SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-5440
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AZTAR CORPORATION
- - ---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 86-0636534
- - ----------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2390 East Camelback Road, Suite 400, Phoenix, Arizona 85016
- - --------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 381-4100
----------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
----- -----
At July 28, 1994, the registrant had outstanding 37,374,666 shares of
its common stock, $.01 par value.
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Page
----
Consolidated Balance Sheets at June 30, 1994 and
December 30, 1993 3
Consolidated Statements of Operations for the quarters
and six months ended June 30, 1994 and July 1, 1993 5
Consolidated Statements of Cash Flows for the six months
ended June 30, 1994 and July 1, 1993 7
Consolidated Statements of Shareholders' Equity for the
six months ended June 30, 1994 and July 1, 1993 9
Notes to Consolidated Financial Statements 10
2
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
---------------------------------------
(in thousands, except share data)
June 30, December 30,
1994 1993
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 30,258 $ 39,551
Accounts receivable, net 19,228 19,170
Refundable income taxes 31 2,062
Inventories 5,445 5,564
Prepaid expenses 8,792 9,206
Deferred income taxes 6,512 6,566
---------- ----------
Total current assets 70,266 82,119
Investments in and advances to
unconsolidated partnership 13,149 13,776
Other investments 23,393 22,131
Property and equipment:
Buildings and equipment, net 646,782 648,139
Land 81,795 81,795
Construction in progress 17,053 6,701
Leased under capital leases, net 901 1,043
---------- ----------
746,531 737,678
Other assets 20,645 21,467
---------- ----------
$ 873,984 $ 877,171
========== ==========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited) (continued)
---------------------------------------
(in thousands, except share data)
June 30, December 30,
1994 1993
------------- ------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accruals $ 35,063 $ 39,515
Accrued payroll and employee benefits 17,601 15,823
Accrued interest payable 13,719 13,714
Income taxes payable 2,623 2,633
Current portion of long-term debt 2,509 2,499
---------- ----------
Total current liabilities 71,515 74,184
Long-term debt 393,966 404,086
Other long-term liabilities 22,860 21,882
Deferred income taxes 23,474 26,126
Contingencies and commitments
Series B ESOP convertible preferred stock
(redemption value $4,474 and $4,295) 4,323 3,905
Shareholders' equity:
Common stock, $.01 par value (37,372,909
and 37,359,011 shares outstanding) 414 414
Paid-in capital 346,965 346,965
Retained earnings 27,382 16,559
Less: Treasury stock (16,885) (16,885)
Unearned compensation (30) (65)
---------- ----------
Total shareholders' equity 357,846 346,988
---------- ----------
$ 873,984 $ 877,171
========== ==========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the periods ended June 30, 1994 and July 1, 1993
----------------------------------------------------
(in thousands, except per share data)
Second Quarter Six Months
------------------- -------------------
1994 1993 1994 1993
--------- --------- --------- ---------
Revenues
Casino $110,108 $111,954 $217,080 $216,313
Rooms 10,910 7,387 20,966 14,730
Food and beverage 11,309 8,991 21,886 17,478
Other 3,420 2,449 6,381 4,582
-------- -------- -------- --------
135,747 130,781 266,313 253,103
Costs and expenses
Casino 50,914 56,002 99,524 107,301
Rooms 6,738 4,381 12,630 8,567
Food and beverage 10,338 8,434 19,759 16,376
Other 1,697 1,555 3,539 3,040
Marketing 11,457 11,130 22,899 22,680
General and administrative 11,608 11,260 23,302 22,320
Utilities 3,334 2,889 6,490 5,566
Repairs and maintenance 4,864 6,308 9,431 10,771
Provision for doubtful accounts 588 7 1,639 459
Property taxes and insurance 3,944 4,191 8,360 8,374
Net rent 2,370 10,793 4,715 23,340
Depreciation and amortization 9,095 6,962 18,381 13,923
-------- -------- -------- --------
116,947 123,912 230,669 242,717
-------- -------- -------- --------
Operating income 18,800 6,869 35,644 10,386
Interest income 570 11,266 1,126 22,985
Interest expense (11,760) (11,095) (23,582) (22,822)
-------- -------- -------- --------
Income before other items and
income taxes 7,610 7,040 13,188 10,549
Equity in unconsolidated
partnership's loss (988) (962) (1,928) (1,929)
-------- -------- -------- --------
Income before income taxes 6,622 6,078 11,260 8,620
Income taxes (41) (2,172) (126) (3,130)
-------- -------- -------- --------
Net income $ 6,581 $ 3,906 $ 11,134 $ 5,490
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)(continued)
For the periods ended June 30, 1994 and July 1, 1993
