<PAGE>
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 December 31, 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 (I.R.S. employer identification no.)
incorporation or organization)
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 February 11, 2000, there were 32,286,077 shares of the
registrant's Common Stock outstanding, net of treasury stock.
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
--------------------------------------------
INDEX
-----
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 1999
and March 31, 1999 3
Condensed Consolidated Statements of Operations for the Three
and Nine Months Ended December 31, 1999 and 1998 5
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended December 31, 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 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 19
Signature 20
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
------------ ----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 27,892 $ 25,687
Accounts receivable, net of allowance for doubtful accounts of
$437 at December 31, 1999 and $461 at March 31, 1999 1,606 1,882
Notes receivable - 1,500
Inventories 1,379 1,164
Deferred income tax 3,281 3,281
Income taxes refundable 5,163 634
Prepaid expenses and other current assets 2,373 2,081
-------- --------
Total current assets 41,694 36,229
-------- --------
Property and equipment, net of accumulated depreciation
and amortization of $73,335 at December 31, 1999 and
$59,846 at March 31, 1999 221,040 222,437
-------- --------
Intangibles, net of accumulated amortization of $5,266 at
December 31, 1999 and $4,535 at March 31, 1999 33,937 34,344
-------- --------
Investment in joint venture 87,337 91,034
-------- --------
Other assets 4,501 5,091
-------- --------
Total assets $388,509 $389,135
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except par value)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
------------ --------
(Unaudited)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ -- $ 541
Accounts payable 3,058 3,627
Accrued liabilities 29,939 31,197
Due to Harrah's (Jackpot termination fee) 13,500 --
Other liabilities 17,563 19,555
-------- --------
Total current liabilities 64,060 54,920
-------- --------
Deferred income tax 2,959 2,959
-------- --------
Long-term debt, net of current portion 150,000 155,000
--------- --------
Other long-term liabilities 16,112 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--
32,958,177 at December 31, 1999 and 32,704,837 at
March 31, 1999 165 163
Additional paid-in capital 134,066 132,666
Treasury stock, at cost; 672,100 shares (7,294) (7,294)
Retained earnings 28,441 34,277
-------- --------
Total stockholders' equity 155,378 159,812
-------- --------
Total liabilities and stockholders' equity $388,509 $389,135
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended December 31, Ended December 31,
--------------------- ------------------------
1999 1998 1999 1998
------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Casino $79,859 $78,045 $ 243,608 $ 237,756
Food and beverage 2,167 2,297 6,901 7,393
Hotel 405 591 1,368 2,539
Other 830 839 3,175 2,902
------- ------- --------- ---------
83,261 81,772 255,052 250,590
------- ------- --------- ---------
Costs and expenses:
Casino 36,582 34,404 109,632 106,709
Food and beverage 1,903 2,022 5,819 6,342
Hotel 189 216 581 1,058
Other operating expenses 10,541 10,685 31,275 31,559
Selling, general and administrative 15,624 15,584 45,824 44,529
Corporate and other non-operating costs 3,077 4,117 10,276 9,915
Allocated amounts of joint venture 2,223 2,527 7,565 7,966
Jackpot termination fee - - 13,500 -
Stipulation of settlement 10,200 - 10,200 -
Depreciation and amortization 5,152 5,015 14,990 14,943
------- ------- --------- ---------
85,491 74,570 249,662 223,021
------- ------- --------- ---------
Income (loss) before other income (expense)
and provision (benefit) for income taxes (2,230) 7,202 5,390 27,569
------- ------- --------- ---------
Other income (expense):
Interest income 103 70 354 350
Interest expense (4,864) (5,319) (14,723) (16,430)
------- ------- --------- ---------
(4,761) (5,249) (14,369) (16,080)
------- ------- --------- ---------
Income (loss) before provision (benefit) for
income taxes (6,991) 1,953 (8,979) 11,489
Provision (benefit) for income taxes (3,147) 761 (3,143) 4,481
------- ------- --------- ---------
Net income (loss) $(3,844) $ 1,192 $ (5,836) $ 7,008
======= ======= ========= =======
Earnings (loss) per common share
Basic and diluted $ (0.12) $ 0.04 $ (0.18) $ 0.22
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months
Ended December 31,
--------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (5,836) $ 7,008
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 14,990 14,943
Equity in allocated amounts of joint venture 3,683 3,627
Loss on disposition of property and equipment 49 272
Other (24) 231
Changes in assets and liabilities:
Accounts and notes receivable 1,801 1,067
Inventories, prepaid expenses and other assets (577) 52
Income taxes (4,529) 7,640
Accounts payable and accrued liabilities 2,332 (6,889)
Other liabilities 7,033 (344)
------- -------
Net cash provided by operating activities 18,922 27,607
------- -------
Cash flows from investing activities:
Purchases of property and equipment (13,380) (6,917)
Proceeds from disposal of property and equipment 804 52
------- -------
Net cash used in investing activities (12,576) (6,865)
-------- -------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 5,000 20,000
Repayments of long-term debt (10,541) (36,484)
Exercise of stock options 1,400 --
Debt issuance costs -- (192)
Other -- 257
-------- --------
Net cash used in financing activities (4,141) (16,419)
-------- --------
Net increase in cash and cash equivalents 2,205 4,323
Cash and cash equivalents at beginning of period 25,687 17,223
-------- --------
Cash and cash equivalents at end of period $ 27,892 $ 21,546
======== ========
Supplemental cash flow disclosure:
Interest paid $ 18,714 $ 20,079
Income taxes paid $ 2,434 $ 1,689
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures normally included
in annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules and
regulations. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's Form 10-K for the year ended March 31, 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 nine months ended December 31, 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 stockholders of the Company approved the merger
with Harrah's at a special meeting of the stockholders held on October 28, 1999
and the Missouri Gaming Commission granted regulatory approval on the proposed
transaction on December 15, 1999. The completion of the merger is still subject
to the receipt of regulatory approvals from Illinois and Louisiana. The
Louisiana Gaming Control Board will consider the merger at its meeting on
February 15, 2000 and the Company expects to be on the agenda for the February
22, 2000, Illinois Gaming Board meeting. The Company and Harrah's have agreed
that neither party will exercise its right to terminate the Agreement and Plan
of Merger for failure to consummate the merger by January 31, 2000, until
February 29, 2000.
