results of operations include a full year of activity in 1998
and just six months of activity in 1997 (July 1, 1997 through December 31,
1997). Casino Magic's results of operations include the period October 16, 1998
through December 31, 1998, only, and no 1997 results.
Total revenues increased by $178,839,000, or 72.1%, for the year ended December
31, 1998, as compared to the year ended December 31, 1997. Approximately
$174,075,000 ($110,454,000 related to Boomtown and $63,621,000 related to Casino
Magic) of the increase was due to the timing of Boomtown and Casino Magic
acquisitions. Gaming revenues increased by $155,398,000, or 112.9%, with
$150,095,000 of the increase due to the timing of acquisitions. Gaming revenues
increased at the Boomtown properties by $10,687,000 (when comparing the six
months ended December 31, 1998 to the six months ended December 31, 1997) due
primarily to increases at Boomtown New Orleans, generated by a new larger
riverboat placed into service in February 1998. Gaming revenues decreased at
the Hollywood Park-Casino by approximately $4,562,000, primarily a result of the
ban on smoking in such establishments and economic problems in various Asian
countries (as a significant number of Hollywood Park-Casino's patrons are
Asian). Racing revenues decreased by $1,973,000, or 2.9%, due to there being
five fewer live race days at the Hollywood Park Race Track in 1998 as compared
to 1997. Food and beverage revenues increased by $10,616,000, or 53.4%, with
$9,002,000 of the increase due to the timing of acquisitions, and the balance of
the increase primarily attributable to increased sales at both Boomtown New
Orleans and Boomtown Biloxi, a result of successful marketing programs. Hotel
and recreational vehicle park revenues increased by $2,139,000, or 228.3%, due
to the timing of acquisitions. Truck stop and service station revenues (all of
which are attributable to Boomtown Reno) increased by $5,866,000, or 67.9%,
primarily due to the timing of the Boomtown acquisition. Other income increased
by $6,793,000, or 55.9%, with $6,456,000 of the increase due to the timing of
acquisitions.
Total operating expenses increased by $156,155,000, or 69.0%, during the year
ended December 31, 1998, as compared to the year ended December 31, 1997.
Approximately $151,578,000 ($96,996,000 related to
9
<PAGE>
Boomtown and $54,582,000 related to Casino Magic) of the increase related to the
timing of acquisitions. Gaming expenses increased by $86,816,000, or 116.2%,
with $85,538,000 of the increase due to the timing of acquisitions, with the
balance of the increase primarily a corresponding result of the increased gaming
revenues at the Boomtown properties. Food and beverage expenses increased by
$13,115,000, or 50.9%, with $10,801,000 of the increase due to the timing of
acquisitions. The balance of the increase was primarily due to increased costs
at Boomtown New Orleans and Boomtown Biloxi, where food and beverage marketing
promotions were increased. Hotel and recreational vehicle expenses increased by
$857,000, or 240.7%, primarily due to the timing of acquisitions. Truck stop and
service station expenses (all of which are attributable to Boomtown Reno)
increased by $5,310,000, or 66.6%, due primarily to the timing of the Boomtown
acquisition. General and administrative expenses increased by $33,156,000, or
53.9%, with $33,361,000 of the increase attributable to the timing of
acquisitions, with the balance of the increase primarily due to additional
staffing at corporate, and expansion related expense increases. Depreciation and
amortization increased by $13,964,000, or 76.9%, with $12,236,000 of the
increase due to the timing of acquisitions, with the balance of the increase
primarily due to Boomtown New Orleans' February 1998 placement of a new
riverboat into service. Loss on write off of assets was $2,221,000 for the year
ended December 31, 1998, of which $1,086,000 related to the closing of the
Hollywood Park Golf Center; $500,000 related to the abandonment of a project in
Kansas, with the balance related to the write off of obsolete assets at Boomtown
Reno. Other expenses increased by $883,000, or 11.7%, including $2,892,000 due
to the timing of acquisitions, offset by a reduction in REIT restructuring
expenses (the Company ceased in 1998 its effort to restructure into a real
estate investment trust). Net interest expense increased by $15,216,000, or
208.4%, due to interest on the 9.5% Notes, which were issued in August 1997, and
interest on bank borrowings, including borrowing to purchase Casino Magic and to
retire the Casino Magic 11.5% Notes. Income tax expense increased by $2,592,000,
or 44.3%, due to increased pre-tax income in 1998.
Liquidity, Capital Resources and Other Factors Influencing Future Results
As of December 31, 1999, the Company had cash, cash equivalents and short-term
investments, all of which had maturities within ninety days, of $246,790,000
compared to $47,413,000 as of December 31, 1998.
The Consolidated Statements of Cash Flows detailing changes in the cash balances
are on page 17.
Operating activities provided net cash increase of $75,323,000 in 1999 compared
with $38,112,000 in 1998. This year-over-year change is largely due to the
increase in net income, increased depreciation and increased current deferred
tax liabilities. The increase in the current deferred tax liabilities at
December 31, 1999 results primarily because Federal and State income taxes of
approximately $22,000,000 due on the gain of the sale of the Hollywood Park Race
Track have not yet been paid.
The 1999 investing activities included the purchase of the minority interest in
Casino Magic Argentina for $16,500,000, the net purchase of short-term
investments of $120,249,000 and the purchase of $59,680,000 of property, plant
and equipment. The construction, land costs and other capitalizable cost for
the Belterra Resort and Casino represented approximately $31,000,000 of the
additions to property, plant and equipment. Approximately $160,000,000 will be
required in 2000 to complete construction and fund the necessary pre-opening
expenses, community grants and other related expenses associated with the
project (which amount excludes capitalized interest and other non-cash costs).
The net cash provided from financing activities of $54,868,000 reflects that in
February 1999, the Company received the net proceeds from the issuance of
$350,000,000 of 9.25% Senior Subordinated Notes, which proceeds were used to
retire all of the Company's outstanding bank borrowings of $287,000,000 and to
invest in approximately $63,000,000 of short term securities. Since February,
the Company has not borrowed any amounts under its bank credit facility and in
May 1999 such bank credit facility was reduced from $300,000,000 (with an
option to increase to $375,000,000) to $200,000,000 (with an option to increase
to $300,000,000).
10
<PAGE>
At December 31, 1999, the Company had signed definitive sales agreements to sell
assets for $219,000,000 cash, which transactions are expected to close in 2000.
This includes the sale of essentially all of the assets to operate the Casino
Magic Bay St. Louis and Boomtown Biloxi casinos in Mississippi and vacant land
adjacent to the Hollywood Park Race Track sold in 1999. In addition, in February
2000, the Company signed a definitive agreement for the sale of Turf Paradise
Race Track in Phoenix, Arizona for $53,000,000 in cash, and is actively seeking
buyers to purchase the additional land in California and Missouri. See "Pending
Casino, Race Track and Land Sales' above for additional information on these
proposed transaction. The sales of these assets are expected to generate gains;
however, there is no assurance any of these transactions will be consummated in
2000.
The Company believes that its available cash, cash equivalents, short-term
investments, cash to be generated by assets held for sale and cash flow from
operations will be sufficient to finance operations and capital requirements for
the foreseeable future, and in any event for at least the next twelve months.
Although the Company has substantial cash resources and unused bank credit
facilities, it has committed to utilize approximately $160,000,000 to complete
the Belterra project and pay approximately $22,000,000 in Federal and State
income taxes related to the sale of the Hollywood Park Race Track. In addition,
the Company may use a portion of these resources to i) reduce its outstanding
debt obligations prior to their scheduled maturities, ii) make significant
capital improvements to existing properties, and/or iii) make acquisitions of
other casino properties or companies. To the extent cash is used for these
purposes, the Company's cash reserves will also be diminished and the Company
may require additional capital to finance any such activities. Additional
capital may be generated through internally generated cash flow, future
borrowings (including amounts available under the bank credit facility) and/or
lease transactions. There can be no assurance, however, that such capital will
be available on terms acceptable to the Company.
11
<PAGE>
Item 8. Financial Statements and Supplementary Data
---------------------------------------------------
Pinnacle Entertainment, Inc.
Index to Consolidated Financial Statements
<TABLE>
<S> <C>
Report of Independent Public Accountants
Report of Arthur Andersen LLP................................... 13
Consolidated Statements of Operations for the years
ended December 31, 1999, 1998 and 1997........................ 14
Consolidated Balance Sheets as of December 31, 1999 and 1998...... 15
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1999, 1998 and 1997.......... 16
Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997........................ 17
Notes to Consolidated Financial Statements........................ 18
</TABLE>
12
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Stockholders of
Pinnacle Entertainment, Inc.:
We have audited the accompanying consolidated balance sheets of Pinnacle
Entertainment, Inc., (a Delaware corporation, formerly Hollywood Park, Inc.) and
subsidiaries (the "Company") as of December 31, 1999 and 1998, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pinnacle Entertainment, Inc.
and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.
ARTHUR ANDERSEN LLP
Los Angeles, California
February 8, 2000 (except with
respect to the matters discussed
in Note 20, as to which the date
is March 21, 2000)
13
<PAGE>
Pinnacle Entertainment, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Years ended December 31,
----------------------------------------------------
1999 1998 1997
-------------- --------------- --------------
(in thousands, except per share data)
<S> <C> <C> <C>
Revenues:
Gaming $557,526 $293,057 $137,659
Racing 55,209 66,871 68,844
Food and beverage 39,817 30,510 19,894
Hotel and recreational vehicle park 11,737 3,076 937
Truck stop and service station 17,644 14,499 8,633
Other 24,924 18,954 12,161
-------------- --------------- --------------
706,857 426,967 248,128
-------------- --------------- --------------
Expenses:
Gaming 309,508 161,549 74,733
Racing 22,694 29,316 30,304
Food and beverage 46,558 38,860 25,745
Hotel and recreational vehicle park 5,923 1,213 356
Truck stop and service station 16,296 13,279 7,969
General and administrative 134,870 94,670 61,514
Depreciation and amortization 51,924 32,121 18,157
Pre-opening costs, Belterra Casino Resort 3,020 821 0
(Gain) loss on disposition of assets, net (62,507) 2,221 0
Impairment write-down of Hollywood Park-Casino 20,446 0 0
Other 13,921 8,414 7,531
-------------- --------------- --------------
562,653 382,464 226,309
-------------- --------------- --------------
Operating Income 144,204 44,503 21,819
Interest expense, net 57,544 22,518 7,302
-------------- --------------- --------------
Income before minority interests and income taxes 86,660 21,985 14,517
Minority interests 1,687 374 (3)
Income tax expense 40,926 8,442 5,850
-------------- --------------- --------------
Net Income $ 44,047 $ 13,169 $ 8,670
============== =============== ==============
==========================================================================================================================
Dividend requirements on convertible preferred stock $ 0 $ 0 $ 1,520
-------------- --------------- --------------
Net income attributable to common stockholders $ 44,047 $ 13,169 $ 7,150
============== =============== ==============
Net income per common share:
Net income - basic $ 1.70 $ 0.50 $ 0.33
Net income - diluted $ 1.67 $ 0.50 $ 0.32
Number of shares - basic 25,966 26,115 22,010
Number of shares - diluted 26,329 26,115 22,340
</TABLE>
___________
See accompanying notes to the consolidated financial statements.
14
<PAGE>
Pinnacle Entertainment, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ------------
Assets (in thousands, except share data)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 123,362 $ 44,234
Short term investments 123,428 3,179
Receivables, net 17,132 16,783
Prepaid expenses and other assets 13,118 15,207
Deferred income taxes 0 18,425
Assets held for sale 154,649 0
Current portion of notes receivable 5,785 2,320
------------ ------------
Total current assets 437,474 100,148
Notes receivable 8,912 17,852
Net property, plant and equipment 437,715 602,912
Goodwill, net of accumulated amortization of $7,927,000 and $6,947,000
at December 31, 1999 and 1998, respectively 87,481 97,098
Gaming licenses, net of accumulated amortization of $5,219,000 and $3,616,000
at December 31, 1999 and 1998, respectively 41,485 44,037
Debt issuance costs, net of accumulated amortization of $8,278,000 and $4,095,000
at December 31, 1999 and 1998, respectively 22,813 12,105
Other assets 9,528 17,187
------------ ------------
$1,045,408 $ 891,339
------------ ------------
---------------------------------------------------------------------------------------------------------------------------------
Liabilities And Stockholders' Equity
Current Liabilities:
Accounts payable $ 21,096 $ 20,970
Accrued interest 26,080 16,741
Other accrued liabilities 45,569 61,498
Accrued compensation 16,073 17,819
Liabilities to be assumed in asset sales 9,866 0
Deferred income taxes 19,542 0
Current portion of notes payable 6,782 11,564
------------ ------------
Total current liabilities 145,008 128,592
Notes payable, less current maturities 618,698 527,619
Deferred income taxes 826 400
Minority interests 0 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;
26,234,699 and 25,800,069 shares issued and outstanding in 1999 and 1998 2,624 2,580
Capital in excess of par value 224,654 218,375
Retained earnings 53,598 10,021
------------ ------------
Total stockholders' equity 280,876 230,976
------------ ------------
$1,045,408 $ 891,339
============ ============
</TABLE>
___________
See accompanying notes to the consolidated financial statements.
15
<PAGE>
Pinnacle Entertainment, Inc.
Consolidated Statements of Changes in Stockholders' Equity
For the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Retained
Capital in Earnings Total
Preferred Common Excess of (Accumulated Stockholders'
Stock Stock Par Value Deficit) Equity
----------- ----------- ----------- ------------ -----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance as of December 31, 1996 $ 28 $1,833 $167,074 ($10,775) $158,160
Net income 0 0 0 8,670 8,670
Issuance of common stock to acquire
Boomtown, Inc. 0 582 56,425 0 57,007
Repurchase and retirement of common stock 0 (45) (3,420) 0 (3,465)
Common stock options exercised 0 20 1,975 0 1,995
Other (28) 232 296 (1,513) (1,013)
----------- ----------- ----------- ------------ -----------
Balance as of December 31, 1997 0 2,622 222,350 (3,618) 221,354
Net income 0 0 0 13,169 13,169
Repurchase and retirement of common stock 0 (50) (5,490) 0 (5,540)
Common stock options exercised 0 8 627 0 635
Tax benefit associated with exercised
common stock options 0 0 888 0 888
Investment in stock - unrealized holding gain 0 0 0 470 470
----------- ----------- ----------- ------------ -----------
Balance as of December 31, 1998 0 2,580 218,375 10,021 230,976
Net income 0 0 0 44,047 44,047
Executive stock option compensation 0 0 828 0 828
Common stock options exercised 0 44 4,335 0 4,379
Tax benefit associated with exercised
common stock options 0 0 1,116 0 1,116
Investment in stock - realized holding gain 0 0 0 (470) (470)
----------- ----------- ----------- ------------ -----------
Balance as of December 31, 1999 $ 0 $2,624 $224,654 $ 53,598 $280,876
=========== =========== =========== ============ ===========
</TABLE>
_______________
See accompanying notes to the consolidated financial statements.
16
<PAGE>
Pinnacle Entertainment, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------------
1999 1998 1997
------------ -------------- -----------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 44,047 $ 13,169 $ 8,670
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 51,924 32,121 18,157
(Gain) loss on disposition of assets (62,507) 2,221 0
Impairment write-down of Hollywood Park-Casino 20,446 0 0
Other changes that (used) provided cash, net of the effects
of the purchase and disposition of businesses:
Receivables, net (2,242) (2,937) (312)
Prepaid expenses and other assets (4,780) 2,927 (452)
Accounts payable (10,948) (3,074) (2,468)
Accrued liabilities (16,254) 2,009 (9,119)
Accrued interest payable 9,344 516 5,175
Deferred income taxes 38,393 (5,546) (4,822)
All other, net 7,900 (3,294) (464)
------------ -------------- -----------
Net cash provided by operating activities 75,323 38,112 14,365
------------ -------------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment (59,680) (56,747) (32,505)
Receipts from disposition of property, plant and equipment 140,083 980 187
Principal collected on notes receivable 5,283 2,489 52
Notes receivable issued 0 (12,850) 0
(Purchase of) proceeds from short term investments, net (120,249) (2,709) 4,776
Payment to buy-out minority interest in subsidiaries (16,500) (1,946) (1,000)
Net cash paid for the acquisition of Casino Magic 0 (65,749) 0
Cash acquired in the acquisition of Boomtown, net of
cash transaction and other costs 0 0 12,264
------------ -------------- -----------
Net cash used in investing activities (51,063) (136,532) (16,226)
------------ -------------- -----------
Cash flows from financing activities:
Proceeds from secured Bank Credit Facility 17,000 270,000 112,000
Payment of secured Bank Credit Facility (287,000) 0 (112,000)
Payment of notes payable (15,566) (7,625) (4,942)
Assumption of notes payable 1,364 0 0
Proceeds from issuance of 9.5% Notes 0 0 125,000
Proceeds from issuance of 9.25% Notes 350,000 0 0
Payment of the 11.5% Casino Magic Notes 0 (135,000) 0
Payment of 11.5% Boomtown Notes 0 (1,253) (110,924)
Increase in debt issuance costs (15,309) (2,719) 0
Common stock options exercised 4,379 635 1,995
Common stock repurchase and retirement 0 (5,540) 0
Dividends paid to preferred stockholders 0 0 (1,520)
------------ -------------- -----------
Net cash provided by financing activities 54,868 118,498 9,609
------------ -------------- -----------
Increase in cash and cash equivalents 79,128 20,078 7,748
Cash and cash equivalents at the beginning of the period 44,234 24,156 16,408
------------ -------------- -----------
Cash and cash equivalents at the end of the period $ 123,362 $ 44,234 $ 24,156
============ ============== ===========
</TABLE>
_______________
See accompanying notes to the consolidated financial statements.
