SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1997
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
(State or other jurisdiction of incorporation or organization)
95-4175832
(I.R.S. Employer Identification No.)
Suite 800, 1300 Atlantic Avenue, Atlantic City, New Jersey
(Address of principal executive offices)
08401
(Zip Code)
(609) 449-7777
(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. [ ]
As of June 20, 1997, the aggregate market value of the
registrant's Common Stock held by non-affiliates of the
registrants was not less than $88,457,180.
As of June 20, 1997, there were 31,891,248 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.
PART I
Item 1. Business
General
Players International, Inc. (the "Company") is a multi-
jurisdictional gaming company with gaming operations in Illinois,
Louisiana, Missouri, Kentucky and Nevada.
In February, 1993, the Company opened its first cruising
riverboat casino in Metropolis, Illinois (the "Metropolis
facility"). The Metropolis facility is the only riverboat casino
operation in southern Illinois. The Company holds one of only
ten statutorily authorized riverboat casino licenses in Illinois
to operate the Metropolis facility. The Metropolis facility
primarily draws patrons from Illinois, Indiana, Kentucky,
Missouri and Tennessee.
The Company also owns and operates two cruising riverboat
casinos in Lake Charles, Louisiana, the Players Lake Charles
Riverboat and the Star Riverboat (the "Lake Charles facility").
The Players Lake Charles Riverboat commenced operations in
December, 1993 while the Star Riverboat commenced operations in
April, 1995. The Company holds two of the fifteen statutorily
authorized riverboat casino licenses in Louisiana to operate the
two (2) riverboats at the Lake Charles facility. While each
riverboat is required by state law to cruise, the two riverboats
operate on staggered three hour cruise schedules. The staggered
cruise schedules allow the Company to offer patrons the
equivalent of dockside gaming since a riverboat is almost
continually available for boarding by patrons at the docking
site. The Lake Charles facility primarily draws patrons from
Houston, Texas and southwest Louisiana.
On March 11, 1997, the Company and Harrah's Entertainment,
Inc. ("Harrah's") opened, in connection with a joint venture
between the companies, a riverboat casino entertainment facility
(the "Maryland Heights facility") in Maryland Heights, Missouri,
a suburb of St. Louis. The Maryland Heights facility offers four
permanently moored, dockside riverboat casinos with a total of
approximately 120,000 square feet of gaming space, a 291 room
hotel, a 95,000 square foot entertainment facility and extensive
covered parking. The Company and Harrah's each operate two of
the four casinos at the Maryland Heights facility. The
entertainment facility offers two specialty restaurants, a
buffet, an entertainment lounge, a child care facility and retail
shops. The Company's portion of the project budget, excluding
capitalized interest, is approximately $141 million, of which
$124 million has been invested through March 31, 1997. The
Maryland Heights facility competes for patrons in the highly
competitive St. Louis metropolitan market.
The Company also owns and operates Players Bluegrass Downs
("Players Bluegrass Downs"), a thoroughbred racetrack located in
Paducah, Kentucky. The racetrack was acquired by the Company in
November, 1993. The Company holds live racing meets each Fall
and offers year-round simulcasting of thoroughbred horse racing
events.
The Company will cease operating its only land based
casino operation, Players Island Resort Casino Spa in Mesquite,
Nevada (the "Mesquite facility"), on June 30, 1997 in connection
with the Company's sale of the facility. The Company determined
to sell the Mesquite facility after experiencing significant
operating losses at the facility.
The Company's principal executive offices are located at
1300 Atlantic Avenue, Suite 800, Atlantic City, New Jersey 08401
(Telephone: 609-449-7777).
Marketing
The Company's marketing strategy focuses on middle-income
patrons who live within a 150 mile radius of each of the
Company's facilities. The Company implements this strategy
through the use of database and on-site marketing and bus
programs. 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 Metropolis facility commenced operations on February 23,
1993 and is the only riverboat casino operating in southern
Illinois. The Company holds one of only ten statutorily
authorized gaming licenses in Illinois. Under Illinois law,
licenses are renewed annually after the first three (3) years of
operation. In February, 1997, the license for Metropolis was
renewed by the Illinois Gaming Board for a one (1) year term.
The Metropolis facility offers a four deck historical
replica of a paddlewheel riverboat. The riverboat features a
fully-equipped Las Vegas style casino that offers approximately
22,000 square feet of gaming space. The casino is equipped with
895 slot machines and 51 table games for a total of approximately
1,200 gaming positions as defined by Illinois regulation.
The docking site at the Metropolis facility 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 a bar and grill style restaurant, a buffet
restaurant and meeting rooms. The dining facilities aboard the
barge have a combined seating capacity of 600 persons. The
second barge, with a total area of approximately 12,000 square
feet, contains the ticketing area, a gift shop, waiting areas,
restrooms and a VIP lounge. A third barge, with a total area of
approximately 15,000 square feet, is used as a queuing area for
patrons prior to boarding the riverboat casino. The barge is
also used for special events and promotions.
In May, 1996, a new 300 space surface riverfront parking
facility and a porte-cochere were added. The new parking
facility, which is located above the flood plain, has a major
positive impact on operations during the Fall and Spring when
high water eliminates the use of the Metropolis facility's lower
parking areas. With the addition of the new parking facility,
the Metropolis facility offers approximately 1,400 automobile and
bus parking spaces.
In October, 1996, the Company purchased an existing
restaurant barge facility for $2.5 million in anticipation of
upgrading the Metropolis facility. The Company plans to
extensively renovate the barge at a cost of approximately $3.5
million and anticipates placing it into operation during the Fall
of 1997. When renovated, the facility will have a tropical theme
and offer upgraded buffet facilities, a larger, upscale dining
facility, an expanded gift shop, a queuing area and a VIP area.
In conjunction with these facility upgrades, the Company is also
considering improved ramps, increased space for support
functions, a 10,000 square foot multipurpose activity showroom
and a larger casino vessel. These projects and plans for future
development are intended to expand capacity and strengthen the
Metropolis facility's position in response to significantly
increased competition.
The Company also holds a 12-1/2% limited partnership
interest in a joint venture which constructed a 120-room hotel
adjacent to the Metropolis facility. The hotel opened in March,
1994. The Company is entitled to a discounted rate for a
specified number of hotel 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
used for special events and promotions.
The Metropolis facility is located approximately three miles
from U.S. Interstate 24, a major highway through Illinois,
Kentucky and Tennessee. Passenger counts are higher during
warmer weather (from late Spring through early Fall) than during
the Winter months. The Company anticipates that this seasonal
passenger count trend will continue in the future.
Lake Charles Operations
The Lake Charles facility commenced operations in the City
of Lake Charles, Louisiana on December 8, 1993 with one riverboat
casino, the Players Lake Charles Riverboat. In January 1995, the
Company acquired all interests in a partnership that owned
another fully-equipped Las Vegas style riverboat casino, the Star
Riverboat, which previously operated for one and one-half years
on Lake Pontchartrain near New Orleans. The Company relocated
the Star Riverboat to Lake Charles and reopened it in April,
1995. The Company presently holds two of a current maximum of
fifteen statutorily authorized riverboat casino licenses in
Louisiana. Under Louisiana law, licenses are initially issued
for a term of five (5) years and then considered for renewal
annually thereafter. The initial Players Lake Charles Riverboat
license will expire December 6, 1998. The initial Star Riverboat
license will expire August 9, 1998.
The Players Lake Charles Riverboat and the Star Riverboat
are docked at a common docking site. The Players Lake Charles
Riverboat features a fully-equipped three deck Las Vegas style
casino that offers approximately 29,200 square feet of gaming
space. The casino is equipped with 896 slot machines and 62
table games for a total of approximately 1,330 gaming positions.
The Star Riverboat also features a fully equipped three deck Las
Vegas style casino that offers approximately 21,730 square feet
of gaming space. The casino is equipped with 733 slot machines
and 47 table games for a total of approximately 1,062 gaming
positions. Both the Players Lake Charles Riverboat and the Star
Riverboat operate staggered three-hour cruises up to 24 hours a
day. While each riverboat is required by state law to cruise,
the staggered cruise schedules allow the Company to offer patrons
the equivalent of dockside gaming since a riverboat is almost
continually available for boarding by patrons at the docking
site.
The Lake Charles facility features a Company owned land-
based 134 room hotel with meeting and entertainment space and a
60,000 square foot floating entertainment "Island." Riverboat
casino passengers walk through the Island, which is connected to
the Players Hotel by a covered walkway, to board the Players Lake
Charles Riverboat and the Star Riverboat. The Island offers a
tropical theme with lush foliage, waterfalls and rockscapes. The
Island includes a gift shop, a 238 seat upscale restaurant, a 389
seat buffet restaurant, a 145 seat sports bar, and a 50 seat
Cajun themed snack bar. The Island also offers a large queuing
area and a state-of-the-art animatronics show with a pirate theme
for guests to view on their way to board the riverboats.
The Company also maintains a permanently moored barge of
approximately 10,000 square feet adjacent to the Island. The
barge provides an employee breakroom, administrative offices and
mechanical rooms.
Parking facilities at the Lake Charles facility consists of
a 540 space, on-site multi-story parking garage and several off-
site surface parking facilities that provide approximately 1,200
additional automobile and bus parking accommodations.
The City of Lake Charles and the surrounding area has a
population of approximately 160,000 within a 25 mile radius. The
Lake Charles facility's primary market area includes population
centers in Houston, Beaumont, Galveston, Orange and Port Arthur,
Texas and Lafayette and Baton Rouge, Louisiana. U.S. Interstate
10 connects Houston, Beaumont and Lake Charles. The Lake Charles
facility is situated immediately adjacent to U.S. Interstate 10.
Since opening, the Company estimates that the Lake Charles
facility 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.
Maryland Heights Operations
On March 11, 1997, the Company and Harrah's opened a
riverboat casino entertainment facility in Maryland Heights,
Missouri, a suburb of St. Louis. The Maryland Heights facility
offers four permanently moored, dockside riverboat casinos
totaling approximately 120,000 square feet of gaming space. The
Company and Harrah's each individually manage, operate and market
two of the four permanently moored, dockside casinos of
approximately equal size pursuant to separate gaming licenses,
but share equally in the development and marketing of the hotel,
entertainment and parking facilities. The Company's two casinos,
with total gaming space of approximately 16,000 sq. ft., have a
tropical island theme with lush foliage, waterfalls, rockscape
and a 3,000 gallon salt water aquarium that also serves as a
partition wall between the Company's two casinos. The Company's
casinos, in the aggregate, offer 1,230 slot machines and 75 table
games for a total of approximately 1,680 gaming positions. The
Company's and Harrah's casinos are permanently moored to a land
based 95,000 square foot entertainment facility (the
"Entertainment Facility").
The Entertainment Facility has a turn of the century St.
Louis theme and includes retail shops, two 125 seat specialty
restaurants (the Company and Harrah's each operate one of the
specialty restaurants), a 600 seat buffet, a 125 seat
entertainment lounge, a child care facility, a 1,824 space
parking garage and 3,231 surface parking spaces. The Maryland
Heights facility also offers a 291 room hotel with 12 luxury
suites (the "Hotel").
While the Company and Harrah's were each individually
responsible for the cost to fit-out the interiors of their
respective casinos and specialty restaurants, the Company and
Harrah's shared equally in all other development costs for the
Maryland Heights facility. The Company's portion of the project
budget, excluding capitalized interest, is approximately $141
million, of which $124 million was expended through March 31,
1997. See " - Properties" for information concerning the
Company's lease at the Maryland Heights facility.
Pursuant to a separate Management Agreement, an affiliate of
Harrah's manages the Hotel and Entertainment Facility with the
exception of the Company's specialty restaurant and the retail
space. The Management Agreement has a basic term that expires on
December 31, 2005, with fourteen (14) renewal terms of five (5)
years each. The Management Agreement provides for the following
fees: a Base Management Fee equal to 3% of the Hotel Revenues;
an Incentive Management Fee which is the greater of 1% of the
hotel revenues, or 50% of operating cost savings; an Accounting
Fee of $130,000 per year, increased each year by the amount of
the consumer price index ("CPI") increase; and a Reservation Fee
of $2.50 per guest room reservation at the hotel made through the
telephone reservation system of an affiliate of Harrah's, which
fee is increased each year by the amount the CPI increases, but
not more than the prevailing charge to other participating
Harrah's affiliated hotels.
The Company maintains separate riverboat casino licenses for
each of its two casinos that are issued by the Missouri Gaming
Commission. Each license is for a one year term. Missouri
Gaming regulations limit patron gaming to $500 per two hour
cruise session. In addition, while the Company's two riverboat
casinos are permanently moored, State law requires the Company to
simulate two hour cruises. The Company and Harrah's stagger
boarding times so that one of the four riverboat casinos is
always available for boarding by patrons.
The Maryland Heights facility is strategically located to
attract patrons from a local population base of approximately 2.3
million in the greater St. Louis metropolitan region. The site
features easy accessibility, a high level of drive-by traffic,
and is located adjacent to the Riverport Amphitheater, which
currently attracts 500,000 visitors per year.
Players Bluegrass Downs Operations
Players Bluegrass Downs, a thoroughbred racetrack located in
Paducah, Kentucky, was acquired by the Company in November, 1993
and holds live racing meets each Fall as well as year-round
simulcasting of thoroughbred horse racing events. During the
year when live race meets are not scheduled, the racetrack
facilities are leased for special events and activities. During
the fourth quarter of 1997, the Company reevaluated Players
Bluegrass Downs, determined that the investment was impaired, and
wrote down the facility to a value of $475,000 (see " - Results
of Operation").
Mesquite Operations
On June 29, 1995, the Company opened Players Island Resort
Casino Spa in Mesquite, Nevada, its only land-based casino
entertainment facility. The Mesquite facility features an island
resort theme and is located approximately 75 miles from Las Vegas
on Interstate 15 between Las Vegas and Salt Lake City, Utah. The
Mesquite facility offers a 40,000 square foot casino, a 500-room
hotel, a spa and an 18-hole golf course.
On February 28, 1997, the Company entered into an Asset
Purchase Agreement with RGB, LLC ("RGB") to sell substantially
all of the assets constituting the Mesquite facility for $29
million cash and a $1.5 million promissory note. The Company sold
the Mesquite facility after experiencing significant operating
losses at the facility. The closing of the sale was structured in
two parts. At the first closing on March 18, 1997, the Company
sold for $22 million in cash, substantially all of the assets of
the Mesquite facility with the exception of gaming equipment.
Simultaneously, the Company leased back the assets in order to
continue to operate the Mesquite facility until the second
closing, scheduled to occur on June 30, 1997. At the second
closing, the Company will cease operating the Mesquite facility,
the Company's lease arrangement with RGB will terminate, RGB will
pay to the Company the remaining amount of the purchase price in
the form of cash and tender the promissory note. At that time,
the Company will transfer to RGB the gaming equipment and
substantially all other assets of the Mesquite facility not
previously sold.