----------------------------------------------------
(in thousands, except per share data)
Second Quarter Six Months
------------------- -------------------
1994 1993 1994 1993
--------- --------- --------- ---------
Net income per common and common
equivalent share $ .17 $ .10 $ .28 $ .14
Net income per common share assuming
full dilution $ .16 $ .09 $ .28 $ .13
Weighted average common shares
applicable to:
Net income per common and common
equivalent share 38,184 38,475 38,223 38,383
Net income per common share
assuming full dilution 39,211 39,602 39,252 39,539
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the periods ended June 30, 1994 and July 1, 1993
-----------------------------------------------------
(in thousands)
Six Months
---------------------
1994 1993
Cash Flows from Operating Activities --------- ---------
Net income $ 11,134 $ 5,490
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 19,605 14,846
Provision for losses on accounts receivable 1,639 459
Loss on reinvestment obligation 486 515
Interest income -- 1,889
Rent expense 484 (1,565)
Distribution in excess of equity in income
of partnership 627 646
Deferred income taxes (2,598) 2,267
Change in assets and liabilities:
(Increase) decrease in accounts receivable (1,915) 355
(Increase) decrease in refundable income taxes 2,031 38
(Increase) decrease in inventories and
prepaid expenses 365 574
Increase (decrease) in accounts payable,
accrued expenses and income taxes payable (1,735) (2,116)
Other items, net 447 571
--------- ---------
Net cash provided by (used in) operating activities 30,570 23,969
--------- ---------
Cash Flows from Investing Activities
Payments received on TropWorld second mortgage -- 24,400
Payments received on other notes receivable 472 1,732
Increase in invested funds -- (1,493)
Increase in TropWorld second mortgage -- (24,400)
Increase in other notes receivable -- (418)
Purchases of property and equipment (26,181) (41,941)
Additions to other long-term assets (3,414) (3,650)
--------- ---------
Net cash provided by (used in) investing activities (29,123) (45,770)
--------- ---------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 10,000 --
Proceeds from issuance of common stock -- 2,149
Principal payments on long-term debt (20,249) (1,917)
Preferred stock dividend (389) (395)
Redemption of preferred stock (102) (55)
--------- ---------
Net cash provided by (used in) financing activities (10,740) (218)
--------- ---------
Net increase (decrease) in cash and cash equivalents (9,293) (22,019)
Cash and cash equivalents at beginning of period 39,551 100,403
--------- ---------
Cash and cash equivalents at end of period $ 30,258 $ 78,384
========= =========
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)(continued)
For the periods ended June 30, 1994 and July 1, 1993
-----------------------------------------------------
(in thousands)
Six Months
-------------------
1994 1993
-------- --------
Supplemental Cash Flow Disclosures
Summary of non-cash investing and financing activities:
Capital lease obligations incurred for property
and equipment $ -- $ 385
Tax benefit from stock options and preferred stock
dividend 83 335
Cash paid during the period for the following:
Interest, net of amount capitalized $ 22,389 $ 21,500
Income taxes 620 480
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)
For the periods ended June 30, 1994 and July 1, 1993
------------------------------------------------------------
(in thousands, except number of shares)
Six Months
---------------------
1994 1993
---------- ---------
Common stock:
Beginning balance $ 414 $ 410
Stock options exercised for 338,830 shares
in 1993 -- 4
-------- --------
Ending balance 414 414
-------- --------
Paid-in capital:
Beginning balance 346,965 344,574
Stock options exercised -- 2,145
Tax benefit from stock options exercised -- 246
-------- --------
Ending balance 346,965 346,965
-------- --------
Retained earnings:
Beginning balance 16,559 5,787
Preferred stock dividend, net of income tax
benefit of $83 and $89 (311) (308)
Net income 11,134 5,490
-------- --------
Ending balance 27,382 10,969
-------- --------
Treasury stock:
Beginning and ending balance (16,885) (16,885)
--------- ---------
Unearned compensation:
Beginning balance (65) (137)
Amortization 35 37
-------- --------
Ending balance (30) (100)
-------- --------
$357,846 $341,363
======== ========
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Note 1: General
- - ----------------
The consolidated financial statements reflect all adjustments, such adjust-
ments being normal recurring accruals, which are necessary, in the opinion of
management, for the fair presentation of the results of the interim periods;
interim results, however, may not be indicative of the results for the full
year.