17
<PAGE>
Pinnacle Entertainment, Inc.
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
General In February 2000, a newly formed wholly owned subsidiary of Hollywood
Park, Inc. merged into Hollywood Park, Inc. for the sole purpose of changing
Hollywood Park, Inc.'s name to Pinnacle Entertainment, Inc. Pinnacle
Entertainment, Inc. (the "Company" or "Pinnacle Entertainment") is a diversified
gaming company that owns and operates eight casinos (four with hotels) in
Nevada, Mississippi, Louisiana and Argentina, two of which are subject to a
pending sales transaction (see Note 4). Pinnacle Entertainment receives lease
income from two card clubs, both in the Los Angeles metropolitan area; and owns
and operates a horse racing facility in Arizona, which is also subject to a
pending sale transaction (see Note 4).
Principles of Consolidation The consolidated financial statements include the
accounts of Pinnacle Entertainment and its majority owned subsidiaries. All
significant inter-company accounts and transactions have been eliminated. The
Company's significant subsidiaries include Boomtown, Inc. (and its Boomtown
casinos), Casino Magic, Corp. (and its Casino Magic casinos), Turf Paradise,
Inc. and Belterra Resort and Casino, LLC.
Gaming Licenses In 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 over the life of the concession agreement (see Note 5). In 1996,
Casino Magic acquired a Louisiana gaming license to conduct the gaming
operations of Casino Magic Bossier City. Casino Magic allocated a portion of
the purchase price to the gaming license and is amortizing the cost over twenty-
five years.
Amortization of Debt Issuance Costs Debt issuance costs incurred in connection
with long-term debt and bank financing are capitalized and amortized to interest
expense during the period the debt or loan commitments are outstanding.
Amortization expense was $2,343,000, $1,141,000 and $598,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
Goodwill Goodwill consists of the excess of the acquisition cost over the fair
value of net assets acquired in business combinations and is being amortized on
a straight-line basis over 40 years. Amortization expense was $2,859,000,
$1,888,000 and $943,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Racing Revenues and Expenses The Company recorded 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 consists of the difference between gaming wins and
losses, and at the Hollywood Park-Casino consists 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 years ended December 31, 1999, 1998, and 1997 was $41,341,000,
$21,270,000 (which includes Casino Magic's promotional allowances from October
15, 1998) and $8,285,000 (which includes Boomtown's promotional allowances from
June 30, 1997), respectively.
Use of Estimates The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect (i) the reported amounts of assets
and liabilities, (ii) the disclosure of contingent assets and liabilities at the
date of
18
<PAGE>
consolidated financial statements, and (iii) the reported amounts of revenues
and expenses during the reporting period. The Company uses estimates in
evaluating the recoverability of property, plant and equipment, other long-term
assets, deferred tax assets and in determining litigation and other obligations.
Property, Plant and Equipment Additions to property, plant and equipment are
recorded at cost and projects in excess of $10,000,000 include interest on funds
borrowed to finance construction. Capitalized interest was $1,359,000,
$2,142,000 and $425,000 in fiscal 1999, 1998 and 1997, respectively.
Depreciation and amortization are provided on the straight-line method over
their estimated useful lives as follows:
Years
-----
Land improvements 3 to 25
Buildings 5 to 40
Vessels and Barges 25 to 31
Equipment 3 to 10
Maintenance and repairs are charged to expense, and betterments are capitalized.
The cost of property sold or otherwise disposed of and its associated
accumulated depreciation are eliminated from both the property and accumulated
depreciation accounts with any gain or loss recorded in the expense accounts.
Property, plant and equipment is carried on the Company's balance sheets at
depreciated cost. Whenever there are recognized events or changes in
circumstances that affect the carrying amount of the property, plant and
equipment, management reviews the assets for possible impairment.
Cash and Cash Equivalents Cash and cash equivalents consisted of cash,
certificates of deposit and short term investments with original maturities of
90 days or less, as well as restricted cash of $300,000 at December 31, 1998.
There was no restricted cash at December 31, 1999.
Short Term Investments Short term investments are classified as held to
maturity and are carried at cost, which approximates market value.
Income Taxes The Company accounts for income taxes under Statement of Financial
Accounting Standards 109, Accounting for Income Taxes ("SFAS No. 109"), whereby
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that included the enactment date.
Stock-Based Compensation The Company accounts for its stock-based compensation
under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and follows the disclosure provisions of Financial Accounting
Standards Board's Statement of Accounting Standards No. 123 Accounting for
Stock-Based Compensation.
Segment Information Statement of Financial Accounting Standards No. 131
Disclosures about Segments of an Enterprise and Related Information ("SFAS No.
131") was effective for years after December 31, 1997, and has been adopted by
the Company for all periods presented in these consolidated financial
statements. SFAS No. 131 establishes guidelines for public companies in
determining operating segments based on those used for internal reporting to
management. Based on these guidelines, Pinnacle Entertainment reports
information under a single gaming segment.
Long-lived Assets The Company periodically reviews the propriety of the
carrying amount of long-lived assets and the related intangible assets as well
as the related amortization period to determine whether current events or
circumstances warrant adjustments to the carrying value and/or the estimates of
useful
19
<PAGE>
lives. This evaluation consists of comparing asset carrying values to the
Company's projection of the undiscounted cash flows over the remaining lives of
the assets, in accordance with Statement of Financial Accounting Standards No.
121 Accounting for the Impairment of Long-lived Assets and for Long-lived Assets
to Be Disposed Of ("SFAS No. 121"). Based on its review, the Company believes
that as of December 31, 1999, there were no significant impairments of its long-
lived assets or related intangible assets. In September 1999, an impairment
write-down of the Hollywood Park-Casino was recorded (see Note 3).
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
organization costs be expensed as incurred. The adoption of Statement of
Position 98-5 did not have an impact on the financial statements of the Company.
Derivative Instruments and Hedging Activities In September 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 133 Accounting for Derivative Instruments and Hedging Activities ("SFAS No.
133"). The Company has not made such investments in the past and does not
expect to make such investments in the foreseeable future, and thus SFAS No. 133
has no impact on the financial reporting of the Company.
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 and
other comprehensive income, which is defined as all other nonowner changes in
equity. Other comprehensive income is immaterial for all periods.
Earnings per Share Basic earnings per share are based on net income less
preferred stock dividend requirements divided by the weighted average common
shares outstanding during the period. Diluted earnings per share assume
exercise of in-the-money stock options outstanding at the beginning of the year
or date of the issuance, unless they are antidilutive.
Reclassifications Certain reclassifications have been made to the 1998 and 1997
amounts to be consistent with the 1999 financial statement presentation.
Note 2 - Supplemental Disclosure of Cash Flow Information
<TABLE>
<CAPTION>
For the years ended December 31,
----------------------------------------------------
1999 1998 1997
--------------- -------------- ---------------
(in thousands)
<S> <C> <C> <C>
Cash paid during the year for:
Interest $58,943 $22,024 $1,321
Income taxes 6,223 8,195 827
</TABLE>
Note 3 - Assets Sold
On September 10, 1999, the Company completed the dispositions of the Hollywood
Park Rack Track and Hollywood Park-Casino to Churchill Downs California Company
("Churchill Downs"), a wholly owned subsidiary of Churchill Downs Incorporated,
for $117,000,000 cash and $23,000,000 cash, respectively. Churchill Downs
acquired the race track, 240 acres of related real estate and the Hollywood
Park-Casino. The Company then entered into a 10-year leaseback of the Hollywood
Park-Casino at an annual lease rate of $3,000,000 per annum, with a 10-year
renewal option. The Company then subleased the facility to a third party
operator for a lease payment of $6,000,000 per year. The sublease is for a one-
year period, at which time the Company and sublessee will negotiate the terms of
any sublease extension.
20
<PAGE>
The disposition of the Hollywood Park Race Track and related real estate was
accounted for as a sale and resulted in a pre-tax gain of $61,522,000. The
disposition of the Hollywood Park-Casino was accounted for as a financing
transaction and therefore not recognized as a sale for accounting purposes as
the Company subleased the Hollywood Park-Casino to a third-party operator.
During the third quarter of 1999, under the provisions of SFAS No. 121, the
Company determined that it would not be able to recover the net book value of
the Hollywood Park-Casino on an undiscounted cash flow basis. The Company
recorded an impairment write-down of the long-lived assets comprising the
Hollywood Park-Casino of $20,446,000 representing the difference between its net
book value of approximately $43,400,000 and estimated fair value. Fair value was
determined based on an independent appraisal. Due to competitive conditions in
the California casino market, sublease rentals were projected to decline over
the ten year lease term. The pre-tax gain on the sale of the race track is
included in "(Gain) loss on disposition of assets, net" in the accompanying
Consolidated Statements of Operations. Pursuant to accounting guidelines, the
Company recorded a long-term debt obligation of $23,000,000 for the Hollywood
Park-Casino (see Note 9). The Hollywood Park-Casino building will continue to be
depreciated over its estimated useful life. The estimated tax liability on the
sales transactions to Churchill Downs is approximately $22,000,000.
Condensed results of operations for the Hollywood Park Race Track and the
Hollywood Park-Casino for the years ended December 31, 1999, 1998 and 1997 were:
<TABLE>
<CAPTION>
Year Ended
December 31,
---------------------------------------------------------------
1999 (a) 1998 1997
-------------------- ---------------- ----------------
(in thousands)
<S> <C> <C> <C>
Revenues $ 86,235 $ 114,751 $ $121,799
Expenses 73,019 103,760 107,775
------------------- --------------- ----------------
Operating income 13,216 10,991 14,024
Interest expense (b) 0 0 0
------------------- ----------------- ------------------
Income before income taxes $ 13,216 $ 10,991 $ 14,024
=================== ================= ==================
</TABLE>
(a) Operating results through the sale date of September 10, 1999.
(b) No interest expense was specifically identified for these operations.
Note 4 - Assets Held For Sale
Assets held for sale at December 31, 1999 consisted of the following, and
excluded the related goodwill and deferred income taxes associated with such
assets:
<TABLE>
<CAPTION>
Net Property
Plant &
Equipment Other Total
----------------- ----------------- ----------------
(in thousands)
<S> <C> <C> <C>
Two casinos in Mississippi $ 115,731 $ 5,876 $ 121,607
Turf Paradise Race Track in Arizona 10,873 4,359 15,232
Other (primarily undeveloped land in California) 17,810 0 17,810
----------------- ----------------- ----------------
$ 144,414 $ 10,235 $ 154,649
================= ================= ================
</TABLE>
Sales transactions for these assets were pending or the properties were actively
being marketed as of December 31, 1999. There are no assurances these
transactions will close or the anticipated cash proceeds and after tax gains as
described below will be achieved. Until the sales transactions are completed,
the Company continues to operate the race track and casinos held for sale. In
addition, certain liabilities will be assumed by the buyers of these assets.
Such liabilities, consisting primarily of accrued liabilities and
21
<PAGE>
accounts payable, have been classified as "Liabilities to be assumed by buyers
of assets held for sale" on the accompanying Consolidated Balance Sheets.
Goodwill net of amortization at December 31, 1999 includes approximately
$13,331,000 related to the pending race track and casino sales.
Casinos in Mississippi On December 10, 1999, the Company announced it had
entered into definitive agreements with subsidiaries of Penn National Gaming,
Inc. ("Penn National") to sell its Casino Magic Bay St. Louis, Mississippi, and
Boomtown Biloxi, Mississippi, casino operations for $195,000,000 in cash.
Subsidiaries of Penn National will purchase all of the operating assets and
certain liabilities and related operations of the Casino Magic Bay St. Louis and
Boomtown Biloxi properties, including the 590 acres of land at Casino Magic Bay
St. Louis and the leasehold rights at Boomtown Biloxi. The transactions are
subject to certain closing conditions, including approval by the Mississippi
Gaming Commission, the purchaser completing the necessary financing and
termination of the Hart-Scott-Rodino waiting period. The Company estimates the
transactions will close in the second quarter of 2000 and generate an after tax
gain of approximately $32,300,000.
Race Track in Arizona On December 30, 1999, the Company announced the signing
of a letter of intent under which the Company will sell its Turf Paradise horse
racing facility located in Phoenix, Arizona to a private investor. In February
2000, the Company announced the signing of a definitive agreement for the sale
of Turf Paradise for $53,000,000 in cash. The agreement includes the horse
racing operations and all 275 acres at the Phoenix, Arizona property. Pinnacle
Entertainment anticipates closing the transaction in the second quarter of 2000.
The after tax gain from such sale is expected to be approximately $23,000,000.
Other On July 15, 1999, the Company announced it had entered into an agreement
to sell 42 acres of the 139 acres retained in the Churchill Downs transaction
for approximately $24,000,000 in cash. In March 2000, the Company completed the
sale (see Note 20). The Company anticipates an after tax gain of approximately
$13,800,000 from this sale. On November 4, 1999, the Company announced it had
entered into an agreement for the sale of the remaining 97 acres for
approximately $63,000,000 in cash. On February 7, 2000, the Company elected to
terminate such agreement and has begun discussions with other buyers. The
Company expects to close the sale of this property for cash by the end of 2000,
which will result in a gain.
The Company owns other land parcels in Missouri, which it is actively trying to
sell.
Condensed results of operations for the Casino Magic Bay St. Louis and Boomtown
Biloxi casinos and the Turf Paradise horse racing facility for the years ended
December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------
1999 1998 (a) 1997 (b)
----------------- ----------------- -----------------
(in thousands)
<S> <C> <C> <C>
Revenues $174,380 $100,014 $ 46,655
Expenses 145,066 86,051 40,479
----------------- ----------------- ----------------
Operating income 29,314 13,963 6,176
Interest expense (income), net 86 339 (153)
----------------- ----------------- ----------------
Income before income taxes $ 29,228 $ 13,624 $ 6,329
================= ================= ================
</TABLE>
(a) Includes the results of Casino Magic Bay St. Louis from October 15, 1998
(see Note 5).
(b) Includes the results of Boomtown Biloxi from June 30, 1997 (see Note 5).
Note 5 - Acquisitions
Casino Magic Argentina On October 8, 1999, the Company purchased the 49%
minority interest not owned by the Company in Casino Magic Argentina for
$16,500,000 in cash. The Casino Magic Argentina operations consist of two
casinos in the Province of Neuquen, Argentina. The Company operates the two
casinos under
22
<PAGE>
an exclusive concession contract with the Province that is currently scheduled
to expire in December 2006. The Company and the province are in discussions to
possibly extend such concession contract for an additional ten years. The
$12,300,000 purchase price in excess of the minority interest of approximately
$4,200,000 is being amortized over the extended life of the concession contract
beginning October 1999.
Casino Magic Acquisition On October 15, 1998, the Company acquired Casino Magic,
Corp. (the "Casino Magic Merger"). The Company paid cash of approximately
$80,904,000 for Casino Magic's common stock. At the date of the acquisition, the
Company had purchased 792,900 common shares of Casino Magic on the open market,
at a total cost of approximately $1,615,000. The Company 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 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. Assets
acquired and liabilities assumed were, when necessary, written up or down to
their fair market values based on financial analyses, which considered the
impact of general economic, financial and market conditions. 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 Company anticipates such
goodwill will be reduced by approximately $10,277,000 in connection with the
pending sale of Casino Magic Bay St. Louis in 2000 (see Note 4). The
amortization of this goodwill is not deductible for income tax purposes. At
December 31, 1999 and 1998, accumulated amortization was $1,350,000 and
$262,000, respectively.
Boomtown, Inc. On June 30, 1997, pursuant to the Agreement and Plan of Merger
dated as of April 23, 1996, the Company acquired Boomtown (the "Boomtown
Merger"). As result of the Boomtown Merger, Boomtown became a wholly owned
subsidiary of the Company and each share of Boomtown common stock was converted
into the right to receive 0.625 of a share of the Company's common stock.
The Boomtown Merger was accounted for under the purchase method of accounting
for a business combination. The purchase price of the Boomtown 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, the estimated fair values
approximated their carrying values. The Boomtown Merger generated approximately
$15,302,000 of excess acquisition cost over the recorded value of the net assets
acquired, all of which was allocated to goodwill, to be amortized over 40 years.
The Company anticipates such goodwill will be reduced by approximately
$3,054,000 in connection with the pending sale of Boomtown Biloxi in 2000 (see
Note 4). The amortization of the goodwill is not deductible for income tax
purposes. At December 31, 1999 and 1998, accumulated amortization was $773,000
and $375,000, respectively.
