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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of report (Date of earliest event reported): June 1, 1998
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HARRAH'S ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-10410 62-1411755
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or File Number) Identification No.)
organization)
1023 CHERRY ROAD
MEMPHIS, TENNESSEE 38117
(Address of Principal Executive (Zip Code)
Offices)
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(901) 762-8600
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(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 1, 1998, the Registrant consummated its acquisition of
Showboat, Inc., a Nevada corporation ("Showboat"), pursuant to that certain
Agreement and Plan of Merger (the "Merger Agreement"), dated as of December 18,
1997, by and among the Registrant, HEI Acquisition Corp., a Nevada corporation
and an indirect wholly-owned subsidiary of the Registrant ("Merger Sub"), and
Showboat. The Registrant's acquisition of Showboat was effected by merging
Merger Sub with and into Showboat (the "Merger") with Showboat continuing as the
surviving corporation.
A special meeting of the stockholders of Showboat was held on April
23, 1998, at which the stockholders were asked, pursuant to a Proxy Statement
dated March 20, 1998, to consider and vote upon the Merger Agreement. The
stockholders of Showboat approved and adopted the Merger Agreement at the
meeting.
Following receipt of stockholder and other regulatory approvals,
Articles of Merger with respect to the Merger were filed with the Secretary of
State of the State of Nevada. This filing was accepted and the Merger became
effective on June 1, 1998 with the result that Showboat became an indirect
wholly-owned subsidiary of the Registrant.
Upon consummation of the Merger, the Registrant acquired Showboat for
$30.75 per issued and outstanding share of common stock, par value $1.00 per
share, in an all-cash transaction valued at approximately $512 million in the
aggregate and assumed approximately $635 million of Showboat debt. The
Registrant borrowed substantially all of the funds needed to pay such merger
consideration and other expenses related to the Merger and to assume such
indebtedness under its existing credit facility.
The Registrant's common stock is listed on the New York Stock
Exchange, Inc. and trades under the symbol "HET." The Registrant's common stock
also is listed on the Chicago Stock Exchange, the Pacific Exchange, Inc. and the
Philadelphia Stock Exchange.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
The audited financial statements of Showboat for the three previous
fiscal years, and the accountant's report related thereto, set forth in
Showboat's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, and the unaudited financial statements for the period ended March 31,
1998 set forth in Showboat's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998, are incorporated herein by reference.
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(b) Pro forma financial information.
The Unaudited Pro Forma Consolidated Condensed Statements of Income
of the Registrant for the six months ended June 30, 1998 and the year ended
December 31, 1997, giving effect to the Registrant's acquisition of Showboat
and certain related transactions, are attached as Exhibit 99.2 and
incorporated herein by reference.
(c) Exhibits
2.1 Agreement and Plan of Merger, dated as of December 18, 1997, by
and among Harrah's Entertainment, Inc., HEI Acquisition Corp. and Showboat,
Inc. (incorporated by reference from Harrah's Current Report on Form 8-K,
dated December 18, 1997).
23.1 Consent of KPMG Peat Marwick L.L.P.*
99.1 Text of Press Release, dated June 1, 1998.*
99.2 Harrah's Entertainment, Inc. Unaudited Pro Forma Consolidated
Condensed Statements of Income for the six months ended June 30, 1998 and the
year ended December 31, 1997.
* Previously filed.
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SIGNATURE
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 hereunto duly authorized.
HARRAH'S ENTERTAINMENT, INC.
Date: August 14, 1998 By: /s/ E.O. Robinson, Jr.
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Name: E.O. Robinson, Jr.
Title: Senior Vice President and
General Counsel
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Exhibit 99.2
HARRAH'S ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF INCOME
The following unaudited pro forma condensed statements of income are
based upon the historical consolidated financial statements of Harrah's
Entertainment, Inc. ("Harrah's") and Showboat, Inc. ("Showboat," and together
with Harrah's, the "Company") and should be read in conjunction with their
respective consolidated financial statements and related notes. Harrah's
acquired Showboat in a transaction which was consummated on June 1, 1998.
The acquisition is being accounted for as a purchase. The Company completed
tender offers and consent solicitations and retired a portion of the debt
assumed in the acquisition on June 15, 1998.
As further described in the accompanying footnotes, the unaudited pro
forma condensed statements of income for the six months ended June 30, 1998,
and the year ended December 31, 1997, give effect to (i) the acquisition by
Harrah's of Showboat applying the purchase method of accounting, (ii) the
refinancing of certain of Showboat's existing indebtedness, (iii) certain
estimated operational benefits attributable to the merger, (iv)
de-consolidation of the Showboat East Chicago property, in which the Company
holds a 55% non-controlling interest and (v) the presentation of the Showboat
Las Vegas property as an asset held for sale. The pro forma results assume
the transactions were consummated on the first day of the period presented.
