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 1, 1998
---------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- -----------
Commission file number 1-5440
----------------------------------------
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 29, 1998, the registrant had outstanding 45,234,478 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 1, 1998 and
January 1, 1998 3
Consolidated Statements of Operations for the quarters and
nine months ended October 1, 1998 and October 2, 1997 5
Consolidated Statements of Cash Flows for the nine months
ended October 1, 1998 and October 2, 1997 7
Consolidated Statements of Shareholders' Equity for the
nine months ended October 1, 1998 and October 2, 1997 9
Notes to Consolidated Financial Statements 10
2
<PAGE>
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
---------------------------------------
(in thousands, except share data)
<CAPTION>
October 1, January 1,
1998 1998
---------- ----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 38,207 $ 46,129
Accounts receivable, net 35,893 44,133
Inventories 6,246 6,779
Prepaid expenses 9,681 10,374
Deferred income taxes, net 13,266 11,403
---------- ----------
Total current assets 103,293 118,818
Investments in and advances to
unconsolidated partnership 8,647 9,375
Other investments 23,891 22,319
Property and equipment:
Buildings, riverboats and equipment, net 782,668 802,230
Land 99,095 98,762
Construction in progress 3,733 1,215
Leased under capital leases, net 7,271 672
---------- ----------
892,767 902,879
Deferred income taxes, net -- 331
Other deferred charges and assets 37,231 37,774
---------- ----------
$1,065,829 $1,091,496
========== ==========
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited) (continued)
---------------------------------------
(in thousands, except share data)
<CAPTION>
October 1, January 1,
1998 1998
---------- ----------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accruals $ 54,289 $ 56,939
Accrued payroll and employee benefits 25,579 23,630
Accrued interest payable 815 13,167
Income taxes payable 4,517 896
Current portion of long-term debt 2,324 27,166
Current portion of other long-term
liabilities 2,926 2,931
---------- ----------
Total current liabilities 90,450 124,729
Long-term debt 489,273 491,932
Other long-term liabilities 23,475 24,204
Deferred income taxes 3,303 --
Contingencies and commitments
Series B ESOP convertible preferred stock
(redemption value $7,003 and $6,857) 7,003 6,593
Shareholders' equity:
Common stock, $.01 par value (45,233,973
and 45,198,889 shares outstanding) 491 491
Paid-in capital 412,147 412,029
Retained earnings 56,813 48,654
Less: Treasury stock (17,126) (17,126)
Unearned compensation -- (10)
---------- ----------
Total shareholders' equity 452,325 444,038
---------- ----------
$1,065,829 $1,091,496
========== ==========
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the periods ended October 1, 1998 and October 2, 1997
---------------------------------------------------------------
(in thousands, except per share data)
<CAPTION>
Third Quarter Nine Months
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Casino $173,500 $166,689 $504,926 $488,355
Rooms 14,995 13,096 41,692 39,695
Food and beverage 13,599 13,293 40,251 39,142
Other 7,995 8,796 23,213 24,825
-------- -------- -------- --------
210,089 201,874 610,082 592,017
Costs and expenses
Casino 75,757 75,650 226,576 224,112
Rooms 8,616 7,601 24,016 22,854
Food and beverage 13,805 14,024 40,546 41,351
Other 7,017 6,774 20,043 18,848
Marketing 21,773 23,682 64,991 64,522
General and administrative 18,838 16,262 57,250 52,133
Utilities 4,363 4,090 10,373 11,018
Repairs and maintenance 5,949 5,963 18,281 17,807
Provision for doubtful accounts 4,638 2,056 11,322 7,261
Property taxes and insurance 5,688 5,715 17,715 18,072
Rent 4,697 5,711 14,917 15,493
Depreciation and amortization 13,517 13,035 40,173 38,431
-------- -------- -------- --------
184,658 180,563 546,203 531,902
-------- -------- -------- --------
Operating income 25,431 21,311 63,879 60,115
Interest income 378 514 1,717 1,541
Interest expense (14,661) (15,626) (45,043) (47,181)
-------- -------- -------- --------
Income before other items, income
taxes and extraordinary items 11,148 6,199 20,553 14,475
Equity in unconsolidated
partnership's loss (1,049) (1,159) (3,287) (3,483)
-------- -------- -------- --------
Income before income taxes and
extraordinary items 10,099 5,040 17,266 10,992
Income taxes (4,472) (1,797) (7,302) (1,643)
-------- -------- -------- --------
Income before extraordinary items 5,627 3,243 9,964 9,349
Extraordinary items -- -- (1,346) --
-------- -------- -------- --------
Net income $ 5,627 $ 3,243 $ 8,618 $ 9,349
======== ======== ======== ========
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)(continued)
For the periods ended October 1, 1998 and October 2, 1997
---------------------------------------------------------------
(in thousands, except per share data)
<CAPTION>
Third Quarter Nine Months
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Earnings per common share:
Income before extraordinary items $ .12 $ .07 $ .21 $ .20
Extraordinary items -- -- (.03) --
-------- -------- -------- --------
Net income $ .12 $ .07 $ .18 $ .20
======== ======== ======== ========
Earnings per common share assuming
dilution:
Income before extraordinary items $ .12 $ .07 $ .20 $ .19
Extraordinary items -- -- (.03) --
-------- -------- -------- --------
Net income $ .12 $ .07 $ .17 $ .19
======== ======== ======== ========
Weighted-average common shares
applicable to:
Earnings per common share 45,233 45,164 45,219 45,097
Earnings per common share assuming
dilution 46,404 46,694 46,694 46,686
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the periods ended October 1, 1998 and October 2, 1997
---------------------------------------------------------------
(in thousands)
<CAPTION>
Nine Months
---------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 8,618 $ 9,349
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 41,937 40,447
Provision for losses on accounts receivable 11,322 7,261
Loss on reinvestment obligation 372 751
Rent expense (697) (777)
Distribution in excess of equity in income
of partnership 728 748
Deferred income taxes 1,771 2,437
Change in assets and liabilities:
(Increase) decrease in accounts receivable (2,072) (5,972)
(Increase) decrease in refundable income taxes -- 1,201
(Increase) decrease in inventories and
prepaid expenses 589 (2,009)
Increase (decrease) in accounts payable,
accrued expenses and income taxes payable (9,911) (24,160)
Other items, net 3,371 503
--------- ---------
Net cash provided by (used in) operating activities 56,028 29,779
--------- ---------