Pro Forma Results of Operations The following unaudited pro forma results of
operations were prepared under the assumption that the acquisitions of Boomtown
and Casino Magic had occurred as of January 1, 1997. The historical results of
operations of Boomtown prior to the Company's June 30, 1997 acquisition
(excluding the approximately $1,900,000 net loss associated with Boomtown's Las
Vegas property, which was sold on June 30, 1997), and Casino Magic prior to the
Company's October 15, 1998 acquisition were combined with the Company's results
for 1998 and 1997. Pro forma adjustments were made for the following: (a) the
early retirement of $102,200,000 principal amount of the Boomtown 11.5% Notes;
(b) the issuance of the 9.5% Notes; (c) redemption of the Casino Magic 11.5%
Notes; (d) the borrowing of approximately $222,615,000 to redeem the Casino
Magic 11.5% Notes ($141,515,000) and to purchase Casino Magic's common stock
($81,100,000); (e) amortization of the costs associated with amending the Bank
Credit Facility to provide the funds necessary to purchase Casino Magic's common
stock and redeem the Casino Magic 11.5% Notes; (f) elimination of compensation
expense associated with three Casino Magic executives who resigned and will not
be replaced; (g) elimination of expenses associated with Casino Magic's board of
directors; (h) the amortization of the excess purchase price over net assets
acquired for both the Casino
23
<PAGE>
Magic Merger and the Boomtown Merger; (i) the amortization of the premium
associated with the purchase accounting write-up of the Casino Magic 13% Notes;
and (j) the tax expense associated with the net pro forma adjustments.
Pinnacle Entertainment, Inc.
Unaudited Pro Forma Combined Consolidated Results of Operations
<TABLE>
<CAPTION>
For the years ended
December 31,
-------------------------------------------
1998 1997
------------------- -------------------
(in thousands, except per share data)
<S> <C> <C>
Revenues:
Gaming $516,622 $467,328
Racing 66,871 68,844
Other 82,846 74,659
------------------- -------------------
$666,339 $610,831
=================== ===================
Operating income (a) $ 74,752 $ 55,569
=================== ===================
Income before extraordinary item $ 7,678 $ 4,323
Extraordinary item, redemption of the
Casino Magic 11.5% Notes $ 0 $ 11,039
------------------- -------------------
Net income (loss) $ 7,678 ($6,716)
Dividend requirement on preferred stock $ 0 $ 1,520
------------------- -------------------
Net income (loss) to common shareholders $ 7,678 ($8,236)
=================== ===================
Per common share:
Net income (loss) - basic $ 0.29 ($0.37)
Net income (loss) - diluted $ 0.29 ($0.37)
</TABLE>
____
(a) In 1998, the operating income is inclusive of costs of $6,243,000,
related to the Casino Magic merger.
The unaudited pro forma combined results of operations are for comparative
purposes only and are not necessarily indicative of the operating results or
financial position that would have occurred if the Boomtown Merger and the
Casino Magic Merger had occurred as of January 1, 1997.
Note 6 - Expansion and Development
Belterra 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 for the Belterra Casino Resort.
Pinnacle Entertainment owns 97% of the Belterra Casino Resort (currently under
construction), with the remaining 3% held by a non-voting local partner.
In July 1999, the Company broke ground on the Belterra Casino Resort and is
continuing on schedule for an opening in August 2000. The project is located in
Switzerland County, Indiana, which is approximately 35 miles southwest of
Cincinnati, Ohio and will be the gaming site most readily accessible to major
portions of northern and central Kentucky, including the city of Lexington.
The Company plans to spend approximately $200,000,000 ($30,635,000 of which has
been spent as of December 31, 1999) in total costs (including land, capitalized
interest, pre-opening expenses, organizational expenses and community grants) on
the Belterra Casino Resort, which will feature a 15-story, 308-room hotel, a
cruising riverboat casino with approximately 1,800 gaming positions, an 18-hole
championship golf course, a 1,500 seat entertainment facility, four restaurants,
retail areas and other amenities.
In October 1999, the Company acquired the Ogle Haus Inn, a 54-room hotel
operation in the city of Vevay, for $2,500,000. The Company is utilizing the
facility principally for the Belterra Casino Resort pre-opening operations,
including housing various key management staff, converting rooms into offices
and training hotel
24
<PAGE>
and food and beverage employees. Operational costs of the Ogle Haus Inn, as well
as all other pre-opening costs of Belterra Casino Resort, are being expensed as
incurred. After completion of Belterra Casino Resort, the Ogle Haus will be
operated as a hotel and restaurant facility and will provide overflow capacity
for Belterra Casino Resort.
Lake Charles In November 1999, the Company filed an application for the
fifteenth and final gaming license to be issued by the Louisiana Gaming Control
Board. The Company was one of five applicants for such license. The Company's
application is seeking the approval to operate a cruising riverboat casino,
hotel and golf course resort complex in Lake Charles, Louisiana. The Louisiana
Gaming Control Board has not awarded such license and there are no assurances
such license will be issued to the Company or any other applicant.
In connection with such submittal, Pinnacle Entertainment has entered into an
option agreement with the Lake Charles Harbor and Terminal District to lease
225-acres of unimproved land from the District upon which such resort complex
would be constructed. The initial lease option is for a six-month period ending
January 2000, with three six-month renewal options, at a cost of $62,500 per
six-month option. If the lease option is exercised, the annual rental payment
would be $815,000, with a maximum annual increase of 5%. The term of the lease
would be for a total of up to 70 years, with an initial term of 10 years and six
consecutive renewal options of 10 years each. The lease would require the
Company to develop certain on-and off- site improvements at the location. If
awarded the license by the Louisiana Gaming Control Board, the Company
anticipates building a resort similar in design and scope to the Belterra Casino
Resort currently under construction in Indiana.
Note 7 - Short Term Investments
As of December 31, 1999, short term held to maturity investments consisted of
investments in commercial paper of $123,428,000. The commercial paper consisted
of investment grade instruments issued by major corporations and financial
institutions that are highly liquid and have original maturities between three
months and one year. Commercial paper held as short term investments is carried
at cost which approximates market value.
At December 31, 1998, short term available for sale investments consisted of
investments in equity securities of approximately $3,179,000.
Interest income for the years ended December 31, 1999, 1998 and 1997 was
$7,927,000, $1,842,000 and $1,294,000, respectively.
Note 8 - Property, Plant and Equipment
Property, plant and equipment held at December 31, 1999, and 1998 consisted of
the following:
December 31,
--------------------------
1999 (a) 1998
------------ ----------
(in thousands)
Land and land improvements $ 71,052 $141,536
Buildings 253,126 393,200
Equipment 134,701 174,270
Vessel and barges 65,580 76,605
Construction in progress 32,813 46,297
------------ ----------
557,272 831,908
Less accumulated depreciation 119,557 228,996
------------ ----------
$ 437,715 $602,912
============ ==========
(a) Excludes $213,992,000 of assets and $69,578,000 of accumulated
depreciation related to assets classified as held for sale (see Note
4).
25
<PAGE>
Note 9 - Secured and Unsecured Notes Payable
Notes payable at December 31, 1999, and 1998 consisted of the following:
December 31,
-----------------------
1999 1998
--------- ----------
(in thousands)
Secured notes payable, Bank Credit Facility $ 0 $270,000
Unsecured 9.25% Notes 350,000 0
Unsecured 9.5% Notes 125,000 125,000
Casino Magic 13% Notes (a) 119,814 121,685
Hollywood Park-Casino debt obligation 22,566 0
Other secured notes payable 5,785 16,569
Other unsecured notes payable 2,315 5,288
Capital lease obligations 0 641
--------- ----------
625,480 539,183
Less current maturities 6,782 11,564
--------- ----------
$618,698 $527,619
========= ==========
(a) Includes a write up to fair market value (net of amortization), as
of the October 15, 1998 acquisition of Casino Magic, of $6,939,000 and
$8,810,000, as of December 31, 1999 and 1998, respectively, as
required under the purchase method of accounting for a business
combination.
Secured Notes Payable, Bank Credit Facility Under the terms of the 1998 bank
credit facility with a syndicate of banks, expiring in 2003 (the "Credit
Facility"), the Company chose in May of 1999 to reduce the amount available
under the facility from $300,000,000 (with an option to increase to
$375,000,000), to $200,000,000 (with an option to increase to $300,000,000).
The Credit Facility also provides for letters of credit up to $30,000,000 and
swing line loans of up to $10,000,000.
At December 31, 1998, the Company had outstanding borrowings under the Credit
Facility of $270,000,000. Through February of 1999, the Company borrowed an
additional $17,000,000, before repaying all $287,000,000 with a portion of the
proceeds from the issuance of the 9.25% Notes (see below). The Credit Facility
has remained unused since the February 1999 repayment, and there was no
outstanding balance at December 31, 1999.
Interest rates on borrowings under the Credit Facility are determined by adding
a margin, which is based upon the Company's debt to cash flow ratio (as defined
in the Credit Facility), to either the LIBOR rate or Prime Rate (at the
Company's option). The Company also pays a quarterly commitment fee on the
unused balance of the Credit Facility. The Credit Facility allows for interest
rate swap agreements or other interest rate protection agreements, to a maximum
notional amount of $300,000,000. Presently, the Company does not use such
financial instruments.
Unsecured 9.25% and 9.5% Notes In February of 1999 the Company issued
$350,000,000 of 9.25% Senior Subordinated Notes due 2007 (the "9.25% Notes"),
the proceeds of which were used to pay the outstanding borrowings on the Credit
Facility, fund current capital expenditures, and other general corporate
purposes.
In August of 1997 the Company issued $125,000,000 of 9.5% Senior Subordinated
Notes due 2007 (the "9.5% Notes"). On January 29, 1999, the Company 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 and increased the size of
allowed borrowings under the Credit Facility. The Company paid a consent fee of
$50.00 per $1,000 principal amount of the 9.5% Notes, which, combined with other
transactional expenses, is being amortized over the remaining term of the 9.5%
Notes.
26
<PAGE>
The 9.25% and 9.5% Notes are redeemable, at the option of the Company, in whole
or in part, on the following dates, at the following premiums to face value:
9.25% Notes redeemable: 9.5% Notes redeemable:
------------------------------------- -----------------------------------
after February 14, at a premium of After July 31, at a premium of
------------------- ----------------- ------------------ ---------------
2003 104.625% 2002 104.750%
2004 103.083% 2003 102.375%
2005 101.542% 2004 101.188%
2006 100.000% 2005 100.000%
2007 maturity 2006 100.000%
2007 maturity
Both the 9.25% and 9.5% Notes are unsecured obligations of the Company,
guaranteed by all material restricted subsidiaries of the Company, as defined in
the indentures. The subsidiaries which do not guaranty the debt include certain
Casino Magic subsidiaries, principally Casino Magic of Louisiana, Corp. (Casino
Magic Bossier City) and the Casino Magic Argentina subsidiaries. The indentures
governing the 9.25% and 9.5% Notes, as well as the Credit Facility, contain
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 interests in its
subsidiaries, or enter into certain mergers and consolidations.
Casino Magic 13% Notes In August of 1996 Casino Magic of Louisiana, Corp.
(Casino Magic Bossier City) issued $115,000,000 of 13% First Mortgage Notes due
2003 (the "Casino Magic 13% Notes"), with contingent interest equal to 5% of
Casino Magic Bossier City's adjusted consolidated cash flow (as defined by the
indenture). 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. The Casino Magic 13% Notes are redeemable, at the option of the Company,
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 through maturity at 102.166%.
In December of 1998, the Company completed the post Casino Magic Merger change
of control purchase offer whereby $2,125,000 of principal amount of the Casino
Magic 13% Notes was tendered to the Company at a price of 101% of face value.
At December 31, 1999 $2,115,000 of contingent interest was accrued. This entire
amount was paid with the February 15, 2000 scheduled interest payment.
The indenture governing the Casino Magic 13% Notes contains certain covenants
limiting the subsidiaries that own Casino Magic Bossier City from engaging in
lines of business other than the current gaming operations at 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.
Hollywood Park-Casino Debt Obligation In connection with the disposition of the
Hollywood Park-Casino to Churchill Downs (see Note 3), the Company recorded a
long-term lease finance obligation of $23,000,000. Annual lease payments to
Churchill Downs of $3,000,000 will be applied as principal and interest on the
finance debt. The debt is being amortized over 10 years (the initial lease term
with Churchill Downs).
27
<PAGE>
Annual Maturities As of December 31, 1999, annual maturities of secured and
unsecured notes payable are as follows:
Year ending
December 31: (in thousands)
------------ --------------
2000 $ 6,782
2001 5,338
2002 5,655
2003 116,667
2004 2,329
Thereafter 488,709
--------------
$625,480
==============
Note 10 - Income Taxes
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 Accounting for Income Taxes, whereby deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases.
The composition of the Company's income tax expense (benefit) for the years
ended December 31, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
Current Deferred Total
-------------- ------------- -------------
(in thousands)
<S> <C> <C> <C>
Year ended December 31, 1999:
U.S. Federal $ 10,986 $21,963 $32,949
State 2,392 3,137 5,529
Foreign 2,448 0 2,448
-------------- ------------- -------------
$ 15,826 $25,100 $40,926
============== ============= =============
Year ended December 31, 1998:
U.S. Federal $ 5,793 $ 97 $ 5,890
State 2,511 41 2,552
-------------- ------------- -------------
$ 8,304 $ 138 $ 8,442
============== ============= =============
Year ended December 31, 1997:
U.S. Federal ($1,616) $ 6,972 $ 5,356
State (698) 1,192 494
-------------- ------------- -------------
($2,314) $ 8,164 $ 5,850
============== ============= =============
</TABLE>
The following table reconciles the Company's income tax expense (based on its
effective tax rate) to the federal statutory tax rate of 35%:
<TABLE>
<CAPTION>
For the years ended December 31,
----------------------------------------
1999 1998 1997
---------- ----------- -----------
<S> <C> <C> <C>
(in thousands)
Income before income tax expense, at the
statutory rate $29,741 $ 7,348 $4,935
State income taxes, net of federal tax benefits 5,529 2,552 494
Non-deductible impairment write-down on
Hollywood Park-Casino (see Note 3) 7,157 0 0
Other non-deductible expenses (1,501) (1,458) 421
---------- ----------- -----------
Income tax expense $40,926 $ 8,442 $5,850
========== =========== ===========
</TABLE>
28
<PAGE>
At December 31, 1999, and 1998, the tax effects of temporary differences that
gave rise to significant portions of the deferred tax assets and deferred tax
liabilities were:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
Current deferred tax assets (liabilities): (in thousands)
<S> <C> <C>
Workers' compensation insurance reserve $ 1,059 $ 1,029
General liability insurance reserve 1,463 1,430
Write off of investment in Kansas Race Track and
excess loss recapture 0 7,139
Vacation and sick pay accrual 1,584 1,709
Sale of Hollywood Race Track & Casino (22,000) 0
Other (1,648) 7,118
------------- -------------
Net current deferred tax assets (liabilities) ($19,542) $ 18,425
============= =============
Non-current deferred tax assets (liabilities):
Net operating loss carryforwards $ 24,615 $ 29,279
Excess tax basis over book value of acquired assets 11,736 11,736
Alternative minimum tax credits 8,395 7,207
Los Angeles revitalization zone tax credits 11,717 11,717
Less valuation allowance (23,490) (23,490)
Depreciation and amortization (30,160) (41,125)
Other (3,639) 4,276
------------- -------------
Net non-current deferred tax liabilities ($826) ($400)
============= =============
</TABLE>
Current income taxes payable of $8,773,000 and $9,935,000 at December 31, 1999
and 1998 respectively are included in other accrued liabilities in the
accompanying consolidated balance sheets.
Prior to 1999 the Company earned a substantial amount of California tax credits
related to the ownership of and operation of the Hollywood Park Race Track and
Hollywood Park-Casino as well as the Crystal Park Card Club Casino, which were
located in the Los Angeles Revitalization Tax Zone (LARZ). At December 31, 1999
the amount subject to carry forward of these unused California tax credits (net
of valuation allowance) was approximately $3,520,000, which can be used to
reduce certain future California tax liabilities. The LARZ credits will expire
between 2007 to 2012.
As of December 31, 1999, the Company had federal net operating loss ("NOL") and
capital loss ("CL") carryforwards of approximately $64,700,000, and $5,600,000,
respectively, comprised principally of NOL carryforwards acquired in the Casino
Magic and Boomtown Mergers, and CL carryforwards resulting from the disposition
of Boomtown's Las Vegas property. The NOL carryforwards expire on various dates
through 2018, and the CL carryforwards expire on various dates through 2002. In
addition, the Company has approximately $400,000 of foreign tax credits related
to Casino Magic Argentina operations, which expire in 2000, and approximately
$8,400,000 of alternative minimum tax credits, which do not expire. The
alternative minimum tax credits can reduce future federal income taxes but
generally cannot reduce federal income taxes paid below the amount of the
alternative minimum tax.
Under several provisions of the Internal Revenue Code (the "Code") and the
regulations promulgated there under, the utilization of NOL, CL and tax credit
carryforwards to reduce tax liability is restricted under certain circumstances.
Events, which cause such a limitation, include, but are not limited to, certain
changes in the ownership of a corporation. Both the Boomtown Merger and the
Casino Magic Merger caused such a change in ownership with respect to Boomtown
and Casino Magic. As a result, the Company's use of approximately $13,800,000
and $50,900,000 of Boomtown and Casino Magic's NOL carryforwards, respectively,
and $3,400,000 and $3,700,000 of Boomtown and Casino Magic's tax credit
carryforwards, respectively, is subject to certain limitations imposed by
Sections 382 and 383 of the Code. These various limitations restrict the amount
of NOL, CL and tax credit carryforwards that may be used by the Company in any
taxable year and, consequently, are expected to defer the Company's use of a
substantial portion of such carryforwards and may ultimately prevent the
Company's use of a portion thereof. Therefore, a valuation allowance has been
recorded related to the Boomtown and Casino Magic carryforwards.
