SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-K/A-2
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to ___________
Commission file number: 0-14897
PLAYERS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Nevada
95-4175832
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
3900 Paradise Road, Suite 135, Las Vegas, Nevada
(Address of principal executive offices)
89109
(Zip Code)
(702) 691-3300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.005 par value
Indicate by check mark whether the 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
(or for such shorter period that the registrant was required to
file such reports), 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. [ X ]
As of June 22, 1995, the aggregate market value of the
registrant's Common Stock held by non-affiliates of the
registrants was not less than $490,000,000.
As of June 22, 1995, there were 29,757,904 shares of the
registrant's Common Stock outstanding.
Documents Incorporated by Reference:
The information required by Part III of this report is
incorporated by reference from the Registrant's Proxy Statement
to be filed with the Commission not later than 120 days after the
end of the fiscal year covered by this report.
August 2, 1995
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
The following submission contains two (2) typographical errors and therefore
has been resubmitted with those errors corrected. The errors and
corresponding corrections are as follows:
1. Consolidated Balance Sheets, Liabilities and Stockholders' Equity,
line item "Other liabilities" - the amount for year ending March 31, 1994
was shown as "54" and it should have been "548".
2. Notes to Consolidated Financial Statements, Note #9-Common Stock Options
and Warrants, in the chart under Warrants, Outstanding for the period March
31, 1993, Granted - the amount shown was "5,083,38" and it should have been
"5,083,383".
I can be reached at (318) 437-1542 if you should need additional information.
Sincerely,
Kerry C. Mitchell
cc: Brian Ford, Ernst & Young
Brian Lynch, Morgan, Lewis, Bockius
53
PART I
Item 1. Business
Players International, Inc. is a multi-jurisdictional gaming
company which owns and operates the Players Riverboat Casino ("the
Metropolis Riverboat") at Merv Griffin's Landing in Metropolis,
Illinois (the "Metropolis Complex"), two riverboat casinos in Lake
Charles, Louisiana, the Players Riverboat Casino (the "Players Lake
Charles Riverboat"), the Players Lake Charles Star Riverboat (the "Lake
Charles Star Riverboat") and a horse racetrack facility in Paducah,
Kentucky, Players Bluegrass Downs, Inc.. The Metropolis Riverboat,
which is the only riverboat operating in southern Illinois and is one
of only ten statutorily authorized Illinois licensees, commenced
operations in February 1993 and has successfully marketed to patrons in
Illinois, Indiana, Kentucky, Missouri and Tennessee. The Players Lake
Charles Riverboat, which is one of the highest revenue producing
riverboat casinos in the United States, commenced operations in
December 1993. Both the Players Lake Charles Riverboat and the Lake
Charles Star Riverboat service the large Houston, Texas gaming market.
The Lake Charles Star Riverboat commenced operations in April 1995.
The Company currently plans to expand existing operations as well
as to develop and construct two new casino entertainment facilities.
The first of these projects is ("the Lake Charles Complex Expansion"),
an approximately $110 million expansion of its successful Lake Charles
operation, which has operated at or near capacity on weekends and
holidays. This multi-phase project includes the recently completed
purchase of the Lake Charles Star Riverboat. In addition, the Company
is party to an agreement pursuant to which it expects to purchase
shortly the Players Hotel and related property currently under lease in
Lake Charles. Following such purchase, the Company expects to
reconstruct or substantially improve and expand the hotel and construct
an entertainment barge and multi-story parking garage. These efforts
are being undertaken in order to offer the equivalent of dockside
gaming, expand capacity and strengthen the Company's market position in
Lake Charles in response to and in anticipation of competition in this
market.
In addition to the Lake Charles Complex Expansion, the Company is
completing the construction of the Players Island Resort, its first
land-based casino in Mesquite, Nevada. This resort will feature a
fully contained island resort environment. The Players Island Resort
is scheduled to open on or about July 1, 1995, subject to the receipt
of regulatory approvals, and is expected to cost between $75 and $80
million.
The Company also recently entered into a letter of intent to form
a joint venture with the Promus Companies, Incorporated ("Promus") to
co-develop a $200 million two riverboat casino entertainment complex in
Maryland Heights, Missouri, which will contain a total of 100,000
square feet of gaming space. The Company and Promus individually have
been endorsed by the City of Maryland Heights for separate riverboat
projects. The Company and Promus expect to begin construction with an
opening targeted for the Summer of 1996, subject to the receipt of all
necessary gaming and other approvals for the joint development project.
The Company also plans a $10 to $15 million improvement program for its
Metropolis Complex, including integration of the Company's island
resort theme featured at the Players Island Resort, as well as the
expansion of food and entertainment facilities and riverfront parking.
The Company's principal executive office is located at 3900
Paradise Road, Suite 135, Las Vegas, Nevada 89109 (Telephone: 702-691-
3300).
Business Strategy
The Company's successful business strategy, emphasizes providing
customers with a high quality entertainment experience, with particular
emphasis on customer service. The Company targets sites that are
conveniently located near frequently traveled interstate highways, and
which have easy access and ample parking, in order to attract local
patronage and repeat visitors. The Company's strategy in developing
and constructing facilities is to create a destination complex which
provides a total entertainment experience rather than merely casino
gaming.
The Company employs a disciplined development philosophy
consisting of the following principal components: (i) a thorough
analysis of demographic, regulatory, competitive and other factors to
identify niche markets or markets where the Company believes it could
have a dominant position; (ii) the maintenance of adequate financial
resources to enable the Company to respond quickly to development
opportunities in existing and new jurisdictions; (iii) the investment
of significant capital and other resources only after a determination
has been made that a project is attractive; and (iv) the development of
themed projects with a high entertainment component that can be
completed in a desirable time frame. The successful implementation of
this philosophy is evidenced by the Company's development record and
its existing facilities at Metropolis and Lake Charles, both of which
were developed on-time and on-budget.
Marketing
The Company's marketing strategy focuses on middle-income
customers who live within a 200 mile radius of each of the Company's
facilities. The Company implements this strategy principally through
the use of database marketing, on-site marketing and bus programs.
Utilizing its proprietary database of gaming enthusiasts, the Company
targets gaming customers through frequent mailings promoting visits to
its casino facilities. In addition, the Company employs on-site
marketing techniques including the use of player tracking systems, slot
clubs and preferred player hosts to identify and service patrons. To
attract additional patronage during non-peak hours, the Company
utilizes bus tours which are organized through the Company's direct
relationship with tour operators.
Metropolis Operations
The Company's Metropolis Complex, which has been operational since
February 23, 1993, is the only riverboat operating in southern Illinois
and has one of a current maximum of ten statutorily authorized gaming
licenses in the state. The Metropolis riverboat is a four deck, air
conditioned replica of a turn of the century side-wheeler riverboat.
The fully-equipped Las Vegas style casino features over 20,000 square
feet of gaming space, with 675 slot machines and 43 table games, for a
total of approximately 1,011 of the 1,200 gaming positions authorized
by statute. The Metropolis Complex also includes a docking site known
as "Merv Griffin's Landing," which features a bar and grill, a
restaurant, meeting rooms and a gift shop. As part of its plan to offer
non-gaming amenities in Metropolis, the Company acquired a 12-1/2%
interest in a joint venture that built a 120-room hotel adjacent to its
Metropolis dock site. The hotel was opened in March 1994. The Company
is entitled to a discounted rate for rooms used for casino guests and
employees. The Company also leases, under a ten year agreement, a 350-
seat cabaret style theater adjacent to the hotel, which is not in
active operation but is available for use in special events and
promotions. The rental payment for this lease is $3,000 per month.
To date, the Metropolis operation's closest gaming competitor
operates in the St. Louis, Missouri area, which is approximately three
hours away by car. The Company expects competing riverboat casinos to
open in the next 12 months at two locations in southern Missouri and at
one location in southern Indiana. In order to maintain its market
position in light of potential increased competition, the Company
intends to invest between $10 and $15 million for additional amenities,
attractions and riverfront parking. As part of this program, the
Company intends to integrate in the Metropolis Complex the Company's
island resort theme which will be featured at the Players Island
Resort, and to expand its food and entertainment facilities.
The docking site at Metropolis consists of three permanently
moored barges and related structures. One barge, with a total area of
approximately 15,000 square feet on three levels, houses Merv Griffin's
Bar and Grill, the Celebrity Buffet restaurant, and meeting rooms. The
dining facilities have the capacity to seat 600 people. The second
barge is approximately 12,000 square feet in size and contains the
ticketing area, a gift shop, waiting areas and restrooms. A special
VIP lounge was added recently to this barge. A third barge is
approximately 15,000 square feet and is used as a queuing area for
patrons prior to boarding the riverboat casino. A deli and bar have
been added on this barge for patron convenience. The docking site is
approximately three miles from U.S. Interstate 24, a major highway
through Illinois, Kentucky and Tennessee. The docking site is within
easy walking distance to over 1,000 free automobile and bus parking
spaces provided by the Company. Although Illinois law requires persons
who enter the casino to be at least 21 years of age, the restaurants
and gift shop are open to everyone.
Metropolis, Illinois is near the southern tip of Illinois on the
Ohio River across from Paducah, Kentucky, approximately 40 miles from
the junction of the Ohio and Mississippi Rivers. Metropolis, with a
population of about 7,000, is approximately 150 miles northwest of
Nashville, 160 miles southeast of St. Louis and 160 miles northeast of
Memphis. The primary market area targeted by the Company for its
Metropolis riverboat includes Bowling Green, Louisville and Owensboro,
Kentucky; Cape Girardeau, Missouri; Clarksville, Hopkinsville and
Nashville, Tennessee; and two military bases in Kentucky, Fort Campbell
and Fort Knox. Regional attractions in the area include Fort Massac
State Park, Shawnee National Forest, Cave-In-Rock State Park, Land
Between the Lakes, and Crab Orchard and Rend Lakes.
The Metropolis Riverboat departs from its landing for eight
cruises daily, commencing at 9:00 a.m., with an additional midnight
cruise on Friday and Saturday. This schedule may be varied, based on
experience and seasonal factors. The Company adds a midweek midnight
cruise during the summer. There is an admission charge, which ranges
from $2 to $5 per cruise. Once passengers board, they are permitted to
game during the half hour prior to the time the riverboat departs.
After the excursion, passengers are permitted to game for another half
hour before new passengers board, for a total of two hours of gaming
per cruise. The Company may permit passengers to remain on board for
additional cruises on a complimentary basis. In addition, Illinois
permits dockside gaming if the riverboat captain reasonably determines
that it is unsafe to cruise due to inclement weather, mechanical or
structural problems or river icing, although there is a possibility
that such authorization may be withdrawn. See "Regulatory Matters--
Illinois Gaming Regulation." During dockside gaming, the Metropolis
Riverboat operates on its normal schedule and passengers may leave the
vessel at any time but may board only during the half hour prior to the
regularly scheduled start of the cruise.
The number of passengers per cruise typically varies, with a
higher number on the weekends than in mid-week. Passenger counts are
higher during warmer weather (from late spring through early fall) than
during colder winter months. The Company anticipates that this trend
will continue in the future. The configuration of the Metropolis
Riverboat, like the configuration of the Players Lake Charles and
Players Star Riverboats, is designed to accommodate a maximum number of
passengers comfortably during peak times, recognizing that there may be
excess capacity for the number of passengers during most off-peak
cruises. The Company's goal is to maximize overall gaming win and
profit with a relatively large and well-equipped boat, while providing
a pleasurable gaming experience, and not necessarily to maximize win
per slot, win per table or win per square foot of casino space. Since
inception, the Metropolis Riverboat typically has operated at close to
full capacity on Friday and Saturday evening cruises and holidays, with
excess capacity on cruises at other times.
Lake Charles Operations
The Players Lake Charles Riverboat, which was the second casino
riverboat to open in the state of Louisiana, commenced operations on
Lake Charles in southwestern Louisiana on December 8, 1993. The Players
Lake Charles Riverboat, a fully-equipped Las Vegas style casino, has
approximately 27,500 square feet of gaming space with 869 slot machines
and 69 table games, for a total of approximately 1,400 gaming positions
and offers gaming on four air-conditioned decks.
In order to offer the equivalent of dockside gaming, expand
capacity and strengthen the Company's market position in Lake Charles,
the Company in January 1995 initiated the $110 million Lake Charles
Complex Expansion. The Company began the Lake Charles Complex Expansion
by acquiring for approximately $52 million all interests in the
partnership that owns a fully equipped Las Vegas style riverboat casino
which had operated for the past one and one-half years on Lake
Pontchartrain, Louisiana. The Company now holds two of the 15
statutorily authorized riverboat gaming licenses in Louisiana.
In April 1995, the Company opened the Lake Charles Star Riverboat,
which has 21,730 square feet of gaming space on three air-conditioned
decks with 778 slot machines and 45 table games for a total of 1,135
gaming positions. Both the Players Lake Charles Riverboat and the Lake
Charles Star Riverboat are approved to operate eight three-hour cruises
seven days a week. The Lake Charles Star Riverboat currently operates
eight three-hour cruises daily, commencing at 9:00 a.m. The Players
Lake Charles Riverboat currently operates five three-hour cruises
Sunday through Thursday and eight three-hour cruises Friday and
Saturday. Cruises on the Players Lake Charles Riverboat commence at
10:30 a.m. With the two Lake Charles riverboats operating on the above
staggered cruise schedules, the Company offers the equivalent of
dockside gaming at all times except 1:30 a.m. through 10:30 a.m. Sunday
through Thursday.
As part of the Lake Charles Complex Expansion, approximately $58
million in additional expansion projects and improvements are budgeted
for the development of a 50,000 square foot themed entertainment center
featuring new restaurants, a sports bar and lounge and banquet
facilities; the reconstruction or substantial improvement and expansion
of hotel space; the construction of a new docking facility and a
covered parking facility; public purpose/city infrastructure
contributions; the integration of the Company's island resort theme at
the Lake Charles facility; and additional amenities.
There is an admission charge of $2.00 per cruise on the Players
Lake Charles Riverboat and Lake Charles Star Riverboat, although
promotional discounts may be given. The Company pays a $2.50 per
passenger admission tax to the City of Lake Charles. Once passengers
board, they are permitted to game prior to the riverboat's departure.
Passengers are permitted to continue to game until they disembark. At
its discretion, the Company may permit passengers to remain on board
for additional cruises. Louisiana permits dockside gaming if the
riverboat captain reasonably determines that it is unsafe to cruise due
to dangerous weather or water conditions.
The Players Lake Charles Riverboat and Lake Charles Star Riverboat
depart from a docking site adjacent to the Players Hotel, which
includes dockside and support facilities. The Company currently leases
the ground floor of the hotel and adjacent parking areas for the hotel
and casino guests. The Company has completely renovated and expanded
the hotel's ground floor into a pavilion that houses the primary areas
for ticketing, waiting, entertainment and retail space, four bars and
additional snack facilities. The space also includes two full service
restaurants, Merv's Bar & Grill and the Celebrity Buffet and
Restaurant, which can seat 125 and 250 people, respectively. Following
the closing under an agreement pursuant to which the Company is a
party, the Company will own the real property on which the Lake Charles
landing area and complex, including the hotel and parking area
currently under lease, are situated. See "Properties--Lake Charles,
Louisiana".
The Company maintains a permanently docked barge of approximately
10,000 square feet, containing a 3,000 square foot VIP waiting lounge,
which allows special access and priority boarding. The barge also
provides areas for employee needs, offices and mechanical rooms.
Passengers enter the Players Lake Charles Riverboat directly from a
barge facility which is connected to the Players Hotel by a covered
walkway. The landing is within easy walking distance of 800 automobile
parking spaces (of which 250 spaces are valet parking) and another 700
parking spaces are accessible to the landing by shuttlebus.
The City of Lake Charles and the surrounding area have a
population of 160,000 within a 25 mile radius. The City of Lake Charles
is an active community with a cultural heritage and community resources
including the symphony, ballet and numerous art galleries and museums.
The area is also host to seasonal festivals and special events that
highlight Cajun food and music, historic crafts and water sports. Lake
Charles hosts the annual "Contraband Days," the biggest promotional
event in Lake Charles, spanning over two weeks and attracting
approximately 200,000 visitors to the City. Lake Charles' Contraband
Days is the second largest festival in Louisiana after New Orleans'
Mardi Gras Festival. In addition, the City of Lake Charles has a civic
center that offers a 2,000 seat theater and a 50,000 square foot
exhibition hall, used for conventions, sporting events and
entertainment. Lake Charles, which exceeds four square miles, serves as
a recreational area for boating and fishing.
The Lake Charles casinos' primary market area includes such
population centers as Houston, Beaumont, Galveston, Orange and Port
Arthur, Texas and Lafayette and Baton Rouge, Louisiana. U.S.
Interstate 10 connects Houston, Beaumont and Lake Charles and is
adjacent to the Company's dock site. Since opening, the Company
estimates that the Lake Charles casino has drawn over half of its
patrons from Texas, mainly from the greater Houston area, due in large
part to the current absence of legalized casino gaming in Texas.
While, to date, the Company has experienced only limited gaming
competition, the Company anticipates significant new and additional
gaming competition in the Lake Charles market. See "Competition."
Projects Under Development
Mesquite, Nevada
As part of a strategy to diversify revenue sources, the Company expects
to open the Players Island resort, its first land-based casino
entertainment facility, in Mesquite, Nevada, on or about July 1, 1995,
subject to the receipt of all necessary gaming and other approvals.
The Players Island Resort will feature an island resort theme and is
estimated to cost between $75 and $80 million to develop and open,
approximately $43.7 million of which had been invested through March
31, 1995. The majority of the remaining project costs are covered by
fixed price contracts. The Mesquite site is located approximately 70
miles by car from Las Vegas on Interstate 15 between Las Vegas and Salt
Lake City, where an estimated 12, 000 cars pass daily. The Players
Island Resort will be marketed as a destination resort for the
residents of the Las Vegas area and Southern Nevada, as well as for
tourists from California, Arizona and nearby Utah.
The initial phase of the Players Island Resort project includes a
40,000 square foot casino; a 500-room hotel with a health spa and
swimming pool with waterfalls; lighted tennis courts; a children's
arcade; four detached three-bedroom villas; and a 50-unit recreational
vehicle facility. As part of the budgeted project, the Company has
leased additional land near the Players Island Resort to commence the
development of an 18-hole golf course during fiscal 1996. The resort
also will feature four restaurants, an estimated 400-seat showroom and
10,000 square feet of banquet/meeting rooms. The resort complex, which
has been master-planned to accommodate further expansion of the casino,
hotel and banquet/meeting space, will feature a fully-contained island
resort environment.
Development Opportunities
Maryland Heights, Missouri
The Company entered into a letter of intent with Promus on March
3, 1995 to form a joint venture to co-develop a $200 million riverboat
casino entertainment complex in Maryland Heights, Missouri, which will
contain a total of 100,000 square feet of gaming space. The Company and
Promus would each own and operate a separate riverboat casino pursuant
to separate gaming licenses but would share in the costs of the
development of, as well as any profit or loss associated with, an
estimated 300,000 square foot shoreside facility. Although the two
riverboat casinos are expected to be similar in theme and decor, each
operator would individually manage and market its own gaming operations
with separate staffing. The Company and Promus individually have been
endorsed by the City of Maryland Heights for separate riverboat casino
projects and have licensing applications under consideration by the
Missouri Gaming Commission. See "Regulatory Matters". The development
and operation of the Maryland Heights Project are conditioned upon the
negotiation and execution of definitive agreements between the Company
and Promus.
In addition to the construction of two riverboats, the shoreside
facility is anticipated to include a hotel facility to be managed by
Promus, extensive covered parking and a 95,000 square foot
entertainment building. The entertainment facility is expected to
contain upscale restaurants, a buffet, bars, an entertainment lounge
with live music nightly, a preferred players lounge and gift shops. The
Company and Promus also are evaluating the development of an outdoor
mall containing themed restaurants and boutique shops similar to the
higher end Las Vegas casinos. Under the Promus Letter of Intent (i)
Promus and the Company would share each other's development costs
(excluding the costs specified in clause (iii) below, the costs of
riverboats to be separately owned and operated and the costs associated
with interior fit-up of separately controlled space); (ii) Promus would
have the right to purchase the Company's interest in the joint venture
upon any "change of ownership" of Players, on terms subject to
negotiation between the parties; and (iii) as between Promus and the
Company, the owner of the property ultimately chosen for development
would receive percentage rent from the other joint venture party, based
on net gaming revenues. See "Properties--Maryland Heights, Missouri."
Situated close to Interstate 70 in Maryland Heights, the casino
entertainment complex will be strategically located to attract patrons
from a local population base of approximately 2.3 million in the
greater St. Louis metropolitan region. The site will feature easy
accessibility, a high level of drive-by traffic and close proximity to
Interstate 70 and Lambert International Airport, and will be
strategically located near the Riverport amphitheater, which attracts
500,000 visitors per year. The Company and Promus expect to begin
construction with an opening targeted for the Summer of 1996, subject
to the negotiation and execution of definitive agreements for the
project and the receipt of all necessary gaming and other approvals.
Although riverboat gaming is currently offered in the metropolitan
St. Louis region, certain patrons of the Metropolis Complex travel
approximately three hours from St. Louis to Metropolis. In recognition
of these valued customers, the Company intends to introduce cross-
marketing programs to St. Louis area residents for the Metropolis and
the proposed Maryland Heights riverboats to increase repeat patronage
at the Company's casino entertainment facilities.
Other Potential Projects
The Company currently is in the early stages of evaluating a
number of other potential opportunities to develop riverboat, dockside
or land-based gaming facilities in jurisdictions that currently permit
gaming as well as in jurisdictions that have not yet legalized gaming.
Competition
The casino gaming industry includes casinos which are either land-
based in jurisdictions such as Nevada and New Jersey, dockside casinos,
riverboat casinos and land-based casinos on Indian reservations. The
gaming industry is highly competitive and is composed of a large number
of companies, many of which have significantly greater resources than
the Company. Numerous states have legalized gaming and several other
states are considering the legalization of gaming in designated areas.
As a result of the proliferation of gaming in new jurisdictional areas
as well as the proliferation of Indian gaming on tribal land, the
Company's operations could be adversely affected in instances where
such other gaming operations are conducted close to the Company's
operations.
The Company's Metropolis Complex currently faces indirect
competition from riverboats in certain parts of Missouri and to a much
lesser extent from dockside casinos in Tunica, Mississippi. In
addition, the Company believes that by late Summer of 1995, the
Metropolis Complex will be subject to competition from a riverboat
operation in Evansville, Indiana, which is located approximately 110
miles from Metropolis. Gaming has also been authorized in Missouri, and
the closest Missouri cities in which proposed future gaming facilities
are under consideration are Cape Girardeau and Caruthersville, which
are approximately 70 and 120 miles, respectively, from Metropolis. The
Caruthersville project opened in April 1995. The timing of the opening
and licensing of the Cape Girardeau project cannot be determined. In
order to maintain its market position, the Company has budgeted
additional amenities and attractions for the Metropolis Complex. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The Company's Lake Charles operation faces direct competition from
the land-based Coushatta facility in Kinder, Louisiana. The Coushatta
facility, which opened in January of 1995, and which has recently
announced an expansion, is a Las Vegas style casino that offers 45,000
square feet of gaming space, with 1,250 slot machines and 50 table
games. Coushatta has announced that it has experienced higher than
expected revenues since opening and plans to expand in August 1995 by
increasing gaming space by 26,000 square feet and adding 750 slot
machines and 15 table games. In addition to the Coushatta facility,
the Company will also face direct competition from a joint venture of
Crown Casinos, Inc., Casino America, Inc. and Louisiana Downs, Inc.,
which expects to open its riverboat operation in Westlake, Louisiana
approximately one mile from the Company's facility. Eastbound travelers
on Interstate 10 can access the Crown facility prior to reaching the
Players' facility. The Company's Lake Charles operations compete to a
lesser degree with riverboat operators in Baton Rouge, approximately
125 miles east of Lake Charles, the New Orleans area, which is over 200
miles east of Lake Charles, and the Shreveport/Bossier City area, which
is approximately 180 miles north of Lake Charles. A land based casino
in New Orleans may produce additional competition.
The Players Island Resort in Mesquite, Nevada will compete
directly with two existing properties, the Oasis and the Virgin River,
both of which are located in Mesquite. The larger of the two
facilities, the Oasis, has been in operation for approximately 11
years, and the Virgin River has been in operation for approximately
three years. These two facilities draw a majority of their patronage
from travelers on Interstate 15, the local population base and the
residents of nearby border towns between Utah and Nevada. The Company
will compete directly with these existing properties as well as attempt
to expand the Mesquite market by targeting Las Vegas residents and tour
and travel patrons who otherwise are visiting Las Vegas.
The Company's planned project in Maryland Heights, Missouri will
compete directly with President Riverboats in downtown St. Louis, Alton
Belle in Alton, Illinois, Casino Queen in East St. Louis and St.
Charles Station in St. Charles, Missouri, proposed riverboat casinos in
Kimmswick, Missouri and St. Charles County, Missouri and, potentially,
additional riverboats in the St. Louis metropolitan area.
Employees
At March 31, 1995, the Company had 2,261 employees, including
approximately 1,357 and 786 employed in riverboat operations (including
land-based activities) in Lake Charles and Metropolis, respectively, 45
employed at Players Bluegrass Downs, 32 employed at Players Island
Resort and 41 employed in the Company's executive office. The Company
believes its relations with its employees are generally good.
