SHOWBOAT, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements.
Consolidated Balance Sheets -
June 30, 1994 and December 31, 1993 1-2
Consolidated Statements of Income (Loss)
For the six months ended
June 30, 1994 and 1993 3-4
Consolidated Statements of Income (Loss)
For the three months ended
June 30, 1994 and 1993 5-6
Consolidated Statements of Shareholders'
Equity - For the six months ended
June 30, 1994 and year ended
December 31, 1993 7
Consolidated Statements of Cash Flows -
For the six months ended
June 30, 1994 and 1993 8-9
Notes to Consolidated Financial
Statements 10-13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. 14-23
PART II
OTHER INFORMATION
ITEMS 1 - 6 24-27
SIGNATURES 28
Item 1. Financial Statements.
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
JUNE 30, 1994 AND DECEMBER 31, 1993
JUNE 30, DECEMBER 31,
ASSETS 1994 1993
-------- ----------- -----------
(In thousands)
Current assets:
Cash and cash equivalents $75,307 $122,787
Receivables, net 8,283 5,913
Income taxes receivable 1,515 -
Inventories 2,308 2,359
Prepaid expenses 5,902 4,044
Current deferred income taxes 6,737 4,865
----------- -----------
Total current assets 100,052 139,968
----------- -----------
Property and equipment 487,618 443,347
Less accumulated depreciation
and amortization 155,600 145,527
----------- -----------
332,018 297,820
----------- -----------
Other assets, at cost:
Deposits and other assets 10,889 7,892
Investment in Showboat Star Partnership 30,313 17,750
Debt issuance costs, net of accumulated
amortization of $576,000 at June 30,
1994 and $323,000 at December 31,
1993 7,257 7,270
----------- -----------
48,459 32,912
----------- -----------
$480,529 $470,700
=========== ===========
See accompanying notes to consolidated financial statements.
-1- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
JUNE 30, 1994 AND DECEMBER 31, 1993
(continued)
JUNE 30, DECEMBER 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993
----------------------------------- ----------- -----------
(In thousands)
Current liabilities:
Current maturities of long-term debt $611 $3,574
Accounts payable 13,806 14,173
Income taxes payable - 1,752
Dividends payable 375 375
Accrued liabilities 25,634 23,664
----------- -----------
Total current liabilities 40,426 43,538
----------- -----------
Long-term debt 277,033 277,043
----------- -----------
Deferred income taxes 18,803 14,961
----------- -----------
Shareholders' equity:
Common stock, $1 par value, 50,000,000
shares authorized, 15,794,578 shares
issued at June 30, 1994 and
December 31, 1993 15,795 15,795
Additional paid-in capital 74,933 71,162
Retained earnings 62,673 54,628
----------- -----------
153,401 141,585
Less: Cost of common stock in treasury,
419,823 shares at June 30,
1994 and 814,483 shares at
December 31, 1993 (3,316) (6,370)
Unearned compensation for
restricted stock (5,818) (57)
----------- -----------
Total shareholders' equity 144,267 135,158
----------- -----------
$480,529 $470,700
=========== ===========
See accompanying notes to consolidated financial statements.
-2-
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(In thousands except share and per share data)
1994 1993
----------- -----------
Revenues:
Casino $166,358 $156,433
Food and beverage 24,037 22,969
Rooms 9,341 8,713
Sports and special events 2,086 2,128
Management fees 1,911 -
Other 3,106 2,814
----------- -----------
206,839 193,057
Less complimentaries 15,183 14,855
----------- -----------
Net revenues 191,656 178,202
----------- -----------
Costs and expenses:
Casino 66,365 62,580
Food and beverage 28,361 26,436
Rooms 6,592 6,325
Sports and special events 1,606 1,591
General and administrative 51,230 45,142
Selling, advertising and promotion 6,240 5,703
Depreciation and amortization 13,196 10,757
----------- -----------
173,590 158,534
----------- -----------
Income from operations from consolidated
subsidiaries 18,066 19,668
Equity in income of unconsolidated
affiliate 7,063 -
----------- -----------
Income from operations 25,129 19,668
----------- -----------
-3- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(In thousands except share and per share data)
(continued)
1994 1993
----------- -----------
Income from operations $25,129 $19,668
----------- -----------
Other (income) expense:
Interest income (1,525) (1,324)
Interest expense 13,272 12,405
Interest capitalized (1,352) (639)
----------- -----------
10,395 10,442
----------- -----------
Income before income tax expense,
extraordinary loss and cumulative
effect adjustment 14,734 9,226
Income tax expense 5,940 3,554
----------- -----------
Income before extraordinary loss and
cumulative effect adjustment 8,794 5,672
Extraordinary loss on extinguishment of
debt, net of tax - (6,679)
Cumulative effect of change in method of
accounting for income taxes - 556
----------- -----------
Net income (loss) $8,794 ($451)
=========== ===========
Weighted average shares outstanding 15,253,861 15,199,435
Income (loss) per common and equivalent share:
Income before extraordinary loss
and cumulative effect adjustment $0.58 $0.37
Extraordinary loss on extinguishment of
debt, net of tax - ($0.44)
Cumulative effect of change in method of
accounting for income taxes - $0.03
----------- -----------
Net income (loss) $0.58 ($0.04)
=========== ===========
See accompanying notes to consolidated financial statements.