29
<PAGE>
Note 11- Stockholders' Equity
In September 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 (see Note 15) to four
executives hired on 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, which approval was granted at the shareholder
meeting held May 25, 1999 (the "Measurement Date") at which time the stock price
was $14.13. Accounting Principles Board Opinion No. 25 requires that
compensation be determined as of 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 for
the year ended December 31, 1999, was $828,000.
In August 1998, the Company announced its intention to repurchase and retire up
to 20% or approximately 5,256,000 shares of its then issued and outstanding
common stock on the open market or in negotiated transactions. As of December
31, 1999 and 1998, the Company had repurchased and retired 500,000 shares at a
total cost of approximately $5,540,000 (with the last purchase being made on
September 28, 1998). At December 31, 1999, under the most restrictive debt
agreement, the Company could spend a maximum of $15,000,000 to buy back its
common stock.
On June 30, 1997, the Company acquired Boomtown and each share of Boomtown
common stock was converted into the right to receive 0.625 of a share of the
Company's common stock. Approximately 5,362,850 net shares of the Company's
common stock were issued in connection with such transaction. In connection
with the Boomtown Merger, the Company purchased and retired 446,491 shares of
its common stock held by a former Boomtown shareholder.
Note 12- Lease Obligations
The Company leases certain equipment for use in gaming operations and general
office equipment. Minimum lease payments required under operating leases that
have initial terms in excess of one year as of December 31, 1999 are as follows:
Period (in thousands)
------ --------------
2000 $6,876
2001 5,954
2002 5,584
2003 5,181
2004 4,453
Thereafter 3,743
Total rent expense for these long-term lease obligations for the years ended
December 31, 1999, 1998 and 1997 was $6,481,000, $5,194,000 and $2,453,000,
respectively.
Note 13 - Employee Benefit Plans
The Company offers a 401(k) Investment Plan (the "401(k) Plan") which is subject
to the provisions of the Employee Retirement Income Security Act of 1994. The
401(k) Plan is available to all employees of the Company (except those covered
by collective bargaining agreements) who have completed a minimum of 500 hours
of service. Employees may contribute up to 18% (up to 15% through June 30,
1999) of pretax income (subject to the legal limitation of $10,000 for 1999).
The Company offers discretionary matching, and for the years ended December 31,
1999, 1998 and 1997 matching contributions to the 401(k) Plan totaled
$1,437,000, $987,000 and $717,000, respectively.
30
<PAGE>
The Company merged the 401(k) plans of Boomtown and Casino Magic into the
Company's 401(k) Plan on July 1, 1998 and January 1, 1999, respectively.
Prior to the sale of the Hollywood Park Race Track in September of 1999, the
Company contributed to several collectively-bargained multi-employer pension and
retirement plans, which were administered by unions, and to a pension plan
covering non-union employees, administered by an association of race track
owners. Amounts charged to pension cost and contributed to these plans for the
years ended December 31, 1999, 1998 and 1997 totaled $948,000, $1,690,000 and
$1,842,000, respectively. Contributions to the collectively-bargained plans
were determined in accordance with the provisions of negotiated labor contracts
and generally based upon the number of employee hours or days worked.
Contributions to the non-union plans were based on the covered employees'
compensation. It is management's belief that no withdrawal liability existed
for these plans at the time of the sale of the race track.
On January 1, 2000, the Company instituted a nonqualified Executive Deferred
Compensation Plan (the "Deferred Plan") to permit certain key employees to defer
receipt of current compensation in order to provide retirement benefits on
behalf of such employees. The Company will not make matching contributions to
the Deferred Plan. As a nonqualified plan (as defined by the Internal Revenue
Service Code), all deferred compensation remains within the general assets of
the Company and would be subject to claims of general creditors in the unlikely
case of insolvency. The Company has the right to amend, modify or terminate the
Deferred Plan.
Note 14 - Related Party Transactions
In June 1998, the Company and R.D. Hubbard Enterprises, Inc. ("Hubbard
Enterprises"), which is wholly owned by Mr. Hubbard, (the Company's Chairman and
Chief Executive Officer) entered into a new Aircraft Time Sharing Agreement.
The former agreement was entered into in November 1993. The June 1998 Aircraft
Time Sharing Agreement is identical to the former agreement in all respects,
except for the type of aircraft covered by the agreement. The Aircraft Time
Sharing Agreement expired on December 31, 1999, and now automatically renews
each month unless written notice of termination is given by either party at
least two weeks before a renewal date. The Company reimburses Hubbard
Enterprises for expenses incurred as a result of the Company's use of the
aircraft, which totaled approximately $176,000 in 1999, $72,000 in 1998 and
$106,000 in 1997.
In August 1998, the Company received a promissory note for up to $3,500,000 from
Paul Alanis (effective January 1, 1999, Mr. Alanis became the Company's
President and Chief Operating Officer and in October 1999 became a director).
At December 31, 1998, the Company had loaned Mr. Alanis $3,232,000. Interest on
the promissory note was at the prime interest rate. The principal amount of the
promissory note, along with accrued interest, was paid in full in June 1999.
Timothy J. Parrott (a director and member of the Executive Committee of the
Company's Board of Directors) purchased 270,738 shares of Boomtown common stock
in connection with Boomtown's 1988 acquisition of Boomtown Hotel & Casino, Inc.
(which operates Boomtown Reno). Mr. Parrott paid an aggregate purchase price
for the common stock of $222,000, of which $1,000 was paid in cash and $221,000
was paid by a promissory note secured by a pledge to Boomtown of all of the
shares owned by Mr. Parrott. As of October 31, 1998, Mr. Parrott resigned his
position as Chairman of Boomtown, and the Company retained him as a consultant
to provide services relating to gaming and other business issues. Mr. Parrott
was retained for a three year period, with an annual retainer of $350,000 with
health and disability benefits equivalent to those he received as Chairman of
Boomtown. Mr. Parrott's $221,000 note will be forgiven in three equal parts on
each anniversary of the consulting agreement.
Marlin Torguson, who beneficially owned approximately 21.5% of the then
outstanding common shares of Casino Magic, agreed, in connection with the Casino
Magic acquisition, to vote his Casino Magic shares in favor of the acquisition
by the Company. In addition, Mr. Torguson agreed to continue to serve as an
employee of Casino Magic for three years following the acquisition, and during
such three year period, not to
31
<PAGE>
compete with the Company or Casino Magic in any jurisdiction in which either the
Company or Casino Magic operates. The Company appointed Mr. Torguson to its
board of directors. The Company issued to Mr. Torguson 60,000 shares of the
Company's common stock as compensation for his three-year service as an
employee, and will pay him $300,000 for each year, during a three-year period,
for his non-compete agreement. In addition, the Company issued Mr. Torguson
30,000 options to acquire the Company's common stock as of the October 15, 1998,
acquisition of Casino Magic, priced at the closing price of the Company's common
stock on that date. The foregoing payments have been and will be made to Mr.
Torguson whether or not the Company or Casino Magic terminates Mr. Torguson's
employment, except for termination for cause.
Note 15 - Stock Option Plans
The Company has two stock option plans that provide for the granting of stock
options to officers and key employees. The objectives of these plans include
attracting and retaining the best personnel, providing for additional
performance incentives, and promoting the success of the Company.
In 1996, the shareholders of the Company adopted the 1996 Stock Option Plan (the
"1996 Plan"), which provides for the issuance of up to 900,000 shares. Except
for the provisions governing the number of shares issuable under the 1996 Plan
and except for provisions which reflect changes in tax and securities laws, the
provisions of the 1996 Plan are substantially similar to the provisions of the
prior plan adopted in 1993. The 1996 Plan is administered and terms of option
grants are established by the Board of Directors' Compensation Committee. Under
the terms of the 1996 Plan, options alone or coupled with stock appreciation
rights may be granted to selected key employees, directors, consultants and
advisors of the Company. Options become exercisable ratably over a vesting
period as determined by the Compensation Committee and expire over terms not
exceeding ten years from the date of grant, one month after termination of
employment, or six months after the death or permanent disability of the
optionee. The purchase price for all shares granted under the 1996 Plan shall
be determined by the Compensation Committee, but in the case of incentive stock
options, the price will not be less than the fair market value of the common
stock at the date of grant. On April 26, 1996, the Company amended the non-
qualified stock option agreements issued through this date, to lower the per
share price of the outstanding options to $10.00.
As of December 31, 1999, the 1996 Stock Option Plan is the only plan with stock
option awards available for grant; all of the 625,000 shares eligible for
issuance under the 1993 Stock Option Plan have been granted. Of the 900,000
shares eligible for issuance under the 1996 Stock Option Plan, 554,449 have been
granted. In addition, 721,077 shares (with a weighted average exercise price of
$9.98 per share) of Pinnacle Entertainment common stock are issuable upon
exercise of options granted under pre-merger stock option plans of Boomtown. Of
such Boomtown stock options, 711,742 (with a weighted average exercise price of
$9.99) are currently vested. In addition, 256,136 shares (with a weighted
average exercise price of $24.57 per share) of Pinnacle Entertainment common
stock are issuable upon exercise of options granted under pre-merger stock
options plans of Casino Magic. Of such Casino Magic stock options, 169,590
(with a weighted average exercise price of $23.65 per share) are currently
vested.
On September 10, 1998, the Company granted 817,500 options (625,000 at an
exercise price of $10.1875, and 192,500 at an exercise price of $18.00) outside
of the 1993 and 1996 Plans to the new executive management team hired as of
January 1, 1999. As of December 31, 1999, none of these options were exercised.
32
<PAGE>
The following table summarizes information related to shares under option and
shares available for grant under the Company's 1993 and 1996 Plans:
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
of Shares Price
--------------- ---------------
<S> <C> <C>
Options outstanding at December 31, 1996 622,500 $10.00
Granted 261,000 $14.75
Exercised, expired or forfeited (26,001) $10.00
--------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1997 857,499 $11.50
Granted 219,188 $12.66
Exercised, expired or forfeited (249,866) $10.00
--------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1998 826,821 $12.02
Granted 278,500 $11.73
Exercised, expired or forfeited (253,478) $11.72
--------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1999 851,843 $12.01
==================================================================================================
Options exercisable at:
December 31, 1999 474,426 $11.86
December 31, 1998 584,846 $10.00
December 31, 1997 696,813 $10.00
==================================================================================================
</TABLE>
The following table summarizes information about stock options under the 1993
and 1996 Plans outstanding as of December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Exercisable
----------- -----------
Weighted Weighted
Number of Average Number of Average
Range of Shares at Exercise Shares at Exercise
Exercise Price 12/31/99 Price 12/31/99 Price
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$8.63 to $10.00 457,633 $ 9.80 271,633 $ 9.94
$10.19 to $14.81 363,210 $ 14.34 197,460 $ 14,34
$16.50 to $18.19 31,000 $ 17.33 5,333 $ 17.31
--------------------------------------------------------------------------------------------
$8.63 to $18.19 851,843 $ 12.01 474,426 $ 11.86
============================================================================================
</TABLE>
The weighted average remaining contractual life of the outstanding options under
the Company's 1993 and 1996 Plans as of December 31, 1999 is approximately 8.3
years.
Accounting for Stock-Based Compensation
The Company estimated the fair market value of stock options using an option-
pricing model taking into account, as of the date of grant, the exercise price
and expected life of the option, the then current price of the underlying stock
and its expected volatility, expected dividend on the stock, and the risk-free
interest rate for the expected term of the options.
In computing the stock-based compensation, the following assumptions were made:
<TABLE>
<CAPTION>
Risk-Free
Interest Expected Expected
Rate Expected Life Volatility Dividends
-------------- ------------------ -------------- ---------------
<S> <C> <C> <C> <C>
Options granted in the following periods:
Third quarter 1997 5.0% 3 years 47.8% None
Third quarter 1998 4.5% 10 years 40.1% None
Fourth quarter 1998 4.5% 3 to 10 years 40.1% None
Fourth quarter 1999 4.6% 10 years 47.3% None
</TABLE>
33
<PAGE>
The following sets forth the pro forma financial results related to the
Company's employee stock-based compensation plans, with respect to the options
estimated fair value, based on the Company's stock price at the grant date:
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------------------------------
1999 1998 1997
------------------- ------------------- -------------------
(in thousands, except per share data)
<S> <C> <C> <C>
Net income before stock-based compensation expense $44,047 $13,169 $ 8,670
Stock-based compensation expense 1,510 1,905 629
------------------- ------------------- -------------------
Pro forma net income $42,537 $11,264 $ 8,041
=================== =================== ===================
Dividend requirements on convertible preferred stock $ 0 $ 0 $ 1,520
Pro forma net income attributed to common stockholders $42,537 $11,264 $ 6,521
=================== =================== ===================
Net income per common share:
Net income - basic $ 1.64 $ 0.43 $ 0.30
Net income - diluted $ 1.62 $ 0.43 $ 0.29
Number of shares - basic 25,966 26,115 22,010
Number of shares - diluted 26,329 26,115 22,340
</TABLE>
Note 16 - Commitments and Contingencies
Belterra Casino Resort The Company plans to spend approximately $200,000,000
($30,635,000 of which has been spent as of December 31, 1999) in total costs
(including land, capitalized interest, pre-opening expenses, organizational
expenses and community grants) on the Belterra Casino Resort, which will feature
a 15-story, 308-room hotel, a cruising riverboat casino with approximately 1,800
gaming positions, an 18-hole championship golf course, a 1,500 seat
entertainment facility, four restaurants, retail areas and other amenities. As
of December 31, 1999, the Company has contractual commitments of $113,301,000
for construction contracts executed as of such date.
Employment and Severance Agreements The Company has employment agreements with
five employees (including three officers) which grant these employees the right
to receive their annual salary for up to the balance of the contract period,
plus extension of certain benefits and the immediate vesting of certain stock
options, if the employee terminates the contract for good reason (as defined and
which definition includes a change in control), or if the Company terminates the
employee without cause (as defined). At December 31, 1999, the maximum
contingent liability for salary and incentive compensation under these
agreements was approximately $3,850,000.
In addition, the Company has severance agreements with three employees which
grant the employees the right to receive up to two and one-half times their
annual salary and two and one-half times their incentive compensation, as well
as the extension of certain benefits, if there is a change in control (as
defined). At December 31, 1999, the maximum contingent liability for salary and
incentive compensation under these agreements was approximately $1,574,000.
Eleven employees have the right to receive severance payments if their
employment is terminated. At December 31, 1999, the maximum contingent
liability for these severance payments was approximately $195,000. There are
also three former employees entitled to future compensation under severance
agreements. At December 31, 1999, the contingent liability for such
compensation was approximately $251,000.
The Company also has (i) a consulting agreement until October 31, 2001, with a
former employee (now a director) for which the contingent liability at December
31, 1999 was $788,000, and (ii) a non-compete agreement with a director for
which the contingent liability at December 31, 1999 was $550,000.
Legal Poulos Lawsuit A class action lawsuit was filed on April 26, 1994, in the
--------------
United States District Court, Middle District of Florida (the "Poulos Lawsuit"),
naming as defendants 41 manufacturers, distributors and casino operators of
video poker and electronic slot machines, including Casino Magic. The lawsuit
alleges that the defendants have engaged in a course of fraudulent and
misleading conduct intended to induce
34
<PAGE>
people to play such games based on false beliefs concerning the operation of the
gaming machines and the extent to which there is an opportunity to win. The suit
alleges violations of the Racketeer Influenced and Corrupt Organization Act, as
well as claims of common law fraud, unjust enrichment and negligent
misrepresentation, and seeks damages in excess of $6 billion. On May 10, 1994, a
second class action lawsuit was filed in the United States District Court,
Middle District of Florida (the "Ahern Lawsuit"), naming as defendants the same
defendants who were named in the Poulos Lawsuit and adding as defendants the
owners of certain casino operations in Puerto Rico and the Bahamas, who were not
named as defendants in the Poulos Lawsuit. The claims in the Ahern Lawsuit are
identical to the claims in the Poulos Lawsuit. Because of the similarity of
parties and claims, the Poulos Lawsuit and Ahern Lawsuit were consolidated into
one case file in the United States District Court, Middle District of Florida.
On December 9, 1994 a motion by the defendants for change of venue was granted,
transferring the case to the United States District Court for the District of
Nevada, in Las Vegas. In an order dated April 17, 1996, the court granted
motions to dismiss filed by Casino Magic and other defendants and dismissed the
Complaint without prejudice. The plaintiffs then filed an amended Complaint on
May 31, 1996 seeking damages against Casino Magic and other defendants in excess
of $1 billion and punitive damages for violations of the Racketeer Influenced
and Corrupt Organizations Act and for state common law claims for fraud, unjust
enrichment and negligent misrepresentation. Casino Magic and other defendants
have moved to dismiss the amended Complaint. The Company believes that the
claims are without merit and does not expect that the lawsuit will have a
materially adverse effect on the financial condition or results of operations of
the Company.
