3
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________________
to ____________________
Commission file number 0-14897
Players International, Inc.
(Exact name of registrant as specified in its charter)
Nevada 95-4175832
(State or other jurisdiction of incorporation or organization)
(I.R.S. employer identification no.)
1300 Atlantic Ave., Suite 800, Atlantic 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:
As of August 12, 1998, there were 31,941,737 shares of the
registrant's Common Stock outstanding, net of treasury stock.
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1998 and
March 31, 1998 3
Condensed Consolidated Statements of Operations for the
Three Months Ended June 30, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended June 30, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3.Quantitative and Qualitative Disclosures About
Market Risk 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature 16
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
ASSETS
June 30, March 31,
1998 1998
-------- ---------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 19,238 $ 17,223
Accounts receivable, net of allowance
for doubtful accounts of $774 at June 30,
1998 and $786 at March 31, 1998 2,575 3,559
Notes receivable 1,500 -
Inventories 1,381 1,476
Deferred income tax 2,010 2,010
Income taxes refundable 4,532 6,580
Prepaid expenses and other current
assets 2,567 2,285
--------- ---------
Total current assets 33,803 33,133
--------- ---------
PROPERTY AND EQUIPMENT, net of
accumulated depreciation
and amortization of $48,861 at June
30, 1998 and $44,405 at
March 31, 1998 235,079 237,478
--------- ---------
NOTES RECEIVABLE - 1,500
--------- ---------
INTANGIBLES, net of accumulated
amortization of $3,813 at June 30, 1998
and $3,572 at March 31, 1998 35,061 35,302
--------- ---------
INVESTMENT IN JOINT VENTURE 95,442 96,587
--------- ---------
OTHER ASSETS 5,529 5,587
--------- ---------
TOTAL ASSETS $ 404,914 $ 409,587
========= =========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except par value)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, March 31,
1998 1998
-------- ---------
(Unaudited)
CURRENT LIABILITIES:
Current portion of long-term debt $ 2,069 $ 2,008
Accounts payable 3,778 4,590
Accrued liabilities 26,491 28,832
Other liabilities 3,924 3,775
-------- --------
Total current liabilities 36,262 39,205
-------- --------
OTHER LONG-TERM LIABILITIES 28,868 28,997
-------- --------
DEFERRED TAX LIABILITIES - LONG TERM 2,930 2,930
-------- --------
LONG-TERM DEBT, net of current portion 176,500 180,541
-------- --------
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- 32,613,873 at June 30, 1998
and 32,613,498 at March 31, 1998 163 163
Additional paid-in capital 132,338 132,338
Treasury stock, at cost; 672,100
shares at June 30, 1998 and
March 31, 1998 (7,294) (7,294)
Retained earnings 35,147 32,707
-------- --------
Total stockholders' equity 160,354 157,914
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $404,914 $409,587
======== ========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(Unaudited)
For the Three
Months Ended June 30,
---------------------
1998 1997
---- ----
REVENUES:
Casino $ 77,024 $ 75,787
Food and beverage 2,510 4,186
Hotel 989 1,795
Other 1,042 2,414
-------- --------
81,565 84,182
-------- --------
COSTS AND EXPENSES:
Casino 35,846 36,488
Food and beverage 2,111 4,077
Hotel 397 671
Other operating expenses 10,588 11,455
Selling, general and administrative 13,456 15,301
Corporate administrative expenses 1,854 1,590
Allocated amounts of joint venture 2,721 3,251
Depreciation and amortization 4,936 4,604
-------- --------
71,909 77,437
-------- --------
Income before other income (expense)
and provision for income taxes 9,656 6,745
-------- --------
OTHER INCOME (EXPENSE):
Interest income 60 12
Other income, net (15) (19)
Interest expense (5,701) (6,254)
-------- --------
(5,656) (6,261)
-------- --------
Income before provision for income taxes 4,000 484
PROVISION FOR INCOME TAXES 1,560 191
-------- --------
NET INCOME $ 2,440 $ 293
======== ========
EARNINGS PER COMMON SHARE
Basic $ 0.08 $ 0.01
Diluted $ 0.08 $ 0.01
The accompanying notes are an integral part of these condensed
consolidated financial statements.