-4-
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
FOR THE THREE MONTHS ENDED JUNE 30, 1994 AND 1993
(In thousands except share and per share data)
1994 1993
----------- -----------
Revenues:
Casino $89,461 $81,161
Food and beverage 12,835 11,997
Rooms 5,116 4,879
Sports and special events 980 969
Management fees 963 -
Other 1,708 1,469
----------- -----------
111,063 100,475
Less complimentaries 8,186 7,769
----------- -----------
Net revenues 102,877 92,706
----------- -----------
Costs and expenses:
Casino 35,360 30,674
Food and beverage 14,794 13,747
Rooms 3,339 3,276
Sports and special events 728 722
General and administrative 27,897 23,244
Selling, advertising and promotion 3,706 3,443
Depreciation and amortization 6,835 5,617
----------- -----------
92,659 80,723
----------- -----------
Income from operations from consolidated
subsidiaries 10,218 11,983
Equity in income of unconsolidated
affiliate 3,823 -
----------- -----------
Income from operations 14,041 11,983
----------- -----------
-5- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
FOR THE THREE MONTHS ENDED JUNE 30, 1994 AND 1993
(In thousands except share and per share data)
(continued)
1994 1993
----------- -----------
Income from operations $14,041 $11,983
----------- -----------
Other (income) expense:
Interest income (722) (923)
Interest expense 6,621 7,316
Interest capitalized (903) (450)
----------- -----------
4,996 5,943
----------- -----------
Income before income tax expense
and extraordinary loss 9,045 6,040
Income tax expense 3,691 2,289
----------- -----------
Income before extraordinary loss 5,354 3,751
Extraordinary loss on extinguishment of
debt, net of tax - (6,679)
----------- -----------
Net income (loss) $5,354 ($2,928)
=========== ===========
Weighted average shares outstanding 15,321,474 15,322,016
Income (loss) per common and equivalent share:
Income before extraordinary loss $0.35 $0.24
Extraordinary loss on extinguishment of
debt, net of tax - ($0.44)
----------- -----------
Net income (loss) $0.35 ($0.20)
=========== ===========
See accompanying notes to consolidated financial statements.
-6-
<TABLE>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 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 - - 8,794 - - 8,794
Cash dividends ($.05 per share) - - (749) - - (749)
Share transactions under
stock plans - 3,771 - 3,054 (6,122) 703
Amortization of unearned
compensation - - - - 361 361
---------- ----------- ---------- ------------ ------------ -----------
Balance, June 30, 1994 $15,795 $74,933 $62,673 ($3,316) ($5,818) $144,267
========== =========== ========== ============ ============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
-7-
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
1994 1993
----------- -----------
(In thousands)
Cash flows from operating activities:
Net income (loss) $8,794 ($451)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Allowance for doubtful accounts (154) 881
Depreciation and amortization 13,196 10,757
Extraordinary loss on extinguishment of
debt - 11,166
Cumulative effect of change in accounting
method - (556)
Amortization of debt issuance costs 253 491
Provision for deferred income taxes 1,970 22
Provision for loss on Casino
Reinvestment Development Authority
obligation 566 524
Amortization of unearned compensation 361 57
Equity in income of unconsolidated
affiliate (7,063) -
(Increase) in receivables, net (2,216) (1,589)
(Increase) in income taxes receivable (3,027) (4,018)
(Increase) in inventories and
prepaid expenses (1,807) (1,478)
(Increase) in deposits and
other assets (2,299) (10)
Increase (decrease) in accounts payable 893 (61)
Increase (decrease) in accrued
liabilities 1,970 (2,665)
Other (63) 449
----------- -----------
Net cash provided by
operating activities 11,374 13,519
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (48,407) (31,803)
Proceeds from sale of equipment 65 60
Deposit for Casino Reinvestment
Development Authority obligation (1,557) (1,461)
Decrease in deposits and other assets - 3,595
Investment in Showboat Star Partnership (9,000) -
Distribution of Partnership earnings 3,500 -
----------- -----------
Net cash used in
investing activities (55,399) (29,609)
----------- -----------
See accompanying notes to consolidated financial statements.
