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 September 30, 1999
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 November 12, 1999, there were 32,100,237 shares of the
registrant's Common Stock outstanding, net of treasury stock.
-1-
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30,
1999 and March 31, 1999 3
Condensed Consolidated Statements of Operations for the
Three and Six Months Ended September 30, 1999 and 1998 5
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended September 30, 1999 and 1998 6
Notes to Condensed Consolidated Financial Statements 7
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3.Quantitative and Qualitative Disclosures About Market Risk 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 19
Signature 20
-2-
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements.
- ------------------------------
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
ASSETS
------
September March
30, 31,
1999 1999
--------- --------
(Unaudited)
Current assets:
Cash and cash equivalents $ 35,329 $ 25,687
Accounts receivable, net of allowance
for doubtful accounts of
$392 at September 30, 1999 and
$461 at March 31, 1999 1,579 1,882
Notes receivable - 1,500
Inventories 1,283 1,164
Deferred income tax 3,281 3,281
Prepaid expenses and other current
assets 4,536 2,715
-------- -------
Total current assets 46,008 36,229
-------- -------
Property and equipment, net of
accumulated depreciation and
amortization of $68,759 at
September 30, 1999 and $59,846
at March 31, 1999 223,000 222,437
-------- --------
Intangibles, net of accumulated
amortization of $5,023 at
September 30, 1999 and $4,535 at
March 31, 1999 34,180 34,344
-------- --------
Investment in joint venture 88,586 91,034
Other assets 4,660 5,091
-------- --------
Total assets $396,434 $389,135
======== ========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-3-
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except par value)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September March
30, 31,
1999 1999
------------ ---------
(Unaudited)
Current liabilities:
Current portion of long-term debt $ - $ 541
Accounts payable 4,451 3,627
Accrued liabilities 32,475 31,197
Other liabilities 32,223 19,555
---------- ---------
Total current liabilities 69,149 54,920
---------- ---------
Deferred income tax 2,959 2,959
---------- ---------
Long-term debt, net of current portion 150,000 155,000
---------- ---------
Other long-term liabilities 16,138 16,444
---------- ---------
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- 32,772,337 at September 30, 1999
and 32,704,837 at March 31, 1999 164 163
Additional paid-in capital 133,033 132,666
Treasury stock, at cost; 672,100 shares (7,294) (7,294)
Retained earnings 32,285 34,277
-------- ---------
Total stockholders' equity 158,188 159,812
-------- ---------
Total liabilities and stockholders' equity $396,434 $389,135
======== =========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-4-
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(Unaudited)
For the Three Months For the Six Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
Revenues:
Casino $ 83,494 $ 82,687 $163,749 $159,711
Food and beverage 2,392 2,586 4,734 5,096
Hotel 469 959 963 1,948
Other 1,386 1,021 2,345 2,063
------- -------- -------- --------
87,741 87,253 171,791 168,818
------- -------- -------- --------
Costs and expenses:
Casino 37,464 36,942 73,050 72,305
Food and beverage 1,943 2,209 3,916 4,320
Hotel 192 445 392 842
Other operating expenses 10,711 10,271 20,734 20,874
Selling, general and
administrative 15,431 15,489 30,200 28,945
Corporate and other non-
operating costs 3,421 3,461 7,199 5,798
Allocated amounts of
joint venture 2,673 2,718 5,342 5,439
Jackpot termination fee 13,500 - 13,500 -
Depreciation and
amortization 4,967 4,992 9,838 9,928
------- -------- -------- --------
90,302 76,527 164,171 148,451
------- -------- -------- --------
Income before other income
(expense) and provision for
income taxes (2,561) 10,726 7,620 20,367
Other income (expense):
Interest income 162 220 251 280
Interest expense (4,883) (5,410) (9,859) (11,111)
------- ------- ------- --------
(4,721) (5,190) (9,608) (10,831)
------- ------- ------- --------
Income (loss) before
provision (benefit) for
income taxes (7,282) 5,536 (1,988) 9,536
Provision (benefit) for
income taxes (2,193) 2,159 4 3,719
--------- -------- --------- --------
Net income (loss) $ (5,089) $ 3,377 $ (1,992) $ 5,817
========= ======== ========= ========
Earnings (loss) per
common share
Basic and diluted $ (0.16) $ 0.11 $ (0.06) $ 0.18
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-5-
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
For the Six Months
Ended September 30,
1999 1998
---- ----
Cash flows from operating activities:
Net (loss) income $ (1,992) $ 5,817
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 9,838 9,928
Equity in allocated amounts of joint
venture 2,432 2,432
Loss on disposition of property and
equipment 43 270
Other (69) 318
Changes in assets and liabilities:
Accounts and notes receivable 1,873 1,044
Inventories, prepaid expenses and
other assets (583) (334)
Income taxes (1,372) 4,424
Accounts payable and accrued
liabilities
Other liabilities 2,182 1,923
12,300 37
-------- -------
Net cash provided by operating
activities 24,652 25,859
-------- -------
Cash flows from investing activities:
Purchases of property and equipment (10,620) (4,217)
Proceeds from disposal of property and
equipment 785 34
-------- -------
Net cash used in investing activities (9,835) (4,183)
-------- -------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt 5,000 10,000
Repayments of long-term debt (10,541) (26,974)
Exercise of stock options 366 -
Debt issuance costs - (190)
Other - 1
-------- ---------
Net cash used in financing activities (5,175) (17,163)
--------- --------
Net increase in cash and cash equivalents 9,642 4,513
Cash and cash equivalents at beginning of
period 25,687 17,223
--------- -------
Cash and cash equivalents at end of period $ 35,329 $ 21,736
========= ========
Supplemental cash flow disclosure:
Interest paid $ 10,067 $ 10,815
Income taxes paid $ 2,450 $ 1,529
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-6-
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,
1999. 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 six months ended
September 30, 1999, 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 - Agreement and Plan of Merger
- -------------------------------------
On August 19, 1999, the Company entered into an Agreement
and Plan of Merger with Harrah's Entertainment, Inc. Pursuant
to the terms of the merger agreement, the Company's stockholders
will receive $8.50 in cash per share of the Company's common
stock. The execution of the definitive merger agreement
followed the termination of the previously signed merger
agreement between the Company and Jackpot Enterprises, Inc. after
the Company's Board of Directors determined that the Harrah's
offer constituted a superior proposal to the Jackpot offer. The
$13.5 million termination fee which was required under the
Jackpot merger agreement was paid to Jackpot by Harrah's on
August 19, 1999 and was recorded as a charge to earnings during
the quarter ending September 30, 1999 (See Note 6 - Contingencies-
Jackpot Termination Fee). The stockholders of the Company
approved the merger with Harrah's at a special meeting of the
stockholders held on October 28, 1999. Approximately 81% of the
Company's issued and outstanding shares were represented at the
meeting and more than 99% of those shares were voted in favor of
the merger. The completion of the merger is still subject to the
receipt of regulatory approvals, including the approvals of the
Illinois, Louisiana, Missouri and Kentucky gaming authorities.