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
For the
Three Months Ended
June 30,
------------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,440 $ 293
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,936 4,604
Joint venture depreciation and
amortization 1,145 1,308
Loss on disposition of property and
equipment 18 24
Other 70 638
Changes in assets and liabilities:
Accounts and notes receivable 914 (7,879)
Inventories, prepaid expenses and
other current assets (187) 1,830
Income taxes refundable 2,048 3,333
Other assets 7 (829)
Accounts payable and accrued
liabilities (3,153) (2,803)
Other liabilities 20 (201)
-------- --------
Net cash provided by operating
activities 8,258 318
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of property and equipment (2,123) (13,498)
Proceeds from disposal of property and
equipment 24 7,057
Investment in joint venture - (6,390)
-------- --------
Cash used in investing activities (2,099) (12,831)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term
debt 9,000 22,317
Repayments of long-term debt (12,980) (11,386)
Debt issuance cost (164) (122)
-------- --------
Net cash provided by (used in)
financing activities (4,144) 10,809
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,015 (1,704)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 17,223 20,567
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $19,238 $18,863
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 9,280 $10,396
Income taxes paid 2 2
Debt incurred to purchase equipment - 3,905
Note receivable on sale of Mesquite
property - 1,500
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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,
1998. 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 months ended
June 30, 1998, 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 $6,126,000 and $6,674,000
for the three months ended June 30, 1998 and 1997, respectively.
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:
For the Three Months
Ended June 30,
--------------------
(dollars in thousands)
1998 1997
---- ----
Food and beverage $ 4,248 $ 4,860
Other 433 465
------- -------
$ 4,681 $ 5,325
======= =======
Note 3 - Allocated Amounts of Joint Venture
The Company owns a 50% interest in a casino entertainment
facility in Maryland Heights, Missouri (the "Joint Venture").
The investment in the Joint Venture is accounted for using the
equity method of accounting.
Summary condensed financial information for the Joint
Venture is as follows:
For the Three Months
Ended June 30,
--------------------
(dollars in thousands)
1998 1997
---- ----
Net revenues $ 4,914 $ 4,658
Depreciation and amortization 2,328 2,617
Net loss 5,441 6,501
Note 4 - Earnings Per Share
The following table illustrates the computation of
basic and diluted earnings per share:
For the Three Months
Ended June 30,
--------------------
1998 1997
---- ----
Numerator:
Net income $ 2,440,000 $ 293,000
Denominator:
Denominator for basic earnings
per share-
weighted-average shares 31,941,579 31,891,248
Effect of dilutive securities-
stock options 147,286 21,702
----------- -----------
Denominator for diluted
earnings per share-
adjusted weighted-average
shares 32,088,865 31,912,950
=========== ===========
Basic earnings per share $ 0.08 $ 0.01
=========== ===========
Diluted earnings per share $ 0.08 $ 0.01
=========== ===========
Note 5 - Contingencies
The Company is involved in certain litigation regarding the
constitutionality of gaming facilities such as the Company's
Maryland Heights, Missouri (the "Maryland Heights Facility")
located upon artificial basins fed by the Missouri River. An
amendment to the State constitution has been proposed for the
November 1998 ballot. Based on the outcome of the November
referendum and subsequent court proceedings, the possibility
exists that the Company could be forced either to remediate or
close the Maryland Heights Facility. If either of these events
occur, the Company could incur substantial remediation costs or a
substantial write-down in asset values. The amounts involved
cannot be reasonably estimated at this time.
Each cruising riverboat is regulated by the U.S. Coast
Guard. U.S. Coast Guard regulations require that hulls of
vessels of the type being operated by the Company in Lake Charles
and Metropolis be inspected every five years at a U.S. Coast
Guard approved dry docking facility which will cause a temporary
loss of service that could last one month or longer, unless the
U.S. Coast Guard determines that an alternative to dry docking is
acceptable. The next such inspection is scheduled to occur in
the fall of calendar 1998 for the Lake Charles Star Riverboat and
the fall of calendar 2000 for both the Players Lake Charles
Riverboat and the Metropolis Riverboat. Subject to U.S. Coast
Guard approval, the Company is pursuing an underwater onsite
inspection of the hull of the Lake Charles Star Riverboat as an
alternative to dry docking. An underwater hull inspection would
likely involve a minimal disruption in operations, however, no
assurance can be given that dry docking and the related loss of
service will not be required.
