SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 2000
-------------
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 27, 2000, the registrant had outstanding 40,666,803 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 June 29, 2000 and
December 30, 1999 3
Consolidated Statements of Operations for the quarters
and six months ended June 29, 2000 and July 1, 1999 5
Consolidated Statements of Cash Flows for the six months
ended June 29, 2000 and July 1, 1999 7
Consolidated Statements of Shareholders' Equity for
the six months ended June 29, 2000 and July 1, 1999 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 19
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 6. Exhibits and Reports on Form 8-K 20
2
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
---------------------------------------
(in thousands, except share data)
<CAPTION>
June 29, December 30,
2000 1999
------------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 39,116 $ 54,180
Accounts receivable, net 24,676 26,104
Refundable income taxes -- 881
Inventories 7,392 7,836
Prepaid expenses 12,303 11,293
Deferred income taxes, net 17,370 17,333
---------- ----------
Total current assets 100,857 117,627
Investments in and advances to
unconsolidated partnership 7,314 7,659
Other investments 20,655 20,379
Property and equipment:
Buildings, riverboats and equipment, net 738,231 754,900
Land 102,445 102,428
Construction in progress 8,286 4,382
Leased under capital leases, net 2,487 4,447
---------- ----------
851,449 866,157
Deferred charges and other assets 35,979 37,185
---------- ----------
$1,016,254 $1,049,007
========== ==========
</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>
June 29, December 30,
2000 1999
------------- ------------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accruals $ 58,277 $ 51,197
Accrued payroll and employee benefits 27,476 26,399
Accrued interest payable 5,496 5,198
Income taxes payable 1,701 --
Current portion of long-term debt 2,769 3,334
Current portion of other long-term
liabilities 2,374 3,198
---------- ----------
Total current liabilities 98,093 89,326
Long-term debt 450,888 497,628
Other long-term liabilities 20,415 21,099
Deferred income taxes 4,327 6,041
Contingencies and commitments
Series B ESOP convertible preferred stock
(redemption value $8,905 and $9,734) 6,695 7,003
Shareholders' equity:
Common stock, $.01 par value (40,749,203
and 42,945,190 shares outstanding) 510 506
Paid-in capital 424,338 420,786
Retained earnings 96,938 63,963
Less: Treasury stock (85,950) (57,345)
---------- ----------
Total shareholders' equity 435,836 427,910
---------- ----------
$1,016,254 $1,049,007
========== ==========
</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 June 29, 2000 and July 1, 1999
-------------------------------------------------------------
(in thousands, except per share data)
<CAPTION>
Second Quarter Six Months
------------------- ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Casino $175,474 $166,078 $346,203 $320,263
Rooms 19,832 17,447 36,710 33,012
Food and beverage 14,959 14,080 29,250 27,319
Other 10,698 9,126 20,324 16,681
-------- -------- -------- --------
220,963 206,731 432,487 397,275
Costs and expenses
Casino 74,703 72,622 149,508 142,660
Rooms 10,040 9,346 18,770 17,575
Food and beverage 14,790 14,252 28,485 27,859
Other 8,510 7,817 16,726 14,988
Marketing 23,978 23,541 47,037 43,157
General and administrative 19,706 18,446 39,130 36,405
Utilities 3,546 3,293 6,874 6,362
Repairs and maintenance 6,683 6,845 13,104 13,057
Provision for doubtful accounts 1,060 2,424 2,664 4,248
Property taxes and insurance 5,922 5,855 11,918 11,764
Rent 4,265 4,414 8,350 8,410
Depreciation and amortization 13,446 13,350 27,166 26,594
-------- -------- -------- --------
186,649 182,205 369,732 353,079
-------- -------- -------- --------
Operating income 34,314 24,526 62,755 44,196
Interest income 341 544 682 961
Interest expense (10,376) (14,781) (21,262) (29,066)
-------- -------- -------- --------
Income before other items, income
taxes and extraordinary items 24,279 10,289 42,175 16,091
Equity in unconsolidated
partnership's loss (1,052) (957) (2,085) (1,965)