Regulatory Matters
The Company is subject to state and Federal laws which regulate
businesses generally and the gaming business specifically. Below is a
brief description of some of the more significant regulations to which
the Company is subject. All laws are subject to change and different
interpretations. This is especially true with respect to laws
regulating the gaming industry, since in many cases these laws and the
regulatory agencies that apply them are new. Changes in laws or their
interpretation may result in the imposition of more stringent,
burdensome, or expensive requirements, or the outright prohibition of
an activity.
Illinois Gaming Regulation
The Riverboat Gambling Act of Illinois (the "Illinois Riverboat
Act") currently authorizes a five-member Illinois Gaming Board to issue
up to ten riverboat gaming licenses. The Illinois Gaming Board issued
an owner's license to a wholly-owned subsidiary of the Company, for its
Metropolis operations in February 1993. This license is subject to
renewal, unless revoked, in February 1996 and annually thereafter. The
Illinois Gaming Board has granted licenses to nine other riverboat
owners, some with multiple boats, with dock sites based in Alton,
Aurora, East Peoria, East St. Louis, Elgin, Rock Island, Joliet (two
licensees have a dock site based in Joliet) and East Dubuque.
Each owner's license granted entitles the licensee to own and
operate up to two riverboats (with a combined maximum of 1,200 gaming
participants) and equipment thereon from a specified dock site. The
duration of the license initially runs for a period of three years.
Thereafter, the license is subject to renewal on an annual basis upon,
among other things, a determination by the Illinois Gaming Board that
the licensee continues to meet all of the requirements of the Illinois
Riverboat Act and the Illinois Gaming Board's Rules. All licensees have
a continuing duty to maintain suitability for licensure. There can be
no assurance that the Company's license will be renewed, although the
Company is not aware of any reason why it would not be. A license does
not create a property right, but is a revocable privilege granted by
the State of Illinois contingent upon continuing suitability for
licensure. The licensee bears the burden of rebutting by clear and
convincing evidence any charges raised by the Illinois Gaming Board.
The Illinois Riverboat Act grants the Illinois Gaming Board
extensive jurisdiction, specific powers and duties for the purposes of
administering, regulating and enforcing the system of riverboat gaming.
Any riverboat operation not conducted in compliance with the Illinois
Riverboat Act may constitute an illegal gaming place and consequently
may be subject to criminal penalties, including possible seizure,
confiscation and destruction of illegal gaming devices and seizure and
sale of riverboats and dock facilities. The Illinois Riverboat Act also
provides for civil penalties, equal to the amount of gross receipts
derived from wagering on the gaming, whether unauthorized or
authorized, conducted on the date of any violation. The Illinois Gaming
Board may revoke or suspend licenses as the Board may see fit and in
compliance with applicable laws of the State of Illinois regarding
administrative procedures and may suspend an owner's license, without
notice or hearing, upon a determination that the safety or health of
patrons or employees is jeopardized by continuing a riverboat's
operation. The suspension may remain in effect until the Illinois
Gaming Board determines that the cause for suspension has been abated
and it may revoke the owner's license upon a determination that the
owner has not made satisfactory progress toward abating the hazard.
A holder of an owner's license is required to obtain all licenses
from the Illinois Gaming Board necessary for the operation of a
riverboat, including a liquor license and a license to prepare and
serve food and all other necessary licenses. All sales, use, occupation
and excise taxes which apply to food and beverages apply to sales
aboard riverboats. All riverboats must be accessible to disabled
persons, must be either a replica of a 19th century Illinois riverboat
or be of a casino cruise ship design, and must comply with applicable
Federal and state laws, including U.S. Coast Guard regulations.
A person employed at a riverboat gaming operation must hold an
occupation license from the Illinois Gaming Board which permits the
holder to perform only activities included within such holder's level
of occupation license or any lower level of occupation license. The
Illinois Gaming Board also requires that officers, directors and other
key persons of a gaming operation be licensed. In addition, a riverboat
licensee can purchase or lease gaming equipment or supplies only from a
supplier who has been issued a supplier's license by the Illinois
Gaming Board.
As a condition to maintaining an owner's license, the licensee
must, among other things, submit detailed financial information and
other information to the Illinois Gaming Board including an annual
audit by an independent certified public accountant, approved by the
Administrator of the Illinois Gaming Board, of the financial
transactions and conditions of the total operations of a holder of an
owner's license including the condition of the licensee and its
internal control system. The holder of an owner's license must prepare
and send to the Administrator and the independent certified public
accountant selected by the Administrator a written response to issues
raised by such accountant's reports on (i) the procedures required to
be performed by such accountant on a quarterly basis with respect to
certain aspects of the licensee's operations and (ii) the annual audit
referred to in the previous sentence. Among other continuing
obligations, the holder of an owner's license has a duty to promptly
disclose any material changes in the information it provides to the
Illinois Gaming Board. The holder of an owner's license must report
promptly to the Administrator of the Illinois Gaming Board any facts
which the holder has reasonable grounds to believe indicate a violation
of law (other than minor traffic violations) or Illinois Gaming Board
Rule or a holder's internal controls committed by suppliers or licensed
employees including, without limitation the performance of licensed
activities different than those permitted under their license. The duty
to disclose to the Illinois Gaming Board changes in information
continues throughout the period of licensure. A duty exists to promptly
disclose the identity of a compensated agent acting on behalf of the
holder of an owner's license with regard to action by the Illinois
Gaming Board.
A holder of an owner's license is subject to the imposition of
fines, suspension or revocation of its license for any act or failure
to act on the part of the licensee or its agents or employees that is
injurious to the public health, safety, morals, good order or general
welfare of the people of the State of Illinois or that would discredit
or tend to discredit the Illinois gaming industry or the State of
Illinois, including, without limitation, (i) failing to comply with or
make provision for compliance with applicable legal requirements
including the Illinois Riverboat Act, the rules promulgated thereunder
or any other applicable Federal, state or local law or regulation or
order or failure by the holder of an owner's license to comply with or
make provisions for complying with the holder's internal controls; (ii)
failing to comply with any rule, order or ruling of the Illinois Gaming
Board or its agents pertaining to gaming; (iii) receiving goods or
services from a person or business entity which does not hold any
required supplier's license; (iv) being suspended or ruled ineligible
for a gaming license or having a gaming license revoked or suspended in
any state or gaming jurisdiction; (v) associating with, either socially
or in business affairs, or employing persons of notorious or unsavory
reputation or who have extensive police records or who have failed to
cooperate with any officially constituted investigatory or
administrative body if public confidence and trust in gaming would
thereby be adversely affected; and (vi) employing in any Illinois
riverboat's gaming operations any person known to have been found
guilty of cheating or using any improper device in connection with any
game.
Minimum and maximum wagers on games are not established by
regulation but are left to the discretion of the licensee; however,
wagering may not be conducted with money or other negotiable currency.
Riverboat cruises are limited to a duration of four hours, and pursuant
to the language of the Illinois Riverboat Act, no gaming may be
conducted while the riverboat is docked. Illinois Gaming Board Rule,
Section 3000.500, currently permits gaming during the 30-minute time
periods at the beginning and end of a cruise while the passengers are
embarking and disembarking (total gaming time per cruise is limited to
four hours, however, including the pre- and post-docking periods). In
addition, pursuant to Illinois Gaming Board Rule, Section 3000.510,
dockside gaming is permitted if the captain of the riverboat reasonably
determines that it is unsafe to cruise due to inclement weather,
mechanical or structural problems or river icing. Recent pronouncements
by the Illinois Gaming Board indicate that the explanations for failure
to cruise pursuant to Illinois Gaming Board Rule, Section 3000.510 will
be scrutinized and that any abuse of the rule will result in
disciplinary actions, which may include, among other things, any of the
following: cancellation of future cruises, penalties, fines and
suspensions or revocation of license. In such event, the riverboat must
be cleared at least once every four hours, at which time a new gaming
session may commence; patrons may leave the vessel at any time but may
only board the vessel during the first 30 minutes of the gaming
session. No person under the age of 21 is permitted to wager, and
wagers may only be taken from a person present on a licensed riverboat.
With respect to electronic gaming devices, the payout percentage may
not be less than 80% nor more than 100%.
The Illinois Riverboat Act imposes a 20% wagering tax on adjusted
gross receipts from gaming. The tax imposed is to be paid by the
licensed owner to the Illinois Gaming Board on the day after the gaming
day when the wagers were made. The Illinois legislation also requires
that licensees pay a $2.00 admission tax for each person admitted to a
gaming cruise.
An ownership interest in a business entity (other than a publicly
traded corporation) which has an interest in a holder of an owner's
license may only be transferred or pledged as collateral with leave of
the Illinois Gaming Board. Any person or entity who or which,
individually or in association with others, acquires directly or
indirectly, beneficial ownership of more than 5% of any class of voting
securities or non-voting securities convertible into voting securities
of a publicly traded corporation which holds an ownership interest or a
beneficial interest in the holder of an owner's license is required to
file a Personal Disclosure Form 1. (The Illinois Gaming Board, however,
takes the position that it can require any individual or entity seeking
a transfer of an ownership interest in an owner's license to file a
personal disclosure Form 1.) The Personal Disclosure Form 1 forms the
basis of investigation by the Illinois Gaming Board to determine
suitability of the person or entity seeking transfer of an ownership
interest. If the Illinois Gaming Board denies an application for such a
transfer, commencing as of the date the Illinois Gaming Board issues a
notice that it denies such application, it will be unlawful for such
applicant to receive any dividends or interest on his shares, to
exercise, directly or indirectly, any right conferred by such shares,
or to receive any remuneration from any person or entity holding any
license under the Illinois Riverboat Act for services rendered. If the
Illinois Gaming Board denies an application for such a transfer and if
no hearing is requested or if the Illinois Gaming Board issues a final
order of disqualification, the holder of an owner's license shall
purchase all of the disqualified person's or entity's shares at the
lesser of either the market price or the purchase price for such
shares.
A holder of an owner's license can only make distributions to
stockholders to the extent such distributions would not impair the
financial viability of the gaming operation. Factors to be considered
should include but not be limited to the following: (i) working capital
requirements, (ii) debt service requirements, (iii) repairs and
maintenance requirements and (iv) capital expenditure requirements.
Holders of an owner's license must immediately inform the Illinois
Gaming Board and obtain formal approval from the Illinois Gaming Board
whenever a change is proposed in the following areas: key persons; type
of entity; equity and debt capitalization of entity; investors and/or
debt holders; sources of funds; applicant's economic development plan;
riverboat capacity or significant design change; gaming positions;
anticipated economic impact; or pro forma budgets and financial
statements.
The Company is subject to certain risks associated with the
promulgation of new or revised rules that could adversely affect the
Company's operations. The Illinois Riverboat Act may be amended, and
new or revised rules may be promulgated, changing the number of
available licenses or gaming locations in Illinois, or otherwise
changing Illinois gaming regulations. Although no new or revised rules
have been promulgated in the last 20 months, no assurance can be given
that no such rules would be promulgated, and the Company has no control
over such developments. In addition, uncertainty exists from time to
time regarding the Illinois gaming regulatory environment due to the
limited experience in interpreting the Illinois Riverboat Act and the
rules promulgated thereunder. For example, changes in membership of the
Illinois Gaming Board resulted in a vote being taken to prohibit any
dockside gambling which was narrowly defeated by a vote of three to
two. Due to the relative novelty of this regulatory environment, there
can be no assurance that adverse regulatory developments will not occur
in the future or that adverse interpretations of rules will not be
issued.
Louisiana Gaming Regulation
In July 1991, the Louisiana legislature adopted legislation
permitting certain types of gaming activity on certain rivers and
waterways in Louisiana. The legislation granted authority to supervise
riverboat gaming activities to the Louisiana Riverboat Gaming
Commission and the Riverboat Gaming Enforcement Division of the
Louisiana State Police (the "Louisiana Enforcement Division"). The
Louisiana Riverboat Gaming Commission is authorized to hear and
determine all appeals relative to the granting, suspension, revocation,
condition or renewal of all licenses, permits and applications. In
addition, the Louisiana Riverboat Gaming Commission must establish
regulations concerning authorized routes, duration of excursions,
minimum levels of insurance, construction of riverboats and periodic
inspections. The Louisiana Enforcement Division is authorized to
investigate applicants and issue licenses, investigate violations of
the statute and conduct continuing reviews of gaming activities.
The statute authorizes issuance of up to 15 licenses to conduct
gaming activities on a riverboat of new construction in accordance with
applicable law. However, no more than six licenses may be granted to
riverboats operating from any one parish.
In issuing a license, the Louisiana Enforcement Division must find
that the applicant is a person of good character, honesty and integrity
and a person whose prior activities, criminal record, if any,
reputation, habits, and associations do not pose a threat to the public
interest of the State of Louisiana or to the effective regulation and
control of gaming, or create or enhance the dangers of unsuitable,
unfair or illegal practices, methods and activities in the conduct of
gaming or the carrying on of business and financial arrangements in
connection therewith. The Louisiana Enforcement Division will not grant
a license unless it finds that: (i) the applicant is capable of
conducting gaming operations, which means that the applicant can
demonstrate the capability, either through training, education,
business experience, or a combination of the above, to operate a gaming
casino; (ii) the proposed financing of the riverboat and the gaming
operations is adequate for the nature of the proposed operation and
from a source suitable and acceptable to the Louisiana Enforcement
Division; (iii) the applicant demonstrates a proven ability to operate
a vessel of comparable size, capacity and complexity to a riverboat so
as to ensure the safety of its passengers; (iv) the applicant submits a
detailed plan of design of the riverboat in its application for a
license; (v) the applicant designates the docking facilities to be used
by the riverboat; (vi) the applicant shows adequate financial ability
to construct and maintain a riverboat; and (vii) the applicant has a
good faith plan to recruit, train and upgrade minorities in all
employment classifications.
Certain persons affiliated with a riverboat gaming licensee,
including directors and officers of the licensee, directors and
officers of any holding company of the licensee involved in gaming
operations, persons holding five percent or greater interests in the
licensee, and persons exercising influence over a licensee ("Affiliated
Gaming Persons"), are subject to the application and suitability
requirements of the Louisiana gaming law.
The Louisiana gaming law specifies certain restrictions and
conditions relating to the operation of riverboat gaming, including the
following: (i) gaming is not permitted while a riverboat is docked,
other than the forty-five minutes between excursions, and during times
when dangerous weather or water conditions exist; (ii) each round-trip
riverboat cruise may not be less than three nor more than eight hours
in duration, subject to specified exceptions; (iii) agents of the
Louisiana Enforcement Division are permitted on board at any time
during gaming operations; (iv) gaming devices, equipment and supplies
may only be purchased or leased from permitted suppliers; (v) gaming
may only take place in the designated gaming area while the riverboat
is upon a designated river or waterway; (vi) gaming equipment may not
be possessed, maintained or exhibited by any person on a riverboat
except in the specifically designated gaming area, or a secure area
used for inspection, repair or storage of such equipment; (vii) wagers
may be received only from a person present on a licensed riverboat;
(viii) persons under 21 are not permitted in designated gaming areas;
(ix) except for slot machine play, wagers may be made only with tokens,
chips or electronic cards purchased from the licensee aboard a
riverboat; (x) licensees may only use docking facilities and routes for
which they are licensed and may only board and discharge passengers at
the riverboat's licensed berth; (xi) licensees must have adequate
protection and indemnity insurance; (xii) licensees must have all
necessary Federal and state licenses, certificates and other regulatory
approvals prior to operating a riverboat; and (xiii) gaming may only be
conducted in accordance with the terms of the license and the rules and
regulations adopted by the Louisiana Enforcement Division.
An initial license to conduct riverboat gaming operations is valid
for a term of five years. The Company was issued an initial operator's
license by the Louisiana Enforcement Division on December 6, 1993. The
Louisiana gaming law provides that a renewal application for the period
succeeding the initial five year term of the operator's license must be
made to the Louisiana Enforcement Division. The application for renewal
consists of a statement under oath of any and all changes in
information, including financial information, provided in the previous
application.
The transfer of license or permit or an interest or permit is
prohibited. The sale, purchase, assignment, transfer, pledge or other
hypothecation, lease, disposition or acquisition (a "Transfer") by any
person of securities which represent 5% or more of the total
outstanding shares issued by a corporation that holds a license is
subject to Louisiana Enforcement Division disapproval. A security
issued by a corporation that holds a license must generally disclose
these restrictions. Prior Louisiana Enforcement Division approval is
required for the Transfer of any ownership interest of 5% or more in
any non-corporate licensee or for the Transfer of any "economic
interest" of 5% or more in any licensee or Affiliated Gaming Person.
An "economic interest" is defined for purposes of a "Transfer" as any
interest whereby a person receives or is entitled to receive, by
agreement or otherwise, a profit, gain, thing of value, loan, credit,
security interest, ownership interest or other economic benefit.
A licensee must notify the Louisiana Enforcement Division of any
withdrawals of capital, loans, advances or distributions in excess of
5% of retained earnings for a corporate licensee, or of capital
accounts for a partnership or limited liability company licensee, upon
completion of any such transaction. No prior approval of any such
withdrawal, loan, advance or distribution is required, but any such
transaction is ineffective if disapproved by the Louisiana Enforcement
Division within 120 days after the required notification. In addition,
the Louisiana Enforcement Division may issue an emergency order for not
more than 10 days prohibiting payment of profits, income or accruals
by, or investments in, a licensee.
Riverboat gaming licensees and their Affiliated Gaming Persons are
required to notify the Louisiana Enforcement Division within thirty
days after the receipt by any such persons of any loans or extensions
of credit. The Louisiana Enforcement Division is required to
investigate the reported loan or extension of credit, and to either
approve or disapprove the transaction. If disapproved, the loan or
extension of credit must be rescinded by the licensee or Affiliated
Gaming Person. The Company is an Affiliated Gaming Person of its
Louisiana subsidiary that is the licensee of the Players Lake Charles
Riverboat and the Players Star Riverboat. On March 23, 1995, the
Company received from the Louisiana Enforcement Division approval of
the sale and issuance of 10-7/8% Senior Notes, the execution and
delivery of a Guarantee by the Company's Louisiana subsidiaries, and
the making and repayment of loans from the Company to its Louisiana
subsidiaries, in amounts up to the amount of the Notes. Any other
advances by the Company to its Louisiana subsidiaries in the form of
loans or other intercompany indebtedness are subject to the disapproval
power of the Louisiana Enforcement Division.
Fees for conducting gaming activities on a riverboat include (i)
$50,000 per riverboat for the first year of operation and $100,000 per
year per riverboat thereafter plus (ii) 18-1/2% of net gaming proceeds.
In July 1991, Louisiana also authorized operation of VLTs at
various types of facilities in the state, including bars, truckstops,
racetracks and off-track betting parlors.
Proposals to amend or supplement Louisiana's riverboat gaming
statute are frequently introduced in the Louisiana state legislature.
No assurances can be given that changes in Louisiana gaming law will
not occur, or that such changes will not have an adverse impact on the
Company's business in Louisiana.
Nevada Gaming Regulation
The ownership and operation of casino gaming facilities in Nevada
are subject to: (i) the Nevada Gaming Control Act and the regulations
promulgated thereunder (collectively, the "Nevada Act"); and (ii)
various local ordinances and regulations. Gaming operations in Nevada
are subject to the licensing and regulatory control of the Nevada
Gaming Commission ("Nevada Commission"), the Nevada State Gaming
Control Board ("Nevada Board") and various other county and city
regulatory agencies, including the City of Mesquite, collectively
referred to as the "Nevada Gaming Authorities."
The Company is required to be registered with the Nevada
Commission as a publicly traded corporation (a "Registered
Corporation") and to be found suitable to own the stock of Players
Nevada. Players Nevada is required to be licensed (a "Corporate
Licensee") by the Nevada Gaming Authorities in order to conduct
nonrestricted gaming operations at the Players Island Resort. In
addition, each of the officers and directors of the Company and Players
Nevada, and Merv Griffin as a controlling shareholder of the Company,
are required to be licensed or found suitable under Nevada gaming laws.
On June 21, 1995, the Nevada Commission approved the application of the
Company to be a Registered Corporation and Players Nevada to be a
Corporate Licensee.
As a Registered Corporation, the Company is required periodically
to submit detailed financial and operating reports to the Nevada
Commission and furnish any other information which the Nevada
Commission may require. No person may become a stockholder of, or
receive, any percentage of profits from a Corporate Licensee without
first obtaining licenses and approvals from the Nevada Gaming
Authorities.
The Nevada Gaming Authorities may investigate any individual who
has a material relationship to, or material involvement with, the
Company or Players Nevada in order to determine whether such individual
is suitable or should be licensed as a business associate of a
Corporate Licensee. Officers, directors and certain key employees of
Players Nevada have been required to file applications with the Nevada
Gaming Authorities and will be required to be licensed or found
suitable by the Nevada Gaming Authorities. Officers, directors and key
employees of the Company who are actively and directly involved in the
activities of the Corporate Licensee will be required to be licensed or
found suitable by the Nevada Gaming Authorities. The Nevada Gaming
Authorities may deny an application for licensing for any cause which
they deem reasonable. A finding of suitability is comparable to
licensing, and both require submission of detailed personal and
financial information followed by a thorough investigation. The
applicant for licensing or a finding of suitability must pay all the
costs of the investigation. Changes in licensed positions must be
reported to the Nevada Gaming Authorities and in addition to their
authority to deny an application for a finding of suitability or
licensure, the Nevada Gaming Authorities have jurisdiction to
disapprove a change in a corporate position.
The Company and Players Nevada are required to submit detailed
financial and operating reports to the Nevada Commission.
Substantially all material loans, leases, sales of securities and
similar financing transactions by Players Nevada are required to be
reported to or approved by the Nevada Commission. The guaranty of the
Notes and the pledge of its stock in connection with the Bank Facility
by Players Nevada have been approved by the Nevada Commission.
If it were determined that the Nevada Act was violated by Players
Nevada, the licenses it holds could be limited, conditioned, suspended
or revoked, subject to compliance with certain statutory and regulatory
procedures. In addition, the Company, Players Nevada and the persons
involved could be subject to substantial fines for each separate
violation of the Nevada Act at the discretion of the Nevada Commission.
Limitation, conditioning or suspension of the licenses of Players
Nevada could (and revocation of any license of Players Nevada would)
materially adversely affect the Company.
Any beneficial holder of a Registered Corporation's voting
securities, regardless of the number of shares owned, may be required
to file an application, be investigated, and have his suitability as a
beneficial holder of the Registered Corporation's voting securities
determined if the Nevada Commission has reason to believe that such
ownership would otherwise be inconsistent with the declared policies of
the State of Nevada. The applicant must pay all costs of investigation
incurred by the Nevada Gaming Authorities in conducting any such
investigation.
The Nevada Act requires any person who acquires more than 5% of a
Registered Corporation's voting securities to report the acquisition to
the Nevada Commission. The Nevada Act requires that beneficial owners
of more than 10% of a Registered Corporation's voting securities apply
to the Nevada Commission for a finding of suitability within thirty
days after the Chairman of the Nevada Board mails the written notice
requiring such filing. Under certain circumstances, an "institutional
investor," as defined in the Nevada Act, which acquires more than 10%,
but not more than 15%, of a Registered Corporation's voting securities
may apply to the Nevada Commission for a waiver of such finding of
suitability if such institutional investor holds the voting securities
for investment purposes only. An institutional investor shall not be
deemed to hold voting securities for investment purposes unless the
voting securities were acquired and are held in the ordinary course of
business as an institutional investor and not for the purpose of
causing, directly or indirectly, the election of a majority of the
members of the board of directors of the Registered Corporation, any
change in the Registered Corporation's corporate charter, bylaws,
management, policies or operations of the Registered Corporation, or
any of its gaming affiliates, or any other action which the Nevada
Commission finds to be inconsistent with holding the Registered
Corporation's voting securities for investment purposes only.
Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all
matters voted on by stockholders; (ii) making financial and other
inquiries of management of the type normally made by securities
analysts for informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other activities as
the Nevada Commission may determine to be consistent with such
investment intent. If the beneficial holder of voting securities who
must be found suitable is a corporation, partnership or trust, it must
submit detailed business and financial information including a list of
beneficial owners. The applicant is required to pay all costs of
investigation.
Any person who fails or refuses to apply for a finding of
suitability or a license within thirty days after being ordered to do
so by the Nevada Commission or the Chairman of the Nevada Board, may be
found unsuitable. The same restrictions apply to a record owner if the
record owner, after request, fails to identify the beneficial owner.
Any stockholder found unsuitable and who holds, directly or indirectly,
any beneficial ownership of the voting securities of the Company beyond
such period of time as may be prescribed by the Nevada Commission may
be guilty of a criminal offense. The Company will be subject to
disciplinary action if, after it receives notice that a person is
unsuitable to be a stockholder or to have any other relationship with
them, it (i) pays that person any dividend or interest upon voting
securities of the Company, (ii) allows that person to exercise,
directly or indirectly, any voting right conferred through securities
held by that person, (iii) pays remuneration in any form to that person
for services rendered or otherwise, or (iv) fails to pursue all lawful
efforts to require such unsuitable person to relinquish his voting
securities including, necessary, the immediate purchase of said voting
securities for cash at fair market value.