After the special meeting, the Company and Harrah's mutually
agreed to extend the date by which the merger must be completed
from October 31, 1999 to January 31, 2000, as contemplated in the
merger agreement. Closing is anticipated around the end of the
calendar year.
Note 3 - Casino Revenues and Promotional Allowances
- ---------------------------------------------------
Casino revenues are the net of gaming wins less gaming
losses. Revenues exclude the retail value of complimentary food
and beverage, hotel accommodations and other items furnished to
customers, which totaled approximately $6.2 million and $5.9
million and $12.0 million and $12.1 million for the three and six
months ended September 30, 1999 and 1998, 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 For the Six Months
Ended September 30, Ended September 30,
(dollars in (dollars in
thousands) thousands)
1999 1998 1999 1998
---- ---- ---- ----
Food and beverage $ 4,268 $ 4,345 $ 8,238 $ 8,593
Other 435 351 849 784
------- ------- ------- -------
$ 4,703 $ 4,696 $ 9,087 $ 9,377
======= ======= ======= =======
-7-
Note 4 - 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 For the Six Months
Ended September 30, September 30,
(dollars in thousands)(dollars in thousands)
1999 1998 1999 1998
---- ---- ---- ----
Net revenues $ 5,588 $ 5,217 $11,133 $10,131
Depreciation and
amortization $ 2,488 $ 2,524 $ 4,864 $ 4,852
Net loss $ 5,346 $ 5,436 $10,684 $10,877
Note 5 - Earnings Per Share
- ----------------------------
The following table illustrates the computation of
basic and diluted earnings (loss) per share:
For the Three Months For the Six Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
Numerator:
Net income (loss) $(5,089,000) $3,377,000 $(1,992,000)$ 5,817,000
Denominator:
Denominator for basic
earnings per share-
weighted-average
shares 32,064,286 31,941,737 32,048,511 31,941,640
Effect of dilutive
securities-stock
options - 138,850 - 143,068
------------ ---------- ---------- ----------
Denominator for diluted
earnings per share-
adjusted weighted-
average shares 32,064,286 32,080,587 32,048,511 32,084,708
=========== ========== ========== ==========
Basic earnings (loss)
per share $ (0.16) $ 0.11 $ (0.06) $ 0.18
========== ========== ========== ==========
Diluted earnings (loss)
per share $ (0.16) $ 0.11 $ (0.06) $ 0.18
========== ========== ========== ==========
Note 6 - Contingencies
- ----------------------
The Company and its subsidiaries are defendants in certain
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 condensed consolidated financial statements.
Louisiana Investigation
In April, 1997, a federal investigation of former Louisiana
Governor Edwin Edwards, his son Stephen Edwards, Richard D.
Shetler and others with respect to their involvement in the
riverboat gaming industry and other matters became public. Upon
learning of the investigation, the Company immediately began
cooperating with the federal authorities. (Stephen Edwards is a
former outside attorney and Richard D. Shetler is a former
consultant to and lobbyist for the Company in Louisiana.) In
August, 1998, the Company was advised in writing by the United
States Attorney that neither the Company nor its current or
former employees were subjects or targets of the federal
investigation. On October 9, 1998, Richard D. Shetler pleaded
guilty to conspiracy to commit extortion of the Company. On
November 6, 1998, a grand jury of the United States District
-8-
Court for the Middle District of Louisiana returned an indictment
against Edwin Edwards, Stephen Edwards, and four other defendants
for matters relating to the riverboat casino industry. The
indictment charges Edwin Edwards and Stephen Edwards with
extorting and conspiring to extort the Company in violation of
the Racketeer Influenced Corrupt Organizations Act and interstate
travel in aid of racketeering. On November 12, 1998, the
defendants pleaded not guilty to the allegations set forth in the
indictment. The Missouri Gaming Commission, the Illinois Gaming
Board and the Louisiana Gaming Control Board are each aware of
and are each investigating the involvement of the Company in the
Shetler and Edwards cases to determine the suitability of the
Company and its subsidiaries for continued licensure. The
Company has and will continue to cooperate with the gaming
regulatory authorities in their investigations.
On August 17, 1999, the Louisiana Gaming Control Board
received and made public a report by the Riverboat Gaming
Division of the Louisiana State Police concerning the
investigation of the Company in relation to the Shetler and
Edwards cases. The report alleges, among other things, that the
Company did not report certain matters to the Louisiana
regulatory authorities and that these actions may provide grounds
for the Louisiana Gaming Control Board to not renew the Company's
licenses or to impose sanctions as a condition of license
renewal. The Louisiana Gaming Control Board took no action on
the report, but a hearing has been scheduled for December 1 and
2, 1999. The Louisiana Gaming Control Board has conditionally
renewed the Company's two licenses, pending the outcome of a
hearing on the report.