Cash Flows from Investing Activities
Payments received on notes receivable 1,493 1,310
Reduction in other investments 564 2,738
Purchases of property and equipment (19,247) (17,454)
Additions to other long-term assets (6,672) (5,628)
--------- ---------
Net cash provided by (used in) investing activities (23,862) (19,034)
--------- ---------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 423,400 171,300
Proceeds from issuance of common stock 83 657
Principal payments on long-term debt (459,333) (191,888)
Principal payments on other long-term liabilities (964) (964)
Debt issuance costs (2,246) (195)
Preferred stock dividend (649) (689)
Redemption of preferred stock (379) (395)
--------- ---------
Net cash provided by (used in) financing activities (40,088) (22,174)
--------- ---------
Net increase (decrease) in cash and cash equivalents (7,922) (11,429)
Cash and cash equivalents at beginning of period 46,129 44,131
--------- ---------
Cash and cash equivalents at end of period $ 38,207 $ 32,702
========= =========
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)(continued)
For the periods ended October 1, 1998 and October 2, 1997
---------------------------------------------------------------
(in thousands)
<CAPTION>
Nine Months
-------------------
1998 1997
-------- --------
<S> <C> <C>
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 8,372 552
Tax benefit from stock options and preferred stock
dividend 70 229
Forfeiture of restricted stock -- 24
Cash flow during the period for the following:
Interest paid, net of amount capitalized $ 55,641 $ 56,592
Income taxes paid (refunded) 1,115 (3,314)
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)
For the periods ended October 1, 1998 and October 2, 1997
---------------------------------------------------------------
(in thousands, except number of shares)
<CAPTION>
Nine Months
--------------------
1998 1997
-------- --------
<S> <C> <C>
Common stock:
Beginning balance $ 491 $ 489
Stock options exercised for 23,405 and
171,348 shares -- 2
-------- --------
Ending balance 491 491
-------- --------
Paid-in capital:
Beginning balance 412,029 411,158
Stock options exercised 83 655
Tax benefit from stock options exercised 35 173
-------- --------
Ending balance 412,147 411,986
-------- --------
Retained earnings:
Beginning balance 48,654 44,846
Preferred stock dividend and losses on redemption,
net of income tax benefit of $35 and $56 (459) (480)
Net income 8,618 9,349
-------- --------
Ending balance 56,813 53,715
-------- --------
Treasury stock:
Beginning balance (17,126) (17,102)
Forfeiture of 3,668 shares of restricted stock
in 1997 -- (24)
-------- --------
Ending balance (17,126) (17,126)
-------- --------
Unearned compensation:
Beginning balance (10) (117)
Amortization 10 63
Forfeiture of restricted stock -- 24
-------- --------
Ending balance -- (30)
-------- --------
$452,325 $449,036
======== ========
</TABLE>
[FN]
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 quarters or nine
months ended 1998 or 1997. Capitalized costs related to various development
projects, included in other deferred charges and assets, were $2,561,000 and
$954,000 at October 1, 1998 and January 1, 1998, respectively. For
additional information regarding significant accounting policies, Las Vegas
Tropicana redevelopment, 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 1, 1998.
Note 2: Investments in and Advances to Unconsolidated Partnership
- -----------------------------------------------------------------
<TABLE>
Following are summarized operating results for the Company's unconsolidated
partnership, accounted for using the equity method for the periods ended
October 1, 1998 and October 2, 1997 (in thousands):
<CAPTION>
Third Quarter Nine Months
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 4,020 $ 4,165 $ 12,225 $ 12,470
Operating expenses (685) (684) (2,060) (2,051)
-------- -------- -------- --------
Operating income 3,335 3,481 10,165 10,419
Interest expense (1,163) (1,360) (3,695) (4,093)
-------- -------- -------- --------
Net income $ 2,172 $ 2,121 $ 6,470 $ 6,326
======== ======== ======== ========
</TABLE>
<TABLE>
The Company's share of the above operating results, after intercompany
eliminations, is as follows (in thousands):
<CAPTION>
Third Quarter Nine Months
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Equity in unconsolidated
partnership's loss $ (1,049) $ (1,159) $ (3,287) $ (3,483)
</TABLE>
10
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Note 3: Long-term Debt
- -----------------------
<TABLE>
At October 1, 1998 and January 1, 1998, long-term debt included (in
thousands):
<CAPTION>
October 1, January 1,
1998 1998
---------- ----------
<S> <C> <C>
11% Senior Subordinated Notes Due 2002 $200,000 $200,000
13 3/4% Senior Subordinated Notes Due 2004 178,195 178,061
Reducing revolving credit note; floating
rate; matures December 31, 1999 -- 139,000
Reducing revolving credit note; floating
rate, 7.7% at October 1, 1998; matures
June 30, 2003 55,000 --
Term loan; floating rate, 8.0% at October 1,
1998; matures June 30, 2005 50,000 --
Other notes payable; 7% to 14.6%; maturities
to 2002 903 1,213
Obligations under capital leases 7,499 824
-------- --------
491,597 519,098
Less current portion (2,324) (27,166)
-------- --------
$489,273 $491,932
======== ========
</TABLE>
On May 28, 1998, the Company completed a new bank financing consisting of a
$250,000,000 reducing revolving credit note maturing on June 30, 2003 (the
"Credit Facility") and a $50,000,000 term loan maturing on June 30, 2005 (the
"Term Loan") provided largely by institutional lenders. The funds borrowed
under the Credit Facility were used to prepay the balance outstanding and
extinguish the prior reducing revolving credit note maturing on December 31,
1999 (the "Original Credit Facility"). The funds received under the Term
Loan were used to repay a portion of the Credit Facility. The Company's
$25,000,000 supplemental reducing revolving loan agreement maturing on March
15, 1999 (the "Supplemental Credit Facility"), was extinguished concurrently
with the extinguishment of the Original Credit Facility. There were no
borrowings outstanding under the Supplemental Credit Facility from its
inception through the date of extinguishment.
The maximum amount available under the Credit Facility will be reduced
quarterly, commencing on September 30, 2000, in annual amounts of $40,000,000
in each year until maturity. Interest is computed on the outstanding
principal balance of the Credit Facility based upon, at the Company's option,
a one-, two-, three- or six-month Eurodollar rate plus a margin ranging from
1.00% to 2.25%, or the prime rate plus a margin ranging from zero to 1.00%.
