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 July 1, 1999
---------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- -----------
Commission file number 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 July 29, 1999, the registrant had outstanding 44,569,004 shares of
its common stock, $.01 par value.
AZTAR CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Balance Sheets at July 1, 1999 and
December 31, 1998 3
Consolidated Statements of Operations for the quarters
and six months ended July 1, 1999 and July 2, 1998 5
Consolidated Statements of Cash Flows for the six months
ended July 1, 1999 and July 2, 1998 7
Consolidated Statements of Shareholders' Equity for
the six months ended July 1, 1999 and July 2, 1998 9
Notes to Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 6. Exhibits and Reports on Form 8-K 24
2
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
---------------------------------------
(in thousands, except share data)
<CAPTION>
July 1, December 31,
1999 1998
---------- ----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 43,991 $ 58,600
Accounts receivable, net 26,457 31,496
Refundable income taxes 52 --
Inventories 6,954 6,496
Prepaid expenses 12,236 9,234
Deferred income taxes, net 15,957 15,957
---------- ----------
Total current assets 105,647 121,783
Investments in and advances to
unconsolidated partnership 8,031 8,437
Other investments 20,628 21,005
Property and equipment:
Buildings, riverboats and equipment, net 760,954 778,420
Land 99,035 99,035
Construction in progress 10,214 2,153
Leased under capital leases, net 6,052 7,782
---------- ----------
876,255 887,390
Deferred charges and other assets 42,776 39,087
---------- ----------
$1,053,337 $1,077,702
========== ==========
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
3
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited) (continued)
---------------------------------------
(in thousands, except share data)
<CAPTION>
July 1, December 31,
1999 1998
---------- ----------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accruals $ 55,512 $ 52,935
Accrued payroll and employee benefits 24,988 26,208
Accrued interest payable 10,030 12,608
Income taxes payable -- 3,185
Current portion of long-term debt 3,738 2,537
Current portion of other long-term
liabilities 2,959 2,921
---------- ----------
Total current liabilities 97,227 100,394
Long-term debt 467,000 487,543
Other long-term liabilities 22,058 22,882
Deferred income taxes 6,262 5,635
Contingencies and commitments
Series B ESOP convertible preferred stock
(redemption value $7,176 and $7,147) 7,176 7,147
Shareholders' equity:
Common stock, $.01 par value (44,762,794
and 45,337,834 shares outstanding) 493 492
Paid-in capital 412,999 412,528
Retained earnings 62,602 58,207
Less: Treasury stock (22,480) (17,126)
---------- ----------
Total shareholders' equity 453,614 454,101
---------- ----------
$1,053,337 $1,077,702
========== ==========
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
4
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the periods ended July 1, 1999 and July 2, 1998
---------------------------------------------------------------
(in thousands, except per share data)
<CAPTION>
Second Quarter Six Months
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Casino $166,078 $167,135 $320,263 $331,426
Rooms 17,447 14,645 33,012 26,697
Food and beverage 14,080 13,605 27,319 26,652
Other 9,126 7,783 16,681 15,218
-------- -------- -------- --------
206,731 203,168 397,275 399,993
Costs and expenses
Casino 72,622 74,627 142,660 150,819
Rooms 9,346 8,260 17,575 15,400
Food and beverage 14,252 13,652 27,859 26,741
Other 7,817 6,627 14,988 13,026
Marketing 23,541 22,007 43,157 43,218
General and administrative 18,446 18,891 36,405 38,412
Utilities 3,293 3,127 6,362 6,010
Repairs and maintenance 6,845 6,347 13,057 12,332
Provision for doubtful accounts 2,424 3,692 4,248 6,684
Property taxes and insurance 5,855 5,963 11,764 12,027
Rent 4,414 4,781 8,410 10,220
Depreciation and amortization 13,350 13,612 26,594 26,656
-------- -------- -------- --------
182,205 181,586 353,079 361,545
-------- -------- -------- --------
Operating income 24,526 21,582 44,196 38,448
Interest income 544 923 961 1,339
Interest expense (14,781) (15,246) (29,066) (30,382)
-------- -------- -------- --------
Income before other items, income
taxes and extraordinary items 10,289 7,259 16,091 9,405
Equity in unconsolidated
partnership's loss (957) (1,113) (1,965) (2,238)
-------- -------- -------- --------
Income before income taxes
and extraordinary items 9,332 6,146 14,126 7,167
Income taxes (3,419) (2,427) (5,361) (2,830)
-------- -------- -------- --------
Income before extraordinary items 5,913 3,719 8,765 4,337
Extraordinary items (4,073) (1,346) (4,073) (1,346)
-------- -------- -------- --------
Net income $ 1,840 $ 2,373 $ 4,692 $ 2,991
======== ======== ======== ========
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
5
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)(continued)
For the periods ended July 1, 1999 and July 2, 1998
---------------------------------------------------------------
(in thousands, except per share data)
<CAPTION>
Second Quarter Six Months
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Earnings per common share:
Income before extraordinary items $ .13 $ .08 $ .19 $ .09
Extraordinary items (.09) (.03) (.09) (.03)
-------- -------- -------- --------