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 $5.7 million and $5.9 million and $17.7 million and $18.0 million
for the three and nine months ended December 31, 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 Nine Months
Ended December 31, Ended December 31,
------------------ ------------------
(dollars in thousands) (dollars in thousands)
1999 1998 1999 1998
---- ---- ---- ----
Food and beverage $ 4,170 $ 4,014 $12,408 $12,607
Other 418 398 1,267 1,182
------ ------ ------ -------
$ 4,588 $ 4,412 $13,675 $13,789
======= ======== ======= =======
7
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended December 31, Ended December 31,
---------------------- --------------------
(dollars in thousands) (dollars in thousands)
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $ 5,185 $ 5,396 $ 16,318 $ 15,527
Depreciation and amortization $ 2,503 $ 2,393 $ 7,367 $ 7,245
Net loss $ 4,445 $ 5,055 $ 15,129 $ 15,932
</TABLE>
Note 5 - Earnings Per Share
The following table illustrates the computation of basic and diluted
earnings (loss) per share (in thousands, except per share data):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended December 31, Ended December 31,
--------------------- -------------------
1999 1998 1999 1998
----- ------- ---- ----
Numerator:
<S> <C> <C> <C> <C>
Net income (loss) $ (3,844) $ 1,192 $(5,836) $ 7,008
Denominator:
Denominator for basic earnings per share-
weighted-average shares 32,109 31,949 32,069 31,944
Effect of dilutive securities-stock options -- 165 -- 150
--------- -------- ------- -------
Denominator for diluted earnings per share-
adjusted weighted-average shares 32,109 32,114 32,069 32,094
======== ====== ======== ======
Basic earnings (loss) per share $ (0.12) $ 0.04 $ ( 0.18) $ 0.22
======== ====== ======== ======
Diluted earnings (loss) per share $ (0.12) $ 0.04 $ (0.18) $ 0.22
======== ====== ======== ======
</TABLE>
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.
8
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
On December 1, 1999, the Louisiana Gaming Control Board approved a
stipulation of settlement between the Company and the Riverboat Gaming Division,
conditionally renewing the Company's riverboat gaming licenses, and releasing
the Company, its current and most of its former officers, directors and
employees from any liability for the allegations contained in the report of the
Riverboat Gaming Division. The stipulation of settlement is conditioned upon a
change in control of the Company occurring within 150 days, the payment of $10.2
million, and other conditions. The payment, which has been placed in escrow
pending the change in control of the Company pursuant to a separate escrow
agreement, is remedial in nature and is not a fine, penalty or forfeiture. If a
change in control of the Company does not occur within 150 days, the stipulation
of settlement shall be void, the $10.2 million payment shall be returned to the
Company, and a hearing shall be held on the allegations contained in the report
of the Riverboat Gaming Division to determine whether the Company's licenses
shall remain in effect.
Assurances cannot be given that disciplinary action will not be commenced,
that the licenses will be renewed, or that all conditions to existing renewals
will be satisfied. 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.
Notice of Violations - Currency Transaction Reporting
By letter dated November 23, 1999, the Financial Crimes Enforcement
Network of the U.S. Department of Treasury ("FinCEN") advised the Company that
an audit had identified 194 potential violations of the currency reporting
requirement of the Bank Secrecy Act, 31 U.S.C. SS 5311, et seq., for the period
from December 8, 1993 through March 31, 1996, for the Company's riverboat
casinos in Lake Charles, Louisiana. FinCEN's letter noted that the maximum
penalty provided by law for the 194 potential violations approximates $5.4
million. The Company is scheduled to respond in writing to FinCEN's letter on
March 1, 2000, and expects to meet with representatives of that agency
thereafter to review this matter. The Company believes that some of the
transactions identified by FinCEN as potential violations were not, in fact,
violations. In addition, similar FinCEN enforcement actions against other casino
companies have been
9
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
settled for amounts below the maximum penalty permitted by law. If no agreement
is reached between FinCEN and the Company, FinCEN has the power to assess a
civil penalty and to seek to enforce that penalty in federal court. The Company
is unable at this time to determine the likely outcome of this matter or to
estimate the amount or range of potential loss, if any.
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. In addition, any tax due the State of
Louisiana will result in an increase in corresponding sales and use taxes
assessed by Calcasieu Parish. 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
In accordance with the Agreement and Plan of Merger with Harrah's, the
$13.5 million termination fee required under the Company's prior merger
agreement with Jackpot Enterprises, Inc. was paid to Jackpot by Harrah's. The
Company must reimburse Harrah's the entire fee in the following circumstances:
o 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;
o if Harrah's terminates the merger agreement after the Company receives a
superior proposal from a third party;
o if Harrah's terminates the merger agreement in the event of a material
breach of the agreement by the Company; or
o 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. On January
31, 2000, the Company and Harrah's agreed that neither party will exercise its
right to terminate the Agreement and Plan of Merger for failure to consummate
the merger by January 31, 2000, until February 29, 2000.