The unaudited pro forma condensed statements of income have been
prepared based upon currently available information and assumptions deemed
appropriate by the Company's management. This pro forma information may not
be indicative of what actual results would have been, nor does such data
purport to represent the Company's operating results for future periods.
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HARRAH'S ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
(In millions, except per Harrah's Showboat Pro Forma Harrah's
share amounts) Historical Historical Adjustments As Adjusted
(Note 1) (Note 2) (Note 3)
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Casino $730.4 $237.6 $(92.7) (a) $875.3
Food and beverage 104.3 25.9 (10.4) (a) 119.8
Rooms 69.8 9.7 (2.5) (a) 77.0
Management fees 32.3 4.4 (0.5) (a) 36.2
Other 37.1 4.1 (1.8) (a) 39.4
Less: casino promotional allowances (80.8) (17.4) 3.0 (a) (95.2)
-------- -------- --------- --------
Total revenues 893.1 264.3 (104.9) 1,052.5
-------- -------- --------- --------
Operating expenses
Direct
Casino 395.6 100.6 (42.4) (a) 453.8
Food and beverage 53.9 27.6 (11.7) (a) 69.8
Rooms 20.4 6.1 (1.6) (a) 24.9
Depreciation of buildings, riverboats
and equipment 61.1 19.0 (7.7) (a) 72.4
Equity in (income) losses of nonconsolidated
subsidiaries 6.3 1.2 2.9 (a) 10.4
Project opening costs 6.0 - - 6.0
Other 219.9 108.1 (38.8) (a) 269.4
6.2 (b)
(26.0) (c)
-------- -------- --------- --------
Total operating expenses 763.2 262.6 (119.1) 906.7
-------- -------- --------- --------
Income from operations 129.9 1.7 14.2 145.8
Interest expense, net of interest capitalized (44.9) (29.7) 9.1 (a) (75.1)
5.0 (d)
(14.6) (e)
Other income, including interest income 18.7 1.8 (0.1) (a) 20.4
-------- -------- --------- --------
Income before income taxes and minority interests 103.7 (26.2) 13.6 91.1
Provision for income taxes (38.0) 4.0 (7.5) (g) (41.5)
Minority interests (3.8) - - (3.8)
-------- -------- --------- --------
Income from continuing operations $61.9 $(22.2) $6.1 $45.8
-------- -------- --------- --------
-------- -------- --------- --------
Income from continuing operations per share
Basic $0.62 $0.46
-------- --------
-------- --------
Diluted $0.61 $0.45
-------- --------
-------- --------
Average common shares outstanding 100.2 100.2
-------- --------
-------- --------
Average common and common equivalent
shares outstanding 101.5 101.5
-------- --------
-------- --------
</TABLE>
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HARRAH'S ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
(In millions, except per Harrah's Showboat Pro Forma Harrah's
share amounts) Historical Historical Adjustments As Adjusted
(Note 1) (Note 2) (Note 3)
---------- ---------- ----------- -----------
<C> <C> <C> <C>
Revenues
Casino $1,338.0 $497.1 $(152.8) (a) $1,682.3
Food and beverage 196.8 62.7 (20.9) (a) 238.6
Rooms 128.4 25.4 (6.1) (a) 147.7
Management fees 24.6 5.7 - (a) 30.3
Other 78.9 10.7 (5.5) (a) 84.1
Less: casino promotional allowances (147.5) (44.8) 6.4 (a) (185.9)
-------- -------- -------- --------
Total revenues 1,619.2 556.8 (178.9) 1,997.1
-------- -------- -------- --------
Operating expenses
Direct
Casino 685.9 252.8 (79.0) (a) 859.7
Food and beverage 103.6 37.4 (18.4) (a) 122.6
Rooms 39.7 6.6 (3.7) (a) 42.6
Depreciation of buildings, riverboats
and equipment 103.7 40.8 (14.3) (a) 130.2
Equity in (income) losses of nonconsolidated
subsidiaries 11.1 3.5 23.9 (a) 38.5
Project opening costs 17.6 9.6 (9.6) (a) 17.6
Other 444.1 180.0 (65.2) (a) 552.2
15.3 (b)
(22.0) (c)
-------- -------- -------- --------
Total operating expenses 1,405.7 530.7 (173.0) 1,763.4
-------- -------- -------- --------
Income from operations 213.5 26.1 (5.9) 233.7
Interest expense, net of interest capitalized (79.1) (49.4) 16.6 (a) (134.5)
10.9 (d)
(33.5) (e)
Other income, including interest income 49.2 5.1 (1.0) (a) 53.3
-------- -------- -------- --------
Income before income taxes and
minority interests 183.6 (18.2) (12.9) 152.5
Provision for income taxes (68.7) 2.3 (1.9) (g) (68.3)
Minority interests (7.4) (2.6) 2.6 (a) (7.4)
-------- -------- -------- --------
Income from continuing operations $107.5 $(18.5) $(12.2) $76.8
-------- -------- -------- --------
-------- -------- -------- --------
Income from continuing operations per share
Basic $1.07 $0.76
-------- --------
