SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF SECURITIES EXCHANGE ACT OF 1943
For the transition period from ____________ to ___________
Commission file number 0-14897
Players International, Inc.
Nevada 95-4175832
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
1300 Atlantic Ave., Suite 800, Atlanti City, NJ 08401
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (609) 449-7777
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each of the registrant's
classes of common stock was 31,891,248 shares at August 14, 1997.
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1997 and
March 31, 1997 1
Condensed Consolidated Statements of Operations for the
Three Months Ended June 30, 1997 and 1996 3
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended June 30, 1997 and 1996 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except par value)
ASSETS
<CAPTION>
June 30, March 31,
1997 1997
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $18,863 $20,567
Accounts receivable, net of
allowance for doubtful accounts of
$1,267 at June 30, 1997 and
$1,028 at March 31, 1997 3,070 3,123
Accounts receivable, sale of Mesquite 7,205 _
Notes receivable 1,500 19
Inventories 1,408 1,955
Deferred income tax 1,881 1,881
Income taxes refundable 24,201 27,534
Prepaid expenses and other current
assets 2,324 3,997
Assets held for sale - 8,500
Total current assets 60,452 67,576
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and
amortization of $31,163 at
June 30, 1997 and $27,336
at March 31, 1997 220,002 210,442
DEFERRED INCOME TAX - long-term 4,654 4,654
INTANGIBLES, net of accumulated
amortization of $2,768
at June 30, 1997 and $2,541 at
March 31, 1997 36,026 36,271
INVESTMENT IN JOINT VENTURE 101,231 95,401
OTHER ASSETS 6,439 6,945
TOTAL ASSETS $428,804 $ 421,289
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
<PAGE>
<TABLE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except par value)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
June 30, March 31,
1997 1997
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $55,083 $8,500
Accounts payable 7,670 6,466
Accrued liabilities 28,953 33,969
Other liabilities 3,097 2,921
Total current liabilities 94,803 51,856
OTHER LONG-TERM LIABILITIES 25,979 26,052
LONG-TERM DEBT, net of current portion 151,848 187,500
STOCKHOLDERS' EQUITY:
Preferred stock, no par value,
Authorized--10,000,000 shares
Issued and outstanding-none - -
Common stock, $.005 par value,
Authorized--90,000,000 shares
Issued-32,563,348 at June 30,
1997 and March 31, 1997 163 163
Additional paid-in capital 132,256 132,256
Treasury stock, at cost; 672,100
shares at June 30, 1997
and March 31, 1997 (7,294) (7,294)
Retained earnings 31,049 30,756
Total Stockholders' Equity 156,174 155,881
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 428,804 $421,289
</TABLE>
<PAGE>
<TABLE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
<CAPTION>
For the Three Months
Ended June 30,
1997 1996
<S> <C> <C>
REVENUES:
Casino $ 75,787 72,252
Food and beverage 4,186 3,705
Hotel 1,795 1,811
Other 2,414 1,843
84,182 79,611
COSTS AND EXPENSES:
Casino 36,488 31,455
Food and beverage 4,077 3,745
Hotel 671 827
Other gaming related expenses 11,455 14,029
Selling, general and administrative 15,229 9,564
Corporate and other non-operating 1,590 2,372
expenses
Equity in loss of joint venture 3,323 -
Pre-opening and gaming development costs 1,411 -
Depreciation and amortization 4,604 4,636
77,437 68,039
Income before other income (expense)
and provision for income taxes 6,745 11,572
OTHER INCOME (EXPENSE):
Interest income 12 113
Other income, net (19) (15)
Interest expense (6,254) (3,864)
(6,261) (3,766)
Income before provision for income taxes 484 7,806
PROVISION FOR INCOME TAXES 191 3,044
NET INCOME $ 293 $4,762
EARNINGS PER COMMON AND
COMMON SHARE EQUIVALENT
Primary and fully diluted $ .01 $ 0.15
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
Primary and fully diluted 31,912,950 31,217,804
</TABLE>
<PAGE>
<TABLE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<CAPTION>
For the Three Months
Ended June 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 293 4,762
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,604 4,636