The Company and its subsidiaries are defendants in certain
other litigation. In the opinion of management, based upon the
advice of counsel, the aggregate liability, if any, arising from
such other litigation will not have a material adverse effect on
the accompanying consolidated financial statements.
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, 1998 and 1997
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 "Maryland Heights
Facility"). The Company operated a land-based casino resort in
Mesquite, Nevada (the "Mesquite Facility") until June 30, 1997.
The Company also owns and operates a thoroughbred racetrack in
Paducah, Kentucky. The Company's fiscal year ends on March 31st.
References to the first quarter of 1999 or 1998, mean the three
month periods ended June 30, 1998, and June 30, 1997,
respectively.
Results of Operations
Financial Highlights
%Increase/
Three months ended June 30, 1998 1997 (Decrease)
(Dollars in thousands, except per share amounts)
Casino Revenues
Metropolis $ 19,684 $ 18,725 5.1
Lake Charles 36,265 37,337 (2.9)
Maryland Heights 21,075 15,287 37.9
Mesquite - 4,438 (c)
--------- ---------
$ 77,024 $ 75,787 1.6
========= =========
Total Revenues
Metropolis $ 20,473 $ 19,504 5.0
Lake Charles 38,904 39,178 (0.7)
Maryland Heights 21,991 16,582 32.6
Mesquite - 8,700 (c)
Other 197 218 (9.6)
--------- ---------
$ 81,565 $ 84,182 (3.1)
========= =========
Operating Income (Loss)
Metropolis $ 4,767 $ 4,717 1.1
Lake Charles 6,848 6,854 -
Maryland Heights (a) 657 (1,683) 139.0
Mesquite - (690) (c)
Corporate, development,
pre-opening and other (2,616) (2,453) (6.7)
--------- ---------
$ 9,656 $ 6,745 43.1
========= =========
Depreciation and
amortization (b) $ 4,936 $ 4,604 7.2
========= =========
Interest expense $ 5,701 $ 6,254 (8.8)
========= =========
Net income $ 2,440 $ 293 732.8
========= =========
Earnings per share
assuming dilution $ 0.08 $ 0.01 700.0
========= =========
Operating Margin (operating
income/total revenues)
Metropolis 23.3% 24.2% (0.9) pts
Lake Charles 17.6% 17.5% 0.1 pts
Maryland Heights 3.0% (10.1)% 13.1 pts
Mesquite - (7.9)% (c)
Consolidated 11.8% 8.0% 3.8 pts
(a) Amount includes the Company's 50% share of both the Maryland
Heights Joint Venture operating losses and Maryland Heights Joint
Venture depreciation and amortization. In the first quarter of
1999, Player's share of the total loss from investment in the
Maryland Heights Joint Venture was approximately $2.7 million
which consisted of $1.6 million in operating losses and $1.1
million in depreciation and amortization. In the first quarter
of 1998, Player's share of the total loss from investment in the
Maryland Heights Joint Venture was approximately $3.3 million,
which includes $1.3 million of depreciation and amortization.
(b) The first quarter of 1999 and 1998 do not include Player's
share of the Maryland Heights Joint Venture depreciation and
amortization of approximately $1.1 million and $1.3 million,
respectively.
(c) The Mesquite Facility was sold on June 30, 1997.
The 1.6% net increase in casino revenue and 3.1% net
decrease in total revenue in the first quarter of 1999 as
compared to the first quarter of 1998, resulted from significant
revenue growth in the comparable periods at the Maryland Heights
Facility which opened on March 11, 1997. Revenue growth from
this facility offset the absence of any revenues from Mesquite
which was sold on June 30, 1997. The 45.9% decline in food and
beverage, hotel and other revenue in the first quarter of 1999 as
compared to the first quarter of 1998, was primarily attributable
to the absence of Mesquite. In the first quarter of 1999,
Metropolis revenues benefited from the addition of the new dining
and entertainment complex which was placed in service during
December, 1997, and the Lake Charles Facility benefited from the
acquisition of the Lake Charles Holiday Inn which was purchased
by the Company in January, 1998.