Net income $ .04 $ .05 $ .10 $ .06
======== ======== ======== ========
Earnings per common share assuming
dilution:
Income before extraordinary items $ .13 $ .08 $ .18 $ .09
Extraordinary items (.09) (.03) (.09) (.03)
-------- -------- -------- --------
Net income $ .04 $ .05 $ .09 $ .06
======== ======== ======== ========
Weighted-average common shares
applicable to:
Earnings per common share 45,268 45,223 45,304 45,213
Earnings per common share assuming
dilution 46,719 46,737 46,593 46,839
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
6
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the periods ended July 1, 1999 and July 2, 1998
---------------------------------------------------------------
(in thousands)
<CAPTION>
Six Months
---------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 4,692 $ 2,991
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 27,603 27,944
Provision for losses on accounts receivable 4,248 6,684
Loss on early retirement of debt 6,266 2,071
Loss on reinvestment obligation 434 186
Rent expense (476) (478)
Distribution in excess of equity in income
of partnership 406 465
Deferred income taxes 627 309
Change in assets and liabilities:
(Increase) decrease in accounts receivable 2,847 (1,925)
(Increase) decrease in refundable income taxes (52) --
(Increase) decrease in inventories and
prepaid expenses (3,541) (43)
Increase (decrease) in accounts payable,
accrued expenses and income taxes payable (4,620) (843)
Other items, net 168 1,092
--------- ---------
Net cash provided by (used in) operating activities 38,602 38,453
--------- ---------
Cash Flows from Investing Activities
Payments received on notes receivable 823 722
Reduction in other investments 267 564
Purchases of property and equipment (13,870) (14,711)
Additions to other long-term assets (5,089) (5,154)
--------- ---------
Net cash provided by (used in) investing activities (17,869) (18,579)
--------- ---------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 407,400 353,800
Proceeds from issuance of common stock 393 84
Principal payments on long-term debt (426,797) (382,932)
Premium paid on early retirement of debt (3,142) --
Principal payments on other long-term liabilities (638) (638)
Debt issuance costs (6,406) (2,139)
Repurchase of common stock (5,354) --
Preferred stock dividend (314) (329)
Redemption of preferred stock (484) (245)
--------- ---------
Net cash provided by (used in) financing activities (35,342) (32,399)
--------- ---------
Net increase (decrease) in cash and cash equivalents (14,609) (12,525)
Cash and cash equivalents at beginning of period 58,600 46,129
--------- ---------
Cash and cash equivalents at end of period $ 43,991 $ 33,604
========= =========
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
7
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)(continued)
For the periods ended July 1, 1999 and July 2, 1998
---------------------------------------------------------------
(in thousands)
<CAPTION>
Six Months
-------------------
1999 1998
-------- --------
<S> <C> <C>
Supplemental Cash Flow Disclosures
Summary of non-cash investing and financing activities:
Capital lease obligations incurred for property
and equipment $ 16 $ 7,847
Tax benefit from stock options and preferred stock
dividend 89 60
Cash flow during the period for the following:
Interest paid, net of amount capitalized $ 30,635 $ 29,781
Income taxes paid (refunded) 5,689 175
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
8
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)
For the periods ended July 1, 1999 and July 2, 1998
---------------------------------------------------------------
(in thousands, except number of shares)
<CAPTION>
Six Months
--------------------
1999 1998
-------- --------
<S> <C> <C>
Common stock:
Beginning balance $ 492 $ 491
Stock options exercised for 86,667 and 23,405 shares 1 --
-------- --------
Ending balance 493 491
-------- --------
Paid-in capital:
Beginning balance 412,528 412,029
Stock options exercised 392 84
Tax benefit from stock options exercised 79 35
-------- --------
Ending balance 412,999 412,148
-------- --------
Retained earnings:
Beginning balance 58,207 48,654
Preferred stock dividend and losses on redemption,
net of income tax benefit of $10 and $25 (297) (302)
Net income 4,692 2,991
-------- --------
Ending balance 62,602 51,343
-------- --------
Treasury stock:
Beginning balance (17,126) (17,126)
Repurchase of 669,500 shares of common stock,
at cost, in 1999 (5,354) --
-------- --------
Ending balance (22,480) (17,126)
-------- --------
Unearned compensation:
Beginning balance -- (10)
Amortization -- 10
-------- --------
Ending balance -- --
-------- --------
$453,614 $446,856
======== ========
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
9
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Note 1: General
- ----------------
The consolidated financial statements reflect all adjustments, such
adjustments 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 six
months ended 1999 or 1998. Capitalized costs related to various development
projects, included in deferred charges and other assets, were $4,970,000 and
$2,630,000 at July 1, 1999 and December 31, 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 December 31, 1998.
Certain reclassifications have been made in the 1998 Consolidated Statement
of Cash Flows in order to be comparable with the 1999 presentation.
