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 27, 1996
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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 25, 1996, the registrant had outstanding 38,498,188 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 27, 1996 and
December 28, 1995 3
Consolidated Statements of Operations for the quarters
and six months ended June 27, 1996 and June 29, 1995 5
Consolidated Statements of Cash Flows for the six months
ended June 27, 1996 and June 29, 1995 7
Consolidated Statements of Shareholders' Equity for the
six months ended June 27, 1996 and June 29, 1995 9
Notes to Consolidated Financial Statements 10
2
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AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
---------------------------------------
(in thousands, except share data)
June 27, December 28,
1996 1995
----------- ------------
Assets
Current assets:
Cash and cash equivalents $ 29,623 $ 26,527
Accounts receivable, net 24,766 21,325
Refundable income taxes 1,305 1,261
Inventories 7,176 6,591
Prepaid expenses 10,445 9,417
Deferred income taxes 8,013 8,013
---------- ----------
Total current assets 81,328 73,134
Investments in and advances to
unconsolidated partnership 10,889 11,467
Other investments 29,526 27,964
Property and equipment:
Buildings, riverboats and equipment, net 758,416 711,454
Land 95,718 95,589
Construction in progress 44,004 46,102
Leased under capital leases, net 391 535
---------- ----------
898,529 853,680
Deferred charges and other assets 43,456 46,993
---------- ----------
$1,063,728 $1,013,238
========== ==========
The accompanying notes are an integral part of these financial statements.
3
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AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited) (continued)
---------------------------------------
(in thousands, except share data)
June 27, December 28,
1996 1995
------------ ------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accruals $ 59,867 $ 60,226
Accrued payroll and employee benefits 20,444 18,012
Accrued interest payable 13,083 14,995
Income taxes payable 1,198 2,197
Current portion of long-term debt 417 466
Current portion of other long-term
liabilities 4,126 6,172
---------- ----------
Total current liabilities 99,135 102,068
Long-term debt 548,813 496,439
Other long-term liabilities 28,621 30,699
Deferred income taxes 19,248 18,914
Contingencies and commitments
Series B ESOP convertible preferred stock
(redemption value $6,347 and $6,114) 5,770 5,459
Shareholders' equity:
Common stock, $.01 par value (38,485,926
and 38,265,813 shares outstanding) 424 422
Paid-in capital 353,844 352,221
Retained earnings 25,407 24,922
Less: Treasury stock (17,040) (17,027)
Unearned compensation (494) (879)
---------- ----------
Total shareholders' equity 362,141 359,659
---------- ----------
$1,063,728 $1,013,238
========== ==========
The accompanying notes are an integral part of these financial statements.
4
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AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the periods ended June 27, 1996 and June 29, 1995
---------------------------------------------------------------
(in thousands, except per share data)
Second Quarter Six Months
------------------- ------------------
1996 1995 1996 1995
--------- --------- --------- ---------
Revenues
Casino $158,530 $118,935 $308,830 $230,847
Rooms 12,008 10,448 23,133 20,149
Food and beverage 13,908 11,980 27,540 23,107
Other 5,047 4,027 10,196 6,855
-------- -------- -------- --------
189,493 145,390 369,699 280,958
Costs and expenses
Casino 77,244 55,606 150,240 110,320
Rooms 6,887 6,405 13,315 12,188
Food and beverage 13,061 11,068 25,794 21,453
Other 4,622 2,397 9,298 4,204
Marketing 23,096 14,018 42,819 24,944
General and administrative 17,409 13,288 34,615 24,264
Utilities 3,524 3,032 6,563 5,967
Repairs and maintenance 5,776 5,041 11,492 9,960
Provision for doubtful accounts 743 886 2,114 1,681
Property taxes and insurance 5,915 4,798 11,440 9,515
Rent 3,449 2,843 6,719 5,639
Depreciation and amortization 12,303 9,630 24,213 18,682
Preopening costs 76 2,586 76 2,586
-------- -------- -------- --------
174,105 131,598 338,698 251,403
-------- -------- -------- --------
Operating income 15,388 13,792 31,001 29,555
Interest income 628 889 1,217 1,717
Interest expense (14,603) (12,735) (28,245) (24,954)
-------- -------- -------- --------
Income before other items
and income taxes 1,413 1,946 3,973 6,318
Equity in unconsolidated
partnership's loss (1,214) (1,323) (2,403) (2,649)
-------- -------- -------- --------
Income before income taxes 199 623 1,570 3,669
Income taxes (159) (98) (761) (1,184)
-------- -------- -------- --------
Net income $ 40 $ 525 $ 809 $ 2,485
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
5
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AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (continued)
For the periods ended June 27, 1996 and June 29, 1995
---------------------------------------------------------------
(in thousands, except per share data)
Second Quarter Six Months
------------------- ------------------
1996 1995 1996 1995
--------- --------- --------- ---------
Net income per common and
common equivalent share $ -- $ .01 $ .01 $ .06
Net income per common share
assuming full dilution $ -- $ .01 $ .01 $ .05
Weighted average common shares
applicable to:
Net income per common and
common equivalent share 39,694 39,119 39,464 38,852
Net income per common share
assuming full dilution 40,684 40,145 40,644 39,997
The accompanying notes are an integral part of these financial statements.