Competition
The casino gaming industry includes casinos which are land-
based, dockside casinos, cruising riverboat casinos and land-
based casinos on Indian reservations. The gaming industry is
highly competitive and is composed of a large number of
companies. Numerous states have legalized gaming and several
other states are considering the legalization of gaming in
designated areas. Indian gaming on tribal land also continues to
expand. As a result of the proliferation of gaming, the
Company's operations have been adversely affected. New gaming
facilities that have opened in markets served by the Company's
facilities have diluted the market by competing for existing
patrons of the Company's facilities. The Company anticipates
this trend will continue as new competition comes on line and
existing competitors enhance their facilities. In addition, many
of the Company's direct competitors have significantly greater
resources as compared to those of the Company. Competitors with
greater resources than the Company enjoy a competitive advantage
since they have more flexibility in the manner in which they
manage, operate and expand their facilities.
The Metropolis facility's closest gaming competitor operates
in Evansville, Indiana, approximately 110 miles away. Another
competing riverboat casino operates in Caruthersville, Missouri,
which is approximately 120 miles southwest of the Metropolis
facility. The Metropolis facility faces further competition as
additional riverboats become licensed in southern Indiana and
Missouri. Metropolis also experiences significant competition
for Tennessee patrons from dockside casinos in Tunica,
Mississippi. Casinos operating in Tunica, Mississippi enjoy a
competitive advantage over the Company's Metropolis facility
since they offer permanently moored, dockside facilities while
the Company's riverboat is required by State law to cruise.
The Lake Charles facility faces direct competition from the
Isle of Capri Casino (the "Isle of Capri"), which opened with one
Las Vegas style riverboat casino on July 29, 1995 in Westlake,
Louisiana, approximately one mile from the Company's facility.
In May 1996, the Isle of Capri opened a 104,000 square foot
pavilion which offers a 450 seat buffet, a live entertainment
facility, retail operations and a 1,400 space parking garage. In
July, 1996, the Isle of Capri opened a second Las Vegas style
riverboat casino. One of the Isle of Capri's riverboat casinos
presently offers approximately 26,000 square feet of gaming space
with 860 slot machines and 40 table games while the other
riverboat casino offers approximately 28,000 square feet of
gaming space with 942 slot machines and 48 table games. A 400
room hotel is also being constructed by Isle of Capri with a
publicly announced opening date of September, 1997. Construction
of another 200 room hotel has also been announced. Additionally,
the Isle of Capri Casino has announced plans to expand its
facility to include an upscale restaurant, youth activity center,
and 300 pad RV park. Eastbound travelers from Texas and western
Louisiana on Interstate 10 are able to access the Isle of Capri
prior to reaching the Company's facility.
The Lake Charles facility also faces direct competition from
the land-based Coushatta Indian casino facility in Kinder,
Louisiana. The Coushatta facility, which opened in January of
1995 and expanded in August 1995, is a Las Vegas style casino
that currently offers approximately 71,000 square feet of gaming
space, 2,000 slot machines and 65 table games. Grand Casinos,
Inc., which manages the facility, recently opened an upscale
restaurant and has announced further expansion plans which
include an additional 27,000 square feet of gaming space, a 650
room hotel, an additional restaurant, a golf course and a 200 pad
RV park. In addition to the Coushatta facility, the Lake Charles
facility competes to a lesser degree with riverboat operators in
Baton Rouge, approximately 125 miles east of Lake Charles, the
New Orleans area, approximately 200 miles east of Lake Charles,
and the Shreveport/Bossier City area, which is approximately 180
miles north of Lake Charles. A planned land-based casino in New
Orleans may produce additional competition.
In the 1997 Regular Session of the Louisiana Legislature, a
bill was passed authorizing the operation of slot machines at
three horse racing tracks in Louisiana, including a racetrack
situated in Calcasieu Parish (the same Parish as the Company's
Lake Charles facility), Delta Downs. Eastbound travelers from
Texas and western Louisiana on Interstate 10 are able to access
Delta Downs prior to reaching either the Company's Lake Charles
facility or the Isle of Capri.
The legislation limits slot machine space at each racetrack
to 15,000 square feet. Within the gaming space, however, there
is no numerical limit on the number of slot machines that can be
permissibly installed. While the Governor has not yet signed the
bill, the Governor has openly supported the bill and has publicly
stated that he intends to sign the bill into law. If the bill is
signed by the Governor, before slot machines can be operated at
Delta Downs, both voter approval is required through a local
option referendum election in Calcasieu Parish and the passage of
companion legislation is required in the 1998 Fiscal Session of
the Louisiana Legislature to establish the tax rate to be levied
on slot machine revenues. Consequently, slot machines cannot be
permissibly operated at Delta Downs until, at the earliest, late
Spring 1998.
The Maryland Heights facility competes directly with its
joint venture partner, Harrah's, the President Riverboat
("President") in downtown St. Louis, Missouri, the Alton Belle
("Alton Belle") in Alton, Illinois, the Casino Queen ("Casino
Queen") in East St. Louis, Illinois and the St. Charles Station
("St. Charles") in St. Charles, Missouri. The Maryland Heights
facility may compete with proposed riverboat casinos in
Kimmswick, Missouri and St. Charles County, Missouri and,
potentially, additional riverboats in the St. Louis metropolitan
area to the extent that additional licenses, if any, are granted
by the Missouri Gaming Commission.
The Company's joint venture partner, Harrah's, has 1,230
slot machines and 80 table games for a total of approximately
1,710 gaming positions. The President operates a single gaming
facility with approximately 1,122 slot machines and 60 table
games for a total of approximately 1,482 gaming positions. St.
Charles' facility consists of two riverboat gaming facilities
with a total of approximately 1,811 slot machines and 85 table
games for a total of approximately 2,321 gaming positions.
Additionally, St. Charles has announced a $190 million expansion
project. Casino Queen operates a single riverboat with 966 slots
and 50 table games for a total of approximately 1,266 gaming
positions. Alton Belle has a total of 684 slots and 35 table
games for a total of approximately 894 gaming positions. As
Illinois operators, neither the Casino Queen nor the Alton Belle
are subject to the same loss limits per passenger imposed in
Missouri.
Employees
As of March 31, 1997, the Company had approximately 4,642
employees, including 758 employed in Metropolis, 1,897 employed
in Lake Charles, 875 employed in Mesquite, 38 employed at Players
Bluegrass Downs, 1,033 employed in Maryland Heights and 41
employed in the Company's corporate and administrative offices.
The Company believes its relations with its employees are
generally good.
On May 23, 1995, the Seafarers International Union ("SIU")
filed a petition for an election with the National Labor
Relations Board (the "NLRB") to represent unlicensed marine crew
members of the Players Lake Charles Riverboat and the Lake
Charles Star Riverboat at the Lake Charles complex. After a
decision on the appropriateness of the union, the NLRB conducted
an election on October 24 and 25, 1995. The election resulted in
the SIU being chosen to represent approximately 61 unlicensed
marine crew members. On May 1, 1997, the Company outsourced its
marine operations to Westbank Riverboat Services, Inc. ("WRS").
The Company had not completed the negotiation of a collective
bargaining agreement with the SIU. WRS assumed the Company's
collective bargaining obligations in connection with the
outsourcing of the marine operations.
Gaming Regulation
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 current laws regulating the
gaming industry, since in many cases these laws and the
regulatory agencies applying them are relatively new. Changes in
laws or their interpretation may result in the imposition of more
stringent, burdensome, 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 facility in
February, 1993. 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. The
Metropolis facility's license was renewed in February, 1997. All
licensees have a continuing duty to maintain suitability for
licensure.
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. The Illinois Gaming Board may revoke or
suspend licenses as the Illinois Gaming 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. The Illinois Gaming Board 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, 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, selected 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 above. 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), an 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 changes in information to the Illinois
Gaming Board 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 gaming operation 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. 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. 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 closely
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. 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. The Illinois
legislature has considered several proposals to modify the
wagering tax, some of which proposals are presently pending
before the Legislature.
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 the permission 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 may 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.
Louisiana Gaming Regulation
In July 1991, the Louisiana legislature adopted legislation
permitting riverboat casinos on certain rivers and waterways in
Louisiana (the "Riverboat Act"). In addition to riverboat
casinos, there are many other forms of legalized gaming in
Louisiana including the lottery, racetracks and video lottery
terminals ("VLTs") at various types of facilities in the state,
including bars, truckstops, racetracks and off-track betting
parlors.
The Riverboat Act authorizes the 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. Pursuant to legislation passed in a Special Session
of the Louisiana Legislature in March 1996, authority to
supervise riverboat gaming activities is vested in the Louisiana
Gaming Control Board, the successor regulatory agency to the
Louisiana Riverboat Gaming Commission. The Louisiana Gaming
Control Board, by regulation, has delegated certain
responsibilities relating to investigations, issuance and renewal
of certain licenses and permits, audits and enforcement of
Louisiana riverboat gaming laws to the Riverboat Gaming
Enforcement Division of the Louisiana State Police (the
"Louisiana Enforcement Division").
In issuing a license, the Louisiana Gaming Control Board
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 Gaming Control Board cannot 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 operation is adequate for the nature of the proposed
operation and from a source suitable and acceptable to the
Louisiana Gaming Control Board; (iii) the applicant demonstrates
a proven ability to operate a vessel of comparable size, capacity
and complexity to the proposed 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 5% 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. A subsidiary of the Company was
issued an initial operator's license by the Louisiana Enforcement
Division for the Players Lake Charles Riverboat on December 6,
1993. Another subsidiary of the Company holds an operator's
license for the Star Riverboat (which was acquired by the Company
in April 1995) issued an on August 9, 1993. The Louisiana gaming
law provides that a renewal application for each one year 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 a license or permit or an interest in a
license 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 approval. A security issued by a
corporation that holds a license must generally disclose these
restrictions. Prior approval of the Louisiana Enforcement
Division 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 Gaming Control Board
sixty days prior to the receipt by any such persons of any loans
or extensions of credit, or modifications thereof. The Louisiana
Gaming Control Board is required to investigate the reported
loan, extension of credit or modification thereof and to
determine whether an exemption exists from the requirement of
prior written approval and, if no exclusion applies, to either
approve or disapprove the transaction. If disapproved, the
transaction cannot be entered into by the licensee or Affiliated
Gaming Person. The Company is an Affiliated Gaming Person of its
Louisiana subsidiaries that are the licensees of the Players Lake
Charles Riverboat and the Star Riverboat.
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.
The Company also has paid since opening a $2.50 per
passenger admission tax to the City of Lake Charles. In 1995,
Louisiana enacted legislation authorizing the governing authority
of Calcasieu Parish to levy an additional admission fee of fifty
cents per passenger, the proceeds of which are used primarily to
fund education in the parish. This increase is applicable to the
Company's two Lake Charles riverboats. In the 1996 Special
Session of the Louisiana Legislature, legislation was enacted
providing for local option elections in November, 1996 on a
parish-by-parish basis which gave voters in communities across
the state the opportunity to decide the fate of certain forms of
gaming in their parishes. In Calcasieu Parish, where the
Company's Lake Charles facility is located, the referendum
determined whether VLTs and riverboat gaming would continue to be
permitted. In November 1996, voters in Calcasieu Parish voted
favorably to permit the continuation of both forms of gaming.
In the 1996 Special Session, legislation was also enacted
placing a constitutional amendment on the October, 1996 election
ballot to limit the expansion of gaming in Louisiana. In October
1996, voters favorably passed the constitutional amendment. The
constitutional amendment requires local option elections before
new forms of gaming can be brought into a parish. The measure
also requires a local option referendum before a riverboat can
move into a parish that has not already authorized riverboat
gaming.
In the 1997 Regular Session of the Louisiana Legislature, a
bill was passed authorizing the operation of slot machines at
three horse racing tracks in Louisiana, including a racetrack
situated in Calcasieu Parish. See " - Competition."
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 laws, regulations and supervisory procedures of the
Nevada Gaming Authorities are based upon declarations of public
policy which are concerned with, among other things: (i) the
prevention of unsavory or unsuitable persons from having a direct
or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible
accounting practices and procedures; (iii) the maintenance of
effective controls over the financial practices of licensees,
including the establishment of minimum procedures for internal
fiscal affairs and the safeguarding of assets and revenues,
providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the
prevention of cheating and fraudulent practices; and (v)
providing a source of state and local revenues through taxation
and licensing fees. Change in such laws, regulations and
procedures could have an adverse effect on the Company's gaming
operations.
The Company is registered with the Nevada Commission as a
publicly traded corporation (a "Registered Corporation") and has
been found suitable to own, through its subsidiary, Players
Holding, Inc. ("Players Holding"), the stock of Players Nevada,
Inc. ("Players Nevada"). Players Nevada is licensed by the
Nevada Gaming Authorities to conduct nonrestricted gaming
operations at the Mesquite facility and is a corporate licensee
("Corporate Licensee") under the terms of the Nevada Act. 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, Players Holding 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
are required to file applications with the Nevada Gaming
Authorities and have been required to be licensed or found
suitable by the Nevada Gaming Authorities. Officers, directors
and key employees of the Company and Players Holding who are
actively and directly involved in the activities of the Corporate
Licensee may 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.
If the Nevada Gaming Authorities were to find an officer,
director or key employee unsuitable for licensing or unsuitable
to continue having a relationship with the Company, Players
Holding or Players Nevada, the companies involved would have to
sever all relationships with such person. In addition, the
Nevada Commission may require the Company, Players Holding or
Players Nevada to terminate the employment of any person who
refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not
subject to judicial review in Nevada.
The Company, Players Holding 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
will be required to be reported to or approved by the Nevada
Commission.
If Players Nevada violates the Nevada Act the gaming
licenses it holds could be limited, conditioned, suspended or
revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, the Company, Players
Holding, 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. Further, a
supervisor could be appointed by the Nevada Commission to operate
the Mesquite facility and, under certain circumstances, earnings
generated during the supervisor's appointment (except for
reasonable rental value of the casino) could be forfeited to the
State of Nevada. 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, by-
laws, 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 is 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 the
Company, Players Holding or Players Nevada, 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, if 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, such as
the holders of the Notes, 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 way 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 to 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 is also required to render
maximum assistance to the Nevada Board, upon its request, to
determine the identities of any of its security holders. 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. However, to date, the Nevada
Commission has not imposed such a requirement on the Company.
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.
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. The Nevada Commission has
established a regulatory scheme to ameliorate the potentially
adverse effects of these business practices upon Nevada's gaming
industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming licensees and their
affiliates; (ii) preserve the beneficial aspects of conducting
business in the corporate form; and (iii) promote a neutral
environment for the orderly governance of corporate affairs.
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. On March 11, 1997, a subsidiary of the
Company received two Class B licenses in Maryland Heights to
operate its two permanently moored riverboat casinos. In
addition, Riverside Joint Venture, the joint venture between a
subsidiary of the Company and a subsidiary of Harrah's, was
issued four Class A licenses, one for each of the four riverboat
casinos permanently moored at the Maryland Heights facility.
There is no statewide numerical limit to the number of
licenses which may be granted to permit riverboat casino
operations. 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.
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.
Licensees must establish financial responsibility sufficient
to meet adequately the requirements of the proposed enterprise.
Additionally, the Missouri Gaming Commission's regulations
prohibit 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 non-gaming 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. Initial Class A and Class B licenses are granted for
a term of one year. License renewal are granted for a term of
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 horse racing, 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 original 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. To
date, no bill authorizing casino gaming has passed. Bills may be
introduced from time to time, however, 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 1997 regular
session, any such legislation will have to await the next regular
session in 1999, 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 worker's 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.