Joint venture depreciation and
amortization 1,308 -
Loss on disposition of property and
equipment 24 -
Other 638 189
Changes in assets and liabilities:
Accounts and notes receivable (9,379) 62
Inventories, prepaid expenses and
other current assets 1,830 1,878
Income taxes refundable 3,333 3,356
Other assets (829) 334
Accounts payable and accrued
liabilities (2,803) (7,732)
Other liabilities (201) (263)
Net cash provided by (used in)
operating activities (1,182) 7,222
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of property and equipment (13,498) (13,314)
Proceeds from disposal of property and
equipment 8,557 -
Proceeds from sale of marketable
securities - 1,467
Investment in joint venture (6,390) (20,000)
Net cash used in investing activities (11,331) (31,847)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 22,317 26,500
Repayments of long-term debt (11,386) -
Debt issuance cost (122) (3)
Other - (48)
Net cash provided by financing
activities 10,809 26,449
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,704) 1,824
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 20,567 18,786
CASH AND CASH EQUIVALENTS AT END OF PERIOD 18,863 20,610
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid 10,396 8,855
Income taxes paid 2 4
Unrealized loss on marketable securities,
net of tax - 23
</TABLE>
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to those rules and regulations. It is suggested that
these condensed consolidated financial statements be read in
conjunction with the financial statements and the notes thereto
included in the Company's Form 10-K for the year ended March 31,
1997. In the opinion of management, all adjustments (which
include normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows of
all periods presented have been made.
The results of operations for the three month period ended
June 30, 1997, are not necessarily indicative of the operating
results for the full year.
Certain reclassifications have been made to the financial
statements as previously presented to conform to current
classifications.
Note 2 - Casino Revenues and Promotional Allowances
Casino revenues are the net of gaming wins less losses.
Revenues exclude the retail value of complimentary food and
beverage, hotel accommodations and other items furnished to
customers, which totaled approximately $6,674,000 and $6,900,000
for the three months ended June 30, 1997 and 1996.
The estimated cost of providing such complimentary services
are included in casino costs and expenses through inter-
department allocations from the department granting the services
as follows (dollars in thousands):
<TABLE>
For the Three Months
Ended June 30,
<CAPTION>
1997 1996
<S> <C> <C>
Food and beverage $ 4,860 $ 5,726
Hotel 222 274
Admissions and other 243 294
$ 5,325 $ 6,294
</TABLE>
<PAGE>
Note 3 - Primary and Fully Diluted Shares
Per share amounts have been computed based on the weighted
average number of outstanding shares and common stock equivalents,
if dilutive, during each period. A summary of the number of shares
used in computing primary and fully diluted earnings per share follows:
<TABLE>
For the Three Months
Ended June 30
<CAPTION>
1997 1996
<S> <C> <C>
Weighted average number of
shares outstanding 31,891,248 29,494,862
Dilutive effect of options
and warrants 21,702 1,722,942
Shares used in computing
primary and fully diluted
earnings per share 31,912,950 31,217,804
</TABLE>
Note 4 - Long-Term Debt
<TABLE>
Long term debt at June 30, 1997 consisted of the following
(dollars in thousands):
<CAPTION>
<S> <C>
Senior Notes, interest at 10-7/8% payable
semi-annually on April 15
and October 15, due 2005 $150,000
Note payable under a revised reducing
revolving credit agreement (the "Revised Credit Facility") 53,000
Note payable, secured by slot machines, interest at 12%
due June 23, 1999 3,931
206,931
Less current portion (55,083)
$151,848
</TABLE>
According to the terms of the Revised Credit Facility,
amounts available under the credit line were reduced to
$60,000,000 as of June 30, 1997. As of August 14, 1997, the
amount outstanding was $47,000,000. The Company has commenced
discussions with lenders to refinance the remaining amounts
outstanding under the Revised Credit Facility.
