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 October 2, 1997
---------------
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 October 30, 1997, the registrant had outstanding 45,197,253 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 October 2, 1997 and
January 2, 1997 3
Consolidated Statements of Operations for the quarters
and nine months ended October 2, 1997 and September 26, 1996 5
Consolidated Statements of Cash Flows for the nine months
ended October 2, 1997 and September 26, 1996 7
Consolidated Statements of Shareholders' Equity for the
nine months ended October 2, 1997 and September 26, 1996 9
Notes to Consolidated Financial Statements 10
2
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
---------------------------------------
(in thousands, except share data)
October 2, January 2,
1997 1997
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 32,702 $ 44,131
Accounts receivable, net 41,271 41,723
Refundable income taxes -- 1,201
Inventories 6,641 7,508
Prepaid expenses 11,452 9,772
Deferred income taxes, net 8,349 8,985
---------- ----------
Total current assets 100,415 113,320
Investments in and advances to
unconsolidated partnership 9,612 10,360
Other investments 25,949 26,697
Property and equipment:
Buildings, riverboats and equipment, net 809,201 827,103
Land 94,067 95,747
Construction in progress 3,613 3,820
Leased under capital leases, net 743 389
---------- ----------
907,624 927,059
Deferred income taxes, net 764 2,565
Other deferred charges and assets 38,248 39,581
---------- ----------
$1,082,612 $1,119,582
========== ==========
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)
October 2, January 2,
1997 1997
---------- ----------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accruals $ 52,625 $ 66,048
Accrued payroll and employee benefits 22,241 22,571
Accrued interest payable 1,923 13,288
Income taxes payable 2,203 1,112
Current portion of long-term debt 19,404 12,960
Current portion of other long-term
liabilities 3,178 4,259
---------- ----------
Total current liabilities 101,574 120,238
Long-term debt 500,753 527,006
Other long-term liabilities 24,827 27,042
Contingencies and commitments
Series B ESOP convertible preferred stock
(redemption value $6,422 and $7,226) 6,422 6,022
Shareholders' equity:
Common stock, $.01 par value (45,187,267
and 45,000,287 shares outstanding) 491 489
Paid-in capital 411,986 411,158
Retained earnings 53,715 44,846
Less: Treasury stock (17,126) (17,102)
Unearned compensation (30) (117)
---------- ----------
Total shareholders' equity 449,036 439,274
---------- ----------
$1,082,612 $1,119,582
========== ==========
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 October 2, 1997 and September 26, 1996
---------------------------------------------------------------
(in thousands, except per share data)
Third Quarter Nine Months
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
Revenues
Casino $166,689 $173,199 $488,355 $482,029
Rooms 13,096 12,008 39,695 35,141
Food and beverage 13,293 12,753 39,142 37,634
Other 8,796 6,317 24,825 19,172
-------- -------- -------- --------
201,874 204,277 592,017 573,976
Costs and expenses
Casino 75,650 82,744 224,112 232,984
Rooms 7,601 7,418 22,854 20,733
Food and beverage 14,024 13,422 41,351 39,037
Other 6,774 6,917 18,848 19,209
Marketing 23,682 22,366 64,522 62,370
General and administrative 16,262 17,988 52,133 52,603
Utilities 4,090 4,870 11,018 11,433
Repairs and maintenance 5,963 6,492 17,807 17,984
Provision for doubtful accounts 2,056 1,233 7,261 3,347
Property taxes and insurance 5,715 5,971 18,072 17,411
Rent 5,711 4,335 15,493 11,054
Depreciation and amortization 13,035 12,194 38,431 36,407
Preopening costs -- 2,197 -- 2,273
-------- -------- -------- --------
180,563 188,147 531,902 526,845
-------- -------- -------- --------
Operating income 21,311 16,130 60,115 47,131
Interest income 514 545 1,541 1,762
Interest expense (15,626) (14,327) (47,181) (42,572)
-------- -------- -------- --------
Income before other items and
income taxes 6,199 2,348 14,475 6,321
Equity in unconsolidated
partnership's loss (1,159) (1,139) (3,483) (3,542)
-------- -------- -------- --------
Income before income taxes 5,040 1,209 10,992 2,779
Income taxes (1,797) (1,162) (1,643) (1,923)
-------- -------- -------- --------
Net income $ 3,243 $ 47 $ 9,349 $ 856
======== ======== ======== ========
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 October 2, 1997 and September 26, 1996
---------------------------------------------------------------
(in thousands, except per share data)
Third Quarter Nine Months
------------------ ------------------
1997 1996 1997 1996
-------- ------- -------- --------
Net income per common and common
equivalent share $ .07 $ -- $ .19 $ .01