Company Repurchase Rights with Respect to Company Securities
As noted earlier, there are various regulations on the
ownership of the Company's Common Stock. The Company's Articles
of Incorporation 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 of Common Stock (or options, convertible
securities or warrants to purchase Common Stock, collectively,
together with Common Stock ("Securities")) 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 securities 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 Securities 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, or shall be grounds for
limiting the activities of such entity, such stockholder shall
divest the Securities that provide the basis for such
determination, and if such stockholder fails to divest Securities
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 Securities 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(s)
failed to divest as required by the Company's notice.
Whenever the Company has the right to acquire securities
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 securities
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 relating to
required divestiture are in addition to, and not in replacement
of, any applicable legal requirements.
The terms of the Company's Senior Notes feature certain
analogous provisions which could give rise to the obligation of
the holder to sell such Senior Notes or the right of the Company
to repurchase the Senior Notes at a price equal to the lower of
the holder's cost, the principal amount or the then current
market prices.
Paid Advertising and Marketing
The Federal Communications Commission ("FCC") prohibits
radio and television broadcasters from accepting advertising that
actively promotes gaming, although the FCC does not ban all
advertising for casino facilities. Federal regulation also
restricts the circulation of certain materials related to gaming
though the United States mail. The Company, together with
several statewide associations of broadcasters (radio and
television stations), is currently suing the FCC in order to
invalidate the current restrictions on radio and television
advertising of casinos on constitutional grounds. The matter is
currently pending decision on cross-motions for summary judgment
before the trial court.
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. See "- Gaming Regulations." The Federal laws referred
to above may also discourage ownership by stockholders who are
not citizens of the United States.
Forward-Looking Information
Certain information included in this Annual Report on Form
10-K contains, and other materials filed or to be filed by the
Company with the Securities and Exchange Commission (as well as
information included in oral statements or other written
statements made or to be made by the Company) contain or will
contain or include, forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as
amended. Such forward-looking statements address, among other
things, the effects of competition, plans for property
enhancements, capital expenditure programs and requirements,
financing sources and the effects of regulation (including gaming
licensure and regulation, state and local regulation and tax
regulation). See " - Management's Discussion and Analysis of
Operations and Financial Conditions." Such forward-looking
information is based upon management's current plans or
expectations and is subject to a number of uncertainties and
risks that could significantly affect current plans, anticipated
actions and the Company's future financial condition and results.
As a consequence, current plans, anticipated actions and future
financial condition and results may differ from those expressed
in any forward-looking statements made by or on behalf of the
Company. These uncertainties and risks include, but are not
limited to, those relating to conducting operations in an
increasingly competitive environment, conducting operations at a
newly or recently developed site or in a jurisdiction for which
gaming has recently been permitted, changes in gaming, state and
local laws and regulations (including local referenda to
terminate the authority to conduct gaming operations),
development and construction activities, leverage and debt
service requirements (including sensitivity to fluctuation in
interest rates), general economic conditions, changes in federal
or state tax laws, action taken under applications for licenses
(including renewals) and approvals under applicable laws and
regulations (including gaming laws and regulations) and the
legalization of gaming in certain jurisdictions.
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. Under a separate 20 year lease with the
City of Metropolis, the Company leases additional riverfront
property immediately adjacent to its docking facilities for
surface parking at an annual rate of $2,500. The Company also
owns several parcels of land in Metropolis, some with buildings,
aggregating approximately eight acres, and leases an additional
two acres. The owned or leased area is used primarily for
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. In March 1996, the
Company completed a two-story office facility which accommodates
the administrative staff.
The Ohio River occasionally overflows its banks at the
Metropolis facility, 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.
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 August 16, 1995, the Company
entered into an 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 Star
Riverboat (collectively, the "Property"). Under this
arrangement, the Company agreed to pay a total purchase price of
$6.7 million for the Property. On January 15, 1996, Beeber
delivered notice to the Company of its desire to exercise
Beeber's Put Right with respect to 200,000 shares of Common Stock
(i.e., $2.44 million in Common Stock at the $12.17 per share
value set forth in the Beeber Agreement). The Company delivered
these funds to Beeber on or about April 10, 1996. In January of
1996, Players and Beeber determined to delay the payment of the
balance of Beeber's Common Stock (i.e., 307,382 shares) pending
the resolution of certain issues. By letter dated October 14,
1996, Beeber agreed to waive the issuance of the remaining
307,382 shares of Common Stock, and the Company agreed to deliver
the cash value of such remaining shares (i.e., $3.74 million) on
or before January 8, 1997. In January of 1997, the Company and
Beeber entered into an agreement pursuant to which the terms of
the Company's final payment was further modified to provide: (i)
a January 1997 payment in the amount of $374,083.88; (ii) the
accrual of interest on the remaining balance (i.e. $3.37 million)
at a rate of 7% per annum; (iii) the Company's delivery of six
(6) monthly payments of principal and interest to Beeber, such
payments based on a five (5) year amortization period; and (iv) a
balloon payment of $3.08 million due to Beeber on July 8, 1997.
As additional consideration, the Company is required to continue
making certain payments to Beeber and a third party, which
payments are related to a lease agreement dated May 19, 1993
between the Company and Beeber, as amended. Under this
arrangement, the Company and such parties have entered into an
agreement, dated July 27, 1995, whereby the Company is obligated
to pay a total of $2.95 for each passenger who patronizes the
Company's Lake Charles riverboats, subject to certain conditions.
The Company has entered into a long-term lease with the
State of Louisiana in order to obtain whatever rights the State
of Louisiana may have in a strip of lakefront land adjacent to
and abutting the Property, which was previously under water, 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 has entered into
another long-term lease with the State of Louisiana for certain
waterbottoms (i.e., riparian rights) adjoining the Lakefront
Strip and underlying the Island. In April, 1997, the Company
entered into a three (3) year commercial lease commencing August
1, 1997 for office and warehouse space to accommodate the
administrative staff.
Mesquite, Nevada: On February 28, 1997, the Company entered
into an Asset Purchase Agreement with RGB to sell substantially
all of the assets constituting the Mesquite facility, including
the real estate assets consisting of a 45 acre parcel and
improvement situated thereon for $29 million cash and a $1.5
million promissory note. The closing of the sale was structured
in two parts. At the first closing on March 18, 1997, the
Company sold for $22 million in cash, substantially all of the
assets of the Mesquite facility with the exception of gaming
equipment. On March 18, 1997, the Company also assigned a lease
for land adjacent to the Mesquite facility, together with
irrigation water rights for such land, on which the Company
developed an 18-hole golf course, upon which the landlord
retained rights to develop a golf community housing development
Simultaneously, the Company leased back the assets in order to
continue to operate the Mesquite facility until the second
closing, scheduled to occur on June 30, 1997. At the second
closing the Company will cease operating the Mesquite facility,
the Company's lease arrangement with RGB will terminate, RGB will
pay to the Company the remaining amount of the purchase price,
and the Company will transfer to RGB the gaming equipment and
substantially all other assets of the Mesquite facility not
previously sold.
Maryland Heights, Missouri: On November 2, 1995, the
Company entered an agreement with Harrah's to form a joint
venture and co-develop the Maryland Heights facility on an
approximate 215 acre site in Maryland Heights, Missouri. An
affiliate of Harrah's owns the property underlying the Maryland
Heights facility. Each of the Company and Harrah's have an
eighty (80) year lease with the Harrah's affiliate for the
property underlying their respective casinos. The leases for the
Company and Harrah's are substantially identical, except that the
Company pays rent and Harrah's does not. The Company's rent
consists of a percentage rent equal to the following specified
percentages multiplied by the relevant specified incremental
levels of annual net gaming revenues earned at the Company's
Maryland Heights complex: 2% times annual net gaming revenue
between zero and $50 million, 3% times annual net gaming revenue
between $50 million and $100 million, and 4% times annual net
gaming revenue in excess of $100 million.
Pursuant to a separate Management Agreement, a Harrah's
affiliate manages the Hotel and Entertainment Facility except for
the Company's specialty restaurant and retail operations The
Management Agreement has a basic term that expires on December
31, 2005, with fourteen five (5) year renewal options. The
Management Agreement provides for the following fees: a Base
Management Fee equal to 3% of the Hotel Revenues; an Incentive
Management Fee which is the greater of 1% of the Hotel Revenues,
or 50% of operating cost savings; an Accounting Fee of $130,000
per year, increased each year by the amount the consumer price
index ("CPI") increases; and a Reservation Fee of $2.50 per guest
room reservation at the hotel made through the telephone
reservation system of an affiliate of Harrah's, which fee is
increased each year by the amount the CPI increases, but not more
than the prevailing charge to other participating Harrah's
affiliated hotels. See " - Maryland Heights Operations."
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. The racetrack is
approximately ten miles from the Company's Metropolis facility.
The next closest Kentucky racetrack to the Metropolis facility is
Ellis Park, which is approximately 100 miles from each of Paducah
and Metropolis. Players Bluegrass Downs consists of
approximately 69.6 acres. The Company owns 58.3 acres and leases
the remaining 11.3 acres. Players Bluegrass Downs includes a 5/8
mile oval racetrack, an enclosed 17,000 square foot clubhouse
housing dining and wagering facilities, administrative areas,
barns and related buildings that can accommodate 725 horses, and
a parking area for more than 1,400 cars.
License with Merv Griffin and The Griffin Group
On December 31, 1996, a license (the "Griffin License")
expired between the Company and The Griffin Group, a company
controlled by Mr. Merv Griffin, a major stockholder of the
Company, under which Mr. Griffin acted as the public
representative for all of the Company's riverboat and dockside
casinos. In addition, Mr. Griffin provided other services,
principally of a promotional nature. The Company's right to Mr.
Griffin's services was exclusive in the riverboat and dockside
casino industry, with certain exceptions related to Mr. Griffin's
other casino interests.
In consideration of Mr. Griffin's services under the Griffin
License, the Company, in 1992, issued to The Griffin Group
warrants to purchase 2.1 million shares of Common Stock at an
exercise price of $2.67 per share (on a split-adjusted basis).
The warrants were exercised in November and December, 1996. In
addition, the Griffin License required the Company to pay annual
fees to The Griffin Group for each riverboat casino facility tied
to the respective casino's earnings fiscal year before
depreciation, interest and taxes ("EBDIT") for the year. The fee
was not payable with respect to the Metropolis facility and the
Company's original riverboat at the Lake Charles facility, the
Players Lake Charles Riverboat, through December 31, 1996. The
Griffin Group was also entitled to reimbursement of certain
expenses and indemnification against certain claims. Mr. Griffin
was also entitled to additional compensation, as negotiated in
good faith, if he hosted, produced or performed in any shows at a
Company casino.
Subsequent to the end of fiscal year 1996, the Company and
The Griffin Group entered into an agreement to modify the Griffin
License to reflect the extension of its terms to the Company's
second riverboat casino in Lake Charles, the Star Riverboat, and
its land-based casino in Mesquite effective as of the opening of
each facility. The EBDIT fees that would have been payable with
respect to these two additional facilities were replaced with one
lump-sum payment of approximately $300,000 for Mr. Griffin's
services at these facilities through the period ending December
31, 1996. This negotiated fee has not yet been paid by the
Company.
Item 3. Legal Proceedings
Poulos, Ahern and Schreier 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 attorney's 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. The defendants filed
various motions seeking dismissal of the action.
On or about October 27, 1995 the Company was served with a
purported class action captioned Schreier, et al. v Players
International, et al. in the United States District Court for the
District of Nevada which is essentially identical to the Poulos
and Ahern litigation, except for certain variations in the
definition of the purported class. The matter has also been
consolidated with the Poulos and Ahern litigation.
On April 17, 1996, the Court dismissed plaintiffs' Complaint
without prejudice for failure to plead their claims with
specificity and dismissed defendants' remaining substantive
motions as moot. The Court permitted plaintiffs to file an
Amended Complaint. The matter is currently in the discovery
stage, after which substantive motions for dismissal will be
filed by the defendants. The Company believes that the
plaintiffs' 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.
J.A. Miller, et al. v. Showboat Star Partnership, et al.
Showboat Star Partnership, a subsidiary of the Company, was
served with a petition captioned J.A. Miller, et al. v. Showboat
Star Partnership, et al. on or about February 27, 1997, Docket
No. 10-14544, in the 38th Judicial District Court, Parish of
Cameron, State of Louisiana. The plaintiffs, a group of oyster
fisherman, allege in the petition that on or about February 2,
1997, the Star Riverboat discharged raw sewage and other
hazardous and toxic substances from the bilge of the vessel into
Lake Charles. Plaintiffs further allege that since 1994 the Star
Riverboat and the Players Lake Charles Riverboat have discharged
raw sewage and other hazardous and toxic substances into Lake
Charles which is part of the Calcasieu Estuary. Plaintiffs claim
that alleged acts of the Company have resulted in great damage to
natural oyster beds forty-three (43) miles down river in Cameron
Parish, resulting in oysters situated thereon to become dangerous
and unfit for human consumption and/or preventing the oyster
fishermen from harvesting said oysters. The oyster fishermen are
claiming both compensatory and punitive damages. The matter is
in the early stages of litigation. The Company has filed several
motions in response to the petition including motions to dismiss
the action. The Company intends to vigorously defend this
action.
W. Todd Akin, et al. v. Missouri Gaming Commission
The matter of W. Todd Akin et al. v. Missouri Gaming
Commission was filed in the Circuit Court of Cole County in the
fall of 1996. While none of the Missouri licensees or applicants
was named in the suit, Players MH, L.P., a subsidiary of the
Company and Harrah's Maryland Heights Corporation, both 50%
partners in the Riverside Joint Venture, and the Missouri
Riverboat Gaming Association, together with the City of Maryland
Heights, have intervened in order to protect their respective
interests. The suit seeks a judicial declaration that the
Missouri Riverboat Gaming Act is unconstitutional because it
permits facilities (such as the Company/Harrah's facility in
Maryland Heights) to be located upon artificial basins fed by
the Missouri River. The statute was found constitutional and the
suit was dismissed in its entirety on the merits by the trial
court in December, 1996. That dismissal was appealed directly to
the Missouri Supreme Court by the Plaintiffs in January, 1997.
Certain briefs have been filed, and once all briefs are all
filed, a date for argument will be set before the Supreme Court.
A ruling on the appeal is not expected for some time.
Item 4. Directors and Executive Officers of the Company
During the fourth quarter ended March 31, 1997, no matter
was submitted to a vote of the Company's stockholders. The
directors and executive officers of the Company are as follows:
Name Age Since Present Position With the
Company
Edward Fishman 54 1985 Chairman of the Board of
Directors
Howard Goldberg 52 1986 President, Chief Executive
Officer and Director
Thomas Gallagher 53 1992 Director
Marshall S. 58 1989 Director
Geller
Lee Seidler 62 1987 Director
Charles Masson 44 1996 Director
Earl Webb 41 1996 Director
Lawrence Cohen 39 1996 Director
Peter J. Aranow 51 - Executive Vice President,
Treasurer and Secretary
John Groom 52 - Executive Vice President and
Chief Operating Officer
Henry M. 50 - Senior Vice President and
Chief
Applegate, III Financial Officer
Patrick H. 35 - Vice President and General
Madamba, Jr. Counsel
Edward Fishman has served as Chairman of the Board of the
Company since 1985. He served as Chief Executive Officer from
1985 until December 1995 and served as President during May 1993.
Prior to his retirement as an active Company employee in
September 1996, his principal activities for the Company related
to marketing, long-range development and strategic planning. He
has 18 years of marketing experience in the casino industry and
he has served as a marketing and strategic planning consultant to
casinos throughout the world.