Assurances cannot be given that disciplinary action
will not be commenced or that the licenses will be renewed. The
Company is unable at this stage to determine the likely outcome
of these gaming regulatory investigations or estimate the amount
or range of potential loss, if any.
Coushatta Tribe of Louisiana Threatened Civil Action
In June, 1999, the Coushatta Tribe of Louisiana (the
"Tribe") informed the Company of the Tribe's intention to file a
civil suit. In this threatened civil action, it is alleged that
the Company wrongfully attempted to prevent the Tribe from
opening its land-based casino in Louisiana in 1993 and 1994. In
the opinion of management, based upon the advice of counsel, the
Company has committed no wrongdoings, has valid defenses, and
will vigorously defend against any claims advanced by the Tribe.
The Company is unable at this stage to determine if this
threatened civil action will ever be filed, or if it is filed, to
estimate the amount or range of potential loss, if any.
State of Louisiana Sales and Use Tax Assessment
The Company has received Notices of Proposed Tax Due from
the State of Louisiana, Department of Revenue asserting amounts
due for Louisiana General Sales Tax, Louisiana Recovery District
Tax, and Louisiana Tourism Promotion District Tax. The total
amount assessed is approximately $4.3 million, including
approximately $1.5 million in interest. The majority of the tax
due relates to the construction of the entertainment barge in
Lake Charles. The Company believes that this barge and the
materials that became component parts of the barge are exempt
from sales and use tax in Louisiana. In addition, pursuant to
the terms of a certain Mutual Receipt, Release and Subrogation
Agreement, certain third parties agreed to indemnify and defend
the Company against such tax liability. The Company intends to
vigorously enforce such rights of indemnification, if necessary.
Jackpot Termination Fee
As discussed in Note 2 above, the $13.5 million termination
fee required under the Jackpot merger agreement was paid to
Jackpot by Harrah's. The Company must reimburse Harrah's the
entire fee in the following circumstances:
if Harrah's terminates the merger agreement in the event the
Company's board withdraws its recommendation of the Harrah's
transaction or recommends an alternative transaction;
if Harrah's terminates the merger agreement after the
Company receives a superior proposal from a third party;
-9-
if Harrah's terminates the merger agreement in the event of
a material breach of the agreement by the Company; or
if Harrah's terminates the merger agreement in the event of
the revocation of the Company's gaming license in Louisiana or
the imposition of a materially adverse fine in connection with
the Shetler-Edwards matter.
This reimbursement would be in addition to the payment of
the $13.5 million termination fee to Harrah's in the
circumstances specified in the merger agreement.
The Company must reimburse Harrah's for half the $13.5
million termination fee paid by Harrah's to Jackpot if the
expiration date passes and either party chooses to terminate the
merger agreement, or if completion of the merger is permanently
prohibited by a court or governmental entity.
Open Boarding - Illinois
A challenge has been mounted to the recent amendment to the
Illinois law that allows for open boarding at Illinois gaming
facilities and also allows an existing licensee to own more than
10% of a second Illinois owner's license. This amendment
contains an "unseverability" provision, meaning that if any one
portion of the amendment is determined to be invalid, the entire
amendment is deemed invalid. The Company is unable to determine
at this stage whether the pendency of this challenge to the
recent Illinois amendment will affect the receipt of regulatory
approval needed from Illinois gaming authorities for the merger
with Harrah's, as presently contemplated. In addition, if the
amendment is deemed invalid and open boarding ceases, the
financial performance at the Metropolis facility could be
negatively impacted.
-10-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
- ----------------------------------------------------------
The Company owns and operates riverboat gaming and
entertainment facilities. These include one dockside 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 also owns and operates a harness
horseracing track in Paducah, Kentucky. The Company's fiscal
year ends on March 31st. Certain reclassifications have been
made to the financial highlights previously presented to conform
to current classifications.
On August 19, 1999, the Company entered into an Agreement
and Plan of Merger with Harrah's Entertainment, Inc. Pursuant
to the terms of the merger agreement, the Company's stockholders
will receive $8.50 in cash per share of the Company's common
stock. The execution of the definitive merger agreement
followed the termination of the previously signed merger
agreement between the Company and Jackpot Enterprises, Inc. after
the Company's Board of Directors determined that the Harrah's
offer constituted a superior proposal to the Jackpot offer. The
$13.5 million termination fee which was required under the
Jackpot merger agreement was paid to Jackpot by Harrah's. The
stockholders of the Company approved the merger with Harrah's at
a special meeting of the stockholders held on October 28, 1999.
Approximately 81% of the Company's issued and outstanding shares
were represented at the meeting and more than 99% of those shares
were voted in favor of the merger. The completion of the merger
is still subject to the receipt of regulatory approvals,
including the approvals of the Illinois, Louisiana, Missouri and
Kentucky gaming authorities. After the special meeting, the
Company and Harrah's mutually agreed to extend the date by which
the merger must be completed from October 31, 1999 to January 31,
2000, as contemplated in the merger agreement. Closing is
anticipated around the end of the calendar year.
Results of Operations
Comparison of Operating Results for the Three-Month Periods Ended
September 30, 1999 and 1998
References to the second quarter of fiscal 2000 or fiscal
1999, mean the three month periods ended September 30, 1999, and
September 30, 1998, respectively.