-8- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(continued)
1994 1993
----------- -----------
(In thousands)
Cash flows from financing activities:
Principal payments of long-term debt and
capital lease obligations ($2,973) ($209,989)
Proceeds from Issuance of long-term debt - 275,000
Debt issuance costs - (7,548)
Payment of dividends (749) (654)
Proceeds from employee stock option exercise 507 1,663
Other (240) -
----------- -----------
Net cash provided by (used in)
financing activities (3,455) 58,472
----------- -----------
Net increase (decrease) in cash and
cash equivalents (47,480) 42,382
Cash and cash equivalents at
beginning of period 122,787 99,601
----------- -----------
Cash and cash equivalents at end of period $75,307 $141,983
=========== ===========
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest $13,019 $14,905
Income taxes 6,998 3,063
Supplemental schedule of noncash investing
and financing activities:
Increase (decrease) in property and equipment
acquisitions included in construction
contracts and retentions payable (1,400) 3,061
Share transactions under long-term incentive
plan 6,131 -
Transfer deposits to property and equipment 433 -
See accompanying notes to consolidated financial statements.
-9-
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 own an equity interest in and manage a riverboat
casino on Lake Pontchartrain in New Orleans, Louisiana (Star
Casino).
LPSI was formed in 1993 to manage a riverboat casino, the Star
Casino, in New Orleans, Louisiana pursuant to a management
contract. SLI was also formed in 1993 to hold a 30% equity
interest in Showboat Star Partnership (SSP) which owns the Star
Casino, managed by LPSI. On March 1, 1994, the Company purchased an
additional 20% equity interest, increasing its interest to 50%, in
SSP, from its partner for $9.0 million. Operation of the Star
Casino commenced on November 8, 1993. The investment by SLI
in SSP has been accounted for under the equity method of
accounting. The Company's equity in the income or loss of SSP is
included in the Consolidated Statement of Income (Loss) as equity in
income of unconsolidated affiliate. LPSI receives a management fee
from SSP of 5.0% of casino revenues net of gaming taxes of 18.5%
and boarding fees.
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.
-10- (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2.LONG-TERM DEBT
Long-term debt consists of the following:
June 30, December 31,
1994 1993
---------- -----------
(In thousands)
9 1/4% First Mortgage Bonds
due 2008 $275,000 $275,000
Capitalized lease obligations 2,644 5,617
---------- -----------
277,644 280,617
Less current maturities 611 3,574
---------- -----------
$277,033 $277,043
========== ===========
On March 24, 1994 the Company secured a line of credit for
approximately $6.1 million, the US dollar equivalent of $8.4 million
Australian dollars, 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%. At June
30, 1994 the bank's prime rate was 7.25%. This line of credit
expires in December 1994. At June 30, 1994 all funds were available
under this line of credit.
At June 30, 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
June 30, 1994, the bank's prime rate was 7.25%. The line of credit
is guaranteed by OSI and expires in August 1994. Borrowings on this
line of credit may not be used for the payment of management fees to
SBO or to fund ventures in other jurisdictions. At June 30, 1994,
ACSI had all the funds under this line of credit available for use.
On July 1, 1994 the Company obtained consents to amend its
Indenture governing its 9 1/4% First Mortgage Bonds due 2008
(Bonds). The permitted Amendments, as supplemented and modified, (a)
permit the Company or its subsidiaries to invest in Controlled
Entities (as defined in the Consent Solicitation Statement), the
-11- (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. Long-term Debt (continued)
equity investment and management fees (subject to certain approvals)
of which will be pledged as additional Collateral to secure the
Bonds; (b) permit the Company or its subsidiaries to raise up to
$150.0 million in subordinated indebtedness, which will not be
secured by any Collateral and at least $100.0 million of the proceeds
of which will be used to fund the Company's investment in Sydney
Harbour Casino Holdings Limited (SHCL); (c) permit the Company to pay
its regular quarterly dividend and make certain Restricted Payments
permitted by Section 4.09(b), as amended, without meeting the debt
incurrence requirement contained in the Indenture; (d) limit the
Company from incurring no more than 50% of the cost of improvements
to either the Las Vegas Showboat or the Atlantic City Showboat with
indebtedness which is pari passu to the Bonds. The Company received
consents from holders of $244,760,000 or 89% of the Bonds.