The Nevada Commission may, in its discretion, require the holder
of any debt security of a Registered Corporation to file applications,
be investigated and be found suitable to own the debt security of a
Registered Corporation. If the Nevada Commission determines that a
person is unsuitable to own such security, then pursuant to the Nevada
Act, the Registered Corporation can be sanctioned, including the loss
of its approvals, if without the prior approval of the Nevada
Commission, it: (i) pays the unsuitable person any dividend, interest,
or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays
the unsuitable person remuneration in any form; or (iv) makes any
payment to the unsuitable person by pay of principal, redemption,
conversion, exchange, liquidation, or similar transaction.
The Company is required to maintain a current stock ledger in
Nevada which may be examined by the Nevada Gaming Authorities at any
time. If any securities are held in trust by an agent or by a nominee,
the record holder may be required to disclose the identity of the
beneficial owner of the Nevada Gaming Authorities. A failure to make
such disclosure may be grounds for finding the record holder
unsuitable. The Company is also required to render maximum assistance
in determining the identity of the beneficial owner. The Company may
also be required to disclose to the Nevada Commission, upon its
request, the identities of any of its securityholders. The Nevada
Commission has the power to require the stock certificates of the
Company to bear a legend indicating that the securities are subject to
the Nevada Act. It is unknown whether the Nevada Commission will impose
such a requirement on the Company.
As a Registered Corporation, the Company may not make a public
offering of its securities without the prior approval of the Nevada
Commission if the securities or proceeds therefrom are intended to be
used to construct, acquire or finance gaming facilities in Nevada, or
to retire or extend obligations incurred for such purposes. Approval of
a public offering does not constitute a finding, recommendation or
approval by the Nevada Commission or the Nevada Board as to the
accuracy or adequacy of the Prospectus or the investment merits of the
securities offered. Any representation to the contrary is unlawful.
The regulations of the Nevada Board and the Nevada Commission also
provide that any entity which is not an "affiliated company", as such
term is defined in the Nevada Act, or which is not otherwise subject to
the provisions of the Nevada Act or such regulations, such as the
Company, which plans to make a public offering of the securities
intending to use such securities, or the proceeds from the sale thereof
for the construction or operation of gaming facilities of Nevada, or to
retire or extend obligation incurred for such purposes, may apply to
the Nevada Commission for prior approval of such offering. The Nevada
Commission may find an applicant unsuitable to be a holding company
based solely on the fact that it did not submit such an application,
unless upon a written request for a ruling, the Nevada Board Chairman
has ruled that it is not necessary to submit an application. The
exchange of the New Notes for the Old Notes ("the Exchange") qualified
as a public offering (as such term is defined in the Nevada Act). In
addition, (i) a corporate Licensee may not guarantee a security issued
by a Registered Corporation pursuant to a public offering without the
prior approval of the Nevada Commission; and (ii) restrictions on the
transfer of the stock of a Corporate Licensee and agreements not to
encumber such stock (collectively, "Stock Restrictions") are
ineffective without approval of the Nevada Commission. Approval of the
guarantee by Players Nevada and of the Stock Restrictions was granted
by the Nevada Commission.
Changes in the control of a Registered Corporation through merger,
consolidation, stock or asset acquisitions, management or consulting
agreements, or any act or conduct by a person whereby he obtains
control, may not occur without the prior approval of the Nevada
Commission. Entities seeking to acquire control of a Registered
Corporation must satisfy the Nevada Board and Nevada Commission in a
variety of stringent standards prior to assuming control of such
Registered Corporation. The Nevada Commission may also require
controlling stockholders, officers, directors and other persons having
a material relationship or involvement with the entity proposing to
acquire control, to be investigated and licensed as part of the
approval process relating to the transaction.
The Nevada legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting securities
and corporate defense tactics affecting Nevada corporate gaming
licensees, and Registered Corporations that are affiliated with those
operations, may be injurious to stable and productive corporate gaming.
Approvals are, in certain circumstances, required from the Nevada
Commission before the Registered Corporation can make exceptional
repurchases of voting securities above the current market price thereof
and before a corporate acquisition opposed by management can be
consummated. The Nevada Act also requires prior approval of a plan of
recapitalization proposed by the Registered Corporation's stockholders
for the purposes of acquiring control of the Registered Corporation.
License fees and taxes, computed in various ways depending on the
type of gaming or activity involved, are payable to the state of Nevada
and to the counties and cities in which the Corporate Licensee's
operations are conducted. Depending upon the particular fee or tax
involved, these fees and taxes are payable either monthly, quarterly or
annually and are based upon either: (i) a percentage of the gross
revenues received up to a maximum of 6.25%; (ii) the number of gaming
devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment
is furnished in connection with the selling of food or refreshments.
Any person who is licensed, required to be licensed, registered,
required to be registered, or is under common control with such persons
(collectively, "Licensees"), and who proposes to become involved in a
gaming venture outside of Nevada, is required to deposit with the
Nevada Board, and thereafter maintain, a revolving fund in the amount
of $10,000 to pay the expenses of investigation by the Nevada Board of
their participation in such foreign gaming. The revolving fund is
subject to increase or decrease in the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with certain
reporting requirements imposed by the Nevada Act. Licensees are also
subject to disciplinary action by the Nevada Commission if they
knowingly violate any laws of the foreign jurisdiction pertaining to
the foreign gaming operation, fail to conduct the foreign gaming
operation in accordance with the standards of honesty and integrity
required of Nevada gaming operations, engage in activities that are
harmful to the state of Nevada or its ability to collect gaming taxes
and fees, or employ a person in the foreign operation who has been
denied a license or finding of suitability in Nevada on the ground of
personal unsuitability.
Missouri Gaming Regulation
In November 1992, the voters of Missouri approved a referendum
authorizing riverboat gaming in Missouri. In 1993, the Missouri
Legislature enacted legislation which substantially revised the
referendum legislation regarding riverboat gaming and its regulation
(the "Missouri Gaming Act"). The Missouri Gaming Act established the
Missouri Gaming Commission, which has broad jurisdiction over and
supervisory powers concerning gaming operations conducted under the
Missouri Gaming Act. Following a challenge to legislation authorizing
riverboat casino gaming, a January 1994 Missouri Supreme Court ruling
created uncertainties regarding the extent to which casino gaming is
constitutional in Missouri. In February 1994, the Missouri legislature
passed legislation which would permit the voters to amend the State
Constitution to permit legislation reauthorizing riverboat casino
gaming consistent with the State Constitution. The vote on the proposed
State Constitutional amendment was held in April 1994 to permit games
of chance on riverboat casinos. In the April 1994 vote, the State
Constitutional amendment was narrowly defeated. As a result of the
Missouri legislature's actions in February 1994, several municipalities
in Missouri which had previously approved local ordinances permitting
gaming, including the City of Maryland Heights resubmitted the local
gaming activities ordinances to the voters in April 1994 as well. The
Maryland Heights ordinance was approved by municipal voters in the
April 1994 vote. Subsequently, at the statewide general election held
November 8, 1994, a second proposal to amend the Missouri Constitution
to permit games of chance on riverboats and floating facilities on the
Missouri and Mississippi Rivers was adopted. As a result thereof,
effective December 8, 1994, reel slot machines and other games of
chance were authorized for use in Missouri casinos.
Under the Missouri Gaming Act, gaming is permitted in Missouri
only on the Missouri and Mississippi Rivers. The Missouri Gaming Act
calls for licensure of owners (Class A license), operators (Class B
license), suppliers and gaming-related occupations. There is no
statewide numerical limit to the number of licenses which may be
granted. As a result of the Missouri legislature's May 1994 amendments
to the Missouri Gaming Act, prior uncertainty regarding whether any
city or county outside of the two major metropolitan areas of Missouri
(St. Louis/St. Louis County and the Kansas City metropolitan area) may
be granted more than one license has been removed. Under the May 1994
amendments to the Missouri Gaming Act, any city or county may be
granted more than one license if the "home dock" city or county has
authorized more than one excursion gaming boat. However, within all
cities and counties in Missouri the Missouri Gaming Commission has the
ultimate responsibility for setting the number, location and type of
licensed boats. As noted above, excursion gaming boats also must be
authorized by the local home dock city or county.
On May 24, 1995, the Company's amended application for a gaming
license at the Maryland Heights Project was approved for investigation
and processing by the Missouri Gaming Commission. The Missouri Gaming
Commission is considering licensing applications for review in selected
pools of three and has chosen the Company's and Promus' applications
for consideration in the next such pool. To date, five gaming licenses
have been issued by the Missouri Gaming Commission, two for the
metropolitan St. Louis area in the eastern part of the state, two for
the Kansas City area (approximately 250 miles west of St. Louis), and
one for St. Joseph, in the northwestern part of Missouri. The two
licenses in the St. Louis area are based in the City of St. Louis,
approximately 20 miles east of the Company's proposed development in
Maryland Heights, and in St. Charles, across the Missouri River and
approximately five miles from the Company's proposed Maryland Heights
development. The City of Maryland Heights previously passed ordinances
permitting two riverboat casinos to be based within its city limits and
giving preliminary local approval to the proposed projects of both the
Company and Promus. The Missouri Gaming Act does not limit the
statewide number of licenses that may be granted. Under the Missouri
Gaming Act, as amended by the Missouri Legislature in May 1994 and as
signed into law by the Missouri Governor shortly thereafter (the
"Amended Missouri Gaming Act"), multiple riverboat casinos can be
licensed for operation in Maryland Heights. No assurance can be given,
however, that the Company's gaming application will be approved for its
proposed Maryland Heights operations, nor can any assurance be given
that the Missouri Gaming Commission will not limit the number of
licenses granted to Maryland Heights, to the St. Louis metropolitan
area in which Maryland Heights is located, or on a statewide basis.
The Missouri Gaming Act provides a maximum loss limit of $500 per
individual player per gaming excursion. Gaming excursions are required
by regulation to be no less than two hours and no more than four hours
in duration. Excursion gaming boats are required to cruise, unless the
Missouri Gaming Commission determines under applicable criteria to
permit gaming at a continuously docked boat. Such criteria include,
among other items, danger to the boat's passengers because of the
location of the dock or excursion cruising conditions, disruption of
interstate commerce, violation of another state's laws or Federal law,
or possible interference with railway or barge transportation.
The U.S. Coast Guard has previously advised the Missouri Gaming
Commission that circumstances generally prevailing on the Missouri
River, on which the Company's excursion gaming boat facility will be
located if its application is granted, militate against cruising
riverboats. While the Coast Guard has refused to instruct the Missouri
Gaming Commission that all Missouri River operations be continuously
docked riverboats, the U.S. Coast Guard has made clear its need to be
advised of all plans to deal with risk factors from riverboat cruising
operations. The U.S. Coast Guard, through the U.S. Army Corps of
Engineers permit process, can veto a cruising riverboat gaming project
for failing to meet its safety requirements. Additionally, Missouri
Gaming Commission regulations provide for dockside operation even for a
cruising riverboat under circumstances of inclement weather, mechanical
difficulty or declaration by the U.S. Army Corps of Engineers that
navigation on the Missouri River is unsafe. Traditionally, between the
months of December and April the U.S. Army Corps of Engineers has
"closed" the Missouri River by failing to warrant the navigational
channel due to low water levels. The Missouri Gaming Commission has
indicated that dockside operation is expected during this period.
Licensees must establish financial responsibility sufficient to
meet adequately the requirements of the proposed enterprise.
Additionally, the Missouri Gaming Commission's regulations require that
if the Company's application is granted, the Company's licensed
subsidiary would be prohibited from allowing withdrawals of capital by,
or making loans, advances, or distributions of any type of assets to,
its owner(s), in excess of 5% of such entity's accumulated earnings
without Missouri Gaming Commission approval.
The Missouri Gaming Act also requires that the excursion gaming
boat resemble historic Missouri riverboats, encourages use of Missouri
resources, goods and services in the operation of the boat, and
requires that the boat provide for nongaming areas, food service and a
Missouri theme gift shop. Use of the space on any vessel and operating
criteria are determined in accordance with rules and regulations of the
U.S. Coast Guard. There is no size limit on Missouri gaming boats and
no minimum or maximum space prescribed for gaming areas.
The Missouri Gaming Act directly subjects the gaming enterprises
to various Missouri taxes. An admission fee of $2.00 per ticket per
excursion must be paid to the Missouri Gaming Commission. Licensees may
charge any admission fee above the $2.00 amount that they desire.
Gaming enterprises in Missouri are also subject to an "adjusted gross
receipts tax" equal to 20 percent of the gross receipts from licensed
gaming games and devices less winnings paid to wagerers.
Owners/operators are subject to all other income taxes, sales taxes,
earnings taxes, use taxes, property taxes or any other tax or fee
levied by local, state or Federal governments.
Transfer of a Class A or Class B gaming license (the type of
licenses applied for in connection with the Maryland Heights
application) is not permitted without approval of the Missouri Gaming
Commission, nor may such interests be pledged as collateral to other
than a regulated bank or savings and loan association without the
approval of the Missouri Gaming Commission. No transfer of an interest
of 5% or greater, directly or indirectly, in a publicly traded company
holding a Class A or Class B license shall occur without the Missouri
Gaming Commission's approval. Additionally, the Missouri Gaming
Commission may require a licensee to maintain cash or cash equivalents,
in an amount sufficient to protect patrons against defaults in gaming
debts owed by the licensee.
Application fees are based upon costs of investigation and
approval of licenses. The minimum nonrefundable application fee is
$50,000. The initial owner's Class A license granted and the first
subsequent license renewal of an excursion gaming boat operator is for
a period of one year. Thereafter, license renewal periods are every two
years. The annual fee for licensure is $25,000.
Kentucky Gaming Regulation
The Company presently owns and operates Players Bluegrass Downs, a
thoroughbred race track located in Paducah, Kentucky. Pursuant to the
Kentucky statutes governing horseracing, the Kentucky Racing Commission
(the "Racing Commission") has plenary power to promulgate
administrative regulations prescribing conditions under which all
legitimate horse racing and wagering thereon is conducted. The Racing
Commission issues race track licenses on an annual basis and awards
racing dates subsequent to an annual application required to be filed
with the Racing Commission. The Racing Commission may revoke or suspend
a license if the Racing Commission has reason to believe that any
provision of the Kentucky statutes, administrative regulations, or
conditions established by the Racing Commission, has not been
satisfied.
Proposed Texas Gaming Legislation
Since the Players Lake Charles Riverboat began operating on
December 8, 1993, more than half of its patrons have come from Texas,
with a significant portion coming from the metropolitan Houston area.
Although casino gaming is not currently permitted in Texas, and the
Attorney General of Texas has issued an opinion that gaming in Texas
would require an amendment to the State's Constitution, the Texas
legislature has considered various proposals to authorize casino gaming
and two bills related to gaming were presented in the most recent
legislative session that concluded on May 29, 1995. See "Business--Lake
Charles Operations." Additional bills may be introduced from time to
time whenever the legislature is in session. Since the Texas
legislature (which meets every two years in odd-numbered years) did not
pass legislation to amend the Texas State Constitution during the 1995
regular session, such legislation will have to await the next regular
session in 1997, or a special session of the legislature. Special
sessions can only be called by the Governor for matters that were
pending in the regular legislative session. Governor George Bush has
taken a public position against legalized casino gaming. A
constitutional amendment requires a two-thirds vote of those present
and voting in each house of the Texas state legislature and approval by
the electorate at a referendum.
U.S. Coast Guard
Each cruising riverboat also is regulated by the U.S. Coast Guard,
whose regulations affect boat design and stipulate on-board facilities,
equipment and personnel (including requirements that each vessel be
operated by a minimum complement of licensed personnel) in addition to
restricting the number of persons who can be aboard the boat at any one
time. All vessels operated by the Company must hold a Certificate of
Inspection. Loss of the Certificate of Inspection of a vessel would
preclude its use as an operating riverboat. The vessel must be dry-
docked periodically for inspection of the hull, which will result in a
loss of service that can have an adverse effect on the Company. For
vessels of the Company's type, the inspection cycle is every five
years. Less stringent rules apply to permanently moored vessels such as
the dockside barges used by the Company. The Company believes that
these regulations, and the requirements of operating and managing
cruising gaming vessels generally, make it more difficult to conduct
riverboat gaming than to operate land-based casinos.
All shipboard employees of the Company employed on U.S. Coast
Guard regulated vessels, even those who have nothing to do with the
actual operation of the vessel, such as dealers, cocktail hostesses and
security personnel, may be subject to the Jones Act which, among other
things, exempts those employees from state limits on workers'
compensation awards. The Company believes that it has adequate
insurance to cover employee claims.
Shipping Act Of 1916
In order for the Company's vessels to have United States flag
registry, the Company must maintain "United States citizenship" as
defined in the Shipping Act of 1916, as amended (the "Shipping Act"),
and other applicable statutes. A corporation operating any vessel in
the coastwise trade, such as the Company, is not considered a United
States citizen unless, among other things, United States citizens own
75% of its outstanding capital stock.
Required Divestiture Of Common Stock
There are various state and Federal regulations on the ownership
of the Company's Common Stock. The Company's Articles of Incorporation
and By-laws provide that if any governmental commission, regulatory
authority, entity, agency or instrumentality (collectively, an
"Authority") having jurisdiction over the Company or any affiliate of
the Company or that has granted a license, certificate of authority,
franchise or similar approval (collectively, a "License") to the
Company or any affiliate of the Company orders or requires any
stockholder to divest any or all of the shares owned by such
stockholder (a "Divestiture Order") and the stockholder fails to do so
by the date required by the Divestiture Order (unless the Divestiture
Order is stayed), the Company will have the right to acquire the shares
from the stockholder that the stockholder failed to divest as required
by such Divestiture Order. If, after reasonable notice and an
opportunity for affected parties to be heard, any Authority determines
that continued ownership of the Company's Common Stock by any
stockholder shall be grounds for the revocation, cancellation, non-
renewal, restriction or withholding of any License granted to or
applied for by the Company or any affiliate of the Company, such
stockholder shall divest the shares that provide the basis for such
determination, and if such stockholder fails to divest shares within 10
days after the date the Authority's determination becomes effective
(unless the determination is stayed), the Company shall have the right
to acquire such shares from the stockholder. If the Company determines
that persons who are not citizens of the United States as determined
under the Shipping Act or other applicable statutes (the "Foreign
Citizens") own more than 25% of the Company's outstanding Common Stock,
the Company may require the Foreign Citizen(s) who most recently
acquired the shares that bring total Foreign Citizen ownership to more
than 25% of the outstanding Common Stock (the "Excess Shares") to
divest the Excess Shares to persons who are United States citizens. If
the Foreign Citizen(s) so directed fail to divest the Excess Shares to
United States citizens within 30 days after the date on which the
Company gives a written notice to the Foreign Citizen(s) to divest the
Excess Shares, the Company shall have the right to acquire the shares
that the Foreign Citizen failed to divest as required by the Company's
notice.
Whenever the Company has the right to acquire shares from a
stockholder pursuant to the provisions described in the preceding
paragraph, the Company will pay the stockholder $.10 per share or such
higher price as may be required by applicable legal requirements. Some
state gaming regulations require a purchase price equal to the fair
market value of the shares under certain circumstances described above.
If there is no other applicable legal requirement, any amount payable
to the stockholder in excess of $.10 per share will be paid in five
equal annual installments with interest at the lower of the prime rate
or the LIBOR rate, as published from time to time in the Wall Street
Journal.
When any Divestiture Order is entered or when the Company tenders
the consideration for which it may acquire shares, as described above,
the shares in question shall no longer be entitled to any voting,
dividend or other rights until such time as they have been
appropriately divested. The foregoing provisions of the Company's
Articles of Incorporation and By-laws relating to required divestiture
are in addition to, and not in replacement of, any applicable legal
requirements.
The provisions of the Articles of Incorporation and By-laws
described above are uncommon and no controlling precedent has been
found to determine how they would be enforced or whether they are
enforceable.
The terms of the Company's 10-7/8% Senior Notes, due 2005, feature
certain analogous provisions which could give rise to the obligation of
the holder to sell such Notes or the right of the Company to repurchase
the Notes at a price equal to the lowest of the holder's cost, the
principal amount or then current market prices.
Paid Advertising And Marketing
The Federal Communications Commission ("FCC") prohibits
broadcasters from accepting advertising that actively promotes gaming,
although the FCC does not ban all advertising for casinos. Federal
regulation also restricts the circulation of certain materials related
to gaming through the United States.
Discouragement of Share Accumulations
Various state limits requiring approvals of shareholdings over
certain thresholds may discourage accumulations over such limits and
therefore may discourage changes in control of the Company. The
Federal laws referred to above may also discourage ownership by
stockholders who are not United States citizens.
Item 2. Properties
Metropolis, Illinois: The Company leases its docking facilities
in Metropolis, which cover 1,810 linear feet of riverfront, from the
City of Metropolis pursuant to a 20-year lease with a 20-year renewal
option at an annual rent of approximately $7,000. The Company also owns
several parcels of land in Metropolis, some with buildings, aggregating
approximately eight acres, and it leases an additional two acres. The
owned or leased area is used primarily for free customer parking or as
office space. Some of the land is being held for development, and some
of the current parking area may be developed, in which event the
Company believes suitable replacement parking space could be obtained.
The Ohio River occasionally overflows its banks at Metropolis,
most often during late winter and early spring. Such flooding may cover
a portion of the Company's closest parking location, although the
Company believes that it will still have adequate available parking
within reasonable walking distance of its landing during typical
flooding periods. Although the Ohio River did not overflow its banks at
Metropolis during the flooding that occurred during the Summer of 1993,
there can be no assurance that it will not do so in the future. If
flooding is especially severe, it may be impractical for passengers to
board the riverboat at its normal dock site. The Company has developed
an emergency plan that would permit gaming activities to continue in
such circumstances. Any use of an alternate landing because of flooding
may result in some loss of service.
Lake Charles, Louisiana: On January 25, 1995, the Company entered
into a preliminary agreement (the "Beeber Agreement") with The Beeber
Corporation ("Beeber") to purchase Players Hotel and approximately 15
acres of real estate comprising the landside facility for the Players
Lake Charles Riverboat and the Lake Charles Star Riverboat
(collectively, the "Property"). Under this arrangement, the Company has
agreed to pay a total purchase price of $6.7 million for the Property
consisting of (i) $5.5 million in cash, Common Stock based upon the per
share closing price of Common Stock on January 25, 1995 ($12.17 per
share, post-split adjusted) or a combination of cash and Common Stock
to be determined by Beeber on or prior to July 25, 1995 and (ii) the
Company's assumption of Beeber indebtedness secured by the Property in
an amount not to exceed $1.25 million. In the event Beeber chooses to
receive any portion of the purchase price in Common Stock, Beeber shall
have the right for up to 36 months after the date of closing under the
Beeber Agreement to require the Company to repurchase the Common Stock
at a price equal to the closing price of the Common Stock on January
25, 1995 ($12.17 per share, post-split adjusted). In addition, Beeber
has been granted certain piggyback registration rights to register the
resale of Common Stock received as part of the purchase price. As
additional consideration, the Company is required to continue making
certain payments under a lease agreement dated May 19, 1993 between the
Company and Beeber, as amended (the "Lake Charles Lease"). Currently,
the Company is obligated to pay $2.50 per passenger for the first
800,000 passengers per year and $3.00 for each passenger in excess of
800,000 per year subject to certain exceptions for passengers who
remain on board for more than one cruise and passengers who are given
complimentary admissions, subject to certain limits ("Continuing Lease
Payments"). Either party may terminate the Beeber Agreement under
certain circumstances if a definitive purchase agreement has not been
executed.
The Company has obtained a commitment for a title insurance policy
with respect to the Property. Such policy contains an exception with
respect to a strip of lakefront land, outside the boundaries of the
Property, which was previously under water, encroaches upon the
Property and may be subject, under certain circumstances, to a claim of
ownership by the State of Louisiana by virtue of certain riparian
claims (the "Lakefront Strip"). The Company is in the process of
negotiating a long-term lease with the State of Louisiana for the
Lakefront Strip and certain waterbottoms (i.e., riparian rights) in
order to obtain whatever rights the State of Louisiana may have in or
to the Lakefront Strip. The Company has obtained written notification
from the State of Louisiana concerning the State's affirmative
intention to enter into such lease with the Company, and the Company
has had preliminary discussions with the State of Louisiana concerning
the terms of such lease. As a result, the Company does not anticipate
any difficulty in executing such lease or any significant annual
payments in connection therewith.
Pending closing under the Beeber Agreement, the Company's use of
the property is subject to the Lake Charles Lease, which relates to the
portions of the Players Hotel the Company currently uses and expires in
December 2003. The Company has the right to extend the term of the
lease for up to 20 additional years by the exercise of four consecutive
five year options. The Company also has the right to terminate the
lease five years after its commencement. The annual rent is the greater
of (i) an amount equal to the Continuing Lease Payment or (ii) a
minimum rent for each of the 30 years, which varies from a low of
$650,000 annually for the first five years of the lease to a high of
$750,000 annually for the 26th through 30th years of the lease,
assuming that the Company exercises its options to extend the lease.