Note 5 - Sale of Mesquite
On June 30, 1997 the second closing of the Mesquite casino
resort was consummated. As a result of this closing, the
Company received a two-year promissory note for $1,500,000
and on July 1, 1997, deposited funds in the amount of $7,000,000
plus settlement costs. For the quarter ended June 30, 1997,
revenues for Mesquite were $8,700,000 and operating losses were
$690,000.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Comparison of Operating Results for the Three-Month Periods ended
June 30, 1997 and 1996
The Company owns and operates riverboat gaming and
entertainment facilities. These include one riverboat casino in
Metropolis, Illinois (the "Metropolis Facility"), two riverboat
casinos in Lake Charles, Louisiana (the "Lake Charles Facility")
and two contiguous, permanently moored, dockside riverboat
casinos in Maryland Heights, Missouri. The Company operated a
land-based casino resort in Mesquite, Nevada, until June 30,
1997. The Company also owns and operates a thoroughbred
racetrack in Paducah, Kentucky. The Company's fiscal year ends
on March 31. References to the first quarter of 1998 or 1997,
mean the three month periods ended June 30, 1997 and June 30,
1996, respectively.
Results of Operations
<TABLE>
Financial Highlights
<CAPTION>
Three months ended June 30 % Increase
1997 1996 (Decrease)
<S> <C> <C> <C>
(Dollars in thousands,
except per share amounts)
Casino revenues
Metropolis $18,725 $19,152 (2.2)
Lake Charles 37,337 47,348 (21.1)
Maryland Heights 15,287 -
Mesquite 4,438 5,752 (22.8)
$75,787 $72,252 4.9
Total revenues
Metropolis $19,504 $19,924 (2.1)
Lake Charles 39,178 49,827 (21.4)
Maryland Heights 16,582 -
Mesquite 8,700 9,540 (8.8)
Other 218 320 (31.9)
$84,182 $79,611 5.7
Operating income
Metropolis $4,717 $ 5,735 (17.8)
Lake Charles 6,854 11,430 (40.0)
Maryland Heights (1,683) -
Mesquite (690) (1,348) 48.8
Corporate, development and
pre-opening expenses (2,452) (4,245) 42.2
$6,746 $11,572 (41.7)
Depreciation and amortization $4,604 $4,636 (0.7)
Interest expense $6,254 $3,864 61.9
Net income $293 $4,762 (93.8)
Net income per share $0.01 $0.15 (93.3)
Operating margin (operating income/total revenues)
Metropolis 24.2% 28.8% (4.6)pts
Lake Charles 17.5% 22.9% (5.4)pts
Maryland Heights (10.1%) - -
Mesquite (7.9%) (14.1%) 6.2pts
Company-wide 8.0% 14.5% (6.5)pts
</TABLE>
<PAGE>
The 4.9% and 5.7% net increases in casino and total
revenues, respectively, in the first quarter of 1998 as compared
to the first quarter of 1997, resulted from the opening, on March
11, 1997, of the Company's Maryland Heights facility. Revenues
from this new facility more than offset year to year decreases in
revenues at the Company's Lake Charles and Mesquite facilities.
In Lake Charles, a competitor commenced operation of an
additional riverboat in July 1996, decreasing the Company's share
of casino capacity in the immediate vicinity from approximately
67% in the first quarter of 1997 to approximately 50% in the
first quarter of 1998. As a result of the additional competitive
capacity, casino revenues and total revenues at the Lake Charles
facility declined by 21% in the first quarter of 1998 as compared
to the prior year first quarter. In Mesquite, the sale of the
facility was finalized on June 30, 1997. Due to staff attrition
and the cessation of any significant casino marketing activities
during the current quarter pending the completion of the sale of
the facility, casino revenues declined by approximately 23% as
compared to the prior year first quarter. This decrease was
partially offset by an increase in non-casino revenues resulting
from the opening of an 18-hole championship golf course in
October 1996. As a result, total revenues at the Mesquite
facility during the first quarter of 1998 decreased by
approximately 9% from the first quarter of 1997.