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
July 1, 1999 and July 2, 1998 (in thousands):
<CAPTION>
Second Quarter Six Months
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 4,283 $ 4,083 $ 8,540 $ 8,205
Operating expenses (691) (691) (1,375) (1,375)
-------- -------- -------- --------
Operating income 3,592 3,392 7,165 6,830
Interest expense (1,010) (1,240) (2,047) (2,532)
-------- -------- -------- --------
Net income $ 2,582 $ 2,152 $ 5,118 $ 4,298
======== ======== ======== ========
</TABLE>
<TABLE>
The Company's share of the above operating results, after intercompany
eliminations, is as follows (in thousands):
<CAPTION>
Second Quarter Six Months
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Equity in unconsolidated
partnership's loss $ (957) $ (1,113) $ (1,965) $ (2,238)
</TABLE>
10
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Note 3: Long-term Debt
- -----------------------
<TABLE>
Long-term debt consists of the following (in thousands):
<CAPTION>
July 1, December 31,
1999 1998
---------- ----------
<S> <C> <C>
11% Senior Subordinated Notes Due 2002
("11% Notes") $ -- $200,000
13 3/4% Senior Subordinated Notes Due 2004
("13 3/4% Notes") 178,344 178,243
8 7/8% Senior Subordinated Notes Due 2007 235,000 --
Reducing revolving credit note ("Revolver");
floating rate; matures June 30, 2003 -- 53,100
Term loan ("Term Loan"); floating rate, 7.62%
at July 1, 1999; matures June 30, 2005 50,000 50,000
Other notes payable; 7% to 14.6%; maturities
to 2002 811 868
Obligations under capital leases 6,583 7,869
-------- --------
470,738 490,080
Less current portion (3,738) (2,537)
-------- --------
$467,000 $487,543
======== ========
</TABLE>
On April 7, 1999 and June 2, 1999, respectively, the Company redeemed
$75,000,000 and $125,000,000 principal amount of the 11% Notes at 101.571% of
the face amount plus accrued interest.
On May 3, 1999, the Company issued $235,000,000 principal amount of 8 7/8%
Senior Subordinated Notes due May 15, 2007 ("8 7/8% Notes"). Interest is
payable on May 15 and November 15, beginning on November 15, 1999. The net
proceeds from the issuance of the 8 7/8% Notes, after payment of the fees and
expenses of the issuance, were approximately $228,700,000. A portion of the
net proceeds of the 8 7/8% Notes was used for the redemption on June 2, 1999
of the 11% Notes. The balance of the net proceeds of the 8 7/8% Notes was
used to repay outstanding borrowings under the Revolver.
At any time prior to May 15, 2003, the 8 7/8% Notes are redeemable at the
option of the Company, in whole or in part, at a price of 100% of the
principal amount plus a redemption premium plus accrued interest. The
redemption premium will be equal to the greater of (1) 1% of the principal
amount or (2) the excess of (A) the sum of the present values of (i) 104.438%
of the principal amount and (ii) all required interest payments through May
15, 2003, excluding accrued but unpaid interest, computed in each case using
a discount rate equal to the treasury rate at the time of redemption plus 50
basis points over (B) the principal amount. On or after May 15, 2003, the 8
7/8% Notes are redeemable at the option of the Company, in whole or in part,
at prices from 104.438% of the principal amount plus interest declining to
100% of the principal amount plus interest beginning May 15, 2006.
11
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
The 8 7/8% Notes, ranked pari passu with the 13 3/4% Notes, are general
unsecured obligations of the Company and are subordinated in right of payment
to all present and future senior indebtedness (as defined) of the Company.
Upon change of control of the Company, the holders of the 8 7/8% Notes would
have the right to require repurchase of the notes at 101% of the principal
amount plus accrued interest. Certain covenants in the 8 7/8% Notes limit
the ability of the Company to incur indebtedness or engage in mergers,
consolidations or sales of assets.
Effective April 30, 1999, the Company and the lenders under the Revolver
agreed to expand the maximum amount available under the Revolver from
$250,000,000 to $300,000,000. In conjunction with this change, the quarterly
reductions in the maximum amount available under the Revolver were increased
from $10,000,000 to $12,000,000.
Note 4: Other Long-term Liabilities
- -------------------------------------
<TABLE>
Other long-term liabilities consist of the following (in thousands):
<CAPTION>
July 1, December 31,
1999 1998
---------- ----------
<S> <C> <C>
Deferred compensation and retirement plans $ 12,199 $ 11,871
Accrued rent expense 9,951 10,427
Obligation to City of Evansville and
other civic and community organizations 2,425 3,050
Las Vegas Boulevard beautification assessment 442 455
-------- --------
25,017 25,803
Less current portion (2,959) (2,921)
-------- --------
$ 22,058 $ 22,882
======== ========
</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. The IRS is
examining the income tax returns for the years 1992 through 1996. The
Indiana Department of Revenue is examining the Indiana income tax returns for
the years 1995 through 1997. Management believes that adequate provision for
income taxes and interest has been made in the financial statements.
Note 6: Extraordinary Items
- ----------------------------
In the 1999 second quarter, the Company expensed the redemption premiums and
the remaining unamortized deferred financing charges in connection with the
redemptions of the 11% Notes. These items were reflected in the Consolidated
Statement of Operations for the quarter and six months ended 1999, as an
extraordinary loss of $4,073,000, which was net of an income tax benefit of
$2,193,000.