Howard Goldberg became President and Chief Operating Officer
of the Company in May 1993, and then became Chief Executive
Officer in December 1995. Prior to joining the Company, he was
the managing shareholder practicing law in the Atlantic City, New
Jersey law firm of Horn, Goldberg, Gorny, Plackter, Weiss &
Perskie ("Horn, Goldberg"), which has represented the company
since its inception. Since the advent of casino gaming in
Atlantic City, Mr. Goldberg specialized in representing casinos
in New Jersey and other jurisdictions for development and
regulatory matters. Mr. Goldberg's name remains a part of the
firm name of Horn, Goldberg, but he does not currently engage in
any firm-related activities or matters. The amount of any
payments due him from the firm is not affected by or dependent
upon fees paid by the Company to Horn, Goldberg.
Thomas E. Gallagher has been President and Chief Executive
Officer of The Griffin Group since April 1992. Since November 1,
1993 until December, 1996, he served as a director, and from May,
1995 to December, 1996, he served as President and Chief
Executive Officer of Griffin Gaming & Entertainment, Inc.
(formerly Resorts International, Inc.) ("GG&E"). For the
preceding 15 years, he was a partner in the law firm of Gibson,
Dunn & Crutcher. Effective July 1, 1997, Mr. Gallagher will
leave The Griffin Group to become Executive Vice President and
General Counsel of Hilton Hotels Corporation.
Marshall S. Geller is the Chairman, Chief Executive Officer
and founding partner of Geller & Friend Capital Partners, Inc., a
merchant banking investment company. He was formerly interim
President and Chief Operating Officer of the Company from
November, 1992 through April, 1993 and now serves as a member of
the Compensation Committee, of which he was Chairman from
September, 1995 to September, 1996. From 1991 through 1995, Mr.
Geller was the Senior Managing Partner and founder of Golenberg &
Geller, Inc., a merchant banking investment company. Mr. Geller
served as Vice Chairman of Gruntal & Co. Inc., an investment
banking firm, from 1988 to 1990. From 1967 until 1988, he was a
Senior Managing Director of Bear Stearns & Co. Inc., an
investment banking firm ("Bear Stearns"). He is currently a
director, and was formerly the interim Co-Chairman of Hexcel
Corporation. Mr. Geller is a director of Value Vision
International, Inc. and serves as Chairman of its Investment
Committee. He also serves on the Boards of Ballantyne of Omaha,
Inc., Styles-on-Video, Inc., Dycam, Inc. and Cabletel
Communications Corporation. Mr. Geller is a member of the
Capital Company Committee.
Lee Seidler is a private investor. He is affiliated with
Bear Stearns as Managing Director Emeritus. From 1981 to 1989,
he was a Senior Managing Director of Bear Stearns. He is a
director of Synthetic Industries, Inc., The Shubert Organization,
Inc. and The Shubert Foundation. Mr. Seidler is the Chairman of
the Company's Audit Committee.
Lawrence Cohen will be named President and Chief Executive
Officer of the Griffin Group on July 1, 1997. From 1988 to June,
1997, he served as Executive Vice President and Chief Financial
Officer of the Griffin Group. From 1986 to 1988, he was
Assistant Corporate Controller of Columbia Pictures
Entertainment, Inc. Prior to 1986, Mr. Cohen was with the
accounting firm of Paneth, Haber & Zimmerman. He also served as
a Director of Resorts International, Hotel Inc. from 1994 to
December, 1996. From 1994 until July, 1996, Mr. Cohen served as
a Director of Liberty Broadcasting, Inc., a privately held
broadcasting company. Mr. Cohen is a member of the Company's
Audit and Compensation Committees.
Earl E. Webb is the head of LaSalle Partners' Investment
Banking Group, which provides real estate acquisition,
disposition and financing services to clients that include
domestic and foreign corporations, pension funds, developers and
financial institutions. He serves on the Board of Directors of
LaSalle Partners and as a member of its management. Mr. Webb
serves as the Chairman of the Compensation Committee.
Charles M. Masson is an independent consultant and has been
President of McCloud Partners, a private advisory firm in New
York City since 1993. He served as the Chairman of the Board of
Directors of Cadillac Fairview Corporation Limited, a real estate
management and development company from September, 1994 through
August, 1995; as a director of Salomon Brothers Inc. from 1991
through May, 1993, and as Vice President of Salomon Brothers,
Inc. from 1990 through 1993. Mr. Masson served as a director of
GG&E from November, 1993 until December, 1996. He is also a
director of Color Tile, Inc.
Peter J. Aranow joined the Company as an Executive Vice
President in May, 1993, became Secretary in September, 1993 and
Treasurer in March, 1996. Mr. Aranow also served as Chief
Financial Officer of the Company from May, 1993 until March,
1996. From 1977 to May 1993, he was a Senior Managing Director
in the investment banking department of Bear Stearns specializing
in the gaming industry.
John Groom joined the Company as Executive Vice President,
Operations in January, 1996 and became Chief Operating Office of
the Company in September, 1996. Mr. Groom has held a number of
executive positions in the gaming industry including the Caesars
organization, serving as Senior Vice President of Caesars
Atlantic City from May, 1979 through June, 1993.
Henry M. Applegate, III joined the Company as Senior Vice
President and Chief Financial Officer in March, 1996. Mr.
Applegate previously served as Senior Vice President and
Controller of Mirage Resorts, Inc. from September, 1992 until
January, 1996. From January, 1990 until August, 1992, Mr.
Applegate served as Senior Vice President and Chief Operating
Officer of Bally's Casino Resort in Reno, Nevada.
Patrick H. Madamba, Jr. was appointed Vice President and
General Counsel to the Company on June 10, 1997. Mr. Madamba
joined the Company in January, 1995 as Vice President and
Associate General Counsel. From May, 1988 through January, 1995,
he was associated with the law firm of Horn, Goldberg. From 1985
through 1988, he held various positions at the Claridge Casino
Hotel in Atlantic City, New Jersey, including the position of
Regulatory Affairs Manager.
Howard Goldberg and Lee Seidler are brothers-in-law.
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 1996
First Quarter 22-2/3 18-3/4
Second Quarter 22-1/4 13-1/8
Third Quarter 14-3/8 10-11/16
Fourth Quarter 11-1/4 8-3/16
Fiscal 1997
First Quarter 12-1/8 9-1/8
Second Quarter 10-1/4 6-1/16
Third Quarter 7-13/16 5-1/8
Fourth Quarter 6-1/8 4-5/8
Fiscal 1998
First Quarter (through June 4-9/16 3
20, 1997)
The last reported sales price of the Common Stock on the
Nasdaq
National Market on June 20, 1997 was 3-7/16 per share.There were
approximately 549 holders of record of the Company's Common Stock
as
of June 20, 1997.
The Company has never declared or paid cash dividends on its
Common Stock. Under the terms of the covenants of its Senior
Notes and its Credit Line, the Company cannot pay cash dividends
to the holders of its Common Stock. The Company presently
intends to retain earnings to finance the operation and expansion
of its business. See " Business Gaming Regulation" and "Company
Repurchase Rights with Respect to Securities" with regard to
certain regulations and provisions affecting the Company's
securities.
On January 29, 1997, the Company announced that its Board
of Directors has approved the adoption of a Stockholders' Rights
Plan, subject to the receipt of necessary gaming approvals. The
Plan is designed to ensure that all stockholders of the Company
receive fair value for their Common Shares in the event of any
proposed takeover and to guard against the use of partial tender
offers or other coercive tactics to gain control of the Company
without offering fair value to stockholders.
Item 6. Selected Consolidated Financial Data
Selected consolidated financial data for the years ended
March
31, 1997, 1996, 1995 and 1994 are presented below.
1997 1996 1995
1994
(in thousands, except per share
data)
Operations Data:
Total revenues
291,210 291,395 223,695
107,082
Net income (loss)
(46,298) 22,320 45,755
20,952
Earnings per Common Share Assuming
Full Dilution:
Net income (loss)
(1.56) .70 1.45
.72
Balance Sheet Data:
Cash, cash equivalents and
marketable securities, net 20,567 23,247 50,332
77,546
Total assets 421,289 413,432 223,790
138,565
Long term debt, including
current portion 196,000 153,000 8,907
5,865
Total stockholders' equity
155,881 193,627 176,143
115,844
Selected Quarterly Financial Information (Unaudited)
Set forth below is selected financial information for the
last
eight fiscal quarters. In management's opinion, the results
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.
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
(in thousands, except per share data)
Fiscal 1997
Casino Revenues:
Lake Charles 47,348 41,407 33,341 36,943
159,039
Metropolis 19,152 20,385 18,976 17,860
76,373
Mesquite 5,752 5,468 5,788 6,364
23,372
Maryland Heights - - - 3,876
3,876
72,252 67,260 58,105 65,043
262,660
Impairment and write - - - 7,357
7,357
down of assets
Loss on sale of Mesquite - - - 57,397
57,397
property
Restructuring Charge - 9,007 - -
9,007
Adjusted EBITDA (1) 16,870 12,292 7,754 8,923
45,839
Income (loss) before
other income (expense)
and provision for
income taxes 11,572 (2,687) (1,152) (64,002)
(56,269)
Net income (loss)
4,762 (3,843) (3,105) (44,112)
(46,298)
Earnings (loss) per
common share -
assuming full dilution .15 (.12) (.10) (1.49)
(1.56)
Fiscal 1996
Casino Revenues:
Lake Charles 43,448 44,869 39,946 42,415 170,678
Metropolis 19,596 23,367 21,079 18,149 82,191
Mesquite 66 5,507 5,369 5,928 16,870
63,110 73,743 66,394 66,492 $269,739
Adjusted EBITDA (1) 22,372 20,824 14,431 11,808 69,435
Income before other
income (expense)
and provision for
income taxes 14,105 13,682 8,152 7,932 43,871
Net income 8,018 7,229 3,312 3,761 22,320
Earnings per common
share-assuming
full dilution .25 .22 .10 .13 .70
(1) Represents earnings, before interest income (expense),
provision for income taxes, depreciation and amortization, pre-
opening expenses, impairment and write-down of assets, loss on
sale of Mesquite property, restructuring charge and other
income. Adjusted earnings before interest, taxes, depreciation,
and amortization ("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 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 Results of
Operations and Financial Condition
The following discussion and analysis provides information
which management believes is relevant to an assessment and
understanding of the consolidated results of operations and
financial condition of the Company and its subsidiaries. The
Company owns and operates gaming, resort and entertainment
facilities. These include one (1) riverboat casino in Illinois
(Metropolis); two (2) riverboat casinos in Louisiana (Lake
Charles); and two (2) permanently moored dockside riverboat
casinos in Missouri (Maryland Heights). Maryland Heights opened
on March 11, 1997. The Company sold the majority of the non-
gaming assets of Mesquite, the land-based casino resort in
Mesquite, Nevada on March 18, 1997, but will continue to operate
this facility until June 30, 1997. See " - Business - Mesquite
Operations." The Company also owns and operates Players
Bluegrass Downs, a thoroughbred racetrack in Paducah, Kentucky.
This discussion and analysis contains "forward-looking
statements" within the meaning of Section 21E of the Securities
and Exchange Act of 1934, as amended and Section 27A of the
Securities Act of 1933, as amended. Such forward-looking
statements are subject to risks, uncertainties and other factors
that could cause actual results to differ materially, as
discussed in "Business Forward-Looking Information" and
"Liquidity and Capital Resources" below.
Results of Operations
The following table sets forth summary operating information
for the Company for the years ended March 31, 1997, 1996 and
1995:
Decreases in casino revenues in Metropolis and Lake Charles
in 1997 as compared to 1996, were primarily the result of
additional competition, although Metropolis' business was also
adversely impacted in March, 1997 by a flood along the Ohio
river. A competitor of Metropolis, located in Evansville,
Indiana which commenced operations in December, 1995,
significantly upgraded its riverboat and land based casino
complex during 1997. The upgrades, which became operational in
December, 1996, included the addition of a hotel and a large
parking garage. In addition, a large casino resort in Tunica,
Mississippi, which opened in June, 1996, actively sought
customers in the southern Illinois and western Kentucky areas in
which the Company operates. In Lake Charles, a competitor opened
an additional riverboat in July, 1996. Whereas through June,
1996 the Company operated two (of a total of three) licensed
riverboats in Lake Charles constituting approximately 67% of
available gaming capacity, it now operates two of four licensed
riverboats, or approximately 50% of available gaming capacity.
The additional competition resulted in both lower passenger
counts and volumes of play in both Metropolis and Lake Charles.
To counter the capacity dilution and additional competition for
patrons, the house advantages on both table games and slot
machines were reduced. Thus, revenues were negatively affected
by both less play and lower hold percentages on reduced volume.
Mesquite operated for the full year in 1997 versus
approximately nine (9) months in 1996 and casino revenues
increased proportionately. Non-casino revenues in Mesquite also
increased in 1997 as a result of the opening of an 18-hole golf
course in October, 1996.
Maryland Heights opened on March 11, 1997, and thus
contributed revenues for the three weeks ended March 31, 1997.
The increase in both casino and total revenues in 1996
compared to 1995 reflects the openings by the Company of a second
riverboat casino in Lake Charles in April, 1995 and a land-based
casino resort in Mesquite in June, 1995, and replacement of the
original Metropolis riverboat with one having more gaming
capacity in November, 1995.
The decreases in operating income in Metropolis and Lake
Charles in 1997 as compared to 1996 were principally due to
decreased casino revenue coupled with additional spending on
advertising, marketing, promotions and entertainment. Such
expenditures increased by approximately 20% in Metropolis and 29%
in Lake Charles in 1997 from 1996. Lake Charles non-marketing
related operating expenses were also approximately 10% higher in
1997 than in 1996, due to a full year of operation of an expanded
facility, including the Players "Island" entertainment and dining
barge which opened in February, 1996.
Mesquite's operating loss was reduced in 1997. It operated
for the entire year compared to only nine (9) months in 1996, and
an 18-hole golf course was opened at the resort in October 1996.
Income from the golf course and resultant increased hotel
occupancy and average room rate, reduced the overall operating
loss.
Maryland Heights' 1997 operating loss includes the Company's
casino operations and pre-opening costs together with the
Company's 50% share in the operations of the joint venture as
follows:
In 1995, the Company contributed land with a carrying value
of $4,945,000 to the Maryland Heights joint venture. The land
was originally purchased as a potential gaming site for the
Company. In the fourth quarter of 1997, an audit of the joint
venture was completed which included an appraisal of the land
determining its fair market value to be $930,000. This value was
used as the basis for recording the contribution of the land in
the joint venture records. As a result, the Company reduced its
investment in the joint venture by $4,014,000 in the fourth
quarter of 1997. The reduction in value of the land by the joint
venture did not affect the 50% interest the Company holds in the
joint venture.