The Company's purchase of the Property, and the Continuing Lease
Payments, are the subjects of litigation (the "Jebaco Litigation")
recently filed by Jebaco, Inc., a corporation which by agreement with
Beeber shares in the rent payable under the Lake Charles Lease
("Jebaco"). See "Legal Proceedings--Jebaco Litigation". The Jebaco
Litigation involves a dispute concerning, among other things, the
amount, manner of payment and manner of computation of the Continuing
Lease Payments and whether the Continuing Lease Payments calculation
must include gaming passengers on the Lake Charles Star Riverboat. The
Company is currently in negotiations with Jebaco and Beeber to settle
all issues involved in the Jebaco Litigation, but intends to proceed
with its purchase of the Property notwithstanding the Jebaco Litigation
or such negotiations. Based upon the outcome of the Jebaco Litigation
or the settlement negotiations, the Company may be required to make
Continuing Lease Payments based on gaming passengers on both the
Players Lake Charles Riverboat and the Lake Charles Star Riverboat. The
Company does not believe that inclusion of all such passengers in
computation of the Continuing Lease Payments, as described above, will
have a material adverse effect on the Company or its business.
Mesquite, Nevada: In June 1994, the Company acquired a 45-acre
site in Mesquite, Nevada from Gem Gaming, Inc. ("Gem Gaming"). The site
is located just off Interstate 15 near the Nevada-Utah border,
approximately 70 miles northeast of Las Vegas. The Company also
acquired an option to purchase all or part of an adjacent 90-acre
parcel (the "90 Acre Mesquite Option"). As total consideration, the
Company paid approximately $12.5 million to Gem Gaming, comprised of $5
million in cash, approximately $4.2 million in Company Common Stock and
a $3.2 million note. The Company also granted Gem Gaming a five year
warrant to purchase up to 150,000 shares of the Company's Common Stock
at an exercise price of $15.80 per share (post-split adjusted). The
Company has closed an agreement to (i) exercise the 90 Acre Mesquite
Option in part to acquire 17 acres of the 23 acre portion of the
subject property that is zoned for casino development (the "17 Acre
Parcel") for approximately $2.6 million, (ii) terminate the option for
the remaining 73 acres of the subject property (the "73 Acre Parcel"),
consisting of 67 acres that are not zoned for casino development and
six acres that are zoned for casino development, (iii) subject the 73
Acre Parcel to a ten-year restriction against casino development or use
and (iv) grant rights to the owner of the 73 Acre Parcel to, under
certain circumstances, (A) participate (purchase up to a 40% equity
interest) in a joint venture with the Company or its affiliates in any
development of the 17 Acre Parcel by the Company or its affiliates, (B)
acquire the 17 Acre Parcel for an amount equal to the Company's
original purchase price, plus interest on such price at a rate of 8%
per annum, if the Company, or its affiliates, fails to commence the
development of such property within five years of the date of purchase
(in which event the 17 Acre Parcel would be subject to a five-year
restriction against casino-related development or use), and (C) so long
as the Company has not yet commenced development of the 17 Acre Parcel,
to require the Company to contribute the 17 Acre Parcel and participate
as a joint venture party in the development of the entire 90 acre
property by the owner of the 73 Acre Parcel, subject to the Company's
reasonable consent, and with percentage interests based on fair market
valuation of the relative contributions to the joint venture.
The Company has also closed an agreement to lease additional land
adjacent to the Players Island Resort, together with irrigation water
rights for such land, to commence the development during fiscal 1996 of
an 18-hole golf course, upon which the landlord has retained rights to
develop a golf community housing development. The Company has leased
the golf course property and related irrigation rights for 99 years at
a starting annual rent of $216,000, subject to increase every five
years based on the consumer price index. During fiscal 1996, the
Company intends to invest approximately $7.5 million in leasehold
improvements related to the development of the golf course; however,
all such proposed expenditures have been included in the Company's $75-
80 million construction budget.
Maryland Heights, Missouri: The Company and Promus are evaluating
two sites for purposes of developing the Maryland Heights Project, one
site which Promus owns (the "Promus Site") and a separate site in which
the Company has certain real property interests (described below). The
two sites are not contiguous. Therefore, if the Maryland Heights
Project is developed, only one of the sites will be utilized.
The Company has acquired options, for which it paid cash of
approximately $1,400,000, to lease and/or purchase and develop two
parcels of real estate (the "Players Option Parcels") aggregating 218
acres located on the Missouri River in Maryland Heights, Missouri. On
March 15, 1995, the Company exercised its option to lease one of the
Players Option Parcels consisting of approximately 132 acres (the "132
Acre Parcel") at an exercise price of $780,000. By doing so, the
Company became the tenant under an existing lease for the 132 Acre
Parcel which provides, among other things, for maximum annual basic
rent of $250,000, maximum annual percentage rent of $100,000, a 15-year
term with four ten-year renewal options, and an option to purchase the
132 Acre Parcel (the "132 Acre Purchase Option") for a purchase price
of $2,500,000 if exercised during the first lease year, or $3,000,000
if exercised during the second lease year. On March 17, 1995, the
Company exercised the 132 Acre Purchase Option and thereby acquired
title to such property. The owner of the Players Option Parcels
recently instituted litigation against, among others, the Company. See
"Legal Proceedings--Missouri Litigation." The option to lease the other
Players Option Parcel (the "Remaining Parcel") expires on July 1, 1995.
If the Company decides to exercise the option to lease the Remaining
Parcel, basic annual rent will be approximately $175,000, plus
percentage rent not to exceed $70,000 per year. Such lease would have a
term of 15 years, with four ten-year renewal options. Basic rent and
percentage rent increase to specified levels during the renewal terms.
The lease for the Remaining Parcel would also give the Company the
option to purchase the Remaining Parcel for $1,800,000 if exercised
during the first lease year or $2,200,000 if exercised during the
second lease year.
While no definitive agreement has been reached, the Company
presently expects that it and Promus will develop the Maryland Heights
Project at the Promus Site. In such event, the Promus Letter of Intent
contemplates that Players would make annual lease payments to Promus
concerning the Promus Site equal to 2% of the first $50 million of net
gaming revenue, as defined by the Missouri regulatory authorities, at
the Company's Maryland Heights riverboat (the "Missouri Net Gaming
Revenue"); 3% of the Missouri Net Gaming Revenue between $50 and $100
million; and 4% of the Missouri Net Gaming Revenue in excess of $100
million.
Bluegrass Downs, Kentucky: In November 1993, the Company acquired
Bluegrass Downs racetrack (currently known as Players Bluegrass Downs),
located in Paducah, Kentucky, in anticipation that the Kentucky
legislature would enact legislation to authorize casino-type gaming,
such as slot machines and table games, at licensed racetracks. If any
legislation is adopted permitting additional forms of gaming at
racetracks, the Company currently plans to develop its track into a
facility that would offer all permitted forms of gaming. There can be
no assurance that such legislation will be adopted. The racetrack is
approximately ten miles from the Company's Metropolis docking site. The
next closest Kentucky racetrack to Metropolis is Ellis Park, which is
approximately 100 miles from Paducah and Metropolis. Bluegrass Downs is
on a 70 acre tract that includes a 5/8 mile oval racetrack; an enclosed
17,000 square foot clubhouse housing dining, wagering facilities and
administrative areas; barns and related buildings that can accommodate
725 horses; and a parking area for more than 1,400 cars.
Evansville, Indiana: The Company has entered into agreements with
private parties that give it options to acquire sites in Evansville,
Indiana. Evansville is near the southwest corner of Indiana on the Ohio
River. One license was approved for issuance to a third party for a
riverboat based in Evansville. Although more than one license is
permitted by statute to be awarded for Evansville, it is unlikely that
the Company will pursue such a license, if it should ever become
available, or that it will exercise its Evansville real estate options
for development of a riverboat facility.
License with Merv Griffin and The Griffin Group
The Company is a party to a license (the "Griffin License") with
The Griffin Group, which is a company controlled by Mr. Merv Griffin, a
major stockholder of the Company, under which Mr. Griffin acts as the
public representative for all of the Company's riverboat and dockside
casinos. In addition, Mr. Griffin provides other services, principally
of a promotional nature. This relationship with Mr. Griffin is designed
to develop, on the Company's behalf, a high profile in new markets and
access to national media. The Company features Mr. Griffin in print,
radio and television advertisements. The Company's right to Mr.
Griffin's services are exclusive in the riverboat and dockside casino
industry, except that Mr. Griffin has the right to represent casinos of
Resorts International, Inc. ("Resorts"). Resorts currently has only
one land-based casino in Atlantic City, New Jersey but may be examining
the possibility of developing riverboat and other land-based casinos.
In consideration of Mr. Griffin's services under the Griffin License,
the Company, in 1992, issued to The Griffin Group a warrant to purchase
2.1 million shares of Common Stock with an exercise price of $2.67 per
share (post-split adjusted). The warrant currently is outstanding and
has not been exercised. In addition, the Griffin License requires the
Company to pay annual fees to The Griffin Group for each riverboat
casino complex equal to the greater of (i) $50,000 or (ii) an amount
based upon a percentage of the respective casino's earnings per fiscal
year before depreciation, interest and taxes ("EBDIT") for the year.
The Griffin License has an initial four-year term expiring
December 31, 1996; provided, however, the fee payable under clauses (i)
or (ii) is not payable with respect to the Metropolis Complex and the
Players Lake Charles Riverboat through December 31, 1996. The EBDIT fee
payable to The Griffin Group is payable in the following cumulative
amounts: to the extent that EBDIT per complex is $15 million or less,
the payment is two-thirds of 1% of EBDIT (against which any minimum
$50,000 payment for the particular riverboat will be credited); to the
extent that EBDIT per complex is more than $15 million but not more
than $30 million, the additional payment is 1% of EBDIT in excess of
$15 million; and to the extent that EBDIT per complex is more than $30
million, the additional payments will be 1 1/2% of EBDIT in excess of
$30 million. The Griffin Group also is entitled to reimbursement of
certain expenses and indemnification against certain claims. Mr.
Griffin will be entitled to additional compensation, as negotiated in
good faith, if he hosts, produces or performs in any shows at a Company
casino. The Company has the right to renew the Griffin License
indefinitely from year-to-year thereafter.
The Company has initiated discussions with The Griffin Group
concerning the extension of the Griffin License to the Company's
development projects and to the Lake Charles Star Riverboat.
Item 3. Legal Proceedings
Ornstein and Mississippi Gold, Inc. Litigation
On June 7, 1994, Marvin Ornstein and Mississippi Gold, Inc.
("MGI") filed a lawsuit in the United States District Court for the
Southern District of Illinois against the Company, PCI, Inc. (a
subsidiary of the Company), Morton Friedman, individually and as
Chairman-Director of the Illinois Gaming Board, the Illinois Gaming
Board and the Illinois State Police. The complaint alleges that the
Company and PCI, Inc. defamed Mr. Ornstein and MGI as a result of the
publication of certain statements made by the Illinois Gaming Board in
1990 concerning the licensability of Mr. Ornstein. The complaint
further alleges that the defendants conspired to prohibit Mr. Ornstein
and MGI from being licensed for riverboat gaming in Illinois. The
complaint requests an unspecified amount for compensatory damages and
punitive damages and seeks recovery of attorneys' fees and costs.
Previous litigation between the Company and Mr. Ornstein and MGI in New
Jersey state court, involving substantially similar factual matters,
was settled by the Company's payment of $10,000 to Mr. Ornstein and
MGI.
Missouri Litigation
The Company has been sued by Roy W. Fischer, Jr., the owner of the
Company's proposed site in Maryland Heights, in both state and Federal
court in St. Louis, Missouri. The suits allege that the Company has
breached its obligations under certain agreements the Company allegedly
entered into directly or indirectly with Mr. Fischer and claim actual
and punitive damages that in the aggregate exceed $30,000,000. See
"Properties--Maryland Heights, Missouri." One of the state court
actions also names Promus as a co-defendant. The Company believes these
lawsuits to be without merit and is vigorously defending them in all
respects. In addition, on March 13, 1995, Mr. Fischer filed suit in
Missouri state court against the Missouri Gaming Commission, and its
members individually, seeking to effectively prohibit the issuance of a
gaming license to Harrah's Maryland Heights Corporation (a Promus
affiliate) for its site in Maryland Heights, and for fees and costs of
suit.
Poulos and Ahern Litigation
The Company, certain suppliers and distributors of video poker and
electronic slot machines and over forty other casino operators have
been named as defendants in a class action suit filed April 26, 1994 in
the United States District Court, Middle District of Florida, by
William Ahern and William H. Poulos. The plaintiffs allege common law
fraud and deceit, mail fraud, wire fraud and Racketeer Influenced and
Corrupt Organizations Act violations in the marketing and operation of
video poker games and electronic slot machines. The suit seeks
unspecified damages and recovery of attorneys' fees and costs. On
December 9, 1994, an Order was entered by the District Court in Florida
transferring the consolidated action to the United States District
Court for the District of Nevada. Motions for class certification and
motions to dismiss are pending. Although discovery is in the
preliminary stages, the Company believes that the claims are wholly
without merit and does not expect that the lawsuit will have a material
adverse effect on the Company's financial position or results of
operations.
Jebaco Litigation
On May 12, 1995, Jebaco filed suit in Louisiana State Court for,
among other things: injunctive relief to prevent the Company's purchase
of the Property from Beeber; judicial dissolution of the Company's
original acquisition (from Jebaco) of the Company's option to enter
into the Lake Charles Lease; a judicial determination of the amount,
manner of computation and manner of payment of the Continuing Lease
Payments; an accounting; and monetary damages. See "Properties--Lake
Charles, Louisiana". Although a temporary restraining order was
originally issued against the Company's purchase of the Property, the
Louisiana State Court on May 24, 1995 dissolved the temporary
restraining order and refused to issue a preliminary injunction,
thereby permitting the purchase of the Property to proceed. The Company
believes that this litigation represents a dispute primarily between
Jebaco and Beeber. The Company is prepared to compute and pay the
Continuing Lease Payments in the manner required under all applicable
agreements, as determined by the Court, and does not anticipate that
such required payments would have a material adverse effect on the
Company or its business. The Company, Beeber and Jebaco are engaged in
settlement negotiations to resolve all issues raised in such
litigation.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders, through
the solicitation of proxies or otherwise, during the fourth quarter of
the fiscal year ended March 31, 1995.
PART II
Item 5.Market for the Registrant's Common Equity and Related
Stockholder Matters
The Company's Common Stock is traded on the Nasdaq National
Market under the symbol "PLAY". The following table sets forth the
high and low closing sale prices of the Company's Common Stock, as
reported by the Nasdaq National Market, during the periods indicated.
High Low
Fiscal 1994
First Quarter 13-5/6 7-7/12
Second Quarter 16 9-7/12
Third Quarter 18-5/12 14-11/12
Fourth Quarter 19-5/6 13-1/3
Fiscal 1995
First Quarter 15-1/12 10
Second Quarter 16-1/6 9-7/12
Third Quarter 16-11/12 11-5/6
Fourth Quarter 18-11/12 12-1/6
Fiscal 1996
First Quarter (through June 22, 1995)22-2/3 18-1/4
The last reported sales price of the Common Stock on the Nasdaq
National Market on June 22, 1995 was 19-1/2 per share. There were
approximately 518 holders of record of the Company's Common Stock as
of June 22, 1995.
On April 26, 1995, the Company declared a 3-for-2 Common Stock
split, which was paid on May 19, 1995 to stockholders of record as of
the close of business on May 8, 1995. The above information has been
adjusted to reflect the 3-for-2 split.
The Company has never declared or paid cash dividends on its
Common Stock. The Company presently intends to retain earnings to
finance the operation and expansion of its business. Under the terms
of the covenants of its proposed Bank Facility, the Company's wholly
owned subsidiaries cannot pay dividends to the Company nor can the
Company pay cash dividends to holders of its Common Stock.
Item 6. Selected Consolidated Financial Data
Selected consolidated financial data for the years ended March
31, 1993, 1994 and 1995 is presented below. In fiscal year 1993 the
Board of Directors of the Company approved a plan to concentrate its
efforts on the development and operation of riverboat casinos and to
discontinue its marketing of various services and products, therefore,
data for the years ended March 31, 1991 and 1992 is not presented due
to the lack of comparability.
Year Ended March 31,
1993 1994 1995
(in thousands, except per share data)
Operations Data:
Total revenues from
continuing operations $ 5,729 $107,082 $223,695
Income (loss) from
continuing operations (4,142) 17,452 45,755
Loss associated with
discontinued operations (7,031) -- --
Cumulative effect of
change in accounting
principle -- 3,500 --
Net income (loss) $ (11,173) $20,952 $45,755
Earnings per Common Share
Assuming Full Dilution:
Income (loss) from
continuing operations $(.32) $.60 $1.45
Loss associated with
discontinued operations $(.54) -- --
Cumulative effect of
change in accounting
principle -- $.12 --
Net income (loss) $(.86) $.72 $1.45
Balance Sheet Data:
Cash, cash equivalents and
marketable securities $8,791 $77,546 $50,332
Total assets $26,542 $138,565 $223,790
Long term debt, including
current portion $ 17,648 $ 5,865 $ 8,907
Total stockholders'
equity (deficit) $(86) $115,844 $176,143
Cash dividends declared
per common share -- -- --
Selected Quarterly Financial Information (Unaudited)
Set forth below is selected financial information for the last
eight fiscal quarters. In management's opinion, the results depicted
below have been prepared on the same basis as the audited financial
statements contained herein and include all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of the
information for the periods presented when read in conjunction with
the Historical Consolidated Financial Statements and notes thereto
contained elsewhere herein. Results of operations are somewhat
seasonal in nature with relatively greater revenues and net income
earned in the second and third quarters of each fiscal year as
compared to the first and fourth quarters of each fiscal year.
Results of operations for any fiscal quarter are not necessarily
indicative of results for any future period.
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
(in thousands)
Fiscal 1994
Net gaming revenues:
Lake Charles,
Louisiana (1) (1) $5,115(1) $25,622 $30,737
Metropolis,
Illinois $15,709 $18,208 $15,880 $15,339 $65,136
Total revenues $18,310 $20,255 $23,271 $45,246 $107,082
Adjusted EBITDA (2) $7,172 $7,552 $7,426 $15,509 $37,659
Income from continuing
operations before other
income and provision
for income taxes $5,256 $5,175 $3,522 $12,935 $26,888
Income from continuing
operations $2,897 $3,965 $2,503 $8,087 $17,452
Net income $6,397 $3,965 $2,503 $8,087 $20,952
Earnings per common and
common equivalent share $.31 $.13 $.08 $.21 $.73
Earnings per common share-
assuming full dilution $.28 $.13 $.08 $.23 $.72
Fiscal 1995
Net gaming revenues:
Lake Charles,
Louisiana $27,418 $35,262 $37,262 $36,143 $136,085
Metropolis,
Illinois $17,279 $19,827 $18,184 $19,567 $74,857
Total revenues $48,326 $58,858 $58,665 $57,846 $223,695
Adjusted EBITDA (2) $17,509 $22,829 $19,713 $20,529 $80,580
Income from continuing
operations before other
income and provision
for income taxes $15,745 $20,907 $17,190 $16,707 $70,549
Income from continuing
operations $10,441 $13,310 $11,575 $10,429 $45,755
Net income $10,441 $13,310 $11,575 $10,429 $45,755
Earnings per common and
common equivalent share $.34 $.43 $.37 $.33 $1.47
Earnings per common share-
assuming full dilution $.34 $.42 $.37 $.32 $1.45
(1) The Players Lake Charles Riverboat did not commence operations
until December 8, 1993.
(2) Represents earnings from continuing operations before interest
income (expense), provisions for income taxes, depreciation and
amortization, pre-opening expenses, one-time, non-cash compensation
expense during fiscal 1994 and other income. Adjusted EBITDA is not
intended to represent cash flows for any of the quarterly periods, nor
has it been presented as an alternative to income from continuing
operations as an indicator of operating performance and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
EBITDA-based information is presented solely as supplemental
disclosure because EBITDA is frequently used to analyze companies on
the basis of operating performance, leverage and liquidity.
Item 7.Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company currently owns and operates a riverboat casino in
Metropolis, Illinois, which commenced operations on February 23, 1993,
and two riverboat casinos in Lake Charles, Louisiana, the Players Lake
Charles Riverboat, which commenced operations on December 8, 1993, and
the Lake Charles Star Riverboat, which was acquired on March 31, 1995
and commenced operations on April 27, 1995. The Company also operates
a horse racetrack in Paducah, Kentucky, which was acquired in November
1993. Operations also include pre-opening and gaming development
costs associated with the development of casino and entertainment
facilities. The Company has plans to continue the development and
operation of additional casino complexes. See "Business--Projects
Under Development" and "Development Opportunities."
In May 1993, the Board of Directors of the Company approved a
plan that discontinued the marketing of various services and products
relating to the gaming, travel and entertainment industries. As a
result, the Company has restated, effective as of May 1993, the
financial statements previously reported to reclassify all prior
operations, except for those relating to casino operations and its
Kentucky racetrack, as discontinued operations. Accordingly, a
reserve for loss on disposition of discontinued operations was
established to offset any potential losses from these activities.
In the course of its business, the Company has had numerous
discussions, and continues to have discussions regarding joint
ventures and business combinations, as well as possible site
acquisitions or options. No assurances can be given about the
likelihood or timing of any such transaction.
As used herein, "fiscal 1993", "fiscal 1994", "fiscal 1995" and
"fiscal 1996" refer to the years ended March 31, 1993, 1994, 1995 and
1996, respectively.
Liquidity and Capital Resources
For the twelve months ended March 31, 1995, the Company generated
$52.1 million in cash from its operating activities as compared to
$23.9 million for the same period of the prior year. The operation of
two riverboat facilities for the entire twelve months ended March 31,
1995 as compared to one facility for the majority of the prior year
period accounted for the increase in cash generated by operating
activities. As of March 31, 1995, the Company had $50.3 million in
cash and cash equivalents and marketable investment grade debt
securities as compared to $77.5 million as of March 31, 1994. The
decrease in cash and cash equivalents and marketable investment grade
debt securities reflects the $50 million of cash used in investing
activities during fiscal 1995 consisting primarily of $33 million in
construction and land costs attributable to Players Island Resort, $42
million for the purchase of the Showboat Star Partnership Interest,
and net proceeds of $36.5 million from the purchases and sales of
marketable securities.
The Company is pursuing the development or acquisition of
additional gaming and entertainment facilities which will require
extensive amounts of capital. Based on the projects currently under
development, the Company estimates that it could spend approximately
$250 million over the next twelve months. The Company expects to fund
these expenditures from (i) cash on hand, (ii) the issuance long term
debt in April 1995, (iii) cash flow from operations and, if needed,
(iv) drawings available under a bank facility currently being
negotiated.
In June 1994, the Company acquired land to construct and operate
a new casino resort in Mesquite, Nevada. The Company acquired
approximately 45 acres of land and an option to acquire an additional
90 acres for total consideration of $12.5 million, comprised of $5.1
million in cash, $4.2 million of the Company's Common Stock and a $3.2
million note, which is payable when the Players Island Resort opens.
The estimated cost of the Players Island Resort, including land
acquisition costs and costs of developing a golf course is
approximately $75 to $80 million. Through March 31, 1995, including
the land acquisition costs described above, the Company had invested
approximately $43.7 million in the Players Island Resort. The Company
expects to spend up to an additional $36 million to complete the
facility.
In addition to $52 million spent to acquire the Showboat Star
Partnership, (consisting of $42 million paid on March 31, 1995 and $10
million paid in April of 1995), the Company expects to incur
approximately $58 million in additional expenditures during the next
12 months to expand its Lake Charles facility.
The Company entered into a letter of intent with Promus on March
3, 1995 to co-develop a $200 million joint venture riverboat casino
entertainment complex in Maryland Heights, Missouri. The joint
venture contemplates that each partner will own and operate its own
riverboat casino and will share equally in the costs of development
of, as well as any profit or loss associated with, the operation of
the shoreside facility. The Company's share of the Maryland Heights
Project will require an investment of approximately $100 million,
including the building of the Company's riverboat casino and related
facilities, and investment in the joint venture that will develop the
entertainment complex, parking facility and docking area. The Company
anticipates investing approximately $40 million in its riverboat
casino and other independently owned facilities and investing
approximately $60 million in the joint venture . The project is
expected to be completed in the Summer of 1996.
During fiscal 1996, the Company intends to begin improvements
costing between $10 and $15 million for additional amenities,
attractions and riverfront parking at its Metropolis Complex.
On April 17, 1995, the Company issued $150 million of 10-7/8%
Senior Notes due April 15, 2005. In addition, the Company expects to
complete the documentation of a $120 million bank line of credit
during the summer of 1995. The bank facility will be available for
general corporate purposes, including development activities.
Results of Operations
The following sets forth certain historical information on the
consolidated operations of the Company for the years ended March 31,
1993, 1994 and 1995.
SELECTED OPERATIONAL DATA
(in thousands, except for earnings per share and win data)
Twelve Months Ended
March 31,
1993 1994 1995
Casino revenues $4,606 $95,873 $210,942
Total revenues $5,729 $107,082 $223,695
Total operating expenses $9,569 $80,194 $153,146
Income (loss) from
continuing operations
before other income
(expense) and provision
for income tax $(3,840) $26,888 $70,549
Net income (loss) $(11,173) $20,952 $45,755
Earnings (loss) per
common share assuming
full dilution $(.86) $.72 $1.45
Metropolis Operating Results:
Casino revenues $4,606 $65,136 $74,857
Average daily win/slot machine $110 $182 $203
Average daily win/table game $1,696 $1,674 $1,749
Lake Charles Operating Results:
Casino revenues $ -- $30,737 $136,085
Average daily win/slot machine $ -- $194 $276
Average daily win/table game $ -- $2,458 $2,475
Period to Period Comparisons
The table of Selected Operating Data above generally reflects the
Company's opening of its initial riverboat casino in February 1993 and
its second riverboat casino in December 1993. The increases from
period to period in revenues, expenses and net income generally
coincide with the opening of the casino facilities. Following are
detailed comparisons of operating results for the periods presented.