The notes to the interim consolidated financial statements are presented to
enhance the understanding of the financial statements and do not necessarily
represent complete disclosures required by generally accepted accounting
principles. Capitalized interest was $772,000 and $1,267,000 for the quarter
and six months ended 1994, respectively; and $1,288,000 and $2,000,000 for
the quarter and six months ended 1993, respectively. For additional
information regarding significant accounting policies, long-term debt, lease
obligations, and other matters applicable to the Company, reference should be
made to the Company's Annual Report to Shareholders for the year ended
December 30, 1993.
Note 2: Investments in and Advances to Unconsolidated Partnership
- - -----------------------------------------------------------------
Following are summarized operating results for the Company's unconsolidated
partnership, accounted for using the equity method for the periods ended
June 30, 1994 and July 1, 1993 (in thousands):
Second Quarter Six Months
------------------ -------------------
1994 1993 1994 1993
-------- -------- -------- --------
Revenues $ 3,675 $ 3,130 $ 7,257 $ 6,282
Operating expenses (698) (984) (1,381) (1,678)
-------- -------- -------- --------
Operating income 2,977 2,146 5,876 4,604
Interest expense (1,005) (664) (1,928) (1,631)
-------- -------- -------- --------
Net income $ 1,972 $ 1,482 $ 3,948 $ 2,973
======== ======== ======== ========
Note 3: Other Long-term Liabilities
- - -------------------------------------
At June 30, 1994 and December 30, 1993, other long-term liabilities consisted
of (in thousands):
1994 1993
-------- --------
Accrued rent expense $ 14,168 $ 13,684
Deferred compensation and retirement plans 8,538 8,044
Deferred income 154 154
-------- --------
$ 22,860 $ 21,882
======== ========
10
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Note 4: Income Taxes
- - ----------------------
The Company is responsible, with certain exceptions, for the taxes of Ramada
through December 20, 1989. The Internal Revenue Service has completed its
examination of the years 1986 and 1987. Ramada has signed a partial
agreement for those two years and has filed a petition with the U.S. Tax
Court for two remaining issues. The Internal Revenue Service is examining
the income tax returns for the years 1988 through 1991. The New Jersey
Division of Taxation is examining the income tax returns for the years 1983
through 1988. Management believes that adequate provision for income taxes
and interest has been made in the financial statements.
The December 30, 1993 valuation allowance was reduced during the 1994 six-
month period due to the generation of taxable income that resulted in the
utilization of a portion of the net operating loss carryforward. The effect
of this reduction was to decrease income tax expense for the 1994 second
quarter and six-month periods by $2,370,000 and $3,974,000, respectively.
Note 5: Net Income Per Share
- - -----------------------------
Net income per common and common equivalent share is computed based on the
weighted average number of common shares outstanding after consideration of
the dilutive effect of stock options. Net income per common share, assuming
full dilution, is computed based on the weighted average number of common
shares outstanding after consideration of the dilutive effect of stock
options and the assumed conversion of the preferred stock at the stated rate.
Net income for both computations is adjusted for dividends on the preferred
stock.
Note 6: Contingencies and Commitments
- - --------------------------------------
The Company agreed to indemnify Ramada against all monetary judgments in
lawsuits pending against Ramada and its subsidiaries as of the conclusion of
the restructuring of Ramada (the "Restructuring") on December 20, 1989, as
well as all related attorneys' fees and expenses not paid at that time,
except for any judgments, fees or expenses accrued on the hotel business
balance sheet and except for any unaccrued and unreserved aggregate amount up
to $5 million of judgments, fees or expenses related exclusively to the hotel
business. Aztar is entitled to the benefit of any crossclaims or
counterclaims related to such lawsuits and of any insurance proceeds
received. In addition, the Company agreed to indemnify Ramada for various
lease guarantees made by Ramada relating to the restaurant business conducted
through its Marie Callender Pie Shops, Inc. ("MCPSI") subsidiary. In
connection with these matters, the Company has an accrued liability of
$3,974,000 and $3,980,000 at June 30, 1994 and December 30, 1993,
respectively.