On August 10, 1994, the Company issued $120,000,000 of 13% Senior
Subordinated Notes due 2009 (Notes). The proceeds from the sale of
the Notes (Note Offering) were $116.5 million, net of underwriting
discounts and commissions. Proceeds will be used to (i) invest
approximately $100.0 million for an approximately 27% equity interest
in SHCL, a subsidiary which has been selected as the preferred
applicant to build, manage and operate the sole full-service casino
in New South Wales, Australia (Sydney Harbour Casino), and (ii)
renovate the Las Vegas Showboat in order to upgrade the facility to
current building codes, replace the existing power plant facility and
add up to a 900-space parking garage at an aggregate cost of
approximately $15.0 million. In the event the Company determines not
to pursue any portion of the Las Vegas renovation the Company will
use any remaining net proceeds for other expansion opportunities,
capital improvements to its existing properties or other general
corporate purposes.
The Company is required to place $100.0 million of the net
proceeds of the Note Offering into an escrow account, which may
only be used to fund the Company's investment in SHCL. In the
event that (i) SHCL (or a subsidiary of SHCL) has not been
officially selected as the sole licensee of the Sydney Harbour
Casino, or (ii) the Company (or a subsidiary of the Company) has
not entered into a binding agreement with SHCL to manage the gaming
operations of the Sydney Harbour Casino for a period of not less
than 12 years, within 12 months of the issuance of the Notes, then
the Company shall first offer to purchase the Notes up to an
aggregate of $100.0 million principal amount and then if any
portion of the $100.0 million remains (First Remaining Portion),
-12- (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. Long-term Debt (continued)
then offer to purchase up to an aggregate of the First Remaining
Portion of the Bonds from the Bondholders. Following such
offers, if any portion of the $100.0 million remains, such portion
may be used for general corporate purposes.
The Notes are unconditionally guaranteed by OSI, ACSI and SOC.
Interest on the Notes is payable semi-annually on February 1 and
August 1 of each year commencing on February 1, 1995. The Notes
are not redeemable prior to August 1, 2001. Thereafter, the Notes
will be redeemable, in whole or in part, at redemption prices
specified in the Indenture for the Notes (Note Indenture). The
Notes are unsecured general obligations of the Company subordinated
in right of payment to all Senior Debt (as defined in the Note
Indenture) of the Company.
The Note Indenture places significant restrictions on the
Company, many of which are similar to the restrictions placed on
the Company by the Indenture for the Bonds (Bond Indenture),
including covenants restricting or limiting the ability of the
Company and its Restricted Subsidiaries (as defined in the Note
Indenture) to, among other things, (i) pay dividends or make other
restricted payments, (ii) incur additional indebtedness and issue
preferred stock, (iii) create liens, (iv) create dividend and other
payment restrictions affecting Restricted Subsidiaries, (v) enter
into mergers, consolidations or make sales of all or substantially
all assets, (vi) enter into transactions with affiliates and (vii)
engage in other lines of business.
3. LONG-TERM INCENTIVE PLAN
On May 25, 1994, the shareholders of SBO approved a long-term
incentive plan in which officers and key employees of the Company
participate. Up to 2,000,000 shares of SBO common stock may be
awarded to plan participants as either restricted shares or stock
options. As of June 30, 1994 1,118,000 stock options have been
granted and 366,000 restricted shares have been issued from
treasury shares to officers and key employees. Plan participants
are entitled to cash dividends and to vote their respective
shares. Restrictions limit the sale or transfer of these shares
during a five-year period. Unearned compensation equal to the
market value of SBO's common stock was recorded at June 30, 1994
and is being amortized ratably from the date of grant over the
restricted five-year period as it is earned. Compensation expense
of $361,000 was recognized during the six months ended June 30,
1994. Unearned compensation at June 30, 1994 is $5,818,000 and is
shown as a reduction of Shareholders' Equity in the accompanying
Consolidated Balance Sheet.