Financial Highlights
- --------------------
For the Three Months
Ended September 30,
%Increase/
1999 1998 Decrease
---- ---- ----------
(dollars in thousands,
except per share data)
Casino Revenues
Metropolis $ 24,795 $ 20,545 20.7
Lake Charles 33,230 39,419 (15.7)
Maryland Heights 25,469 22,723 12.1
--------- --------- ------
$ 83,494 $ 82,687 1.0
--------- --------- ------
Total Revenues
Metropolis $ 25,699 $ 21,317 20.6
Lake Charles 35,035 42,002 (16.6)
Maryland Heights 26,665 23,633 12.8
Other 342 301 13.6
--------- --------- ------
$ 87,741 $ 87,253 0.6
--------- --------- ------
Operating Income (Loss)
Metropolis $ 7,881 $ 4,393 79.4
Lake Charles 3,640 8,416 (56.7)
Maryland Heights (a) 3,141 1,813 73.2
Corporate and other (17,223) (3,896) (342.1)
--------- --------- -------
$ (2,561) $ 10,726 (123.9)
--------- --------- -------
-11-
Other Information
Depreciation and
amortization (b) $ 4,967 $ 4,992 (0.5)
Interest expense (net) $ 4,721 $ 5,190 (9.0)
Net income (loss) $ (5,089) $ 3,377 (250.7)
Earnings (loss) per
share assuming dilution$ (0.16) $ 0.11 (245.5)
Operating Margin (operating
income/total revenues) (c)
Metropolis 30.7 % 20.6% 10.1 pts
Lake Charles 10.4 % 20.0% (9.6) pts
Maryland Heights 11.8 % 7.7% 4.1 pts
Consolidated (2.9)% 12.3% (15.2) pts
(a) Amount includes the Company's 50% share of the Maryland
Heights joint venture operating losses, which include
depreciation and amortization. Such joint venture operating
losses were $2.7 million for each of the three months ended
September 30, 1999 and 1998.
(b) Amount excludes the Company's share of the Maryland Heights
joint venture depreciation and amortization of approximately $1.2
million and $1.3 million for the three months ended September 30,
1999 and 1998, respectively, which are included in the joint
venture operating losses as shown above.
(c) The "% Increase/(Decrease)" for operating margins represents
the absolute difference in percentage points (pts) between the
two periods.
Increases in casino revenues and operating income
experienced during the second quarter of fiscal 2000 as compared
to the second quarter of fiscal 1999 were attributable to the
Company's Metropolis and Maryland Heights facilities. Increases
at these facilities were partially offset by decreases at the
Company's Lake Charles facility.
The Company's Metropolis facility showed significant
improvement quarter-over-quarter. The results reflect a full
quarter of dockside gaming as a result of a new law allowing open
boarding at all Illinois casinos that went into effect on June
26, 1999. Other factors affecting the current quarter include
the replacement of approximately 40% of the facility's slot
machines and a reconfiguration of the gaming floor.
The Maryland Heights facility continued its trend of double-
digit revenue growth for the quarter as the St. Louis market
continues to expand. Casino revenues in the St. Louis market
increased 18% during the second quarter of fiscal 2000 as
compared to the prior year period. Also contributing to the
positive variance was an 18% increase in the slot product
available to patrons. On August 16, 1999, the Maryland Heights
facility, along with other casinos in eastern Missouri, began a
state approved, test program allowing continuous boarding on its
riverboats. The program has enhanced customer service by
allowing customers greater access to the facility.
Casino revenues and operating income at the Lake Charles
facility were negatively impacted during the second quarter of
fiscal 2000 by a number of factors including the ongoing road
construction on Interstate 10 ("I-10"), competitive pressures
from the Isle of Capri and Grand Casino - Coushatta facilities,
and concerns over regulatory issues. While the I-10 road
construction has moved east of the facility, signage in the area
encourages both eastbound and westbound travelers to follow
alternate routes. Thus, traffic flow and access to the property
has been impeded. Among other things, over the past year, Grand
Casino - Coushatta has added a 250+ room hotel, two new
restaurants and an additional 30,000 square feet of gaming space
with more than 800 new slot machines. Grand Casino - Coushatta
now operates an approximately 100,000 square foot casino.
-12-
Hotel revenues decreased by approximately $500,000 quarter-
to-quarter due to the November 1998 closure of the former Players
Hotel in Lake Charles. The hotel was demolished to make way for
a 250-space surface parking lot that opened in the first quarter
of fiscal 2000. The Company now operates only one hotel.
Corporate and other expenses during the second quarter of
fiscal 2000 include approximately $14.8 million in merger and
acquisition expenses related to the Company's anticipated merger
with Harrah's Entertainment, Inc. and charges related to the
prior agreement with Jackpot Enterprises, Inc. $13.5 million of
the merger and acquisition expenses relate to the August 19,
1999 payment of a termination fee by Harrah's to Jackpot in
connection with the Company terminating its agreement with
Jackpot. During the second quarter of fiscal 1999 the company
incurred merger and acquisition-related expenses of
approximately $600,000 and legal and consulting expenses related
to the "boat in a moat" proceedings of approximately $150,000.
Net interest expense decreased approximately $469,000 in the
second quarter of fiscal 2000 as compared to the second quarter
of fiscal 1999, primarily due to reductions in the amounts
outstanding under the Company's line of credit.
Comparison of Operating Results for the Six-Month Periods Ended
September 30, 1999 and 1998
References to the first half of fiscal 2000 or fiscal 1999,
mean the six month periods ended September 30, 1999, and
September 30, 1998, respectively.
