SHOWBOAT, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements.
Consolidated Balance Sheets -
March 31, 1994 and December 31, 1993 1-2
Consolidated Statements of Income
For the three months ended
March 31, 1994 and 1993 3-4
Consolidated Statements of Shareholders'
Equity - For the three months ended
March 31, 1994 and year ended
December 31, 1993 5
Consolidated Statements of Cash Flows -
For the three months ended
March 31, 1994 and 1993 6-7
Notes to Consolidated Financial
Statements 8-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. 11-17
PART II
OTHER INFORMATION
ITEMS 1 - 6 18
SIGNATURES 19
Item 1. Financial Statements.
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
MARCH 31, 1994 AND DECEMBER 31, 1993
MARCH 31, DECEMBER 31,
ASSETS 1994 1993
-------- ----------- -----------
(In thousands)
Current assets:
Cash and cash equivalents $107,458 $122,787
Receivables, net 6,086 5,913
Income taxes receivable 435 -
Inventories 2,213 2,359
Prepaid expenses 4,114 4,044
Current deferred income taxes 5,847 4,865
----------- -----------
Total current assets 126,153 139,968
----------- -----------
Property and equipment 462,717 443,347
Less accumulated depreciation
and amortization 150,795 145,527
----------- -----------
311,922 297,820
----------- -----------
Other assets, at cost:
Deposits and other assets 8,167 7,892
Investment in Showboat Star Partnership 29,090 17,750
Debt issuance costs, net of accumulated
amortization of $450,000 at March 31,
1994 and $323,000 at December 31,
1993 7,143 7,270
----------- -----------
44,400 32,912
----------- -----------
$482,475 $470,700
=========== ===========
See accompanying notes to consolidated financial statements.
-1- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
MARCH 31, 1994 AND DECEMBER 31, 1993
(continued)
MARCH 31, DECEMBER 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993
----------------------------------- ----------- -----------
(In thousands)
Current liabilities:
Current maturities of long-term debt $2,549 $3,574
Accounts payable 16,497 14,173
Income taxes payable - 1,752
Dividends payable 375 375
Accrued liabilities 30,787 23,664
----------- -----------
Total current liabilities 50,208 43,538
----------- -----------
Long-term debt 277,021 277,043
----------- -----------
Deferred income taxes 16,685 14,961
----------- -----------
Shareholders' equity:
Common stock, $1 par value, 20,000,000
shares authorized, 15,794,578 shares
issued at March 31, 1994 and
December 31, 1993 15,795 15,795
Additional paid-in capital 71,437 71,162
Retained earnings 57,693 54,628
----------- -----------
144,925 141,585
Less: Cost of common stock in treasury,
809,383 shares at March 31,
1994 and 814,483 shares at
December 31, 1993 (6,328) (6,370)
Unearned compensation for
restricted stock (36) (57)
----------- -----------
Total shareholders' equity 138,561 135,158
----------- -----------
$482,475 $470,700
=========== ===========
See accompanying notes to consolidated financial statements.
-2-
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(In thousands except share and per share data)
1994 1993
----------- -----------
Revenues:
Casino $76,897 $75,272
Food and beverage 11,202 10,972
Rooms 4,225 3,834
Sports and special events 1,106 1,159
Management fees 948 -
Other 1,398 1,345
----------- -----------
95,776 92,582
Less complimentaries 6,997 7,086
----------- -----------
Net revenues 88,779 85,496
----------- -----------
Costs and expenses:
Casino 31,005 31,906
Food and beverage 13,567 12,689
Rooms 3,253 3,049
Sports and special events 878 869
General and administrative 23,333 21,898
Selling, advertising and promotion 2,534 2,260
Depreciation and amortization 6,361 5,140
----------- -----------
80,931 77,811
----------- -----------
Income from operations from consolidated
subsidiaries 7,848 7,685
Equity in income of unconsolidated
affiliate 3,240 -
----------- -----------
Income from operations 11,088 7,685
----------- -----------
-3- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(In thousands except share and per share data)
(continued)
1994 1993
----------- -----------
Income from operations $11,088 $7,685
----------- -----------
Other (income) expense:
Interest income (803) (401)
Interest expense 6,651 5,089
Interest capitalized (449) (189)
----------- -----------
5,399 4,499
----------- -----------
Income before income tax expense and
cumulative effect adjustment 5,689 3,186
Income tax expense 2,249 1,265
----------- -----------
Income before cumulative effect adjustment 3,440 1,921
Cumulative effect of change in method of
accounting for income taxes - 556
----------- -----------
Net income $3,440 $2,477
=========== ===========
Weighted average shares outstanding 15,180,008 15,141,493
Income per common and equivalent share:
Income before cumulative effect adjustment $0.23 $0.13
Cumulative effect of change in method of
accounting for income taxes - $0.03
----------- -----------
Net income $0.23 $0.16
=========== ===========
See accompanying notes to consolidated financial statements.