In the 1998 second quarter, the Company expensed the remaining unamortized
12
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
deferred financing charges in connection with the extinguishment of the
Company's reducing revolving credit note maturing on December 31, 1999 and
supplemental reducing revolving loan agreement maturing on March 15, 1999.
These items were reflected in the Consolidated Statement of Operations for
the quarter and six 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 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 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.
<TABLE>
The computations of earnings per common share and earnings per common share,
assuming dilution, for the periods ended July 1, 1999 and July 2, 1998, are
as follows:
<CAPTION>
Second Quarter Six Months
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income before extraordinary items $ 5,913 $ 3,719 $ 8,765 $ 4,337
Deduct: preferred stock dividends
and losses on redemption (net of
income tax benefits of $3, $11,
$10 and $25, credited to retained
earnings) (143) (148) (297) (302)
-------- -------- -------- --------
Income before extraordinary items
applicable to computations 5,770 3,571 8,468 4,035
Extraordinary items (4,073) (1,346) (4,073) (1,346)
-------- -------- -------- --------
Net income applicable to
computations $ 1,697 $ 2,225 $ 4,395 $ 2,689
======== ======== ======== ========
Weighted-average common shares
applicable to earnings per
common share 45,268 45,223 45,304 45,213
Effect of dilutive securities:
Stock option incremental shares 651 649 475 755
Assumed conversion of preferred
stock 800 865 814 871
-------- -------- -------- --------
1,451 1,514 1,289 1,626
-------- -------- -------- --------
Weighted-average common shares
applicable to earnings per
common share assuming dilution 46,719 46,737 46,593 46,839
======== ======== ======== ========
</TABLE>
13
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
<CAPTION>
Second Quarter Six Months
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Earnings per common share:
Income before extraordinary items $ .13 $ .08 $ .19 $ .09
Extraordinary items (.09) (.03) (.09) (.03)
-------- -------- -------- --------
Net income $ .04 $ .05 $ .10 $ .06
======== ======== ======== ========
Earnings per common share
assuming dilution:
Income before extraordinary items $ .13 $ .08 $ .18 $ .09
Extraordinary items (.09) (.03) (.09) (.03)
-------- -------- -------- --------
Net income $ .04 $ .05 $ .09 $ .06
======== ======== ======== ========
</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. In
connection with these matters, the Company has an accrued liability of
$3,889,000 and $3,894,000 at July 1, 1999 and December 31, 1998,
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
$21,000,000 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.
14
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
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
$20,000,000 at July 1, 1999.
Item 2. Management's Discussion and Analysis
Financial Condition
On April 7, 1999 and June 2, 1999, respectively, the Company redeemed $75
million and $125 million principal amount of the 11% Notes at 101.571% of the
face amount plus accrued interest.
On May 3, 1999, the Company issued $235 million principal amount of 8 7/8%
Senior Subordinated Notes due May 15, 2007 ("8 7/8% Notes"). Interest is
payable on May 15 and November 15, beginning on November 15, 1999. The net
proceeds from the issuance of the 8 7/8% Notes, after payment of the fees and
expenses of the issuance, were approximately $228.7 million. A portion of
the net proceeds of the 8 7/8% Notes was used for the redemption on June 2,
1999 of the 11% Notes. The balance of the net proceeds of the 8 7/8% Notes
was used to repay outstanding borrowings under the Revolver.
In May 1999, the Company announced authorization by the board of directors to
make discretionary repurchases of up to 3.5 million shares of its common
stock. Such repurchases may be made in the open market or in privately
negotiated transactions, depending upon market prices and other business
factors. As of July 1, 1999, the Company has repurchased under this program,
669,500 shares of its common stock at prices ranging from $6.69 per share to
$9.25 per share and at an average price of $7.96 per share.
Effective April 30, 1999, the Company and the lenders under the Revolver
agreed to expand the maximum amount available under the Revolver from $250
million to $300 million. In conjunction with this change, the quarterly
reductions in the maximum amount available under the Revolver were increased
from $10 million to $12 million.
Results of Operations
Six Months Ended July 1, 1999 Compared to Six Months Ended July 2, 1998
The Company's consolidated revenues in the first half of 1999 were $397.3
million, down slightly from $400.0 million in the first half of 1998.
Consolidated rooms revenue was $6.3 million or 24% higher in the 1999 versus
1998 six-month period reflecting increases at all hotel properties.
Consolidated operating income was $44.2 million in the first half of 1999, a
15
AZTAR CORPORATION AND SUBSIDIARIES
15% improvement over $38.4 million in the first half of 1998. Consistent
with the increase in consolidated rooms revenue, consolidated rooms costs
were $2.2 million or 14% higher in the 1999 versus 1998 six-month period.