Casino America Litigation On or about September 6, 1996, Casino America, Inc.
-------------------------
commenced litigation in the Chancery Court of Harrison County, Mississippi,
Second Judicial District, against Casino Magic, and James Edward Ernst, its then
Chief Executive Officer, seeking injunctive relief and unspecified compensatory
damages in an amount to be proven at trial as well as punitive damages. The
plaintiff claims, among other things, that the defendants (i) breached the terms
of an agreement they had with the plaintiff, (ii) tortiously interfered with
certain of the plaintiff's business relations; and (iii) breached covenants of
good faith and fair dealing they allegedly owed to the plaintiff. On or about
October 8, 1996, the defendants interposed an answer, denying the allegations
contained in the Complaint. On June 26, 1998, defendants filed a motion for
summary judgment. Thereafter, plaintiffs, in July of 1998, filed a motion to
reopen discovery. Both of these motions are pending. On November 30, 1999, the
matter was transferred to the First Judicial District Court for Harrison County,
Mississippi. No trial date has been set. While the Company cannot predict the
outcome of this action, it believes plaintiff's claims are without merit and
intends to vigorously defend this action.
Bus Litigation On May 9, 1999, a bus owned and operated by Custom Bus Charters,
--------------
Inc. was involved in an accident in New Orleans, Louisiana while en route to
Casino Magic in Bay St. Louis, Mississippi. To date, multiple deaths and
numerous injuries are attributed to this accident and the Company's
subsidiaries, Casino Magic Corp. and / or Mardi Gras Casino Corp., together with
several other defendants, have been named in thirty-eight (38) lawsuits, each
seeking unspecified damages due to the deaths and injuries sustained in this
accident. While the Company cannot predict the outcome of the litigation, the
Company believes Casino Magic is not liable for any damages arising from this
accident and the Company and its insurers intend to vigorously defend these
actions.
Skrmetta Lawsuit A suit was filed on August 14, 1998 in the Circuit Court of
----------------
Harrison County, Mississippi by the ground lessor of property underlying
Boomtown Biloxi landbased improvements in Biloxi, Mississippi (the "Project").
The lawsuit alleges that the plaintiff agreed to exchange the first two years'
ground rentals for an equity position in the Project based upon defendants'
purported assurances that a hotel would be constructed as a component of the
Project. Plaintiff seeks recovery in excess of $4,000,000 plus punitive
damages. No substantive developments in the matter occurred prior to July 30,
1999 when the court denied the defendants' motions to arbitrate, and to stay,
the matter. Trial of the matter will commence on March 28, 2000. The Company
believes that the claims are without merit and intends to contest the matter
vigorously.
The Company is party to a number of other pending legal proceedings in the
ordinary course of business, though management does not expect that the outcome
of such proceedings, either individually or in the aggregate, will have a
material effect on the Company's financial condition or results of operations.
35
<PAGE>
Note 17 - Unaudited Quarterly Information; Supplementary Financial Information
The following is a summary of unaudited quarterly financial data for the years
ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999
-------------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31,
--------------- ------------- --------------- --------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $150,675 $184,655 $199,529 $171,998
(Gain) loss on dispositions of assets, net $ 78 $(42,139) $ 0 $ 0
Pre opening costs $ 827 $ 684 $ 802 $ 707
Operating income $ 18,937 $ 70,246 $ 33,183 $ 21,838
Net income $ 3,971 $ 26,232 $ 9,711 $ 4,133
Net income per common share:
Net income - basic $ 0.15 $ 1.01 $ 0.38 $ 0.16
Net income - diluted $ 0.15 $ 0.98 $ 0.37 $ 0.16
</TABLE>
<TABLE>
<CAPTION>
1998
-------------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31,
--------------- ------------- --------------- --------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $158,218 $ 87,467 $103,125 $ 78,157
(Gain) loss on dispositions of assets, net $ 635 $ 1,586 $ 0 $ 0
Pre opening costs $ 361 $ 367 $ 93 $ 0
Operating income $ 18,906 $ 6,337 $ 17,602 $ 1,658
Net income (loss) $ 4,302 $ 1,972 $ 8,129 ($1,234)
Net income (loss) per common share:
Net income (loss) - basic $ 0.17 $ 0.08 $ 0.31 ($0.05)
Net income (loss) - diluted $ 0.17 $ 0.08 $ 0.31 ($0.05)
</TABLE>
(a) No dividends were paid in 1999 or 1998.
(b) Net income per share calculations for each quarter are based on the
weighted average number of shares outstanding during the respective periods;
accordingly, the sum of the quarters may not equal the full year income per
share.
(c) The Company acquired Casino Magic on October 15, 1998, and accounted for
the acquisition under the purchase method of accounting for a business
combination, and therefore, Casino Magic's results of operations are not
included prior to its acquisition date.
(d) Hollywood Park Race Track and Casino were sold on September 10, 1999, and
accordingly, results of operations after that date are excluded.
Note 18 - Fair Value of Financial Instruments
Due to the short term maturity of financial instruments classified as current
assets and liabilities, the fair value approximates the carrying value. It is
not practical to estimate the fair value of long term receivables and long term
debt instruments, other than the 9.25% Notes, 9.5% Notes and the Casino Magic
13% Notes, because there are no quoted market prices for transactions of a
similar nature.
Based on quoted market values at December 31, 1999, the carrying values of the
9.25% Notes and the 9.5% Notes approximate fair value and the carrying value of
$119,800,000 for the Casino Magic 13% Notes is below the fair value by
approximately $3,500,000.
36
<PAGE>
Note 19 - Consolidating Condensed Financial Information
The Company's subsidiaries (excluding Casino Magic of Louisiana, Corp., Casino
Magic Argentina and certain 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:
Pinnacle Entertainment, Inc.
Consolidating Condensed Financial Information
As of and for the year ended December 31, 1999
<TABLE>
<CAPTION>
(b)
(a) Wholly
Wholly Owned Consolidating Pinnacle
Pinnacle Owned Non- and Entertainment
Entertainment, Guarantor Guarantor Eliminating Inc.
Inc. Subsidiaries Subsidiaries Entries Consolidated
----- ------------ ------------ ------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
As of and for the year
ended Dec. 31, 1999
Balance Sheet
-------------
Current assets $220,216 $188,330 $ 28,928 $ 0 $ 437,474
Property, plant and equipment, net 36,671 311,165 89,879 0 437,715
Other non-current assets 28,369 40,788 44,599 56,463 170,219
Investment in subsidiaries 340,840 86,215 0 (427,055) 0
Inter-company 239,469 173,002 31,493 (443,964) 0
-------- -------- -------- ---------- ----------
$865,565 $799,500 $194,899 ($814,556) $1,045,408
======== ======== ======== ========== ==========
Current liabilities $ 75,933 $ 52,159 $ 16,916 $ 0 $ 145,008
Notes payable, long term 502,421 3,393 112,884 0 618,698
Other non-current liabilities (7,165) 83 20,114 (12,206) 826
Inter-company 13,500 406,437 24,031 (443,968) 0
Equity 280,876 337,428 20,954 (358,382) 280,876
-------- -------- -------- ---------- ----------
$865,565 $799,500 $194,899 ($814,556) $1,045,408
======== ======== ======== ========== ==========
Statement of Operations
-----------------------
Revenues:
Gaming $ 33,638 $368,993 $154,895 $ 0 $ 557,526
Racing 39,714 15,495 0 0 55,209
Food and beverage 8,073 27,823 3,921 0 39,817
Equity in subsidiaries 78,679 42,974 0 (121,653) 0
Other 6,661 44,324 3,320 0 54,305
-------- -------- -------- ---------- ----------
166,765 499,609 162,136 (121,653) 706,857
-------- -------- -------- ---------- ----------
Expenses:
Gaming 18,241 200,594 90,673 0 309,508
Racing 15,843 6,851 0 0 22,694
Food and beverage 11,060 31,237 4,261 0 46,558
Administrative and other 34,124 114,633 25,273 0 174,030
(Gain) loss on disposition of assets (42,828) 767 0 0 (42,061)
Depreciation and amortization 5,295 35,480 9,664 1,485 51,924
-------- -------- -------- ---------- ----------
41,735 389,562 129,871 1,485 562,653
-------- -------- -------- ---------- ----------
Operating income (loss) 125,030 110,047 32,265 (123,138) 144,204
Interest expense, net 41,030 (1,460) 17,974 0 57,544
-------- -------- -------- ---------- ----------
Income (loss) before minority interests and taxes 84,000 111,507 14,291 (123,138) 86,660
Minority interests 0 1,687 0 0 1,687
Income tax expense 38,469 10 2,447 0 40,926
-------- -------- -------- ---------- ----------
Net income (loss) $ 45,531 $109,810 $ 11,844 ($123,138) $ 44,047
======== ======== ======== ========== ==========
Statement of Cash Flows
-----------------------
Net cash provided by (used in) operating activities $ 592 $ 56,861 $ 19,632 ($1,762) $ 75,323
Net cash provided by (used in) investing activities 897 (49,100) (2,860) 0 (51,063)
Net cash provided by (used in) financing activities 66,941 (3,149) (8,924) 0 54,868
</TABLE>
37
<PAGE>
Pinnacle Entertainment, Inc.
Consolidating Condensed Financial Information
As of and for the year ended December 31, 1998
<TABLE>
<CAPTION>
Hollywood
Park
Pinnacle Operating (b) (c)
Entertainment, Co. (a) Wholly Non Wholly
Inc. (Co-Obligor Wholly Owned Owned Consolidating Pinnacle
Guarantor 9.5% Notes/ Owned Non- Non- And Entertainment,
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating 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 year
ended Dec. 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 (471,422) 0
Inter-company 252,556 144,569 303,855 0 5,012 (705,992) 0
---------- -------- ---------- -------- ------- ------------ ---------
$ 674,053 $171,131 $1,000,441 $163,396 $29,140 ($1,146,822) $ 891,339
========== ======== ========== ======== ======= ============ =========
Current liabilities $ 11,048 $ 12,547 $ 79,178 $ 29,266 $ 5,604 ($9,051) $ 128,592
Notes payable, long term 279,018 125,228 10,042 118,349 0 (5,018) 527,619
Other non-current
liabilities 5,889 0 9,747 2,727 7,532 (25,495) 400
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
========== ======== ========== ======== ======= ============ =========
Statement of Operations
-----------------------
Revenues:
Gaming $ 46,255 $ 0 $ 221,029 $ 21,985 $ 3,788 $ 0 $ 293,057
Racing 0 39,618 27,253 0 0 0 66,871
Food and beverage 4,881 0 25,008 381 240 0 30,510
Equity in subsidiaries 20,812 0 3,390 0 0 (24,202) 0
Inter-company 0 0 22,856 0 0 (22,856) 0
Other 3,797 1,983 30,487 214 48 0 36,529
---------- -------- ---------- -------- ------- ------------ ---------
75,745 41,601 330,023 22,580 4,076 (47,058) 426,967
---------- -------- ---------- -------- ------- ------------ ---------
Expenses:
Gaming 27,167 0 118,813 14,602 967 0 161,549
Racing 0 17,198 12,118 0 0 0 29,316
Food and beverage 9,613 0 28,490 566 191 0 38,860
Administrative and other 19,035 14,254 80,451 3,394 1,263 0 118,397
Loss on write off of assets 1,586 0 635 0 0 0 2,221
Depreciation and
amortization 4,346 3,985 21,451 1,429 306 604 32,121
---------- -------- ---------- -------- ------- ------------ ---------
61,747 35,437 261,958 19,991 2,727 604 382,464
---------- -------- ---------- -------- ------- ------------ ---------
Operating income (loss) 13,998 6,164 68,065 2,589 1,349 (47,662) 44,503
Interest expense 6,871 12,565 (226) 3,308 0 0 22,518
Inter-company interest 0 0 22,856 0 0 (22,856) 0
---------- -------- ---------- -------- ------- ------------ ---------
Income (loss) before
minority interests and
taxes 7,127 (6,401) 45,435 (719) 1,349 (24,806) 21,985
Minority interests 0 0 0 0 0 374 374
Income tax expense
(benefit) (6,213) 0 14,164 0 491 0 8,442
---------- -------- ---------- -------- ------- ------------ ---------
Net income (loss) $ 13,340 ($6,401) $ 31,271 ($719) $ 858 ($25,180) $ 13,169
========== ======== ========== ======== ======= ============ =========
Statement of Cash Flows
-----------------------
Net cash provided by
(used in) operating
activities ($153,372) $ 1,965 $ 203,874 $ 7,042 $ 1,055 ($22,452) $ 38,112
Net cash provided by
(used in) investing
activities (89,208) (2,132) (57,942) (5,844) (72) 18,666 (136,532)
Net cash provided by
(used in) financing
activities 261,682 (27) (140,773) 0 0 (2,384) 118,498
</TABLE>
38
<PAGE>
Pinnacle Entertainment, Inc.
Consolidating Condensed Financial Information
As of and for the year ended December 31, 1997
<TABLE>
<CAPTION>
Hollywood
Park
Pinnacle Operating (b) (c)
Entertainment, Co. (a) Wholly Non Wholly
Inc. (Co-Obligor Wholly Owned Owned Consolidating Pinnacle
Guarantor 9.5% Notes/ Owned Non- Non- and Entertainment,
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating 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 year
ended Dec. 31, 1997
Balance Sheet
-------------
Current assets $ 19,844 $ 8,568 $ 25,074 $ 6,720 $0 $ 0 $ 60,206
Property, plant and
equipment, net 68,515 23,753 140,105 68,293 0 0 300,666
Other non-current assets 22,306 0 29,320 7,611 0 (1,080) 58,157
Investment in subsidiaries 126,121 15,132 116,020 0 0 (257,273) 0
Inter-company 125,210 148,380 122,035 0 0 (395,625) 0
-------- ---------- --------- ------- -- ---------- --------
$361,996 $ 195,833 $ 432,554 $82,624 $0 ($653,978) $419,029
======== ========== ========= ======= == ========== ========
Current liabilities $ 16,890 $ 14,232 $ 19,583 $ 6,612 $0 $ 0 $ 57,317
Notes payable, long term 2,406 125,256 1,936 2,504 0 0 132,102
Other non-current liabilities 4,753 5,202 83 0 0 (3,728) 6,310
Inter-company 146,145 21,589 178,448 49,443 0 (395,625) 0
Minority interest 0 0 0 0 0 1,946 1,946
Equity 191,802 29,554 232,504 24,065 0 (256,571) 221,354
-------- ---------- --------- ------- -- ---------- --------
$361,996 $ 195,833 $ 432,554 $82,624 $0 ($653,978) $419,029
======== ========== ========= ======= == ========== ========
Statement of Operations
-----------------------
Revenues:
Gaming $ 50,820 $ 0 $ 58,622 $28,217 $0 $ 0 $137,659
Racing 0 39,930 28,914 0 0 0 68,844
Food and beverage 4,659 0 13,483 1,752 0 0 19,894
Equity in subsidiaries 13,963 3,735 (43) 0 0 (17,655) 0
Inter-company 0 0 4,823 0 0 (4,823) 0
Other 4,601 1,808 13,789 1,533 0 0 21,731
-------- ---------- --------- ------- -- ---------- --------
74,043 45,473 119,588 31,502 0 (22,478) 248,128
-------- ---------- --------- ------- -- ---------- --------
Expenses:
Gaming 28,353 0 32,370 14,010 0 0 74,733
Racing 0 17,822 12,482 0 0 0 30,304
Food and beverage 9,658 0 13,784 2,303 0 0 25,745
Administrative and other 18,282 14,536 33,277 8,792 0 0 74,887
REIT restructuring 2,483 0 0 0 0 0 2,483
Depreciation and
amortization 4,632 3,804 6,229 3,459 0 33 18,157
-------- ---------- --------- ------- -- ---------- --------
63,408 36,162 98,142 28,564 0 33 226,309
-------- ---------- --------- ------- -- ---------- --------
Operating income (loss) 10,635 9,311 21,446 2,938 0 (22,511) 21,819
Interest expense 1,789 5,368 (37) 182 0 0 7,302
Inter-company interest 0 0 2,244 2,579 0 (4,823) 0
-------- ---------- --------- ------- -- ---------- --------
Income (loss) before
minority interests and
taxes 8,846 3,943 19,239 177 0 (17,688) 14,517
Minority interests 0 0 0 0 0 (3) (3)
Income tax expense 4,124 0 1,726 0 0 0 5,850
-------- ---------- --------- ------- -- ---------- --------
Net income (loss) $ 4,722 $ 3,943 $ 17,513 $ 177 $0 ($17,685) $ 8,670
======== ========== ========= ======= == ========== ========
Statement of Cash Flows
-----------------------
Net cash provided by
(used in) operating
activities $ 19,559 ($122,039) $ 129,260 $ 5,250 $0 ($17,665) $ 14,365
Net cash provided by
(used in) investing
activities 14,747 (3,139) (23,516) (4,328) 0 10 (16,226)
Net cash provided by
(used in) financing
activities 475 124,975 (114,345) (2,373) 0 877 9,609
</TABLE>
39
<PAGE>
_____
(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. (through September 10, 1999), Hollywood
Park Fall Operating Company (through September 10, 1999) and, with respect
to the 9.25% Notes, Hollywood Park Operating Company (through September 10,
1999) (it was a co-obligor on the 9.5% Notes through September 10, 1999).