-4-
<TABLE>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1994
AND YEAR ENDED DECEMBER 31, 1993
<CAPTION>
Unearned
Additional compensation
Common paid-in Retained Treasury for restricted
stock capital earnings stock stock Total
--------- ----------- ---------- ------------ ----------- ------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 $15,795 $69,374 $48,778 ($7,761) ($168) $126,018
Net income - - 7,341 - - 7,341
Cash dividends ($.10 per share) - - (1,491) - - (1,491)
Share transactions under
stock plans - 1,788 - 1,391 - 3,179
Amortization of unearned
compensation - - - - 111 111
--------- ----------- ---------- ------------ ------------ -----------
Balance, December 31, 1993 15,795 71,162 54,628 (6,370) (57) 135,158
Net income - - 3,440 - - 3,440
Cash dividends ($.025 per share) - - (375) - - (375)
Share transactions under
stock plans - 275 - 42 9 326
Amortization of unearned
compensation - - - - 12 12
--------- ----------- ---------- ------------ ------------ -----------
Balance, March 31, 1994 $15,795 $71,437 $57,693 ($6,328) ($36) $138,561
========= =========== ========== ============ ============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
-5-
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
1994 1993
----------- -----------
(In thousands)
Cash flows from operating activities:
Net income $3,440 $2,477
Adjustments to reconcile net income to
net cash provided by operating activities:
Allowance for doubtful accounts 58 513
Depreciation and amortization 6,361 5,140
Amortization of debt issue costs 127 134
Provision for deferred income taxes 742 141
Provision for loss on Casino
Reinvestment Development Authority
obligation 255 249
Amortization of unearned compensation 12 30
Equity in income of unconsolidated
affiliate (3,240) -
(Increase) decrease in receivables, net (231) 43
(Increase) decrease in inventories and
prepaid expenses 76 (339)
Decrease in deposits and
other assets 235 52
Increase in accounts payable 1,556 1,236
(Decrease) in income taxes payable (1,996) (1,531)
Increase (decrease) in accrued
liabilities 7,123 (5,038)
Other (66) 346
----------- -----------
Net cash provided by
operating activities 14,452 3,453
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (19,693) (17,286)
Proceeds from sale of equipment 47 29
Deposit for Casino Reinvestment
Development Authority obligation (792) (717)
(Increase) in deposits and other assets - (67)
Investment in Showboat Star Partnership (9,000) -
Distribution of Partnership earnings 900 -
----------- -----------
Net cash used in
investing activities (28,538) (18,041)
----------- -----------
See accompanying notes to consolidated financial statements.
-6- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(continued)
1994 1993
----------- -----------
(In thousands)
Cash flows from financing activities:
Principal payments of long-term debt and
capital lease obligations ($1,047) ($51,080)
Proceeds from note payable - 1,100
Payment of dividends (375) (284)
Issuance of common stock 179 18
----------- -----------
Net cash used in financing
activities (1,243) (50,246)
----------- -----------
Net decrease in cash and
cash equivalents (15,329) (64,834)
Cash and cash equivalents at
beginning of period 122,787 99,601
----------- -----------
Cash and cash equivalents at end of period $107,458 $34,767
=========== ===========
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest $164 $10,275
Income taxes 3,503 2,100
Supplemental schedule of noncash investing
and financing activities:
Increase in property and equipment
acquisitions included in construction
contracts and retentions payable 795 483
See accompanying notes to consolidated financial statements.