During the fourth quarter of 1997, the Company reevaluated
its decision to remain in the Mesquite market due primarily to
continuing losses at that facility and as a result, entered into
an Asset Purchase Agreement in February, 1997 to sell
substantially all of the Mesquite operating assets to RGB, LLC
("RGB"). Due to the need for RGB to be licensed by the State of
Nevada to operate the property as a gaming establishment, it was
agreed that the sale would be consummated in two parts. The first
part, effective March 18, 1997, involved the transfer of most of
the real property, inventory and non-gaming equipment for $22
million in cash. The second part, scheduled to close on June 30,
1997, will include the gaming equipment and the remaining
furniture, equipment and other assets as defined in the
agreement, for $7 million in cash and a two-year promissory note
for $1.5 million. The Company will continue to operate the
facility through the date of the second closing pursuant to a
sale/lease-back agreement. The excess of the net book value of
the assets sold, plus related professional fees, severance and
other closing costs, over total consideration was $57.4 million.
Effective April 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, ("SFAS 121") Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of. During the fourth quarter of 1997, the
Company re-evaluated its investment in Players Bluegrass Downs
and committed to a plan to remove from service and replace the
entertainment and dining barge utilized by Metropolis. Prior to
and since the Company's acquisition of Players Bluegrass Downs in
1993, the State of Kentucky has considered a variety of proposals
to expand the types of gaming allowed in the state. Such
proposals included allowing the operators of licensed racetracks
to operate electronic gaming devices on-site. The Company
originally acquired Players Bluegrass Downs for its strategic and
development potential if suitable enabling legislation were to be
signed into law. The most recent legislative session concluded
without any such legislation being enacted. The Company has
incurred losses operating Players Bluegrass Downs since its
acquisition and believes that in the absence of additional forms
of gaming at the facility operating losses will continue. As a
result, the Company has determined that its investment in
Bluegrass Downs is impaired. In accordance with SFAS 121,
impairment losses for Players Bluegrass Downs and the Metropolis
barge totaling $3.3 million were recorded in the year ended March
31, 1997.
Corporate and other non-operating costs decreased in 1997
versus 1996 principally due to the curtailment of development
activities with a concomitant decline in legal, consulting and
other professional fees, travel and personnel relocation
expenses. This was partially offset by the write-off of $2.7
million of unamortized loan costs related to the original Bank
Credit Facility. See "Liquidity and Capital Resources."
The restructuring charge in 1997 reflects the Company's
decision to significantly reduce its pursuit of development
opportunities in new or emerging jurisdictions and instead
concentrate on improving its existing operations. This resulted
in the sale of assets used in development activities or held for
future development and a significant downsizing of management and
staff. The non-recurring charge consists of the net loss on
disposal of assets and the cost of employee severance
arrangements.
In July, 1995, the first competing riverboat in Lake Charles
opened and the Coushatta Indian tribe's land-based casino,
located approximately 45 minutes away, was expanded. To compete
with the additional gaming capacity, the Company increased its
spending on promotional allowances, advertising and marketing and
made significant capital improvements to the Lake Charles
facility (see "Investments, Divestitures and Capital
Expenditures"). The decrease in operating income in Lake Charles
in 1996 as compared to 1995, was due to the increased marketing
related expenditures and facility operating expense and
depreciation.
The operating loss in Mesquite in 1996 was due to poor
operating results at the facility which resulted in a significant
shortfall in actual versus projected casino revenues. The
increase in Corporate and other non-operating costs in 1996
versus 1995 was due to increased pre-opening, development and
administrative costs. During 1996, the Star Riverboat in Lake
Charles was brought on-line, the Players Hotel was purchased and
the entertainment, dining barge and parking garage were
constructed and opened. In addition, the Mesquite facility was
completed and opened and construction commenced in Maryland
Heights.
Capitalized interest totaled $6.7 million in 1997 and $3.3
million in 1996. Non-capitalized interest expense, net of
interest income, increased in 1997 versus 1996 as a result of
additional borrowings under the bank credit facility and the
liquidation of all remaining marketable securities to fund the
capital investment required in Maryland Heights. Non-capitalized
interest expense increased in 1996 versus 1995 primarily due to
the issuance of the Senior Notes in April 1995. Interest income
increased in 1996 versus 1995 as a result of the short term
investment of the proceeds of the Senior Note issuance.
Investments, Divestitures and Capital Expenditures
On March 11, 1997 the Company opened Maryland Heights.
Constructed by a joint venture with Harrah's, the project
consists of four (4) permanently moored, dockside riverboat
casinos on barges, two for each venture partner, with a total of
120,000 square feet of casino space, connected via a 350,000
square foot land-based pavilion. Each venture partner was
responsible for furnishing and equipping, and operates its own
casinos and specialty restaurant, while the joint venture was
responsible for building and equipping, and operates the common
areas of the project. These include the turn-of the-century
themed pavilion, the two specialty restaurants, a 600 seat
buffet, a 291 room hotel, a variety of retail stores, a child
care facility, 10,000 square feet of convention/meeting space, a
9,000 square foot sports and entertainment lounge and other
attractions. The Company's share of the total project cost,
excluding capitalized interest, approximates $141 million, of
which $124 million had been expended as of March 31, 1997.
The Company's balance sheet at March 31, 1997 versus March
31, 1996, reflects changes principally from the capital
expenditures in Maryland Heights and additional investments in
the Maryland Heights joint venture, the associated increase in
bank debt and the sale of Mesquite in March, 1997. The balance
sheet at March 31, 1996 versus March 31, 1995 reflects the
issuance of $150 million of Senior Notes, the proceeds of which
were the principal source of funds for the completion of
Mesquite, which opened in late June 1995, and a $150 million
expansion program in Lake Charles which commenced in January,
1995. The Lake Charles expansion plan was completed in February,
1996. The expansion included the acquisition of the contiguous
land-based Players Hotel, surrounding land and the Star
Riverboat, construction of a parking garage and the 60,000 square
foot entertainment/dining "Island".
The following table summarizes the above and all other
sources and uses of capital for the past three years:
Liquidity and Capital Resources
In August, 1995, the Company entered into a $120 million
revolving credit agreement ("Credit Facility") with a consortium
of banks ("Banks"). The Credit Facility contained restrictive
covenants including minimum rolling four (4) quarters' EBITDA, as
defined in the Credit Facility. As of September 30, 1996, the
Company advised the Banks of an event of default with respect to
the minimum EBITDA covenant for the four quarters then ended.
Following a waiver from the Banks of the event of default the
Company and the Banks reached an agreement that revised the terms
of the Credit Facility (the "Revised Credit Facility") which
included an increase in the loan interest rate. Certain of the
terms of the Revised Credit Facility were further amended in
March 1997 in connection with the sale of Mesquite. The total
credit line was reduced from $120 million to $69.5 million as of
the date of the first closing on the Mesquite sale and will be
further reduced to $60 million on June 30, 1997, $52.5 million on
September 30, 1997, $45 million on December 31, 1997, and $37.5
million on March 31, 1998. The remaining commitment of $37.5
million will expire on June 30, 1998. At March 31, 1997, $46
million was outstanding under the Revised Credit Facility at an
interest rate of prime plus 2.5%. The interest rate will
increase by 0.5% per quarter beginning October 1, 1997.
In addition to a rolling four quarters minimum EBITDA
requirement, the Revised Credit Agreement added minimum
quarterly (non-cumulative) EBITDA requirements as follows:
Quarter Ended Minimum EBITDA
Requirement
March 31, 1997 $ 6.5 million
June 30, 1997 9.0 million
September 30, 1997 12.0 million
December 31, 1997 11.0 million
March 31, 1998 11.5 million
The Company met the EBITDA requirement for the quarter ended
March 31, 1997, and is confident that, based on operating results
through May, 1997, it will exceed the requirement for the quarter
ending June 30, 1997. Based on the operating budget for fiscal
1998, the Company believes that it will also meet or exceed the
minimum requirement for each of the other three quarters. In
light of the competitive environment in which the Company
operates, however, such attainment is not guaranteed and it is
possible that an event of default could occur if operating
results are significantly below budget. The Company expects to
receive a federal tax refund of approximately $22 million during
the quarter ending September 30, 1997. In connection with the
receipt of these funds and their possible utilization to further
reduce outstanding borrowings under the Revised Credit Facility,
the Company anticipates commencing negotiations with the Banks
and/or other lenders to refinance the remaining borrowings under
the Revised Credit Facility. If the Company fails to meet any
covenant under the Revised Credit Facility, the lender may, at
its option, give notice that amounts owed are immediately due and
payable. Accelerated maturity of the Revised Credit Facility
would require management to complete a restructuring or
refinancing of the Revised Credit Facility or implement actions
to obtain cash from other sources to repay the Revised Credit
Facility. Management believes it is capable of completing a
restructuring or refinancing of amounts currently outstanding and
that failure to meet any covenant will not have a material
adverse affect on the accompanying financial statements.
As of May 15, 1997, the Company had fully funded its
contractual capital obligations with respect to the Maryland
Heights joint venture. The Company expects to use a significant
portion of the approximately $7 million cash proceeds from the
second Mesquite closing to reduce outstanding borrowings under
the Revised Credit Facility. The Company believes that expected
cash flow from operations will be sufficient to meet working
capital requirements for current operations and debt service not
otherwise funded through March 31, 1998. At the present time,
other than the replacement of the entertainment and dining barge
at Metropolis, no major capital projects are contemplated for
1998.
Forward Looking Information
Certain information included in this section and elsewhere
in this Annual Report on Form 10-K contains, and other materials
filed or to be filed by the Company with the Securities and
Exchange Commission (as well as information included in oral
statements or other written statements made or to be made by the
Company) contain or will contain or include, forward-looking
statements within the meaning of Section 21E of the Securities
and Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended. Such forward-looking
statements, address, among other things, the effects of
competition, future borrowing and capital costs, business
development activities, capital expenditure programs and
requirements, financing sources and the effects of legislation
and regulation (including possible gaming legislation, gaming
licensure and regulation, state and local regulation and tax
regulation). Such forward-looking information is based upon
management's current plans or expectations and is subject to a
number of uncertainties and risks that could significantly affect
current plans, anticipated actions and the Company's future
financial condition, liquidity and results. As a consequence,
current plans, anticipated actions and future financial condition
may differ from those expressed in any forward-looking statements
made by or on behalf of the Company. These uncertainties and
risks include, but are not limited to, conducting operations in
an increasingly competitive industry, conducting operations at a
newly or recently developed site or in a jurisdiction for which
gaming has recently been permitted, changes in gaming, state and
local laws and regulations, development and construction
activities, leverage and debt service requirements (including
sensitivity to fluctuations in interest rates), general economic
conditions, changes in federal or state tax laws, action taken
under applications for licenses (including renewals) and
approvals under applicable laws and regulations (including gaming
laws and regulations) and the legalization of gaming in certain
jurisdictions.
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.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.
None.
PART III
Except for the information regarding executive officers
called for by Item 401 of Regulation S-K, which is included in
Part I, Item 4 hereof, Items 10, 11, 12 and 13 will be
incorporated by reference to the Company's definitive proxy
statement for its Annual Meeting of Stockholders or by reference
to Form 10-K/A, which in either case will be filed not later than
120 days after the end of the Company's fiscal year, in
accordance with General Instruction G(3) to Form 10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) (1) and (2) Index to Financial Statements
PAGE
REPORT OF INDEPENDENT AUDITORS 35
CONSOLIDATED BALANCE SHEETS AT MARCH 31, 1997 AND 1996 36
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED MARCH 31,1997:
CONSOLIDATED STATEMENTS OF OPERATIONS 37
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 38
CONSOLIDATED STATEMENTS OF CASH FLOWS 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 41
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.
Exhibit Description
Number
3.1 (1) Articles of Incorporation, as amended, of Players
International, Inc.
(the "Company").
3.2 (11) By-laws of the Company, as amended.
4.1 (11) Indenture among certain subsidiaries of the Company and
First Fidelity Bank, National Association, as Trustee,
including form of Note (the "Senior Note Indenture").
4.2 (1) Form of First Supplemental Indenture to the Senior Note
Indenture.
4.3 (1) Form of Second Supplemental Indenture to the Senior
Note Indenture.
4.4 Form of Third Supplemental Indenture to the Senior Note
Indenture.
10.1 (3) The Company's 1985 Incentive Stock Option Plan.
10.2 (4) Amendment No. 1 to the Company's 1985 Incentive Stock
Option Plan.
10.3 (5) The Company's 1990 Incentive Stock Option and Non-
Qualified Stock Option Plan, as amended.
10.4 (2) The Company's 1993 Stock Incentive Plan.
10.5 (2) Form of Registration Rights Agreement dated as of June
23, 1992 by and among the Company, Southern Illinois
Riverboat/Casino Cruises, Inc., and the purchasers
named therein.
10.6 (2) 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 (now known as the Players Hotel).
10.7 (2) 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 (now
known as the Players Hotel).
10.8 (2) 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
(now known as the Players Hotel).
10.9 (2) 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.
10.10 (2) Joint Venture Agreement dated May 1993 between
Amerihost and a subsidiary of the Company with respect
to a hotel in Metropolis, Illinois adjacent to the
Company's Metropolis riverboat.
10.11 (6) Lease dated March 19, 1993 by and among the Beeber
Corporation and Players Lake Charles, Inc., a
subsidiary of the Company.
10.12 (7) Agreement of 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).
10.13 (7) Transfer of Data Agreement dated June 16, 1994,
between
Gem Gaming, Inc. and Players Nevada, Inc. (including
form of Promissory Note).
10.14 (7) Development Consulting Agreement dated June 16, 1994,
between Gem Gaming, Inc. and Players Nevada, Inc.
(including form of 1994 Series G Warrant).
10.15 (7) Option Transfer Agreement dated June 16, 1994, between
Gem Gaming, Inc., Gem Mesquite, Ltd. and Players
Nevada, Inc.
10.16 (8) The Company's 1994 Directors Stock Incentive Plan, as
adopted April 14, 1994, and as amended July 14, 1994.
10.17 (9) Agreement for Sale of Partnership Interests among the
Company and certain of its subsidiaries and Showboat,
Inc. and certain of its subsidiaries.
10.18 (1) Asset Purchase Agreement dated August 16, 1995 among
the Company, Players Lake Charles, Inc. and the Beeber
Corporation.
10.19 (1) Form of Credit Agreement ("Credit Agreement") among
the
Company, First Interstate Bank of Nevada, N.A.,
Bankers
Trust Company, BT Securities Corporation, and certain
other Lenders party thereto.
10.20 (1) Form of Revolving Promissory Notes made by the Company
in favor of the Lenders party to the Credit Agreement.
10.21 (1) Form of Swing Line Promissory Note made by the Company
in favor of First Interstate Bank of Nevada, N.A.
10.22 (1) Form of Guaranty made by Players Lake Charles, Inc.,
Players Nevada, Inc., Southern Illinois
Riverboat/Casino Cruises, Inc., Players Bluegrass
Downs, Inc., Players Riverboat Management, Inc.,
Players Riverboat, Inc., Players Mesquite Golf Club,
Inc., Players Indiana, Inc., Players Riverboat, LL
Players Mesquite Land, Inc., Players Maryland Heights,
Inc., River Bottom Inc. and Showboat Star Partnership
in favor of First Interstate Bank of Nevada, N.A.
10.23 (1) Form of Company Pledge Agreement between the Company
and First Interstate Bank of Nevada, N.A.
10.24 (1) Form of Company Pledge Agreement (Nevada) between the
Company and First Interstate Bank of Nevada, N.A.
10.25 (1) Form of First Amendment to Company Pledge Agreement
(Nevada) between the Company and First Interstate Bank
of Nevada, N.A.
10.26 (1) Form of LLC Membership Interest Security Agreement
between the Company and First Interstate Bank of
Nevada, N.A.