The consolidated provision for doubtful accounts was $2.4 million or 36%
lower in the 1999 versus 1998 six-month period, reflecting decreases in the
allowance for potential uncollectible markers at Tropicana Las Vegas and
Tropicana Atlantic City as a result of a lower volume of table games play at
those properties. Consolidated rent expense was $1.8 million or 18% lower in
the 1999 versus 1998 six-month period due to a decreased number of operating
leases at Tropicana Atlantic City as a result of a shift from operating
leases to capital leases or ownership.
For a discussion of extraordinary items, refer to "Note 6: Extraordinary
Items".
TROPICANA ATLANTIC CITY Total revenues at Tropicana Atlantic City were
$208.8 million in the first half of 1999, up 2% from $204.4 million in the
first half of 1998. Casino revenue was 1% higher in the 1999 versus 1998
six-month period, primarily reflecting an 8% increase in slot revenue,
partially offset by a 10% decrease in games revenue. The decline in games
revenue was a result of a decrease in the volume of play. Rooms revenue was
17% higher in the 1999 versus 1998 six-month period primarily as a result of
an increase in rooms occupied on a non-complimentary basis.
Tropicana Atlantic City had operating income of $33.3 million in the first
half of 1999, a 12% improvement over $29.8 million in the first half of 1998.
Rooms costs were 16% higher in the 1999 versus 1998 six-month period due to
the increase in rooms revenue. The provision for doubtful accounts was $1.1
million lower in the 1999 versus 1998 six-month period, reflecting a decrease
as a result of the lower volume of table games play. Operating income is
after rent and depreciation and amortization expenses. Rent expense
decreased to $1.4 million in the first half of 1999 from $3.0 million in the
first half of 1998 due to a decreased number of operating leases as a result
of a shift from operating leases to capital leases or ownership.
Depreciation and amortization was $12.6 million in the 1999 six-month period
compared to $11.8 million in the 1998 six-month period.
TROPICANA LAS VEGAS At Tropicana Las Vegas, total revenues were $73.4
million in the first half of 1999, a 6% decrease from $78.2 million in the
first half of 1998. Casino revenue was 21% lower in the 1999 versus 1998
six-month period, primarily due to a 47% decrease in games revenue combined
with a 3% decrease in slot revenue. More than half of the decrease in games
revenue was attributable to lower bacarrat revenue, which decreased as a
result of an 89% decline in the volume of play as the Las Vegas Tropicana
continued its program to reduce the increasingly expensive high-end games
business. Rooms revenue was $4.3 million or 29% higher in the 1999 versus
1998 six-month period primarily as a result of an increase in average daily
rate combined with higher occupancy.
Tropicana Las Vegas had an operating loss of $2.2 million in the first half
of 1999 compared to $4.6 million in the first half of 1998. Casino costs
were 24% lower in the 1999 versus 1998 six-month period, primarily due to the
decrease in casino revenues. Consistent with the increase in rooms revenue,
rooms costs were 12% higher in the 1999 versus 1998 six-month period. The
16
AZTAR CORPORATION AND SUBSIDIARIES
provision for doubtful accounts was $1.3 million lower in the 1999 versus
1998 six-month period as a result of a lower volume of bacarrat play.
Operating loss is after rent and depreciation and amortization expenses.
Rent expense was $4.9 million in the 1999 six-month period compared with $5.0
million in the 1998 six-month period. Depreciation and amortization was $5.1
million in the 1999 six-month period compared with $4.8 million in the 1998
six-month period.
RAMADA EXPRESS At Ramada Express, total revenues were $49.4 million in the
first half of 1999, up 16% from $42.7 million in the first half of 1998.
Ramada Express is benefiting from an increase in revenue in the Laughlin
market. Operating income was $9.3 million in the 1999 six-month period, a
71% improvement over $5.4 million in the 1998 six-month period. Operating
income is after rent and depreciation and amortization expenses. Rent
expense was $0.3 million in the 1999 six-month period compared to $0.2
million in the 1998 six-month period. Depreciation and amortization was $2.4
million in the 1999 six-month period compared to $3.5 million in the 1998
six-month period.
CASINO AZTAR EVANSVILLE Total revenues at Casino Aztar Evansville were $53.9
million in the first half of 1999, down 14% from $62.3 million in the first
half of 1998. Casino revenue was down 14% in the 1999 versus 1998 six-month
period. The introduction in November 1998 of a riverboat casino in the
Louisville, Kentucky area, in combination with severe winter weather in
January and March of 1999, negatively impacted results at Casino Aztar
Evansville. Operating income was $10.7 million in the 1999 six-month period,
a 33% decrease from $16.0 million in the 1998 six-month period. Operating
income is after rent and depreciation and amortization expenses. Rent
expense was $1.6 million in the 1999 six-month period compared with $1.8
million in the 1998 six-month period. Depreciation and amortization was $4.9
million in both periods.
CASINO AZTAR CARUTHERSVILLE Total revenues at Casino Aztar Caruthersville
were $11.8 million in the first half of 1999, a 5% decrease from $12.4
million in the first half of 1998 due in large part to unfavorable winter
weather. Casino Aztar Caruthersville had an operating loss of $0.3 million
in the first half of 1999 compared with $0.8 million in the first half of
1998. Operating loss is after depreciation and amortization of $1.5 million
in the 1999 six-month period compared to $1.6 million in the 1998 six-month
period.