-7-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The consolidated financial statements of Showboat, Inc. and
Subsidiaries (the Company) include the accounts of Showboat, Inc.
(SBO) and its wholly-owned subsidiaries, Showboat Development
Company (SDC), Showboat Operating Company (SOC) and Ocean
Showboat, Inc. (OSI). They also include SDC's wholly-owned
subsidiaries, Lake Pontchartrain Showboat, Inc. (LPSI) and
Showboat Louisiana, Inc. (SLI), and OSI's wholly-owned
subsidiaries Atlantic City Showboat, Inc. (ACSI) and Ocean
Showboat Finance Corporation (OSFC). Showboat, Inc. and its
subsidiaries own and operate hotel casinos in Las Vegas, Nevada
(Las Vegas Showboat) and Atlantic City, New Jersey (Atlantic City
Showboat) and owns an equity interest in and manages a riverboat
casino on Lake Pontchartrain in New Orleans, Louisiana (Star
Casino).
On March 1, 1994, the Company purchased an additional 20% equity
interest, increasing its interest to 50%, in Showboat Star
Partnership from its partner for $9.0 million. The Company's
equity in the income of Showboat Star Partnership is included in
the Consolidated Statement of Income as equity in income of
unconsolidated affiliate.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. These condensed financial statements should be read in
conjunction with the financial statements and notes thereto
included in the Company's December 31, 1993 Annual Report to
Shareholders and Form 10-K.
The accompanying unaudited consolidated financial statements
contain all adjustments which are, in the opinion of management,
necessary for a fair statement of the results of the interim
periods. The results of operations for the interim periods are
not indicative of results of operations for an entire year.
Reclassifications
Certain prior period balances have been reclassified to conform
to the current period's presentation.
-8- (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2.LONG-TERM DEBT
Long-term debt consists of the following:
March 31, December 31,
1994 1993
--------- -----------
(In thousands)
9 1/4% First Mortgage Bonds
due 2008 $275,000 $275,000
Capitalized lease obligations 4,570 5,617
--------- -----------
279,570 280,617
Less: Current maturities 2,549 3,574
--------- -----------
$277,021 $277,043
========= ===========
On March 24, 1994 the Company secured a line of credit for the
US dollar equivalent of $8.4 million Australian dollars
(approximately $6.0 million) in compliance with the New South Wales
Casino Control Authority's licensing requirements. This line of
credit is secured by a $6.3 million certificate of deposit.
Interest on this line of credit is payable at the bank's prime rate
plus 2.0%. This line of credit expires in December 1994. At March
31, 1994 all funds were available under this line of credit.
At March 31, 1994, ACSI had available an unsecured line of
credit for general working capital purposes totaling $15.0 million.
Interest is payable monthly at the bank's prime rate plus .5%. At
March 31, 1994, the bank's prime rate was 6.75%. The line of credit
is guarantied by OSI and expires in August 1994. Borrowings on this
line of credit may not be used for the payment of management fees
or to fund ventures in other jurisdictions. At March 31, 1994,
ACSI had all the funds under this line of credit available for use.
-9- (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
3.Subsequent Events
On May 6, 1994 the New South Wales Casino Control Authority
announced that Sydney Harbour Casino Pty Limited, a company in
which Showboat, Inc. is a principal founding shareholder, was the
Preferred Applicant to develop a casino in Sydney, Australia. As
the Preferred Applicant, Sydney Harbour Casino will work with the
Authority during the next six months to obtain all the necessary
planning agency approvals. Subsequently the Authority will enter
into a 99-year lease for the site of the casino in New South Wales
and issue an exclusive casino license for 12 years to cover the
State of New South Wales. The Company will have a 27% equity
interest in the casino at a cost of approximately $100.0 million.
The Company anticipates making its investment in September or
October 1994.