6
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AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the periods ended June 27, 1996 and June 29, 1995
---------------------------------------------------------------
(in thousands)
Six Months
---------------------
1996 1995
Cash Flows from Operating Activities --------- ---------
Net income $ 809 $ 2,485
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 25,812 20,516
Provision for losses on accounts receivable 2,114 1,681
Loss on reinvestment obligation 277 --
Rent expense (441) (340)
Distribution in excess of equity in income
of partnership 578 591
Deferred income taxes 334 246
Change in assets and liabilities:
(Increase) decrease in accounts receivable (5,555) (4,159)
(Increase) decrease in refundable income taxes (44) (864)
(Increase) decrease in inventories and
prepaid expenses (1,767) 598
Increase (decrease) in accounts payable,
accrued expenses and income taxes payable (481) 14,995
Other items, net 1,711 1,585
--------- ---------
Net cash provided by (used in) operating activities 23,347 37,334
--------- ---------
Cash Flows from Investing Activities
Payments received on notes receivable 556 488
Reduction in other investments 193 5,183
Purchases of property and equipment (67,122) (54,503)
Additions to other long-term assets (2,637) (6,721)
--------- ---------
Net cash provided by (used in) investing activities (69,010) (55,553)
--------- ---------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 96,700 30,000
Proceeds from issuance of common stock 1,146 1,391
Principal payments on long-term debt (44,516) (10,311)
Principal payments on other long-term liabilities (3,988) --
Debt issuance costs -- (80)
Preferred stock dividend (368) (380)
Redemption of preferred stock (215) (137)
--------- ---------
Net cash provided by (used in) financing activities 48,759 20,483
--------- ---------
Net increase (decrease) in cash and cash equivalents 3,096 2,264
Cash and cash equivalents at beginning of period 26,527 43,861
--------- ---------
Cash and cash equivalents at end of period $ 29,623 $ 46,125
========= =========
The accompanying notes are an integral part of these financial statements.
7
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AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)(continued)
For the periods ended June 27, 1996 and June 29, 1995
---------------------------------------------------------------
(in thousands)
Six Months
-------------------
1996 1995
-------- --------
Supplemental Cash Flow Disclosures
Summary of non-cash investing and financing activities:
Capital lease obligations incurred for property
and equipment $ -- $ 41
Tax benefit from stock options and preferred stock
dividend 397 552
Issuance of restricted stock 136 2,244
Forfeiture of restricted stock 13 142
Cash flow during the period for the following:
Interest paid, net of amount capitalized $ 29,066 $ 23,360
Income taxes paid 1,073 1,257
The accompanying notes are an integral part of these financial statements.
8
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AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)
For the periods ended June 27, 1996 and June 29, 1995
-------------------------------------------------------
(in thousands, except number of shares)
Six Months
---------------------
1996 1995
---------- ---------
Common stock:
Beginning balance $ 422 $ 414
Stock options exercised for 210,570 and 354,562
shares 2 4
Issuance of 292,000 shares of restricted stock
in 1995 -- 3
-------- --------
Ending balance 424 421
-------- --------
Paid-in capital:
Beginning balance 352,221 347,284
Stock options exercised 1,144 1,387
Tax benefit from stock options exercised 343 484
Restricted stock 136 2,241
-------- --------
Ending balance 353,844 351,396
-------- --------
Retained earnings:
Beginning balance 24,922 30,555
Preferred stock dividend, net of income tax
benefit of $54 and $68 (324) (312)
Net income 809 2,485
-------- --------
Ending balance 25,407 32,728
-------- --------
Treasury stock:
Beginning balance (17,027) (16,885)
Forfeiture of 2,000 and 18,000 shares
of restricted stock (13) (142)
-------- --------
Ending balance (17,040) (17,027)
-------- --------
Unearned compensation:
Beginning balance (879) --
Restricted stock (136) (2,244)
Amortization 508 773
Forfeiture of restricted stock 13 142
-------- --------
Ending balance (494) (1,329)
-------- --------
$362,141 $366,189
======== ========
The accompanying notes are an integral part of these financial statements.
9
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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. The interest that was capitalized during the quarter and six
months ended 1996 was $1,180,000 and $2,723,000, respectively; and $1,162,000
and $2,351,000 for the quarter and six months ended 1995. Capitalized
preopening costs, included in deferred charges and other assets, were
$1,371,000 at June 27, 1996. There were no capitalized preopening costs at
December 28, 1995. Capitalized costs related to various development
projects, included in deferred charges and other assets, were $1,547,000 and
$1,458,000 at June 27, 1996 and December 28, 1995, 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 28, 1995.