The applicable margin is dependent upon the Company's outstanding
indebtedness and operating cash flow. As of October 1, 1998, the margin was
at 0.50% less than the highest level. The Company incurs a commitment fee
ranging from 0.225% to 0.4375% per annum on the unused portion of the Credit
Facility.
The Term Loan calls for quarterly principal payments of $125,000 beginning on
September 30, 1999 through June 30, 2004, and $11,875,000 beginning on
11
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
September 30, 2004 through maturity. Interest is computed on the Term Loan
based upon, at the Company's option, a one-, two-, three- or six-month
Eurodollar rate plus a margin of 2.5%.
The collateral for the Credit Facility and the Term Loan, shared on a pari
passu basis, is the same as under the Original Credit Facility. The Credit
Facility imposes various restrictions on the Company similar to those imposed
by the Original Credit Facility. The restrictions imposed by the Term Loan
are similar to those of the Company's subordinated debt. The Credit Facility
has certain quarterly financial tests, including a minimum requirement for
operating cash flow, a minimum debt service coverage ratio and ratios of
maximum debt and senior debt to operating cash flow. At October 1, 1998, the
maximum debt to operating cash flow ratio as calculated under the Credit
Facility was 3.65 to 1 and the allowable ratio was 5.25 to 1. The maximum
allowable ratio decreases to 5.00 to 1 at June 30, 1999 and continues to
decrease periodically, beginning June 30, 2000, in increments of .25 or .50,
until it is 4.00 to 1 at June 30, 2002 and thereafter. At October 1, 1998,
the maximum senior debt to operating cash flow ratio as calculated under the
Credit Facility was 1.17 to 1 and the allowable ratio was 3.50 to 1. The
maximum allowable ratio decreases to 3.00 to 1 at June 30, 1999 and
thereafter.
Note 4: Other Long-term Liabilities
- -------------------------------------
<TABLE>
At October 1, 1998 and January 1, 1998, other long-term liabilities consisted
of (in thousands):
<CAPTION>
October 1, January 1,
1998 1998
---------- ----------
<S> <C> <C>
Deferred compensation and retirement plans $ 11,703 $ 10,776
Accrued rent expense 10,630 11,327
Obligation to City of Evansville and
other civic and community organizations 3,613 4,550
Las Vegas Boulevard beautification assessment 455 482
-------- --------
26,401 27,135
Less current portion (2,926) (2,931)
-------- --------
$ 23,475 $ 24,204
======== ========
</TABLE>
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 1997 nine-month period included 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 through 1996.
Management believes that adequate provision for income taxes and interest has
been made in the financial statements.
12
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Note 6: Extraordinary Items
- ----------------------------
In May 1998, the Company expensed the remaining unamortized deferred
financing costs in connection with the early extinguishment of the Original
Credit Facility and the Supplemental Credit Facility. This item was
reflected in the Consolidated Statement of Operations for the nine months
ended 1998, as an extraordinary loss of $1,346,000, which was net of an
income tax benefit of $725,000.
Note 7: Earnings Per Share
- -----------------------------
Earnings per common share and earnings per common share, assuming dilution,
are computed based on the provisions of Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 128, Earnings per Share
("SFAS 128"), which superseded and simplified the standards for computing
earnings per share previously found in Accounting Principles Board Opinion
No. 15, Earnings per Share ("APB 15"). SFAS 128 replaced the presentation of
earnings per common and common equivalent share under APB 15 with a
presentation of earnings per common share. Earnings per common share
excludes dilution and is computed by dividing income applicable to common
shareholders by the weighted-average number of common shares outstanding.
Earnings per common share, assuming dilution, is computed similarly under
SFAS 128 as it was under APB 15 and is 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. In accordance with the provisions of SFAS 128, the Company has
restated the earnings per share data for the quarter and nine months ended
1997.
<TABLE>
The computations under SFAS 128 of earnings per common share and earnings
per common share, assuming dilution, for the periods ended October 1, 1998
and October 2, 1997, are as follows:
<CAPTION>
Third Quarter Nine Months
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income before extraordinary items $ 5,627 $ 3,243 $ 9,964 $ 9,349
Deduct: preferred stock dividends
and losses on redemption (net of
income tax benefits of $10, $17,
$35 and $56, credited to retained
earnings) (157) (152) (459) (480)
-------- -------- -------- --------
Income before extraordinary items
applicable to computations 5,470 3,091 9,505 8,869
Extraordinary items -- -- (1,346) --
-------- -------- -------- --------
Net income applicable to
computations $ 5,470 $ 3,091 $ 8,159 $ 8,869
======== ======== ======== ========
</TABLE>
13
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
<TABLE>
<CAPTION>
Third Quarter Nine Months
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted-average common shares
applicable to earnings per
common share 45,233 45,164 45,219 45,097
Effect of dilutive securities:
Stock option incremental shares 319 629 610 674
Assumed conversion of preferred
stock 852 901 865 915
-------- -------- -------- --------
1,171 1,530 1,475 1,589
-------- -------- -------- --------
Weighted-average common shares
applicable to earnings per
common share assuming dilution 46,404 46,694 46,694 46,686
======== ======== ======== ========
Earnings per common share:
Income before extraordinary items $ .12 $ .07 $ .21 $ .20
Extraordinary items -- -- (.03) --
-------- -------- -------- --------
Net income $ .12 $ .07 $ .18 $ .20
======== ======== ======== ========
Earnings per common share
assuming dilution:
Income before extraordinary items $ .12 $ .07 $ .20 $ .19
Extraordinary items -- -- (.03) --
-------- -------- -------- --------
Net income $ .12 $ .07 $ .17 $ .19
======== ======== ======== ========
</TABLE>
Note 8: 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 $3,898,000 and
$3,905,000 at October 1, 1998 and January 1, 1998, respectively.
14
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
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
$21,000,000 in cash or a letter of credit if the Tropicana Las Vegas
operation fails to meet certain financial tests. A determination was made
for the period ended October 1, 1998, that the additional security deposit
would be required by December 30, 1998; however, the lessor has waived the
requirement. The Company has a 50% partnership interest in the lessor.
The Company has severance agreements with certain of its senior executives.
Severance benefits range from a lump-sum cash payment equal to three times
the sum of the executive's annual base salary and the average of the
executive's annual bonuses awarded in the preceding three years plus payment
of the value in the executive's outstanding stock options and vesting and
distribution of any restricted stock to a lump-sum cash payment equal to the
executive's annual 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
$9,000,000 at October 1, 1998.