Financial Highlights
- --------------------
For the Six Months
Ended September 30, %Increase/
1999 1998 Decrease
---- ---- ----------
(dollars in thousands,
except per share data)
Casino Revenues
Metropolis $ 45,856 $ 40,230 14.0
Lake Charles 67,217 75,683 (11.2)
Maryland Heights 50,676 43,798 15.7
--------- --------- ------
$ 163,749 $ 159,711 2.5
--------- --------- ------
Total Revenues
Metropolis $ 47,496 $ 41,790 13.7
Lake Charles 70,852 80,907 (12.4)
Maryland Heights 52,905 45,623 16.0
Other 538 498 8.0
--------- --------- ------
$ 171,791 $ 168,818 1.8
--------- --------- ------
Operating Income (Loss)
Metropolis $ 13,291 $ 9,282 43.2
Lake Charles 9,215 15,421 (40.2)
Maryland Heights (a) 6,506 2,660 144.6
Corporate and other (21,392) (6,996) (205.8)
--------- --------- -------
$ 7,620 $ 20,367 (62.6)
--------- --------- -------
Other Information
Depreciation and
amortization (b) $ 9,838 $ 9,928 (0.9)
Interest expense (net) $ 9,608 $ 10,831 (11.3)
Net income (loss) $ (1,992) $ 5,817 (134.2)
Earnings (loss) per
share assuming dilution$ (0.06) $ 0.18 (133.3)
Operating Margin (operating
income/total revenues) (c)
Metropolis 28.0% 22.2% 5.8 pts
Lake Charles 13.0% 19.1% (6.1) pts
Maryland Heights 12.3% 5.8% 6.5 pts
Consolidated 4.4% 12.1% (7.7) pts
-13-
(a) Amount includes the Company's 50% share of the Maryland
Heights joint venture operating losses, which include
depreciation and amortization. Such joint venture operating
losses were $5.3 million and $5.4 million for the six months
ended September 30, 1999 and 1998, respectively.
(b) Amount excludes the Company's share of the Maryland Heights
joint venture depreciation and amortization of approximately $2.4
million for each of the six months ended September 30, 1999 and
1998, which are included in the joint venture operating losses as
shown above.
(c) The "% Increase/(Decrease)" for operating margins represents
the absolute difference in percentage points (pts) between the
two periods.
Increases in casino revenues and operating income
experienced during the first half of fiscal 2000 as compared to
the first half of fiscal 1999 were attributable to the Company's
Metropolis and Maryland Heights facilities. Increases at these
facilities were partially offset by decreases at the Company's
Lake Charles facility.
The Company's Metropolis facility showed significant
improvement during the first half of fiscal 2000 as compared to
the prior year period. On June 25, 1999, the Governor of
Illinois signed a bill into law allowing dockside gaming for all
Illinois casinos. The Metropolis facility commenced dockside
gaming operations on June 26, 1999. In addition to dockside
gaming for slightly more than three months, a reconfiguration of
the gaming floor plus the introduction of new slot product
during the period contributed to the 17.9% increase in slot
revenue at this facility.
The Maryland Heights facility continued its trend of double-
digit revenue growth for the first half of fiscal 2000 as the
St. Louis market continues to expand. Casino revenues in the
St. Louis market increased 18% during the first half of fiscal
2000 as compared to the prior year period. Slot revenue was the
primary driver for these revenue increases. The Maryland
Heights facility added approximately 144 slot machines during
the first half of fiscal 2000, increasing its slot product to
approximately 1600 units.
Casino revenues and operating income at the Lake Charles
facility were negatively impacted during the first half of
fiscal 2000 by a number of factors including the ongoing road
construction on I-10, competitive pressures from the Isle of
Capri and Grand Casino - Coushatta facilities, and concerns over
regulatory issues. While the I-10 road construction has moved
east of the facility, signage in the area encourages both
eastbound and westbound travelers to follow alternate routes.
Thus, traffic flow and access to the property has been impeded.
Among other things, over the past year, Grand Casino-Coushatta
has added a 250+ room hotel, two new restaurants and an
additional 30,000 square feet of gaming space with more than 800
new slot machines. Grand Casino-Coushatta now operates an
approximately 100,000 square foot casino. In addition, casino
revenues for the six month period ending September 30, 1999,
were also impacted by disruption associated with the demolition
of the former Players Hotel and the construction of a 250-space
surface parking lot on the former hotel site.
Hotel revenues decreased by approximately $1.0 million in
the first half of fiscal 2000 as compared to the prior year
period due to the previously mentioned closure of the former
Players Hotel.
Corporate and other expenses in the first half of fiscal
2000 include approximately $15.3 million in merger and
acquisition expenses related to the Company's anticipated merger
with Harrah's Entertainment, Inc. and charges related to the
prior agreement with Jackpot Enterprises, Inc. $13.5 million of
the merger and acquisition expenses relate to the August 19,
1999 payment of a termination fee by Harrah's to Jackpot in
connection with the Company terminating its agreement with
Jackpot. In addition, a $750,000 charge was incurred in
conjunction with an executive severance arrangement. During the
first half of fiscal 1999, the Company incurred merger and
acquisition-related expenses of approximately $600,000 and legal
and consulting expenses related to the "boat-in-a-moat"
proceedings of approximately $400,000.
Net interest expense decreased approximately $1.2 million in
the first half of fiscal 2000 as compared to the first half of
fiscal 1999, primarily due to reductions in the amounts
outstanding under the Company's line of credit.
-14-
Additional Factors Affecting Future Operating Income
On November 20, 1999, the voters of Calcasieu Parish,
Louisiana will once again vote on whether or not to allow slot
machines at the Delta Downs horse racetrack facility. This issue
was previously defeated in October, 1997. If approved and
companion tax legislation is passed by the Louisiana Legislature,
competition in the Lake Charles market could further intensify.
The Isle of Capri, a competitor of the Company in Lake
Charles, has started construction of an additional 250 unit all-
suite hotel. Construction of this new facility, which would
strengthen the Isle of Capri's competitive position, is
anticipated to be completed in the Fall of 2000.
Hollywood Park, Inc. has indicated its intentions to apply
to the State of Louisiana for a gaming license. It is
anticipated that if this license is issued and the Parish voters
approve the casino, Hollywood Park would build a $150 million
casino complex in Lake Charles, Louisiana.