-10-
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL
The consolidated financial statements of Showboat, Inc. and
Subsidiaries (the Company) include the accounts of Showboat, Inc.
(SBO) and its wholly-owned subsidiaries, Showboat Development
Company (SDC), Showboat Operating Company (SOC) and Ocean Showboat,
Inc. (OSI). They also include SDC's wholly-owned subsidiaries,
Lake Pontchartrain Showboat, Inc. (LPSI) and Showboat Louisiana,
Inc. (SLI), and OSI's wholly-owned subsidiaries Atlantic
City Showboat, Inc. (ACSI) and Ocean Showboat Finance Corporation
(OSFC). Showboat, Inc. and its subsidiaries own and operate hotel
casinos in Las Vegas, Nevada (Las Vegas Showboat) and Atlantic
City, New Jersey (Atlantic City Showboat) and owns an equity
interest in and manages a riverboat casino on Lake Pontchartrain in
New Orleans, Louisiana (Star Casino).
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Quarter Ended March 31, 1994 Compared to
Quarter Ended March 31, 1993
Revenues
Net revenues for the Company increased to $88.8 million in the
quarter ended March 31, 1994 compared to $85.5 million in the same
period in 1993, an increase of $3.3 million or 3.8%. Casino
revenues increased $1.6 million or 2.2% to $76.9 million in the
quarter ended March 31, 1994 from $75.3 million in 1993. Nongaming
revenues, which consist principally of food, beverage, room and
bowling revenues and management fees, were $18.9 million in the
first quarter of 1994, compared to $17.3 million in 1993.
The Atlantic City Showboat generated $66.3 million of net revenues
in the quarter ended March 31, 1994 compared to $64.8 million in
the same period in the prior year, an increase of $1.5 million or
2.3%. Casino revenues were $60.5 million in the three months ended
March 31, 1994 compared to $59.7 million for the same period in the
prior year, an increase of $.8 million or 1.4%. The increase in
casino revenues was due primarily to poker revenue of $.7 million
and simulcasting revenue of $.5 million recognized for the three
months ended March 31, 1994. The poker and simulcasting facilities
were not open in the same period in the prior year. This increase
was offset by a $.6 million or 1.3% decrease in slot revenues to
$44.1 million for the three months ended March 31, 1994 compared
to $44.7 million for the same period in the prior year. During the
first quarter of 1993, slot revenues included the effect of a $.8
-11- (continued)
million reversal for a progressive slot accrual. The decrease in
slot revenue was also affected by the harsh winter weather
experienced during the first quarter of 1994. The inclement
weather was a factor in the results for the total Atlantic City
market as gross slot revenues declined 3.7% in that market.
At the Las Vegas Showboat, net revenues increased to $21.6
million in the quarter ended March 31, 1994 from $20.7 million in
the same period in 1993, an increase of $.9 million or 4.2%. The
greatest improvement in revenues was realized in the casino where
revenues increased to $16.4 million in the first quarter of 1994
from $15.6 million in the first quarter of 1993, an increase of $.8
million or 5.1%. Slot revenues accounted for 81.7% of casino
revenues in the first three months of 1994 and 83.3% for the same
period in 1993. This is consistent with the increased customer
volume as a result of certain marketing activities. Improvements
in nongaming revenues were due to increased hotel occupancy
resulting from increased effectiveness of certain marketing
activities.
LPSI generated $.9 million in management fee revenues in the first
quarter of 1994. LPSI receives management fees of 5.0% of Star
Casino's revenues after gaming taxes of 18.5% and boarding fees
totaling $5.00 per passenger boarding the vessel. Star Casino,
which began operation in November 1993, generated net revenues of
$27.5 million in the first quarter of 1994 consisting primarily of
casino revenues of $27.1 million. During the first quarter of 1994
the total number of passengers boarding the vessel was 485,189 with
an average gaming win per passenger of $55.00.
Income from operations
The Company's income from operations increased to $11.1 million in
the quarter ended March 31, 1994 from $7.7 million in the same
period in 1993, an increase of $3.4 million or 44.3% primarily as a
result of improved operating results at the Atlantic City Showboat
and the opening of the Star Casino in late 1993.