15
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
Financial Condition
On May 28, 1998, the Company completed a new bank financing consisting of a
$250 million reducing revolving credit note maturing on June 30, 2003 (the
"Credit Facility") and a $50 million term loan maturing on June 30, 2005 (the
"Term Loan") provided largely by institutional lenders. In addition, the
maturity date of a $63 million term loan among Tropicana Enterprises and a
group of banks was extended to June 30, 2003 from December 31, 1999. The
Company has a noncontrolling partnership interest of 50% in Tropicana
Enterprises, a Nevada general partnership that owns the real property and
certain personal property that the Company leases in the operation of the Las
Vegas Tropicana.
The maximum amount available under the Credit Facility will be reduced
quarterly, commencing on September 30, 2000, in annual amounts of $40 million
in each year until maturity. The funds borrowed under the Credit Facility
were used to prepay the balance outstanding and extinguish the prior reducing
revolving credit note maturing on December 31, 1999 (the "Original Credit
Facility"). The balance outstanding under the Original Credit Facility at
the time of prepayment was $135 million. The funds received under the Term
Loan were used to repay a portion of the Credit Facility. As of October 1,
1998, the Credit Facility had an outstanding balance of $55 million. The
Company's $25 million supplemental reducing revolving loan agreement maturing
on March 15, 1999 (the "Supplemental Credit Facility"), was extinguished
concurrently with the extinguishment of the Original Credit Facility. There
were no borrowings outstanding under the Supplemental Credit Facility from
its inception through the date of extinguishment.
At October 1, 1998, the maximum debt to operating cash flow ratio as
calculated under the Credit Facility was 3.65 to 1 and the allowable ratio
was 5.25 to 1. The maximum senior debt to operating cash flow ratio as
calculated under the Credit Facility was 1.17 to 1 at October 1, 1998 and the
allowable ratio was 3.50 to 1.
The Tropicana Las Vegas lease agreement contains a provision that requires
the Company to maintain an additional security deposit with the lessor of $21
million in cash or a letter of credit if the Tropicana Las Vegas operation
fails to meet certain financial tests. A determination was made for the
period ended October 1, 1998, that the additional security deposit would be
required by December 30, 1998; however, the lessor has waived the
requirement.
Results of Operations
Nine Months Ended October 1, 1998 Compared to Nine Months Ended October 2,
1997
The Company's consolidated revenues in the 1998 nine-month period were $610.1
million, a 3% increase over $592.0 million in the 1997 nine-month period.
Consolidated operating income improved by 6% to $63.9 million in the 1998
nine-month period from $60.1 million in the 1997 nine-month period.
16
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AZTAR CORPORATION AND SUBSIDIARIES
Consolidated interest expense was 5% or $2.1 million lower in the 1998 versus
1997 nine-month period primarily as a result of lower levels of debt
outstanding.
For a discussion of income taxes and extraordinary items, refer to "Note 5:
Income Taxes" and "Note 6: Extraordinary Items", respectively.
TROPICANA ATLANTIC CITY Total revenues at Tropicana Atlantic City were
$317.8 million in the 1998 nine-month period, up 5% from $302.5 million in
the 1997 nine-month period. Casino revenue was 5% higher in the 1998 versus
1997 nine-month period, primarily reflecting an 11% increase in games revenue
combined with a 3% increase in slot revenue. The increase in games revenue
was a result of increases in the hold percentage and the volume of play. The
increase in slot revenue was attained in spite of a 4% reduction in coin
offers to slot players.
Tropicana Atlantic City had operating income of $51.9 million in the 1998
nine-month period, a 27% improvement over $40.8 million in the 1997 nine-
month period. Utilities expense was $1.0 million lower in the 1998 versus
1997 nine-month period primarily due to a favorable electrical contract that
began in November 1997. The provision for doubtful accounts was $4.2 million
higher in the nine months ended 1998 versus 1997 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 is
after rent and depreciation and amortization expenses. Rent expense was $3.9
million in the 1998 nine-month period compared to $5.1 million in the 1997
nine-month period. Depreciation and amortization was $18.1 million in the
nine months ended 1998 compared to $16.5 million in the nine months ended
1997.
TROPICANA LAS VEGAS At Tropicana Las Vegas, total revenues were $115.9
million in the 1998 nine-month period, a 3% decrease from $119.3 million in
the 1997 nine-month period. Casino revenue was 7% lower in the 1998 versus
1997 nine-month period, primarily due to a 24% decrease in games revenue that
was partially offset by a 9% increase in slot revenue. The decrease in games
revenue was attributable in part to a decline in baccarat revenue in the 1998
versus 1997 nine-month period. The decrease in baccarat revenue was a result
of decreases in the volume of play and the hold percentage.
Tropicana Las Vegas had an operating loss of $8.1 million in the 1998 nine-
month period compared to an operating loss of $2.1 million in the 1997 nine-
month period. Operating loss is after rent and depreciation and amortization
expenses. Rent expense was $7.4 million in the 1998 nine-month period
compared to $7.3 million in the 1997 nine-month period. Depreciation and
amortization was $7.2 million in the 1998 nine-month period compared to $7.0
million in the 1997 nine-month period.
RAMADA EXPRESS At Ramada Express, total revenues were $62.9 million in the
1998 nine-month period, up slightly from $62.3 million in the 1997 nine-month
period. Operating income was $7.2 million in the nine months ended 1998
compared to $8.3 million in the nine months ended 1997. Operating income is
after rent and depreciation and amortization expenses. Rent expense was $0.4
million in both periods. Depreciation and amortization was $5.0 million in
the 1998 nine-month period compared to $5.4 million in the 1997 nine-month
period.
17
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AZTAR CORPORATION AND SUBSIDIARIES
AZTAR CASINO EVANSVILLE Total revenues at Casino Aztar Evansville were $94.9
million in the 1998 nine-month period, a 6% increase over $89.5 million in
the 1997 nine-month period. Operating income was $24.1 million in the 1998
nine-month period, a 4% improvement over $23.1 million in last year's nine-
month period. Operating income is after rent and depreciation and
amortization expenses. Rent expense was $2.9 million in the 1998 nine-month
period compared to $2.4 million in the 1997 nine-month period. Depreciation
and amortization was $7.3 million in the 1998 nine-month period compared to
$6.9 million in the 1997 nine-month period.