United States Coast Guard Inspection
The U.S. Coast Guard regulates each cruising riverboat. 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 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 inspections scheduled to
occur are in the fall of calendar 2000 for the Players II Riverboat in
Metropolis and the Players III Riverboat in Lake Charles, and the fall of
calendar 2003 for the Star Riverboat in Lake Charles. The Company is currently
considering several options regarding the upcoming required inspections,
however, no assurances can be given that there will not be a loss of service
related to the potential dry docking of these vessels.
10
<PAGE>
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 stockholders of the Company approved the merger
with Harrah's at a special meeting of the stockholders held on October 28, 1999
and the Missouri Gaming Commission granted regulatory approval on the proposed
transaction on December 15, 1999. The completion of the merger is still subject
to the receipt of regulatory approvals from Illinois and Louisiana. The
Louisiana Gaming Control Board will consider the merger at its meeting on
February 15, 2000 and the Company expects to be on the agenda for the February
22, 2000, Illinois Gaming Board meeting. The Company and Harrah's have agreed
that neither party will exercise its right to terminate the Agreement and Plan
of Merger for failure to consummate the merger by January 31, 2000, until
February 29, 2000.
Results of Operations
Comparison of Operating Results for the Three-Month Periods Ended December 31,
1999 and 1998
References to the third quarter of fiscal 2000 or fiscal 1999, mean the
three month periods ended December 31, 1999, and December 31, 1998,
respectively.
Financial Highlights
<TABLE>
<CAPTION>
For the Three Months
Ended December 31,
--------------------
% Increase/
1999 1998 Decrease
---- ---- ------
(dollars in thousands,
except per share data)
<S> <C> <C> <C>
Casino Revenues
Metropolis $ 24,303 $19,069 27.4
Lake Charles 30,953 34,929 (11.4)
Maryland Heights 24,603 24,047 2.3
-------- ------- ------
$ 79,859 $78,045 2.3
-------- ------- ------
Total Revenues
Metropolis $ 25,101 $19,794 26.8
Lake Charles 32,478 36,750 (11.6)
Maryland Heights 25,521 25,025 2.0
Other 161 203 (20.7)
-------- ------- -------
$ 83,261 $81,772 1.8
-------- ------- -------
Operating Income (Loss)
Metropolis $ 7,271 $ 4,291 69.4
Lake Charles 2,012 5,862 (65.7)
Maryland Heights (a) 2,120 2,002 5.9
Stipulation of settlement (10,200) - n.m.
Corporate and other (3,433) (4,953) 30.7
-------- ------- ------
$ (2,230) $ 7,202 (130.9)
-------- ------- ------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
For the Three Months
Ended December 31,
---------------------
% Increase/
1999 1998 Decrease
---- ----- --------
(dollars in thousands,
except per share data)
<S> <C> <C> <C>
Other Information
Depreciation and amortization (b) $ 5,152 $ 5,015 2.7
Interest expense (net) $ 4,761 $ 5,249 (9.3)
Net income (loss) $(3,844) $ 1,192 (422.5)
Earnings (loss) per share assuming dilution $(0.12) $ 0.04 (400.0)
Operating Margin (operating income/total revenues) (c)
Metropolis 29.0% 21.7% 7.3 pts
Lake Charles 6.2% 16.0% (9.8) pts
Maryland Heights 8.3% 8.0% 0.3 pts
Consolidated (2.7%) 8.8% (11.5)pt
</TABLE>
n.m. - not meaningful
(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 $2.2 million and $2.5 million for the
three months ended December 31, 1999 and 1998.
(b) Amount excludes the Company's share of the Maryland Heights joint venture
depreciation and amortization of approximately $1.3 million and $1.2
million for the three months ended December 31, 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
third quarter of fiscal 2000 as compared to the third 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 continued to show quarter-over-quarter
improvement in casino revenue and operating results. With the removal of
riverboat cruising requirements on June 26, 1999, Illinois riverboats have
experienced casino revenue increases in excess of 30%.
Revenues and operating results at the Maryland Heights facility increased
slightly in the third quarter of fiscal 2000 as compared to the prior year
period. Revenue growth was not as strong as previously experienced partially due
to dockside gaming now being offered at the two Illinois riverboats located in
the St. Louis market.
Casino revenues and operating income at the Lake Charles facility continues
to be negatively impacted during the third 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. With the ongoing I-10 road
construction, 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. In addition, 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. Negative media coverage regarding licensing issues, resulting in
patron concern as to the future of the property (see Contingencies-Louisiana
Investigation) also impacted the property during the third quarter.
Corporate and other expenses decreased approximately $1.5 million in the
third quarter of fiscal 2000 as compared to the prior year quarter. During the
third quarter of fiscal 2000 the Company incurred
12
<PAGE>
merger and acquisition-related expenses of approximately $129,000 as compared to
$1.2 million in the third quarter of fiscal 1999. The third quarter of fiscal
1999 also included legal and consulting expenses related to the "boat in a moat"
proceedings of approximately $458,000.
Included in the third quarter of fiscal 2000 is a charge of $10.2 million
related to a stipulation of settlement with the Louisiana Riverboat Gaming
Division regarding the renewal of the Company's riverboat licenses in Louisiana
(see Contingencies-Louisiana Investigation).
Net interest expense decreased approximately $500,000 in the third quarter
of fiscal 2000 as compared to the third 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 Nine-Month Periods Ended December 31,
1999 and 1998
References to the first nine months of fiscal 2000 or fiscal 1999, mean the
nine-month periods ended December 31, 1999, and December 31, 1998, respectively.