The Company's operating income increased 43.1% during the
first quarter of 1999 as compared to the first quarter of 1998.
The increase was due to profitable performance at the Maryland
Heights Facility as compared to the loss experienced in the first
quarter of 1998, its first full quarter of operation.
Substantial revenue growth coupled with continuing cost
reductions were the primary reasons for the operating income
growth in Maryland Heights between the comparable first quarter
periods. The growth in operating income at the Metropolis
Facility more than offset the increase in Illinois gaming taxes
which went into effect on January 1, 1998. In addition, the
first quarter of 1999 benefited from the absence of an operating
loss for Mesquite.
Corporate, development, pre-opening and other expenses
increased 6.7% as a result of approximately $250,000 in legal and
consulting costs incurred during the first quarter of 1999 for
the "boat-in-a-moat" proceedings in the State of Missouri.
Depreciation and amortization expense increased 7.2% in the
first quarter of 1999 as compared to the first quarter of 1998
due to additional depreciation from both the new Metropolis
dining and entertainment complex and the Lake Charles Holiday Inn
acquisition. In addition, depreciation adjustments at the
Maryland Heights Facility for the comparable periods contributed
to the overall increase.
Interest Expense
Interest expense decreased 8.8% in the first quarter of 1999
as compared to the first quarter of 1998 due to reductions in the
Company's bank borrowings and average borrowing rate. The
interest rate decrease resulted from a new $80 million, five year
bank agreement that closed in March, 1998.
Additional Factors Affecting Future Operating Income
Road construction is currently scheduled to begin on U.S.
Interstate 10 in front of the Company's Lake Charles Facility in
August, 1998, and is scheduled to be completed no later than
March, 1999. The construction will result in lanes of U.S.
Interstate 10 being closed for periods of time, although the
Company has been advised that one Eastbound lane and one
Westbound lane will always remain open, permitting access to and
from the casino. The Company cannot determine what effect, if
any, traffic delays caused by road construction may have on
patronage to the facility, although significant delays may
adversely impact patronage and revenues during the construction
period.
Capital Resources and Liquidity
During the three months ended June 30, 1998, cash generated
by operations was used to reduce bank borrowings from $30 million
on March 31, 1998, to $26.5 million on June 30, 1998.
Contingencies
The Company is involved in certain litigation regarding the
constitutionality of gaming facilities (such as the Maryland
Heights Facility) located upon artificial basins fed by the
Missouri River. See Part II, Item 1; W. Todd Akin, et al. v.
Missouri Gaming Commission. Based on the outcome of the November
Referendum and subsequent court proceedings, the possibility
exists that the Company could be forced either to remediate or
close the Maryland Heights Facility. If either of these events
occur, the Company could incur substantial remediation costs or a
substantial write-down in asset values. The amounts involved
cannot be reasonably estimated at this time.
Each cruising riverboat is regulated by the U.S. Coast
Guard. U.S. Coast Guard regulations require that hulls of
vessels of the type being operated by the Company in Lake Charles
and Metropolis be inspected every five years at a U.S. Coast
Guard approved dry docking facility which will cause a temporary
loss of service that could last one month or longer, unless the
U.S. Coast Guard determines that an alternative to dry docking is
acceptable. The next inspection is scheduled to occur in the
fall of calendar 1998 for the Lake Charles Star Riverboat and the
fall of calendar 2000 for both the Players Lake Charles Riverboat
and the Metropolis Riverboat. Subject to U.S. Coast Guard
approval, the Company is pursuing an underwater onsite inspection
of the hull of the Lake Charles Star Riverboat as an alternative
to dry docking. An underwater hull inspection would likely
involve a minimal disruption in operations, however, no assurance
can be given that dry docking and the related loss of service
will not be required.