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 27, 1996 and June 29, 1995 (in thousands):
Second Quarter Six Months
------------------ -------------------
1996 1995 1996 1995
-------- -------- -------- --------
Revenues $ 4,153 $ 4,385 $ 8,308 $ 8,774
Operating expenses (746) (692) (1,430) (1,376)
-------- -------- -------- --------
Operating income 3,407 3,693 6,878 7,398
Interest expense (1,408) (1,680) (2,828) (3,374)
-------- -------- -------- --------
Net income $ 1,999 $ 2,013 $ 4,050 $ 4,024
======== ======== ======== ========
10
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AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Note 3: Long-term Debt
- -----------------------
At June 27, 1996 and December 28, 1995, long-term debt included (in
thousands):
1996 1995
--------- ---------
11% Senior Subordinated Notes Due 2002 $200,000 $200,000
13 3/4% Senior Subordinated Notes Due 2004 177,832 177,768
Reducing revolving credit note (floating
rate); matures December 31, 1999 169,000 116,600
Other notes payable; 7% to 14.6%; maturities
to 2002 1,797 1,814
Obligations under capital leases 601 723
--------- ---------
549,230 496,905
Less current portion (417) (466)
--------- ---------
$548,813 $496,439
========= =========
Note 4: Other Long-term Liabilities
- -------------------------------------
At June 27, 1996 and December 28, 1995, other long-term liabilities consisted
of (in thousands):
1996 1995
-------- --------
Accrued rent expense $ 12,602 $ 13,043
Obligation to City of Evansville and
other civic and community organizations 9,425 13,400
Deferred compensation and retirement plans 10,044 9,739
Las Vegas Boulevard beautification assessment 522 535
Deferred income 154 154
-------- --------
32,747 36,871
Less current portion (4,126) (6,172)
-------- --------
$ 28,621 $ 30,699
======== ========
Note 5: 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 income tax returns for 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. Management expects those
two issues to be resolved on satisfactory terms prior to trial. The Internal
Revenue Service is examining the income tax returns for the years 1988
through 1993. The New Jersey Division of Taxation is examining the income tax
returns for the years 1986 through 1989. Management believes that adequate
provision for income taxes and interest has been made in the financial
statements. In connection with the Internal Revenue Service examinations of
the years 1986 through 1989, management has been conservative in providing
for amounts that could be due upon settlement. It is reasonably possible
that these examinations could be favorably settled in the near term.
11
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AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Gross deferred tax assets are reduced by a valuation allowance. The
December 29, 1994 valuation allowance was reduced during 1995 which caused a
decrease in income tax expense of $326,000 and $497,000 in the 1995 second
quarter and six-month periods, respectively.
Note 6: 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 restricted stock and 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 restricted stock, 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 7: 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 $5,000,000 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. subsidiary. In connection with
these matters, the Company has an accrued liability of $3,936,000 and
$3,941,000 at June 27, 1996 and December 28, 1995, 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 Tropicana Las Vegas lease agreement contains a provision that requires
the Company to maintain an additional security deposit with the lessor of
approximately $21,251,000 in cash or a letter of credit if the Tropicana Las
Vegas operation fails to meet certain financial tests. This requirement was
waived at June 27, 1996. A determination has been made for the period ended
June 27, 1996, that the additional security deposit will be required by
September 25, 1996 unless the requirement is again waived by the lessor. The
Company has a 50% partnership interest in the lessor.
12
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AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
The Company has severance agreements with certain of its senior executives.
Severance benefits for three of the executives consist of, among other
things, a lump-sum cash payment equal to twice the sum of the executive's
annual base salary plus twice the average of the executive's annual bonuses
awarded in the three years preceding termination of employment, payment of
the value in their outstanding stock options and vesting and distribution of
any restricted stock. Certain other executives would receive a lump-sum cash
payment equal to their annual base salary plus a three-year average of their
annual bonus, plus the other described benefits. Some of the executives
would receive a lump-sum cash payment equal to their base salary. In certain
agreements, the termination must be as a result of a change in control of the
Company. Based upon current salary levels and stock options, the aggregate
commitment under the severance agreements should all these executives be
terminated is approximately $24,900,000 as of June 27, 1996.
The Company had commitments for the purchase of property and equipment of
approximately $36,000,000 at June 27, 1996.