-------- -------- -------- --------
Income before income taxes
and extraordinary items 23,227 9,332 40,090 14,126
Income taxes (874) (3,419) (6,713) (5,361)
-------- -------- -------- --------
Income before extraordinary items 22,353 5,913 33,377 8,765
Extraordinary items -- (4,073) -- (4,073)
-------- -------- -------- --------
Net income $ 22,353 $ 1,840 $ 33,377 $ 4,692
======== ======== ======== ========
</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 June 29, 2000 and July 1, 1999
-------------------------------------------------------------
(in thousands, except per share data)
<CAPTION>
Second Quarter Six Months
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Earnings per common share:
Income before extraordinary items $ .53 $ .13 $ .79 $ .19
Extraordinary items -- (.09) -- (.09)
-------- -------- -------- --------
Net income $ .53 $ .04 $ .79 $ .10
======== ======== ======== ========
Earnings per common share assuming
dilution:
Income before extraordinary items $ .51 $ .13 $ .76 $ .18
Extraordinary items -- (.09) -- (.09)
-------- -------- -------- --------
Net income $ .51 $ .04 $ .76 $ .09
======== ======== ======== ========
Weighted-average common shares
applicable to:
Earnings per common share 41,356 45,268 41,861 45,304
Earnings per common share assuming
dilution 43,083 46,719 43,418 46,593
</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 June 29, 2000 and July 1, 1999
---------------------------------------------------------------
(in thousands)
<CAPTION>
Six Months
---------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 33,377 $ 4,692
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 27,758 27,603
Provision for losses on accounts receivable 2,664 4,248
Loss on early retirement of debt -- 6,266
Loss on reinvestment obligation 1,006 434
Rent expense (469) (476)
Distribution in excess of equity in income
of partnership 345 406
Deferred income taxes (1,751) 627
Change in assets and liabilities:
(Increase) decrease in accounts receivable (1,236) 2,847
(Increase) decrease in refundable income taxes 881 (52)
(Increase) decrease in inventories and
prepaid expenses (569) (3,541)
Increase (decrease) in accounts payable,
accrued expenses and income taxes payable 10,530 (4,620)
Other items, net 213 168
-------- --------
Net cash provided by (used in) operating activities 72,749 38,602
-------- --------
Cash Flows from Investing Activities
Payments received on notes receivable -- 823
Reduction in other investments 1,404 267
Purchases of property and equipment (10,736) (13,870)
Additions to other long-term assets (3,554) (5,089)
-------- --------
Net cash provided by (used in) investing activities (12,886) (17,869)
-------- --------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 116,000 407,400
Proceeds from issuance of common stock 1,894 393
Principal payments on long-term debt (163,347) (426,797)
Premium paid on early retirement of debt -- (3,142)
Principal payments on other long-term liabilities (888) (638)
Debt issuance costs -- (6,406)
Repurchase of common stock (27,868) (5,354)
Preferred stock dividend (277) (314)
Redemption of preferred stock (441) (484)
-------- --------
Net cash provided by (used in) financing activities (74,927) (35,342)
-------- --------
Net increase (decrease) in cash and cash equivalents (15,064) (14,609)
Cash and cash equivalents at beginning of period 54,180 58,600
-------- --------
Cash and cash equivalents at end of period $ 39,116 $ 43,991
======== ========
</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 June 29, 2000 and July 1, 1999
---------------------------------------------------------------
(in thousands)
<CAPTION>
Six Months
-------------------
2000 1999
-------- --------
<S> <C> <C>
Supplemental Cash Flow Disclosures
Summary of non-cash investing and financing activities:
Capital lease obligations incurred for property
and equipment $ -- $ 16
Tax benefit from stock options and preferred stock
dividend 416 89
Exchange of common stock in lieu of cash payments
in connection with the exercise of stock options 737 --
Cash flow during the period for the following:
Interest paid, net of amount capitalized $ 20,372 $ 30,635
Income taxes paid 5,466 5,689