The Company is a party to various other claims, legal actions and complaints
arising in the ordinary course of business or asserted by way of defense or
counterclaim in actions filed by the Company. Management believes that its
defenses are substantial in each of these matters and that the Company's
legal posture can be successfully defended without material adverse effect on
its consolidated financial statements.
The Company had commitments for capital expenditures of approximately
$16,000,000 at June 30, 1994.
11<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
Financial Condition
The Company's application, filed with the Missouri Gaming Commission, for a
gaming license to operate a casino riverboat in Caruthersville, Missouri is
pending. The Missouri Gaming Commission has commenced its formal
investigation of the Company's application. In addition, certain other
approvals are required, including those of the U.S. Army Corps of Engineers
and the U.S. Coast Guard. "Games of skill" are permitted in Missouri;
however, as a result of a Missouri Supreme Court decision in early 1994, the
use of slot machines and other "games of chance" is currently not permitted
in Missouri. On April 5, 1994, voters in a Missouri statewide election
defeated a proposed constitutional amendment that would have allowed games of
chance, such as slot machines, on riverboats. A petition has been filed with
the Secretary of the State of Missouri to place a referendum on the issue on
the ballot for the November 1994 election. The signatures on the petition
have yet to be verified by the Secretary of State of the State of Missouri.
The Company intends to proceed with this project utilizing electronic
machines and gaming tables as approved by the Missouri Gaming Commission.
The Company hopes to begin operations in Caruthersville in 1995.
On June 30, 1994, the Company was named by the City of Evansville as its
choice to develop and operate the only riverboat gaming facility planned to
be licensed in the Evansville market. The Company and the City of Evansville
have signed a development agreement, and the City of Evansville will endorse
the Company's license request to the Indiana Gaming Commission, which prior
to the state trial court ruling discussed below had indicated that it
anticipated granting a license for the Evansville market area this fall. If
the Company is granted a riverboat gaming license, the development agreement
will bind the Company to make a series of payments in the nature of civic
inducements to the City of Evansville and community organizations that are
necessary to the success of the Company's efforts in Indiana. Evansville,
located on the Ohio River in southwestern Indiana, is a market of 2.5 million
people living within 100 miles, which reaches the metropolitan Louisville,
Kentucky area. Aztar's proposed project, at an estimated cost of $110
million, would include a replica of the historic "Robert E. Lee" racing
sidewheel steamboat. The boat will have a 37,000-square-foot casino with
1,250 slot machines and 70 table games and will have a capacity of 2,500
passenger guests and a crew of 300. The project would also include, among
other things, a 250-room hotel and a 44,000-square-foot entertainment complex
for pre-boarding facilities, restaurants, lounge and retail shops. With the
boat due for delivery by April 1995, operations could commence in the summer
of 1995 utilizing permanent docking facilities and interim boarding
facilities, with all permanent facilities in place by December 1995.
However, a number of legal and regulatory matters could delay or prevent the
opening of the Evansville facility. A state trial court has ruled that
portions of the Indiana riverboat gaming law conflict with the state
constitution. Under this ruling, the Indiana Gaming Commission is precluded
from awarding licenses. The trial court decision is being appealed directly
to the Indiana Supreme Court, which is handling the case on an expedited
basis. Oral arguments in the case are currently scheduled for August 30,
1994. Furthermore, a number of approvals are required, including those of
the U.S. Army Corps of Engineers and the U.S. Coast Guard.
12
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
The Company is continuing its efforts to explore opportunities in new
jurisdictions in which the likelihood of legalization of gaming in the near
term is high and where the potential markets meet our standards for sound,
meaningful long-term opportunities.
During the first quarter of 1994, the Company by drawing on the revolving
line of credit that is collateralized by Ramada Express (the "Ramada Express
Credit Facility") repaid in full the $10 million that was borrowed under the
revolving credit facility (the "AREI/AGP Facility") obtained in connection
with the purchase in July 1993 of the partnership interests in Ambassador
Real Estate Investors, L.P. ("AREI") and Ambassador General Partnership
("AGP"). AREI owned a 99.9% general partnership interest in AGP which
acquired a substantial interest in TropWorld in a sale-leaseback transaction
in 1984. On June 30, 1994, the Company terminated the AREI/AGP Facility.