-13-
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 own an equity
interest in and manage a riverboat casino on Lake Pontchartrain in
New Orleans, Louisiana (Star Casino).
LPSI was formed in 1993 to manage a riverboat casino, the Star
Casino, in New Orleans, Louisiana pursuant to a management contract.
SLI was also formed in 1993 to hold a 30% equity interest in Showboat
Star Partnership (SSP) which owns the Star Casino, managed by LPSI.
On March 1, 1994, the Company purchased an additional 20% equity
interest, increasing its interest to 50%, in SSP, from its partner
for $9.0 million. Operation of the Star Casino commenced on November
8, 1993. The investment by SLI in SSP has been accounted for under
the equity method of accounting. The Company's equity in the income
or loss of SSP is included in the Consolidated Statement of Income
(Loss) as equity in income of unconsolidated affiliate. LPSI
receives a management fee from SSP of 5.0% of casino revenues net of
gaming taxes of 18.5% and boarding fees. Due to either inclement
weather or underwater obstructions, Star Casino has been principally
operating mock cruises since the commencement of operations and
dockside gaming with open boarding since June 22, 1994.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Quarter Ended June 30, 1994 Compared to
Quarter Ended June 30, 1993
Revenues
Net revenues for the Company increased to $102.9 million in the
quarter ended June 30, 1994 compared to $92.7 million in the same
period in 1993, an increase of $10.2 million or 11.0%. Casino
revenues increased $8.3 million or 10.2% to $89.5 million in the
quarter ended June 30, 1994 from $81.2 million in 1993. Nongaming
revenues, which consist principally of food, beverage, room and
bowling revenues and management fees, were $21.6 million in the
second quarter of 1994, compared to $19.3 million in 1993.
The Atlantic City Showboat generated $81.1 million of net revenues
in the quarter ended June 30, 1994 compared to $72.1 million in
the same period in the prior year, an increase of $9.0 million or
-14- (continued)
12.4%. Casino revenues were $73.9 million in the three months ended
June 30, 1994 compared to $65.7 million for the same period in the
prior year, an increase of $8.2 million or 12.5%. The increase in
casino revenues was due to an increase in slot revenues of $8.1
million or 17.4%. Slot revenues were $54.9 million in the second
quarter of 1994, compared to $46.8 million for the prior year. This
increase compares to a 2.6% growth in slot revenues in the Atlantic
City market for the quarter ended June 30, 1994. The favorable
comparison to prior year is the result of the adverse impact of
construction activities in the second quarter of 1993 on slot
revenues and the opening on May 27, 1994 of an additional 15,000
square feet of casino space with approximately 560 new slot machines,
an increase in slot machines of approximately 23%. Atlantic City
Showboat slot revenues continued to dominate casino revenues at 74.3%
in the quarter ended June 30, 1994 and 71.2% of casino revenues in
the quarter ended June 30, 1993.
At the Las Vegas Showboat, net revenues increased to $20.8
million in the quarter ended June 30, 1994 from $20.6 million in the
same period in 1993, an increase of $.2 million or 1.2%. Casino
revenues increased to $15.5 million in the second quarter of 1994
from $15.4 million in the second quarter of 1993, an increase of $.1
million or .7%. Slot revenues accounted for 84.0% of casino revenues
in the second quarter of 1994 and in 1993. Improvements in nongaming
revenues were due to increased hotel occupancy resulting from
increased effectiveness of certain marketing activities.
LPSI generated $1.0 million in management fee revenues in the second
quarter of 1994. LPSI receives management fees of 5.0% of Star
Casino's casino revenues after gaming taxes of 18.5% and boarding
fees totaling $5.00 per passenger boarding the vessel. Star Casino
generated net revenues of $25.9 million in the second quarter of 1994
consisting primarily of casino revenues of $25.6 million. During the
second quarter of 1994 the total number of passengers boarding the
vessel was 485,461 with an average gaming win per passenger per visit
of $52.77.
Income From Operations
The Company's income from operations increased to $14.0 million in
the quarter ended June 30, 1994 from $12.0 million in the same
period in 1993, an increase of $2.0 million or 17.2% 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 $4.9 million in corporate
expenses and expenses relating to the pursuit of expansion
opportunities in jurisdictions outside of Nevada and New Jersey in
the second quarter of 1994 compared to $1.0 million in the second
quarter of 1993.