Financial Highlights
- --------------------
<TABLE>
<CAPTION>
For the Nine Months
Ended December 31,
-------------------
%Increase/
1999 1998 Decrease
---- ----- ---------
(dollars in thousands,
except per share data)
<S> <C> <C> <C>
Casino Revenue
Metropolis $70,159 $ 59,299 18.3
Lake Charles 98,170 110,612 (11.2)
Maryland Heights 75,279 67,845 11.0
-------- -------- ------
$243,608 $237,756 2.5
-------- -------- ------
Total Revenues
Metropolis $ 72,597 $ 61,585 17.9
Lake Charles 103,330 117,657 (12.2)
Maryland Heights 78,426 70,649 11.0
Other 699 699 -
-------- -------- ------
$255,052 $250,590 1.8
-------- -------- ------
Operating Income (Loss)
Metropolis $ 20,562 $ 13,573 51.5
Lake Charles 11,227 21,282 (47.3)
Maryland Heights (a) 8,626 4,662 85.0
Jackpot termination fee (13,500) - n.m.
Stipulation of settlement (10,200) - n.m.
Corporate and other (11,325) (11,948) 5.2
-------- -------- ------
$ 5,390 $ 27,569 (80.4)
------- ------- ------
Other Information
Depreciation and amortization (b) $ 14,990 $ 14,943 0.3
Interest expense (net) $ 14,369 $ 16,080 (10.6)
Net income (loss) $(5,836) $ 7,008 (183.3)
Earnings (loss) per share assuming dilution $(0.18) $ 0.22 (181.8)
Operating Margin (operating income/total revenues) (c)
Metropolis 28.3% 22.0% 6.3
Lake Charles 10.9% 18.1% (7.2)
Maryland Heights 11.0% 6.6% 4.4
Consolidated 2.1% 11.0% (8.9)
</TABLE>
n.m. - not meaningful
13
<PAGE>
(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 $7.6 million and $8.0 million for the
nine months ended December 31, 1999 and 1998, respectively.
(b) Amount excludes the Company's share of the Maryland Heights joint venture
depreciation and amortization of approximately $3.7 million and $3.6
million for the nine months ended December 31, 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 revenues and operating income experienced during the first
nine months of fiscal 2000 as compared to the first nine months 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 nine months 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 six months, a reconfiguration of the gaming floor plus the
introduction of new slot product during the period contributed to the 24%
increase in slot revenue at this facility, while table games experienced a
modest 2% gain during the same period.
The Maryland Heights facility continued its trend of double-digit revenue
growth for the first nine months of fiscal 2000 as the St. Louis market
continued to expand. Casino revenues in the St. Louis market, which includes two
Illinois riverboats, increased 17% during the first nine months 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 nine months 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 nine months 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. With the ongoing I-10 road construction, 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
nine month period ending December 31, 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. Negative media
coverage regarding licensing issues, resulting in patron concern as to the
future of the property (see Contingencies-Louisiana Investigation) also impacted
the property during the first nine months of fiscal 2000.
Hotel revenues decreased by approximately $1.2 million in the first nine
months of fiscal 2000 as compared to the prior year period due to the November
1998 closure of the former Players Hotel in Lake Charles. The hotel was
demolished to make way for the previously mentioned 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 in the first nine months of fiscal 2000
decreased approximately $600,000 as compared to the first nine months of fiscal
1999. Included in the first nine months of fiscal 2000 are merger and
acquisition-related expenses of approximately $2.0 million as compared to
approximately $1.8 million in the prior year period. Also included in the first
nine months of fiscal 2000 is a $750,000 charge related to an executive
severance arrangement. In addition, the prior year period included approximately
$865,000 in legal and consulting expenses related to the "boat-in-a-moat"
proceedings in Missouri.
14
<PAGE>
During the first nine months of fiscal 2000, the Company recorded a $13.5
million charge related 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 (see Contingencies-Jackpot Termination Fee).
Included in the first nine months of fiscal 2000 is a charge of $10.2
million related to a stipulation of settlement with the Louisiana Riverboat
Gaming Division regarding the renewal of the Company's riverboat licenses in
Louisiana (see Contingencies-Louisiana Investigation).
Net interest expense decreased approximately $1.7 million in the first nine
months of fiscal 2000 as compared to the first nine months of fiscal 1999,
primarily due to reductions in the amounts outstanding under the Company's line
of credit.
Additional Factors Affecting Future Operating Income
A challenge has been mounted to the recent amendment to the Illinois law
that among other provisions, allows for continuous dockside gaming 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. Although the specific
provisions being challenged are related to issues other than dockside gaming or
the 10% ownership limitation on a second license, 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 dockside
gaming ceases, the financial performance at the Metropolis facility could be
negatively impacted.
On November 20, 1999, the voters of Calcasieu Parish, Louisiana approved
slot machines at Delta Downs horse racetrack facility. If companion tax
legislation is approved by the Louisiana legislature and slot machines are
installed at the racetrack, the Company's competitive position could be
weakened, as the racetrack facility is located between the Texas border and Lake
Charles, Louisiana.
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 intention to apply to the State of
Louisiana for a gaming license. It is anticipated that if this license is issued
and the Calcasieu Parish voters approve the casino, Hollywood Park would build a
$200 million casino complex in Lake Charles, Louisiana.
Capital Resources and Liquidity
During the first nine months of fiscal 2000, cash generated by operations
was used to fund approximately $13.4 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 December 31, 1999. During January 2000, the
Company's line of credit was used to partially fund a $12.8 million payment
related to the Patron Fee Buy-Out Agreements (see March 31, 1999 Form 10-K) and
the final $5.1 million payment related to the Stipulation of Settlement (see
Contingencies-Louisiana Investigation). As of February 2, 2000, there was $8.0
million outstanding on the Company's line of credit.