</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 June 29, 2000 and July 1, 1999
-----------------------------------------------------------
(in thousands, except number of shares)
<CAPTION>
Six Months
--------------------
2000 1999
-------- --------
<S> <C> <C>
Common stock:
Beginning balance $ 506 $ 492
Stock options exercised for 393,856 and
86,667 shares 4 1
-------- --------
Ending balance 510 493
-------- --------
Paid-in capital:
Beginning balance 420,786 412,528
Stock options exercised 3,136 392
Tax benefit from stock options exercised 416 79
-------- --------
Ending balance 424,338 412,999
-------- --------
Retained earnings:
Beginning balance 63,963 58,207
Preferred stock dividend and losses on redemption,
net of an income tax benefit of $10 in 1999 (402) (297)
Net income 33,377 4,692
-------- --------
Ending balance 96,938 62,602
-------- --------
Treasury stock:
Beginning balance (57,345) (17,126)
Repurchase of 2,494,300 and 669,500 shares of
common stock at cost (27,659) (5,354)
Repurchase of 95,543 shares of common stock, at
cost, in connection with stock options exercised
in 2000 (946) --
-------- --------
Ending balance (85,950) (22,480)
-------- --------
$435,836 $453,614
======== ========
</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 2000 or 1999. Capitalized costs related to various development
projects, included in deferred charges and other assets, were $5,261,000 and
$4,778,000 at June 29, 2000 and December 30, 1999, 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 30, 1999.
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
June 29, 2000 and July 1, 1999 (in thousands):
<CAPTION>
Second Quarter Six Months
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 4,433 $ 4,283 $ 8,809 $ 8,540
Operating expenses (691) (691) (1,375) (1,375)
-------- -------- -------- --------
Operating income 3,742 3,592 7,434 7,165
Interest expense (1,148) (1,010) (2,246) (2,047)
-------- -------- -------- --------
Net income $ 2,594 $ 2,582 $ 5,188 $ 5,118
======== ======== ======== ========
</TABLE>
<TABLE>
The Company's share of the above operating results, after intercompany
eliminations, is as follows (in thousands):
<CAPTION>
Second Quarter Six Months
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Equity in unconsolidated
partnership's loss $ (1,052) $ (957) $ (2,085) $ (1,965)
</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>
June 29, December 30,
2000 1999
-------- ------------
<S> <C> <C>
8 7/8% Senior Subordinated Notes Due 2007 $235,000 $235,000
Revolving credit facility ("Revolver");
floating rate, 8.10% at June 29, 2000;
matures June 30, 2003 165,000 210,100
Term loan ("Term Loan"); floating rate, 9.15%
at June 29, 2000; matures June 30, 2005 49,625 49,875
Other notes payable; 14.6%; maturities
to 2002 636 594
Obligations under capital leases 3,396 5,393
-------- --------
453,657 500,962
Less current portion (2,769) (3,334)
-------- --------
$450,888 $497,628
======== ========
</TABLE>
Note 4: Other Long-term Liabilities
-------------------------------------
<TABLE>
Other long-term liabilities consist of the following (in thousands):
<CAPTION>
June 29, December 30,
2000 1999
--------- ------------
<S> <C> <C>
Deferred compensation and retirement plans $ 12,379 $ 12,530
Accrued rent expense 9,070 9,539
Obligation to City of Evansville and
other civic and community organizations 925 1,800
Las Vegas Boulevard beautification assessment 415 428
-------- --------
22,789 24,297
Less current portion (2,374) (3,198)
-------- --------
$ 20,415 $ 21,099
======== ========
</TABLE>
11
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Note 5: Income Taxes
----------------------
The Company is responsible, with certain exceptions, for the taxes of Ramada
Inc. ("Ramada") through December 20, 1989. In connection with Internal
Revenue Service ("IRS") examinations of the income tax returns for the years
1989 through 1996, an issue was resolved, which was the last remaining issue
for the years 1989 through 1991, that resulted in an income tax benefit of
approximately $7,500,000 in the 2000 second quarter. The IRS examinations of
the income tax returns for the years 1992 through 1996 is continuing.