CASINO AZTAR CARUTHERSVILLE Total revenues at Casino Aztar Caruthersville
were $18.6 million in the 1998 nine-month period compared to $18.4 million in
the 1997 nine-month period. Casino Aztar Caruthersville had an operating
loss of $1.1 million in the nine months ended 1998 compared to $2.1 million
in the nine months ended 1997. Operating loss is after depreciation and
amortization of $2.4 million in the 1998 nine-month period compared to $2.5
million in the 1997 nine-month period.
Quarter Ended October 1, 1998 Compared to Quarter Ended October 2, 1997
The Company's consolidated revenues in the 1998 third quarter were $210.1
million, a 4% increase over $201.9 million in the 1997 third quarter.
Consolidated operating income was $25.4 million in the third quarter of 1998,
a 19% improvement over $21.3 million in the third quarter of 1997.
Consolidated interest expense was 6% or $1.0 million lower in the 1998 versus
1997 third quarter primarily as a result of lower levels of debt outstanding.
For a discussion of income taxes, refer to "Note 5: Income Taxes".
TROPICANA ATLANTIC CITY Total revenues at Tropicana Atlantic City were
$113.5 million in the 1998 third quarter, up 5% from $108.6 million in the
1997 third quarter. Casino revenue was 5% higher in the 1998 versus 1997
third quarter due, in large part, to a strong market growth rate of 4% in the
Atlantic City market during the 1998 third quarter. Rooms revenue was $0.7
million or 19% higher in the 1998 versus 1997 third quarter due to an
increase in the average daily room rates as well as an increase in the number
of occupied rooms.
Tropicana Atlantic City had operating income of $22.1 million in the 1998
third quarter, a 19% improvement over $18.6 million in the 1997 third
quarter. Rooms cost was 17% higher in the 1998 versus 1997 third quarter as
a result of increased direct costs. The provision for doubtful accounts was
$1.9 million higher in the 1998 versus 1997 third quarter 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 is after rent and depreciation and amortization expenses. Rent
expense decreased to $0.9 million in the 1998 third quarter from $2.0 million
in the 1997 third quarter due to a decreased number of operating leases.
Depreciation and amortization was $6.3 million in the third quarter of 1998
compared to $5.6 million in the third quarter of last year.
TROPICANA LAS VEGAS At Tropicana Las Vegas, total revenues were $37.7
million in the 1998 third quarter, a 1% increase from $37.2 million in the
1997 third quarter. Casino revenue was 5% lower in the 1998 versus 1997
18
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AZTAR CORPORATION AND SUBSIDIARIES
third quarter, primarily due to a 28% decrease in games revenue that was
partially offset by an 11% increase in slot revenue. Rooms revenue was 15%
higher in the 1998 versus 1997 third quarter primarily as a result of an
increase in the number of occupied rooms.
Tropicana Las Vegas had an operating loss of $3.5 million in the 1998 third
quarter compared to an operating loss of $3.0 million in the 1997 third
quarter. Rooms cost was 15% higher in the 1998 versus 1997 third quarter as
a result of increased direct costs. Operating loss is after rent and
depreciation and amortization expenses. Rent expense was $2.4 million in the
1998 third quarter compared to $2.5 million in the 1997 third quarter.
Depreciation and amortization was $2.4 million in both periods.
RAMADA EXPRESS At Ramada Express, total revenues were $20.2 million in the
1998 third quarter, up 6% from $19.1 million in the 1997 third quarter.
Operating income was $1.8 million in the 1998 third quarter, a 106%
improvement over $0.9 million in the 1997 third quarter. Operating income is
after rent and depreciation and amortization expenses. Rent expense was $0.2
million in the 1998 third quarter compared to $0.1 million in the 1997 third
quarter. Depreciation and amortization was $1.5 million in the 1998 third
quarter compared to $1.8 million in the 1997 third quarter.
CASINO AZTAR EVANSVILLE Total revenues at Casino Aztar Evansville were $32.5
million in the 1998 third quarter, a 6% increase over $30.7 million in last
year's third quarter. Operating income was $8.0 million in the 1998 third
quarter, an 8% increase from $7.4 million in the 1997 third quarter.
Operating income is after rent and depreciation and amortization expenses.
Rent expense was $1.1 million in the third quarter of 1998 compared to $1.0
million in the third quarter of 1997. Depreciation and amortization was $2.5
million in the 1998 third quarter compared to $2.4 million in last year's
third quarter.
CASINO AZTAR CARUTHERSVILLE Total revenues at Casino Aztar Caruthersville
were $6.2 million in the 1998 third quarter compared to $6.3 million in the
1997 third quarter. Casino Aztar Caruthersville had an operating loss of
$0.3 million in the third quarter of 1998 compared to $0.7 million in the
third quarter of 1997. Operating loss is after depreciation and amortization
of $0.8 million in both periods.
Other Matters
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position No.
98-5 entitled "Reporting on the Costs of Start-up Activities" ("SOP"). The
SOP stipulates that all costs that meet its definition of start-up
activities, which the Company has referred to as preopening costs, must be
expensed as incurred. The provisions of the SOP are effective for fiscal
years beginning after December 15, 1998. Upon adoption, entities are
required to write off all capitalized start-up costs as a cumulative effect
of a change in accounting principle. Entities are not required to report the
pro forma effect of retroactive application. The Company will adopt this SOP
when required. The Company's policy is, and has been, to capitalize these
costs as incurred and to expense them in the period the related facility
commences operations. Adoption of the SOP will have only a prospective
effect on the Company's financial statements as there are no capitalized
19
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
preopening costs at October 1, 1998 and the Company is not, nor does it plan
to be, engaged in start-up activities in 1998.
In June 1998, the Financial Accounting Standards Board ("FASB") adopted
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"), which establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure
those instruments at fair value. If certain conditions are met, a derivative
may be specifically designated as a hedge of certain financial exposures.
The accounting for changes in the fair value of a derivative depends on the
intended use of the derivative and, if it is used in hedging activities, it
depends on its effectiveness as a hedge. SFAS 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. SFAS 133
should not be applied retroactively to financial statements of prior periods.
The Company will adopt SFAS 133 when required. The effect, if any, of
adopting SFAS 133 has not been determined.
Year 2000
A. Background
In the past, many computer software programs were written using two digits
rather than four to define the applicable year. As a result, date-sensitive
computer software may recognize a date using "00" as the year 1900 rather
than the year 2000. This is generally referred to as the Year 2000 issue.
If this situation occurs, the potential exists for computer system failures
or miscalculations by computer programs, which could disrupt operations.