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
15
<PAGE>
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.
On December 1, 1999, the Louisiana Gaming Control Board approved a
stipulation of settlement between the Company and the Riverboat Gaming Division,
conditionally renewing the Company's riverboat gaming licenses, and releasing
the Company, its current and most of its former officers, directors and
employees from any liability for the allegations contained in the report of the
Riverboat Gaming Division. The stipulation of settlement is conditioned upon a
change in control of the Company occurring within 150 days, the payment of $10.2
million, and other conditions. The payment, which has been placed in escrow
pending the change in control of the Company pursuant to a separate escrow
agreement, is remedial in nature and is not a fine, penalty or forfeiture. If a
change in control of the Company does not occur within 150 days, the stipulation
of settlement shall be void, the $10.2 million payment shall be returned to the
Company, and a hearing shall be held on the allegations contained in the report
of the Riverboat Gaming Division to determine whether the Company's licenses
shall remain in effect.
Assurances cannot be given that disciplinary action will not be commenced,
that the licenses will be renewed, or that all conditions to existing renewals
will be satisfied. 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.
Notice of Violations - Currency Transaction Reporting
By letter dated November 23, 1999, the Financial Crimes Enforcement Network
of the U.S. Department of Treasury ("FinCEN") advised the Company that an audit
had identified 194 potential violations of the currency reporting requirement of
the Bank Secrecy Act, 31 U.S.C. SS 5311, et seq., for the period from December
8, 1993 through March 31, 1996, for the Company's riverboat casinos in Lake
Charles, Louisiana. FinCEN's letter noted that the maximum penalty provided by
law for the 194 potential violations approximates $5.4 million. The Company is
scheduled to respond in writing to FinCEN's letter on March 1, 2000, and expects
to meet with representatives of that agency thereafter to review this matter.
The Company believes that some of the transactions identified by FinCEN as
potential violations were not, in fact, violations. In addition, similar FinCEN
enforcement actions against other casino companies have been settled for amounts
below the maximum penalty permitted by law. If no agreement is reached between
FinCEN and the Company, FinCEN has the power to assess a civil penalty and to
seek to enforce that penalty in federal court. The Company is unable at this
time to determine the likely outcome of this matter or to estimate the amount or
range of potential loss, if any.
16
<PAGE>
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. In addition, any tax due the State of
Louisiana will result in an increase in corresponding sales and use taxes
assessed by Calcasieu Parish. 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
In accordance with the Agreement and Plan of Merger with Harrah's, the
$13.5 million termination fee required under the Company's prior merger
agreement with Jackpot Enterprises, Inc. was paid to Jackpot by Harrah's. The
Company must reimburse Harrah's the entire fee in the following circumstances:
o 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;
o if Harrah's terminates the merger agreement after the Company receives a
superior proposal from a third party;
o if Harrah's terminates the merger agreement in the event of a material
breach of the agreement by the Company; or
o 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. On January 31, 2000,
the Company and Harrah's agreed that neither party will exercise its right to
terminate the Agreement and Plan of Merger for failure to consummate the merger
by January 31, 2000, until February 29, 2000.
United States Coast Guard Inspection
The U.S. Coast Guard regulates each cruising riverboat. 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 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 inspections scheduled to
occur are in the fall of calendar 2000 for the Players II Riverboat in
Metropolis and the Players III Riverboat in Lake Charles, and the fall of
calendar 2003 for the Star Riverboat in Lake Charles. The Company is currently
considering several options regarding the upcoming required inspections,
however, no assurances can be given that there will not be a loss of service
related to the potential dry docking of these vessels.
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
17
<PAGE>
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, the outcome of the state and parish sales and use
tax assessments, the outcome of the Currency Transaction Reporting violations,
the U.S. Coast Guard inspections, 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 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, the
outcome of state and parish sales and use tax assessments, the outcome of the
Currency Transaction Reporting violations, the U.S. Coast Guard inspections,
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
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On October 28, 1999, a Special Meeting of Stockholders was held to:
1. approve and adopt the Agreement and Plan of Merger, dated as of August
19, 1999, among Players, Harrah's Entertainment, Inc. and HEI
Acquisition Corp. II, a Nevada corporation and wholly-owned subsidiary
of Harrah's and approve the merger of HEI Acquisition Corp. II with
and into Players as provided for in the agreement; and
2. to consider and vote upon a proposal to grant the Players board of
directors the discretionary authority to postpone or adjourn the
special meeting in order to solicit additional votes to approve any
matter set forth in paragraph (1) above if the Secretary of Players
determined that there were not sufficient votes to approve any such
matter.
There were 25,907,087 votes cast for, 36,441 votes cast against and 54,230
abstentions cast regarding Proposal No. 1. There were 23,611,470 votes cast for,
2,227,180 votes cast against and 159,108 abstentions cast regarding Proposal No
2.
Item 6. Exhibits and Reports on Form 8-K
Exhibits filed with this Form 10-Q:
Exhibit No. Exhibit Description
----------- -------------------
10.1 Amendment to Purchase Agreement dated December 30, 1999,
between Karl E. Boellert and Players Lake Charles, LLC
27.0 Financial Data Schedule
Reports on Form 8-K filed during the quarter:
On December 15, 1999, a Form 8-K was filed regarding the December 1, 1999,
stipulation of settlement with the Louisiana Gaming Control Board regarding the
renewal of the Company's riverboat licenses.
19
<PAGE>
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: February 11, 2000 By: /s/ Raymond A. Spera, Jr.
-------------------------------
Raymond A. Spera, Jr.