Net income per common share
assuming full dilution $ .07 $ -- $ .19 $ .01
Weighted average common shares applicable to:
Net income per common and common
equivalent share 45,789 43,704 45,768 40,878
Net income per common share
assuming full dilution 46,757 44,660 46,720 41,873
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 October 2, 1997 and September 26, 1996
---------------------------------------------------------------
(in thousands)
Nine Months
---------------------
1997 1996
Cash Flows from Operating Activities --------- ---------
Net income $ 9,349 $ 856
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 40,447 38,830
Provision for losses on accounts receivable 7,261 3,347
Loss on reinvestment obligation 751 520
Rent expense (777) (645)
Distribution in excess of equity in income
of partnership 748 819
Deferred income taxes 2,437 13
Change in assets and liabilities:
(Increase) decrease in accounts receivable (5,972) (13,045)
(Increase) decrease in refundable income taxes 1,201 341
(Increase) decrease in inventories and
prepaid expenses (2,009) (62)
Increase (decrease) in accounts payable,
accrued expenses and income taxes payable (24,160) 10,505
Other items, net 503 4,472
--------- ---------
Net cash provided by (used in) operating activities 29,779 45,951
--------- ---------
Cash Flows from Investing Activities
Payments received on notes receivable 1,310 1,150
Reduction in other investments 2,738 383
Purchases of property and equipment (17,454) (98,307)
Additions to other long-term assets (5,628) (4,840)
--------- ---------
Net cash provided by (used in) investing activities (19,034) (101,614)
--------- ---------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 171,300 154,800
Proceeds from issuance of common stock 657 57,674
Principal payments on long-term debt (191,888) (146,685)
Principal payments on other long-term liabilities (964) (4,313)
Debt issuance costs (195) --
Preferred stock dividend (689) (726)
Redemption of preferred stock (395) (376)
--------- ---------
Net cash provided by (used in) financing activities (22,174) 60,374
--------- ---------
Net increase (decrease) in cash and cash equivalents (11,429) 4,711
Cash and cash equivalents at beginning of period 44,131 26,527
--------- ---------
Cash and cash equivalents at end of period $ 32,702 $ 31,238
========= =========
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 October 2, 1997 and September 26, 1996
---------------------------------------------------------------
(in thousands)
Nine Months
-------------------
1997 1996
-------- --------
Supplemental Cash Flow Disclosures
Summary of non-cash investing and financing activities:
Reduction in land and other long-term liabilities $ 2,000 $ --
Capital lease obligations incurred for property
and equipment 552 --
Tax benefit from stock options and preferred stock
dividend 229 840
Issuance of restricted stock -- 136
Forfeiture of restricted stock 24 57
Cash flow during the period for the following:
Interest paid, net of amount capitalized $ 56,592 $ 31,537
Income taxes paid (refunded) (3,314) 1,075
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 October 2, 1997 and September 26, 1996
---------------------------------------------------------------
(in thousands, except number of shares)
Nine Months
--------------------
1997 1996
-------- --------
Common stock:
Beginning balance $ 489 $ 422
Issuance of 6,279,200 shares of common stock in 1996 -- 63
Stock options exercised for 171,348 and
376,315 shares 2 4
-------- --------
Ending balance 491 489
-------- --------
Paid-in capital:
Beginning balance 411,158 352,221
Issuance of common stock -- 55,813
Stock options exercised 655 1,794
Tax benefit from stock options exercised 173 762
Restricted stock -- 136
-------- --------
Ending balance 411,986 410,726
-------- --------
Retained earnings:
Beginning balance 44,846 24,922
Preferred stock dividend and losses on redemption,
net of income tax benefit of $56 and $78 (480) (501)
Net income 9,349 856
-------- --------
Ending balance 53,715 25,277
-------- --------
Treasury stock:
Beginning balance (17,102) (17,027)
Forfeiture of 3,668 and 8,667 shares
of restricted stock (24) (57)
-------- --------
Ending balance (17,126) (17,084)
-------- --------
Unearned compensation:
Beginning balance (117) (879)
Restricted stock -- (136)
Amortization 63 774
Forfeiture of restricted stock 24 57
-------- --------
Ending balance (30) (184)
-------- --------
$449,036 $419,224
======== ========
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. There was no interest capitalized during the quarter or nine
months ended 1997. The interest that was capitalized during the quarter and
nine months ended 1996 was $1,027,000 and $3,750,000, respectively.