The Company utilizes computer systems in virtually all aspects of its
business. In particular, Year 2000 problems in the hotel or casino systems
at the Company's properties could disrupt operations at the affected
properties and have a material adverse impact upon the Company's operating
results. The Company is also exposed to the risk that one or more of its
suppliers could experience Year 2000 problems that impact the ability of such
suppliers to provide goods and services. Though this is not considered as
significant a risk with respect to the suppliers of goods, due to the
availability of alternative suppliers, the disruption of certain services,
such as utilities, could, depending upon the extent of the disruption, have a
material adverse impact on the Company's operations.
B. Approach
The Company has established a coordinated effort between its corporate level
and responsible parties at each of its properties to address the Company's
response to Year 2000 issues. Among the efforts underway to monitor Year
2000 readiness include each property's monthly submission to the corporate
office of a Year 2000 status report, which is then reviewed with each
property. The status of each property's Year 2000 readiness is in turn
discussed at least quarterly with the Audit Committee of the Company's Board
of Directors. The Company has established a program for the Year 2000 issue
that consists of the following phases:
20
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Phase 1 Compilation of an inventory of information technology (IT)
and non-IT systems that may be sensitive to the Year 2000
problem.
Phase 2 Identification and prioritization of the critical systems
from the systems inventory compiled in Phase 1 and inquiries
of third parties with whom the Company does significant
business (i.e., vendors and suppliers) as to the state of
their Year 2000 readiness.
Phase 3 Analysis of critical systems to determine which systems are
not Year 2000 compliant and evaluation of the costs to repair
or replace those systems.
Phase 4 Repair or replace noncompliant systems and testing of those
systems for which representation as to Year 2000 compliance
has not been received or for which representation was
received but has not been confirmed.
C. Status
1. IT Systems
The Company utilizes software purchased from vendors in virtually
all critical technology systems at its properties. In certain
instances, such vendor-supplied software is modified through the
use of internal programming to enhance these systems. In many
cases, the solution to the Year 2000 issue is simply to install a
vendor-tested software upgrade ("Upgrade") and further test the
Upgrade through internally generated test data. In other cases, the
Company is purchasing and installing new vendor software
("Conversion") that is Year 2000 compliant. The cost and effort to
install and test new software systems is more extensive than the
aforementioned Upgrade and therefore these Conversions contain more
risks to the Company.
The Company is currently in Phase 4 on all critical IT systems at
all properties. The following chart shows for each critical IT
system at each of its properties whether an Upgrade or Conversion
is underway and the date when installation and testing of such
systems is expected to be completed. In addition, the chart
identifies those IT systems where internal programming is required
and the extent of such programming requirements. The more
programming required, the greater the risk to the Company's Year
2000 readiness.
21
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
TROPICANA
ATLANTIC TROPICANA RAMADA CASINO AZTAR CASINO AZTAR
SYSTEM CITY LAS VEGAS EXPRESS EVANSVILLE CARUTHERSVILLE
- --------- ---------- --------- ----------- ------------ --------------
Casino Conversion Upgrade Upgrade Upgrade Upgrade
* **
4/99 12/98 3/99 3/99 3/99
Slots Upgrade Upgrade Conversion Upgrade Upgrade
** *
12/98 12/98 9/99 12/98 12/98
Hotel Conversion Upgrade Conversion Upgrade N/A
**
12/98 12/98 12/98 12/98
Financial Conversion Upgrade Upgrade Upgrade Upgrade
12/98 12/98 3/99 3/99 3/99
Point of
Sale/ Upgrade Upgrade Conversion Upgrade Upgrade
Inventory 12/98 12/98 6/99 4/99 4/99
* Indicates more significant internal programming also required
** Indicates minor internal programming also required
2. Non-IT Systems
The Company utilizes embedded technology such as microcontrollers
or date sensitive computer chips in its facilities including fire
safety and security systems, elevators, heating and cooling
monitoring systems and surveillance systems ("Non-IT Systems").
The Company is in Phase 3 and 4 in the process of ensuring Year
2000 readiness in these Non-IT Systems. Procedures being utilized
include: vendor letters to critical Non-IT Systems providers asking
for the Year 2000 status for each embedded chip or technology;
meetings with vendors who provide maintenance for these Non-IT
Systems to assess Year 2000 readiness; and testing of such systems
using test data wherever possible. The Company expects to have
completed Year 2000 compliance on Non-IT Systems by March 1999.
D. Costs
The total cost to the Company of making its systems Year 2000 compliant is
estimated to be approximately $7.5 million. Approximately $7.0 million of
this amount relates to the acquisition of new computer hardware and software
systems as follows: new hardware and software at Tropicana Atlantic City
($5.7 million); new software at Ramada Express ($0.9 million) and personal
computer upgrades companywide ($0.4 million). These costs will be
capitalized and depreciated over their expected useful lives.
The estimated costs related to internal programming modifications and the
Company's administration of its Year 2000 project are approximately $0.5
million, and such costs are being expensed as incurred.
22
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AZTAR CORPORATION AND SUBSIDIARIES
As of October 1, 1998, approximately $5 million has been spent on Year 2000
issues. The Year 2000 issue has not caused other Company IT system projects
to be deferred; in fact, it has accelerated the spending on IT systems
overall.
E. Risk Assessment
The greatest risk to the Company is if one or more of its properties'
critical IT systems, such as casino or hotel, or Non-IT Systems, such as
cooling or heating, experience problems due to Year 2000 issues which cause
business interruptions or customer service problems. The Company believes
that any Year 2000 problems, should they arise, would be short-term in nature
and not affect the Company's liquidity or financial condition. However,
because New Year's week is a very busy period for the Company's properties,
Year 2000 problems at a given property could negatively impact first-quarter
2000 results.
F. Contingency Plans
The Company has had general discussions regarding contingency plans should
Year 2000 problems arise, including the possibility of utilizing other Aztar
properties' systems should a problem arise at a given property. However, a
formal contingency plan has not been completed.
Contingency plans will be assessed, by property, considering risk levels of
non-compliance as the Year 2000 implementation and testing process continues.
On an on-going basis, each property maintains certain emergency manual
procedures and back-up plans. These alternatives will be considered as each
property assesses its formal Year 2000 contingency plan.