Note 8: Subsequent Events
- --------------------------
On July 31, 1996, the Company issued 6,000,000 shares of common stock, par
value $.01 per share, at a price of $9.50 per share. On August 5, 1996, the
Company issued 279,200 shares of common stock, par value $.01 per share, at a
price of $9.50 per share as part of an over-allotment option contained in an
underwriting agreement dated July 25, 1996. The combined net proceeds from
both issuances of approximately $55,800,000, after deducting the
underwriters' discount and estimated expenses payable by the Company, will be
used for general corporate purposes, including ongoing and potential
development of casino and hotel facilities. Pending specific application,
the Company will use such net proceeds to reduce amounts outstanding (and
permitted to be reborrowed, subject to the conditions contained therein)
under its reducing revolving credit facility, which matures on December 31,
1999.
13
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AZTAR CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
Financial Condition
The Company's expansion of Tropicana Casino and Resort in Atlantic City, New
Jersey (which had been known as "TropWorld Casino and Entertainment Resort"),
consisting primarily of a 604-room hotel tower, opened in late April 1996.
The new hotel tower includes a concierge floor of six large penthouse suites
completed in late July 1996 to attract high-end players. The Company's
expenditures for property and equipment on the expansion project for the year
to date through June 27, 1996 were approximately $27 million. Modifications
made to the existing facilities include the construction of a new hotel
lobby, refurbishment of all existing hotel rooms and extensive improvements
to the casino. The Company held a grand opening celebration of its new
facilities on the Fourth of July weekend and used this event as an
opportunity to rename the property.
At Casino Aztar Evansville in Indiana, construction of the 250-room hotel, an
entertainment and ticketing pavilion, a parking garage and other amenities is
on schedule for completion by December 1996. The Company's expenditures for
property and equipment on this project for the year to date through June 27,
1996 were approximately $22.4 million.
During the first half of 1996, the Company borrowed $96.7 million and repaid
$44.3 million under the reducing revolving credit facility (the "Credit
Facility"), leaving an outstanding balance of $169 million at June 27, 1996.
The Company's debt to operating cash flow ratio as calculated under the
Credit Facility was 4.85 to 1 at June 27, 1996 and the maximum allowable
ratio was 4.50 to 1. The Company has received a waiver from its lenders
under the Credit Facility with respect to the maximum allowable debt to
operating cash flow ratio at June 27, 1996. The effect of this action is to
waive compliance with this covenant for the entire third quarter, and
accordingly, the Company expects to have access to borrowings under the
Credit Facility during such period. A similar waiver had been obtained at
December 28, 1995, but was not necessary at March 28, 1996. The maximum
allowable ratio decreases to 4.25 to 1 at September 26, 1996, 3.75 to 1 at
the end of fiscal 1996 and to 3.25 to 1 at the end of fiscal 1997. The
Company's ability to maintain or increase debt capacity is contingent on
increased levels of operating cash flow or deleveraging by the use of
additional equity.
At June 27, 1996, the Company had commitments of approximately $36 million
for the purchase of property and equipment.
The Tropicana Las Vegas lease agreement contains a provision that requires
the Company to maintain an additional security deposit with the lessor of
approximately $21.3 million in cash or a letter of credit if the Tropicana
Las Vegas operation fails to meet certain financial tests. This requirement
was waived at June 27, 1996. A determination has been made for the period
ended June 27, 1996, that the additional security deposit will be required by
September 25, 1996 unless the requirement is again waived by the lessor.
On July 31, 1996, the Company issued 6,000,000 shares of common stock, par
value $.01 per share, at a price of $9.50 per share. On August 5, 1996, the
14
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AZTAR CORPORATION AND SUBSIDIARIES
Company issued 279,200 shares of common stock, par value $.01 per share, at a
price of $9.50 per share as part of an over-allotment option contained in an
underwriting agreement dated July 25, 1996. The combined net proceeds from
both issuances of approximately $55,800,000, after deducting the
underwriters' discount and estimated expenses payable by the Company, will be
used for general corporate purposes, including ongoing and potential
development of casino and hotel facilities. Pending specific application,
the Company will use such net proceeds to reduce amounts outstanding (and
permitted to be reborrowed, subject to the conditions contained therein)
under its Credit Facility, which matures on December 31, 1999.
Results of Operations
Six Months Ended June 27, 1996 Compared to Six Months Ended June 29, 1995
The Company's consolidated revenues for the first half of 1996 were $369.7
million, a 32% increase over $281.0 million for the first half of 1995. The
increase in consolidated revenues was largely as a result of added revenues
attributable to operations at the Company's riverboat casino in Evansville,
Indiana, which opened on December 7, 1995. The increase in consolidated
revenues also reflected increased revenues from the Company's riverboat
casino in Caruthersville, Missouri, which began operations on April 28, 1995,
and higher total revenues at all three of the Company's land-based
facilities. Consolidated operating income for the first half of 1996 was
$31.0 million, a 5% increase over $29.6 million for the first half of last
year. A strong operating performance by Casino Aztar Evansville and
increased operating results from Casino Aztar Caruthersville combined with
improved operating results at Tropicana Las Vegas more than offset lower
operating results at Tropicana Atlantic City. The Atlantic City Tropicana's
results for the first half of 1996 were significantly impeded by disruption
to operations due to the expansion and renovation activities at the property,
as well as increased costs associated with promotional programs implemented
to increase market share in anticipation of the opening of the new
facilities. In addition, results at the Atlantic City Tropicana for the
first half of 1996 were reduced as a result of severe winter weather.