The Company incurred approximately $2.3 million in expenses
relating to the pursuit of expansion opportunities in jurisdictions
outside of Nevada and New Jersey in the first three months of 1994
compared to $.5 million in the first quarter of 1993.
Atlantic City Showboat's income from operations, before management
fees, increased to $7.0 million in the first quarter of 1994
compared to $5.6 million for the same period in 1993, an increase
of $1.4 million or 25.3%, primarily as a result of the increase in
net revenues. Total operating expenses at the Atlantic City
Showboat remained unchanged from the prior year at $59.2 million.
-12-
(continued)
Increased depreciation expense resulting from recent facility
expansion was offset by a $1.1 million or a 15% decrease
in promotional coin incentives offered in conjunction with slot
marketing programs and by a $1.2 million or 11% decrease in general
and administrative costs.
Income from operations at the Las Vegas Showboat, which includes
parent company expenses, declined to $2.4 million in the first
quarter of 1994 from $2.6 million in the quarter ended March 31,
1993, a decrease of $.2 million or 9.5%. This decrease is
primarily due to increased parent company expenses, increased food
costs and increases in payroll and benefits due to the increased
customer volume.
Until March 1, 1994 SLI owned 30% of Showboat Star Partnership.
On March 1, 1994 SLI acquired an additional 20% equity interest in
Showboat Star Partnership giving SLI a total equity interest of 50%.
SLI's equity in the earnings of Showboat Star Partnership for the
quarter ending March 31, 1994 was $3.2 million. Showboat Star
Partnership had net income of $9.1 million on net revenues of $27.5
million.
LPSI, which manages Showboat Star Partnership, had income from
operations for the quarter ended March 31, 1994 of $.8 million.
Operating expenses for LPSI for the first quarter of 1994 were $.1
million.
Other (income) expense
Net interest expense increased to $5.4 million in the first
quarter of 1994 up from $4.5 million in the same period in 1993, an
increase of $.9 million or 20.0%. This increase is primarily the
result of an increase in interest expense of $1.5 million as a
result of an increase in long-term debt. The increase in interest
expense was offset by a $.4 million increase in interest income
as a result of increased invested cash and a $.3 million increase
in capitalized interest costs associated with the Company's
Atlantic City expansion.
The Company recognized net income of $3.4 million for the quarter
ended March 31, 1994 or $.23 per share, compared to a net income
before the cumulative effect of the change in method of accounting
for income taxes of $1.9 million or $.13 per share in the quarter
ended March 31, 1993. Net income for the quarter ended March 31,
1993 was $2.5 million or $.16 per share.
-13- (continued)
MATERIAL CHANGES IN FINANCIAL CONDITION
As of March 31, 1994 the Company held cash and cash equivalents
of $107.5 million compared to $122.8 million at December 31, 1993.
On March 1, 1994 the Company purchased from a partner an additional
20% equity interest in Showboat Star Partnership for $9.0 million.
The Company has expended approximately $2.3 million in the quarter
ended March 31, 1994 in its investigation of expansion
opportunities in new jurisdictions.
During the quarter ended March 31, 1994, the Company expended
approximately $19.7 million on capital improvements at its Las
Vegas and Atlantic City facilities which were funded from
operations. Costs associatied with the expansion project in
Atlantic City were $19.5 million at March 31, 1994. Capital
expenditures relating to the expansion project in Atlantic City are
expected to be $52.2 million in 1994 and $2.3 million in 1995.
At March 31, 1994, ACSI had available an unsecured line of
credit for general working capital purposes totaling $15.0
million. Interest is payable monthly at the bank's prime rate plus
.5%. The bank's prime rate at March 31, 1994 was 6.75%. The line
of credit is guarantied by OSI and expires in August 1994.
Borrowings on this line of credit may not be used for the payment
of management fees or to fund ventures in other jurisdictions. At
March 31, 1994, ACSI had all the funds under this line of credit
available for use.