The following subsidiaries were treated as guarantors for periods beginning
on June 30, 1997, when the Boomtown Merger was consummated: 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. HP Casino, Inc., HP Yakama, Inc., and HP
Consulting, Inc., were treated as guarantors beginning in 1997 when these
subsidiaries began operations. HP/Compton, Inc. was treated as a guarantor
beginning in October 1996 when this subsidiary began operations. 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. In October 1999, Casino Magic Neuquen S.A. and
its subsidiary Casino Magic Support Services, became wholly owned
subsidiaries of the Company but remain non-guarantors of the 9.5% Notes and
9.25% Notes.
(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.
Note 20 - Subsequent Events
On March 8, 2000, the Company announced it had received a proposal pursuant to
which Harveys Casino Resorts ("Harveys") would acquire all of the outstanding
shares of common stock of Pinnacle Entertainment for cash at $25 per fully
diluted share (the "Acquisition Proposal"). The Acquisition Proposal is subject
to, among other things, the execution of a definitive agreement containing the
customary terms and conditions, including regulatory approval, the agreement of
Pinnacle Entertainment's senior management to retain an equity interest in the
combined company and the approval of a majority of Pinnacle Entertainment's
shareholders. The Company's Board of Directors, excluding management members,
agreed to evaluate the Acquisition Proposal and to negotiate on an exclusive
basis through the end of March 2000. Harveys Casino Resorts is majority owned by
Colony Capital, Inc., a private investment firm.
On March 14, 2000, Harbor Finance Partners filed a class action lawsuit in the
Chancery Court of the State of Delaware against the Company, and each of its
directors, claiming that the defendants have breached their fiduciary duty to
the stockholders of the Company by agreeing to negotiate exclusively with
Harveys Resorts Casinos, a majority owned company of Colony Capital, Inc. (see
Acquisition Proposal discussion above). On March 21, 2000, a similar class
action lawsuit was filed by Leta Hilliard in the Superior Court of the State of
California. The lawsuits claim that the Company and its directors have failed to
undertake an appropriate evaluation of the Company's worth and engage in an
auction of the Company with third parties, and that the price for the stock is
inadequate. The Company intends to vigorously defend these actions and believes
no basis exists for the plaintiffs' claims.
On March 17, 2000, the Company completed the sale of approximately 42 acres of
the 139 acres retained in the Churchill Downs transaction for $24,200,000 in
cash (see Note 4). The Company anticipates an after tax gain of approximately
$13,800,000 from this sale.
40
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
-------------------------------------------------------------------------
(a) The following documents filed as a part of this report.
1. Financial Statements - See index to Consolidated Financial Statements in
Item 8 (Financial Statements and Supplementary Data) of this Amendment
No. 1. to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999.
2. Financial Statement Schedules - Schedule II - Condensed financial
information of the Company was filed with the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, filed March 29,
2000.
3. Exhibits
Exhibit
Number Description of Exhibit
------- ----------------------
2.1 Agreement and Plan of Merger, by and among Hollywood Park, Inc., HP
Acquisition, Inc. and Boomtown, Inc., dated April 23, 1996, is hereby
incorporated by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K, filed May 3, 1996.
2.2 Agreement and Plan of Merger, dated as of February 19, 1998, among
Casino Magic Corp., Hollywood Park, Inc. and HP Acquisition II, Inc.,
is hereby incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K, filed February 26, 1998.
3.1 Certificate of Incorporation of Hollywood Park, Inc., is hereby
incorporated by reference to Exhibit 3.1 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.2 Restated By-laws of Hollywood Park, Inc. are hereby incorporated by
reference to Exhibit 3.2 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.3 Certificate of Ownership and Merger, dated February 23, 2000, merging
Pinnacle Entertainment, Inc. into Hollywood Park, Inc. is hereby
incorporated by reference to Exhibit 3.3 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
3.4 Articles of Incorporation of HP/Compton, Inc., are hereby incorporated
by reference to Exhibit 3.9 to the Company's Amendment No. 1 to
Form S-4 Registration dated October 30, 1997.
3.5 By-laws of HP/Compton, Inc., are hereby incorporated by reference to
Exhibit 3.10 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
3.6 Articles of Organization of Crystal Park Hotel and Casino Development
Company, LLC, are hereby incorporated by reference to Exhibit 3.11 to
the Company's Amendment No. 1 to Form S-4 Registration Statement dated
October 30, 1997.
3.7 Operating Agreement of Crystal Park Hotel and Casino Development
Company, LLC, are hereby incorporated by reference to Exhibit 3.12 to
the Company's Amendment No. 1 to Form S-4 Registration Statement dated
October 30, 1997.
3.8 Restated Articles of Incorporation of Turf Paradise, Inc., are hereby
incorporated by reference to Exhibit 3.13 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.9 By-laws of Turf Paradise, are hereby incorporated by reference to
Exhibit 3.14 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
3.10 Certificate of Incorporation of HP Yakama, Inc., is hereby
incorporated by reference to Exhibit 3.15 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.11 By-laws of HP Yakama, Inc., are hereby incorporated by reference to
Exhibit 3.16 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
3.12 Amended and Restated Certificate of Incorporation of Boomtown, Inc.,
is hereby incorporated by reference to Exhibit 3.17 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.13 By-laws of Boomtown, Inc., are hereby incorporated by reference to
Exhibit 3.18 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
41
<PAGE>
3.14 Certificate of Amended and Restated Articles of Incorporation of
Boomtown Hotel & Casino, Inc., are hereby incorporated by reference to
Exhibit 3.19 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
3.15 Revised and Restated By-laws of Boomtown Hotel & Casino, Inc., are
hereby incorporated by reference to Exhibit 3.20 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.16 Articles of Incorporation of Bayview Yacht Club, Inc., are hereby
incorporated by reference to Exhibit 3.21 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.17 By-laws of Bayview Yacht Club, Inc., are hereby incorporated by
reference to Exhibit 3.22 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated October 30, 1997.
3.18 Certificate of Mississippi Limited Partnership of Mississippi - I
Gaming, L.P., are hereby incorporated by reference to Exhibit 3.23 to
the Company's Amendment No. 1 to Form S-4 Registration Statement dated
October 30, 1997.
3.19 Amended and Restated Agreement of Limited Partnership of Mississippi -
I Gaming, L.P., is hereby incorporated by reference to Exhibit 10.31
to the Company's Quarterly Report on Form 10-Q for quarter ended June
30, 1997.
3.20 Articles of Incorporation of Louisiana Gaming Enterprises, Inc., are
hereby incorporated by reference to Exhibit 3.25 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.21 Second Amended and Restated Partnership Agreement of Louisiana - I
Gaming, a Louisiana Partnership in Commendam, is hereby incorporated
by reference to Exhibit 3.26 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
3.22 Certificate of Incorporation of HP Yakama Consulting, Inc., is hereby
incorporated by reference to Exhibit 3.27 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.23 By-laws of HP Yakama Consulting, Inc., are hereby incorporated by
reference to Exhibit 3.28 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.24 Articles of Incorporation of Casino Magic Corp., are hereby
incorporated by reference to Exhibit 3.29 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.25 Amended By-laws of Casino Magic Corp., are hereby incorporated by
reference to Exhibit 3.30 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.26 Articles of Incorporation of Casino Magic American Corp., are hereby
incorporated by reference to Exhibit 3.31 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.27 By-laws of Casino Magic American Corp., are hereby incorporated by
reference to Exhibit 3.32 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.28 Articles of Incorporation of Biloxi Casino Corp., are hereby
incorporated by reference to Exhibit 3.33 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.29 By-laws of Biloxi Casino Corp., are hereby incorporated by reference
to Exhibit 3.34 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.30 Articles of Incorporation of Casino Magic Finance Corp., are hereby
incorporated by reference to Exhibit 3.35 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.31 By-laws of Casino Magic Finance Corp., are hereby incorporated by
reference to Exhibit 3.36 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.32 Articles of Incorporation of Casino One Corporation, are hereby
incorporated by reference to Exhibit 3.37 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.33 By-laws of Casino One Corporation, are hereby incorporated by
reference to Exhibit 3.38 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
42
<PAGE>
3.34 Articles of Incorporation of Bay St. Louis Casino Corp., are hereby
incorporated by reference to Exhibit 3.39 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.35 By-laws of Bay St. Louis Casino Corp., are hereby incorporated by
reference to Exhibit 3.40 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.36 Articles of Incorporation of Mardi Gras Casino Corp., are hereby
incorporated by reference to Exhibit 3.41 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.37 By-laws of Mardi Gras Casino Corp., are hereby incorporated by
reference to Exhibit 3.42 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.38 Articles of Incorporation of Boomtown Hoosier, Inc., are hereby
incorporated by reference to Exhibit 3.43 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.39 By-laws of Boomtown Hoosier, Inc., are hereby incorporate by reference
to Exhibit 3.44 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.40 Articles of Incorporation of Indiana Ventures LLC, are hereby
incorporated by reference to Exhibit 3.45 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.41 Operating Agreement of Indiana Ventures LLC, is hereby incorporated by
reference to Exhibit 3.46 to the Company Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.42 Articles of Incorporation of HP Casino, Inc., are hereby incorporated
by reference to Exhibit 3.51 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
3.43 By-laws of HP Casino, Inc., are hereby incorporated by reference to
Exhibit 3.52 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated March 26, 1999.
4.1 Hollywood Park 1996 Stock Option Plan is hereby incorporated by
reference to Exhibit 10.24 to the Company's Registration Statement on
Form S-4 dated September 18, 1996.
4.2 Hollywood Park 1993 Stock Option Plan is hereby incorporated by
reference to Exhibit 4.2 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
4.3 Indenture, dated August 1, 1997, by and among the Company, Hollywood
Park Operating Company, Hollywood Park Food Services, Inc., Hollywood
Park Fall Operating Company, HP/Compton, Inc., Crystal Park Hotel and
Casino Development Company, LLC, HP Yakama, Inc., Turf Paradise, Inc.,
Boomtown, Inc., Boomtown Hotel & Casino, Inc., Louisiana - I Gaming,
Louisiana Gaming Enterprises, Inc., Mississippi - I Gaming, L.P.,
Bayview Yacht Club, Inc. and The Bank of New York, as trustee, is
hereby incorporated by reference to Exhibit 10.37 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
4.4 First Supplemental Indenture, dated as of February 5, 1999, to
Indenture dated as of August 1, 1997 governing the 9.5% Senior
Subordinated Notes due 2007, by and among the Company and Hollywood
Park Operating Company, as co-issuers, and Bayview Yacht Club, Inc.,
Boomtown Hotel & Casino, Inc., Boomtown, Inc., Crystal Park Hotel and
Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP/Compton, Inc., HP Yakama, Inc., Louisiana Gaming
Enterprises, Inc., Louisiana - I Gaming, a Louisiana Partnership in
Commendam, Mississippi - I Gaming, LP, and Turf Paradise, Inc. as
guarantors, and The Bank of New York, as trustee, is hereby
incorporated by reference to Exhibit 4.4 to the Company's S-4
Registration dated March 2, 1999.
4.5 Form of Series B 9.5% Senior Subordinated Notes due 2007 (included in
Exhibit 4.3), is hereby incorporated by reference to the Company's
Amendment No.1 to Registration Statement on Form S-4 dated October 30,
1997.
43
<PAGE>
4.6 Indenture, dated as of February 18, 1999, governing the 9.25% Senior
Subordinated Notes due 2007, by and among the Company as issuer, and
Bay St. Louis Casino Corp., Bayview Yacht Club, Inc., Biloxi Casino
Corp., Boomtown Hoosier, Inc., Boomtown Hotel & Casino, Inc.,
Boomtown, Inc., Casino Magic American Corp., Casino Magic Corp.,
Casino Magic Finance Corp., Casino One Corporation, Crystal Park Hotel
and Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP Casino, Inc., HP/Compton, Inc., HP Yakama, Inc., HP Yakama
Consulting, Inc., Indiana Ventures LLC, Louisiana Gaming Enterprises,
Inc., Louisiana - I Gaming, a Louisiana Partnership in Commendam,
Mardi Gras Casino Corp., Mississippi - I Gaming, L.P., Pinnacle Gaming
Development Corp., Switzerland County Development Corp., and Turf
Paradise, Inc. as initial guarantors, and The Bank of New York, as
trustee, is hereby incorporated by reference to Exhibit 4.6 to the
Company's S-4 Registration Statement dated March 2, 1999.
4.7 Form of Series B 9.25% Senior Subordinated Notes due 2007 (included in
Exhibit 4.6), is hereby incorporated by reference to Exhibit 4.7 to
the Company's S-4 Registration Statement dated March 2, 1999.
10.1 Directors Deferred Compensation Plan for Hollywood Park, Inc. is
hereby incorporated by reference to Exhibit 10.1 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated March 26,
1999.
10.2 Aircraft Time Sharing Agreement dated June 2, 1998, by and between
Hollywood Park, Inc. and R.D. Hubbard Enterprises, Inc. is hereby
incorporated by reference to Exhibit 10.2 to the Company's Amendment
No.1 to Form S-4 Registration Statement dated March 26, 1999.
10.3 Amended and Restated Disposition and Development Agreement of Purchase
and Sale, and Lease with Option to Purchase, dated August 2, 1995, by
and between The Community Redevelopment Agency of the City of Compton
and Compton Entertainment, Inc., is hereby incorporated by reference
to Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995.
10.4 Guaranty, dated July 31, 1995, by Hollywood Park, Inc., in favor of
the Community Redevelopment Agency of the City of Compton, is hereby
incorporated by reference to Exhibit 10.17 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995.
10.5 Assignment, Assumption and Consent Agreement, by and among HP/Compton,
Inc., and Crystal Park Hotel and Casino Development Company LLC,
Hollywood Park, Inc. and The Community Redevelopment Agency of the
City of Compton, dated July 18, 1996, is hereby incorporated by
reference to Exhibit 10.20 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996.
10.6 Operating Agreement for Crystal Park Hotel and Casino Development
Company, LLC, a California Limited Liability Company, dated July 18,
1996, effective August 28, 1996, is hereby incorporated by reference
to Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996.
10.7* Amended and Restated Lease, by and between Crystal Park Hotel and
Casino Development Company, LLC and California Casino Management,
Inc., dated as of February 14, 2000.
10.8 Blue Diamond Swap Agreement by and among Boomtown, Inc., Blue Diamond
Hotel & Casino, Inc., Hollywood Park, Inc., Edward P. Roski, Jr., IVAC
and Majestic Realty Co., dated August 12, 1996, is hereby incorporated
by reference to Exhibit 10.22 to the Company's Registration Statement
on Form S-4 filed September 18, 1996.
10.9 Stock Purchase Agreement, by and between Hollywood Park, Inc. and
Edward P. Roski, Jr., dated August 12, 1996, is hereby incorporated by
reference to Exhibit 10.23 to the Company's Registration Statement on
Form S-4 filed September 18, 1996.
10.10 Ground Lease, dated October 19, 1993, between Raphael Skrmetta as
Landlord and Mississippi - I Gaming, L.P. as Tenant, is hereby
incorporated by reference to Exhibit 10.33 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
10.11 First Amendment to Ground Lease dated October 19, 1993, between
Raphael Skrmetta and Mississippi - I Gaming, L.P., is hereby
incorporated by reference to Exhibit 10.34 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
44
<PAGE>
10.12 Second Amendment to Ground Lease dated October 19, 1993, between
Raphael Skrmetta and Mississippi -I Gaming, L.P., is hereby
incorporated by reference to Exhibit 10.35 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
10.13 Profit Participation Agreement, by and between Hollywood Park, Inc.,
and North American Sports Management, Inc., dated July 14, 1997, is
hereby incorporated by reference to Exhibit 10.40 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
10.14 Loan Agreement, by and between Yakama Tribal Gaming Corporation and HP
Yakama, Inc., dated September 11, 1997, is hereby incorporated by
reference Exhibit 10.41 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997.
10.15 Security Agreement, by and between Yakama Tribal Gaming Corporation
and HP Yakama, Inc., dated September 11, 1997, is hereby incorporated
by reference to Exhibit 10.42 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997.
10.16 Master Lease, by and between The Confederated Tribes and Bands of the
Yakama Indian Nation and HP Yaka Inc., dated September 11, 1997, is
hereby incorporated by reference to Exhibit 10.43 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
10.17 Sublease, by and between HP Yakama, Inc. and Yakama Tribal Gaming
Corporation, dated September 11, 1997, is hereby incorporated by
reference to Exhibit 10.44 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997.
10.18 Construction and Development Agreement, by and between Yakama Tribal
Gaming Corporation and HP Yakama Consulting, Inc., dated September 11,
1997, is hereby incorporated by reference to Exhibit 10.45 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
10.19 Voting Agreement, dated as of February 25, 1998, by and between
Hollywood Park, Inc., and Marlin F. Torguson, is hereby incorporated
by reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K, filed February 26, 1998.