During June 1994, the Company repaid $10 million of the Ramada Express Credit
Facility, leaving a balance of $25 million at June 30, 1994.
On June 16, 1994, the Company filed a registration statement (No. 33-54151)
relating to the proposed offering of $180 million Senior Subordinated Notes
Due 2004. On July 21, 1994, the Company filed Amendment No. 1 to this
registration statement and such registration statement is still subject to
completion. If the Company is successful in the offering of these
securities, it intends to use the proceeds to redeem the $170 million
principal amount of outstanding 13 1/2% First Mortgage Notes Due 1996. These
notes are redeemable at par at the option of the Company, in whole or in
part, on or after September 15, 1994.
The Company is currently negotiating with a group of banks to enter into an
approximately $212 million reducing revolving credit facility maturing on
December 31, 1999. The availability of funds under this facility will reduce
from $212 million quarterly beginning on March 31, 1996 in the annual amounts
of $25 million in 1996 and $35 million in each year thereafter until
maturity. The proposed credit facility will be secured by all the property
of TropWorld and Ramada Express and, with certain exceptions, the stock of
the Company's subsidiaries. The Company expects to use funds provided by the
proposed credit facility to repay the outstanding amount due under the Ramada
Express Credit Facility, which will then be terminated. The remaining funds
under the proposed credit facility would be available for general corporate
purposes, including to fund the expansion of the Company's existing
businesses and to fund the Company's development of businesses in new gaming
jurisdictions, including the properties at Caruthersville and Evansville.
Concurrently with entering into the proposed credit facility, the same group
of banks would enter into an approximately $73 million term loan with
Tropicana Enterprises maturing on December 31, 1999, which would refinance
the existing Tropicana loan in the same amount. The term loan is expected to
call for principal payments of between $1.2 million and $3.3 million each
year with a final payment of approximately $57 million due at maturity. The
term loan would be secured by the Tropicana property. The Tropicana loan is
serviced through rent payments made by the Tropicana operation. The Company
is a noncontrolling 50% partner in Tropicana Enterprises.
At June 30, 1994, the Company had commitments of $16 million for the purchase
of fixed assets.
13
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Results of Operations
Six Months Ended June 30, 1994 Compared to Six Months Ended July 1, 1993
The Company's consolidated revenues for the first half of 1994 were $266.3
million, a 5% increase over $253.1 million for the first half of 1993, as
increases in total revenues at Ramada Express and Tropicana more than offset
a decrease in total revenues at TropWorld. The primary reason for the
increase in consolidated revenues was due to the major expansion completed in
September 1993 of the Ramada Express facility. Consolidated operating income
was $35.6 million in the 1994 six-month period compared with $10.4 million in
the 1993 six-month period. The primary reason for the increase in
consolidated operating income was a reduction in net rent at TropWorld which
was principally a result of the AREI/AGP acquisition in July 1993. The
reduction in consolidated net rent was partially offset by an increase in
consolidated depreciation and amortization that was caused in large part by
this purchase, combined with higher depreciation and amortization at Ramada
Express due to the major expansion of that facility. The Ramada Express
expansion was the primary cause for an increase in the consolidated utilities
expense in the 1994 six-month period. Consolidated repairs and maintenance
expense was lower in the 1994 six-month period compared to last year's six-
month period primarily due to a reduction in the number of special facility
maintenance projects at TropWorld. The consolidated provision for doubtful
accounts was higher in the 1994 six-month period, due in part to a favorable
adjustment in the 1993 six-month period in connection with a large account
receivable at TropWorld. In addition, at TropWorld, there was a small
decline in the collection rate on accounts receivable in the 1994 six-month
period compared to the 1993 six-month period. Consolidated casino costs were
lower in the first half of 1994 compared to the same period last year,
largely as a result of a reduction in coin redemptions and complimentaries at
TropWorld.
Consolidated interest income was $21.9 million lower in the 1994 six-month
period compared to the 1993 six-month period, principally as a result of the
replacement on Aztar's balance sheet of the AGP notes receivable with the
assets acquired in the AREI/AGP acquisition.