A challenge has been mounted to the recent amendment to the
Illinois law that allows for open boarding at Illinois gaming
facilities and also allows an existing licensee to own more than
10% of a second Illinois owner's license. This amendment
contains an "unseverability" provision, meaning that if any one
portion of the amendment is determined to be invalid, the entire
amendment is deemed invalid. The Company is unable to determine
at this stage whether the pendency of this challenge to the
recent Illinois amendment will affect the receipt of regulatory
approval needed from Illinois gaming authorities for the merger
with Harrah's, as presently contemplated. In addition, if the
amendment is deemed invalid and open boarding ceases, the
financial performance at the Metropolis facility could be
negatively impacted.
Capital Resources and Liquidity
During the first half of fiscal 2000, cash generated by
operations was used to fund approximately $10.6 million in
capital expenditures and to reduce amounts outstanding under the
Company's line of credit from $5.0 million as of March 31, 1999
to $0 as of September 30, 1999.
Contingencies
Louisiana Investigation
In April, 1997, a federal investigation of former Louisiana
Governor Edwin Edwards, his son Stephen Edwards, Richard D.
Shetler and others with respect to their involvement in the
riverboat gaming industry and other matters became public. Upon
learning of the investigation, the Company immediately began
cooperating with the federal authorities. (Stephen Edwards is a
former outside attorney and Richard D. Shetler is a former
consultant to and lobbyist for the Company in Louisiana.) In
August, 1998, the Company was advised in writing by the United
States Attorney that neither the Company nor its current or
former employees were subjects or targets of the federal
investigation. On October 9, 1998, Richard D. Shetler pleaded
guilty to conspiracy to commit extortion of the Company. On
November 6, 1998, a grand jury of the United States District
Court for the Middle District of Louisiana returned an indictment
against Edwin Edwards, Stephen Edwards, and four other defendants
for matters relating to the riverboat casino industry. The
indictment charges Edwin Edwards and Stephen Edwards with
extorting and conspiring to extort the Company in violation of
the Racketeer Influenced Corrupt Organizations Act and interstate
travel in aid of racketeering. On November 12, 1998, the
defendants pleaded not guilty to the allegations set forth in the
indictment. The Missouri Gaming Commission, the Illinois Gaming
Board and the Louisiana Gaming Control Board are each aware of
and are each investigating the involvement of the Company in the
Shetler and Edwards cases to determine the suitability of the
Company and its subsidiaries for continued licensure. The
Company has and will continue to cooperate with the gaming
regulatory authorities in their investigations.
On August 17, 1999, the Louisiana Gaming Control Board
received and made public a report by the Riverboat Gaming
Division of the Louisiana State Police concerning the
investigation of the Company in relation to the Shetler and
Edwards cases. The report alleges, among other things, that the
Company did not report certain matters to the Louisiana
regulatory authorities and that these actions may provide grounds
for the Louisiana Gaming Control Board to not renew the Company's
licenses or to impose sanctions as a condition of license
renewal. The Louisiana Gaming Control Board took no action on
the report, but a hearing has been scheduled for December 1 and
-15-
2, 1999. The Louisiana Gaming Control Board has conditionally
renewed the Company's two licenses, pending the outcome of a
hearing on the report.
Assurances cannot be given that disciplinary action
will not be commenced or that the licenses will be renewed. The
Company is unable at this stage to determine the likely outcome
of these gaming regulatory investigations or estimate the amount
or range of potential loss, if any.
Coushatta Tribe of Louisiana Threatened Civil Action
In June, 1999, the Coushatta Tribe of Louisiana (the
"Tribe") informed the Company of the Tribe's intention to file a
civil suit. In this threatened civil action, it is alleged that
the Company wrongfully attempted to prevent the Tribe from
opening its land-based casino in Louisiana in 1993 and 1994. In
the opinion of management, based upon the advice of counsel, the
Company has committed no wrongdoings, has valid defenses, and
will vigorously defend against any claims advanced by the Tribe.
The Company is unable at this stage to determine if this
threatened civil action will ever be filed, or if it is filed, to
estimate the amount or range of potential loss, if any.
State of Louisiana Sales and Use Tax Assessment
The Company has received Notices of Proposed Tax Due from
the State of Louisiana, Department of Revenue asserting amounts
due for Louisiana General Sales Tax, Louisiana Recovery District
Tax, and Louisiana Tourism Promotion District Tax. The total
amount assessed is approximately $4.3 million, including
approximately $1.5 million in interest. The majority of the tax
due relates to the construction of the entertainment barge in
Lake Charles. The Company believes that this barge and the
materials that became component parts of the barge are exempt
from sales and use tax in Louisiana. In addition, pursuant to
the terms of a certain Mutual Receipt, Release and Subrogation
Agreement, certain third parties agreed to indemnify and defend
the Company against such tax liability. The Company intends to
vigorously enforce such rights of indemnification, if necessary.
Notice of Violation - Underage Patrons
On September 13, 1999, the Riverboat Gaming Division of the
Louisiana State Police filed a Notice of Violation against
Players Lake Charles, LLC with the Louisiana Gaming Control Board
alleging that more than ten underage patrons had gained access to
the gaming area in each of 1997 and 1998. The matter is not
covered by the administrative fine schedule and no hearing date
has been scheduled. This matter is currently in the early states
of discovery.
The Company is unable at this stage to determine the likely
outcome of this proceeding or estimate the amount or range of
potential loss, if any.
Jackpot Termination Fee
As discussed above, the $13.5 million termination fee required
under the Jackpot merger agreement was paid to Jackpot by
Harrah's. The Company must reimburse Harrah's the entire fee in
the following circumstances:
if Harrah's terminates the merger agreement in the event the
Company's board withdraws its recommendation of the Harrah's
transaction or recommends an alternative transaction;
if Harrah's terminates the merger agreement after the
Company receives a superior proposal from a third party;
if Harrah's terminates the merger agreement in the event of
a material breach of the agreement by the Company; or
if Harrah's terminates the merger agreement in the event of
the revocation of the Company's gaming license in Louisiana or
the imposition of a materially adverse fine in connection with
the Shetler-Edwards matter.