10.20 Public Trust Tidelands Lease, dated August 15, 1994, by and between
the Secretary of State on behalf of the State of Mississippi and
Mississippi - I Gaming, L.P., is hereby incorporated by reference to
Exhibit 10.43 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
10.21 Public Trust Tidelands Lease Amendment, dated March 31, 1997, by and
between the Secretary of State on behalf of the State of Mississippi
and Mississippi - I Gaming, L.P., is hereby incorporated by reference
to Exhibit 10.43 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
10.22 Option agreement, by and among The Webster Family Limited Partnership
and The Diuguid Family Limited Partnership, and Pinnacle Gaming
Development Corp., dated June 2, 1998, is hereby incorporated by
reference to Exhibit 10.47 of the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
10.23 Memorandum of Option Agreement, by and between the Webster Family
Limited Partnership and The Duiguid Family Limited Partnership, and
Pinnacle Gaming Development Corp., dated June 2, 1998, is hereby
incorporated by reference to Exhibit 10.48 of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998.
10.24 Amended and Restated Option Agreement, by and among Daniel Webster,
Marsha S. Webster, William G. Duiguid, Sara T. Diuguid, J.R. Showers,
III and Carol A. Showers, and Pinnacle Gaming Development Corp., dated
June 2, 1998, is hereby incorporated by reference to Exhibit 10.49 of
the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998.
10.25 Memorandum of Amended and Restated Option Agreement, by and between
Daniel Webster, Marsha S. Webster, William Diuguid, Sara T. Diuguid,
J.R. Showers, III and Carol A. Showers, and Pinnacle Gaming
Development Corp., dated June 4, 1998, is hereby incorporated by
reference to Exhibit 10.50 of the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
10.26 Assignment of Option Agreement, by Daniel Webster and Marsha S.
Webster, and Pinnacle Gaming Development Corp., dated June 2, 1998, is
hereby incorporated by reference to Exhibit 10.51 of the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
45
<PAGE>
10.27 Amended and Restated Reducing Revolving Loan Agreement, dated October
14, 1998, among Hollywood Park, Inc., and the banks named therein,
Societe Generale and Bank of Scotland (as Managing Agents), First
National Bank of Commerce (as Co-Agent), and Bank of America National
Trust and Savings Association (as Administrative Agent), is hereby
incorporated by reference to Exhibit 2 of the Company's Current Report
on Form 8-K, filed October 30, 1998.
10.28 Purchase Agreement, dated February 12, 1999, by and among the Company
and Bay St. Louis Casino Corp., Bayview Yacht Club, Inc., Biloxi
Casino Corp., Boomtown Hoosier, Inc., Boomtown Hotel & Casino, Inc.,
Boomtown, Inc., Casino Magic American Corp., Casino Magic Corp.,
Casino Magic Finance Corp., Casino One Corporation, Crystal Park Hotel
and Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP Casino, Inc., HP/Compton, Inc., HP Yakama, Inc., HP Yakama
Consulting, Inc., Indiana Ventures LLC, Louisiana Gaming Enterprises,
Inc., Louisiana - I Gaming, a Louisiana Partnership in Commendam,
Mardi Gras Casino Corp., Mississippi - I Gaming, L.P., Pinnacle Gaming
Development Corp., Switzerland County Development Corp., and Turf
Paradise, Inc., and Lehman Brothers, Inc., CIBC Oppenheimer Corp.,
Morgan Stanley & Co., Incorporated, NationsBanc Montgomery Securities
LLC, SG Cowen Securities Corporation, and Wasserstein Perella
Securities, Inc., as initial purchasers, is hereby incorporated by
reference to Exhibit 10.34 to the Company's S-4 Registration Statement
dated March 2, 1999.
10.29 Registration Rights Agreement, dated as of February 18, 1999, by and
among the Company and Bay St. Louis Casino Corp., Bayview Yacht Club,
Inc., Biloxi Casino, Corp., Boomtown Hoosier, Inc., Boomtown Hotel &
Casino, Inc., Boomtown, Inc., Casino Magic American Corp., Casino
Magic Finance Corp., Casino One Corporation, Crystal Park Hotel and
Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP Casino, Inc., HP/Compton, Inc., HP Yakama, Inc., HP Yakama
Consulting, Inc., Indiana Ventures LLC, Louisiana Gaming Enterprises,
Inc., Louisiana - I Gaming, a Louisiana Partnership in Commendam,
Mardi Gras Casino Corp., Mississippi - I Gaming L.P., Pinnacle Gaming
Development Corp., Switzerland County Development Corp., and Turf
Paradise, Inc., and Lehman Brothers Inc., CIBC Oppenheimer Corp.,
Morgan Stanley & Co. Incorporated, NationsBanc Montgomery Securities
LLC, SG Cowen Securities Corporation and Wasserstein Perella
Securities, Inc., as initial purchasers, is hereby incorporated by
reference to Exhibit 10.35 to the Company's S-4 Registration Statement
dated March 2, 1999.
10.30 Employment Agreement, dated December 23, 1998, by and between
Hollywood Park, Inc. and G. Michael Finnigan, is hereby incorporated
by reference to Exhibit 10.36 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
10.31 Employment Agreement, dated September 10, 1998, by and between
Hollywood Park, Inc. and Paul Alanis, is hereby incorporated by
reference to Exhibit 10.37 to the Company's Amendment No. 1 to Form S-
4 Registration Statement dated March 26, 1999.
10.32 Employment Agreement, dated September 10, 1998, by and between
Hollywood Park, Inc. and Mike Allen, is hereby incorporated by
reference to Exhibit 10.38 to the Company's Amendment No. 1 to Form S-
4 Registration Statement dated March 26, 1999.
10.33 Employment Agreement, dated January 1, 1999, by and between Hollywood
Park, Inc. and Donald M. Robbins, is here by incorporated by reference
to Exhibit 10.39 to the Company's Amendment No. 1 S-4 Registration
Statement dated March 26, 1999.
10.34 Purchase Agreement, dated as of February 25, 1998, among Hilton Gaming
(Switzerland County) Corporation and Boomtown Hoosier, Inc., is hereby
incorporated by reference to Exhibit 10.40 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
10.35 Asset Purchase Agreement, dated May 5, 1999, among Hollywood Park,
Inc. and Churchill Downs Incorporated, is hereby incorporated by
reference to Exhibit 10.41 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999.
10.36 Form of Amendment No. 1 to Asset Purchase Agreement between Hollywood
Park, Inc. and Churchill Downs Incorporated is hereby incorporated by
reference to Exhibit 10.2 to the Company's Current Report on Form 8-K,
filed September 27, 1999.
46
<PAGE>
10.37 Form of Guaranty issued by Churchill Downs Incorporated in favor of
Hollywood Park, Inc. is hereby incorporated by reference to Exhibit
10.3 to the Company's Current Report of Form 8-K, filed September 27,
1999.
10.38* Lease and Agreement by and between Hollywood Park, Inc. and Century
Gaming Management, Inc., dated September 10, 1999.
10.39 Form of Lease, by and between Churchill Downs California Company and
Hollywood Park, Inc., is hereby incorporated by reference to Exhibit
C to Exhibit 10.38 to this Amendment No. 1 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
10.40 Amendment No. 1 to Amended and Restated Reducing Revolving Loan
Agreement, dated June 2, 1999, is hereby incorporated by reference to
Exhibit 10.42 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999.
10.41 Amendment No. 2 to Amended and Restated Reducing Revolving Loan
Agreement, dated September 24, 1999, is hereby incorporated by
reference to Exhibit 10.43 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999.
10.42 Asset Purchase Agreement, dated as of December 9, 1999, between BSL,
Inc., and Casino Magic Corp. is hereby incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K filed
December 21, 1999.
10.43 Asset Purchase Agreement, dated as of December 9, 1999, between BTN,
Inc. and Boomtown, Inc. is hereby incorporated by reference to Exhibit
10.2 to the Company's Current Report on Form 8-K filed December 21,
1999.
10.44 First Amendment to Asset Purchase Agreement, dated December 17, 1999,
between BSL, Inc. and Casino Magic Corp. is hereby incorporated by
reference to Exhibit 10.3 to the Company's Current Report on Form 8-K
filed December 21, 1999.
10.45 First Amendment to Asset Purchase Agreement, dated December 17, 1999,
between BTN, Inc. and Boomtown, Inc. is hereby incorporated by
reference to Exhibit 10.4 to the Company's Current Report on Form 8-K
filed December 21, 1999.
10.46 Guaranty issued by Penn National in favor of Casino Magic Corp.
entered into as of December 9, 1999 is hereby incorporated by
reference to Exhibit 10.5 to the Company's Current Report on Form 8-K
filed December 21, 1999.
10.47 Guaranty issued by Penn National in favor of Boomtown, Inc. entered
into as of December 9, 1999 is hereby incorporated by reference to
Exhibit 10.6 to the Company's Current Report on Form 8-K filed
December 21, 1999.
10.48 Guaranty issued by Hollywood Park in favor of BSL, Inc. entered into
as of December 9, 1999 is hereby incorporated by reference to Exhibit
10.7 to the Company's Current Report on Form 8-K filed December 21,
1999.
10.49 Guaranty issued by Hollywood Park in favor of BTN, Inc. entered into
as of December 9, 1999 is hereby incorporated by reference to Exhibit
10.8 to the Company's Current Report on Form 8-K filed December 21,
1999.
10.50 Executive Deferred Compensation Plan for Hollywood Park, Inc. is
hereby incorporated by reference to Exhibit 10.48 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1999.
10.51 Agreement for Purchase and Sale of Assets, dated as of February 24,
2000, between Pinnacle Entertainment, Inc. and Jerry Simms is hereby
incorporated by reference to Exhibit 10.49 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
11.1 ** Statement re: Computation of Per Share Earnings.
21.1 Subsidiaries of Hollywood Park, Inc. is hereby incorporated by
reference to Exhibit 21.1 to the Company's Form S-4 Registration
Statement dated March 2, 1999.
23.1 * Consent of Arthur Andersen LLP
27.1 ** Financial Data Schedule
_____
* Filed herewith
** Filed with the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999, filed March 29, 2000.
47
<PAGE>
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed December 21, 1999, to report
(i) the execution on December 9, 1999 of the Asset Purchase Agreements
under which wholly-owned subsidiaries of the Company agreed to sell
the operating assets of certain of the Company's casino properties to
subsidiaries of Penn National Gaming, Inc., and (ii) the December 10,
1999 press release announcing the execution of such Agreements.
48
<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.
Pinnacle Entertainment, Inc.
(Registrant)
By: /s/ Bruce C. Hinckley Dated: September 6, 2000
------------------------------
Bruce C. Hinckley
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
49
<PAGE>
Pinnacle Entertainment, Inc.
Exhibit Index
Exhibit
Number Description of Exhibit
------- ----------------------
2.1 Agreement and Plan of Merger, by and among Hollywood Park, Inc., HP
Acquisition, Inc. and Boomtown, Inc., dated April 23, 1996, is hereby
incorporated by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K, filed May 3, 1996.
2.2 Agreement and Plan of Merger, dated as of February 19, 1998, among
Casino Magic Corp., Hollywood Park, Inc. and HP Acquisition II, Inc.,
is hereby incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K, filed February 26, 1998.
3.1 Certificate of Incorporation of Hollywood Park, Inc., is hereby
incorporated by reference to Exhibit 3.1 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.2 Restated By-laws of Hollywood Park, Inc. are hereby incorporated by
reference to Exhibit 3.2 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.3 Certificate of Ownership and Merger, dated February 23, 2000, merging
Pinnacle Entertainment, Inc. into Hollywood Park, Inc. is hereby
incorporated by reference to Exhibit 3.3 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
3.4 Articles of Incorporation of HP/Compton, Inc., are hereby incorporated
by reference to Exhibit 3.9 to the Company's Amendment No. 1 to
Form S-4 Registration dated October 30, 1997.
3.5 By-laws of HP/Compton, Inc., are hereby incorporated by reference to
Exhibit 3.10 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
3.6 Articles of Organization of Crystal Park Hotel and Casino Development
Company, LLC, are hereby incorporated by reference to Exhibit 3.11 to
the Company's Amendment No. 1 to Form S-4 Registration Statement dated
October 30, 1997.
3.7 Operating Agreement of Crystal Park Hotel and Casino Development
Company, LLC, are hereby incorporated by reference to Exhibit 3.12 to
the Company's Amendment No. 1 to Form S-4 Registration Statement dated
October 30, 1997.
3.8 Restated Articles of Incorporation of Turf Paradise, Inc., are hereby
incorporated by reference to Exhibit 3.13 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.9 By-laws of Turf Paradise, are hereby incorporated by reference to
Exhibit 3.14 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
3.10 Certificate of Incorporation of HP Yakama, Inc., is hereby
incorporated by reference to Exhibit 3.15 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.11 By-laws of HP Yakama, Inc., are hereby incorporated by reference to
Exhibit 3.16 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
3.12 Amended and Restated Certificate of Incorporation of Boomtown, Inc.,
is hereby incorporated by reference to Exhibit 3.17 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.13 By-laws of Boomtown, Inc., are hereby incorporated by reference to
Exhibit 3.18 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
<PAGE>
3.14 Certificate of Amended and Restated Articles of Incorporation of
Boomtown Hotel & Casino, Inc., are hereby incorporated by reference to
Exhibit 3.19 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated October 30, 1997.
3.15 Revised and Restated By-laws of Boomtown Hotel & Casino, Inc., are
hereby incorporated by reference to Exhibit 3.20 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.16 Articles of Incorporation of Bayview Yacht Club, Inc., are hereby
incorporated by reference to Exhibit 3.21 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.17 By-laws of Bayview Yacht Club, Inc., are hereby incorporated by
reference to Exhibit 3.22 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated October 30, 1997.
3.18 Certificate of Mississippi Limited Partnership of Mississippi - I
Gaming, L.P., are hereby incorporated by reference to Exhibit 3.23 to
the Company's Amendment No. 1 to Form S-4 Registration Statement dated
October 30, 1997.
3.19 Amended and Restated Agreement of Limited Partnership of Mississippi -
I Gaming, L.P., is hereby incorporated by reference to Exhibit 10.31
to the Company's Quarterly Report on Form 10-Q for quarter ended June
30, 1997.
3.20 Articles of Incorporation of Louisiana Gaming Enterprises, Inc., are
hereby incorporated by reference to Exhibit 3.25 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.21 Second Amended and Restated Partnership Agreement of Louisiana - I
Gaming, a Louisiana Partnership in Commendam, is hereby incorporated
by reference to Exhibit 3.26 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
3.22 Certificate of Incorporation of HP Yakama Consulting, Inc., is hereby
incorporated by reference to Exhibit 3.27 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.23 By-laws of HP Yakama Consulting, Inc., are hereby incorporated by
reference to Exhibit 3.28 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.24 Articles of Incorporation of Casino Magic Corp., are hereby
incorporated by reference to Exhibit 3.29 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.25 Amended By-laws of Casino Magic Corp., are hereby incorporated by
reference to Exhibit 3.30 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.26 Articles of Incorporation of Casino Magic American Corp., are hereby
incorporated by reference to Exhibit 3.31 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.27 By-laws of Casino Magic American Corp., are hereby incorporated by
reference to Exhibit 3.32 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.28 Articles of Incorporation of Biloxi Casino Corp., are hereby
incorporated by reference to Exhibit 3.33 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.29 By-laws of Biloxi Casino Corp., are hereby incorporated by reference
to Exhibit 3.34 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.30 Articles of Incorporation of Casino Magic Finance Corp., are hereby
incorporated by reference to Exhibit 3.35 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.31 By-laws of Casino Magic Finance Corp., are hereby incorporated by
reference to Exhibit 3.36 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.32 Articles of Incorporation of Casino One Corporation, are hereby
incorporated by reference to Exhibit 3.37 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.33 By-laws of Casino One Corporation, are hereby incorporated by
reference to Exhibit 3.38 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
<PAGE>
3.34 Articles of Incorporation of Bay St. Louis Casino Corp., are hereby
incorporated by reference to Exhibit 3.39 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.35 By-laws of Bay St. Louis Casino Corp., are hereby incorporated by
reference to Exhibit 3.40 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.36 Articles of Incorporation of Mardi Gras Casino Corp., are hereby
incorporated by reference to Exhibit 3.41 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.37 By-laws of Mardi Gras Casino Corp., are hereby incorporated by
reference to Exhibit 3.42 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.38 Articles of Incorporation of Boomtown Hoosier, Inc., are hereby
incorporated by reference to Exhibit 3.43 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.39 By-laws of Boomtown Hoosier, Inc., are hereby incorporate by reference
to Exhibit 3.44 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.40 Articles of Incorporation of Indiana Ventures LLC, are hereby
incorporated by reference to Exhibit 3.45 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.41 Operating Agreement of Indiana Ventures LLC, is hereby incorporated by
reference to Exhibit 3.46 to the Company Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.42 Articles of Incorporation of HP Casino, Inc., are hereby incorporated
by reference to Exhibit 3.51 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
3.43 By-laws of HP Casino, Inc., are hereby incorporated by reference to
Exhibit 3.52 to the Company's Amendment No. 1 to Form S-4 Registration
Statement dated March 26, 1999.
4.1 Hollywood Park 1996 Stock Option Plan is hereby incorporated by
reference to Exhibit 10.24 to the Company's Registration Statement on
Form S-4 dated September 18, 1996.