Forward Looking Information
Certain information included in this section and elsewhere
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, the resolution of pending or threatened litigation
or regulatory proceedings concerning the Company's alleged non-
compliance with Missouri's gaming laws and Constitution, plans
for future riverboat hull inspections, I-10 road construction in
Lake Charles, future borrowing and capital costs, plans for
future expansion and property enhancements, 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, tax regulation, and the
potential for regulatory reform). Forward looking statements can
generally be identified by the use of forward-looking terminology
such as "may", "will", "expect", "intend", "estimate", "believe",
or "continue" or the negative thereof or variations thereon or
similar terminology. 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 of operations. 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 state and local gaming laws and
regulations, development and construction activities, leverage
and debt service requirements (including sensitivity to
fluctuation in interest rates), general economic conditions, the
U.S. Coast Guard's acceptance of underwater hull inspections as
an alternative to dry docking and inspection, changes in federal
and state tax laws, the disruption to Lake Charles operations
caused by road construction, 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. As a
consequence, current plans, anticipated actions, and future
financial condition and results from operations may differ from
those expressed in any forward-looking statements made by or on
behalf of the Company and no assurance can be given that such
statements will prove to be correct.
Item 3. Quantitative and Qualitative Disclosure About Market
Risk.
Not applicable.
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.
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 been
consolidated with the Poulos and Ahern litigation.
These matters are 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 lawsuits 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 and Players Lake Charles, LLC,
subsidiaries of the Company, were 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 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 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 requested certain discovery in
connection with the motions. The Company has also filed a motion
to require Plaintiffs to post security for taxable costs which
may be incurred by the Company, through its insurer, in
connection with this litigation. The Company intends to
vigorously defend this action.
Ceola and Richard Morris v. Players Lake Charles, Inc., et al.
Players Lake Charles, Inc. has been named as a defendant in
a claim in Louisiana State Court for personal injuries filed by
Ceola and Richard Morris. The claim allegedly resulted when a
piece of fret-work aboard the Players Lake Charles Riverboat fell
from the wall and allegedly hit Ms. Morris on the head. Third
party demands and cross claims have been filed on behalf of
Players against Leevac Shipyards, who was responsible for the
construction of the vessel, and its insurer, as well as James
Carpet & Drapery, who actually installed the fret work, and its
insurer. These claims arise from a breach of workmanlike
performance in the construction of the vessel. The Company is in
the process of filing a Motion for Summary Judgment against
Leevac Shipyards on the issue of indemnity. The Company's
primary insurer with respect to this claim, Anglo American
Insurance Company Limited ("Anglo American"), has been placed in
liquidation, which liquidation proceedings are still ongoing. It
is not known whether, at the conclusion of such proceedings,
Anglo American will have sufficient assets remaining to satisfy
and judgment that may be obtained against the Company in this
case, which is currently set for trial on September 8, 1998.
There is a likelihood that this trial date will be continued.
The Company continues to pursue its claim against Anglo American.
W. Todd Akin, et al. v. Missouri Gaming Commission
W. Todd Akin et al. v. Missouri Gaming Commission was filed
in the Circuit Court of Cole County, Missouri, in August of 1996
in order to seek a judicial declaration that the Missouri Gaming
Act is unconstitutional because, allegedly contrary to the
Missouri Constitution, the Missouri Gaming Act permits gaming
facilities (such as the Maryland Heights Facility) to be located
upon artificial basins fed by the Missouri River. The Company
and Harrah's, the Missouri Riverboat Gaming Association and the
City of Maryland Heights intervened in order to protect their
respective interests. 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.
On November 25, 1997, the Missouri Supreme Court ruled that
gaming may occur only in artificial spaces that are contiguous to
the surface stream of the Missouri and Mississippi Rivers. The
case was remanded to the trial court for a factual determination
as to whether those casino operators meet this requirement. The
plaintiffs dismissed their case against the Company after this
ruling but prior to a determination by the trial court on this
issue. A number of Missouri gaming licensees conduct gaming
operations directly on the Missouri and Mississippi rivers and
thus these operators are not expected to be adversely affected by
the implications of the Akin decision.