Vice President, Chief Financial Officer,
Treasurer and Secretary
(Principal Financial Officer)
20
<PAGE>
EXHIBIT 10.1
AMENDMENT TO PURCHASE AGREEMENT
This Amendment to Purchase Agreement is made as of December 30,
1999, by and between:
KARL E. BOELLERT, a person of the age of majority and domiciled
in Calcasieu Parish, Louisiana, whose mailing address is P.O. Box 4385, Lake
Charles, Louisiana 70606-4385 (the "Individual"); and
PLAYERS LAKE CHARLES, LLC (successor in interest to Players Lake
Charles, Inc.), a Louisiana limited liability company ("Players"), herein
represented by Players Lake Charles Riverboat, Inc., its duly authorized
managing member, which appears herein by and through John Groom, its duly
authorized president, whose mailing address is 2333 Broad Street, Lake Charles,
Louisiana 70601.
BACKGROUND
A. Pursuant to the terms of that certain Purchase Agreement dated as
of March 1, 1999, by and between Players and the Individual (the "Purchase
Agreement"), Players has offered to purchase from the Individual and the
Individual has agreed to sell and convey to Players the Boellert Payment
Interest (as that term is defined in the Purchase Agreement), all subject to the
terms and conditions of the Purchase Agreement. All terms used herein shall have
the meaning ascribed to them in the Purchase Agreement unless the context
clearly requires otherwise.
B. Players and Boellert desire to amend certain provisions of the
Purchase Agreement to provide, among other things, for the acceleration of a
certain portion of the purchase price in consideration of an extension of the
Closing Date, all in accordance with the terms of this Amendment.
NOW, THEREFORE, in consideration of the foregoing, the mutual
promises contained herein, and other good and valuable consideration, the
receipt and legal sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
1. Incorporation of Background. The Background provisions above are
incorporated herein by this reference as if set forth at length. Players and the
Individual hereby acknowledge the truth and accuracy of the Background
provisions.
2. Amendment to Certain Provisions of the Purchase Agreement.
(a) Paragraph 2 of the Purchase Agreement shall be deleted and in its
place the following shall be substituted:
2. Purchase and Sale of Boellert Payment Interest. On or before
February 29, 2000, Players shall purchase from the Individual, and the
Individual shall sell to Players the Boellert Payment Interest. Players
shall provide the Individual with at least two (2) days' notice of the
date of the closing of such transactions (the "Closing Date").
(b) The first sentence of Paragraph 3 of the Purchase Agreement shall
be deleted and in its place the following shall be substituted:
<PAGE>
3. Purchase Price. In consideration of the purchase of the Boellert
Payment Interest, on the Closing Date, Players shall purchase a fixed
annuity contract for the benefit of the Individual (the "Annuity"),
which Annuity shall provide for monthly payments in the amounts and at
the times provided below:
(c) Paragraph 4 of the Purchase Agreement shall be deleted and in its
place the following shall be substituted:
4. Release and Non-Compete Agreement. In consideration of the purchase
of the Annuity, the Individual shall execute and deliver to Players a
Release and Non-Compete Agreement in substantially the form attached
hereto as Exhibit "A" (the "Release and Non-Compete Agreement").
(d) Paragraph 7 of the Purchase Agreement shall be deleted and in its
place the following shall be substituted:
7. Time of Closing; Closing Deliveries. Closing of the purchase and
sale of the Boellert Payment Interest ("Closing") shall take place on
the Closing Date at a time and a place mutually convenient to the
parties. At Closing, Players shall deliver to the Individual evidence
of the purchase of the Annuity and the opinion of a tax adviser as
referenced in paragraph 3, above, and the Individual shall deliver to
Players the Release and Non-Compete Agreement.
(e) Exhibit "A" to the Purchase Agreement shall be deleted and in its
place shall be substituted the form of Release and Non-Compete Agreement
attached hereto as Exhibit "A".
3. Status of Conditions Precedent; Representation of the Individual.
Players and the Individual acknowledge that in response to the request of
Players' counsel seeking Regulatory Approval of the Transactions from the Board,
the Board's attorney, William J. Quinlan, Jr., Assistant Attorney General,
provided a letter to Players' counsel indicating that while the Board would not
render any opinion regarding the proposed Transactions, the Board would not use
a failure to obtain approval as a basis for regulatory action against any
disclosed party to the agreements. Players has determined that this statement
satisfies the requirement for Regulatory Approval contained in Paragraph 5 of
the Purchase Agreement. The Individual represents to Players that there are no
third parties with any interest in the Purchase Agreement, or the Individual's
right to receive payments thereunder and acknowledges that such representation
is a material representation on which Players is entitled to rely in proceeding
to Closing.
2
<PAGE>
4. Consideration for Amendment. In consideration of the Individual's
agreement to amend the Purchase Agreement, including the extension of the
Closing Date provided for herein, on or before December 31, 1999, Players shall
pay to the Individual the sum of One Hundred Thousand and No/100 Dollars
($100,000.00) (the "Extension Consideration") in immediately available funds.
5. Limitation on Modifications. Except as specifically amended hereby,
all terms contained in the Purchase Agreement shall remain in full force and
effect.
6. Counterparts. This Amendment may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
before the undersigned, competent witnesses, and the notaries shown below, as of
the date first above written.
s/s Karl E. Boellert
--------------------
Karl E. Boellert
WITNESSES:
___________________________
___________________________
__________________________________________
Notary Public
ATTEST:
PLAYERS LAKE CHARLES, LLC
By: Players Lake Charles Riverboat, Inc.,
Managing Member
____________________________ By: s/s Raymond A. Spera
--------------------
Raymond A. Spera
____________________________
__________________________________________
Notary Public
3
<PAGE>
EXHIBIT "A"
RELEASE AND NON-COMPETE AGREEMENT
This Release and Non-compete Agreement is made on the _____ day of
__________, 2000, by and between KARL E. BOELLERT, an individual (the
"Individual") and Players Lake Charles, LLC (successor in interest to Players
Lake Charles, Inc.), a Louisiana limited liability company ("Players").