Comparison of Fiscal 1995 to Fiscal 1994
The Company's total revenues for fiscal 1995 increased by 109% to
$223.7 million when compared to total revenue of $107.1 million for
fiscal 1994. This increase was due primarily to the Players Lake
Charles Riverboat, which opened on December 8, 1993 and was in
operation for all of fiscal 1995 as compared to less than four months
of operation during fiscal 1994. Casino revenues for the Metropolis
Riverboat increased to $74.9 million for fiscal 1995 as compared to
$65.2 million for the prior fiscal year. The 15% year over year
improvement in casino revenues can be attributed to the maturation of
the Company's marketing programs and an increasing customer base. The
improvement in casino revenues in fiscal 1995 more than offset an
expected decline in admission revenues. The Players Lake Charles
Riverboat generated casino revenues of $136.1 million for fiscal 1995
as compared to $30.7 million for its first 114 days of operation,
ending March 31, 1994.
For fiscal 1995, total operating costs increased 91% to $153.1
million as compared to $80.2 million for the prior fiscal year.
Increases in total operating costs reflected the operation of two
riverboat facilities for all of fiscal 1995 as compared to the
operation of only the Metropolis facility for the majority of fiscal
1994.
Corporate administrative expenses for fiscal 1995 increased to
$7.3 million as compared to $2.7 million for the prior fiscal year.
The increase of $4.6 million was primarily related to staff expansion,
the reassignment of personnel who were previously employed by the
operating properties, and additional administrative activities
associated with the operation of two riverboat facilities as compared
to one facility for most of the prior year period.
The Company recorded pre-opening and gaming development costs of
$9.1 million for fiscal 1995 as compared to $7.0 million for the prior
fiscal year. Pre-opening expenses for fiscal 1995 were $3.0 million
for Players Island Resort and the Lake Charles Star Riverboat, while
the prior fiscal year amount of $4.2 million included the majority of
the Lake Charles pre-opening costs. Development costs totaled $6.1
million for fiscal 1995 compared to $2.8 million for fiscal 1994
reflecting the Company's development activities in new and emerging
jurisdictions. The increase is primarily the result of the Company's
pursuit of gaming opportunities in Evansville, Indiana and Maryland
Heights, Missouri.
Income from continuing operations before other income and
provision for income taxes increased to $70.5 million for fiscal 1995
as compared to $26.9 million for the prior fiscal year. Income from
continuing operations before other income and provisions for income
taxes as a percentage of total revenues increased from 25.1% for
fiscal 1994 to 31.5% for fiscal 1995. These increases are directly
attributable to the operation of the Players Lake Charles Riverboat
for the entire 12 months of fiscal 1995.
The Company's effective net tax rate, including both state and
Federal taxes, increased to 38% for fiscal 1995 as compared to an
effective net tax rate of 37% for fiscal 1994.
Consolidated net income for fiscal 1995 was $45.8 million, or
$1.47 per share ($1.45 per share fully diluted) as compared to $21.0
million, or $.73 per share ($.72 per share fully diluted) for fiscal
1994.
Comparison of Fiscal 1994 to Fiscal 1993
The Company's total revenues for fiscal 1994 increased to $107.1
million as compared to $5.7 million for fiscal 1994. This increase
reflects 12 months of operation for the Metropolis Riverboat and the
opening of the Players Lake Charles Riverboat in December 1993 as
compared to 37 days of operation for the Metropolis Riverboat during
fiscal 1993. The Metropolis Riverboat recorded casino revenues of
$65.1 million during fiscal 1994 as compared to $4.6 million during
its initial period of operation in fiscal 1993. The Players Lake
Charles Riverboat generated $30.7 million of casino revenues from its
opening on December 8, 1993 through the end of fiscal 1994.
For fiscal 1994, total operating costs were $80.2 million as
compared to $9.6 million for the prior fiscal year. Again, the
increases in operating costs from year to year reflects the full year
of operation for the Company's Metropolis Complex and the opening of
its Players Lake Charles Riverboat in fiscal 1994 as compared to its
limited operation in fiscal 1993.
Corporate administrative expenses for fiscal 1994 were $2.7
million and include the costs of establishing the Company's corporate
office in Lake Charles, Louisiana and related staff expansion to
support the development of its gaming and entertainment operations.
The Company recorded pre-opening and gaming development costs of
$7.0 million for fiscal 1994 as compared to $5.0 million for the prior
fiscal year. Pre-opening expenses for fiscal 1994 were $4.2 million
and related to the Players Lake Charles Riverboat, while the prior
fiscal year included pre-opening costs of $5.0 million that related to
the opening of the Company's Metropolis Complex and initial costs
associated with the Players Lake Charles Riverboat. Development costs
were $2.8 million for fiscal 1994 reflecting the Company's development
activities in new and emerging jurisdictions principally Evansville,
Indiana and Maryland Heights, Missouri.
Income from continuing operations before other income and
provisions for income taxes increased to $26.9 million for fiscal 1994
as compared to a loss of $3.8 million for fiscal 1993. The results
for fiscal 1993 reflect only 39 days of operations for the Metropolis
Complex as compared to a full 12 months of operation for the
Metropolis Complex along with the opening of the Players Lake Charles
Riverboat in December 1993.
For fiscal 1994, the Company's effective net tax rate covering
both state and Federal taxes was 37%, or $10.3 million as compared to
$34,000 for fiscal 1993, which represents a provision for state income
taxes only. For Federal tax purposes, the Company had net operating
loss carryforwards of approximately $6.8 million at the close of
fiscal 1993.
Consolidated net income for fiscal 1994 was $21.0 million, or
$.73 per share ($.72 per share fully diluted) as compared to a loss of
$11.2 million, or $.86 per share, of which $4.1 million ($.32 per
share) related to continuing operations and $7.0 million ($.54 per
share) related to discontinued operations.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and supplementary data are
as set forth in the Index to Consolidated Financial Statements on page
37.
Item 9.Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The Board of Directors of Players International, Inc. and the
Audit Committee of the Board of Directors of the Company approved the
engagement of Ernst & Young LLP as its independent auditors for the
fiscal year ended March 31, 1995 to replace the firm of Arthur
Andersen LLP, which was dismissed as auditors of the Company effective
December 31, 1994.
The reports of Arthur Andersen LLP on the Company's financial
statements for the past two fiscal years did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified
as to uncertainty, audit scope, or accounting principle.
In connection with the audits of the Company's financial
statements for each of the two fiscal years ended March 31, 1994 and
1993, and in the subsequent interim period, there were no
disagreements with Arthur Andersen LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing
scope and procedures which, if not resolved to the satisfaction of
Arthur Andersen LLP, would have caused Arthur Andersen LLP to make
reference to the matter in its report.
PART III
Item 10. Directors and Executive Officers of the Registrant
This information is incorporated by reference from the Company's
Proxy Statement to be filed with the Commission in connection with the
Annual Meeting of Stockholders on September 12, 1995.
Item 11. Executive Compensation
This information is incorporated by reference from the Company's
Proxy Statement to be filed with the Commission in connection with the
Annual Meeting of Stockholders on September 12, 1995.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
This information is incorporated by reference from the Company's
Proxy Statement to be filed with the Commission in connection with the
Annual Meeting of Stockholders on September 12, 1995.
Item 13. Certain Relationships and Related Transactions
This information is incorporated by reference from the Company's
Proxy Statement to be filed with the Commission in connection with the
Annual Meeting of Stockholders on September 12, 1995.
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K
(a) (1) and (2) Index to Financial Statements
PAGE
REPORTS OF INDEPENDENT AUDITORS 38
CONSOLIDATED BALANCE SHEETS AT MARCH 31, 1994 AND 1995 40
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED MARCH 31,
1995:
CONSOLIDATED STATEMENTS OF OPERATIONS 41
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 42
CONSOLIDATED STATEMENTS OF CASH FLOWS 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 45
All other schedules have been omitted because they are
not applicable or not required or the required
information is included in the Consolidated Financial
Statements or Notes thereto.
(a) (3) Exhibits
3.1 Articles of Incorporation, as amended (filed
as an exhibit to the Company's Registration
Statement on Form S-4, File No. 33-60085).
3.2 By-laws, as amended (filed as an exhibit
to the Company's Registration Statement on Form S-
3, File No. 33-61026).
4.1 Indenture among Players International, Inc.,
certain subsidiaries and First Fidelity Bank
National Association as Trustee, including form of
Note (filed as an exhibit to the Company's
Registration Statement on Form S-4, File No. 33-
60085).
4.2 Exchange and Registration Rights Agreement
among Players International, Inc., certain
subsidiaries, Donaldson, Lufkin & Jenrette
Securities Corporation and Salomon Brothers Inc.
10.1 Vessel Construction Agreement dated as of
April 8, 1993 between Leevac Shipyards, Inc. and
Players Lake Charles, Inc. (filed as an exhibit to
the Company's Registration Statement on Form S-3,
File No. 33-61026).
10.2 The Company's 1985 Incentive Stock Option Plan
(filed as an exhibit to the Company's Registration
Statement on Form 10 filed on August 13, 1986, File
No. 0-14897, as amended on Form 8 filed October 17,
1987).
10.3 Amendment No. 1 to the Company's 1985
Incentive Stock Option Plan (filed as an exhibit to
the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1988).
10.4 The Company's 1990 Incentive Stock Option and
Non-Qualified Option Plan, as amended (filed as an
exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1991).
10.5 The Company's 1993 Stock Incentive Plan (filed
as an exhibit to the Company's Registration
Statement on Form S-3, File No. 33-61026).
10.6 Agreement dated as of December 8, 1992 between
PCI, Inc. and Comdata Network, Inc. (filed as an
exhibit to the Company's Registration Statement on
Form S-3, File No. 33-61026).
10.7 Loan Agreement dated March 26, 1992 between
the Company and Mercedes-Benz Credit Corporation
(filed as an exhibit to the Company's Annual Report
on Form 10-K for the fiscal year ended March 31,
1992).
10.8 Agreement dated March 1, 1993 by and among the
Company, PCI, Inc., Allwyn Pictures Corporation,
Inc., Telly Savalas, Charles Stern, Philip Mamos
and Robert Morgan (filed as an exhibit to the
Company's Registration Statement on Form S-3, File
No. 33-61026).
10.9 Form of Registration Right Agreement dated as
of June 23, 1992 by and among the Company, Southern
Illinois Riverboat Casino Cruises, Inc., and the
purchasers named therein (filed as an exhibit to
the Company's Registration Statement on Form S-3,
File No. 33-61026).
10.10 Agreement dated February 12, 1993 by and
between Jebaco, Inc. and the Company with respect
to the assignment of an option agreement relating
to the Downtowner Hotel (filed as an exhibit to the
Company's Registration Statement on Form S-3, File
No. 33-61026).
10.11 Forms of Series A, B, and C warrants
issued to Jebaco, Inc. (filed as an exhibit to the
Company's Registration Statement on Form S-3, File
No. 33-61026).
10.12 Form of Registration Rights Agreement
with Jebaco, Inc. (filed as an exhibit to the
Company's Registration Statement on Form S-3, File
No. 33-61026).
10.13 Option Agreement dated December 24, 1991
by and among The Beeber Corporation and Elisabeth
S. Woodward and Jebaco, Inc. with respect to the
Downtowner Hotel (filed as an exhibit to the
Company's Registration Statement on Form S-3, File
No. 33-61026).
10.14 Amendment to Option Agreement dated March
9, 1993 by and among The Beeber Corporation and
Elisabeth S. Woodward and Players Lake Charles,
Inc., a subsidiary of the Company, with respect to
the Downtowner Hotel (filed as an exhibit to the
Company's Registration Statement on Form S-3, File
No. 33-61026).
10.15 License and Services Agreement dated
December 8, 1992 by and among The Griffin Group,
Inc., the Company and Southern Illinois Riverboat
Casino Cruises, Inc., as amended (filed as an
exhibit to the Company's Registration Statement on
Form S-3, File No. 33-61026).
10.16 Agreement dated April 20, 1993 with B.B.
Riverboat, Inc. (filed as an exhibit to the
Company's Registration Statement on Form S-3, File
No. 33-61026).
10.17 Joint Venture Agreement dated May 1993
between Amerihost and a subsidiary of the Company
with respect to the construction of a hotel in
Metropolis, Illinois (filed as an exhibit to the
Company's Registration Statement on Form S-3, File
No. 33-61026).
10.18 Form of Employment Agreement with Howard
A. Goldberg dated May 19, 1993 (filed as an exhibit
to the Company's Registration Statement on Form S-
3, File No. 33-61026).
10.19 Employment Agreement with Peter J. Aranow
effective May 26, 1993 (filed as an exhibit to the
Company's Registration Statement on Form S-3, File
No. 33-61026).
10.20 Termination Agreement with Stanley
Harfenist dated as of March 28, 1993 (filed as an
exhibit to the Company's Registration Statement on
Form S-3, File No. 33-61026).
10.21 Termination Agreement with Harvey
Goldberg dated June 8, 1993 (filed as an exhibit to
the Company's Registration Statement on Form S-3,
File No. 33-61026).
10.22 Lease dated March 19, 1993 by and
among the Beeber Corporation and Players Lake
Charles, Inc., a subsidiary of the Company (filed
as an exhibit to the Company's Registration
Statement on Form S-3 filed on February 4, 1994, as
amended by Form S-3, File No. 33-75006).
10.23 Option Agreement dated July 15, 1993
by and between Evansville Federal Savings Bank and
the Company (filed as an exhibit to the Company's
Registration Statement on Form S-3 filed on
February 4, 1994, as amended by Form S-3, File No.
33-75006).
10.24 Option Agreement dated July 30, 1993
by and between Earl Harp and the Company (filed as
an exhibit to the Company's Registration Statement
on Form S-3 filed on February 4, 1994, as amended
by Form S-3, File No. 33-75006).
10.25 Agreement dated October 15, 1993 by
and between Carnival Casino Corporation and the
Company (filed as an exhibit to the Company's
Registration Statement on Form S-3 filed on
February 4, 1994, as amended by Form S-3, File No.
33-75006).
10.26 Agreement dated December 30, 1993 by
and between the Company and Roy W. Fischer (filed
as an exhibit to the Company's Registration
Statement on Form S-3 filed on February 4, 1994, as
amended by Form S-3 File No. 33-75006).
10.27 Preferred Mortgage dated April 13,
1993 by SIRCC in favor of Mercedes-Benz Credit
Corporation (filed as an exhibit to the Company's
Registration Statement on Form S-3 filed on
February 16, 1994, File No. 33-75006).
10.28 Promissory Note dated April 14, 1993
by SIRCC in favor of Mercedes-Benz Credit
Corporation (filed as an exhibit to the Company's
Registration Statement on Form S-3 filed on
February 16, 1994, File No. 33-75006).
10.29 Continuing Guaranty of the Company
to Mercedes-Benz Credit Corporation dated March 26,
1992, as amended (filed as an exhibit to the
Company's Registration Statement on Form S-3 filed
on February 16, 1994, File No. 33-75006).
10.30 Building Loan Note dated March 26,
1992 by SIRCC in favor of Mercedes-Benz Credit
Corporation (filed as an exhibit to the Company's
Registration Statement on Form S-3 filed on
February 16, 1994, File No. 33-75006).
10.31 Agreement to Purchase and Sale dated
June 16, 1994, between Gem Mesquite, Ltd. and
Players Nevada, Inc., a subsidiary of the Company
(including form of letter Agreement from the
Company to Gem Mesquite, Ltd. relating to
registration rights) (filed as an exhibit to the
Company's Current Report on Form 8-K filed on June
24, 1994).
10.32 Transfer of Data Agreement dated
June 16, 1994, between Gem Gaming, Inc. and Players
Nevada, Inc. (including form of Promissory Note).
10.33 Development Consulting Agreement
dated June 16, 1994, between Gem Gaming, Inc. and
Players Nevada, Inc. (including form of 1994 Series
G Warrant) (filed as an exhibit to the Company's
Current Report on Form 8-K filed on June 24, 1994).
10.34 Opinion Transfer Agreement dated
June 16, 1994, between Gem Gaming, Inc., Gem
Mesquite, Ltd. and Players Nevada, Inc. (filed as
an exhibit to the Company's Current Report on Form
8-K filed on June 24, 1994).
10.35 Players International, Inc. 1994
Directors Stock Incentive Plan, as adopted April
14, 1994, and as amended July 14, 1994 (filed as an
exhibit to the Company's Registration Statement on
Form S-4 filed on July 27, 1994).
10.36 Commitment Letter among Players
International, Inc. and certain of its
subsidiaries, First Interstate Bank and other
financial institutions (filed as an exhibit to the
Company's Registration Statement on Form S-4, File
No. 33-60085).
10.37 Agreement for Sale of Partnership
Interests among the Company and certain of its
subsidiaries and Showboat Inc. and certain of its
subsidiaries.
21 Subsidiaries of the Company.
_______________
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter ended March 31, 1995.
36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this annual report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Players International, Inc.
Date: June 27, 1995 By /s/ Edward Fishman
Edward Fishman
Chairman of the Board,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
annual report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated below.
This annual report may be signed in multiple identical counterparts all of
which, taken together, shall constitute a single document.
Dated: June 27, 1995 /s/ Edward Fishman
Edward Fishman
Chairman of the Board, Chief Executive Officer
(Principal Executive Officer)
Dated: June 27, 1995 /s/ David Fishman
David Fishman
Director
Dated: June 27, 1995 /s/ Howard Goldberg
Howard Goldberg
Director
Dated: June 27, 1995 /s/ Peter J. Aranow
Peter J. Aranow
Executive Vice President, Chief Financial Officer
and Secretary
(Principal Financial Officer)
Dated: June 27, 1995 /s/ Steven P. Perskie
Steven P. Perskie
Director
Dated: June 27, 1995 /s/ Stephen K. Radusch
Stephen K. Radusch
Controller
(Principal Accounting Officer)
Dated: June 27, 1995 /s/ Lee Seidler
Lee Seidler
Director
Dated: June 27, 1995
Marshall S. Geller
Director
Dated: June 27, 1995
Thomas E. Gallagher
Director
37
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Reports of Independent Auditors 38
Consolidated Balance Sheets as of March 31, 1994 and 1995 40
Consolidated Statements of Operations for the Years Ended
March 31, 1993, 1994 and 1995 41
Consolidated Statements of Stockholders' Equity for the
Years Ended March 31, 1993, 1994 and 1995 42
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1993, 1994 and 1995 43
Notes to Consolidated Financial Statements 45
All other schedules have been omitted because they are not
applicable or not required or the required information is
included in the Consolidated Financial Statements or Notes
thereto.
38
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Players International, Inc.
We have audited the accompanying consolidated balance sheet
of Players International, Inc. as of March 31, 1995 and the
related consolidated statements of operations, stockholders'
equity, and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting 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 audit provides
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the consolidated financial position of Players
International, Inc. as of March 31, 1995, and the results of
its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
May 19, 1995
39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board Of Directors of Players
International, Inc.:
We have audited the accompanying consolidated balance
sheet of PLAYERS INTERNATIONAL, INC. (a Nevada corporation)
and subsidiaries as of March 31, 1994, and the related
consolidated statements of operations, stockholders' equity
and cash flows for the years ended March 31, 1994 and 1993.
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. Those standards require that
we plan and perform the audit 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 Players International, Inc. and
subsidiaries as of March 31, 1994, and the results of their
operations and their cash flows for the years ended March
31, 1994 and 1993 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
May 24, 1994
2
The accompanying notes are an integral part of these consolidated
balance sheets.
41
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except par value)
ASSETS
March 31,
1994 1995
CURRENT ASSETS:
Cash and cash equivalents $ 13,957 $ 23,886
Marketable securities, net (Note 2) 63,589 26,446
Accounts receivable, net of allowance
for doubtful accounts of $43
at March 31, 1994 and $130 at March 31, 1995 949 1,351
Notes receivable 1,320 1,279
Inventories 494 863
Deferred income tax (Note 5) 1,773 2,345
Prepaid expenses and other current assets 1,415 5,452
Total current assets 83,497 61,622
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization
of $3,619 at March 31, 1994 and
$10,248 at March 31, 1995 (Note 4) 46,899 118,105
DEFERRED INCOME TAX - long-term (Note 5) 3,180 1,943
INTANGIBLES, net (Note 1) 1,716 39,130
OTHER ASSETS 3,273 2,990
$ 138,565 $ 223,790
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 7) $ 154 $ 3,375
Accounts payable 2,669 8,233
Accrued liabilities (Note 3) 9,877 27,030
Other liabilities 548 669
Income taxes payable (Note 5) 2,893 --
Total current liabilities 16,141 39,307
OTHER LONG-TERM LIABILITIES (Note 6) 869 2,808
LONG-TERM DEBT, net of current
portion (Note 7) 5,711 5,532
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY:
Preferred stock, no par value,
Authorized -- 10,000,000 shares,
Issued and outstanding -- none -- --
Common stock, $.005 par value,
Authorized -- 90,000,000 shares,
Issued and outstanding -- 26,357,100
shares at March 31, 1994 and
29,672,400 shares at March 31, 1995 132 148
Additional paid-in capital 106,883 121,712
Unrealized loss on marketable
securities, net of tax (150) (451)
Retained earnings 8,979 54,734
Total stockholders' equity 115,844 176,143
$ 138,565 $ 223,790
The accompanying notes are an integral part of these consolidated statements.