10.27 (1) Form of Company Security Agreement between the Company
and First Interstate Bank of Nevada, N.A.
10.28 (1) Form of Subsidiary Security Agreement (Nevada) among
Players Nevada, Inc., Players Mesquite Golf Club,
Inc.,
Players Mesquite Land, Inc. and First Interstate Bank
of Nevada, N.A.
10.29 (1) Form of Subsidiary Security Agreement (Louisiana)
among
Players Lake Charles, Inc., Showboat Star Partnership,
Players Riverboat LLC and First Interstate Bank of
Nevada, N.A.
10.30 (1) Form of Subsidiary Security Agreement (Illinois)
between Southern Illinois Riverboat/Casino Cruises,
Inc. and First Interstate Bank of Nevada, N.A.
10.31 (1) Form of Partnership Interest Security Agreement
between
Players Riverboat Management, Inc. and First
Interstate
Bank of Nevada, N.A.
10.32 (1) Form of Collateral Account Agreement between the
Company and First Interstate Bank of Nevada, N.A.
10.33 (1) Form of Nevada Deed of Trust, Fixture Filing and
Security Agreement with Assignment of Rents relating
to
the Credit Agreement.
10.34 (1) Form of Louisiana Act of Mortgage, Fixture Filing and
Security Agreement between Players Lake Charles, Inc.
and First Interstate Bank of Nevada, N.A.
10.35 (1) Form of Illinois Mortgage Fixture Filing and Security
Agreement with Assignment of Rents relating to the
Credit Agreement.
10.36 (1) Form of First Preferred Ship Mortgage made by Showboat
Star Partnership (an entity owned, directly or
indirectly, by the Company and its subsidiaries) to
First Interstate Bank of Nevada, N.A.
10.37 (1) Form of Environmental Indemnity made by the Company to
First Interstate Bank of Nevada, N.A.
10.38 (1) Form of Master Vessel and Collateral Trust Agreement
between First Interstate Bank of Nevada, N.A. as
Administrative Agent and First Interstate Bank of
Nevada, N.A. as Trustee and acknowledged and accepted
by the Company.
10.39 (10) Partnership Agreement dated November 2, 1995, by and
between Harrah's Maryland Heights Corporation and
Players MH, L.P.
10.40 (10) Guaranty of Players International, Inc. dated November
2, 1995.
10.41 (10) Management Agreement dated November 2, 1995 by and
between Riverside Joint Venture and Harrah's Maryland
Heights Operating Company.
10.42 (10) License Agreement dated November 2, 1995 by and among
Players International, Inc., Riverside Joint Venture
and Harrah's Maryland Heights Operating Company.
10.43 (10) Ground Lease dated November 3, 1995 by and between
Harrah's Maryland Heights LLC and Riverside Joint
Venture.
10.44 (10) Lease Agreement dated as of November 3, 1995 by and
between Riverside Joint Venture and Players MH, L.P.
10.45 (10) Parent Guaranty of Players International, Inc. dated
November 3, 1995.
10.46 (10) Right of First Refusal to Purchase dated November 3,
1995 by and between Harrah's Maryland Heights LLC and
Players MH, L.P.
10.47 (10) Option Agreement dated November 3, 1995 by and between
Riverside Joint Venture and Harrah's Maryland Heights,
L.L.C.
10.48 (10) Development of Agreement (Earth City Expressway
Extension) by and between the City of Maryland Heights
and Riverside Joint Venture.
10.49 Form of Agreement between the Company and Lake Charles
Construction Corporation dated November 15, 1995 for
the Players Island-Entertainment Barge.
10.50 Agreement between the Company and Lake Charles
Construction Corporation dated February 16, 1996 for
the Players Island-Entertainment Barge.
10.51 (12) Retirement Agreement and General Release dated
September 9, 1996 between the Company and Edward
Fishman.
10.52 (12) Retirement Agreement and General Release dated
September 9, 1996 between the Company and David
Fishman.
10.53 (13) Amended and Restated Credit Agreement, dated as of
December 16, 1996, among the Company and the Lenders
party thereto, Wells Fargo Bank, N.A., Bankers Trust
Company and BT Securities Corporation.
10.54 (14) Purchase Agreement by and among Players Nevada, Inc.,
Players Mesquite Land, Inc., Players Mesquite Golf
Club, Inc. and RBG, LLC.
10.55 (15) March 17, 1997 Letter Agreement to the Asset Purchase
Agreement Extending Closing Date.
10.56 (15) March 18, 1997 Letter Agreement to the Asset Purchase
Agreement Regarding Application of Due of Due
Diligence
Fee.
10.57 (15) March 18, 1997 Letter Agreement to the Asset Purchase
Agreement Regarding Certain Matters Incident to
Closing.
21 Subsidiaries of Players International, Inc.
____________
(1)Filed as an exhibit to the Company's Registration
Statement on Form S-4, File No. 33-60085, and
incorporated herein by reference.
(2)Filed as an exhibit to the Company's Registration
Statement on Form S-3, File No. 33-61026, and
incorporated herein by reference.
(3)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,
and incorporated herein by reference.
(4)Filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1988 and
incorporated herein by reference.
(5)Filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1991 and
incorporated herein by reference.
(6)Filed as an exhibit to the Company's Registration
Statement on Form S-3, as amended by Form S-3, File No.
33-75006, and incorporated herein by reference.
(7)Filed as an exhibit to the Company's Current Report on
Form 8-K filed on June 24, 1994, and incorporated herein
by reference.
(8)Filed as an exhibit to the Company's Registration
Statement on Form S-3 filed on July 24, 1994, and
incorporated herein by reference.
(9)Filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1995, and
incorporated herein by reference.
(10)Filed as an exhibit to the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1995,
and incorporated herein by reference.
(11)Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996,
incorporated herein by reference.
(12)Filed as an exhibit to the Company's Form 8-K dated for
the period September 17, 1996, and incorporated
by reference.
(13)Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1996, and
incorporated herein by reference.
(14)Incorporated by reference to exhibit attached to Form 8-
K/A. Filing dated March 18, 1997, and incorporated herein by
reference.
(15)Incorporated by reference to exhibit attached to Form 8-K.
Filing dated March 18, 1997 and incorporated herein by
reference
__________________________________________
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, 1997 By /s/ Edward Fishman
Edward Fishman
Chairman of the Board
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, 1997 /s/ Edward Fishman
Edward Fishman
Chairman of the Board
Dated: June 27, 1997 /s/ Howard Goldberg
Howard Goldberg
President and Director
(Principal Executive Officer)
Dated: June 27, 1997 /s/ Henry M. Applegate, III
Henry M. Applegate, III
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
Dated: June 27, 1997 /s/ Thomas E. Gallagher
Thomas E.
Gallagher
Director
Dated: June 27, 1997 /s/ Lawrence Cohen
Lawrence Cohen
Director
Dated: June 27, 1997 /s/ Lee Seidler
Lee Seidler
Director
Dated: June 27, 1997 /s/ Marshall S. Geller
Marshall S. Geller
Director
Dated: June 27, 1997 /s/ Earl Webb
Earl Webb
Director
Dated: June 27, 1997 /s/ Charles Masson
Charles Masson
Director
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Auditors 35
Consolidated Balance Sheets as of March 31, 1997 and 1996 36
Consolidated Statements of Operations for the Years Ended
March 31, 1997, 1996 and 1995 37
Consolidated Statements of Stockholders' Equity for the
Years Ended March 31, 1997, 1996 and 1995 38
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1997, 1996 and 1995 39
Notes to Consolidated Financial Statements 41
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.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Players International, Inc.
We have audited the accompanying consolidated balance sheets
of Players International, Inc. and Subsidiaries as of March 31,
1997 and 1996, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the
three years in the period ended March 31, 1997. 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 consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of Players International, Inc.
and Subsidiaries at March 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the
three years in the period ended March 31, 1997, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
May 30, 1997
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except par value)
ASSETS
March 31,
1997
1996
CURRENT ASSETS:
Cash and cash equivalents $
$
20,567
18,786
Marketable securities
4,461
-
Accounts receivable, net of allowance for
doubtful accounts of $1,028 at March 31,
1997 and $118 at March 31, 1996 3,123
4,541
Notes receivable 19
3,062
Inventories 1,955
2,719
Deferred income tax 1,881
2,970
Income taxes refundable 27,534
72
Prepaid expenses and other current assets
3,997
4,972
Assets held for sale
8,500
- -
Total current assets
67,576
41,583
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization of
$27,336 at March 31, 1997 and $23,078 at
279,916
March 31, 1996 210,442
DEFERRED INCOME TAX - long-term
4,654
4,897
INTANGIBLES, net of accumulated amortization of
$2,541 at March 31, 1997 and
$1,714 at March 31, 1996
36,271
37,126
INVESTMENT IN JOINT VENTURE
95,401
39,474
OTHER ASSETS
6,945
10,436
$ 421,289 $
413,432
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $
$
8,500
- -
Accounts payable 6,466
6,736
Accrued liabilities 33,969
32,432
Other liabilities
2,921
537
Total current liabilities
51,856
39,705
OTHER LONG-TERM LIABILITIES
26,052
27,100
LONG-TERM DEBT, net of current portion
187,500
153,000
COMMITMENTS AND CONTINGENCIES (Note 14)
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, Authorized -- -
- -
10,000,000 shares, Issued - none
Common stock, $.005 par value, Authorized --
90,000,000 shares, Issued-
32,563,348 shares at March 31, 1997 and 163
149
29,859,580 shares at March 31, 1996
Additional paid-in capital 132,256
123,719
Unrealized loss on marketable securities, net -
(1)
of tax
Treasury stock, at cost; 672,100 shares at
(7,294)
March 31, 1997 and March 31, 1996 (7,294)
Retained earnings
30,756
77,054
Total stockholders' equity
155,881
193,627
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $
$
421,289
413,432
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
Year
ended March 31,
1997
1996 1995
REVENUES:
Casino $ $
$
262,660 269,739
210,942
Food and beverage 14,139 11,825
7,406
Hotel 6,608 4,851
- -
Other
7,803 4,980
5,347
291,210 291,395
223,695
COSTS AND EXPENSES:
Casino 122,250 110,959
74,839
Food and beverage 14,185 12,601
6,799
Hotel 3,144 2,503
- -
Other gaming related expenses 38,136 34,351
18,972
Selling, general and administrative 56,246 45,700
29,078
Corporate and other non-operating costs 9,102 10,387
7,276
Equity in loss of joint venture 1,934
-
- -
Impairment and write-down of assets 7,357
-
- -
Pre-opening and gaming development costs 6,915 13,787
9,117
Depreciation and amortization 21,806 17,236
7,065
Loss on sale of Mesquite property
57,397 -
- -
Restructuring charge
9,007 -
- -
347,479 247,524
153,146
Income (loss) before other income
(expense) and provision (benefit)
for income taxes (56,269) 43,871
70,549
OTHER INCOME (EXPENSE):
Interest income 237 5,850
3,340
Other income, net 241 1,587
275
Interest expense
(15,998) (14,718)
(694)
(15,520) (7,281)
2,921
Income (loss) before provision (benefit) (71,789) 36,590
73,470
for income taxes
PROVISION (BENEFIT) FOR INCOME TAXES
(25,491) 14,270
27,715
NET INCOME (LOSS) $
$
($46,298 22,320
45,755
)
EARNINGS (LOSS) PER COMMON AND
COMMON SHARE EQUIVALENT:
Primary ($1.56) $0.70
$1.47
Fully diluted ($1.56) $0.70
$1.45
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES:
Primary 29,765,4 32,009,7
31,169,6
83 00
00
Fully diluted 29,765,4 32,015,8
31,636,7
83 00
00
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED MARCH 31, 1997
(dollars in thousands, except per share data)
Additional
Common Stock
Capital
Loss Treasury Stock Retained
Shares
Amount Paid-In Unrealized Shares
Amount Earnings
BALANCE, March 31, 26,357 $ $ $ -
$ $
1994 ,100 132 106,88 (150)
- - 8,979
3
Shares issued under 277,70 1 688 - -
- - -
stock option plans 0
Shares issued in 381,00 2 4,237 - -
- - -
exchange for land 0
Shares issued for 2,656, 13 7,261 - -
- - -
warrants exercised 600
Tax benefit from
exercise of non-
qualified options - - 2,643 - -
- - -
Change in unrealized
loss on
marketable - - - (301) -
- - -
securities, net of tax
Net income
- - - - -
- - 45,755
BALANCE, March 31, 29,672 148 121,71 (451) -
- - 54,734
1995 ,400 2
Shares issued under 187,18 1 1,296 - -
- - -
stock option plans 0
Tax benefit from
exercise of
non-qualified - - 713 - -
- - -
options
Adjustment for number
of shares as
the result of the - - (2) - -
- - -
stock split
Purchase of common (672,1 - - - 672,10
7,294 -
stock 00) 0
Change in unrealized
loss on
marketable - - - 450 -
- -
securities, net of tax
- -
Net income
- - - - -
- - 22,320
BALANCE, March 31, 29,187 123,71 (1) 672,10
7,294
1996 ,480 149 9 0
77,054
Shares issued for 2,100, 11 5,590 - -
- - -
warrants exercised 000
Shares issued pursuant
to retirement
agreement 603,76 3 2,996 - -
- - -
8
Expired put options - - (49) - -
- - -
Change in unrealized
loss on
marketable - - - 1 -
- - -
securities, net of tax
Net loss
- - - - -
- - (46,29
8)
BALANCE, March 31, 31,891 $ $ $
$ $
1997 ,248 163 132,25 - 672,10
7,294 30,756
6 0
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Year ended March 31,
1997
1996
1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($46,29
$ $
8)
22,320 45,755
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 21,806
17,236 7,065
Amortization of bond premium/(discount) -
(3,861) 247
Loss on disposition of property/equipment 60,321
- - -
Impairment and write-down of assets 7,357
- - -
Equity in loss of joint venture 1,934
- - -
Stock issued pursuant to retirement agreement 3,000
- - -
Deferred income taxes 1,332
(2,459) 665
Other 924
468 32
Changes in assets and liabilities:
Accounts and notes receivable 3,551
(4,985) (450)
Inventories (1,269)
(1,856) (369)
Income taxes payable (refundable) (27,462
1,772 (250)
)
Prepaid expenses and other current assets 975
(2,484) (3,465)
Other assets 1,141
(1,812) (457)
Accounts payable (270)
(1,497) 1,934
Accrued liabilities 80
(918) 1,737
Other liabilities
1,336
(1,176) (340)
Net cash provided by operating activities
28,458
20,748 52,104
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of property and equipment (46,499
(147,11 (62,419
)
9) )
Proceeds from disposal of property and 30,749
equipment
- - -
Costs in excess of fair value of tangible -
- - (24,090
assets acquired
)
Purchases of marketable securities -
(170,80 (22,970
6) )
Proceeds from sale of marketable securities 4,401
196,886 59,509
Investment in joint venture
(61,875
(34,015 -
)
)
Net cash used in investing activities
(73,224
(155,0 (49,970
)
54) )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 65,500
153,000 -
Repayments of long-term debt (22,500
(8,907) (169)
)
Purchase of common stock -
(7,294) -
Debt issuance cost (2,051)
(8,890) -
Proceeds from exercise of stock options and
warrants 5,598
1,297 7,964
Net cash provided by financing activities
46,547
129,206 7,795
NET INCREASE (DECREASE) IN CASH AND CASH 1,781
(5,100) 9,929
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
18,786
23,886 13,957
CASH AND CASH EQUIVALENTS AT END OF PERIOD $
$ $
20,567
18,786 23,886
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Year ended March 31,
1997 1996
1995
Interest paid $
$ $
22,637
10,124 694
Income taxes paid 4,159
15,201 30,102
Debt incurred to purchase land and equipment -
- - 3,200
Unrealized gain (loss) on marketable -
(450) 301
securities, net of tax
Accrued liabilities incurred to purchase -
31,910 8,005
property and equipment
Liabilities relating to costs in excess of fair -
- - 13,441
value of tangible assets acquired
Land, property and equipment contributed to -
5,459 -
joint venture
Common stock issued for purchase of land -
- - 4,238
Tax benefit related to exercise of non- -
713 2,643
qualified stock options
Note 1 - Summary of Significant Accounting Policies
Fiscal Year
The Company has a fiscal year that ends on March 31.