In January, 1998, the Company was advised by the Missouri
Gaming Commission that it intended to take disciplinary action
against the licenses held by the Company in Maryland Heights for
failure to comply with Missouri law, as modified and interpreted
in the Akin decision, and to revoke the Company's licenses to
conduct games of chance at the Maryland Heights Facility. In
response to this, on January 9, 1998, the Company (and certain
other casino companies) sought and obtained a Preliminary Writ of
Prohibition from the Circuit Court of Cole County, prohibiting
the Missouri Gaming Commission from taking disciplinary action
against such companies. On January 29, 1998, following hearings
on the Petition for Writ of Prohibition, the Circuit Court of
Cole County made its Preliminary Writ of Prohibition permanent,
holding that the companies had a constitutional right to due
process which was violated by the proposed disciplinary actions
of the Missouri Gaming Commission. The Missouri Gaming
Commission appealed that decision granting a Writ of Prohibition
to the Missouri Supreme Court. On May 28, 1998 the Missouri
Supreme Court issued its decision in this case, reversing the
decision of the Circuit Court and quashing the Writ of
Prohibition issued against the Missouri Gaming Commission. The
Court found that because the Missouri Gaming Commission
presumptively had jurisdiction to take disciplinary action
against gaming facilities for failing to comply with state law
location requirements, a Writ of Prohibition was an inappropriate
remedy. The Court held that the companies' objections to
jurisdiction and other components of the proceedings should be
addressed to the agency, and to the courts of appeal should the
companies not prevail before the agency. The Court also held
that the appeal was an effective alternative remedy at law
because the Commission does have the authority to stay any
adverse decision pending the outcome of all appeals, thus
rendering prohibition an inappropriate remedy in the
circumstances.
On June 18, 1998, the Missouri Gaming Commission issued its
Preliminary Orders for Disciplinary Action to the gaming
companies affected by the Akin decision, including the Company.
On July 23, 1998, the Company requested a hearing on the
Preliminary Orders for Disciplinary Action, which stays the
effect of the proposed Preliminary Orders indefinitely and
entitles the Company to a full evidentiary hearing before the
Missouri Gaming Commission's Hearing Officer. There are five
gaming companies in separate locations which received Preliminary
Orders for Disciplinary Action and for whom hearings must be
conducted. The Missouri Gaming Commission has indicated that all
hearings will be conducted prior to any recommended decision
being submitted to the Commission by its Hearing Officer for a
vote of the Commission on final discipline for any facility.
Hearings are anticipated to take several weeks. Discovery is
permitted and it is anticipated that hearings are unlikely to
commence prior to September or October of 1998. Should a
recommendation adverse to the Company be made and adopted by the
Missouri Gaming Commission, the Company may obtain a stay of any
discipline, in order to appeal to the Missouri Court of Appeals,
Western District. Appeals of this type ordinarily take six
months to one year from filing to decision. Further appeal from
any adverse decision of the Missouri Court of Appeals may then be
taken by transfer to the Missouri Supreme Court.
Because of management's belief that the Company is entitled
to clarification of the uncertainty caused by the Akin decision
and the Missouri Gaming Commission's and Attorney General's
interpretation of it, the Company and Harrah's filed suit for a
declaratory judgment in Circuit Court on January 22, 1998. Such
suit seeks a declaration that: (i) the Company's reasonable
reliance upon the prior approval of the Missouri Gaming
Commission of its location prohibits adverse action by the
Commission or Attorney General against the Company on the basis
of the subsequent Akin decision; (ii) the Company, if found not
in compliance to any extent, must be permitted a period of time
within which to remedy any deficiency in its facilities to bring
them into compliance; and (iii) the Company is entitled to be
justly compensated for any financial loss resulting from adverse
actions of the Missouri Gaming Commission or the Attorney General
in enforcing their interpretation of the Akin decision. On
February 23, 1998 the Commission filed its Motion to Dismiss the
Petition for Lack of Ripeness and Failure to Exhaust
Administrative Remedies. On March 26, 1998 arguments were heard
on the Commission's Motion by the Circuit Court. On April 13,
1998 the Circuit Court issued its Order denying the Motions to
Dismiss and requiring an Answer to be filed. Defendants' Answer
to the Petition was filed May 1, 1998 and Plaintiff's Discovery
commenced with Interrogatories and Requests for Production of
Documents on April 16, 1998. While this case involves no
monetary sum, it will be diligently prosecuted by the Company in
order to obtain relief from the uncertainty created by the Akin
decision.