47
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
Year ended March 31,
1993 1994 1995
REVENUES:
Casino $ 4,606$ 95,873 $ 210,942
Food and beverage 546 5,314 7,406
Other 577 5,895 5,347
5,729 107,082 223,695
COSTS AND EXPENSES:
Casino 2,177 35,145 74,839
Food and beverage 505 5,094 6,799
Other gaming related and general costs 1,712 23,680 48,050
Corporate administrative expenses -- 2,675 7,276
Pre-opening and gaming development costs 4,995 7,026 9,117
Depreciation and amortization 180 3,706 7,065
Option and stock compensation expense -- 2,868 --
9,569 80,194 153,146
Income (loss) from continuing
operations before other income
(expense) and provision for
income taxes (3,840) 26,888 70,549
OTHER INCOME (EXPENSE):
Interest income 6 1,623 3,340
Other income, net -- 83 275
Interest expense (274) (887) (694)
(268) 819 2,921
Income (loss) from continuing
operations before provision
for income taxes (4,108) 27,707 73,470
PROVISION FOR INCOME TAXES 34 10,255 27,715
Income (loss) from
continuing operations (4,142) 17,452 45,755
DISCONTINUED OPERATIONS (Note 13):
Loss from discontinued operations (6,071) -- --
Loss on disposition of
discontinued operations,
including a provision
of $748 for operating losses
during phase out period (960) -- --
(7,031) -- --
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- 3,500 --
NET INCOME (LOSS) $ (11,173) $20,952 $ 45,755
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK AND COMMON STOCK
EQUIVALENTS OUTSTANDING (Note 1) 13,042,500 28,436,600 31,169,600
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK AND COMMON STOCK
EQUIVALENTS OUTSTANDING ASSUMING
FULL DILUTION (Note 1) 13,042,500 28,987,200 31,636,700
EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE:
From continuing operations $ (.32) $ .61 $1.47
From change in accounting principle -- .12 --
From discontinued operations (.54) -- --
$ (.86) $ .73 $ 1.47
EARNINGS PER COMMON SHARE -
ASSUMING FULL DILUTION:
From continuing operations $ (.32) $ .60 $ 1.45
From change in accounting principle -- .12 --
From discontinued operations (.54) -- --
$ (.86) .72 $ 1.45
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED MARCH 31, 1995
(dollars in thousands)
Additional Accumulated
Common Stock Paid-In Unrealized Earnings
Shares Amount Capital Loss (Deficit)
BALANCE, March 31, 1992 12,417,200 $ 62 $ 2,728 -- $ (800)
Shares issued for
contract settlement 527,100 3 2,282 -- --
Shares issued under
stock option plans 423,600 2 322 -- --
Shares issued for
warrants exercised 2,152,200 11 5,156 -- --
Shares issued in
exchange
of debentures 396,100 2 861 -- --
Shares issued for services 75,000 -- 201 -- --
Proceeds allocated to
warrants issued in
conjunction with
sale of 15 percent
series A&B exchangeable
debentures (Note 9) -- -- 257 -- --
Net Loss -- -- -- -- (11,173)
BALANCE, March 31, 1993 15,991,200 80 11,807 -- (11,973)
Shares issued under
stock option plans 502,800 3 948 -- --
Shares issued for
warrants exercised 245,100 1 912 -- --
Shares issued in
exchange for
debentures 2,028,700 10 4,413 -- --
Shares sold in public
offering and
subsequent registration
costs 7,499,300 38 85,935 -- --
Shares issued in
connection with
employment contracts 90,000 -- 1,065 -- --
Compensation in
connection with nonemployee
directors' options -- -- 1,803 -- --
Unrealized loss on
marketable securities,
net of tax -- -- -- (150) --
Net income -- -- -- -- 20,952
BALANCE, March 31, 1994 26,357,100 132 106,883 (150) 8,979
Shares issued under
stock option plans 277,700 1 688 -- --
Shares issued in
exchange for land 381,000 2 4,237 -- --
Shares issued for
warrants exercised 2,656,600 13 7,261 -- --
Tax benefit from
exercise of
nonqualified options -- -- 2,643 -- --
Change in unrealized
loss on marketable
securities, net of tax -- -- -- (301) --
Net income -- -- -- -- 45,755
BALANCE,
March 31, 1995 29,672,400 $148 $121,712 $(451) $54,734
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
For the year ended March 31,
1993 1994 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(11,173) $20,952 $45,755
Adjustments to reconcile net
income (loss)to net cash provided
by (used in) operating activities:
Depreciation and amortization 180 3,706 7,065
Option and stock compensation expense -- 2,868 --
Net benefit realized from
deferred tax asset -- (1,299) --
Loss from discontinued operations 6,071 -- --
Loss on disposition of
discontinued operations 960 -- --
Cumulative effect of change
in accounting principle -- (3,500) --
Other -- 141 279
Changes in assets and liabilities,
net of effects of discontinued
operations:
Accounts and notes receivable (19) (2,292) (450)
Inventories (135) (349) (369)
Prepaid expenses and other
current assets (335) (1,080) (4,037)
Other assets (593) (2,741) 780
Accounts payable 1,460 1,211 1,934
Accrued interest 880 (880) --
Accrued liabilities 1,320 8,871 1,487
Other liabilities 150 1,081 (340)
Net effect of discontinued operations (2,871) (2,822) --
Net cash provided by (used in)
operating activities (4,105) 23,867 52,104
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of property and equipment (5,195) (33,845) (62,419)
Costs in excess of fair value of
tangible assets acquired -- (1,755) (24,090)
Purchases of marketable securities -- (63,922) (22,970)
Proceeds from sale of marketable
securities -- -- 59,509
Other assets -- pre-opening
costs -- riverboat 550 -- --
Net effect of discontinued operations 281 423 --
Net cash used in investing
activities (4,364) (99,099) (49,970)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt,
net of debt issuance costs 6,991 -- --
Payments of long-term debt (28) (7,133) (169)
Proceeds allocated to warrants
issued in conjunction with
sale of 15 percent series
A&B exchangeable debentures (Note 9) 257 -- --
Issuance of common stock for
warrants exercised 5,168 263 7,273
Proceeds from sale of common
stock, net of all issuance
and subsequent registration costs -- 85,973 --
Proceeds from exercise of
stock options 524 1,601 691
Net effect of discontinued
operations (219) (306) --
Net cash provided by
financing activities 12,693 80,398 7,795
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,224 5,166 9,929
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 4,567 8,791 13,957
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 8,791 $ 13,957 $ 23,886
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
SUPPLEMENTAL CASH FLOW INFORMATION:
For the year ended March 31,
1993 1994 1995
CONTINUING OPERATIONS:
Interest paid, including
amount capitalized $ 249 $ 2,050 $ 694
Income taxes paid -- 8,761 30,102
Debt incurred to purchase
property and equipment 10,513 -- 3,200
Common stock issued for
purchase of land -- -- 4,238
Accrued liabilities incurred to
purchase property and equipment -- -- 8,005
Accrued liabilities relating to
costs in excess of fair value
of tangible assets acquired -- -- 13,441
Tax benefit related to exercise
of non-qualified stock options -- -- 2,643
Debentures exchanged for common stock 908 4,650 --
Debenture loan costs amortized into
additional paid-in capital 44 227 --
Land transferred to joint venture -- 167 --
Unrealized loss on marketable
securities, net of tax -- 150 301
DISCONTINUED OPERATIONS:
Interest paid 73 27 --
Taxes paid 34 -- --
Debt incurred to purchase property and equipment 57 -- --
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
63
1. Summary of Significant Accounting Policies
Basis of Presentation
Players International, Inc. ("the Company") through wholly
owned subsidiaries operates three riverboat casinos and a horse
racetrack facility. Through another wholly owned subsidiary, the
Company expects to open a land-based hotel and casino in
Mesquite, Nevada on or about July 1, 1995. All operations
include food and beverage facilities. A retail gift shop is also
included in the operations of each casino.
The accompanying consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries.
All significant intercompany balances and transactions have been
eliminated in consolidation.
Certain reclassifications have been made to the consolidated
financial statements as previously presented to conform to the
current classifications.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an
original maturity of three months or less to be cash equivalents.
Cash and cash equivalents are carried at cost which approximates
market value.
Investments
In May, 1993, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 115 ("SFAS
115"), "Accounting for Certain Investments in Debt and Equity
Securities." The Company adopted the provisions of the
new standard for investments held as of or acquired after March
31, 1994. Pursuant to SFAS 115, management has determined that
the Company's marketable securities should be classified as
available-for-sale. As available-for-sale investments, these
securities are carried at fair value (previously carried at
amortized cost) and unrealized gains and losses are reported in a
separate component of stockholders' equity. The amortized cost
of investments is adjusted for amortization of premiums and the
accretion of discounts to maturity. Such amortization is
included in interest income. Realized gains and losses are
included in other income. The cost of securities sold is based
on the specific identification method.
Revenues and Promotional Allowances
Casino revenues are the net of gaming wins less losses.
Revenues exclude the retail value of complimentary admissions,
food and beverage and other items furnished to customers, which
totaled approximately $141,000, $3,385,000 and $9,916,000 for the
years ended March 31, 1993, 1994 and 1995, respectively.
The estimated costs of providing such complementary services
are included in casino costs and expenses through inter-
department allocations from the department granting the services
as follows (dollars in thousands):
1993 1994 1995
Food and beverage $ 70 $ 1,398 $ 5,583
Admissions -- 1,548 2,848
Other 49 218 717
$ 119 $ 3,164 $ 9,148
Pre-opening and Gaming Development Costs
The Company is currently pursuing expansion opportunities in
new gaming jurisdictions. All pre-opening and gaming development
costs are expensed as they are incurred except for the cost of
property and equipment which is capitalized.
Inventories
Inventories consisting of food, beverage and gift items are
stated at the lower of cost (first-in, first-out) or market.
Depreciation and Amortization
The Company computes depreciation for property and equipment
using primarily the straight-line method over the estimated
useful life of the assets. Amortization of leasehold and land
improvements is computed using the straight-line method over the
lesser of the estimated useful life or lease term.
The following estimated useful lives are used:
Riverboat 10 years
Furniture, fixtures and equipment 5 to 7 years
Building and improvements 10 to 20 years
Intangibles
Costs in excess of fair value of tangible assets acquired
are recorded as intangibles on the accompanying consolidated
balance sheets and are being amortized using the straight-line
method over 15 years. At March 31, 1995 the increase in
intangibles of $37,531,000 primarily related to the purchase of a
riverboat.
The Company periodically evaluates whether the remaining
estimated useful life of intangibles may warrant revision or the
remaining balance of intangibles may not be recoverable,
generally based upon expectations of nondiscounted cash flows and
operating income. Based on present operations and strategic
plans, the Company believes that no impairment of intangibles has
occurred.
Per Share Amounts
Per share amounts have been computed based on the weighted
average number of outstanding shares and common stock
equivalents, if dilutive, during each period. All per share
amounts and shares outstanding reflect the 3-for-2 stock split
declared on April 26, 1995 for stockholders of record at the
close of business on May 8, 1995. For the year ended March 31,
1993, the effect of options and warrants was not considered since
they were antidilutive. A summary of the number of shares used
in computing primary earnings per share follows:
Year ended March 31,
1993 1994 1995
Weighted average number of
shares outstanding 13,042,500 23,669,400 27,233,000
Dilutive effect of options
and warrants -- 4,767,200 3,936,600
Shares used in computing
primary earnings per share 13,042,500 28,436,600 31,169,600
The number of shares used in computing fully diluted
earnings per share for the year ended March 31, 1994 includes the
conversion of convertible debentures as of April 1, 1993. Also,
net income includes the elimination of interest expense on the
convertible debentures of $116,000, net of tax. Fully diluted
earnings per share reflect additional dilution related to stock
options, due to the use of the market price at the end of the
period, when higher than the average price for the period. As a
result, the number of shares used in computing fully diluted
earnings per share is as follows:
Year ended March 31,
1993 1994 1995
Weighted average number of
shares outstanding 13,042,500 23,669,400 27,233,000
Dilutive effect of
exchangeable debentures -- 550,600 --
Dilutive effect of options
and warrants -- 4,767,200 4,403,700
Shares used in computing
fully diluted earnings
per share 13,042,500 28,987,200 31,636,700
2. Marketable Securities
All marketable securities at March 31, 1994 and 1995 are
municipal bonds. The following is a summary of marketable
securities as of March 31, 1994 and 1995 (dollars in thousands):
March 31,
1994 1995
Cost $ 63,844 $ 27,165
Gross unrealized losses (255) (719)
Estimated fair value $ 63,589 $ 26,446
The gross realized gains and (losses) on marketable
securities totaled $136,000 and ($30,000) for the year ended
March 31, 1995. There were no realized gains or (losses) for the
years ended March 31, 1994 and 1993.
The contractual maturities of marketable securities at March
31, 1995 were (dollars in thousands):
Estimated
Cost Fair Value
Due in one year or less $ -- $ --
Due in one year through
five years $ 22,147 $ 21,552
Due after five years $ 5,018 $ 4,894
3. Accrued Liabilities
A summary of the accrued liabilities is as follows (dollars
in thousands):
March 31,
1994 1995
Medical insurance claims $ 618 $ 842
Chip and token liability 245 322
Accrued payroll and related expenses 3,074 3,253
Accrued expenses 5,940 7,197
Current portion of liabilities
related to the purchase of
a riverboat -- 15,416
$ 9,877 $27,030
4. Property and Equipment
A summary of property and equipment, stated at cost is as
follows:
March 31,
1994 1995
Land $ 1,133 $ 14,828
Riverboat and barges 22,798 44,607
Furniture, fixtures and equipment 16,270 25,975
Leasehold and land improvements 10,063 12,000
Construction in progress 254 30,943
Less -- accumulated depreciation
and amortization (3,619) (10,248)
$ 46,899 $ 118,105
5. Income Taxes
Effective April 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the
liability method required by FASB Statement No. 109, "Accounting
for Income Taxes". As permitted under the new rules, prior
years' financial statements have not been restated.
The cumulative effect of adopting Statement 109 as of April
1, 1993 was to increase net income by $3,500,000.
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Company's
deferred tax assets and liabilities as of March 31, 1994 and 1995
are as follows (dollars in thousands):
March 31,
1994 1995
Deferred tax assets:
Reserve for discontinued operations $ 689 $ 607
Pre-opening, development and other costs 3,696 4,422
Unrealized loss on marketable securities 95 268
Accrued liabilities and prepaid expenses -- 1,305
Deferred revenue 422 268
Accrual of directors' option expense 674 558
Total deferred tax assets 5,576 7,428
Deferred tax liabilities:
Tax over book depreciation 616 1,626
Prepaid expenses -- 394
Other 7 1,120
Total deferred tax liabilities 623 3,140
Net deferred tax assets $ 4,953 $ 4,288
Significant components of the provision for income taxes
attributable to continuing operations are as follows (dollars in
thousands):
Deferred Method Liability Method
March 31, 1993 March 31, 1994 March 31, 1995
Current:
Federal $ -- $9,324 $23,263
State 34 2,004 4,451
Total current 34 11,328 27,714
Deferred:
Federal -- (873) (89)
State -- (200) 90
Total deferred -- (1,073) 1
$ 34 $ 10,255 $ 27,715
The reconciliation of income tax attributable to continuing
operations computed a the Federal statutory rates to income tax
expense is:
Deferred Method Liability Method
March 31, 1993 March 31, 1994 March 31, 1995
Federal statutory rate (34%) 35% 35%
State taxes on income,
net of Federal income
tax benefit 1 4 4
Losses producing no
current tax benefit 32 -- --
Tax exempt interest
income from
municipal bonds -- (2) (1)
Financial statement
provision rate (1%) 37% 38%
6. Other Long-Term Liabilities
A summary of other long-term liabilities follows (dollars in
thousands):
March 31,
1994 1995
Long-term portion of liabilities
related to purchase of a riverboat $ -- $ 2,400
Other 869 408
$ 869 $ 2,808
7. Long-Term Debt
A summary of long-term debt is as follows (dollars in
thousands):
March 31,
1994 1995
First Ships Mortgage, secured by a
riverboat, interest at prime plus
2 percent(8 percent at March 31,
1994 and 1995) adjusted every 60
months, payable in monthly
installments of $49, due 2013 $ 5,803 $ 5,669
Note payable to Gem Gaming, Inc.,
unsecured, interest at 9% per year,
principal due the earlier of the
opening of the Mesquite facility
or December 31, 1995. -- 3,200
Other 62 38
5,865 8,907
Less -- current portion (154) (3,375)
$ 5,711 $ 5,532
The aggregate annual maturities of long-term debt at March
31, 1995 are as follows (dollars in thousands):
Year ending March 31:
1996 $ 3,375
1997 164
1998 169
1999 184
2000 199
Thereafter 4,816
$ 8,907
8. Stockholders' Equity
In July 1993, the Company issued 7,499,250 shares of its
$.005 par value common stock in a public offering. The price to
the public was $12.50 per share. Net proceeds of the offering,
after deducting all associated costs, were $86,238,400, or $11.50
per newly issued share.
9. Common Stock Options and Warrants
The Company has four stock option plans, the 1985 Incentive
Stock Option Plan ("1985 Plan") for employees covering 600,000
shares of common stock, the 1990 Incentive Stock Option and Non-
Qualified Option Plan covering 1,200,00 shares of common stock
("1990 Plan"), the 1993 Incentive Stock Option and Non-Qualified
Option Plan covering 3,000,000 shares of common stock ("1993
Plan"), and the 1994 Directors Stock Incentive Plan ("1994
Plan") covering 900,000 shares of common stock. As of March
31, 1995, the Company had 116,686, 495,375, 286,500 and 840,000
shares available for issuance in connection with future stock
options that may be granted under the 1985 Plan, 1990 Plan,
1993 Plan and 1994 Plan, respectively. Options granted are
generally exercisable between three and ten years from date of
grant. The following is a summary of the 1985, 1990, 1993, and
1994 Plans:
1985 1990 1993 1994
Plan Plan Plan Plan Sub-total
Outstanding
March 31, 1992 418,875 -- -- -- 418,875
Granted 15,000 936,375 -- -- 951,375
Exercised (75,000) (12,000) -- -- (87,000)
Expired or
canceled (96,375) (720,000) -- -- (816,375)
Outstanding
March 31, 1993 262,500 204,375 -- -- 466,875
Granted -- 262,500 628,500 -- 891,000
Exercised (207,170) (48,225) -- -- (255,395)
Expired or
canceled (9,701) (2,250) -- -- (11,951)
Outstanding
March 31, 1994 45,629 416,400 628,500 -- 1,090,529
Granted -- 267,000 1,995,000 60,000 2,322,000
Exercised (9,652) (12,737) -- -- (22,389)
Expired or
canceled (7,500) (42,750) -- -- (50,250)
Outstanding
March 31, 1995 28,477 627,913 2,623,500 60,000 3,339,890
Exercisable at
March 31, 1995 16,327 257,927 439,502 -- 713,756
In addition to the foregoing plans, other option and warrant
activity is listed below including total for all plans and the
exercise price range per share:
Non-employee Other Exercise Price
Directors Options Warrants Total Range per share
Outstanding
March 31, 1992 -- 1,532,347 -- 1,951,222 $0.33-$2.83
Granted -- 161,544 7,237,544 8,350,463 $1.19-$6.92
Exercised -- (336,645) (2,152,161) (2,575,806) $0.33-$3.00
Expired or
canceled -- (740,292) -- (1,556,667) $0.33-$2.50
Outstanding
March 31, 1993 -- 616,954 5,085,383 6,169,212 $0.33- $6.92
Granted 332,877 -- -- 1,223,877 $6.25-$17.83
Exercised -- (247,355) (245,088) (747,838) $0.33-$4.13
Expired or
canceled -- (8,982) -- (20,933) $0.83-$11.17
Outstanding
March 31, 1994 332,877 360,617 4,840,295 6,624,318 $0.33-$17.83
Granted -- -- 150,000 2,472,000 $11.50-$16.58
Exercised (112,500) (142,857) (2,740,295) (3,018,041) $0.33-$11.17
Expired or
canceled -- (260) -- (50,510) $0.83-$17.83
Outstanding
March 31,1995 220,377 217,500 2,250,000 6,027,767 $0.67-$17.83
Exercisable at
March 31, 1995 220,377 217,500 1,612,50 2,764,133
On June 23, 1992, a subsidiary of the Company sold to
accredited investors 15 percent series A&B exchangeable
debentures with a face value of $5,815,000, due April 14, 1997.
In addition, 4,750,650 warrants to purchase common stock of the
Company were issued. The debentures were exchangeable for common
stock of the Company at the rate of 417 shares of common
stock per $1,000 face value of debt. The Company called
all outstanding debentures for redemption on June 28, 1993.
These debentures were exchanged for 2,028,750 shares of
the Company's common stock. The warrants were fully exercised prior
to their expiration on February 23, 1995.
Under a contract with a spokesperson for the riverboats
through December 31, 1996, the Company issued 2,100,000 warrants
to purchase common stock of the Company. The warrants, which
vest at 25% per year beginning January 1, 1993, are exercisable
at $2.67 per warrant.
10. Employee Benefit Plans
The Company has a defined contribution plan that provides
retirement benefits for eligible employees. Eligible employees
may elect to participate by contributing a percentage of their
pre-tax earnings to the plan. Employee contributions to the
plan, up to certain limits, are matched at 25% by the employer.
The expense for the Company's defined contribution plan was
$224,000 for the fiscal year ended March 31, 1995. There were no
employer contributions in the prior years.
11. Commitments and Contingencies
The Company leases office space, land and equipment under
operating leases expiring at various dates through December 2011.
The minimum annual payments under noncancelable lease
agreements at March 31, 1995 are as follows (dollars in
thousands):
Year ending March 31:
1996 $ 2,180
1997 963
1998 766
1999 440
2000 7
Thereafter 80
$ 4,436
A lease agreement for one of the Company's subsidiaries
provided for contingent payments based on either the greater of
the annual minimum rent or the calculated rent based on adjusted
passenger admission. Rent expense for all operating leases was
as follows (dollars in thousands):
Years ended March 31,
1993 1994 1995
Minimum rentals $ 606 $ 869 $ 2,213
Contingent payments -- 662 3,236
$ 606 $ 1,531 $ 5,449
For the fiscal years ended March 31,1994 and 1995, $203,000
and $101,000, respectively, of rent expense is included in pre-
opening and gaming development costs in the accompanying
consolidated statements of operations.
In 1994, the Company began construction of a land based
casino in Mesquite, Nevada. The total cost of the project is
approximately $75-80 million. Costs incurred through March 31,
1995 were approximately $44 million. The project is expected to
open on or about July 1, 1995.
The Company is a defendant in various lawsuits. In the
opinion of management and counsel, the outcome of these matters
will not have a material adverse effect on the Company's business
or results of operations.
12. Transactions with Related Parties
A law firm performed legal services for the Company during
the fiscal years ended March 31, 1993, 1994 and 1995 for which it
was paid fees in the aggregate amount of $240,000, $955,000 and
$1,293,000, respectively. The President of the Company was a
partner of the firm through May 1993.
A member of the board of directors was paid $70,000 during
the year ended March 31, 1995 in consideration for consulting
services rendered.
The Company purchases promotional items from a company owned
by certain directors and stockholders of the Company. During the
years ended March 31, 1993, 1994 and 1995, the Company paid
$98,000, $79,000 and $306,000, respectively, for such materials.
In June 1992, the Company sold $2,250,000 face value of the
15% series A exchangeable debentures to The Griffin Group, Inc.
(Griffin) (see Note 9). One of the affiliates of Griffin
acquired $150,000 face value of debentures and 779,100 of the
detachable warrants from Griffin. Subsequent to this purchase, a
representative of Griffin, became a member of the Board of
Directors of the Company. In December 1992, Griffin entered into
a contract under which Mr. Merv Griffin became the spokesperson
for the Company's riverboats (see Note 9). In February 1993,
Griffin and its affiliates exercised 622,950 and 107,550,
respectively, of the warrants attached to the debentures and
became stockholders of the Company.
13. Discontinued Operations
In fiscal year 1993 the Board of Directors of the Company
approved a plan to concentrate its efforts on the development and
operation of riverboat casinos and to discontinue its marketing
of various services and products related to gaming, travel and
entertainment industries. The discontinued operations include
the services and products of Players Club International,
International Gaming Promotions, Players World Travel, the 900
Game Show Network and its cash advance services.
In July 1993, the Company sold substantially all of its
assets relating to (i) its Players Club membership club, which
provides discount and other benefits to individuals who
participate in recreational gaming, and (ii) its Players World
Travel travel agency, to Privilege Players Club Group, Inc.
("Privilege Players"), as assignee of Winners Entertainment
Group, Inc. In consideration of the sale of the Players Club and
Players World Travel assets the Company received $350,000 cash
and Privilege Players assumed certain liabilities relating to
such assets.
The consolidated financial statements report separately the
operating results and cash flows of the discontinued operations.
There was no operating or cash flow activity resulting from the
discontinued operations for the year ended March 31, 1995.
Summary operating results of the discontinued operations are as
follows (dollars in thousands):
Year ended March 31,
1993 1994
Revenues $ 14,640 $ 3,360
Costs and expenses 20,711 4,376
Loss before provision for income
taxes and loss on disposition
of discontinued operations (6,071) (1,016)
Provision for income taxes -- --
Loss before loss on disposition of
discontinued operations (6,071) (1,016)
Loss on disposition of
discontinued operations (960) --
Net loss $ (7,031) $ (1,016)
The net loss from discontinued operations for the year ended
March 31, 1994, had been previously provided for and reflected on
the March 31, 1993 financial statements as a net liability for
discontinued operations. The significant components of the net
effect of discontinued operations on cash flows from operating
activities are as follows (dollars in thousands):
Year ended March 31,
1993 1994
Net loss $ (7,031) $ (1,016)
Issuance of common stock
under contract settlement 2,284 --
Amortization of deferred membership
acquisition costs 5,756 --
Payment of deferred membership
acquisition costs (3,874) --
Other 550 163
Changes in net liability of
discontinued operations (556) (1,969)
$ (2,871) $ (2,822)
There were no significant components of the net effect of
discontinued operations on cash flows from investing and
financing activities.
14. Subsequent Events
On April 17, 1995, the Company issued $150,000,000 aggregate
principal amount of 10-7/8% Senior Notes due to mature on April
15, 2005. Interest is payable in cash semi-annually on April 15
and October 15 commencing October 15, 1995. The Company intends
to use the net proceeds for future expansion and development.
On April 26, 1995, the Board of Directors declared a 3-for-2
stock split for stockholders of record at the close of business
on May 8, 1995. All references to share data have been
retroactively restated to reflect this split.
[DESCRIPTION] AGREEMENT FOR SALE OF PARTNERSHIP INTERESTS
AGREEMENT FOR SALE OF
PARTNERSHIP INTERESTS
THIS AGREEMENT, made and entered into as of the ___ day of March, 1995, by
and among LAKE PONTCHARTRAIN SHOWBOAT, INC., a Nevada corporation ("LPS"),
SHOWBOAT LOUISIANA, INC., a Nevada corporation ("SLI") (LPS and SLI are
sometimes collectively referred to as "Sellers") and SHOWBOAT, INC., a Nevada
corporation ("SBO") and PLAYERS RIVERBOAT, LLC, a Louisiana limited liability
company ("PRL"), PLAYERS RIVERBOAT MANAGEMENT, INC., a Nevada Corporation
("PRM"), and PLAYERS INTERNATIONAL, INC., a Nevada corporation ("Players") (PRL,
PRM and Players are sometimes collectively referred to as the "Players
Parties").
BACKGROUND
A. LPS and SLI are the sole partners of Showboat Star Partnership (the
"Partnership"). The Partnership owns a riverboat casino, with all inventory,
fixtures, furniture and equipment, including gaming equipment, known as the
"Star Casino" (the "Casino") which it operated under a Certificate of Final
Approval for Riverboat Gaming Operations (the "Operating Certificate") from the
Louisiana Riverboat Gaming Commission (the "Gaming Commission") and a Riverboat
Operator's License (the "Riverboat License" and together with the Operating
Certificate herein the "Gaming Authorizations") issued by Louisiana Department
of Public Safety and Corrections, Office of the State Police, Riverboat Gaming
Enforcement Division (the "State Police" and together with the Gaming Commission
herein the "Louisiana Gaming Authorities").
B. Players, LPS and SLI have agreed to the general terms of a purchase and
sale of the partnership interests (the "Interests") of LPS and SLI in the
Partnership, pursuant to the terms laid out in that certain letter agreement
dated January 25, 1995, addressed to Players, and signed or acknowledged by the
Partnership, LPS, SLI, Players and Showboat (the "Preliminary Agreement"). This
Agreement shall constitute one of the Definitive Agreements contemplated by the
Preliminary Agreement.
C. Sellers desire to transfer to Players or its designees, and Players has
designated PRL and PRM ("Buyers") to take and accept from Sellers, the Interests
of Sellers, free and clear of all liabilities, liens, mortgages, encumbrances
and any and all other claims to or upon the Interests or any and all assets of
the Partnership, all upon the terms and conditions more specifically set forth
in this Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
Incorporation of Background Preambles. The background preambles set
forth above are incorporated herein by this reference.