Consolidated operating results for the 1996 six-month period reflected a
$641,000 pretax loss on disposal of assets, included in consolidated general
and administrative expense, related to the construction of new facilities.
Consolidated operating income is after the writeoff of preopening costs of
$0.1 million in the 1996 six-month period compared to $2.6 million in the
1995 six-month period.
Consolidated interest expense increased by $3.3 million or 13% in the first
half of 1996 compared to the first half of 1995. The increase was mainly as
a result of higher levels of debt outstanding under the Credit Facility
during the 1996 six-month period, partially offset by the lower average
interest rates in effect on that debt during the 1996 six-month period.
For a discussion of income taxes, refer to "Note 5: Income Taxes".
TROPICANA ATLANTIC CITY Total revenues at Tropicana Atlantic City were $176.2
million in the first half of 1996, up 6% from $165.9 million in the first
half of last year. Casino revenue was 6% higher in the first half of 1996
15
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AZTAR CORPORATION AND SUBSIDIARIES
versus 1995, primarily reflecting a $5.0 million increase in games revenue as
well as a 4% increase in slot revenue due to an increase in coin redemptions
mainly associated with the bus segment of the market. Rooms revenue was 32%
higher in the 1996 versus 1995 six-month period due to an increase in the
number of occupied rooms as well as an increase in average daily room rates.
The increase in occupied rooms was primarily attributable to the opening in
late April 1996 of the new hotel tower.
Tropicana Atlantic City had operating income of $14.0 million in the 1996
six-month period, down 53% from $30.1 million in the 1995 six-month period.
The Atlantic City Tropicana's results for the first half of 1996 were reduced
as a result of the factors noted above. Casino costs were 18% higher in the
1996 versus 1995 six-month period as a result of the increase in coin
redemptions and increased direct costs associated with the increase in games
business. Rooms costs increased by 35% in the 1996 versus 1995 six-month
period primarily due to increased direct costs associated with the opening of
the new hotel tower. Marketing costs were $7.1 million, or 42%, higher in
the first half of 1996 versus the first half of 1995 primarily due to an
increased number of promotions and special events. General and
administrative expense increased by $3.0 million, or 35%, in the 1996 versus
1995 six-month period. General and administrative expense for the 1995 six-
month period included a gain associated with funds received from the Casino
Reinvestment Development Authority ("CRDA") in conjunction with the
construction of the hotel tower. The increase in general and administrative
expense also reflected increases in executive and security payroll related to
the increased promotional activities and a pretax loss on disposal of assets
in 1996 related to the construction of the new casino facilities at the
property. Operating results for the 1996 six-month period included a $0.1
million writeoff of preopening costs related to the new hotel tower.
Operating income is after rent and depreciation and amortization expenses.
Rent expense was $0.8 million in the 1996 six-month period compared to $0.7
million in the 1995 six-month period. Depreciation and amortization was
$10.3 million in the first half of 1996 compared to $11.1 million in the
first half of 1995.
TROPICANA LAS VEGAS At Tropicana Las Vegas, total revenues were $82.7 million
in the first half of 1996 compared to $69.6 million in the first half of
1995, a 19% increase reflecting increases in all revenue components. Casino
revenue was 20% higher in the 1996 versus 1995 six-month period, primarily
reflecting a substantial increase in baccarat revenue. In mid-1995, the
Company adopted new marketing initiatives at Tropicana Las Vegas to increase
premium table game business while maintaining slot revenue. Rooms revenue
increased by 14% in the first half of 1996 versus 1995 due to an increase in
average daily room rates as well as an increase in the number of occupied
rooms. Food and beverage revenue was 17% higher in the first half of 1996
due to higher volume associated with the introduction of a buffet in mid-1995
and capital improvements associated with two restaurants.
Tropicana Las Vegas had operating income of $2.3 million for the first half
of 1996 compared to $0.3 million for last year's first half. Casino costs
were 26% higher in the 1996 versus 1995 six-month period, primarily
reflecting the higher costs associated with increasing the premium table
games business. Consistent with the increases in rooms and food and beverage
revenues were increases in rooms and food and beverage costs as a result of
16
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
increased direct costs. Operating income is after rent and depreciation and
amortization expenses. Rent expense was $4.5 million in the 1996 six-month
period compared to $4.7 million in the 1995 six-month period. Depreciation
and amortization was $4.5 million in the 1996 six-month period compared to
$3.5 million in last year's six-month period.