Quarter Ended July 1, 1999 Compared to Quarter Ended July 2, 1998
The Company's consolidated revenues in the 1999 second quarter were $206.7
million, up 2% from $203.2 million in the 1998 second quarter. Consolidated
rooms revenue was $2.8 million or 19% higher in the 1999 versus 1998 second
quarter reflecting increases at all hotel properties. Consolidated operating
income was $24.5 million in the 1999 second quarter, a 14% improvement over
$21.6 million in the 1998 second quarter. Consolidated rooms costs were $1.1
million or 13% higher in the 1999 versus 1998 second quarter due to the
increase in rooms revenue. The consolidated provision for doubtful accounts
was $1.3 million or 34% lower in the 1999 versus 1998 second quarter,
reflecting decreases in the allowance for potential uncollectible markers at
Tropicana Las Vegas and Tropicana Atlantic City as a result of a lower volume
of table games play at those properties.
17
AZTAR CORPORATION AND SUBSIDIARIES
For a discussion of extraordinary items, refer to "Note 6: Extraordinary
Items".
TROPICANA ATLANTIC CITY Total revenues at Tropicana Atlantic City were
$111.5 million in the 1999 second quarter, up 7% from $104.2 million in the
1998 second quarter. Casino revenue was 6% higher in the 1999 versus 1998
second quarter, primarily reflecting a 13% increase in slot revenue,
partially offset by an 8% decrease in games revenue. The increase in slot
revenue was caused, in large part, by a strong market growth rate in the
Atlantic City market during the 1999 second quarter. The decline in games
revenue was a result of a decrease in the volume of play in the 1999 versus
1998 second quarter. Rooms revenue was $1.0 million or 25% higher in the
1999 second quarter primarily as a result of an increase in occupied rooms on
a non-complimentary basis.
Tropicana Atlantic City had operating income of $18.5 million in the 1999
second quarter, a 17% improvement over $15.9 million in the 1998 second
quarter. Consistent with the increases in casino revenue and rooms revenue,
casino costs and rooms costs were 7% higher and 22% higher, respectively, in
the 1999 versus 1998 second quarter. The provision for doubtful accounts was
$0.4 million lower in the 1999 versus 1998 second quarter, reflecting a
decrease as a result of the lower volume of table games play. Operating
income is after rent and depreciation and amortization expenses. Rent
expense was $0.8 million in the 1999 second quarter compared with $1.1
million in the 1998 second quarter. Depreciation and amortization was $6.4
million in the second quarter of 1999 compared to $6.2 million in the second
quarter of last year.
TROPICANA LAS VEGAS At Tropicana Las Vegas, total revenues were $37.6
million in the 1999 second quarter, a 7% decrease from $40.6 million in the
1998 second quarter. Casino revenue was 20% lower in the 1999 versus 1998
second quarter, primarily due to a 48% decrease in games revenue partially
offset by a 1% increase in slot revenue. A substantial portion of the
decrease in games revenue was attributable to lower bacarrat revenue, which
decreased as a result of an 89% decline in the volume of play. Rooms revenue
was $1.5 million or 19% higher in the 1999 versus 1998 second quarter due to
an increase in average daily rate combined with higher occupancy.
Tropicana Las Vegas had an operating loss of $0.2 million in the 1999 second
quarter compared to $1.2 million in the 1998 second quarter. Casino costs
were 24% lower in the 1999 versus 1998 second quarter, primarily due to the
decrease in casino revenue. The provision for doubtful accounts was $0.9
million or 60% lower in the 1999 versus 1998 second quarter as a result of a
lower volume of bacarrat play. Operating loss is after rent and depreciation
and amortization expenses. Rent expense was $2.5 million in both periods.
Depreciation and amortization was $2.5 million in the 1999 second quarter
compared with $2.4 million in the 1998 second quarter.
RAMADA EXPRESS At Ramada Express, total revenues were $24.2 million in the
1999 second quarter, up 13% from $21.4 million in the 1998 second quarter.
Ramada Express is benefiting from an increase in revenue in the Laughlin
market. Operating income was $4.0 million in the 1999 second quarter, a 56%
improvement over $2.6 million in the 1998 second quarter. Operating income
is after rent and depreciation and amortization expenses. Rent expense was
18
AZTAR CORPORATION AND SUBSIDIARIES
$0.2 million in the 1999 second quarter compared to $0.1 million in the 1998
second quarter. Depreciation and amortization was $1.2 million in the 1999
second quarter compared to $1.7 million in the 1998 second quarter.