Management believes that adequate provision for income taxes and interest has
been made in the financial statements.
The Company has received proposed assessments from the Indiana Department of
Revenue ("IDR") in connection with the examination of the Company's Indiana
income tax returns for the years 1996 and 1997. Those assessments are based
on IDR's position that the Company's gaming taxes that are based on gaming
revenue are not deductible for Indiana income tax purposes. The Company
believes that it has meritorious legal defenses to those assessments and has
not recorded an accrual for payment. The amount involved, including the
Company's estimate of interest, net of a federal income tax benefit assuming
continuation through June 29, 2000 was approximately $5,600,000 at June 29,
2000.
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 its 11% Senior Subordinated Notes Due 2002. 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.
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.
The computations of earnings per common share and earnings per common share,
assuming dilution, for the periods ended June 29, 2000 and July 1, 1999, are
as follows:
12
<TABLE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Note 7: Earnings Per Share (continued)
---------------------------------------
<CAPTION>
Second Quarter Six Months
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income before extraordinary items $ 22,353 $ 5,913 $ 33,377 $ 8,765
Less: preferred stock dividends
and losses on redemption (net of
income tax benefits of $3 and
$10 in 1999, credited to retained
earnings) (241) (143) (402) (297)
-------- -------- -------- --------
Income before extraordinary items
applicable to computations 22,112 5,770 32,975 8,468
Extraordinary items -- (4,073) -- (4,073)
-------- -------- -------- --------
Net income applicable to
computations $ 22,112 $ 1,697 $ 32,975 $ 4,395
======== ======== ======== ========
Weighted-average common shares
applicable to earnings per
common share 41,356 45,268 41,861 45,304
Effect of dilutive securities:
Stock option incremental shares 999 651 824 475
Assumed conversion of preferred
stock 728 800 733 814
-------- -------- -------- --------
1,727 1,451 1,557 1,289
-------- -------- -------- --------
Weighted-average common shares
applicable to earnings per
common share assuming dilution 43,083 46,719 43,418 46,593
======== ======== ======== ========
Earnings per common share:
Income before extraordinary items $ .53 $ .13 $ .79 $ .19
Extraordinary items -- (09) -- (.09)
-------- -------- -------- --------
Net income $ .53 $ .04 $ .79 $ .10
======== ======== ======== ========
Earnings per common share
assuming dilution:
Income before extraordinary items $ .51 $ .13 $ .76 $ .18
Extraordinary items -- (.09) -- (.09)
-------- -------- -------- --------
Net income $ .51 $ .04 $ .76 $ .09
======== ======== ======== ========
</TABLE>
13
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
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
$3,833,000 and $3,832,000 at June 29, 2000 and December 30, 1999,
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.
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
$36,000,000 at June 29, 2000.
14
AZTAR CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
Financial Condition
During the first half of 2000, we repurchased 2,494,300 shares of common
stock at prices ranging from $8.81 per share to $14.94 per share and at an
average price of $11.05 per share, under a program authorized by our Board of
Directors in 1999.
Results of Operations
Six Months Ended June 29, 2000 Compared to Six Months Ended July 1, 1999
The Company's consolidated revenues in the first half of 2000 were $432.5
million, a 9% increase over $397.3 million in the first half of 1999.
Consolidated rooms revenue was $3.7 million or 11% higher in the 2000 versus
1999 six-month period reflecting increases at all hotel properties.