Capitalized costs related to various development projects, included in other
deferred charges and assets, were $359,000 at October 2, 1997. There were no
capitalized costs related to development projects at January 2, 1997. 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 January 2, 1997.
Certain reclassifications have been made in the 1996 Consolidated Statement
of Operations in order to be comparable with the 1997 presentation.
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
October 2, 1997 and September 26, 1996 (in thousands):
Third Quarter Nine Months
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
Revenues $ 4,165 $ 4,128 $ 12,470 $ 12,436
Operating expenses (684) (631) (2,051) (2,061)
-------- -------- -------- --------
Operating income 3,481 3,497 10,419 10,375
Interest expense (1,360) (1,372) (4,093) (4,200)
-------- -------- -------- --------
Net income $ 2,121 $ 2,125 $ 6,326 $ 6,175
======== ======== ======== ========
The Company's share of the above operating results, after intercompany
eliminations, is as follows (in thousands):
Third Quarter Nine Months
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
Equity in unconsolidated
partnership's loss $ (1,159) $ (1,139) $ (3,483) $ (3,542)
10
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Note 3: Long-term Debt
- -----------------------
At October 2, 1997 and January 2, 1997, long-term debt included (in
thousands):
1997 1996
-------- --------
11% Senior Subordinated Notes Due 2002 $200,000 $200,000
13 3/4% Senior Subordinated Notes Due 2004 178,020 177,904
Reducing revolving credit note ("Credit
Facility"); floating rate, 8.3% at
October 2, 1997; matures December 31, 1999 140,000 160,000
Other notes payable; 7% to 14.6%; maturities
to 2002 1,240 1,521
Obligations under capital leases 897 541
-------- --------
520,157 539,966
Less current portion (19,404) (12,960)
-------- --------
$500,753 $527,006
======== ========
On March 13, 1997, the Company entered into a supplemental reducing revolving
loan agreement maturing on March 15, 1999 (the "Supplemental Credit
Facility"). The Company has obtained bank commitments under the Supplemental
Credit Facility for $25,000,000. The Supplemental Credit Facility has terms
and imposes restrictions on the Company similar to the Credit Facility. The
availability of funds under the Supplemental Credit Facility will reduce
quarterly beginning on June 30, 1998 by $4,000,000. As of October 2, 1997,
there were no borrowings under the Supplemental Credit Facility.
Note 4: Other Long-term Liabilities
- -------------------------------------
At October 2, 1997 and January 2, 1997, other long-term liabilities consisted
of (in thousands):
1997 1996
-------- --------
Accrued rent expense $ 11,534 $ 12,311
Obligation to City of Evansville and
other civic and community organizations 5,363 8,300
Deferred compensation and retirement plans 10,626 10,181
Las Vegas Boulevard beautification assessment 482 509
-------- --------
28,005 31,301
Less current portion (3,178) (4,259)
-------- --------
$ 24,827 $ 27,042
======== ========
11
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Note 5: Income Taxes
- ----------------------
The Company is responsible, with certain exceptions, for the taxes of Ramada
Inc. ("Ramada") through December 20, 1989. The Internal Revenue Service
("IRS") has completed its examinations of the income tax returns for the
years 1988 through 1991 and has settled for all but one issue. Income taxes
for the nine months ended 1997 include a non-recurring tax benefit of
$2,323,000 in the first quarter of 1997, primarily related to cash received
as a result of the settlement agreement between the IRS and Ramada. The IRS
is examining the income tax returns for the years 1992 and 1993. Management
believes that adequate provision for income taxes and interest has been made
in the financial statements.