CASINO AZTAR EVANSVILLE Total revenues at Casino Aztar Evansville were $27.5
million in the 1999 second quarter, down 11% from $31.0 million in last
year's second quarter. Casino revenue was 12% lower in the 1999 versus 1998
second quarter. The introduction in November 1998 of a riverboat casino in
the Louisville, Kentucky area negatively impacted results at Casino Aztar
Evansville. Operating income was $5.7 million in the 1999 second quarter, a
29% decrease from $8.0 million in the 1998 second quarter. Operating income
is after rent and depreciation and amortization expenses. Rent expense was
$0.8 million in the 1999 second quarter compared with $1.0 million in the
1998 second quarter. Depreciation and amortization was $2.5 million in both
periods
CASINO AZTAR CARUTHERSVILLE Total revenues at Casino Aztar Caruthersville
were $5.9 million in the 1999 second quarter, a slight decrease from $6.0
million in the 1998 second quarter. Casino Aztar Caruthersville had an
operating loss of $0.3 million in the second quarter of 1999 compared to $0.5
million in the second quarter of 1998. Operating loss is after depreciation
and amortization of $0.8 million in both periods.
Year 2000
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.
Approach
The Company has established a coordinated effort between its corporate level
and responsible parties at each of its properties to address Year 2000
issues. The Company requires each property to submit a monthly status report
to the corporate office, which is then reviewed with each property. The
audit committee of Aztar's board of directors discusses the status of each
property's Year 2000 readiness at least quarterly. The Company's Year 2000
readiness program consists of four phases:
19
AZTAR CORPORATION AND SUBSIDIARIES
Phase 1 Compile an inventory of information technology (IT) and non-
IT systems that may be sensitive to the Year 2000 problem.
Phase 2 Identify and prioritize the critical systems from the
inventory of systems compiled in Phase 1 and inquire of third
parties with whom the Company does significant business, such
as vendors and suppliers, as to the state of their Year 2000
readiness.
Phase 3 Analyze the critical systems to determine which systems are
not Year 2000 compliant and evaluate the costs to repair or
replace those systems.
Phase 4 Repair or replace noncompliant systems and test 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.
Status
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 a greater risk to the Company.
The Company is currently in Phase 4 or has completed Phase 4 on
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 or completed and the date when
installation and testing of such systems is expected to be
completed as part of Phase 4. 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. The dates used on the following chart indicate when the
Company believes it will have installed Year 2000 compliant
software and Phase 4 is completed. After Phase 4 is completed the
Company will perform integrated systems testing on critical systems
to further ensure that Year 2000 compliance has been achieved.
This integrated testing will be performed on a risk assessment
basis focusing on systems where interfaces with other systems is
most critical and focusing on those systems where internal
programming was required. These testing procedures will continue
during the balance of 1999.
20
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
* **
Done Done 8/99 8/99 8/99
Slots Upgrade Upgrade Conversion Upgrade Upgrade
** *
Done Done 9/99 Done Done
Hotel Conversion Upgrade Conversion Upgrade N/A
**
Done Done Done Done
Financial Conversion Upgrade Upgrade Upgrade Upgrade
Done Done 8/99 8/99 8/99
Point of
Sale/ Upgrade Upgrade Conversion Upgrade Upgrade
Inventory Done 8/99 Done Done Done
* Indicates more significant internal programming also required
** Indicates minor internal programming also required
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").
Procedures being utilized in the process of ensuring Year 2000
readiness in critical Non-IT Systems include: sending letters to
vendors of critical Non-IT Systems 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 has now substantially completed its
compliance procedures on the majority of Non-IT systems which are
considered critical. The Company expects to substantially complete
procedures on those remaining critical Non-IT Systems by September
1999.
Costs
The total cost to the Company of making its systems Year 2000 compliant is
estimated to be approximately $8.0 million. Approximately $7.6 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 ($1.2 million) and personal
computer upgrades and other systems company-wide ($0.7 million). These costs
will be capitalized and depreciated over their expected useful lives.
21
AZTAR CORPORATION AND SUBSIDIARIES
The estimated costs related to internal programming modifications and the
Company's administration of its Year 2000 project are approximately $0.4
million, and such costs are being expensed as incurred. Approximately
$90,000 of these costs were expensed in the six months ended July 1, 1999 and
approximately $0.2 million were expensed in 1998.
As of July 1, 1999, approximately $7.1 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.
Risk Assessment
The greatest risk to the Company is if one or more of its properties'
critical IT systems, such as casino, hotel or financial, 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 is
also exposed to the risk of possible failure of systems external to the
Company's operations ("External Risk Factors"). These External Risk Factors
arise from the fact that the Company's operations, like most businesses, are
dependent upon numerous other private, pubic and governmental entities.
While these External Risk Factors are not the responsibility of the Company
and the remediation of these factors is beyond the Company's control, we are
attempting to monitor these risks and form contingency plans as warranted.
As a result of these External Risk Factors, the Company may be adversely
impacted even if its own IT systems and Non-IT Systems are Year 2000
compliant. External Risk Factors being monitored include utility service to
the Company's properties; banking networks which may affect properties' or
customers' access to cash and travel service disruptions to the Company's
properties. 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.
Ramada Express, Casino Aztar Evansville and Casino Aztar Caruthersville all
utilize the same third-party vendor software for their casino and financial
systems. The Company has not yet received Year 2000 compliant software from
this vendor. The vendor has represented that compliant software systems are
substantially completed and will be made available to the Company in August
1999. In the event that such compliant software is not made available on a
timely basis the Company may spend additional capital to purchase alternative
software systems and accordingly the risks of Year 2000 non-compliance would
increase at each of these properties until such alternative systems are
successfully installed.