Consolidated operating income was $62.8 million in the first half of 2000, a
42% improvement over $44.2 million in the first half of 1999, reflecting
improved operating results at all properties. The consolidated provision for
doubtful accounts was $1.6 million or 37% lower in the 2000 versus 1999 six-
month period due to favorable risk analysis, a lower level of receivables and
a lower volume of table games play at the Las Vegas Tropicana.
Consolidated interest expense was $7.8 million or 27% lower in the 2000
versus 1999 six-month period. The decrease in interest expense was primarily
a result of lower interest rates achieved through a refinancing of debt we
completed in 1999.
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
$232.0 million in the first half of 2000, up 11% from $208.8 million in the
first half of 1999. Casino revenue was 11% higher in the 2000 versus 1999
six-month period, primarily reflecting a 12% increase in games revenue
combined with a 10% increase in slot revenue. The increase in games revenue
was a result of increases in the volume of play and the hold percentage.
Rooms revenue was $1.2 million or 16% higher in the 2000 versus 1999 six-
month period, primarily as a result of an increase in occupied rooms on a
non-complimentary basis. The increase in occupied rooms led to a 13%
increase in food and beverage revenue in the first half of 2000.
Tropicana Atlantic City had operating income of $41.1 million in the first
half of 2000, a 23% improvement over $33.3 million in the first half of 1999.
Consistent with the increases in casino revenue, rooms revenue and food and
beverage revenue, casino costs were 10% higher and rooms and food and
beverage costs were each 11% higher in the 2000 versus 1999 six-month period.
Operating income is after rent and depreciation and amortization expenses.
Rent expense was $1.1 million in the 2000 six-month period compared to $1.4
million in the 1999 six-month period. Depreciation and amortization was
$13.1 million in the six months ended 2000 compared to $12.6 million in the
six months ended 1999.
15
AZTAR CORPORATION AND SUBSIDIARIES
TROPICANA LAS VEGAS At Tropicana Las Vegas, total revenues were $78.9
million in the first half of 2000, a 7% increase from $73.4 million in the
first half of 1999. Casino revenue was slightly lower in the 2000 versus
1999 first half, primarily due to a 12% decrease in games revenue partially
offset by a 1% increase in slot revenue. Rooms revenue was $2.3 million or
12% higher in the 2000 versus 1999 six-month period, primarily as a result of
an increase in average daily rate combined with higher occupancy.
Contributing to the increase in total revenue was an increase in revenue from
retail shops and entertainment.
Tropicana Las Vegas had operating income of $4.9 million in the first half of
2000 compared to an operating loss of $2.2 million in the first half of 1999.
Casino costs were 12% lower in the 2000 versus 1999 six-month period,
primarily due to the decrease in games revenue. Consistent with the increase
in rooms revenue, rooms costs were 5% higher in the 2000 versus 1999 six-
month period. Operating income or loss is after rent and depreciation and
amortization expenses. Rent expense was $5.1 million in the 2000 six-month
period compared to $4.9 million in the 1999 six-month period. Depreciation
and amortization was $4.8 million in the 2000 six-month period compared to
$5.1 million in the 1999 six-month period.
RAMADA EXPRESS At Ramada Express, total revenues were $52.9 million in the
first half of 2000, up 7% from $49.4 million in the first half of 1999.
Operating income was $11.4 million in the 2000 six-month period, a 23%
improvement over $9.3 million in the 1999 six-month period. Operating income
is after rent and depreciation and amortization expenses. Rent expense was
$0.3 million in both periods. Depreciation and amortization was $2.6 million
in the six months ended 2000 compared to $2.4 million in the six months ended
1999.
CASINO AZTAR EVANSVILLE Total revenues at Casino Aztar Evansville were $55.8
million in the first half of 2000, up 4% from $53.9 million in the first half
of 1999. Operating income was $11.3 million in the 2000 six-month period, a
6% improvement over $10.7 million in the 1999 six-month period. Operating
income is after rent and depreciation and amortization expenses. Rent
expense was $1.6 million in both periods. Depreciation and amortization was
$5.1 million in the 2000 six-month period compared to $4.9 million in the
1999 six-month period.