Basis of Presentation
The Company, through wholly owned subsidiaries, operates
five riverboat casinos, a land-based hotel and casino and a horse
racetrack facility and, through a joint venture, a riverboat
casino entertainment complex. All operations include food and
beverage facilities and a retail gift shop. Three of the
facilities include hotel operations. The majority of the assets
comprising the Mesquite facility were sold in 1997. However, the
Company will continue to operate the facility through the first
quarter of 1998.
The consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been
eliminated. The investment in joint venture is accounted for by
the equity method.
Certain reclassifications have been made to the consolidated
financial statements as previously presented to conform to the
current classifications.
Accounting Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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.
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, hotel and other items furnished to customers,
which totaled approximately $27,238,000, $21,336,000 and
$9,916,000 for the years ended March 31, 1997, 1996 and 1995,
respectively.
The estimated costs of providing such complimentary services
are included in casino costs and expenses through inter-
department allocations from the department granting the services
as follows:
1997 1996
1995
(dollars
in thousands)
Food and beverage $ $
$
20,736 15,651
5,583
Admissions 157 1,725
2,848
Hotel 1,281 565
- -
Other
1,370 1,177
717
$ $
$
23,544 19,118
9,148
Pre-opening and Gaming Development Costs
All pre-opening and gaming development costs are expensed as
incurred except for the cost of property and equipment which is
capitalized.
Inventories
Inventories consisting of food, beverage and retail items
are stated at the lower of cost (first-in, first-out) or market.
Property, Equipment, Depreciation and Amortization
Property and equipment are stated at cost. Improvements and
extraordinary repairs that extend the life of the asset are
capitalized. Maintenance and repairs are expensed as incurred.
Interest expense is capitalized on major construction projects.
Capitalized interest amounted to $6,714,000 and $3,329,000 in
1997 and 1996, respectively. There was no capitalized interest
in 1995.
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:
Riverboats and barges 30 years
Buildings 40 years
Furniture, fixtures and equipment 5-7 years
Leasehold and land improvements
Lesser of useful life or lease term
Effective October 1, 1995, the Company revised its estimate
of the useful lives of certain property and equipment as follows:
Original Life
Revised Life
Riverboats, barges and improvements 10 years 30
years
Buildings 20 years 40
years
These changes were made to better reflect industry practice
and the estimated periods during which such assets will remain in
service. This change increased net income by approximately
$1,403,000 ($.04 per share) for the year ended March 31, 1996.
Depreciation expense of $16,405,000, $13,145,000 and
$6,735,000 were recorded for the fiscal years ended March 31,
1997, 1996 and 1995 respectively. Amortization expense amounted
to $5,401,000, $4,091,000 and $330,000 in 1997, 1996 and 1995
respectively.
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. Effective October 1, 1995, the Company revised its
estimate of the useful life of intangibles from 15 years to 40
years. This change was made to better reflect the estimated
periods during which the related tangible assets will remain in
service. This change increased net income by approximately
$466,000 ($.01 per share) for the year ended March 31, 1996.
The Company periodically evaluates whether the remaining
estimated useful life of intangibles may warrant revision or the
remaining balance of intangibles may require adjustment generally
based upon expectations of nondiscounted cash flows and operating
income. At March 31, 1996, the Company recorded a $1,500,000
write-down of goodwill associated with its racetrack facility.
Unamortized Loan Costs
Costs incurred in connection with the issuance of debt are
being amortized using the straight-line method over the term of
the related debt issue or loan. During the year ended March 31,
1997, the Company wrote-off loan costs related to its original
revolving credit agreement (dated August 25, 1995) in the amount
of $2,744,000.
Stock Based Compensation
The Company has adopted SFAS No. 123- Accounting for Stock
Based Compensation. As provided by SFAS No. 123, the Company
accounts for stock options under Accounting Principles Board
(APB) Opinion No. 25-Accounting for Stock Issued to Employees.
The Company discloses the pro forma net income and earnings per
share effect as if the Company had used the fair value method
prescribed under SFAS No. 123. (See Note 12)
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 a 3-for-2 stock split
declared on April 26, 1995 for stockholders of record at the
close of business on May 8, 1995. A summary of the number of
shares used in computing primary earnings per share follows:
Year
ended
March 31,
1997 1996
1995
Weighted average number of shares outstanding
29,765,483 29,765,200
27,233,000
Dilutive effect of stock options and warrants
- 2,244,500
3,936,600
Shares used in computing primary earnings per share
29,765,483 32,009,700
31,169,600
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,
1997 1996 1995
Weighted average number of shares outstanding
29,765,483 29,765,200 27,233,000
Dilutive effect of stock options and warrants
- - 2,245,200 4,403,700
Dilutive effect of put options
- - 5,400 -
Shares used in computing fully diluted earnings per share
29,765,483 32,015,800 31,636,700
In February 1997, the Financial Accounting Standards Board issued
Statement
of Financial Accounting Standards, No. 128, ("SFAS 128 ")
Earnings per
Share, which is required to be adopted for the quarter ended
December
31, 1997. At that time, the Company will be required to change
the method
currently used to compute earnings per share and to restate all
prior
periods. Under the new requirements for calculating primary
earnings
per share, the dilutive effect of stock options will be excluded.
The
Company ct of SFAS 128 will be on the calculation of fully
diluted
earnings per share.
Note 2 - Accrued Liabilities
A summary of accrued liabilities is as follows:
March 31,
(dollars in thousands)
1997 1996
Insurance claims
$ 1,638 $ 1,442
Chip and token liability
558 489
Accrued payroll and related expenses
6,500 4,806
Accrued interest expense
7,477 7,477
Accrued expenses
13,724 11,898
Current portion of liabilities
related to the purchase of a
riverboat and a hotel 4,072 6,320
$33,969 $ 32,432
Note 3 - Property and Equipment
A summary of property and equipment is as follows:
March 31,
(dollars in thousands)
1997 1996
Land and buildings
$ 65,174 $ 121,671
Riverboats and barges
113,281 107,282
Furniture, fixtures and equipment
46,379 54,765
Leasehold and land improvements
8,032 11,241
Construction in progress
4,912 8,035
Less -- accumulated depreciation
(27,336) (23,078)
$ 210,442 $ 279,916
Note 4 - Sale of Mesquite Property
On February 28, 1997, the Company entered into a definitive
agreement to sell the assets comprising the Mesquite casino resort for a
total purchase price of $30,500,000. The agreement was structured to
take place in two closings. The initial closing was completed on
March 18, 1997, in which the Company received $22,000,000 in cash for
primarily the non-gaming property and equipment. The second closing, for
the gaming and other furniture and equipment is scheduled for June 30,
1997 at which time the Company entered into a lease with the purchaser
pursuant to which the Company leases the property for the period
between the first and second closings and absorbs any income or
loss related to the operation of the facility during such period.
As of March 31, 1997, the Company recorded a loss on the sale of
Mesquite totaling $57,397,000. Such loss includes a write-down
to fair value of the assets to be sold in the second closing. The
loss is summarized as follows (dollars in thousands):
Carrying value of property and equipment, net $ 84,232
Inventories and other assets 2,208
Expenses related to sale 1,457
Proceeds received at first closing (22,000)
Receivable at second closing (8,500)
Total loss on sale $ 57,397
For the year ended March 31, 1997, revenues for Mesquite were
$38,945,000 and losses before other income (expense) were
$65,473,000, inclusive of the loss on sale.
Note 5 - Impairment and Write-down of Assets
During the fourth quarter of 1997, the Company re-evaluated
its investment in its horse racetrack facility, committed to a
plan to remove from service and replace a barge utilized by one
of its riverboat facilities and wrote-down to fair value land
that was contributed to a joint venture. Impairment losses and
the write-down of assets totaling $7,357,000, were recorded in
the year ended March 31, 1997, and are detailed below.
The Company has incurred losses operating the racetrack
since its acquisition, and has determined that due to flat or
declining demand for both live and simulcast pari-mutuel race
wagering that such operating losses will continue in the future
in the absence of additional forms of gaming at the facility.
Due to this and the continued lack of consensus within the State
of Kentucky governing body relating to the expansion of legalized
gaming, the Company has determined that its investment in the
racetrack i
is represents the approximate fair value of the property.
The barge at the riverboat facility is being removed from service
and will be replaced in 1998. A replacement barge was purchased
in 1997. The book value for the barge prior to the impairment
was $676,000. It is estimated that, net of disposal costs, the
fair value of the barge is zero.
In 1995, Players contributed land with a carrying value of
$4,944,000 to the joint venture. The land was originally
purchased as the potential gaming site for the Company. In the
fourth quarter of 1997, an audit of the joint venture was
completed which included an appraisal of the land determining its
fair market value to be $930,000. This value was used as the
basis for recording the contribution of the land in the joint
venture records. As a result, the Company reduced its investment
in the joint ven
Note 6 - Equity in Joint Venture
In November, 1995, the Company formed a joint venture to co-
develop a riverboat casino complex with Harrah's in Maryland
Heights, Missouri, which opened in March, 1997. The Company
holds a 50% interest in the joint venture. The Company's
expected investment in the project including the investment in
the joint venture is $141,000,000, including pre-opening costs
but excluding capitalized interest, of which approximately
$124,000,000 had been expended as of March 31, 1997. The
investment in the joint vent
Summary condensed financial information for the joint
venture is as follows (dollars in thousands):
Year Ended
March 31, 1997
(Unaudited)
Net revenues $ 952
Pre-opening costs 3,180
Depreciation and amortization 847
Net loss 3,869
As of
March 31, 1997
(Unaudited)
Current assets $ 25,646
Current liabilties 19,864
Total assets 210,254
Partners' Capital 190,390
The net loss is net of development period interest income of
$1,421,000.
Note 7 - Income Taxes
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 are as follows:
March 31,
(dollars in thousands)
1997 1996
Deferred tax assets:
Excess capital loss over capital gain $ 266 $ -
State tax net operating loss carryforwards 991 -
Excess intangible assets basis 542 564
Pre-opening, development and other costs 7,843 7,321
Accrued liabilities and prepaid expenses 7,230 2,698
Deferred revenue 244 122
Accrual of directors' option expense 475 475
Total deferred tax assets 17,591 11,180
Valuation allowance (1,536) -
Deferred tax assets, net of
valuation allowance 16,055 11,180
Deferred tax liabilities:
Excess tax depreciation (7,751) (2,718)
Prepaid expenses (1,769) (507)
Other - (88)
Total deferred tax liabilities (9,520) (3,313)
Net deferred tax assets $ 6,535 $ 7,867
The valuation allowance on the deferred tax assets consists
primarily of an allowance for state tax net operating loss
carryforwards. In the opinion of Management, the remaining net
deferred tax asset is realizable, primarily based on the ability
to carry back further losses and recover previously paid taxes.
Significant components of the provision (benefits) for
income taxes attributable to operations are as follows:
Year ended March 31,
(dollars in thousands)
1997 1996 1995
Current:
Federal $ (25,777) $ 13,975 $ 23,263
State (1,045) 2,745 4,451
Total current (26,822) 16,720 27,714
Deferred:
Federal 624 (2,199) (89)
State 707 (251) 90
Total deferred 1,331 (2,450) 1
Total provision (benefit) ($ 25,491) $ 14,270 $ 27,715
The 1997 net loss has been carried back to previous tax
years and will result in a refund of taxes previously paid.
The reconciliation of income tax attributable to continuing
operations computed at the Federal statutory rates to income tax
expense is:
Year ended March 31,
1997 1996 1995
Federal statutory rate (benefit) (35%) 35% 35%
State taxes on income,
net of Federal income tax benefit (1%) 4% 4%
Tax exempt interest income
from municipal bonds - - (1)%
Financial statement provision rate (benefit)(36%) 39% 38%
Note 8 - Restructuring Charge
The restructuring charge reflects the Company's decision to
significantly reduce its pursuit of development opportunities in
new or emerging jurisdictions and instead concentrate on
improving its existing operations. The one-time charge consists
principally of the net loss on the disposal of assets held for or
used in development activities and the cost of employee severance
arrangements. This resulted from the sale of the Players I
riverboat, which was previously held for future deployment, and a
corporate aircraft, the closure of two development offices and
the retirement or termination of 21 senior management and staff.
The affected employees included those specifically responsible
for the Company's developmental activities and others affected by
the Company's revised business plan.
Note 9 - Other Long-Term Liabilities
A summary of other long-term liabilities follows:
March 31,
(dollars in thousands)
1997 1996
Long-term portion of liabilities
related to purchase of a riverboat $ 800 $ 1,600
Net present value of estimated
future payments to purchase a hotel 25,161 25,336
Other 91 164
$ 26,052 $ 27,100
In August 1995 the Company acquired a hotel for $6,700,000
plus future payments based on the number of passengers boarding
the riverboat casinos contiguous to it over the ensuing 28 years.
The estimated future payments were discounted at 11 % and
recorded at their net present value. Actual payments in excess
of the amortization of the net present value of estimated future
payment are recorded as contingent payments (see Note 14).
Note 10 - Long-Term Debt
A summary of long-term debt is as follows:
March 31,
(dollars in thousands)
1997 1996
Senior Notes, interest at 10-7/8% payable
semi-annually on April 15 and October 15, due 2005
(fair value based on quoted market price is approximately
$155,250 and $150,750 for the years ended March 31, 1997 and 1996,
respectively)
$ 150,000 $ 150,000
Note payable under reducing revolving credit agreement, weighted
average interest rate of 9.10% and 8.50% for years ended March 31, 1997
and 1996, respectively (carrying amount approximates fair value)
46,000 3,000
196,000 153,000
Less current portion (8,500) -
$ 187,500 $ 153,000
On August 25, 1995, the Company entered into a $120,000,000
revolving credit agreement (the "Credit Facility") with a
consortium of banks (the "Banks").
Following a waiver by the Banks of a default of the Credit
Facility's minimum EBITDA covenant as of September 30, 1996, the
Company and the Banks reached an agreement that revised the terms
of the Credit Facility (the "Revised Credit Facility") in
December 1996. As a result of these revisions, the Company
expensed $2,744,000 of unamortized loan costs relating to the
Credit Facility.
In connection with the sale of Mesquite in March 1997, the
terms of the Revised Credit Facility were changed to: (i) permit
the sale of Mesquite; (ii) reduce the credit line from
$120,000,000 to $69,500,000; and (iii) reduce the credit line to
$60,000,000 on June 30, 1997 at the time of the second closing of
the sale of Mesquite.