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 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 and redemption
losses 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 $3,909,000 and
$3,931,000 at October 2, 1997 and January 2, 1997, 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 $21,064,000 in cash or a letter of credit if the Tropicana Las
Vegas operation fails to meet certain financial tests. The Company has a 50%
partnership interest in the lessor.
12
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Note 7: Contingencies and Commitments (continued)
- --------------------------------------------------
The Company has severance agreements with certain of its senior executives.
Severance benefits range from 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 preceding three years plus payment
of the value in his outstanding stock options and vesting and distribution of
any restricted stock to a lump-sum cash payment equal to his 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 was approximately $12,100,000 at October 2, 1997.
13
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
Financial Condition
On March 13, 1997, the Company entered into a supplemental reducing revolving
loan agreement maturing on March 15, 1999 (the "Supplemental Credit
Facility"). The Company has obtained bank commitments under the Supplemental
Credit Facility for $25 million. The Supplemental Credit Facility has terms
and imposes restrictions on the Company similar to the Credit Facility. The
availability of funds under the Supplemental Credit Facility will reduce
quarterly beginning on June 30, 1998 by $4 million. As of October 2, 1997,
there were no borrowings under the Supplemental Credit Facility.
During the nine months of 1997, the Company borrowed $171.3 million and
repaid $191.3 million under the Credit Facility, leaving an outstanding
balance of $140 million at October 2, 1997. The Company's debt to operating
cash flow ratio as calculated under the Credit Facility was 4.01 to 1 at
October 2, 1997 and the maximum allowable ratio was 5.00 to 1. The Company's
senior debt to operating cash flow ratio was 1.43 to 1 at October 2, 1997 and
the maximum allowable ratio was 1.95 to 1.
Results of Operations
Nine Months Ended October 2, 1997 Compared to Nine Months Ended September 26,
1996
The Company's consolidated revenues for the 1997 nine-month period were
$592.0 million, a 3% increase over $574.0 million for the 1996 nine-month
period. Consolidated rooms revenue was $4.6 million higher in the 1997
versus 1996 nine-month period primarily as a result of the added rooms
capacity at Tropicana Atlantic City due to the opening in late April 1996 of
a new 604-room hotel tower and the opening in December 1996 of a 250-room
hotel at Casino Aztar Evansville. Consolidated operating income for the 1997
nine-month period was $60.1 million, a 28% increase over $47.1 million for
the nine-month period of 1996. Improved operating results at Tropicana
Atlantic City, Casino Aztar Evansville and Casino Aztar Caruthersville were
more than sufficient to offset lower operating results at Tropicana Las Vegas
and Ramada Express. The Tropicana Atlantic City results for the 1996 nine-
month period were reduced as a result of severe winter weather, disruption
from the expansion and renovation activities at the property, and start-up
costs associated with the major expansion completed in July 1996.
Consolidated operating income for the nine-month period of 1996 is after the
writeoff of preopening costs of $2.3 million. Consolidated operating results
for the 1996 nine-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 interest expense increased by $4.6 million or 11% in the 1997
versus 1996 nine-month period primarily as a result of discontinuing the
capitalization of interest as the Company's major construction projects were
completed in phases in 1996.
For a discussion of income taxes, refer to "Note 5: Income Taxes".
14
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
TROPICANA ATLANTIC CITY Total revenues at Tropicana Atlantic City were $302.5
million in the 1997 nine-month period, up 6% from $284.9 million in the 1996
nine-month period. Casino revenue was 4% higher in the 1997 versus 1996
nine-month period, primarily reflecting a 29% increase in games revenue that
was partially offset by a 5% decrease in slot revenue. Slot revenue
decreased due to a reduction in coin offers to slot players. Rooms revenue
was $3.5 million or 60% higher in the 1997 nine-month period due to an
increase in occupied rooms primarily attributable to the opening in late
April 1996 of the new hotel tower and to an increase in the percentage of
rooms occupied on a non-complimentary basis.