CASINO AZTAR CARUTHERSVILLE Total revenues at Casino Aztar Caruthersville
were $12.9 million in the first half of 2000, up 9% from $11.8 million in the
first half of 1999. Casino Aztar Caruthersville had operating income of $0.3
million in the first half of 2000 compared to an operating loss of $0.3
million in the first half of 1999. Operating income or loss is after
depreciation and amortization of $1.6 million in the 2000 six-month period
compared to $1.5 million in the 1999 six-month period.
16
AZTAR CORPORATION AND SUBSIDIARIES
Quarter Ended June 29, 2000 Compared to Quarter Ended July 1, 1999
The Company's consolidated revenues in the 2000 second quarter were $221.0
million, up 7% from $206.7 million in the 1999 second quarter. Consolidated
rooms revenue was $2.4 million or 14% higher in the 2000 versus 1999 second
quarter reflecting increases at all hotel properties. Consolidated operating
income was $34.3 million in the 2000 second quarter, a 40% improvement over
$24.5 million in the 1999 second quarter. The consolidated provision for
doubtful accounts was $1.4 million or 56% lower in the 2000 versus 1999
second quarter due to favorable risk analysis, a lower level of receivables
and a lower volume of table games play at the Las Vegas Tropicana.
Consolidated interest expense was $4.4 million or 30% lower in the 2000
versus 1999 second quarter. The decrease in interest expense was primarily a
result of lower interest rates achieved through a refinancing of debt we
completed in 1999.
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
$121.0 million in the 2000 second quarter, up 9% from $111.5 million in the
1999 second quarter. Casino revenue was 9% higher in the 2000 versus 1999
second quarter, primarily reflecting a 16% increase in games revenue combined
with a 6% increase in slot revenue. The increase in games revenue was a
result of increases in the hold percentage and volume of play. The table
games hold percentage was 17.2% in the 2000 second quarter compared with
14.6% in the 1999 second quarter. Rooms revenue was $0.6 million or 13%
higher in the 2000 versus 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 $23.5 million in the 2000
second quarter, a 27% improvement over $18.5 million in the 1999 second
quarter. Consistent with the increases in casino revenue and rooms revenue,
casino costs and rooms costs were 7% and 9% higher, respectively in the 2000
versus 1999 second quarter. Operating income is after rent and depreciation
and amortization expenses. Rent expense was $0.7 million in the 2000 second
quarter compared to $0.8 million in the 1999 second quarter. Depreciation
and amortization was $6.5 million in the second quarter of 2000 compared to
$6.4 million in the second quarter of last year.
TROPICANA LAS VEGAS At Tropicana Las Vegas, total revenues were $40.9
million in the 2000 second quarter, a 9% increase from $37.6 million in the
1999 second quarter. Casino revenue was 4% lower in the 2000 versus 1999
second quarter, primarily due to a 14% decrease in games revenue. Rooms
revenue was $1.7 million or 18% higher in the 2000 versus 1999 second quarter
due to an increase in the average daily rate combined with higher occupancy.
Contributing to the increase in total revenue was an increase in revenue from
retail shops and entertainment.
17
AZTAR CORPORATION AND SUBSIDIARIES
Tropicana Las Vegas had operating income of $3.8 million in the 2000 second
quarter compared to an operating loss of $0.2 million in the 1999 second
quarter. Casino costs were 13% lower in the 2000 versus 1999 second
quarter,primarily due to the decrease in games revenue. Consistent with the
increase in rooms revenue, rooms costs were 7% higher in the 2000 versus 1999
second quarter. Operating income or loss is after rent and depreciation and
amortization expenses. Rent expense was $2.6 million in the 2000 second
quarter compared to $2.5 million in the 1999 second quarter. Depreciation
and amortization was $2.3 million in the second quarter of 2000 compared to
$2.5 million in the second quarter of 1999.