On March 24, 1994 the Company secured a line of credit for the US
dollar equivalent of $8.4 million Australian dollars (approximately
$6.0 million) in compliance with the New South Wales Casino Control
Authority's licensing requirements. This line of credit is secured
by a $6.3 million certificate of deposit. Interest on this line of
credit is payable at the bank's prime rate plus 2.0%. This line of
credit expires in December 1994. At March 31, 1994 all funds were
available under this line of credit.
On May 18, 1993, the Company issued $275,000,000 of 9 1/4%
First Mortgage Bonds due 2008 (First Mortgage Bonds). The
proceeds from the sale of the First Mortgage Bonds were
$268,469,000, net of underwriting discounts and commissions.
Proceeds from the sale of the First Mortgage Bonds were used to
redeem all of the outstanding 11 3/8% Mortgage-Backed Bonds Due
2002 at 105.7% of the principal amount plus accrued interest. The
remaining proceeds were reserved by the Company to benefit
existing facilities and to expand into new facilities or gaming
jurisdictions.
-14- (continued)
The First Mortgage Bonds are unconditionally guarantied by
OSI, ACSI and SOC. Interest on the First Mortgage Bonds is
payable semi-annually on May 1 and November 1 of each year
commencing November 1, 1993. The First Mortgage Bonds are not
redeemable prior to May 1, 2000. Thereafter, the First Mortgage
Bonds will be redeemable, in whole or in part, at redemption
prices specified in the Indenture for the First Mortgage Bonds
(Indenture). The First Mortgage Bonds are senior secured
obligations of the Company and rank senior in right of payment to
all existing and future subordinated indebtedness of the Company
and pari passu with the Company's senior indebtedness. The First
Mortgage Bonds are secured by a deed of trust representing a first
lien on the Las Vegas hotel casino (other than certain assets), by
a pledge of all outstanding shares of capital stock of OSI, an
intercompany note by ACSI in favor of SBO and a pledge of certain
intellectual property rights of the Company. OSI's obligation
under its guaranty is secured by a pledge of all outstanding shares
of capital stock of ACSI. ACSI's obligation under its guaranty is
secured by a leasehold mortgage representing a first lien on the
Atlantic City hotel casino (other than certain assets). SOC's
guaranty is secured by a pledge of certain assets related to the
Las Vegas hotel casino.
The Indenture places significant restrictions on SBO and its
subsidiaries, including restrictions on making loans and advances
by SBO to subsidiaries which are Non-Recourse Subsidiaries or
subsidiaries in which SBO owns less than 50% of the equity. All
capitalized terms not otherwise defined in this paragraph have the
meanings assigned to the Indenture. The Indenture also places
significant restrictions on the incurrence of additional
Indebtedness by SBO and its subsidiaries, the creation of
additional Liens on the Collateral securing the First Mortgage
Bonds, transactions with Affiliates and the investment of SBO and
its subsidiaries in certain Investments. In addition, the terms
of the Indenture prohibit SBO and its subsidiaries from making a
Restricted Payment unless, at the time of such Restricted
Payment: (i) no Default or Event of Default has occurred or would
occur as a consequence of such restricted payment; (ii) SBO, at
the time of such Restricted Payment and after giving proforma
effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, would have been
permitted to incur at least $1.00 of additional Indebtedness; and,
(iii) such Restricted Payment, together with the aggregate of all
other Restricted Payments by SBO and its subsidiaries is less than
the sum of (x) 50% of the Consolidated Net Income of SBO for the
period (taken as one accounting period) from April 1, 1993 to the
end of SBO's most recently ended fiscal quarter for which internal
financial statements are available, plus (y) 100% of the aggregate
net cash proceeds received by SBO from the issuance or sale of
-15- (continued)
Equity Interests of SBO since the Issue Date, plus (z) Excess
Non-Recourse Subsidiary Cash Proceeds received after the Issue
Date. The term Restricted Payment does not include, among other
things, the payment of any dividend if, at the time of declaration
of such dividend, the dividend would have complied with the
provisions of the Indenture; the redemption, repurchase,
retirement, or other acquisition of any Equity Interest of SBO out
of proceeds of, the substantially concurrent sale of other Equity
Interests of SBO; Investments by SBO in an amount not to exceed
$75,000,000 in the aggregate in any Non-Recourse Subsidiary
engaged in a Gaming Related Business; Investments by SBO in any
Non-Recourse Subsidiary engaged in a Gaming Related Business in an
amount not to exceed in the aggregate 100% of all cash received by
SBO from any Non-Recourse Subsidiary up to $75,000,000 in the
aggregate and thereafter, 50% of all cash received by SBO from any
Non-Recourse Subsidiary other than cash required to be repaid or
returned to such Non-Recourse Subsidiary provided that the
aggregate amount of Investments pursuant thereto does not exceed
$125,000,000 in the aggregate; and the purchase, redemption,
defeasance of any pari passu Indebtedness with a substantially
concurrent purchase, redemption, defeasance, or retirement of the
First Mortgage Bonds (on a pro rata basis).