Tropicana Atlantic City had operating income of $40.8 million in the 1997
nine-month period, a 45% improvement over $28.2 million in the 1996 nine-
month period. The Tropicana Atlantic City results for the 1996 nine-month
period were reduced as a result of the factors noted above. Casino costs
were 6% lower in the 1997 versus 1996 nine-month period primarily due to a
$16.9 million reduction in coin offers to slot players that more than offset
increased costs related to the increase in casino revenue. The reduction in
coin offers consisted of a $12.0 million reduction in direct mail and cash-
back coin offers and a $4.9 million reduction in line and charter bus coin.
Rooms costs were 43% higher in the 1997 versus 1996 nine-month period
primarily due to increased direct costs associated with the new hotel tower.
The provision for doubtful accounts was $1.1 million higher in the 1997
versus 1996 nine-month period due to an increase in the allowance for
potential uncollectible markers associated with the property's ongoing
emphasis on the games segment of the business. Operating income for the 1996
nine-month period is after the writeoff of preopening costs of $2.3 million.
Operating income is after rent and depreciation and amortization expenses.
Rent expense increased to $5.1 million in the 1997 nine-month period from
$1.8 million in the 1996 nine-month period as a result of an increased number
of operating leases associated with the new facilities. Depreciation and
amortization was $16.5 million in the 1997 nine-month period compared to
$15.7 million in the 1996 nine-month period.
TROPICANA LAS VEGAS At Tropicana Las Vegas, total revenues were $119.3
million in the 1997 nine-month period, down slightly from $121.5 million in
the 1996 nine-month period. Casino revenue was 3% lower in the 1997 versus
1996 nine-month period as an 11% decrease in slot revenue due to a supply
increase in the market more than offset a 6% increase in games revenue.
Tropicana Las Vegas had an operating loss of $2.1 million for the 1997 nine-
month period compared to an operating loss of $1.0 million for the 1996 nine-
month period. The provision for doubtful accounts was $2.7 million higher in
the 1997 versus 1996 nine-month period due to an increase in the allowance
for potential uncollectible markers associated with the property's ongoing
emphasis on premium table game business. Operating income is after rent and
depreciation and amortization expenses. Rent expense was $7.3 million in the
1997 nine-month period compared to $6.8 million in the 1996 nine-month
period. Depreciation and amortization was $7.0 million in the 1997 nine-
month period compared to $6.5 million in the 1996 nine-month period.
15
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
RAMADA EXPRESS At Ramada Express, total revenues were $62.3 million in the
1997 nine-month period, up slightly from $61.2 million in the 1996 nine-month
period. Operating income was $8.3 million in the 1997 nine-month period, a
4% decrease from $8.7 million in the 1996 nine-month period. Operating
income is after rent and depreciation and amortization expenses. Rent
expense was $0.4 million in the 1997 nine-month period compared to $0.2
million in the 1996 nine-month period. Depreciation and amortization was
$5.4 million in both periods.
CASINO AZTAR EVANSVILLE Total revenues at Casino Aztar Evansville were $89.5
million in the 1997 nine-month period, a 4% increase over $86.2 million in
last year's nine-month period. Casino Aztar Evansville's hotel, which opened
in December 1996, contributed $2.1 million to consolidated rooms revenue in
the 1997 nine-month period. Operating income was $23.1 million in the 1997
nine-month period, a 3% improvement over $22.4 million in the 1996 nine-month
period. Operating results included $0.6 million of rooms costs associated
with the hotel. Operating income is after rent and depreciation and
amortization expenses. Rent expense was $2.4 million in the 1997 nine-month
period compared to $2.0 million in the 1996 nine-month period. Depreciation
and amortization was $6.9 million in the 1997 nine-month period compared to
$6.0 million in the 1996 nine-month period.
CASINO AZTAR CARUTHERSVILLE Total revenues at Casino Aztar Caruthersville
were $18.4 million in the nine-month period of 1997 compared to $20.2 million
in the nine-month period of last year. Casino Aztar Caruthersville had an
operating loss of $2.1 million in the 1997 nine-month period compared to $2.4
million in the 1996 nine-month period. Operating income is after depreciation
and amortization of $2.5 million in the 1997 nine-month period compared to
$2.6 million in the 1996 nine-month period.