BACKGROUND
A. Pursuant to the terms of that certain Purchase Agreement dated as
of the 1st day of March, 1999, by and between Players and the Individual, as
amended by that certain Amendment to Purchase Agreement dated as of the ___ day
of December, 1999 (collectively, the "Purchase Agreement"), Players offered to
purchase from the Individual and the Individual agreed to sell and convey to
Players, the "Boellert Payment Interest" (as that term is defined in the
Purchase Agreement) arising under that certain Settlement Agreement dated as of
the 27th day of July, 1995, by and among Players Lake Charles, Inc. (predecessor
in interest to Players) and certain other parties (the "Settlement Agreement"),
all subject to the terms and conditions of the Purchase Agreement.
B. The Individual is entering into this Agreement with Players in
consideration of its receipt of the consideration stated in the Purchase
Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual
promises contained herein, and other good and valuable consideration, the
receipt and legal sufficiency of which is hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
1. Incorporation of Background. The Background provisions above are
incorporated herein by this reference as if set forth at length. Players and the
Individual hereby acknowledge the truth and accuracy of the Background
provisions.
2. Acknowledgment of Receipt of Funds. The Individual acknowledges
that on even date herewith, the Individual received from Players (i) the
Extension Consideration (as that term is defined in the Purchase Agreement) and
(ii) evidence of Players' purchase of the Annuity (as that term is defined in
the Purchase Agreement), in full and complete satisfaction of Players'
obligations under the Purchase Agreement.
3. Release.
(a) In full and complete settlement of (i) any and all
obligations of Players to the Individual (and any party claiming under the
Individual) arising under or out of the Settlement Agreement and (ii) any claims
that the Individual may have against
4
<PAGE>
Players, and for and in consideration of the undertakings of Players described
herein and in the Purchase Agreement, including the payment of the Extension
Consideration and the purchase of the Annuity, the Individual does hereby
REMISE, RELEASE AND FOREVER DISCHARGE Players, its affiliates and assigns,
directors, shareholders, partners, employees and agents, and their respective
successors and assigns, heirs, executors and administrators (hereinafter all
included within the term "Players Parties"), of and from any and all manner of
actions and causes of actions, suits, debts, claims and demands whatsoever at
law or in equity, which it ever had, now has, or hereafter may have, or which
its heirs, executors, administrators, successors or permitted assigns hereafter
may have, by reason of any action, matter, cause or thing whatsoever from the
beginning of time to the date of execution hereof; and particularly, but without
limitation of the foregoing general terms, any claims arising from or relating
in any way to the Settlement Agreement and the Purchase Agreement, including but
not limited to, any claims which have been asserted, could have been asserted,
or could be asserted now or in the future under any federal, state or local
laws, and any common law claims now or hereafter recognized and all claims for
counsel fees and costs, and any claims relating in any way to the Settlement
Agreement or the Purchase Agreement. Notwithstanding the foregoing, nothing
contained in this Paragraph 3(a) shall be deemed to limit the enforceability of
any provision of this Agreement.
(b) In full and complete settlement of (i) any and all
obligations of the Individual to Players (and any party claiming under Players)
arising under or out of the Settlement Agreement and (ii) any claims that
Players may have against the Individual, and for and in consideration of the
undertakings of the Individual described herein and in the Purchase Agreement,
Players does hereby REMISE, RELEASE AND FOREVER DISCHARGE the Individual, its
heirs, executors and administrators (hereinafter all included within the term
"the Individual Parties"), of and from any and all manner of actions and causes
of actions, suits, debts, claims and demands whatsoever at law or in equity,
which it ever had, now has, or hereafter may have, or which its heirs,
executors, administrators, successors or permitted assigns hereafter may have,
by reason of any action, matter, cause or thing whatsoever from the beginning of
time to the date of execution hereof; and particularly, but without limitation
of the foregoing general terms, any claims arising from or relating in any way
to the Settlement Agreement and the Purchase Agreement, including but not
limited to, any claims which have been asserted, could have been asserted, or
could be asserted now or in the future under any federal, state or local laws,
and any common law claims now or hereafter recognized and all claims for counsel
fees and costs, and any claims relating in any way to the Settlement Agreement
or the Purchase Agreement. Notwithstanding the foregoing, nothing contained in
this Paragraph 3(b) shall be deemed to limit the enforceability of any provision
of this Agreement.
4. Covenant Not to Sue. The Individual and Players further agree and
covenant that, except as may be necessary to enforce their respective rights
hereunder, neither will, directly or indirectly, file, charge, claim, sue or
cause or permit to be filed, charged or claimed, any action for damages,
including injunctive, declaratory, monetary or other relief against the other,
involving any matter occurring at any time in the past up
5
<PAGE>
to the date hereof in connection with the Individual or Players, as the case may
be, or involving any continuing effects of any actions or practices which may
have arisen or occurred prior to the date hereof. The Individual and Players
further agree and covenant that should either of them, directly or indirectly,
file, charge, claim, sue or cause or permit to be filed, charged or claimed, any
action for damages, including injunctive, declaratory, monetary or other relief,
in each case as prohibited by the preceding sentence, despite such party's
agreement not to do so hereunder, then such breaching party will repay to the
other all amounts (or the value of benefits) paid hereunder, and pay all of the
costs and expenses of the nonbreaching party (including reasonable attorneys'
fees) incurred in the defense of any such action or undertaking.