The Company believes that it has sufficient capital resources to
cover the cash requirements of its existing operations. The
ability of the Company to satisfy its cash requirements, however,
will be dependent upon the future performance of its casino hotels
which will continue to be influenced by prevailing economic
conditions and financial, business and other factors, certain of
which are beyond the control of the Company.
The Company is involved, among others, in the following expansion
opportunities:
1. On May 6, 1994 the New South Wales Casino Control Authority
announced that Sydney Harbour Casino Pty Limited, a company in
which Showboat, Inc. is a principal founding shareholder, was the
Preferred Applicant to develop a casino in Sydney, Australia. As
the Preferred Applicant, Sydney Harbour Casino will work with the
Authority during the next six months to obtain all the necessary
planning agency approvals. Subsequently the Authority will enter
into a 99-year lease for the site of the casino in New South Wales
and issue an exclusive casino license for 12 years to cover the
State of New South Wales. The Company will have a 27% equity
interest in the casino at a cost of approximately $100.0 million.
The Company anticipates making its investment in September or
October 1994.
-16- (continued)
2. The Company is a member of a partnership which is the only
applicant for the gaming berth in East Chicago, Indiana. The
Company anticipates that it will contribute approximately $30.0
million to the East Chicago partnership and obtain financing of
approximately $90.0 million for the construction of a gaming vessel
and related land site improvements. The Partnership has not yet
determined the timing of the contribution or financing for the East
Chicago gaming opportunity.
3. The Company has entered into a tribal management and
construction agreement with the St. Regis Mohawk Tribe for a tribal
casino on the St. Regis Mohawk reservation. The Company will
initially loan up to $35.0 million for renovating and outfitting an
existing building on the St. Regis Mohawk reservation for the
conduct of a gaming business and for working capital purposes.
This agreement must be approved by the National Indian Gaming
Commission (NIGC). No funds shall be advanced for renovation of an
existing building until the project has obtained the approval of
NIGC and other environmental approvals.
Under the terms of the Indenture the Company can finance its
investment in announced opportunities with equity or a combination
of debt and equity financing. The Company is currently exploring
equity and debt financing options in order to timely meet all of its
obligations in connection with these announced expansion
opportunities. There can be no assurance that funds will be
available on acceptable terms to the Company to finance the
development of all announced or other gaming opportunities.
-17-
SHOWBOAT, INC. AND SUBSIDIARIES
PART II, OTHER INFORMATION
ITEM 1. Legal Proceedings.
Not Applicable
ITEM 2. Changes in Securities.
Not applicable
ITEM 3. Defaults Upon Senior Securities.
Not applicable
ITEM 4. Submission of Matters to a Vote of Security
Holders.
None
ITEM 5. Other Information.
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
None
-18-
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.
SHOWBOAT, INC
Registrant
Date: May 13, 1994 s/ J. K. Houssels
------------------ -------------------------------------
J. K. HOUSSELS, CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Date: May 13, 1994 s/ Leann Schneider
------------------ -----------------------------------------
LEANN SCHNEIDER, VICE PRESIDENT - FINANCE
AND CHIEF FINANCIAL OFFICER
-19-