Private Securities Litigation Reform Act
Certain information included in Aztar's Form 10-K for 1997, this Form 10-Q
and other materials filed or to be filed by the company with the Securities
and Exchange Commission ("SEC")(as well as information included in oral
statements or other written statements made or to be made by the Company
including those made in Aztar's 1997 annual report) contains statements that
are forward-looking. These include forward-looking statements relating to
the following activities, among others: operation and expansion of existing
properties, including future performance; redevelopment of the Las Vegas
Tropicana and financing and/or concluding an arrangement with a partner for
such redevelopment; other business development activities; refinancing of the
Company's indebtedness; arrangement of new credit facilities and the Year
2000 issue. These activities involve important factors that could cause
actual results to differ materially from those expressed in any forward-
looking statements made by or on behalf of the Company. These include, but
are not limited to, the following factors as well as other factors described
from time to time in the Company's reports filed with the SEC: construction
and development factors, including zoning issues, environmental restrictions,
soil conditions, weather and other hazards, site access matters and building
permit issues; factors affecting leverage and debt service, including
sensitivity to fluctuation in interest rates; access to available and
feasible financing; regulatory and licensing approvals; third-party consents,
approvals and representations, and relations with partners, owners, suppliers
and other third parties; reliance on key personnel; business and economic
23
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
conditions; litigation, judicial actions and political uncertainties,
including gaming legislation and taxation; and the effects of competition,
including locations of competitors and operating and marketing competition.
Any forward-looking statements are made pursuant to the Private Securities
Litigation Reform Act of 1995 and, as such, speak only as of the date made.
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 1, 1998, the
plaintiffs, as reported under Part II, Item 1(a) of the Company's Form
10-Q for the quarter ended April 2, 1998, filed a motion on March 18,
1998, for class certification. On March 19, 1998, the Magistrate Judge
granted defendants' motion seeking to bifurcate discovery into "class"
and "merits" phases, and to stay "merits" discovery pending a decision
on plaintiffs' motion for class certification. "Class" discovery, as
reported under Part II, Item 1(a) of the Company's Form 10-Q for the
quarter ended July 2, 1998, was completed on July 17, 1998; however,
plaintiffs have filed a motion to compel further discovery from the
defendants. If that motion is granted, defendants could be required to
provide additional documents and information to plaintiffs. The
defendants have filed their opposition to the motion for class
certification. The plaintiffs have filed a reply memorandum and the
matter has been submitted for decision. The stay of merits discovery
remains in effect until the court decides the motion for class
certification.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Page No.
----------
10.1 Amendment No. 1, dated October 8, 1998, to
Amended and Restated Reducing Revolving Loan
Agreement, dated as of May 28, 1998, among
Aztar Corporation and the lenders therein
named; Bankers Trust Company and Societe
Generale, as documentation agents; Bank of
Scotland, Credit Lyonnais Los Angeles Branch
and PNC Bank, National Association, as co-
agents; and Bank of America National Trust and
Savings Association, as administrative agent. *
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.
24
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K (continued)
(b) Reports on Form 8-K
The Company did not file any report on Form 8-K during the quarter
ended October 1, 1998.
25
<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, 1998 By ROBERT M. HADDOCK
-------------------------- ---------------------------
Robert M. Haddock
Executive Vice President and
Chief Financial Officer
26
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Exhibit Index
- -------------
10.1 Amendment No. 1, dated October 8, 1998, to Amended and Restated
Reducing Revolving Loan Agreement, dated as of May 28, 1998,
among Aztar Corporation and the lenders therein named; Bankers
Trust Company and Societe Generale, as documentation agents;
Bank of Scotland, Credit Lyonnais Los Angeles Branch and PNC
Bank, National Association, as co-agents; and Bank of America
National Trust and Savings Association, as administrative
agent.
27. Financial Data Schedule.
E-1
AMENDMENT NO. 1 TO AMENDED AND RESTATED
REDUCING REVOLVING LOAN AGREEMENT
This Amendment No. 1 to Amended and Restated Reducing
Revolving Loan Agreement (this "Amendment") dated as of October 8, 1998
is entered into with reference to the Amended and Restated Reducing
Revolving Loan Agreement dated as of May 28, 1998 among Aztar
Corporation ("Borrower"), the Banks party thereto, Bankers Trust Company
and Societe Generale, as Documentation Agents, Bank of Scotland, Credit
Lyonnais Los Angeles Branch and PNC Bank, National Association, as Co-
Agents, and Bank of America National Trust and Savings Association, as
Administrative Agent (the "Loan Agreement"). Capitalized terms used but
not defined herein are used with the meanings set forth for those terms
in the Loan Agreement.
Borrower and the Administrative Agent, acting with the consent
of the Requisite Banks pursuant to Section 11.2 of the Loan Agreement,
agree as follows:
1. Section 1.1. Section 1.1 of the Loan Agreement is
amended by revising the definition of "Basket Expenditures" to read as
follows:
"Basket Expenditures" means (a) Capital
Expenditures permitted by Sections
6.15(c), 6.15(d) and 6.15(e), (b) the
Acquisition Expenditures permitted by
Section 6.16(l) and 6.16(m), (c) the
aggregate purchase or redemption prices
paid in respect of Subordinated
Obligations permitted by Section
6.1(b)(ii) and (d) the aggregate purchase
price paid in respect of repurchases of
Common Stock permitted by Section 6.5(d).
2. Section 6.5. Section 6.5 of the Loan Agreement is
amended by striking the word "and" in the sixth line thereof, inserting
a comma at that place and adding a new Subsection (d) in the seventh
line thereof immediately after the word "Stock" to read as follows:
and (d) Distributions in the form of
repurchases of Common Stock for which the
aggregate purchase price does not exceed
either (i) $30,000,000 or (ii) when
aggregated with all other Basket
Expenditures made since the Closing Date,
$300,000,000;
<PAGE>
3. Conditions Precedent. The effectiveness of this
Amendment shall be conditioned upon the receipt by the Administrative
Agent of all of the following, each properly executed by a Responsible
Official of each party thereto and dated as of the date hereof:
(a) Counterparts of this Amendment executed by all
parties hereto;
(b) Written consent of each of the Significant
Subsidiaries to the execution, delivery and performance
hereof, substantially in the form of Exhibit A to this
Amendment; and
(c) Written consent of the Requisite Banks as
required under Section 11.2 of the Loan Agreement in the form
of Exhibit B to this Amendment.
4. Representation and Warranty. Borrower represents and
warrants to the Administrative Agent and the Banks that no Default or
Event of Default has occurred and remains continuing.