5. Covenant Not to Compete. The Individual hereby agrees that for a
term of two (2) years, it shall not, directly or indirectly (individually or
for, with or through any other person, firm, joint venture, corporation or other
entity), carry on or engage in any casino gaming business within Calcasieu
Parish, or solicit customers of Players within Calcasieu Parish; provided,
however, that subject to the terms of this Paragraph 5, nothing contained herein
shall limit the ability of the Individual to distribute, own or operate, or to
provide services to any manufacturer, distributor, or operator of, "Video Draw
Poker Devices" as that term is defined in La.R.S. 33:4862.1(B)(15) ("VDPDs").
The phrase "carry on or engage in any casino gaming business within Calcasieu
Parish" shall mean being or acting, in any capacity (whether legal or
beneficial), as an owner, landlord of, broker of or for, operator, employee,
agent, consultant, lobbyist, spokesperson or representative of the interests of
any person, firm, joint venture, corporation or other entity engaged in, or
preparing to engage in, gaming operations or other casino gaming enterprises
within the geographical boundaries of Calcasieu Parish (any such person, firm,
joint venture, corporation or other entity being referred to as a "Calcasieu
Gaming Operator"). Notwithstanding the provisions of the first sentence of this
Paragraph 5, and as a limited specific exception thereto, any party may (i) own
or operate VDPDs, so long as the subject VDPDs are not owned or operated,
directly or indirectly, with, for or on behalf of any Calcasieu Gaming Operator,
and (ii) distribute VDPDs, or provide services to any person or entity who
manufactures, distributes, or operates VDPDs, so long as such distributee or
recipient of such services is not, now or in the future, a Calcasieu Parish
Operator. If, after the execution of this Agreement, any party hereto is engaged
in the distribution of VDPDs or the provision of services to any person or
entity who manufactures, distributes, or operates VDPDs, and such distributee or
recipient of services becomes a Calcasieu Parish Operator, such party(ies) shall
immediately cease its(their) association with such Calcasieu Parish Operator to
the extent of such Calcasieu Parish Operator's activities in Calcasieu Parish.
6. Indemnification.
(a) The Individual agrees to indemnify, hold harmless and
defend Players, and the Players Parties, from and against any losses,
liabilities, damages, charges, expenses, costs (including, without limitation,
attorneys' fees, court costs and other legal costs and expenses), penalties,
fines, injunctions, suits, claims, judgments,
6
<PAGE>
or demands suffered by or made against or imposed at any time upon any of the
Players Parties, directly or indirectly, arising as a result of or in connection
with its breach of any term of this Agreement, including its violation of any of
the terms and conditions of Paragraphs 4 or 5 of this Agreement. If Players
shall incur any fees, costs, expenses, or charges (including, without
limitation, attorneys' fees, court costs and other legal costs or expenses) in
order to enforce the terms of this Agreement, the Individual agrees to pay
directly, or at Players' option to reimburse Players for, such fees, costs, and
expenses no later than thirty (30) days after receiving written notice of said
fees, costs, expenses, or charges.
(b) Players agrees to indemnify, hold harmless and defend the
Individual, and the Individual Parties, from and against any losses,
liabilities, damages, charges, expenses, costs (including, without limitation,
attorneys' fees, court costs and other legal costs and expenses), penalties,
fines, injunctions, suits, claims, judgments, or demands suffered by or made
against or imposed at any time upon any of the Individual Parties, directly or
indirectly, arising as a result of or in connection with its breach of any term
of this Agreement, including its violation of any of the terms and conditions of
Paragraph 4 of this Agreement. If the Individual shall incur any fees, costs,
expenses, or charges (including, without limitation, attorneys' fees, court
costs and other legal costs or expenses) in order to enforce the terms of this
Agreement, Players agrees to pay directly, or at the Individual's option to
reimburse the Individual for, such fees, costs, and expenses no later than
thirty (30) days after receiving written notice of said fees, costs, expenses,
or charges.
7. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein.
8. Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Release
and Non-compete Agreement as of the date first above written.
s/s Karl E. Boellert
--------------------
Karl E. Boellert
WITNESSES:
- ---------------------------
- ---------------------------
------------------------------------------
Notary Public
[SIGNATURES CONTINUE ON NEXT PAGE]
7
<PAGE>
ATTEST:
PLAYERS LAKE CHARLES, LLC
By: Players Lake Charles Riverboat, Inc.,
Managing Member
By: s/s Raymond A. Spera
- ---------------------------- --------------------
Raymond A. Spera
- ----------------------------
------------------------------------------
Notary Public
8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 27,892
<SECURITIES> 0
<RECEIVABLES> 2,043
<ALLOWANCES> 437
<INVENTORY> 1,379
<CURRENT-ASSETS> 41,694
<PP&E> 294,375
<DEPRECIATION> 73,335
<TOTAL-ASSETS> 388,509
<CURRENT-LIABILITIES> 64,060
<BONDS> 150,000
0
0
<COMMON> 165
<OTHER-SE> 155,213
<TOTAL-LIABILITY-AND-EQUITY> 388,509
<SALES> 0
<TOTAL-REVENUES> 255,052
<CGS> 0
<TOTAL-COSTS> 116,032
<OTHER-EXPENSES> 133,630
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,723
<INCOME-PRETAX> (8,979)
<INCOME-TAX> (3,143)
<INCOME-CONTINUING> (5,836)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,836)
<EPS-BASIC> (.18)
<EPS-DILUTED> (.18)
</TABLE>