RAMADA EXPRESS At Ramada Express, total revenues were $42.5 million in the
first half of 1996, up slightly from $41.9 million in the first half of last
year. Operating income was $7.9 million in the first half of 1996, an
increase from $7.7 million in the first half of last year. Operating income
is after rent and depreciation and amortization expenses. Rent expense was
$0.1 million in the 1996 six-month period; rent expense was insignificant in
the 1995 six-month period. Depreciation and amortization was $3.6 million in
both periods.
CASINO AZTAR EVANSVILLE Casino Aztar Evansville, which opened on December 7,
1995, added $54.7 million to total consolidated revenues in the 1996 six-
month period and contributed $14.2 million to consolidated operating income.
Operating income is after rent expense of $1.1 million and depreciation and
amortization of $4.0 million.
CASINO AZTAR CARUTHERSVILLE Casino Aztar Caruthersville, which opened on
April 28, 1995, had total revenues of $13.6 million and an operating loss of
$1.4 million in the 1996 six-month period compared to total revenues of $3.6
million and an operating loss of $2.8 million for the period of operations in
1995. Operating results in the 1995 period of operations included a $2.6
million writeoff of preopening costs. Operating income is after depreciation
and amortization of $1.7 million in the 1996 six-month period and $0.4
million in the 1995 period of operations.
Quarter Ended June 27, 1996 Compared to Quarter Ended June 29, 1995
The Company's consolidated revenues for the 1996 second quarter were $189.5
million, a 30% increase over $145.4 million for the 1995 second quarter. The
increase in consolidated revenues was largely as a result of added revenues
attributable to Casino Aztar Evansville, which opened in December 1995. The
increase in consolidated revenues also reflected increased revenues from
Casino Aztar Caruthersville, which began operations on April 28, 1995, and
higher total revenues at Tropicana Atlantic City and Tropicana Las Vegas.
Consolidated operating income for the second quarter of 1996 was $15.4
million, a 12% increase over $13.8 million for last year's second quarter. A
strong operating performance by Casino Aztar Evansville combined with
increased operating results from Casino Aztar Caruthersville more than offset
lower operating results at Tropicana Atlantic City. The Atlantic City
Tropicana's results for the second quarter of 1996 were significantly impeded
by disruption to operations due to the expansion and renovation activities at
the property, as well as increased costs associated with promotional programs
implemented to increase market share in anticipation of the opening of the
new facilities. Consolidated operating results for the 1996 second quarter
reflected a $641,000 pretax loss on disposal of assets, included in
consolidated general and administrative expense, related to the construction
of new facilities. Consolidated operating income is after the writeoff of
preopening costs of $0.1 million in the 1996 second quarter compared to $2.6
million in the 1995 second quarter.
17
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Consolidated interest expense increased by $1.9 million or 15% in the 1996
versus 1995 second quarter. The increase was mainly as a result of higher
levels of debt outstanding under the Credit Facility during the 1996 second
quarter, partially offset by lower average interest rates in effect on that
debt during the 1996 second quarter.
For a discussion of income taxes, refer to "Note 5: Income Taxes."
TROPICANA ATLANTIC CITY Total revenues at Tropicana Atlantic City were $92.4
million in the 1996 second quarter, up 8% from $85.8 million in the 1995
second quarter. Casino revenue was 8% higher in the 1996 versus 1995 second
quarter, primarily reflecting a $3.1 million increase in games revenue as
well as a 5% increase in slot revenue due to an increase in coin redemptions
mainly associated with the bus segment of the market. Rooms revenue was 51%
higher in the 1996 second quarter due to an increase in the number of
occupied rooms as well as an increase in average daily room rates. The
increase in occupied rooms was primarily attributable to the opening of the
new hotel tower.
Tropicana Atlantic City had operating income of $7.5 million in the second
quarter of 1996, a 53% decline from $16.2 million in last year's second
quarter. The Atlantic City Tropicana's results for the 1996 second quarter
were reduced as a result of the factors noted above. Casino costs were 22%
higher in the 1996 versus 1995 second quarter as a result of the increase in
coin redemptions and increased direct costs associated with the increase in
games business. Rooms costs increased by 46% in the 1996 versus 1995 second
quarter primarily due to increased direct costs associated with the opening
of the new hotel tower. Marketing costs were $3.1 million, or 33%, higher in
the 1996 second quarter primarily due to an increased number of promotions
and special events. General and administrative expense increased by $1.8
million, or 38%, in the 1996 versus 1995 second quarter. General and
administrative expense for the 1995 second quarter included a gain associated
with funds received from the CRDA in conjunction with the construction of the
hotel tower. The increase in general and administrative expense also
reflected increases in executive and security payroll related to the
increased promotional activities and a pretax loss on disposal of assets in
1996 related to the construction of the new casino facilities at the
property. Operating results for the 1996 second quarter included a $0.1
million writeoff of preopening costs related to the new hotel tower.