Quarter Ended October 2, 1997 Compared to Quarter Ended September 26, 1996
The Company's consolidated revenues for the 1997 third quarter were $201.9
million, a slight decrease from $204.3 million for the 1996 third quarter.
Consolidated operating income was $21.3 million for the 1997 third quarter
compared to $16.1 million for the 1996 third quarter, a 32% increase
reflecting improved operating results at Tropicana Atlantic City, Tropicana
Las Vegas and Casino Aztar Caruthersville, partially offset by lower
operating results at Casino Aztar Evansville. The Tropicana Atlantic City
results for the 1996 third quarter were reduced as a result of pressure on
operating margins due to start-up costs associated with the major expansion
completed in July 1996 as well as increased costs associated with promotional
programs implemented in response to marketing pressures resulting from
additional casino supply throughout the Atlantic City market. Consolidated
operating income for the 1996 third quarter is after the writeoff of
preopening costs of $2.2 million.
Consolidated interest expense increased by $1.3 million or 9% in the 1997
versus 1996 third quarter primarily as a result of discontinuing the
capitalization of interest as the Company's major construction projects were
completed in phases in 1996.
For a discussion of income taxes, refer to "Note 5: Income Taxes".
16
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AZTAR CORPORATION AND SUBSIDIARIES
TROPICANA ATLANTIC CITY Total revenues at Tropicana Atlantic City were
$108.6 million in the 1997 third quarter compared to $108.7 million in the
1996 third quarter. Casino revenue was 2% lower in the 1997 versus 1996
third quarter as a 9% decrease in slot revenue more than offset a 15%
increase in games revenue. Slot revenue decreased due to a reduction in coin
offers to slot players and a supply increase in the market. Rooms revenue
was $1.2 million or 43% higher in the 1997 third quarter due to higher
average daily rates and to an increase in the percentage of rooms occupied on
a non-complimentary basis.
Tropicana Atlantic City had operating income of $18.6 million in the 1997
third quarter, a 31% improvement over $14.2 million in the 1996 third
quarter. The Tropicana Atlantic City results for the 1996 third quarter were
reduced as a result of the factors noted above. Casino costs were 12% lower
in the 1997 versus 1996 third quarter primarily due to a $5.4 million
reduction in coin offers to slot players. The reduction in coin offers
consisted of a $4.0 million reduction in direct mail and cash-back coin
offers and a $1.4 million reduction in line and charter bus coin. Operating
income for the 1996 third quarter is after the writeoff of preopening costs
of $2.2 million. Operating income is after rent and depreciation and
amortization expenses. Rent expense increased to $2.0 million in the 1997
third quarter from $1.0 million in the 1996 third quarter as a result of an
increased number of operating leases associated with the new facilities.
Depreciation and amortization was $5.6 million in the third quarter of 1997
compared to $5.4 million in the third quarter of 1996.
TROPICANA LAS VEGAS At Tropicana Las Vegas, total revenues were $37.2
million in the 1997 third quarter, down slightly from $38.8 million in the
1996 third quarter. Tropicana Las Vegas had an operating loss of $3.0
million for the 1997 third quarter compared to an operating loss of $3.3
million for the 1996 third quarter. Operating income is after rent and
depreciation and amortization expenses. Rent expense was $2.5 million in the
third quarter of 1997 compared to $2.3 million in last year's third quarter.
Depreciation and amortization was $2.4 million in the 1997 third quarter
compared to $2.0 million in the 1996 third quarter.
RAMADA EXPRESS At Ramada Express, total revenues were $19.1 million in the
third quarter of 1997, a 3% increase over $18.6 million in the third quarter
of last year. Operating income was $0.9 million in the 1997 third quarter
compared to $0.8 million in the 1996 third quarter. Operating income is
after rent and depreciation and amortization expenses. Rent expense was $0.1
million in both periods. Depreciation and amortization was $1.8 million in
the third quarter of 1997 compared to $1.7 million in the third quarter of
last year.