RAMADA EXPRESS At Ramada Express, total revenues were $25.2 million in the
2000 second quarter, up 4% from $24.2 million in the 1999 second quarter.
Operating income was $4.6 million in the 2000 second quarter, a 15%
improvement over $4.0 million in the 1999 second quarter. Operating income
is after rent and depreciation and amortization expenses. Rent expense was
$0.1 million in the 2000 second quarter compared to $0.2 million in the 1999
second quarter. Depreciation and amortization was $1.3 million in the second
quarter of 2000 compared to $1.2 million in the second quarter of 1999.
CASINO AZTAR EVANSVILLE Total revenues at Casino Aztar Evansville were $27.6
million in the 2000 second quarter, a slight increase from $27.5 million in
the last year's second quarter. Operating income was $5.3 million in the
2000 second quarter, a 7% decrease from $5.7 million in the 1999 second
quarter. Operating income is after rent and depreciation and amortization
expenses. Rent expense was $0.8 million in both periods. Depreciation and
amortization was $2.6 million in the 2000 second quarter compared to $2.5
million in the 1999 second quarter.
CASINO AZTAR CARUTHERSVILLE Total revenues at Casino Aztar Caruthersville
were $6.3 million in the 2000 second quarter, a 7% increase from $5.9 million
in the 1999 second quarter. Casino Aztar Caruthersville had operating income
of $0.1 million in the second quarter of 2000 compared to an operating loss
of $0.3 million in the second quarter of 1999. Operating income or loss is
after depreciation and amortization of $0.7 million in the 2000 second
quarter compared to $0.8 million in the 1999 second quarter.
Other Matters
In June 1998, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards No. 133 entitled "Accounting for Derivative
Instruments and Hedging Activities," 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 specific conditions are met, a derivative may
18
AZTAR CORPORATION AND SUBSIDIARIES
be specifically designated as a hedge of specific 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.
Aztar will adopt SFAS 133 when required. Because of our minimal use of
derivatives, we do not anticipate that the adoption of SFAS 133 will have a
significant effect on Aztar's earnings or financial position.
Private Securities Litigation Reform Act
Certain information included in Aztar's 1999 Form 10-K, this Form 10-Q and
other materials filed or to be filed by us with the Securities and Exchange
Commission (as well as information included in oral statements or other
written statements made or to be made by us including those made in Aztar's
1999 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; uses of free cash flow; stock repurchases;
debt repayments; and use of derivatives. Such forward-looking information
involves important risks and uncertainties that could significantly affect
results in the future and, accordingly, such results may differ materially
from those expressed in any forward-looking statements made by us or on our
behalf. These risks and uncertainties include, but are not limited to, the
following factors as well as other factors described from time to time in
Aztar'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; market prices of our
common stock; 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of June 29, 2000, there were no material changes to the information
incorporated by reference in Item 7A of the Company's Annual Report on Form
10-K for the fiscal year ended December 30, 1999.
19
AZTAR CORPORATION AND SUBSIDIARIES
PART - II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's annual meeting of shareholders held on May 11, 2000, one
item was voted on as follows:
1. The persons whose names are set forth below were elected as directors
to serve until the 2003 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
---------------- ---------- --------
Robert M. Haddock 40,012,594 407,222
Terence W. Thomas 40,006,581 413,235
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
The Company did not file any report on Form 8-K during the quarter
ended June 29, 2000.
20
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 4, 2000 By ROBERT M. HADDOCK
-------------------------- ---------------------------
Robert M. Haddock
Executive Vice President and
Chief Financial Officer
21
AZTAR CORPORATION AND SUBSIDIARIES
Exhibit Index
-------------
27. Financial Data Schedule.
E-1