Operating income is after rent and depreciation and amortization expenses.
Rent expense was $0.4 million in both periods and depreciation and
amortization was $5.5 million in both periods.
TROPICANA LAS VEGAS At Tropicana Las Vegas, total revenues were $41.1 million
in the 1996 second quarter compared to $35.4 million in the 1995 second
quarter, a 16% increase reflecting increases in all revenue components.
Casino revenue was 16% higher in the 1996 versus 1995 second quarter,
primarily reflecting a substantial increase in baccarat revenue. Rooms
revenue increased by 10% in the 1996 versus 1995 second quarter due to an
increase in average daily room rates as well as an increase in the number of
occupied rooms. Food and beverage revenue was 16% higher in the second
quarter of 1996 due to higher volume associated with the introduction of a
buffet in mid-1995 and capital improvements associated with two restaurants.
18
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Tropicana Las Vegas had operating income of $0.6 million in the second
quarter of 1996 compared to $0.3 million in the second quarter of 1995.
Casino costs were 30% higher in the 1996 versus 1995 second quarter,
primarily reflecting the higher costs associated with increasing the premium
table games business. Consistent with the increases in rooms and food and
beverage revenues were increases in rooms and food and beverage costs as a
result of increased direct costs. Marketing costs were 28% higher in the
1996 versus 1995 second quarter due to increased contract entertainment and
advertising costs as well as an increased number of promotional programs.
Operating income is after rent and depreciation and amortization expenses.
Rent expense was $2.3 million in both periods. Depreciation and amortization
was $2.1 million in the 1996 second quarter compared to $1.8 million in the
1995 second quarter.
RAMADA EXPRESS At Ramada Express, total revenues were $20.4 million in the
second quarter of 1996, down slightly from $20.6 million in the second
quarter of last year. Operating income was $3.2 million in the 1996 second
quarter, a slight decrease from $3.3 million in last year's second quarter.
Operating income is after rent and depreciation and amortization expenses.
Rent expense was insignificant in both periods. Depreciation and
amortization was $1.8 million in both periods.
CASINO AZTAR EVANSVILLE Casino Aztar Evansville, which opened in December
1995, added $28.8 million to total consolidated revenues in the 1996 second
quarter and contributed $7.4 million to consolidated operating income.
Operating income is after rent expense of $0.6 million and depreciation and
amortization of $2.0 million.
CASINO AZTAR CARUTHERSVILLE Casino Aztar Caruthersville, which opened on
April 28, 1995, had total revenues of $6.8 million and an operating loss of
$0.6 million in the 1996 second quarter compared to total revenues of $3.6
million and an operating loss of $2.8 million for the period of operations in
1995. Operating results in the 1995 period of operations included a $2.6
million writeoff of preopening costs. Operating income is after depreciation
and amortization of $0.8 million in the 1996 second quarter and $0.4 million
in the 1995 period of operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
(a) In connection with Case Nos. CV-S-94-1126-LDG(RJJ) and CV-S-94-1137-
LDG(RJJ) (collectively, the Poulos/Ahearn Case") , as reported under
Part I, Item 3 of the Company's Form 10-K for the year ended December
28, 1995, by order entered April 17, 1996, as reported under Part II,
Item 1(a) of the Company's Form 10-Q for the quarter ended March 28,
1996, the court granted the defendants' motions and dismissed the
complaint without prejudice. On May 31, 1996, the plaintiffs filed an
amended complaint and the defendants have again moved to dismiss it for
failure to state a claim. The claims in the amended complaint seek
damages that are the same as those in the original complaint. No
hearing date has been set. On May 31, 1996, the plaintiffs filed a
motion to substitute Brenda McElmore for Mr. Ahearn as one of the class
representatives. This motion has not been opposed by the Company. No
hearing date has been set.
19
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
(b) In connection with Case No. 95cv2236(JEI), as reported under Part I,
Item 3 of the Company's Form 10-K for the year ended December 28, 1995,
Counsel for Plaintiff, as reported under Part II, Item 1(a) of the
Company's Form 10-Q for the quarter ended March 28, 1996, has responded
to the Company's motion to dismiss and pursuant to Local Rule, the
Company's motion was submitted to the Court on April 25, 1996. On
May 30, 1996, the court ordered that defendants' motions to dismiss the
complaint be granted and plaintiff's complaint be dismissed in its
entirety.
(c) In connection with Case No. CV-S-95-936-LDG(RLH) (the "Poulos vs.
Ambassador Cruise Lines Case"), as reported under Part I, Item 3 of the
Company's Form 10-K for the year ended December 28, 1995, the plaintiff
in Case No. CV-S-95-00923-LDG(RJJ) (the "Schreier Case"), has sought
review of the Court's denial of the motion to consolidate the Schreier
Case with the Poulos/Ahearn Case and the Poulos vs. Ambassador Cruise
Lines Case. No hearing date has been set on this motion.