CASINO AZTAR EVANSVILLE Total revenues at Casino Aztar Evansville were $30.7
million in the 1997 third quarter, a 3% decrease from $31.6 million in the
1996 third quarter. Casino Aztar Evansville's hotel, which opened in
December 1996, contributed $0.8 million to consolidated rooms revenue in the
1997 third quarter. Operating income was $7.4 million in the third quarter
of 1997, a 9% decrease from $8.2 million in last year's third quarter.
Operating results included $0.3 million of rooms costs associated with the
hotel. Operating income is after rent and depreciation and amortization
expenses. Rent expense was $1.0 million in the 1997 third quarter compared
17
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
to $0.9 million in the 1996 third quarter. Depreciation and amortization was
$2.4 million in the 1997 third quarter compared to $2.1 million in the 1996
third quarter.
CASINO AZTAR CARUTHERSVILLE Total revenues at Casino Aztar Caruthersville
were $6.3 million in the third quarter of 1997 compared to $6.6 million in
the third quarter of 1996. Casino Aztar Caruthersville had an operating loss
of $0.7 million in the third quarter of 1997 compared to an operating loss of
$1.0 million in the third quarter of 1996. Operating income is after
depreciation and amortization of $0.8 million in the 1997 third quarter
compared to $0.9 million in the 1996 third quarter.
Other Matters
In February 1997, the Financial Accounting Standards Board ("FASB") adopted
Statement of Financial Accounting Standards No. 128, Earnings per Share
("SFAS 128"), which supersedes and simplifies the standards for computing
earnings per share ("EPS") previously found in Accounting Principles Board
Opinion No. 15, Earnings per Share ("APB 15"). SFAS 128 replaces net income
per common and common equivalent share with a presentation of net income per
common share. Net income per common share excludes dilution and is computed
by dividing income available to common shareholders by the weighted average
number of common shares outstanding for the period. Net income per common
share assuming full dilution is computed similarly under SFAS 128 as it was
under APB 15, and reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is not permitted. The Company
will provide the required EPS disclosures in its financial statements
commencing with the fiscal year ended January 1, 1998. SFAS 128 requires
restatement of all prior period EPS data presented. Pursuant to the
provisions of SFAS 128, the Company's net income per common share was $.07
and $.20 for the quarter and nine months ended 1997, respectively; and, $.00
and $.01 for the quarter and nine months ended 1996, respectively. The
application of the provisions of SFAS 128 would have no effect on the amounts
reported for net income per common share assuming full dilution in the 1997
and 1996 third quarters and nine-month periods.
In June 1997, the FASB adopted Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income ("SFAS 130"), which establishes
standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. SFAS 130
is effective for fiscal years beginning after December 15, 1997 and requires
restatement of earlier periods presented. SFAS 130 will not have an effect
on the Company's financial statements currently being presented because the
Company, at this time, has no items of comprehensive income other than net
income.
In June 1997, the FASB adopted Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
("SFAS 131"), which supersedes FASB Statement No. 14, Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes standards for the
way that public business enterprises report information about operating
18
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. SFAS 131 is effective for fiscal years
beginning after December 15, 1997 and requires restatement of earlier periods
presented. SFAS 131 will not have a material effect on the Company's
financial statements as the required information is either currently being
presented by the Company or it is not applicable to the Company.
PART - II OTHER INFORMATION
Item 1. Legal Proceedings
(a) In connection with Case No. CV-S-94-1126-DAE(RJJ)-BASE FILE (the
"Poulos/Ahearn Case"), Case No. CV-S-95-00923-LDG(RJJ)(the "Schreier
Case") and Case No. CV-S-95-936 LDG(RLH)(the "Cruise Ship Case"),
(collectively, the "Consolidated Cases"), as reported under Part I, Item
3 of the Company's Form 10-K for the year ended January 2, 1997, the
defendants (including the Company), as reported under Part II, Item 1(a)
of the Company's Form 10-Q for the quarter ended April 3, 1997, moved on
March 21, 1997, to dismiss the consolidated amended complaint filed on
February 14, 1997, for failure to state a claim and on other grounds.
The plaintiffs, as reported under Part II, Item 1(a) of the Company's
Form 10-Q for the quarter ended July 3, 1997, have opposed these
motions. The defendants filed reply memoranda in support of the
motions. All motions were argued on November 3, 1997 and were taken
under submission.