-------- --------
Diluted $1.06 $0.76
-------- --------
-------- --------
Average common shares outstanding 100.6 100.6
-------- --------
-------- --------
Average common and common equivalent
shares outstanding 101.3 101.3
-------- --------
-------- --------
</TABLE>
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HARRAH'S ENTERTAINMENT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENTS OF INCOME
Note 1 - Historical financial information for Harrah's for the six months
ended June 30, 1998, and for the year ended December 31, 1997, has been
derived from the Harrah's historical financial statements. Harrah's
financial statements for the six month period ended June 30, 1998, include
Showboat's operations after its June 1, 1998, acquisition by Harrah's.
Note 2 - The Showboat historical financial information for the year ended
December 31, 1997, has been derived from Showboat's historical financial
information. Showboat's historical financial results reflected on the
Unaudited Pro Forma Consolidated Condensed Statement of Income for the Six
Months Ended June 30, 1998, include only the five months of Showboat's
operations prior to its June 1, 1998, acquisition by Harrah's.
Note 3 - Following are brief descriptions of the pro forma adjustments.
(a) Adjusts the historical statements of income to reflect the operating
results of Showboat East Chicago as being accounted for under the equity
method (rather than consolidated) and to remove the operating results of
Showboat Las Vegas. The Company owns a 55% non-controlling interest in the
partnership which owns and operates Showboat East Chicago. Showboat Las
Vegas is being carried by the Company as an asset held for sale, and as such,
is carried on the Company's balance sheet at its estimated realizable value,
net of estimated selling expenses and carrying costs through the expected
date of sale. The net impact on income from continuing operations of the pro
forma adjustments related to East Chicago is zero. The net impact of the
adjustments related to Showboat Las Vegas is to increase income from
continuing operations by $2.1 million for the six months ended June 30, 1998,
and $3.5 million for the year ended December 31, 1998.
(b) Reflects estimated expense for the amortization of the excess of the
purchase price paid over the net book value of the assets acquired. The
Company is currently in process of allocating the purchase price among the
assets acquired and the liabilities assumed based on fair market values, as
determined by appraisals, discounted cash flows, quoted market prices and
estimates made by management. For purposes of these pro forma statements, it
is assumed that the excess purchase price will be amortized over an average
life of 30 years.
(c) Reflects adjustments for transaction costs expensed by Showboat in
pre-transaction periods and estimated administrative costs savings to be
realized as a result of merger efficiencies.
(d) Reflects reduction in interest expense for the impact of the Company's
retirement of $218.6 million face amount of Showboat's 9 1/4% First Mortgage
Bonds due 2008 and $117.9 million face amount of Showboat's Senior
Subordinated Notes due 2009 using funds drawn under Harrah's revolving credit
facility. See Note (f).
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(e) Reflects additional interest expense, including amortization of related
deferred finance charges, arising from the incremental borrowings incurred by
the Company to fund the purchase of Showboat's outstanding common stock. See
Note (f).
(f) The funds required to fund the retirement of a portion of Showboat's
outstanding debt (see Note (d)) and the purchase of Showboat's outstanding
common stock (see Note (e)) were provided by Harrah's revolving credit
facility and the pro forma affects on interest expense have been computed at
an average floating rate of 6.26% for the six months ended June 30, 1998, and
6.29% for the year ended December 31, 1997. Each 1/8 of a percent change in
the floating rate on these borrowings would result in a change in interest
expense of $1.1 million for the six months ended June 30, 1998, and $0.6
million for the year ended December 31, 1997.
(g) Records the estimated tax effect of the pro forma adjustments, with the
exception of the amortization of the unallocated purchase price, which is
assumed to be nondeductible for tax purposes.