For a discussion of income taxes, refer to "Note 4: Income Taxes".
RAMADA EXPRESS At Ramada Express, revenues and operating income for the 1994
six-month period increased substantially over last year's six-month period
due to the major expansion of that facility completed in September 1993.
Total revenues were $42.3 million for the first half of 1994, a 70% increase
over $24.9 million for the first half of 1993, reflecting increases in all
revenue components. Hotel occupancy was 91% on a 1,500-room base for the
1994 first half compared to 95% on a 400-room base for the 1993 first half.
Operating income was $10.3 million in the 1994 six-month period compared to
$4.6 million in last year's six-month period, a 122% increase. Operating
income is after net rent and depreciation and amortization expenses. Net
rent was insignificant in both six-month periods. As a result of the
expanded facility, depreciation and amortization increased to $3.7 million in
the 1994 six-month period from $2.1 million in the 1993 six-month period.
14
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
TROPICANA Total revenues at Tropicana were $72.3 million in the first half
of 1994, up 10% from $65.9 million in the first half of 1993. The increase
in revenues reflects significant pedestrian walk-in business being generated
by the new properties recently opened at the intersection of Las Vegas
Boulevard and Tropicana Avenue, commonly referred to as "The New Four
Corners" of Las Vegas.
Rooms revenue was 22% higher in the 1994 six-month period compared to the
1993 six-month period principally because of higher room rates and higher
occupancies, combined with a reduction in the use of complimentary rooms as a
means of promoting casino activity. The higher hotel occupancies, combined
with the additional pedestrian walk-in business mentioned previously, caused
a 14% increase in food and beverage revenue.
Tropicana's operating income improved 122% to $6.8 million for the first half
of 1994 from $3.1 million for the first half of 1993. Operating income is
after net rent and depreciation and amortization expenses. Net rent was $3.8
million in the 1994 six-month period versus $3.4 million in the 1993 six-
month period. Depreciation and amortization was $3.1 million in the 1994
six-month period compared to $3.2 million in the 1993 six-month period.
Total costs and expenses increased by a modest 4% in comparison to the 10%
increase in total revenues.
TROPWORLD Total revenues at TropWorld were $151.7 million in the 1994 six-
month period compared to $162.3 million in the 1993 six-month period, a 7%
decrease that was primarily the result of lower casino revenue. The decline
in casino revenue was caused by a decrease in coin redemptions in this year's
first half compared to last year's first half. In addition, there was a
reduction in the use of complimentary rooms and food and beverage service as
a means of promoting casino activity. Severe weather conditions in the East
were, in large part, the cause of declines in the market's growth rate for
casino revenue during January and February 1994.
TropWorld had operating income of $23.3 million in the first half of 1994
compared to $7.0 million in the first half of last year. The increase in
TropWorld's operating income was largely due to the effects of the AREI/AGP
acquisition, which resulted in a reduction in net rent expense, partially
offset by higher depreciation and amortization expense. Net rent declined
from $19.7 million in the 1993 six-month period to $0.7 million in the 1994
six-month period. Depreciation and amortization increased from $8.4 million
in the 1993 six-month period to $11.4 million in the 1994 six-month period.
In addition to the effects of the AREI/AGP acquisition, operating costs
decreased at TropWorld due in large part to a $10.6 million or 14% reduction
in casino costs attributable to the decrease in coin redemptions and
complimentaries. Repairs and maintenance expense was lower in this year's
six-month period compared to last year's six-month period due to a reduction
in the number of special facility maintenance projects. These decreases in
operating expenses were partially offset by an increase in the provision for
doubtful accounts as described in the above discussion of the consolidated
results.