(b) In connection with Case No. 00698592 (the "Payne Case"), as reported
under Part I, Item 3 of the Company's Form 10-K for the year ended
January 2, 1997, it was ultimately determined, after various preliminary
motions regarding whether the state or federal court should hear this
case, that the California state court should hear it. Thereafter,
certain defendants, who could not contest personal jurisdiction, moved
for dismissal on grounds that the commerce clause of the United States
Constitution barred plaintiffs' claims. The Company and certain of the
other defendants moved for dismissal on the grounds that the California
state court lacked personal jurisdiction over them. The court first
considered the commerce clause motion and ruled in defendants' favor
dismissing the case without leave to amend. To enable the plaintiffs to
immediately appeal that ruling, plaintiffs, on the one hand, and the
Company, and the other defendants who brought the personal jurisdiction
motion (the "Remaining Defendants"), on the other hand, have entered
into an agreement whereby plaintiffs have dismissed their claims against
the Company and the Remaining Defendants without prejudice and the
parties have agreed that the court's ruling and any ruling on appeal on
the commerce clause issue will be equally applicable to the Company and
the Remaining Defendants. Accordingly, at this time this suit is no
longer pending against the Company and the Remaining Defendants but it
is subject to reinstatement if the trial court's ruling on the commerce
clause issue is reversed on appeal. In the event there is a
reinstatement as a result of an appellate ruling, the Company and the
Remaining Defendants would pursue their motion to dismiss for lack of
personal jurisdiction.
19
<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) The Company did not file any report on Form 8-K during
the quarter ended October 2, 1997.
20
<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 November 10, 1997 By ROBERT M. HADDOCK
-------------------------- ---------------------------
Robert M. Haddock
Executive Vice President and
Chief Financial Officer
21
<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 October 2, 1997 and September 26, 1996
---------------------------------------------------------------
(in thousands, except per share data)
Third Quarter Nine Months
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
Net income $ 3,243 $ 47 $ 9,349 $ 856
Deduct: preferred stock dividend
and losses on redemption (net of
income taxes credited to retained
earnings) (152) (177) (480) (501)
-------- -------- -------- --------
Net income applicable to
computation $ 3,091 $ (130) $ 8,869 $ 355
======== ======== ======== ========
Weighted average common shares
assuming no dilution 45,164 42,518 45,097 39,738
Common equivalent shares
Additional shares applicable to
stock options based on the
weighted average market price 625 1,186 671 1,140
-------- -------- -------- --------
Weighted average common shares
applicable to net income per
common and common equivalent
share 45,789 43,704 45,768 40,878
Shares applicable to stock
options based on exercises
during the period and/or
the market close price at
the end of the period 67 3 37 29
Conversion of preferred stock at
the stated rate 901 953 915 966
-------- -------- -------- --------
Weighted average common shares
assuming full dilution 46,757 44,660 46,720 41,873
======== ======== ======== ========
Net income per common and common
equivalent share $ .07 $ -- $ .19 $ .01
Net income per common share
assuming full dilution $ .07 $ -- $ .19 $ .01
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at October 2, 1997 and the Consolidated Statement of
Operations for the year-to-date period ended October 2, 1997 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-1-1998
<PERIOD-END> OCT-2-1997
<CASH> 32,702
<SECURITIES> 0
<RECEIVABLES> 56,093
<ALLOWANCES> 14,822
<INVENTORY> 6,641
<CURRENT-ASSETS> 100,415
<PP&E> 1,171,564
<DEPRECIATION> 263,940
<TOTAL-ASSETS> 1,082,612
<CURRENT-LIABILITIES> 101,574
<BONDS> 500,753
6,422
0
<COMMON> 491
<OTHER-SE> 448,545
<TOTAL-LIABILITY-AND-EQUITY> 1,082,612
<SALES> 39,142
<TOTAL-REVENUES> 592,017
<CGS> 41,351
<TOTAL-COSTS> 307,165
<OTHER-EXPENSES> 28,825
<LOSS-PROVISION> 7,261
<INTEREST-EXPENSE> 47,181
<INCOME-PRETAX> 14,475
<INCOME-TAX> 1,643
<INCOME-CONTINUING> 9,349
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,349
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