Contingency Plans
Contingency plans are being developed, 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 and such plans are being enhanced to deal
with potential Year 2000 problems should they arise. In each instance where
Year 2000 compliant vendor software has not yet been installed, alternative
software systems are being investigated, although timely installation of such
alternative software cannot be assured.
22
AZTAR CORPORATION AND SUBSIDIARIES
Other Matters
In June 1998, the Financial Accounting Standards Board ("FASB") adopted
Statement of Financial Accounting Standards No. 133 entitled "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,
2000. SFAS 133 should not be applied retroactively to financial statements
of prior periods. The Company will adopt SFAS 133 when required. Because of
the Company's minimal use of derivatives, the Company does not anticipate
that the adoption of SFAS 133 will have a significant effect on its earnings
or its financial position.
Private Securities Litigation Reform Act
Certain information included in Aztar's 1998 Form 10-K, 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 1998 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; use of derivates; 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 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.
23
AZTAR CORPORATION AND SUBSIDIARIES
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For a discussion of information that affects information incorporated by
reference in Item 7A of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, see "Note 3: Long-term Debt" of the
Notes to Consolidated Financial Statements included in this Form 10-Q under
Item 1.
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
December 31, 1998, the Judge, on June 21 and 22, 1999, heard
argument on the plaintiffs' objection to the Magistrate Judge's
recommendation that the plaintiff's motion to compel further
discovery from the defendants should be denied. The Judge affirmed
the Magistrate's recommendation with one exception: the defendants
were ordered to produce documents which show whether the phrase
"uses one 52 card deck" (or similar language) appeared on the
machines.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's annual meeting of shareholders held on May 6, 1999, two
items were voted on as follows:
1. The persons whose names are set forth below were elected as directors
to serve until the 2002 annual meeting or until their retirement date
or until their successors are elected and qualified. The relevant
voting information is as follows:
Votes Cast
------------------------
Nominee For Withheld
---------------- ---------- --------
John B. Bohle 40,684,716 773,458
Linda C. Faiss 40,676,815 781,359
Paul E. Rubeli 40,644,482 813,692
2. The 1999 Employee Stock Option and Incentive Plan was adopted. The
relevant voting information is as follows:
Votes Cast
------------
For 16,974,977
Against 9,395,775
Abstain 169,025
Broker Non-Votes 14,918,397
24
AZTAR CORPORATION AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Page No.
----------
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) Reports on Form 8-K
On April 19, 1999, the Company filed a report on Form 8-K under Item
5. Other Events to file, as Exhibit 99.1, a news release issued by
the Registrant on April 19, 1999, reporting an anticipated offering
by the Company of $200,000,000 in aggregate principal amount of
Senior Subordinated Notes due 2007 in a private placement pursuant to
Rule 144A under the Securities Act of 1933.
On April 28, 1999, the Company filed a report on Form 8-K under Item
5. Other Events to file, as Exhibit 99.1, a news release issued by
the Registrant on April 27, 1999, reporting an anticipated offering
by the Company of $235,000,000 in aggregate principal amount of
Senior Subordinated Notes due May 15, 2007 in a private placement
pursuant to Rule 144A under the Securities Act of 1933.
25
AZTAR CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AZTAR CORPORATION
------------------------------
(Registrant)
Date August 10, 1999 By ROBERT M. HADDOCK
-------------------------- ---------------------------
Robert M. Haddock
Executive Vice President and
Chief Financial Officer
26
AZTAR CORPORATION AND SUBSIDIARIES
Exhibit Index
- -------------
27. Financial Data Schedule.
E-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at July 1, 1999 and the Consolidated Statement of
Operations for the year-to-date period ended July 1, 1999 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1999
<PERIOD-END> JUL-1-1999
<CASH> 43,991
<SECURITIES> 0
<RECEIVABLES> 52,452
<ALLOWANCES> 25,995
<INVENTORY> 6,954
<CURRENT-ASSETS> 105,647
<PP&E> 1,218,305
<DEPRECIATION> 342,050
<TOTAL-ASSETS> 1,053,337
<CURRENT-LIABILITIES> 97,227
<BONDS> 467,000
7,176
0
<COMMON> 493
<OTHER-SE> 453,121
<TOTAL-LIABILITY-AND-EQUITY> 1,053,337
<SALES> 27,319
<TOTAL-REVENUES> 397,275
<CGS> 27,859
<TOTAL-COSTS> 203,082
<OTHER-EXPENSES> 19,419
<LOSS-PROVISION> 4,248
<INTEREST-EXPENSE> 29,066
<INCOME-PRETAX> 16,091
<INCOME-TAX> 5,361
<INCOME-CONTINUING> 8,765
<DISCONTINUED> 0
<EXTRAORDINARY> (4,073)
<CHANGES> 0
<NET-INCOME> 4,692
<EPS-BASIC> .10
<EPS-DILUTED> .09
</TABLE>