15
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Quarter Ended June 30, 1994 Compared to Quarter Ended July 1, 1993
Consolidated revenues for the 1994 second quarter were $135.7 million, a 4%
increase over $130.8 million for the 1993 second quarter, as increases in
total revenues at Ramada Express and Tropicana more than offset a decrease in
total revenues at TropWorld. The primary reason for the increase in
consolidated revenues was due to the major expansion of the Ramada Express
facility completed in September 1993. Consolidated operating income was
$18.8 million in the 1994 second quarter compared with $6.9 million in last
year's second quarter. The primary reason for the increase in consolidated
operating income was a reduction in net rent at TropWorld principally as a
result of the AREI/AGP acquisition. The reduction in consolidated net rent
was partially offset by an increase in consolidated depreciation and
amortization that was caused in large part by this purchase, combined with
higher depreciation and amortization at Ramada Express due to the major
expansion of that facility. The Ramada Express expansion was the primary
cause for an increase in the consolidated utilities expense in the 1994
second quarter. Consolidated repairs and maintenance expense was lower in
this year's second quarter compared to last year's second quarter primarily
due to a reduction in the number of special facility maintenance projects at
TropWorld. The consolidated provision for doubtful accounts was higher in
the 1994 second quarter, due in part to a favorable adjustment in the 1993
second quarter in connection with a large account receivable at TropWorld.
In addition, at TropWorld, there was a small decline in the collection rate
on accounts receivable in the 1994 second quarter compared to the 1993 second
quarter. Consolidated casino costs were lower in the 1994 second quarter
compared to last year's second quarter, primarily as a result of a reduction
in coin redemptions and complimentaries at TropWorld.
Consolidated interest income was $10.7 million lower in the 1994 second
quarter compared to the 1993 second quarter, principally as a result of the
replacement on Aztar's balance sheet of the AGP notes receivable with the
assets acquired in the AREI/AGP acquisition.
For a discussion of income taxes, refer to "Note 4: Income Taxes".
RAMADA EXPRESS Revenues and operating income at Ramada Express were
substantially higher in the 1994 second quarter than the 1993 second quarter
due to the major expansion of that facility completed in September 1993.
Total revenues were $20.5 million for the 1994 second quarter, up 71% from
$12.0 million for the 1993 second quarter, reflecting increases in all
revenue components. Hotel occupancy was 90% on a 1,500-room base for the
1994 second quarter compared to 96% on a 400-room base for the 1993 second
quarter.
Operating income increased 146% to $4.8 million in the 1994 second quarter
from $1.9 million in last year's second quarter. Operating income is after
net rent and depreciation and amortization expenses. Net rent was
insignificant in both quarters. As a result of the expanded facility,
depreciation and amortization increased to $1.8 million in the 1994 second
quarter from $1.0 million in the 1993 second quarter.
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AZTAR CORPORATION AND SUBSIDIARIES
TROPICANA Total revenues at Tropicana were $35.6 million in the 1994 second
quarter, up 8% from $33.0 million in the 1993 second quarter. The increase
in revenues reflects significant pedestrian walk-in business being generated
by the new properties recently opened at "The New Four Corners" of Las Vegas.
Rooms revenue increased 27% in the 1994 second quarter over the 1993 second
quarter primarily because of higher room rates, combined with a reduction in
the use of complimentary rooms as a means of promoting casino activity. The
occupancy rate was unchanged in the 1994 second quarter compared to last
year's second quarter. The additional pedestrian walk-in business mentioned
previously was the primary cause of a 14% increase in food and beverage
revenue.
Tropicana's operating income improved 199% to $2.7 million for the 1994
second quarter from $0.9 million for the 1993 second quarter. Operating
income is after net rent and depreciation and amortization expenses. Net
rent was $1.9 million in the 1994 second quarter compared to $1.7 million in
last year's second quarter. Depreciation and amortization was $1.5 million
in the 1994 second quarter compared to $1.6 million in the 1993 second
quarter.
TROPWORLD TropWorld had total revenues of $79.6 million in the 1994 second
quarter compared to $85.8 million in the 1993 second quarter, down 7%
primarily as a result of lower casino revenue. The decline in casino revenue
was caused by a decrease in coin redemptions in this year's second quarter
compared to last year's second quarter. In addition, there was a reduction
in the use of complimentary rooms and food and beverage service as a means of
promoting casino activity.
TropWorld had operating income of $13.8 million in the 1994 second quarter
compared to $6.2 million in the 1993 second quarter. The increase in
TropWorld's operating income was largely due to the effects of the AREI/AGP
acquisition, which resulted in a reduction in net rent expense, partially
offset by higher depreciation and amortization expense. Net rent declined
from $9.0 million in the 1993 second quarter to $0.4 million in the 1994
second quarter. Depreciation and amortization increased from $4.2 million in
the 1993 second quarter to $5.7 million in the 1994 second quarter. In
addition to the effects of the AREI/AGP acquisition, operating costs
decreased at TropWorld due in large part to a $5.6 million or 14% reduction
in casino costs attributable to the decrease in coin redemptions and
complimentaries. Repairs and maintenance expense was lower in this year's
second quarter compared to last year's second quarter as a result of a
reduction in the number of special facility maintenance projects. These
decreases in operating expenses were partially offset by an increase in the
provision for doubtful accounts as described in the above discussion of the
consolidated results.