-16-
This reimbursement would be in addition to the payment of
the $13.5 million termination fee to Harrah's in the
circumstances specified in the merger agreement.
The Company must reimburse Harrah's for half the $13.5
million termination fee paid by Harrah's to Jackpot if the
expiration date passes and either party chooses to terminate the
merger agreement, or if completion of the merger is permanently
prohibited by a court or governmental entity.
Year 2000
In its initiative to become Year 2000 compliant, the Company
has conducted a comprehensive review of its hardware, software,
systems relying on embedded chips, and its vendor affiliates.
For purposes of this process, the Company identified five phases
in its Year 2000 Readiness Plan, which include awareness,
assessment, renovation, testing and implementation. The
awareness, assessment and renovation phases are complete and the
Company is now in the process of finalizing testing on systems
that have been deemed compliant by the vendor, yet remain
suspect. All critical operating systems have been updated and
deemed compliant.
The Company is currently in the process of testing its
embedded systems for Year 2000 compliance and performing follow-
up communication with its critical vendors to assess their
respective Year 2000 compliance status. The Company's current
focus is on the testing phase and contingency planning for
critical areas. The Company anticipates completing its testing as
well as its overall Year 2000 readiness by November 30, 1999.
The Company is developing a comprehensive contingency plan
to address alternative solutions for any remaining potential Year
2000 exposure or possible unforeseen system failures. Critical
operating systems are backed up by detailed manual procedures
that are initiated during periods of system malfunctions.
Nonetheless, the Company believes there are a number of external
risk factors that are out of the Company's control, which could
have a material effect on results of operations or financial
position. The most serious of these external risk factors
include, but are not limited to, the failure of utility providers
to continue service (including electricity, gas, water, sewer and
similar services), the disruption of banking services (including
the Company's access to cash and the ability of customers to
access cash through the use of automated teller machines), and
the U.S. Coast Guard imposed waterway closures. Like all other
businesses, the Company's ability to predict the eventual outcome
of the Year 2000 problem is hampered by the breadth and the depth
of the issue and the unprecedented nature of the problem.
However, the Company believes it is taking the necessary steps
within its power to mitigate any potential disruption in
operations and financial losses that could result.
As of September 30, 1999, the Company had either expended or
committed approximately $700,000 on its Year 2000 compliance
efforts and expects to expend no more than $1.0 million in the
aggregate. Estimated completion dates and total costs are
reflective of management's best estimates; however, actual
results could differ.
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 approval and
subsequent closing of the merger between the Company and
Harrah's, the effects of competition, the resolution of pending
or threatened litigation or regulatory proceedings, I-10 road
construction in Lake Charles, dockside gaming in Illinois,
continuous boarding in Missouri, Year 2000 compliance efforts and
costs, the approval of slot machines at horse racetrack
facilities in Calcasieu Parish, the issuance of Louisiana's 15th
gaming license, the outcome of Louisiana sales and use tax
assessment, 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",
-17-
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 the approval and subsequent closing of the merger
between the Company and Harrah's, conducting operations in an
increasingly competitive environment, 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 results of various gaming regulatory authorities'
investigations as to the Company's suitability for continued
licensure, changes in federal and state tax laws, the disruption
to Lake Charles operations caused by road construction, dockside
gaming in Illinois, continuous boarding in Missouri, Year 2000
compliance efforts and costs, the approval of slot machines at
horse racetrack facilities in Calcasieu Parish, the issuance of
Louisiana's 15th gaming license, the outcome of Louisiana sales
and use tax assessment, 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
-18-
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings.
- ----------------------------
Douglas Joseph McNeely v. Showboat Star Partnership, et al.
The Company's Louisiana operating subsidiaries and several
other casino operators (collectively, the "Casino Operators")
have been named in a lawsuit filed on August 13, 1997 by Douglas
J. McNeely in U.S. District Court for the Eastern District of
Louisiana (Civil Action No. 97-2518(B)(4)). In his original and
amended complaints, Mr. McNeely alleges that (1) for at least
approximately 20 years, he has suffered from a psychological
condition that includes "compulsive gambling" as one of its
manifestations, (2) the Casino Operators knew of such condition
after August 15, 1996, (3) after August 15, 1996, the Casino
Operators exploited such condition by enticing and allowing him
to gamble in their casinos, and (4) as a consequence of the
foregoing, Mr. McNeely suffered significant financial and
emotional damages, including direct gambling losses, business
losses, the collapse of his marriage and an unfavorable result in
the distribution of the marital estate in the attendant divorce
action. The Company disputes many of the aspects of Mr.
McNeely's complaint, both as to the facts alleged and the amount
of damages allegedly incurred by Mr. McNeely. In addition, the
Company has raised as a defense Mr. McNeely's failure to follow
the statutory "self-exclusion" process available by the filing of
an affidavit with the Louisiana gaming regulators (La.R.S.
27:60). The Company has now concluded a favorable settlement of
the litigation.
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------
Exhibits filed with this Form 10-Q:
Exhibit No. Exhibit Description
- ----------- -------------------
4.1 Amendment No. 2 to Rights Agreement
10.1 Second Amendment dated as of August 19, 1999, to
Agreement dated as of August 1, 1997, between
Players International, Inc. and John Groom.
27.0 Financial Data Schedule
Reports on Form 8-K filed during the quarter:
On August 19, 1999, a Form 8-K was filed regarding the
Agreement and Plan of Merger with Harrah's Entertainment, Inc.