(d) On March 27, 1996, a purported consumer class action entitled Payne, et
al. v. Aztar Corporation, et. al., Case No. 00698592, was filed in the
state Superior Court in San Diego, California naming as defendants the
Company and several other entities whom plaintiffs allege are casino
owners or operators. Plaintiffs purport to bring the action on behalf
of a class consisting of all persons in California who have played video
poker machines owned or operated by defendants. Plaintiffs allege that
defendants have engaged in a course of fraudulent and misleading conduct
intended to induce plaintiffs to play video poker machines based on a
false belief conveyed by defendants concerning how such machines operate
and that such conduct violates various provisions of the California
Business and Professions Code and the so-called Consumer Legal Remedies
Act. Plaintiffs seek unspecified compensatory and punitive damages,
disgorgement and other equitable remedies and attorneys' fees and other
costs. Defendants have removed the action to the United States District
Court for the Southern District of California in San Diego, Case No. 96-
905-J(CGA), and filed various motions to dismiss and or transfer the
action to the United States District Court for the District of Nevada
where the Poulos/Ahearn Case and the Schreier Case are pending.
Plaintiffs' attorneys in the Payne case include attorneys who represent
the plaintiffs in the Poulos/Ahearn Case and the Schreier Case.
Plaintiffs have filed a motion to have the case remanded to state court
contending that the federal court lacks subject matter jurisdiction over
the case. These motions are now scheduled to be heard on various dates
in the period October-December 1996. The Company believes that
plaintiffs' allegations are without merit and intends to defend the
action vigorously.
20
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Page No.
----------
11. Statement Regarding Computation of Per Share Earnings. *
27. Financial Data Schedule. *
* 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) On July 12, 1996, the Company filed a report on Form
8-K under Item 5. Other Events to file, as Exhibit 99,
the news release issued by the Registrant on July 11,
1996 reporting the Company's financial results for the
second quarter and six months ended June 27, 1996.
21
<PAGE>
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 6, 1996 By ROBERT M. HADDOCK
-------------------------- ---------------------------
Robert M. Haddock
Executive Vice President and
Chief Financial Officer
22
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Exhibit Index
- -------------
11. Statement Regarding Computation of Per Share Earnings.
27. Financial Data Schedule.
E-1
<PAGE>
Exhibit 11
AZTAR CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
For the periods ended June 27, 1996 and June 29, 1995
---------------------------------------------------------------
(in thousands, except per share data)
Second Quarter Six Months
------------------- -------------------
1996 1995 1996 1995
--------- --------- --------- ---------
Net income $ 40 $ 525 $ 809 $ 2,485
Deduct: preferred stock dividend
(net of income taxes credited to
retained earnings) (164) (154) (324) (312)
--------- --------- -------- --------
Net income applicable to computation $ (124) $ 371 $ 485 $ 2,173
======== ======== ======== ========
Weighted average common shares
assuming no dilution 38,411 38,026 38,348 37,837
Common equivalent shares
Additional shares applicable to
stock options based on the
weighted average market price 1,283 1,093 1,116 1,015
-------- -------- -------- --------
Weighted average common shares
applicable to net income per
common and common equivalent share 39,694 39,119 39,464 38,852
Additional shares applicable to
stock options based on the market
close price at the end of the period 23 24 207 140
Conversion of preferred stock at
the stated rate 967 1,002 973 1,005
-------- -------- -------- --------
Weighted average common shares
assuming full dilution 40,684 40,145 40,644 39,997
======== ======== ======== ========
Net income per common and common
equivalent share $ -- $ .01 $ .01 $ .06
Net income per common share assuming
full dilution $ -- $ .01 $ .01 $ .05
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 27, 1996 and the Consolidated Statement of
Operations for the year-to-date period ended June 27, 1996 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-2-1997
<PERIOD-END> JUN-27-1996
<CASH> 29,623
<SECURITIES> 0
<RECEIVABLES> 34,949
<ALLOWANCES> 10,183
<INVENTORY> 7,176
<CURRENT-ASSETS> 81,328
<PP&E> 1,116,589
<DEPRECIATION> 218,060
<TOTAL-ASSETS> 1,063,728
<CURRENT-LIABILITIES> 99,135
<BONDS> 548,813
5,770
0
<COMMON> 424
<OTHER-SE> 361,717
<TOTAL-LIABILITY-AND-EQUITY> 1,063,728
<SALES> 27,540
<TOTAL-REVENUES> 369,699
<CGS> 25,794
<TOTAL-COSTS> 198,647
<OTHER-EXPENSES> 18,055
<LOSS-PROVISION> 2,114
<INTEREST-EXPENSE> 28,245
<INCOME-PRETAX> 3,973
<INCOME-TAX> 761
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<EPS-PRIMARY> .01
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