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AZTAR CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As reported in the Company's registration statement No. 33-54151, filed on
June 16, 1994, the Company and more than 30 other major casino operators, as
well as various suppliers and distributors of video poker and electronic slot
machines, have been named as defendants in actions entitled William H. Poulos
v. Caesars World, Inc., et al., 94 Civ. 478-ORL-22 (filed on April 26, 1994)
and William Ahern v. Caesars World, Inc., et al., 94 Civ. 532-ORL-19 (filed
on May 10, 1994) (the "Actions") in the United States District Court for the
Middle District of Florida, Orlando Division.
On June 24, 1994, the Company, together with certain other defendants, filed
motions seeking orders: (i) dismissing the Actions for lack of personal
jurisdiction and improper venue, for failure to state a claim and for failure
to plead fraud with particularity, (ii) abstaining from exercising
jurisdiction over the Actions on the grounds of primary jurisdiction; (iii)
alternatively, transferring the Actions to the United States District Court
for the District of Nevada; and (iv) staying discovery pending a ruling on
defendants' motions to dismiss.
During July 1994, the Court issued orders setting time frames for the conduct
of certain pre-trial proceedings, staying discovery as to the merits until
October 31, 1994 and directing that discovery on jurisdictional and class
issues proceed.
The Company believes that plaintiffs' allegations are without merit, and it
intends to defend the Actions vigorously.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Page No.
----------
11 Statement regarding computation of net income per share *
* See exhibit index at page E-1 of this report for
a listing of exhibits filed with this report.
All other exhibits have been omitted because the
information is either not required or not
applicable.
(b) The Company did not file any report on Form 8-K
during the quarter ended June 30, 1994.
18
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AZTAR CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AZTAR CORPORATION
------------------------------
(Registrant)
Date August 2, 1994 By /s/ Robert M. Haddock
-------------------------- ---------------------------
Robert M. Haddock
Executive Vice President and
Chief Financial Officer
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AZTAR CORPORATION AND SUBSIDIARIES
Exhibit Index
- - -------------
11. Statement regarding computation of net income per share.
E-1
Exhibit 11
AZTAR CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE
For the periods ended June 30, 1994 and July 1, 1993
-------------------------------------------------------
(in thousands, except per share data)
Second Quarter Six Months
------------------- -------------------
1994 1993 1994 1993
-------- --------- --------- ---------
Net income $ 6,581 $ 3,906 $ 11,134 $ 5,490
Deduct: preferred stock dividend
(net of income taxes credited to
retained earnings) (155) (154) (311) (308)
-------- -------- --------- ---------
Net income applicable to computation $ 6,426 $ 3,752 $ 10,823 $ 5,182
======== ======== ======== ========
Weighted average common shares
assuming no dilution 37,371 37,333 37,368 37,257
Stock options that had a dilutive
effect on net income (based on
relationship of market value to
exercise price), assumed to have
been exercised on the first day
of each period (or date of grant,
if later), less number of shares
which could have been purchased
from the proceeds of such assumed
exercise:
Number of shares using the
weighted average market price
for the assumed purchase of
shares described above 813 1,142 855 1,126
-------- -------- -------- --------
Weighted average common shares
applicable to net income per
common and common equivalent share 38,184 38,475 38,223 38,383
Additional shares using the market
close price at the end of the period
for the assumed purchase of shares
described above -- 85 -- 112
Conversion of preferred stock at
the stated rate assumed to have
been converted at the beginning
of the earliest period reported
1,027 1,042 1,029 1,044
-------- -------- -------- --------
Weighted average common shares
assuming full dilution 39,211 39,602 39,252 39,539
======== ======== ======== ========
Net income per common and common
equivalent share $ .17 $ .10 $ .28 $ .14
Net income per common share assuming
full dilution $ .16 $ .09 $ .28 $ .13