Transfer of Partnership Interests. Sellers do hereby agree to sell,
assign, transfer and set over unto Buyers, and at Closing, Buyers do hereby
<PAGE>
agree to take and accept from Sellers, Sellers' Interests and all of Sellers'
right, title and interest as partner or otherwise, in and to the Partnership and
each and every of its assets, including, but not limited to the Casino and all
rights of the Partnership in and to all trademarks, tradenames and other
intellectual property of the Partnership, including but not limited to the name
"Star Casino" (the "Casino's Name"). Notwithstanding the foregoing, Buyers shall
have no interest in, nor shall Sellers sell, assign, transfer or set over unto
Buyers, any of the following:
(a) all bank accounts, or cash and cash equivalents held by the
Partnership except that the Partnership shall retain all coins currently located
on the Casino, for which Sellers shall receive a credit at Closing in the amount
of $417,388.50;
(b) all accounts receivable of the Partnership all of which shall be
assigned to Sellers by the Partnership as of the date of Closing;
(c) original books and records of the Partnership, provided, however,
Buyers shall have access to the original books and records during business hours
upon written request if such review is necessary in connection with an audit by
any governmental entity having jurisdiction over the operations of the
Partnership. Sellers shall have the continuing obligation to maintain the
referenced books and records of the Partnership in such condition and for such
periods of time as may be required by any governmental entity having
jurisdiction over the operations of the Partnership;
(d) deposits, referred claims, deferred charges and prepaid expenses,
for which Sellers, to the extent not already provided for herein, shall receive
a credit at Closing;
(e) insurance policies and rights thereunder as of the date of Closing
all of which shall be assigned to Sellers by the Partnership as of the date of
Closing;
(f) choses in action, claims and litigation relating to same, all of
which shall be assigned to Sellers by the Partnership as of the date of Closing;
(g) any trademark utilized or owned by SBO; and
(h) any items of inventory of the Partnership which are ordered but
undelivered as of the date of Closing, it being the intent of the parties that
such items of inventory be available for purchase by the Partnership should the
Partnership determine that such items of inventory can be used in the operations
of the Partnership.
2
<PAGE>
To the extent applicable, the Partnership may make distributions of any of the
foregoing to Sellers prior to Closing. Sellers' Interests shall be separately
transferred to and allocated among Buyers as more particularly set forth in
Section 5, below.
Purchase Price. Buyers shall pay to Sellers, and Sellers shall accept
from Buyers, the sum of $52,000,000.00 as the full and complete purchase price
for Sellers' Interests, which purchase price shall be paid to Sellers in the
following manner, and subject to adjustment as provided elsewhere in this
Agreement:
(a) Buyers shall pay to Sellers $42,000,000.00 in immediately
available funds at the closing of the transaction contemplated hereby
("Closing").
(b) Buyers shall pay to Sellers $10,000,000.00 in immediately
available funds on or before April 7, 1995.
(c) The $52,000,000.00 purchase price shall be allocated among Sellers
as follows:
(1) $51,500,000.00 to SLI; and
(2) $500,000.00 to LPS.
Effect of Transfer. It is acknowledged and agreed by and among the
parties hereto that the transactions contemplated by this Agreement involve the
transfer of Sellers' Interests; that from and after the date of Closing Buyers,
or some representative of Buyers shall be the sole partners of the Partnership,
for all purposes; and that upon transfer of the Interests to Buyers as herein
provided the Partnership shall continue its existence.
Respective Interests. Upon the consummation of the transaction
contemplated hereunder, Buyers shall have and possess separate Interests in the
Partnership as set forth in the following chart:
BUYERS INTEREST
Players Riverboat, LLC ninety-nine percent (99%)
Players Riverboat Management, Inc. one percent (1%)
3
<PAGE>
Closing Deliveries.
(a) Closing shall take place in accordance with the provisions of
Section 9 hereof.
(b) At Closing, Sellers shall deliver to Buyers valid and duly
executed instruments of assignment of the Interests of Sellers.
(c) At Closing, Buyers shall deliver to Sellers the following items:
(1) $42,000,000.00 in immediately available funds, and the
balance of $10,000,000.00 in immediately available funds on or before April 7,
1995;
(2) Valid and duly executed instruments of assignment of (i) the
accounts receivable of the Partnership as of the date of Closing, (ii) any
insurance policies and rights thereunder of the Partnership as of the date of
Closing, and (iii) any choses in action, claims and litigation relating to same
of the Partnership as of the date of Closing.
(d) The parties hereto agree to execute and deliver to each other at
Closing such other documents as are necessary to evidence or effectuate the
transfer of Sellers' Interests to Buyers, including, without limitation, an
amendment to the Partnership Agreement governing the affairs of the Partnership.
7. Representations and Warranties of Sellers. Sellers hereby make the
following representations and warranties to the Players Parties, each of which
Sellers acknowledge is material and relied upon by the Players Parties, and each
of which shall be true and correct in all material respects at the time of
execution of this Agreement and as of Closing as if then made:
(a) Ownership. Sellers are the record and beneficial owners of the
Interests with full power and authority to vote, transfer and otherwise dispose
of the Interests. Such Interests represent 100% of the interests in the
Partnership and are held free and clear of all liens, encumbrances, equities,
options or claims of third parties. There are no agreements or understandings
between Sellers and any other person with respect to the voting, sale or other
disposition of the Interests or any other matter relating thereto. Sellers have
the right, power, and authority to enter into, be bound by and perform their
obligations under this Agreement, including without limitation, the right,
power, and authority to sell the Interests as set forth herein.
(b) Validity of Agreement. This Agreement constitutes the valid and
4
<PAGE>
binding obligation of Sellers and is enforceable in accordance with its terms
against each of them, subject, however, to any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time in
effect affecting generally the enforcement of creditors' rights and remedies,
and to general principles of equity.
(c) Consents and Approvals. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate, result in a breach of any of the terms or provisions of, constitute a
default under or conflict with any agreement, indenture or other instrument to
which any of Sellers or the Partnership is a party or by which any of them is
bound, any judgment, decree, order or award of any court, governmental body or
arbitrator applicable to Sellers, the Partnership or the Interests, or any law,
rule or regulation applicable to Sellers, the Partnership or the Interests.
Sellers have already made all declarations, filings and registrations with, and
have obtained all consents, approvals or authorizations of, any governmental or
regulatory authority (including but not limited to the Louisiana Gaming
Authorities) or any other person (either governmental or private), required in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
(d) Organization and Good Standing. The Partnership is duly organized
and validly existing general partnership, under the laws of the State of
Louisiana with all required and appropriate licenses, certificates and
registrations under the laws of the appropriate jurisdictions and has all
requisite power and authority to own, lease or operate its properties and assets
and to conduct its business as presently conducted. All documents required to be
filed with or delivered to the Secretary of State of the respective
jurisdictions in respect of the Partnership have been properly filed or
delivered, and the Partnership is duly qualified to do business in those
jurisdictions in which the nature of the operations or business conducted by it
requires such qualification. True, correct and complete copies of the
Partnership Agreement, with all amendments through the date hereof (the
"Partnership Agreement") are attached hereto as Exhibit "B", and made a part
hereof. The Partnership Agreement shall not be amended further without the prior
written consent of Players which consent shall not be unreasonably withheld.
(e) No Other Interests. There are no options or, except pursuant to
this Agreement, other rights presently outstanding to purchase any interest in
the Partnership. There is no liability or indebtedness for dividends or other
distributions declared or accumulated but unpaid with respect to any interest in
the Partnership. The Interests represent all of Sellers' right, title and
interest in any equity or other rights in the Partnership, and no party other
than Sellers' own any record or beneficial interest in the Partnership.
5
<PAGE>
(f) Financial Wherewithal. Sellers and SBO have the financial capacity
and ability to support the indemnities provided to Buyers in Section 10(a)
hereof.
(g) Absence of Certain Changes. Since January 1, 1995, there has not
occurred, nor do Sellers have knowledge of any present circumstances likely to
give rise in the future to, the following:
(i) Any material adverse change in the results of operations,
assets, condition (financial or otherwise), liabilities, earnings, contractual
or trading position, business or prospects of the Partnership other than the
closure of the Casino which occurred effective January 20, 1995, the reopening
of the Casino effective January 27, 1995 and the subsequent closure of the
Casino on March 9, 1995;
(ii) Any sale or transfer of any of the assets or property of the
Partnership which assets or property have not been specifically excluded from
the transaction contemplated hereby or transferred to Belle of Orleans, L.L.C.
pursuant to that certain Purchase and Sale Agreement dated January 4, 1995,
whether tangible or intangible, or any cancellation of debt, except sales of
inventory in the ordinary course of business;
(iii) Any damage, destruction or loss (whether or not covered by
insurance) which has or may have a material adverse effect on the assets,
condition (financial or otherwise), business or prospects of the Partnership;
(iv) Any declaration, setting aside or payment of any
distribution by the Partnership of money or any assets of any kind with respect
to any interest in the Partnership except as provided for in Section 2 of this
Agreement;
(v) Any material amendment or modification of any Contract (as
defined in subsection 7(l) hereof) or termination of any agreement which would
have been a Contract were it in existence on the date hereof;
(vi) Any material alteration in the manner of keeping the books,
accounts or records of the Partnership or in the accounting practices therein
reflected;
(vii) Any issuance, delivery or transfer of any interests in the
Partnership or the granting of any options or rights to purchase any interests
in the Partnership, or the borrowing of any funds by the Partnership other than
the purchase of certain interests in the Partnership by LPS and SLI from prior
minority partners in the Partnership;
6
<PAGE>
(viii) Any mortgage, pledge, lien, charge or other encumbrances
of any of the assets of the Partnership, whether tangible or intangible other
than inchoate liens arising by operation of maritime law;
(ix) Any capital expenditures, except in the ordinary course of
business;
(x) Any transaction by the Partnership, whether or not covered by
the foregoing, not in the ordinary course of business other than the
distribution of cash receivables and certain liabilities to Sellers immediately
preceding Closing in accordance with Section 2 hereof; or
(xi) Any other event or condition specifically and directly
involving the assets or business operations of the Partnership which was or may
have a material adverse effect on the assets, condition (financial or otherwise)
or business of the Partnership.
(h) Real Property and Leaseholds. The Partnership owns no real
property. Exhibit "E" attached hereto and made a part hereof includes a complete
copy of the leases of each parcel of real property leased or subleased to or by,
or used in the business of the Partnership. Except as indicated in such
description:
(i) The Partnership is not in default with respect to any
material term or condition of any such lease, nor has any event occurred which
through the passage of time, or the giving of notice, or both, would constitute
a default thereunder by the Partnership or would cause the acceleration of any
obligation of the Partnership or the creation of a lien or encumbrance upon any
asset of the Partnership;
(ii) To the best of Sellers' knowledge, all improvements of the
real estate leased to or used by the Partnership conform to all applicable
federal and state environmental laws, rules and regulations, including but not
limited to all laws, rules and regulations relating to the creation, use,
treatment, storage and disposal of any hazardous materials. There has been no
notice received by the Partnership relating to violations of or non-compliance
with any such laws, rules or regulations.
(i) Tangible Personal Property. Exhibit "F" attached hereto and made a
part hereof is a description of: (i) the Casino, and each item of other tangible
personal property owned by the Partnership having on the date hereof either a
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depreciated book value or estimated fair market value per unit in excess of
$2,500.00, or not owned by the Partnership but in the possession of or used in
the business of the Partnership and requiring rental or lease payments therefor
in excess of $2,500.00 per year; (ii) a description of the owner of, and any
agreement relating to the use of, each item of tangible personal property not
owned by the Partnership and the circumstances under which such property is
used; and (iii) the location of the foregoing. Except as indicated in such
description:
(i) The Partnership is and at all times has been the sole owner
of, and it now has good and marketable title to, the Casino and each item of
such other tangible personal property, free and clear of all liens (other than
those set forth in the Financial Statements and inchoate liens created by
operation of maritime law), leases, encumbrances, equities, conditional sales
contracts, security interests, charges and restrictions. Prior to Closing, the
Partnership will satisfy certain claims under bailment and storage agreements in
the approximate amount of $40,000.00. True and correct copies of the
Partnership's (A) Certificate of Documentation, (B) Certificate of Ownership
Vessel and (C) Certificate of Inspection, each relating to the Casino, are
attached hereto and made a part hereof as Exhibit "G".
(ii) No officer, director stockholder or employee of the
Partnership, or Sellers, or any spouse, child, relative or affiliate thereof,
owns directly or indirectly, in whole or in part, any of the items of tangible
personal property described;
(iii) There is no tangible personal property used by the
Partnership that is not owned by it other than such equipment as may have been
leased from Belle of Orleans, L.L.C.;
(iv) The Partnership owns or otherwise has the right to use all
of the tangible personal properties now used by them in the operation of its
business or the use of which is necessary for the performance of any Contract,
letter of intent or proposal to which they are parties.
(v) The Partnership has all licenses, permits, approvals and
authorizations, including but not limited to U.S. Coast Guard and Louisiana
State licenses, permits, approvals and authorizations (the "Operating Permits")
required for it to operate the Casino along a defined route in Lake
Pontchartrain, Louisiana. True and correct copies of the Operating Permits are
attached hereto and made a part hereof as Exhibit "H". There are no notices of
violation or conditions requiring correction or other attention by the
Partnership in connection with the Operating Permits.
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(j) Intangible Personal Property. To the best of Sellers' knowledge,
there are no (i) items of intangible personal property owned by, or used in the
business of, the Partnership, including, but not limited to, trade names,
trademarks, service marks, service names, trade name and trademark
registrations, other than the name of the Partnership and the Casino's Name (the
"Names"), or (ii) licenses, authorizations or similar agreements or arrangements
as to which the Partnership is a party either as licensee or licensor as to any
item of intangible personal property, other than the Gaming Authorizations and
the Operating Permits. The Gaming Authorizations and the Operating Permits are
in full force and effect without challenge to its use by the Partnership having
been filed by the issuing authorities or any other party.
(k) Inventories. The Partnership has good and marketable title to its
inventories, free and clear of all claims, liens (other than those securing
obligations set forth in the Financial Statements), charges, encumbrances and
rights of third parties. The inventories of the Partnership are salable in the
ordinary course of business without discount from the prices generally charged,
except that certain logo-bearing gift shop items have been sold at a discount to
the general public.
(l) Contracts. Attached hereto as Exhibit "I" and made a part hereof
is a complete list of all unexpired contracts and leases of personal property to
which the Partnership is a party or which affect the Partnership's business or
assets having an unexpired value of TWO THOUSAND FIVE HUNDRED ($2,500.00)
DOLLARS or more or containing unexpired warranties. Prior to the date hereof,
Sellers have delivered or have caused the Partnership to deliver to Buyers true,
complete and accurate copies of all such contracts and/or leases (the
"Contracts"). All of the Contracts are in full force and effect, are valid and
binding and are enforceable in accordance with their terms, and Sellers have not
received and have no knowledge of any notice of default or violation of such
Contracts. There are no liabilities of any party to any Contract (including the
Partnership) arising from any breach or default of any provision thereof and, no
event has occurred which with the passage of time or the giving of notice or
both would constitute a breach or default by any party thereto. The Partnership
is not a party to, nor is it bound by, any agreement which is or could be
materially adverse to its assets, condition (financial or otherwise), business
or prospects or which requires or will require future expenditures (including
internal costs and overhead) in excess of reasonably anticipated receipts. The
Partnership is not in default in any loans or other obligations to any lending
institution. The Partnership has terminated its previously existing agreement
with LPS for management of the Casino by LPS.
(m) Labor and Employment Issues. Attached hereto as Exhibit "J" and
made a part hereof is a complete list of: (i) each labor or employment agreement
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to which the Partnership is a party or by which it is bound; (ii) each
employment profit sharing, stock option, stock purchase, deferred compensation,
bonus, pension, retainer, consulting, retirement, health, welfare, incentive
plan or contract or similar agreement to which the Partnership is a party or by
which it either is or may be bound; (iii) each plan and agreement under which
"fringe benefits" (including, but not limited to, vacation plans or programs,
sick leave plans or programs, dental or medical plans or programs and related or
similar benefits) are afforded to an employee of the Partnership; and (iv) the
name, job description, salary and fringe benefits of each employee, agent, or
consultant of the Partnership. Prior to the date of this Agreement, Sellers have
delivered or have caused the Partnership to deliver to Buyers true, complete and
accurate copies of all such labor or employment agreements and plans (the "Labor
and Employment Agreements and Plans"). The Partnership has complied in all
material respects with all applicable laws, rules and regulations relating to
(i) the employment of labor, including, without limitation, those related to
wages, hours, collective bargaining and the payment and withholding of taxes and
other sums as required by appropriate governmental authorities, and (ii) the
closure of the Casino, notice of which was given to all employees on January 20,
1995, and reissued February 10, 1995 as required by the Federal Worker
Adjustment and Retaining Notification Act ("WARN").
(n) Absence of Certain Business Practices. Neither Sellers, any
affiliate of Sellers, the Partnership, any officer, employee or agent of Sellers
or the Partnership, nor any other person acting on their behalf, has, directly
or indirectly, given or agreed to give any gift or similar benefit to any
customer, supplier, competitor or governmental employee or official which would
subject the Partnership to any damage or penalty in any civil, criminal or
governmental litigation or proceeding or which would have a material adverse
effect on the assets, condition (financial or otherwise), business or prospects
of the Partnership.
(o) Compliance with Laws. To the best knowledge and belief of Sellers,
the Partnership's business at all times has been conducted in full compliance
with all applicable laws, rules, regulations and ordinances and all judgments
and orders of any court, arbitrator or governmental authority applicable to the
Partnership, including, without limitation, any of the foregoing related to
gaming, taxation and employment, and Sellers and the Partnership have received
no notices of violations of any applicable laws, rules, regulations, ordinances,
judgments or orders other than those notices from the State Police and District
Attorney generally regarding dockside operation of the Casino with which Buyers
are familiar. Notwithstanding the foregoing, Buyers and Sellers acknowledge the
Partnership's payment of fines from time to time for various minor regulatory
infractions.
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(p) Litigation. There is no legal, administrative, arbitration or
other proceeding or claim, or any governmental investigation, pending or
threatened against or otherwise affecting the Partnership or any of its assets,
and there is no basis for any such proceeding or investigation, except as set
forth in Exhibit "K". Such matters, whether disclosed or undisclosed by Sellers
shall be referred to herein as "Pending or Threatened Litigation".
(q) Taxes.
(i) Within the times and in the manner prescribed by law, and to
the best of Sellers' knowledge, the Partnership has paid all taxes and
assessments required by law with respect to any jurisdiction empowered to levy
taxes upon it, and has filed all tax returns required by any such jurisdiction.
(ii) To the best of Sellers' knowledge, all tax returns filed by
the Partnership for previous taxable years constitute complete and accurate
representations of its tax liabilities for such years and accurately set forth
all items (to the extent required by law to be included or reflected in such
returns) relevant to its future tax liabilities, including the tax basis of its
properties and assets. In the event that a federal or state taxing authority
issues an assessment which benefits the Partnership for any period in which
either of Sellers owned a partnership interest in the Partnership, Buyers shall
notify in writing Sellers of such assessment within fifteen (15) days of notice
of such assessment by the taxing authority in order for Sellers to amend their
respective tax returns.
(iii) The Partnership has not waived or extended any applicable
statute of limitations relating to the assessment of taxes.
(iv) Sellers are not aware of and have not received any notices
or other communication regarding examinations or disputes with respect to tax
returns of the Partnership, and to the best knowledge of Sellers, no such
examination or dispute is threatened.
(r) Insurance. The Partnership has policies of fire, liability and
other insurance insuring it against the risks of loss arising out of or related
to its assets and business as listed and described on Exhibit "L" attached
hereto and made a part hereof, setting forth the coverages, carriers and
expiration dates involved. All such policies and coverages will be outstanding
and duly in force at Closing and the amounts of such insurance, in the
aggregate, are adequate to cover the replacement cost of the Partnership's
tangible and personal property if all claims of the Partnership were to be
approved by the respective insurance companies. There are no outstanding
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requirements or recommendations by an insurance company that issued any such
policy or other similar body or governmental entity requiring or recommending
any changes in the conduct of the business of, or any repairs or other work to
be done or with respect to the properties or assets of, the Partnership. Sellers
shall cancel such policies of insurance as of the date and time of Closing, and
shall be entitled to a credit at Closing for any unused premium returned to the
Partnership on account of such policies.
(s) No Powers of Attorney or Suretyships. The Partnership has not
granted any general or special power of attorney. The Partnership has no
obligation or liability (whether actual, contingent or otherwise) as guarantor,
surety, co-signor, endorser, co-maker, indemnitor or obligor in respect of the
obligation of any person, corporation, partnership, joint venture, association,
organization or other entity.
(t) Progressive Slot Machines. Sellers shall be liable to Buyers for
the outstanding jackpot amounts of any and all progressive slot machines located
at the Casino ("Machines") prior to Closing (the "Progressive Slot Machine
Obligations"). As of the date of Closing the Progressive Slot Machine
Obligations equal $51,572.97. The Progressive Slot Machine Obligations shall be
subject to adjustment based on the final audit of such obligations conducted by
the State Police. Buyers shall receive a credit at Closing to provide for
Sellers' satisfaction of the Progressive Slot Machine Obligations. Exhibit "M"
attached hereto and made a part hereof sets forth a true and complete list of
each of the Machines located at the Casino, and the amount of each outstanding
progressive jackpot that has accrued on each such Machine. Exhibit "M" shall be
updated as of the date of Closing.
(u) No Brokerage Fees. No broker or finder has acted for Sellers in
connection with this Agreement or the transactions contemplated hereby, and no
broker or finder is entitled to any brokerage or finder's fee or other
commission from or through Sellers in respect of this Agreement or any such
transactions.
(v) Special Knowledge. Sellers have no knowledge of any fact or
information which may or does materially and adversely affect the assets,
condition (financial or otherwise), business or prospects of the Partnership
which has not been disclosed in writing to Buyers by Sellers prior to the date
of this Agreement or in this Agreement and/or Exhibits hereto.
(w) Disclosure. The documents and written disclosures required to be
provided by Sellers to Buyers pursuant to this Agreement do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated herein or therein or necessary to make the statements of facts
contained herein or therein, in light of the circumstances in which they are
made, not false or misleading.
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(x) Definition of Best Knowledge. In each case where a representation
or warranty is being given herein to the best knowledge of Sellers, such
representation or warranty shall be based on reasonable inquiry and diligence by
Sellers, and Sellers shall be held to have knowledge of those facts which they
should reasonably have known by the fact of their position as general partners
of the Partnership and the fact of the position of their officers as managers of
the business of the Partnership.
8. Representations and Warranties of Buyers. The Players Parties hereby
make the following representations and warranties to Sellers, each of which the
Players Parties acknowledge is material and relied upon by Sellers and each of
which shall be true and correct in all material respects at the time of
execution of this Agreement and as of the Closing as if then made:
(a) Authorization and Validity of Agreement. The Players Parties all
have the requisite power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. This Agreement constitutes the
valid and binding obligation of the Players Parties and is enforceable in
accordance with its terms against each of them except as such terms may be
modified by a bankruptcy court or a court of equity.
(b) No Brokerage Fees. No Broker or finder has acted for the Players
Parties in connection with this Agreement or the transactions contemplated
hereby, and no broker or finder is entitled to any brokerage or finder's fee or
other commission from or through the Players Parties in respect of this
Agreement or any such transactions.
(c) Valuation of Interests. The Players Parties have made their own
evaluation of the Interests and have not relied upon any other statements or
information of Sellers in determining such value other than the information set
forth herein and in the exhibits hereto.
(d) Financial Wherewithal. The Players Parties have the financial
capacity and ability to pay the full purchase price to Sellers.
(e) Consents and Approvals. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate, result in a breach of any of the terms or provisions of, constitute a
default under or conflict with any agreement, indenture or other instrument to
which any of Buyers is a party or by which any of them is bound, any judgment,
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decree, order or award of any court, governmental body or arbitrator applicable
to Buyers, the Partnership or the Interests, or any law, rule or regulation
applicable to Buyers, the Partnership or the Interests. Buyers have already made
all declarations, filings and registrations with, and have obtained all
consents, approvals or authorizations of, any governmental or regulatory
authority (including but not limited to the Louisiana Gaming Authorities) or any
other person (either governmental or private), required in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(f) Organization and Good Standing. PRL is a duly organized and
validly existing limited liability company, under the laws of the State of
Louisiana and PRM is a duly organized and validly existing corporation, under
the laws of the State of Nevada, each with all required and appropriate
licenses, certificates and registrations under the laws of the appropriate
jurisdictions and has all requisite power and authority to own, lease or operate
its properties and assets and to conduct its business as presently conducted.
All documents required to be filed with or delivered to the Secretary of State
of the respective jurisdictions in respect of PRL and PRM have been properly
filed or delivered, and PRL and PRM are each duly qualified to do business in
those jurisdictions in which the nature of the operations or business conducted
by it requires such qualification.
9. Closing and Transfer of Possession.
(a) Subject to the escrow provisions of subsection (c) hereof and
provided all of the conditions precedent to Buyers' and Sellers' duty to close
as hereinafter set forth have been satisfied, Closing shall take place in the
law office of Horn, Goldberg, Gorny, Daniels, Plackter & Weiss, in Atlantic
City, New Jersey at 3:00 p.m. on March 31, 1995.