5. Confirmation. In all other respects, the terms of the
Loan Agreement and the other Loan Documents are hereby confirmed.
IN WITNESS WHEREOF, Borrower and the Administrative Agent have
executed this Amendment as of the date first written above by their duly
authorized representatives.
AZTAR CORPORATION
By: R. HADDOCK
-----------------------------
Robert M. Haddock
Executive Vice President &
Chief Financial Officer
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent
By: JANICE HAMMOND
-----------------------------
Janice Hammond
Vice President
<PAGE>
Exhibit A to Amendment
CONSENT OF SUBSIDIARY GUARANTORS
Reference is hereby made to that certain Amended and Restated
Reducing Revolving Loan Agreement dated as of May 28, 1998 among Aztar
Corporation ("Borrower"), the Banks party thereto, Bankers Trust Company
and Societe Generale, as Documentation Agents, Bank of Scotland, Credit
Lyonnais Los Angeles Branch and PNC Bank, National Association, as Co-
Agents, and Bank of America National Trust and Savings Association, as
Administrative Agent (the "Loan Agreement").
Each of the undersigned hereby consents to the execution,
delivery and performance by Borrower and the Administrative Agent of
Amendment No. 1 to the Loan Agreement.
Each of the undersigned represents and warrants to the
Administrative Agent and the Banks that there is no defense,
counterclaim or offset of any type or nature to the Subsidiary Guaranty,
and that the same remains in full force and effect.
Dated: October 8, 1998
HOTEL RAMADA OF NEVADA
By: R. HADDOCK
Robert M. Haddock
Title: Vice President & Treasurer
AZTAR DEVELOPMENT CORPORATION
By: R. HADDOCK
Robert M. Haddock
Title: President
AZTAR INDIANA GAMING CORPORATION
By: R. HADDOCK
Robert M. Haddock
Title: Vice President & Treasurer
AZTAR MISSOURI GAMING CORPORATION
By: R. HADDOCK
Robert M. Haddock
Title: Vice President & Treasurer
RAMADA NEW JERSEY, INC.
By: R. HADDOCK
Robert M. Haddock
Title: Vice President
<PAGE>
ATLANTIC-DEAUVILLE INC.
By: R. HADDOCK
Robert M. Haddock
Title: Vice President
ADAMAR GARAGE CORPORATION
By: R. HADDOCK
Robert M. Haddock
Title: Vice President
RAMADA NEW JERSEY HOLDINGS CORPORATION
By: R. HADDOCK
Robert M. Haddock
Title: Vice President
MANCHESTER MALL, INC.
By: R. HADDOCK
Robert M. Haddock
Title: Vice President
RAMADA EXPRESS, INC.
By: R. HADDOCK
Robert M. Haddock
Title: Vice President & Treasurer
ADMAR OF NEW JERSEY, INC.
By: R. HADDOCK
Robert M. Haddock
Title: Vice President
<PAGE>
Exhibit B to Amendment
CONSENT OF BANK
Reference is hereby made to that certain Amended and Restated
Reducing Revolving Loan Agreement dated as of May 28, 1998 among Aztar
Corporation ("Borrower"), the Banks party thereto, Bankers Trust Company
and Societe Generale, as Documentation Agents, Bank of Scotland, Credit
Lyonnais Los Angeles Branch and PNC Bank, National Association, as Co-
Agents, and Bank of America National Trust and Savings Association, as
Administrative Agent (the "Loan Agreement").
The undersigned Bank hereby consents to the execution and
delivery of Amendment No. 1 to the Loan Agreement by the Administrative
Agent on its behalf, substantially in the form of the most recent draft
thereof presented to the undersigned Bank.
Date: October 5, 1998
BANK OF AMERICA
By: SCOTT FABER
Scott Faber
Title: Vice President
Date: September 24, 1998
ABN AMRO BANK N.V.
By: JEFFREY A. FRENCH
Jeffrey A. French
Title: Group Vice President & Director
By: M.M. VALENTINE
Michael M. Valentine
Title: Vice President
Date: September 25, 1998
BANK OF SCOTLAND
By: JANET TAFFE
Janet Taffe
Title: Asst. Vice President
Date: October 8, 1998
CREDIT LYONNAIS LOS ANGELES
By: DIANNE M. SCOTT
Dianne M. Scott
Title: First Vice President and Manager
<PAGE>
Date: September 13, 1998
IMPERIAL BANK
By: STEVEN K. JOHNSON
Steven K. Johnson
Title: Senior Vice President
Date: September 29, 1998
KEYBANK NATIONAL ASSOCIATION
By: MARY K. YOUNG
Mary K. Young
Title: Commercial Banking Officer
Date: October 1, 1998
THE MITSUBISHI TRUST AND BANKING CORPORATION
By: Y. SATOMI
Yasushi Satomi
Title: Senior Vice President and Chief Manager
Date: October 7, 1998
PNC BANK NATIONAL ASSOCIATION
By: G.W. WESSELS
Gary W. Wessels
Title: Vice President
Date: October 7, 1998
SOCIETE GENERALE
By: DONALD L. SCHUBERT
Donald L. Schubert
Title: Managing Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at October 1, 1998 and the Consolidated Statement of
Operations for the year-to-date period ended October 1, 1998 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> DEC-31-1998
<PERIOD-END> OCT-1-1998
<CASH> 38,207
<SECURITIES> 0
<RECEIVABLES> 60,759
<ALLOWANCES> 24,866
<INVENTORY> 6,246
<CURRENT-ASSETS> 103,293
<PP&E> 1,199,572
<DEPRECIATION> 306,805
<TOTAL-ASSETS> 1,065,829
<CURRENT-LIABILITIES> 90,450
<BONDS> 489,273
7,003
0
<COMMON> 491
<OTHER-SE> 451,834
<TOTAL-LIABILITY-AND-EQUITY> 1,065,829
<SALES> 40,251
<TOTAL-REVENUES> 610,082
<CGS> 40,546
<TOTAL-COSTS> 311,181
<OTHER-EXPENSES> 28,654
<LOSS-PROVISION> 11,322
<INTEREST-EXPENSE> 45,043
<INCOME-PRETAX> 20,553
<INCOME-TAX> 7,302
<INCOME-CONTINUING> 9,964
<DISCONTINUED> 0
<EXTRAORDINARY> (1,346)
<CHANGES> 0
<NET-INCOME> 8,618
<EPS-PRIMARY> .18
<EPS-DILUTED> .17
</TABLE>