The Revised Credit Facility is collateralized by all the
Company's property and equipment, contract rights, leases,
intangibles and other security interest related to primarily the
company's operating properties. The Revised Credit Facility
agreement contains restrictive financial covenants requiring the
Company to maintain a specified tangible net worth and to meet
certain financial ratios among which is a minimum quarterly
EBITDA requirement. The Revised Credit Facility agreement also
contains covenants that restrict the ability of the Company to,
among other things, incur additional debt, make significant
capital contributions, commit funds to new business ventures, pay
dividends or repurchase shares.
Minimum quarterly (non-cumulative) EBITDA requirements are as
follows:
Quarter Ended Minimum
EBITDA Requirement March 31, 1997 $ 6.5 million
June 30, 1997 9.0 million
September 30, 1997 12.0 million
December 31, 1997 11.0 million
March 31, 1998 11.5 million
The Company met the EBITDA requirement for the quarter ended
March 31, 1997, and is confident that, based on operating results
through May, 1997, it will exceed the requirement for the quarter
ending June 30, 1997. Based on the operating budget for fiscal
1998, the Company believes that it will also meet or exceed the
minimum requirement for each of the other three quarters. In
light of the competitive environment in which the Company
operates, however, such attainment is not guaranteed and it is
possible that an event of default could occur if operating
results are significantly below budget. The Company expects to
receive a federal tax refund of approximately $22 million during
the quarter ending September 30, 1997. In connection with the
receipt of these funds and their possible utilization to further
reduce outstanding borrowings under the Revised Credit Facility,
the Company anticipates commencing negotiations with the Banks
and/or other lenders to refinance the remaining borrowings under
the Revised Credit Facility. If the Company fails to meet any
covenant under the Revised Credit Facility, the lender may, at
its option, give notice that amounts owed are immediately due and
payable. Accelerated maturity of the Revised Credit Facility by
the lender would require management to complete a restructuring
or refinancing of the Revised Credit Facility or implement
actions to obtain cash from other sources to repay the Revised
Credit Facility. Management believes it is capable of completing
a restructuring or refinancing of amounts currently outstanding
and that failure to meet any covenant will not have a material
adverse affect on the accompanying financial statements.
The interest rate on the Revised Credit Facility is
currently 2.5% above the bank's prime rate and is scheduled to
increase by 0.5% per quarter beginning October 1, 1997.
Commitments under the Revised Credit Facility will be reduced as
follows:
Date Scheduled Commitment Reduction
September 30, 1997 $ 7,500,000
December 31, 1997 7,500,000
March 31, 1998 7,500,000
June 30, 1998 37,500,000
During 1997, maximum borrowings under the Credit Facility or
Revised Credit Facility did not exceed $60,000,000.
Note 11 - Stockholders' Equity
During 1996, the Company repurchased a total of 672,100 shares of
its common stock for a total cost of $7,294,000. On January 29,
1997, the Company announced that its Board of Directors has
approved the adoption of a Stockholders' Rights Plan, subject to
the receipt of necessary gaming approvals. The Plan is designed
to ensure that all stockholders of the Company receive fair value
for their Common Shares in the event of any proposed takeover and
to guard against the use of partial tender offers or other
coercive tactics to gain control of the Company without offering
fair value to stockholders.
Note 12 - 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 1,200,000 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, 1997,
the Company had 71,449 shares under the 1990 Plan, 1,515,500
shares under the 1993 Plan and 498,750 shares under the 1994 Plan
available for issuance in connection with future stock options
that may be granted. The 1985 Plan expired on April 22, 1995,
therefore, no additional grants may be made, although outstanding
awards may be exercised. Options granted are generally
exercisable between three and ten years from date of grant.
In addition to the foregoing plans, 347,877 other options
and 150,000 warrants were outstanding as of March 31, 1997.
Summarized information for all stock options and warrants is as
follows:
1997 1996 1995
Options/ Weighted Options/ Weighted Options/ Weighted
Warrants Average Warrants Average Warrants Average
Exercise Exercise Exercise
Price Price Price
Outstanding at
beginning of year
6,335,502 $ 9.54 6,027,767 $ 9.16 6,624,318 $ 4.42
Granted:
Exercise price
equals market price
491,750 $ 7.65 528,250 $13.26 2,322,000 $ 14.60
Exercise price exceeds
market price 1,082,300 $ 8.17 - - 150,000 $ 15.80
Exercised (2,100,000) $ 2.67 (187,165) $ 6.94 (3,018,041) $ 3.23
Expired or
canceled (2,529,024) $14.24 (33,350) $14.20 (50,510) $ 11.42
Outstanding
at end of year 3,280,528 $ 9.58 6,335,502 $ 9.54 6,027,767 $ 9.16
Options exercisable
at end of year 2,056,351 $10.05 3,851,005 $ 6.48 2,764,133 $ 5.28
Weighted average
fair value of options granted:
Equal to market price - $ 7.65 - $13.26 - $ 14.60
Greater than market price - $ 7.23 - - - $ 13.17
In 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 123-Accounting for Stock Based
Compensation ("SFAS 123"). SFAS 123 is effective for fiscal
years beginning after December 15, 1995 and provides, among other
things, that companies may elect to account for employee stock
options using a fair value-based method or continue to apply the
intrinsic value-based method prescribed by Accounting Principal
Board Opinion No. 25 ("APB 25").
Under the fair value-based method prescribed by SFAS
123, all employee stock option grants are considered
compensatory. Compensation cost is measured at the date of grant
based on the estimated fair value of the options exercise price,
the expected life of the option, the volatility of the stock,
expected dividends on the stock and the risk-free interest rate
over the expected life of the option. Under APB 25, generally
only stock options that have intrinsic value at the date of grant
are considered compensatory. Intrinsic value represents the
excess, if any, of the market price of the stock at the grant
date over the exercise price of the options. Under both methods,
compensation cost is charged to earnings over the period the
options become exercisable.
As permitted by SFAS 123, the Company has elected to
continue to apply the intrinsic value-based method for employee
stock options. Accordingly, no compensation cost has been
recognized.
The following table discloses the Company's pro forma net
income and net income per share assuming compensation cost for
employee stock options had been determined using the fair value-
based method prescribed by SFAS 123. The table also discloses
the weighted-average assumptions used in estimating the fair
value of each option grant on the date of grant using the Black-
Scholes option pricing model. The model assumes no expected
future dividend payments on the Company's common stock for the
options granted in both fiscal years 1997 and 1996.
Year ended March 31,
1997 1996
Net income (loss)
As reported $ (46,298) $ 22,320
Pro forma (49,318) 21,587
Net income (loss) per share,
assuming full dilution
As reported $ (1.56) $ 0.70
Pro forma (1.66) 0.67
Weighted-average assumptions
Expected stock price volatility 57.48% 55.27%
Risk-free interest rate 6.38% 6.48%
Expected option lives 3.4 years 4.7 years
Because the provisions of SFAS No. 123 have not been applied
to options granted prior to April 1, 1995, and due to the
issuance in fiscal year 1997 of a large option grant under the
special program discussed below, the resulting pro forma
compensation cost for the years presented may not be
representative of that to be expected in future years.
Given the competitive environment in which the Company
operates and the need to retain and provide incentive for key
management, the Company's Board of Directors was concerned by the
large number of outstanding options with an exercise price above
the current market price of the stock. To restore the intended
incentive offered to employees by stock option grants, during
fiscal year 1997, the Company approved a special program which
enabled certain option holders to consent to the cancellation of
certain outstanding stock options, whether vested or unvested, in
exchange for a grant of new stock options with an option price
based on a minimum of 110% of the current market price of the
Company's stock. The new options vest in five equal annual
installments commencing September 19, 1996. In total, 1,442,900
options with an average exercise price of $13.59 per share were
canceled in exchange for 842,300 new options with an average
exercise price of $7.91 per share.
The following table summarizes information regarding stock
options and warrants outstanding at March 31, 1997.
OPTIONS OUTSTANDING
Range of Number Weighted Average Weighted Average
Exercise Prices Outstanding Remaining Contractual Exercise Price
Life
$0.8933 - $7.5625 903,528 2.87 $ 6.4260
$7.7000 - $8.4700 984,300 3.72 $ 7.8760
$9.1250 - $11.8333 902,700 2.04 $ 11.0284
$13.5625 -$19.3333 490,000 2.05 $ 16.1690
$0.8933 - $19.3333 3,280,528 2.78 $ 9.5828
OPTIONS EXERCISABLE
Range of
Exercise Prices Number Exercisable Weighted Avereage
Exercise Price
$0.8933 - $7.5625 595,528 $ 6.0655
$7.7000 - $8.4700 478,460 $ 7.7724
$9.1250 - $11.8333 597,863 $ 11.5928
$13.5625 - $19.3333 384,500 $ 16.6660
$0.8933 - $19.3333 2,056,351 $ 10.0517
Note 13 - Employee Benefit Plans
The Company has a defined contribution plan that provides
retirement benefits for participating 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
Company. The Company's contribution expense for the plan was
$385,000, $321,000 and $224,000 for the years ended March 31,
1997, 1996 and 1995, respectively.
Note 14 - 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 non-terminable lease agreements
at March 31, 1997 are as follows (dollars in thousands):
Year ending March 31
1998 $ 4,804
1999 3,970
2000 358
2001 48
Thereafter 92
$ 9,272
In May 1997, the Company renegotiated a lease agreement with
its slot machine vendor to purchase the slot machines and
terminate the existing lease agreement. This decision will
reduce the annual lease payments in 1998 and 1999 by $3,400,000
in each of the respective years.
Rent expense for all operating leases was as follows:
Year ended March 31,
(dollars in thousands)
1997 1996 1995
Minimum rentals $ 2,016 $ 4,227 $ 2,213
Contingent payments 3,807 2,590 3,236
$ 5,823 $ 6,817 $ 5,449
For the fiscal years ended March 31, 1997, 1996 and 1995,
$262,000, $232,000 and $101,000, respectively, of rent expense
is included in pre-opening and gaming development costs in the
accompanying consolidated statements of operations.
The Company and its subsidiaries are defendants in certain
litigation. In the opinion of management, based upon the advise
of counsel, the aggregate liability, if any, arising from such
litigation will not have a material adverse effect of the
accompanying consolidated financial statements.
Showboat Star Partnership, a subsidiary of the Company, was
served with a petition captioned J.A. Miller, et al. v. Showboat
Star Partnership, et al. on or about February 27, 1997, Docket
No. 10-14544, in the 38th Judicial District Court, Parish of
Cameron, State of Louisiana. The plaintiffs, a group of oyster
fisherman, allege in the petition that on or about February 2,
1997, the Star Riverboat discharged raw sewage and other
hazardous and toxic substances from the bilge of the vessel into
Lake Charles. Plaintiffs further allege that since 1994 the Star
Riverboat and the Players Lake Charles Riverboat have discharged
raw sewage and other hazardous and toxic substances into Lake
Charles which is part of the Calcasieu Estuary. Plaintiffs claim
that alleged acts of the Company have resulted in great damage to
natural oyster beds forty-three (43) miles down river in Cameron
Parish, resulting in oysters situated thereon to become dangerous
and unfit for human consumption and/or preventing the oyster
fishermen from harvesting said oysters. The oyster fishermen are
claiming both compensatory and punitive damages. The matter is
in the early stages of litigation. The Company has filed several
motions in response to the petition including motions to dismiss
the action. The Company cannot estimate at this time what
effect, if any, an unfavorable outcome would have.
Note 15 - Transactions with Related Parties
Marshall Geller, a member of the board of directors, by a
Company owned by Edward Fishman, Chairman, and David Fishman,
Vice Chairman of the Company, were paid $50,000 during the year
ending March 31, 1996, in consideration for consulting services
rendered.
The Company purchases promotional items from a company owned
by certain directors and officers of the Company. During the
years ended March 31, 1997, 1996 and 1995, the Company paid
$312,000, $1,052,000, and $306,000, respectively, for such items.
Mr. Merv Griffin, a major stockholder of the Company entered
into a contract dated July 18, 1995 for the production of theater
shows at its Mesquite property. Under the contract, which
expired on March 7, 1996, the Company paid an aggregate of
$396,000 to the affiliate.
During fiscal year 1997, the Company entered into an
agreement with a company controlled by a major stockholder of the
Company to modify its license agreement, under which this
individual acted as the public representative for all of the
Company's riverboat and dockside casinos, to reflect the
extension of its terms to the Company's second riverboat casino
in Lake Charles and its land-based casino in Mesquite effective
as of the opening of each facility. The fees that would have
been payable with respect to these two additional facilities were
replaced with one lump-sum payment of approximately $300,000 for
services at these facilities through the period ending December
31, 1996.
EXHIBIT 21
PLAYERS INTERNATIONAL, INC.
SUBSIDIARIES OF THE COMPANY
Subsidiary State of Incorporation or Organization
Metropolis, IL 1292 Limited Partnership Illinois
PCI, Inc. Nevada
Players Bluegrass Downs, Inc. Kentucky
Players Development, Inc. Nevada
Players Entertainment, Inc. Nevada
Players Holding, Inc. Nevada
Players International, Inc. Nevada
Players Lake Charles, LLC Louisiana
Players Lake Charles Riverboat, Inc. Louisiana
Players LC, Inc. Nevada
Players Maryland Heights, Inc. Missouri
Players MH, L.P. Missouri
Players Maryland Heights Nevada, Inc. Nevada
Players Mesquite Golf Club, Inc. Nevada
Players Mesquite Land, Inc. Nevada
Players Nevada, Inc. Nevada
Players Resources, Inc. Nevada
Players Riverboat, LLC Louisiana
Players Riverboat, Inc. Nevada
Players Riverboat Management, Inc. Nevada
Players Services, Inc. New Jersey
Riverfront Realty Corporation Illinois
Riverside Joint Venture Missouri
Showboat Star Partnership Louisiana
Southern Illinois Riverboat/Casino Cruises, Inc.Illinois
WCBJ Enterprises, Inc. California
[ARTICLE] 5
[LEGEND]
This schedule contains summary financial information extracted
from SEC Form
10-K and is qualified in its entirety by reference to such
financial statements.
[/LEGEND]
[CIK] 0000796912
[NAME] PLAYERS INTERNATIONAL, INC.
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] MAR-31-1997
[PERIOD-END] MAR-31-1997
[CASH] 20,567
[SECURITIES] 0
[RECEIVABLES] 4,170
[ALLOWANCES] 1,028
[INVENTORY] 1,955
[CURRENT-ASSETS] 67,576
[PP&E] 237,778
[DEPRECIATION] 27,336
[TOTAL-ASSETS] 421,289
[CURRENT-LIABILITIES] 51,856
[BONDS] 187,500
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 163
[OTHER-SE] 155,718
[TOTAL-LIABILITY-AND-EQUITY] 421,289
[SALES] 0
[TOTAL-REVENUES] 291,210
[CGS] 0
[TOTAL-COSTS] 139,579
[OTHER-EXPENSES] 207,900
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 15,998
[INCOME-PRETAX] (71,789)
[INCOME-TAX] (25,491)
[INCOME-CONTINUING] (46,298)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (46,298)
[EPS-PRIMARY] (1.56)
[EPS-DILUTED] (1.56)
</TABLE>