-19-
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: November 12, 1999 By: /s/ Raymond A. Spera, Jr.
-------------------------
Raymond A. Spera, Jr.
Vice President,
Chief Financial Officer,
Treasurer and Secretary
(Principal Financial Officer)
-20-
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 35329
<SECURITIES> 0
<RECEIVABLES> 1971
<ALLOWANCES> 392
<INVENTORY> 1283
<CURRENT-ASSETS> 46008
<PP&E> 291759
<DEPRECIATION> 68759
<TOTAL-ASSETS> 396434
<CURRENT-LIABILITIES> 69149
<BONDS> 150000
0
0
<COMMON> 164
<OTHER-SE> 158024
<TOTAL-LIABILITY-AND-EQUITY> 396434
<SALES> 0
<TOTAL-REVENUES> 171791
<CGS> 0
<TOTAL-COSTS> 76966
<OTHER-EXPENSES> 87205
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9859
<INCOME-PRETAX> (1988)
<INCOME-TAX> 4
<INCOME-CONTINUING> (1992)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1992)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
1-LA/481163.1
Exhibit 4.1
AMENDMENT NO. 2 TO RIGHTS AGREEMENT
AMENDMENT, dated as of August 19, 1999, to the Rights
Agreement, dated as of January 27, 1997 (the "Rights Agreement"),
between Players International, Inc., a Nevada corporation (the
"Company"), and Interwest Transfer Co., Inc., as Rights Agent
(the "Rights Agent"), as amended to date.
WHEREAS, the Company and the Rights Agent have heretofore
executed and entered into the Rights Agreement;
WHEREAS, pursuant to Section 26 of the Rights Agreement, the
Company and the Rights Agent may from time to time supplement or
amend the Rights Agreement; and
WHEREAS, all acts and things necessary to make this
Amendment a valid agreement, enforceable according to its terms,
have been done and performed, and the execution and delivery of
this Amendment by the Company and the Rights Agent have been in
all respects duly authorized by the Company and the Rights Agent.
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements set forth herein, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. The definition of "Acquiring Person" in Section 1 of
the Rights Agreement is hereby amended by adding the following
additional sentence to the end of such definition:
Notwithstanding the foregoing, neither Volunteer, Inc.,
a Delaware corporation ("Volunteer"), nor Volunteer
Merger Corp., a Nevada corporation and a wholly-owned
subsidiary of Volunteer ("Merger Sub"), shall be deemed
to be an "Acquiring Person" to the extent of the
acquisition by Volunteer or Merger Sub of Common Shares
pursuant to the terms of the Agreement and Plan of
Merger, dated as of August 19, 1999 (the "Merger
Agreement"), by and among the Company, Volunteer and
Merger Sub.
2. The definition of "Section 11(a)(ii) Event" contained
in Section 1 of the Rights Agreement is hereby amended by adding
the following additional sentence to the end of such definition:
Notwithstanding the foregoing, the acquisition by
Volunteer or Merger Sub of Common Shares pursuant to
the terms of the Merger Agreement, the consummation of
the transactions contemplated by the Merger Agreement
and the execution by Volunteer and Merger Sub of the
Merger Agreement with the Company shall not in any case
be deemed to be a "Section 11(a)(ii) Event."
3. The definition of "Section 13 Event" contained in
Section 1 of the Rights Agreement is hereby amended by adding the
following additional sentence to the end of such definition:
Notwithstanding the foregoing, the acquisition by
Volunteer or Merger Sub of Common Shares pursuant to
the terms of the Merger Agreement, the consummation of
the transactions contemplated by the Merger Agreement
and the execution by Volunteer and Merger Sub of the
Merger Agreement with the Company shall not in any case
be deemed to be a "Section 13 Event."
4. Unless otherwise defined herein, the terms used herein
shall have the meanings ascribed to them in the Rights Agreement.
5. This Amendment to the Rights Agreement may be executed
in any number of counterparts. It shall not be necessary that
the signature of or on behalf of each party appears on each
counterpart, but it shall be sufficient that the signature of or
on behalf of each party appears on one or more counterparts. All
counterparts shall collectively constitute a single agreement.
6. Except as expressly set forth herein, this Amendment to
the Rights Agreement shall not by implication or otherwise alter,
modify, amend or in any way effect any of the terms, conditions,
obligations, covenants or agreements contained in the Rights
Agreement, all of which are ratified and affirmed in all respects
and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
PLAYERS INTERNATIONAL, INC.
Attest:
By: /s/ Raymond A. Spera, Jr.
Title: Vice President Finance
INTERWEST TRANSFER CO., INC.
Attest:
By:/s/ Curtis D. Hughes
Title: Vice President
1-LA/481264.2
SECOND AMENDMENT
THIS SECOND AMENDMENT, dated as of August 19, 1999, is
between Players International, Inc. (together with its successors
or assigns, the "Company") and John Groom ("Executive").
W I T N E S S E T H:
WHEREAS, the Company and Executive are parties to an
Agreement dated as of August 1, 1997, as amended on August 31,
1998 (the "Agreement"), and the Company and Executive now wish to
amend the Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable
consideration, the Company and Executive agree as follows:
1. Section 2 is amended in its entirety to read as
follows:
2. Term of Agreement. This Agreement shall
commence on March 1, 1997 and shall continue in effect
through December 31, 2000, provided that if a Change in
Control of the Company occurs during the term of this
Agreement, this Agreement shall automatically continue
in effect for a period of twenty-four months beyond the
month in which such Change in Control occurs.
2. In all respects not amended hereby, the Agreement is
hereby ratified and confirmed.
IN WITNESS WHEREOF, the undersigned have executed this
Second Amendment as of the date first above written.
PLAYERS INTERNATIONAL, INC.
/s/ Raymond A. Spera
Raymond A. Spera
Chief Financial Officer
/s/ John Groom
John Groom