(b) Physical possession of the Casino and the other personal property
of the Partnership shall be transferred by Sellers to Buyers immediately upon
the Casino's having cruised to a position outside of its current berthing site
in South Shore Harbor, beyond all obstructions located in South Shore Harbor. At
the time of the transfer of possession of the Casino, the risk of loss relative
to the Casino shall shift from Sellers to Buyers. Sellers shall cancel all
insurance policies affecting the Casino, and Buyers, through the Partnership,
shall be responsible for insuring the Casino.
(c) At Closing, the purchase price due to be paid by Buyers to
Sellers, together with all other deliveries to be made by the parties shall be
delivered to the law firm of Horn, Goldberg, Gorny, Daniels, Plackter & Weiss,
attorneys for the Players Parties (the "Escrow Agent") to be held in escrow
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subject to the terms and provisions of this subsection (c), and further subject
to the terms and provisions of Exhibit "N" to this Agreement. The Escrow Agent
shall forward to the parties the deliveries to be made under Section 6 of this
Agreement immediately upon receipt of notification from Buyers that Buyers have
taken possession of the Casino and the other personal property of the
Partnership, in accordance with subsection (b) hereinabove, with cash deliveries
to be made by wire transfer in accordance with instructions to be provided by
Sellers to the Escrow Agent at the Closing and all other deliveries to be made
by Federal Express or other recognized overnight courier or mail service.
10. Indemnification.
(a) Sellers' Indemnity. Each of Sellers and SBO, jointly, severally
and in the alternative, hereby agree to indemnify, defend and hold each of the
Players Parties harmless from and against and in respect of all losses, costs
and/or expenses (including, without limitation, diminution in their equity
interest in the Partnership or the loss or reduction in distributions from the
Partnership) incurred by any of them arising from:
(i) Any misrepresentation, breach of warranty or non-fulfillment
of any agreement or covenant on the part of Sellers under this Agreement or from
any misrepresentation in or omission from any Exhibit furnished or to be
furnished by Sellers hereunder, including therein, without limitation, the
obligations of Sellers set forth in Section 11 of this Agreement.
(ii) Any and all debts, liabilities, penalties, fines, sanctions,
assessments and obligations, without any limitation, relating to (A) the
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business and operations of the Partnership prior to the Closing and (B) the
closure of the Casino, including specifically, but without limitation, all of
the outstanding debts, liabilities and obligations of, or claims against the
Partnership as of the date thereof, whether absolute, contingent or otherwise
(the "Partnership Obligations"), any inchoate liens created by operation of
maritime law arising out of some transaction or occurrence occurring prior to
Closing, all such debts, liabilities, penalties, fines, sanctions, assessments
and obligations arising under the Contracts (defined in subsection 7(l)), under
the Labor and Employment Agreements and Plans (defined in subsection 7(m)),
under WARN (defined in subsection 7(m)) and other similar laws, or otherwise in
connection with the Pending or Threatened Litigation (defined in subsection
7(p)), and the Progressive Slot Machine Obligations, whether known or unknown
and whether existing on the date of this Agreement or the date of Closing, or
coming into existence hereafter.
(iii) Any loss, cost, claim, demand or expense which may be
incurred by the Players Parties by virtue of any claim for a fee or commission
made against any of the Players Parties by any broker or other person claiming
through Sellers.
(iv) All reasonable costs and expenses, including reasonable
attorney's fees, incurred by the Players Parties in connection with any action,
suit, proceeding, demand, assessment or judgment incident to any of the matter
pursuant to which Sellers and SBO have agreed to indemnify the Players Parties.
(b) Buyers' Indemnity. Buyers hereby agree to indemnify, defend and
hold Sellers harmless from and against and in respect of any losses incurred by
Sellers arising from:
(i) Any damages resulting from any misrepresentation, breach of
warranty or non-fulfillment of any agreement or covenant on the part of Buyers
under this Agreement.
(ii) Any debts, liabilities, penalties, fines, sanctions,
assessments and obligations relating to the business and operations of the
Partnership arising after Closing.
(iii) Any loss, cost, claim, demand or expense which may be
incurred by Sellers by virtue of any claim for a fee or commission made against
any of Sellers by any broker or other person claiming through the Players
Parties.
(iv) All reasonable costs and expenses, including reasonable
attorney's fees, incurred by Sellers in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the matters
pursuant to which Buyers have agreed to indemnify Sellers.
(c) The indemnified party shall provide the indemnifying party notice
of any such claims of liability with reasonable promptness, and the indemnifying
party, at its election, shall have the right of defense in such proceedings, by
counsel of its own choosing, at the indemnifying party's expense. The
indemnified party shall cooperate fully in all respects with the indemnifying
party in any such defense, including, without limitation, by making available to
the indemnifying party all pertinent information under the control of the
indemnified party. If the indemnifying party does not notify the indemnified
party within ten (10) days of the indemnified party's notice to the indemnifying
party of a potential claim that the indemnifying party will defend the same, or
should the indemnifying party fail to file any answer or other pleading at least
five (5) days before the same is due, the indemnified party may defend or settle
such claim or action in such manner as the indemnified party deems appropriate
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in its sole discretion, and the indemnifying party shall cooperate fully in all
respects with the indemnified party in any such defense, including, without
limitation, by making available to the indemnified party all pertinent
information under the control of the indemnifying party. If the indemnifying
party so notifies the indemnified party concurrently with the indemnifying
party's notice of election to defend, the indemnifying party may defend, but not
settle, a claim without waiving its right to assert that such claim is not
subject to the indemnity agreements in this Section 10. If the indemnifying
party elects to defend a claim, the indemnified party may, at the indemnified
party's expense, participate in such matter with counsel of the indemnified
party's own choosing.
11. Conditions Precedent to Sellers' Duty to Close.
(a) Conditions. The duty of Sellers to close the transaction
contemplated by this Agreement is subject to the following conditions precedent,
any or all of which Sellers may, at their option, elect to waive by written
agreement to do so:
(i) All of the representations and warranties by the Players
Parties contained in this Agreement shall have been true and correct in all
material respects when made, and shall be true and correct in all material
respects on and as of Closing.
(ii) All of the covenants and agreements herein on the part of
the Parties Players to be complied with or performed on or before the Closing
shall have been fully complied with and performed in all material respects.
(b) Failure of Conditions. If one or more of the conditions to
Sellers' obligations is not either performed in all material respects, satisfied
or waived in writing on or before the date set for Closing and Sellers are not
in default hereunder, then Sellers may elect, by written notice to the Players
Parties, to terminate this Agreement, in which event no party shall have any
further obligation to another in connection herewith. Nothing in this Section
shall be construed as limiting Sellers' rights or remedies at law or equity, in
the event of a default by the Players Parties.
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12. Conditions Precedent to Buyers' Duty to Close.
(a) Conditions. The duty of the Players Parties to close the
transaction contemplated by this Agreement is subject to the following
conditions precedent, any or all of which the Players Parties may, at their
option, elect to waive by written agreement to do so:
(i) All of the warranties and representations by Sellers
contained in this Agreement shall have been true and correct in all material
respects when made, and shall be true and correct in all material respects on
and as of the Closing.
(ii) All of the covenants and agreements herein on the part of
Sellers to be complied with or performed on or before the Closing shall have
been fully complied with and performed in all material respects.
(iii) The Partnership shall have all of the Federal and/or State
licenses, permits, approvals certificates and authorizations necessary for
operation of the Partnership's businesses and there shall be no material changes
therein.
(iv) Title to all of the Partnership's assets (including without
limitation the Casino) shall be good and marketable.
(v) Any person or entity that is a party to any agreement
restricting Sellers' rights to convey the Interests shall be released or waived
such rights.
(vi) Buyers and the Partnership shall have received the consent
and approval of any governmental body where the consent and approval of any such
entity to the within Agreement and the transactions described herein is required
for any reason, and all conditions to any such consent or approval shall have
been satisfied, without Buyers being required to have or incur any personal
obligations or liabilities as a condition of receiving such consent and
approval. Buyers and Sellers acknowledge that at the time of the execution of
this Agreement, Buyers and the Partnership have received the consent and
approval of all governmental bodies required for the consummation of the
transactions described herein, and that all conditions to any such consent or
approval have been satisfied, except that the approval of the State Police is
conditioned upon the Partnership's delivery of fifteen (15) days' notice of the
Partnership's intent to move the Casino from its place of docking in Orleans
Parish.
(vii) All of the Contracts and the Labor and Employment
Agreements and Plans shall have been terminated; all Partnership Obligations
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shall have been paid or otherwise satisfied; and all Pending and Threatened
Litigation shall have been settled or otherwise provided for with all
obligations of the Partnership in connection therewith paid or otherwise
satisfied.
(viii) Seller shall have caused the Casino to be moved from its
present location to a mutually acceptable location beyond all obstructions
located in South Shore Harbor for transfer of possession to the Buyers.
(b) Failure of Conditions. If one or more of the conditions to Buyers'
obligations is not either performed in all material respects, satisfied or
waived in writing on or before the date set for Closing hereunder, and the
Players Parties are not in default hereunder, then the Players Parties may
elect, by written notice to Sellers, to terminate this Agreement, in which event
no party shall have any further obligation to another in connection herewith.
Nothing in this Section shall be construed to limit any of the Players Parties'
rights or remedies at law or equity, in the event of a default by Sellers.
13. Distributions. Except as provided in Section 2 and subsection 7(g)(x)
hereof, the Partnership and Sellers agree that no distributions of any kind
shall be made by the Partnership to its partners between the date of this
Agreement and Closing.
14. Disclosure of Information. Buyers recognize and acknowledge that the
operations, procedures and management utilized by the Partnership were developed
and are owned by SBO. Additionally, the information regarding the operations,
procedures and management of the Partnership is a valuable, special and unique
asset of SBO and the Partnership. As a part of the sale of the Interests, the
information regarding the operations, procedures and management may be
implemented by Buyers in the operation of the Partnership. Without limiting the
generality of the foregoing, Sellers shall provide Buyers with original
operational blueprints of the Casino and original security and surveillance
schematics of the Casino. Buyers will not, during the term of this Agreement and
after Closing, disclose any information relating to the operations, procedures
or management of the Partnership's business or any part thereof, to any person,
firm, partnership, association or other entity, for any reason or purpose
whatsoever; provided, however, that the Partnership may disclose any information
relating to the operations, procedures or management of the Partnership's
business or any part thereof, to any Louisiana Gaming Authorities or any other
governmental authorities having jurisdiction over such matters, as such
authorities shall demand.
15. Closure of Business Operations. The Sellers shall cause the Partnership
to terminate all business operations on or before the day prior to the Closing.
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All costs and expenses in connection with the termination of operations of the
Partnership and the closure of the Casino shall be the sole responsibility of
the Sellers, notwithstanding any contrary provision of the Preliminary
Agreement.
16. Risk of Loss/Casualty. The risk of loss with respect to the assets of
the Partnership shall remain with the Sellers until the release of Escrow. In
the event of any uninsured loss or damage by fire or other casualty to the
assets of the Partnership, subsequent to the execution hereof and prior to the
release of the Escrow, exceeding FIVE HUNDRED THOUSAND ($500,000.00) DOLLARS,
the Players Parties shall have the option to terminate this Agreement. Such
option shall be exercised by the Players Parties in writing no later than thirty
(30) days after receipt by the Players Parties of written notice of such damage
or loss, which notice shall include the details thereof, including the amount of
loss and assets damaged, the amount of insurance coverage, if any, and such
other information as shall be necessary for the Players Parties to make a
determination whether to exercise this option. Failure by Sellers to give such
written notice to the Players Parties within five (5) business days after the
occurrence of such loss or damage shall be a default by Sellers in this
Agreement.
17. Survival. All terms and provisions of this Agreement, including but not
limited to the representations and warranties of the parties set forth in
Sections 7 and 8, shall survive Closing, irrespective of any presumption of law
to the contrary.
18. Default/Remedies.
(a) Sellers' Remedies. The failure of the Players Parties to complete
the transaction as contemplated hereby on or before the date herein set for
Closing, subject to the provisions of Section 12 hereof, or the failure of the
Players Parties to proceed in good faith to satisfy the conditions precedent set
forth in subsection 12(a)(vi), shall constitute a default on the part of the
Players Parties hereunder. In the event of such a default, Sellers shall have
the option to either (i) extend the date for Closing on written notice to the
Players Parties or (ii) terminate this Agreement and sue for money damages.
(b) Buyers' Remedies. The failure of Sellers to make Closing or
otherwise to perform as required of them under the terms of this Agreement shall
constitute a default. The parties agree that in the event of a default by
Sellers it will be impossible to measure the damages that will be incurred by
the Players Parties due to the loss of the business and investment opportunities
afforded to the Players Parties under the terms of this Agreement. In the event
of an actual or threatened default by Sellers, Sellers hereby waive the claim of
defense that there is an adequate remedy at law, and the Players Parties shall
be entitled to equitable relief, including the right to specific performance and
20
<PAGE>
an injunction requiring Sellers to make closing hereunder. In the event that the
Players Parties are unable to obtain specific performance by Sellers, the
Players Parties shall be entitled to such other remedies as shall be available
to them at law or in equity.
19. Confidentiality. Each of the parties hereto agrees for itself and its
respective affiliates, agents, representatives and consultants to hold in the
strictest confidence and not to disclose to any person, entity, party, firm or
corporation (other than agents or representatives of the parties who are also
bound by this Section and except as such disclosures are required in
applications or by applicable securities or gaming laws) any confidential data
of another party, whether related to the Casino or to general business matters,
which shall come into their possession or knowledge, without the other party's
prior written consent. In addition, each party agrees that it shall cause all
documents, drawings, plans or other materials developed by another party ("Owner
of the Materials") in connection with the sale of the Interests to be returned
to the Owner of the Materials in the event of termination of this Agreement and
that no party shall make use of such information in connection with the sale of
the Interests or any other undertaking without the prior express written consent
of the Owner of the Materials, which shall entail the reimbursement to the Owner
of the Materials of its costs, direct and indirect, incurred in pursuing this
Agreement.
20. Press Release. All press releases or prepared statements to the media
made by any party or their respective affiliates concerning this Agreement or
the transactions contemplated thereby shall be jointly approved in advance by
all parties with the exception of any releases required to be made by any party
or their respective affiliates pursuant to various securities laws applicable to
any party or their respective affiliates.
21. General Provisions.
(a) Any notice, communication, request, reply or advice (hereinafter
severally and collectively called "notice") in this Agreement provided for or
permitted to be given, made or directed by any party to the other must be in
writing, and may, unless otherwise in this Agreement expressly provided, be
given by personal service or by depositing the same in the United States mail,
postage prepaid, certified mail, and addressed to the party to be notified, with
return receipt requested, or by a prepaid telegram or Federal Express or other
reputable and recognized overnight delivery services, or telecopier transmittal,
addressed to the party to be notified. Notice deposited in the United States
mail in the manner hereinabove described shall be effective, unless otherwise
stated in this Agreement, from and after the expiration of two (2) days after it
21
<PAGE>
is so deposited and notice sent by (i) Federal Express or other reputable and
recognized overnight delivery service or (ii) telecopier transmittal shall be
effective on the next business day after it is sent. For purposes of notice, the
addresses and telecopier numbers of the parties shall, unless changed as herein
provided, be as follows:
If to Sellers: J. Kell Housells, III, Vice Chairman
Showboat Louisiana, Inc.
c/o Showboat Development Corp.
Ventnor Professional Campus
6601 Ventnor Avenue
Ventnor, New Jersey 08406
Telecopier No. (609) 823-7811
22
<PAGE>
With a copy to: John N. Brewer, Esquire
Kummer, Kaempfer, Bonner & Renshaw
Seventh Floor
3800 Howard Hughes Parkway
Las Vegas, Nevada 89109
Telecopier No. (702) 796-7181
If to Players Parties: Howard A. Goldberg, President
Players International, Inc.
1300 Atlantic Avenue, Suite 203
Atlantic City, New Jersey 08401
Telecopier No. (609) 340-8165
With a copy to: Michael J. Viscount, Jr., Esquire
Horn, Goldberg, Gorny, Daniels, Plackter
& Weiss
1300 Atlantic Avenue, Suite 500
Atlantic City, New Jersey 08401
Telecopier No. (609) 348-6834
However, the parties hereto and their respective heirs, successors, legal
representatives, personal representatives, executors, administrators, successors
and assigns shall have the right from time to time and at any time to specify as
their address any other address and/or telecopier numbers by at least ten (10)
days advance written notice to the other party.
(b) The captions appearing in this Agreement are inserted and included
solely for convenience and shall not be considered or given any effect in
construing this Agreement.
(c) This Agreement and the exhibits hereto embody the entire agreement
between the parties hereto relative to the subject matter hereof, and all prior
agreements and understanding with respect to the subject matter hereof,
including the terms of the Preliminary Agreement shall be merged into the terms
hereof. No variations, modifications, changes or amendments hereof shall be
binding upon any party hereto unless in writing and executed by such party, a
duly authorized officer or a duly authorized agent of the particular party.
(d) All covenants and obligations as contained within this Agreement
shall bind, extend and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, personal representatives, estates,
administrators, executors and assigns.
23
<PAGE>
(e) All personal pronouns used in this Agreement shall include the
other gender whether used in the masculine or feminine or neuter gender and the
singular shall include the plural and the plural the singular whenever and as
often as may be appropriate.
(f) This Agreement and the rights and obligations of the parties
hereto shall be interpreted, construed and enforced in accordance with the laws
of the State of Nevada without reference to its choice of law provisions. All
disputes arising under or related to this Agreement shall be resolved by
arbitration by a single arbitrator acting pursuant to the rules of the American
Arbitration Association. Any decision of such arbitrator may be enforced by the
Eighth Judicial District Court of the State of Nevada.
(g) Except as specifically provided herein, the rights and obligations
of the parties hereto are neither assignable nor delegable without the prior
written consent of the other party.
(h) This Agreement may be executed in an unlimited number of
counterparts, all of which counterparts shall together constitute one and the
same Agreement.
22. Waiver of Pre-Closing Loan. The Sellers and SBO hereby waive the
requirement under paragraph 5 of the Preliminary Agreement for Players to lend
$10,000,000.00 to the Partnership prior to the Closing.
23. Reimbursement for Slot Club Obligations. Buyers and Sellers hereby
acknowledge the existence of certain Partnership liabilities to patrons of the
Casino arising out of certain promotional programs of the Partnership related to
slot machine play (the "Slot Club Obligations"). Buyers agree to provide that
the Partnership shall continue to honor the Slot Club Obligations. SBO agrees
that it shall reimburse the Partnership for any payments and/or costs made or
incurred on account of the Slot Club Obligations. Such reimbursement shall be
made by SBO to the Partnership within thirty (30) days of SBO's receipt of the
Partnership's invoice for such payments and/or costs. Nothing contained herein
shall be construed to modify the indemnity obligations of any of the parties to
24
<PAGE>
this Agreement, and the Slot Club Obligations are acknowledged to be Partnership
Obligations for the purposes of Section 10 of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
LAKE PONTCHARTRAIN SHOWBOAT, INC.,
a Nevada corporation
ATTEST:
_______________________ By:____________________________________
Leann Schneider, Treasurer
SHOWBOAT LOUISIANA, INC.,
a Nevada corporation
ATTEST:
_______________________ By:____________________________________
Leann Schneider, Treasurer
SHOWBOAT, INC.,
a Nevada corporation
ATTEST:
_______________________ By:____________________________________
Leann Schneider, Vice President and
Chief Financial Officer
[SIGNATURES CONTINUE ON NEXT PAGE]
25
<PAGE>
PLAYERS RIVERBOAT, LLC,
a Louisiana limited liability company
By its members:
PLAYERS RIVERBOAT, INC.,
a Nevada corporation
ATTEST:
_______________________ By:____________________________________
PLAYERS RIVERBOAT MANAGEMENT, INC.,
a Nevada corporation
ATTEST:
_______________________ By:____________________________________
PLAYERS INTERNATIONAL, INC.,
a Nevada corporation
ATTEST:
_______________________ By:____________________________________
PLAYERS RIVERBOAT MANAGEMENT, INC.,
a Nevada corporation
ATTEST:
_______________________ By:____________________________________
26
<PAGE>
SCHEDULE OF EXHIBITS
A. $10,000,000.00 Promissory Note
B. Partnership Agreement and all Amendments
C. INTENTIONALLY LEFT BLANK
D. INTENTIONALLY LEFT BLANK
E. Deeds and Leases
F. Schedule of Personal Property
G. Documentation and Ownership Certificates for the Casino
H. Casino Operating Permits
I. Partnership Contracts
J. Labor and Employment Agreements and Plans
K. Pending and Threatened Litigation
L. Schedule of Partnership Insurance Policies
M. Progressive Slot Machine Obligations
N. Provisions Regarding the Escrow Agent
27
<PAGE>
AC-56729/4
6/26/95
WJD/mja
EXHIBIT "N"
CONCERNING THE ESCROW AGENT
(a) The parties hereto agree that Escrow Agent is acting hereunder as
a stakeholder only and for the convenience and at the request of the Seller and
the Buyer, and it shall be responsible only for the safe keeping and proper
disbursement of the cash funds and documents delivered to it (collectively, the
"Fund"), in accordance with the terms of this Agreement. In taking any action
hereunder, the Escrow Agent shall be entitled to rely upon any written notice,
paper or other document believed by him to be genuine and signed or presented by
the proper person, or upon any evidence deemed by it to be sufficient, and in no
event shall it be liable for any act performed or omitted to be performed by it
hereunder in the absence of gross negligence or willful misconduct. Escrow Agent
shall be under no obligation to institute or to defend any action, suit or legal
proceeding in connection herewith or to take any other action likely to involve
him in expense unless first indemnified to his satisfaction. The Escrow Agent
may consult with counsel in connection with his duties hereunder and shall be
fully protected by any action taken, suffered or permitted by him in good fait
in accordance with the advice of such counsel.
The Escrow Agent shall be permitted to continue representing the Players
Parties in connection with the Agreement and any dispute and/or subsequent court
proceedings notwithstanding its undertaking as Escrow Agent hereunder.
(b) In the event of a controversy between Seller and Buyer with
respect to any matter or thing in connection with the Fund or any term or
condition of this Agreement, or in the event that Escrow Agent should receive or
become aware of conflicting demands or claims with respect to any of such
matters, Escrow Agent shall be entitled to refuse to comply with any such demand
or claim, and in such event the Escrow Agent are hereby authorized:
(i) To keep and retain the Fund until it shall have received
written notice from the Seller and Buyer, jointly, that the controversy between
Seller and Buyer have been settled either by agreement or by final judgment or a
court of competent jurisdiction, or
(ii) To deliver the Fund to the Clerk of a court of competent
jurisdiction, whereupon the Escrow Agent shall be relieved of any further duties
or obligations under this Agreement.
(c) The Escrow Agent (or any successor) may at any time during the
term hereof resign his position hereunder by giving written notice thereof to
the other parties hereto. Such resignation shall be effective upon the
appointment of a successor reasonably acceptable to Buyer and Seller who shall
have agreed to serve pursuant to the terms hereof. Upon receipt of such a notice
of resignation, such other parties shall use their best efforts to assure the
prompt appointment of a successor.
28
<PAGE>
(d) Seller and Buyer hereby agree to indemnify, defend and hold Escrow
Agent harmless from and against any loss, cost or expense arising out of or
relating to any action taken or thing done by it in connection with this
Agreement or any failure by it to take any action required to be taken by it in
connection herewith, provided, however, that any such action or failure to act
shall have been taken or omitted in good faith, and not as a result of Escrow
Agent gross negligence or willful misconduct.
29
<PAGE>
55
EXHIBIT 21
PLAYERS INTERNATIONAL, INC.
SUBSIDIARIES OF THE COMPANY
Subsidiary State of Incorporation or
Organization
Players Lake Charles, Inc. Louisiana
Players Riverboat Management, Inc. Nevada
Players Riverboat, Inc. Nevada
Players Riverboat, LLC Louisiana
Showboat Star Partnership Louisiana
Players Nevada, Inc. Nevada
Players Mesquite Golf Club, Inc. Nevada
Players Mesquite Land, Inc. Nevada
Players Indiana, Inc. Indiana
Players Michigan City, Inc. Indiana
Players Michigan City Management, Inc. Indiana
Players Bluegrass Downs, Inc. Kentucky
River Bottom, Inc. Missouri
Players Maryland Heights, Inc. Missouri
Southern Illinois Riverboat/Casino
Cruises, Inc. Illinois
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 23886
<SECURITIES> 26446
<RECEIVABLES> 2760
<ALLOWANCES> 130
<INVENTORY> 863
<CURRENT-ASSETS> 61622
<PP&E> 128353
<DEPRECIATION> 10428
<TOTAL-ASSETS> 223790
<CURRENT-LIABILITIES> 39307
<BONDS> 8907
<COMMON> 148
0
0
<OTHER-SE> 175995
<TOTAL-LIABILITY-AND-EQUITY> 223790
<SALES> 0
<TOTAL-REVENUES> 223695
<CGS> 0
<TOTAL-COSTS> 81638
<OTHER-EXPENSES> 71508
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 694
<INCOME-PRETAX> 73470
<INCOME-TAX> 27715
<INCOME-CONTINUING> 45755
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45755
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.45
</TABLE>