The Company's operating income decreased approximately 42%
during the first quarter of 1998 as compared to the first quarter
of 1997. This decrease was due to declines of 18% at the
Metropolis facility and 40% at the Lake Charles facility from the
prior year first quarter and a $1.7 million operating loss at the
Maryland Heights facility in its first full quarter of
operations. Results at the Metropolis facility were negatively
impacted by a lower than average table game hold percentage
coupled with increased marketing and promotional spending to
offset increased competition. The decrease at the Lake Charles
facility resulted from the year to year decline in casino
revenue. Results at Maryland Heights reflect a lower than
anticipated volume of business due to less than anticipated
market growth and the Company's one-half share of the operating
loss of the joint venture which operates the hotel, dining,
entertainment and parking facilities contiguous to the Company's
casinos.
The operating loss at the Mesquite facility decreased by
approximately 49%, primarily because no depreciation expense was
recorded in the first quarter of 1998. The Company operated the
facility under a sale-leaseback agreement during the first
quarter of 1998, but the bulk of Mesquite's depreciable property
was sold in March, 1997. The remaining assets were classified as
held for sale until June 30, 1997 when the sale was finalized.
Corporate, development and pre-opening expenses decreased by
42% as a result of the opening of Maryland Heights on March 11,
1997, the cessation of any significant development activities and
the downsizing of corporate staff during the second half of
fiscal 1997.
Other Factors Affecting Net Income
Interest expense increased by 62% in the first quarter of
1998 as compared to the first quarter of 1997, due to additional
borrowings to complete the Maryland Heights facility, an increase
in the Company's average borrowing rate and a $1.1 million
decrease in the amount of capitalized interest. The interest
rate increase resulted from amendments to the Company's bank
credit agreement (the "Credit Agreement") in December 1996.
Capital Resources, Capital Spending and Liquidity
During the three months ended June 30, 1997, cash generated
by operations, excluding receivables relating to the sale of
remaining Mesquite facility assets, net bank borrowings and
equipment financing were the sources of funds for investments in
the Maryland Heights joint venture, the acquisition of gaming
equipment for the Maryland Heights facility and maintenance
capital expenditures at the Company's other facilities. Cash
flow from operating activities, excluding the aforementioned
receivables, approximated $7 million in the first quarter of both
1998 and 1997. As of May 15, 1997, the Company had fully funded
its contractual capital obligations with respect to the Maryland
Heights joint venture.
<PAGE>
Total credit available under the Company's Credit Agreement
was $60 million as of June 30, 1997. This availability decreases
by $7.5 million each quarter through March 1998, and the Credit
Agreement expires on June 30, 1998. The Company has commenced
discussions to replace the current Credit Agreement with a new
bank line with a longer maturity.
In July 1997, the Company received approximately $7 million
in cash from the completion of the sale of the Mesquite facility
and $23.8 million from a Federal income tax refund for the year
ended March 31, 1997.
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 refinanced
through June 30, 1998.
Forward Looking Information
Certain information included in this Quarterly Report on
Form 10-Q 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, plans for projects currently
under development, plans for future expansion and property
enhancements, business development activities, capital
expenditure programs and requirements, financing sources and the
effects of regulation (including 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 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, 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.
<PAGE>
PART II - OTHER INFORMATION
Item 1. 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 and
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
fishermen, allege in the petition that on or about February 2,
1997, the Star Riverboat discharged raw sewerage and other
hazardous and toxic substances from the bilge of the vessel in to
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 has also requested certain discovery in
connection with the motions. 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.
Briefs have been filed. A date for oral argument has not yet
been set before the Supreme Court.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
Exhibits Filed with this Form 10-Q
Exhibit No. Exhibit Description
27.0 Financial Data Schedule
Reports on Form 8-K Filed During Quarter
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
PLAYERS INTERNATIONAL, INC.
Date: August 14, 1997 By: /s/ Henry M. Applegate, III
Henry M. Applegate, III, Senior Vice President,
Chief Financial Officer and Chief Accounting Officer