Because of the questions raised, but not answered, in the
Missouri Supreme Court's Akin decision, and because the Company
has not yet had its hearing on the Missouri Gaming Commission's
Preliminary Order for Disciplinary Action, the Company cannot
predict what effect the Missouri Supreme Court's ruling, or any
action of the Attorney General or Missouri Gaming Commission,
will have on the operations at Maryland Heights. At this time,
based on discussions with Missouri legal counsel, management
believes that any potential problem could be remedied through (i)
a public referendum at the November 1998 Missouri election in
order to cure any ambiguity or uncertainty in the law or (ii) the
defenses available to the Company if a lawsuit or administrative
action based on this ruling were to be brought or (iii) remedial
action to the property. The riverboat gaming industry in
Missouri has circulated petitions for signatures of 8% of the
qualified voters in two-thirds of the state's congressional
districts for the purpose of placing on the November 1998
statewide general election ballot a constitutional amendment
authorizing floating facilities within 1,000 feet of the main
channel of the Missouri and Mississippi Rivers. Petition
signatures of over 200,000 voters were submitted to the Secretary
of State July 3, 1998, and are undergoing a verification process
for placement of the constitutional amendment on the November
1998 general election ballot. Such initiative, if approved by
the voters, would terminate all litigation and disciplinary
action described herein. The staff of the Missouri Gaming
Commission has suggested to counsel for the Company that no final
decision of the Missouri Gaming Commission on disciplinary
actions is anticipated prior to the November, 1998 election.
Should the initiative fail, the Company shall pursue its state
administrative remedies before the Missouri Gaming Commission,
judicial review before the courts of appeal, and the Company's
litigation for declaratory judgment, injunction and compensation
for regulatory taking of property described above.
If, subsequent to any judicial or administrative resolution
of any of the foregoing issues, remediation of the Maryland
Heights property were considered, management would, prior to
undertaking any remediation, (i) consult with Harrah's concerning
the alternative means by which to remediate the property and the
terms thereof, including whether the Company in such
circumstances would be contractually obligated to fund any
remediation effort and (ii) individually evaluate whether the
cost of remediation would be justified in light of the projected
future results of the Company's Maryland Heights operations.
Management cannot presently provide any assurance as to whether
the Maryland Heights Facility would be permitted to modify the
facility to comply with any such remediation order or whether the
Company's legal defenses, legislative or electoral avenues or
other means available would be successful to permit continued use
of the facility without interruption. Further, it is unclear, in
the event of a determination of non-compliance, what penalty or
monetary obligation or sanction, if any, including a possible
temporary or permanent closure, could be imposed on the Maryland
Heights Facility or the Company. If the Company could not, or
chose not to, remediate the property and it were closed, the
Company would incur a substantial write-down in asset values
related to the property in addition to the possibility of
incurring substantial losses related to any potential shut-down
or suspension of operations. Such negative impacts may be
offset, in part, by certain tax benefits.
Item 5. Other Information.
TIMELY SUBMISSION OF STOCKHOLDER PROPOSALS
The Securities and Exchange Commission ("SEC") requires
a registrant to give stockholders notice of deadlines for timely
submission of certain types of stockholder proposals that
stockholders wish to present for a vote at a registrant's annual
meeting. These deadlines are set based on certain SEC rules as
they relate to the registrant's annual meeting and proxy
statement mailing dates and relevant provisions of its charter
and by-laws. The Company's Board of Directors has not yet acted to
set a 1998 annual meeting date, but the Company anticipates a proxy
statement mailing date on or about September 17, 1998, for the
Company's 1998 Annual Meeting.
Stockholder proposals submitted outside the process of
Rule 14a-8 under the Securities Exchange Act of 1934, as amended,
must have been received by August 3, 1998, or they will be
considered untimely.
In the event a stockholder did not timely notify the
Company concerning stockholder proposals, the Company will have
the right to exercise its discretionary authority (through the
right conferred upon its proxies) to vote against such
stockholder proposal.
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
SIGNATURE
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 13, 1998 By: /s/ Peter J. Aranow
Peter J. Aranow,
Executive Vice President Finance,
Chief Financial Officer,
Treasurer and Secretary
(Principal Financial Officer)
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