4.2 Hollywood Park 1993 Stock Option Plan is hereby incorporated by
reference to Exhibit 4.2 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
4.3 Indenture, dated August 1, 1997, by and among the Company, Hollywood
Park Operating Company, Hollywood Park Food Services, Inc., Hollywood
Park Fall Operating Company, HP/Compton, Inc., Crystal Park Hotel and
Casino Development Company, LLC, HP Yakama, Inc., Turf Paradise, Inc.,
Boomtown, Inc., Boomtown Hotel & Casino, Inc., Louisiana - I Gaming,
Louisiana Gaming Enterprises, Inc., Mississippi - I Gaming, L.P.,
Bayview Yacht Club, Inc. and The Bank of New York, as trustee, is
hereby incorporated by reference to Exhibit 10.37 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
4.4 First Supplemental Indenture, dated as of February 5, 1999, to
Indenture dated as of August 1, 1997 governing the 9.5% Senior
Subordinated Notes due 2007, by and among the Company and Hollywood
Park Operating Company, as co-issuers, and Bayview Yacht Club, Inc.,
Boomtown Hotel & Casino, Inc., Boomtown, Inc., Crystal Park Hotel and
Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP/Compton, Inc., HP Yakama, Inc., Louisiana Gaming
Enterprises, Inc., Louisiana - I Gaming, a Louisiana Partnership in
Commendam, Mississippi - I Gaming, LP, and Turf Paradise, Inc. as
guarantors, and The Bank of New York, as trustee, is hereby
incorporated by reference to Exhibit 4.4 to the Company's S-4
Registration dated March 2, 1999.
4.5 Form of Series B 9.5% Senior Subordinated Notes due 2007 (included in
Exhibit 4.3), is hereby incorporated by reference to the Company's
Amendment No.1 to Registration Statement on Form S-4 dated October 30,
1997.
<PAGE>
4.6 Indenture, dated as of February 18, 1999, governing the 9.25% Senior
Subordinated Notes due 2007, by and among the Company as issuer, and
Bay St. Louis Casino Corp., Bayview Yacht Club, Inc., Biloxi Casino
Corp., Boomtown Hoosier, Inc., Boomtown Hotel & Casino, Inc.,
Boomtown, Inc., Casino Magic American Corp., Casino Magic Corp.,
Casino Magic Finance Corp., Casino One Corporation, Crystal Park Hotel
and Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP Casino, Inc., HP/Compton, Inc., HP Yakama, Inc., HP Yakama
Consulting, Inc., Indiana Ventures LLC, Louisiana Gaming Enterprises,
Inc., Louisiana - I Gaming, a Louisiana Partnership in Commendam,
Mardi Gras Casino Corp., Mississippi - I Gaming, L.P., Pinnacle Gaming
Development Corp., Switzerland County Development Corp., and Turf
Paradise, Inc. as initial guarantors, and The Bank of New York, as
trustee, is hereby incorporated by reference to Exhibit 4.6 to the
Company's S-4 Registration Statement dated March 2, 1999.
4.7 Form of Series B 9.25% Senior Subordinated Notes due 2007 (included in
Exhibit 4.6), is hereby incorporated by reference to Exhibit 4.7 to
the Company's S-4 Registration Statement dated March 2, 1999.
10.1 Directors Deferred Compensation Plan for Hollywood Park, Inc. is
hereby incorporated by reference to Exhibit 10.1 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated March 26,
1999.
10.2 Aircraft Time Sharing Agreement dated June 2, 1998, by and between
Hollywood Park, Inc. and R.D. Hubbard Enterprises, Inc. is hereby
incorporated by reference to Exhibit 10.2 to the Company's Amendment
No.1 to Form S-4 Registration Statement dated March 26, 1999.
10.3 Amended and Restated Disposition and Development Agreement of Purchase
and Sale, and Lease with Option to Purchase, dated August 2, 1995, by
and between The Community Redevelopment Agency of the City of Compton
and Compton Entertainment, Inc., is hereby incorporated by reference
to Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995.
10.4 Guaranty, dated July 31, 1995, by Hollywood Park, Inc., in favor of
the Community Redevelopment Agency of the City of Compton, is hereby
incorporated by reference to Exhibit 10.17 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995.
10.5 Assignment, Assumption and Consent Agreement, by and among HP/Compton,
Inc., and Crystal Park Hotel and Casino Development Company LLC,
Hollywood Park, Inc. and The Community Redevelopment Agency of the
City of Compton, dated July 18, 1996, is hereby incorporated by
reference to Exhibit 10.20 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996.
10.6 Operating Agreement for Crystal Park Hotel and Casino Development
Company, LLC, a California Limited Liability Company, dated July 18,
1996, effective August 28, 1996, is hereby incorporated by reference
to Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996.
10.7* Amended and Restated Lease, by and between Crystal Park Hotel and
Casino Development Company, LLC and California Casino Management,
Inc., dated as of February 14, 2000.
10.8 Blue Diamond Swap Agreement by and among Boomtown, Inc., Blue Diamond
Hotel & Casino, Inc., Hollywood Park, Inc., Edward P. Roski, Jr., IVAC
and Majestic Realty Co., dated August 12, 1996, is hereby incorporated
by reference to Exhibit 10.22 to the Company's Registration Statement
on Form S-4 filed September 18, 1996.
10.9 Stock Purchase Agreement, by and between Hollywood Park, Inc. and
Edward P. Roski, Jr., dated August 12, 1996, is hereby incorporated by
reference to Exhibit 10.23 to the Company's Registration Statement on
Form S-4 filed September 18, 1996.
10.10 Ground Lease, dated October 19, 1993, between Raphael Skrmetta as
Landlord and Mississippi - I Gaming, L.P. as Tenant, is hereby
incorporated by reference to Exhibit 10.33 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
10.11 First Amendment to Ground Lease dated October 19, 1993, between
Raphael Skrmetta and Mississippi - I Gaming, L.P., is hereby
incorporated by reference to Exhibit 10.34 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
<PAGE>
10.12 Second Amendment to Ground Lease dated October 19, 1993, between
Raphael Skrmetta and Mississippi -I Gaming, L.P., is hereby
incorporated by reference to Exhibit 10.35 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
10.13 Profit Participation Agreement, by and between Hollywood Park, Inc.,
and North American Sports Management, Inc., dated July 14, 1997, is
hereby incorporated by reference to Exhibit 10.40 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
10.14 Loan Agreement, by and between Yakama Tribal Gaming Corporation and HP
Yakama, Inc., dated September 11, 1997, is hereby incorporated by
reference Exhibit 10.41 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997.
10.15 Security Agreement, by and between Yakama Tribal Gaming Corporation
and HP Yakama, Inc., dated September 11, 1997, is hereby incorporated
by reference to Exhibit 10.42 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997.
10.16 Master Lease, by and between The Confederated Tribes and Bands of the
Yakama Indian Nation and HP Yaka Inc., dated September 11, 1997, is
hereby incorporated by reference to Exhibit 10.43 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
10.17 Sublease, by and between HP Yakama, Inc. and Yakama Tribal Gaming
Corporation, dated September 11, 1997, is hereby incorporated by
reference to Exhibit 10.44 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997.
10.18 Construction and Development Agreement, by and between Yakama Tribal
Gaming Corporation and HP Yakama Consulting, Inc., dated September 11,
1997, is hereby incorporated by reference to Exhibit 10.45 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
10.19 Voting Agreement, dated as of February 25, 1998, by and between
Hollywood Park, Inc., and Marlin F. Torguson, is hereby incorporated
by reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K, filed February 26, 1998.
10.20 Public Trust Tidelands Lease, dated August 15, 1994, by and between
the Secretary of State on behalf of the State of Mississippi and
Mississippi - I Gaming, L.P., is hereby incorporated by reference to
Exhibit 10.43 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
10.21 Public Trust Tidelands Lease Amendment, dated March 31, 1997, by and
between the Secretary of State on behalf of the State of Mississippi
and Mississippi - I Gaming, L.P., is hereby incorporated by reference
to Exhibit 10.43 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
10.22 Option agreement, by and among The Webster Family Limited Partnership
and The Diuguid Family Limited Partnership, and Pinnacle Gaming
Development Corp., dated June 2, 1998, is hereby incorporated by
reference to Exhibit 10.47 of the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
10.23 Memorandum of Option Agreement, by and between the Webster Family
Limited Partnership and The Duiguid Family Limited Partnership, and
Pinnacle Gaming Development Corp., dated June 2, 1998, is hereby
incorporated by reference to Exhibit 10.48 of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998.
10.24 Amended and Restated Option Agreement, by and among Daniel Webster,
Marsha S. Webster, William G. Duiguid, Sara T. Diuguid, J.R. Showers,
III and Carol A. Showers, and Pinnacle Gaming Development Corp., dated
June 2, 1998, is hereby incorporated by reference to Exhibit 10.49 of
the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998.
10.25 Memorandum of Amended and Restated Option Agreement, by and between
Daniel Webster, Marsha S. Webster, William Diuguid, Sara T. Diuguid,
J.R. Showers, III and Carol A. Showers, and Pinnacle Gaming
Development Corp., dated June 4, 1998, is hereby incorporated by
reference to Exhibit 10.50 of the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
10.26 Assignment of Option Agreement, by Daniel Webster and Marsha S.
Webster, and Pinnacle Gaming Development Corp., dated June 2, 1998, is
hereby incorporated by reference to Exhibit 10.51 of the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
<PAGE>
10.27 Amended and Restated Reducing Revolving Loan Agreement, dated October
14, 1998, among Hollywood Park, Inc., and the banks named therein,
Societe Generale and Bank of Scotland (as Managing Agents), First
National Bank of Commerce (as Co-Agent), and Bank of America National
Trust and Savings Association (as Administrative Agent), is hereby
incorporated by reference to Exhibit 2 of the Company's Current Report
on Form 8-K, filed October 30, 1998.
10.28 Purchase Agreement, dated February 12, 1999, by and among the Company
and Bay St. Louis Casino Corp., Bayview Yacht Club, Inc., Biloxi
Casino Corp., Boomtown Hoosier, Inc., Boomtown Hotel & Casino, Inc.,
Boomtown, Inc., Casino Magic American Corp., Casino Magic Corp.,
Casino Magic Finance Corp., Casino One Corporation, Crystal Park Hotel
and Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP Casino, Inc., HP/Compton, Inc., HP Yakama, Inc., HP Yakama
Consulting, Inc., Indiana Ventures LLC, Louisiana Gaming Enterprises,
Inc., Louisiana - I Gaming, a Louisiana Partnership in Commendam,
Mardi Gras Casino Corp., Mississippi - I Gaming, L.P., Pinnacle Gaming
Development Corp., Switzerland County Development Corp., and Turf
Paradise, Inc., and Lehman Brothers, Inc., CIBC Oppenheimer Corp.,
Morgan Stanley & Co., Incorporated, NationsBanc Montgomery Securities
LLC, SG Cowen Securities Corporation, and Wasserstein Perella
Securities, Inc., as initial purchasers, is hereby incorporated by
reference to Exhibit 10.34 to the Company's S-4 Registration Statement
dated March 2, 1999.
10.29 Registration Rights Agreement, dated as of February 18, 1999, by and
among the Company and Bay St. Louis Casino Corp., Bayview Yacht Club,
Inc., Biloxi Casino, Corp., Boomtown Hoosier, Inc., Boomtown Hotel &
Casino, Inc., Boomtown, Inc., Casino Magic American Corp., Casino
Magic Finance Corp., Casino One Corporation, Crystal Park Hotel and
Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP Casino, Inc., HP/Compton, Inc., HP Yakama, Inc., HP Yakama
Consulting, Inc., Indiana Ventures LLC, Louisiana Gaming Enterprises,
Inc., Louisiana - I Gaming, a Louisiana Partnership in Commendam,
Mardi Gras Casino Corp., Mississippi - I Gaming L.P., Pinnacle Gaming
Development Corp., Switzerland County Development Corp., and Turf
Paradise, Inc., and Lehman Brothers Inc., CIBC Oppenheimer Corp.,
Morgan Stanley & Co. Incorporated, NationsBanc Montgomery Securities
LLC, SG Cowen Securities Corporation and Wasserstein Perella
Securities, Inc., as initial purchasers, is hereby incorporated by
reference to Exhibit 10.35 to the Company's S-4 Registration Statement
dated March 2, 1999.
10.30 Employment Agreement, dated December 23, 1998, by and between
Hollywood Park, Inc. and G. Michael Finnigan, is hereby incorporated
by reference to Exhibit 10.36 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
10.31 Employment Agreement, dated September 10, 1998, by and between
Hollywood Park, Inc. and Paul Alanis, is hereby incorporated by
reference to Exhibit 10.37 to the Company's Amendment No. 1 to Form S-
4 Registration Statement dated March 26, 1999.
10.32 Employment Agreement, dated September 10, 1998, by and between
Hollywood Park, Inc. and Mike Allen, is hereby incorporated by
reference to Exhibit 10.38 to the Company's Amendment No. 1 to Form S-
4 Registration Statement dated March 26, 1999.
10.33 Employment Agreement, dated January 1, 1999, by and between Hollywood
Park, Inc. and Donald M. Robbins, is here by incorporated by reference
to Exhibit 10.39 to the Company's Amendment No. 1 S-4 Registration
Statement dated March 26, 1999.
10.34 Purchase Agreement, dated as of February 25, 1998, among Hilton Gaming
(Switzerland County) Corporation and Boomtown Hoosier, Inc., is hereby
incorporated by reference to Exhibit 10.40 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
10.35 Asset Purchase Agreement, dated May 5, 1999, among Hollywood Park,
Inc. and Churchill Downs Incorporated, is hereby incorporated by
reference to Exhibit 10.41 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999.
10.36 Form of Amendment No. 1 to Asset Purchase Agreement between Hollywood
Park, Inc. and Churchill Downs Incorporated is hereby incorporated by
reference to Exhibit 10.2 to the Company's Current Report on Form 8-K,
filed September 27, 1999.
<PAGE>
10.37 Form of Guaranty issued by Churchill Downs Incorporated in favor of
Hollywood Park, Inc. is hereby incorporated by reference to Exhibit
10.3 to the Company's Current Report of Form 8-K, filed September 27,
1999.
10.38* Lease and Agreement by and between Hollywood Park, Inc. and Century
Gaming Management, Inc., dated September 10, 1999.
10.39 Form of Lease, by and between Churchill Downs California Company and
Hollywood Park, Inc., is hereby incorporated by reference to Exhibit
C to Exhibit 10.38 to this Amendment No. 1 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
10.40 Amendment No. 1 to Amended and Restated Reducing Revolving Loan
Agreement, dated June 2, 1999, is hereby incorporated by reference to
Exhibit 10.42 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999.
10.41 Amendment No. 2 to Amended and Restated Reducing Revolving Loan
Agreement, dated September 24, 1999, is hereby incorporated by
reference to Exhibit 10.43 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999.
10.42 Asset Purchase Agreement, dated as of December 9, 1999, between BSL,
Inc., and Casino Magic Corp. is hereby incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K filed
December 21, 1999.
10.43 Asset Purchase Agreement, dated as of December 9, 1999, between BTN,
Inc. and Boomtown, Inc. is hereby incorporated by reference to Exhibit
10.2 to the Company's Current Report on Form 8-K filed December 21,
1999.
10.44 First Amendment to Asset Purchase Agreement, dated December 17, 1999,
between BSL, Inc. and Casino Magic Corp. is hereby incorporated by
reference to Exhibit 10.3 to the Company's Current Report on Form 8-K
filed December 21, 1999.
10.45 First Amendment to Asset Purchase Agreement, dated December 17, 1999,
between BTN, Inc. and Boomtown, Inc. is hereby incorporated by
reference to Exhibit 10.4 to the Company's Current Report on Form 8-K
filed December 21, 1999.
10.46 Guaranty issued by Penn National in favor of Casino Magic Corp.
entered into as of December 9, 1999 is hereby incorporated by
reference to Exhibit 10.5 to the Company's Current Report on Form 8-K
filed December 21, 1999.
10.47 Guaranty issued by Penn National in favor of Boomtown, Inc. entered
into as of December 9, 1999 is hereby incorporated by reference to
Exhibit 10.6 to the Company's Current Report on Form 8-K filed
December 21, 1999.
10.48 Guaranty issued by Hollywood Park in favor of BSL, Inc. entered into
as of December 9, 1999 is hereby incorporated by reference to Exhibit
10.7 to the Company's Current Report on Form 8-K filed December 21,
1999.
10.49 Guaranty issued by Hollywood Park in favor of BTN, Inc. entered into
as of December 9, 1999 is hereby incorporated by reference to Exhibit
10.8 to the Company's Current Report on Form 8-K filed December 21,
1999.
10.50 Executive Deferred Compensation Plan for Hollywood Park, Inc. is
hereby incorporated by reference to Exhibit 10.48 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1999.
10.51 Agreement for Purchase and Sale of Assets, dated as of February 24,
2000, between Pinnacle Entertainment, Inc. and Jerry Simms is hereby
incorporated by reference to Exhibit 10.49 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
11.1 ** Statement re: Computation of Per Share Earnings.
21.1 Subsidiaries of Hollywood Park, Inc. is hereby incorporated by
reference to Exhibit 21.1 to the Company's Form S-4 Registration
Statement dated March 2, 1999.
23.1 * Consent of Arthur Andersen LLP
27.1 ** Financial Data Schedule
_____
* Filed herewith
** Filed with the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999, filed March 29, 2000.