-15-
(continued)
Atlantic City Showboat's income from operations, before management
fees, increased to $12.6 million in the second quarter of 1994
compared to $11.0 million for the same period in 1993, an increase
of $1.6 million or 14.6%, primarily as a result of the increase in
slot revenues. Total operating expenses at the Atlantic City
Showboat increased to $68.5 million in the second quarter of 1994,
an increase of $7.4 million or 12.0%. This increase in operating
expenses was due primarily to a $1.3 million increase in
depreciation expense due to the expanded facility, and a $4.7
million increase in casino division expenses consisting primarily
of an increase in promotional coin expense.
Income from operations at the Las Vegas Showboat declined to $1.9
million in the second quarter of 1994 from $2.3 million in the
second quarter of 1993, a decrease of $.4 million or 17.9%. This
decrease is primarily due to increased food costs as a result of
certain promotional activities, entertainment expenses and
advertising costs.
SLI's equity in the earnings of Showboat Star Partnership for the
quarter ending June 30, 1994 was $3.8 million. Showboat Star
Partnership had net income of $7.6 million on net revenues of
$25.9 million. LPSI, which manages Showboat Star Partnership, had
income from operations for the quarter ended June 30, 1994 of $.7
million.
Other (Income) Expense
Net interest expense decreased to $5.0 million in the second
quarter of 1994 down from $5.9 million in the same period in 1993,
a decrease of $.9 million or 15.9%. This decrease is primarily the
result of the repurchase of all ACSI's 11 3/8% Mortgage-Backed
Bonds Due 2002 on June 18, 1993 and a $.5 million increase in
capitalized interest associated with the Company's Atlantic City
expansion.
Net Income (Loss)
The Company recognized net income of $5.4 million for the quarter
ended June 30, 1994 or $.35 per share, compared to income of $3.8
million for the quarter ended June 30, 1993 or $.24 per share,
before an extraordinary loss on early extinguishment of debt of $6.7
million or $.44 per share. The net loss for the quarter ended June
30, 1993 was $2.9 million or $.20 per share.
-16- (continued)
Six Months Ended June 30, 1994 Compared to Six Months
Ended June 30, 1993
Net revenues for the Company increased to $191.7 million in the
six months ended June 30, 1994 compared to $178.2 million in the same
period in 1993, an increase of $13.5 million or 7.6%. Casino
revenues increased $9.9 million or 6.3% to $166.4 million in the
six months ended June 30, 1994 from $156.4 million in 1993.
Nongaming revenues, which consist principally of food, beverage,
room and bowling revenues and management fees, were $40.5 million
in the six months ended June 30, 1994 compared to $36.6 million in
1993.
The Atlantic City Showboat generated $147.4 million of net
revenues in the six months ended June 30, 1994, compared to $136.9
million for the same period in the prior year, an increase of $10.5
million or 7.6%. Casino revenues were $134.5 million for the six
months ended June 30, 1994 compared to $125.4 million for the same
period in the prior year, an increase of $9.1 million or 7.2%. The
increase in casino revenues is attributable to an increase of $7.5
million in slot revenues, an increase in poker revenues of $1.4
million and an increase of $1.2 million in simulcast revenues. Slot
revenues were $99.0 million for the six months ended June 30, 1994,
compared to $91.5 million for the prior year. The $7.5 million, or
8.3%, increase in slot revenues at the Atlantic City Showboat
compares to a slight decrease (.3%) in slot revenues in the Atlantic
City market for the same time period. The favorable comparison to
prior year is the result of the adverse impact of construction
activities in the first six months of 1993 on slot revenues and the
opening on May 27, 1994 of an additional 15,000 square feet of casino
space with approximately 560 new slot machines, an increase in slot
machines of approximately 23%. At the Atlantic City Showboat, slot
revenues were 73.6% of casino revenues for the first six months of
1994 and 72.9% of casino revenues in the same period in 1993.
At the Las Vegas Showboat, net revenues increased to $42.4
million in the six months ended June 30, 1994 from $41.3 million in
the same period in 1993, an increase of $1.1 million or 2.7%.
Casino revenues increased to $31.9 million in the first six months
of 1994 from $31.0 million in the first six months of 1993, an
increase of $.9 million or 2.9%. Slot revenues accounted for 82.8%
of casino revenues in the six months ended June 30, 1994 and 83.7%
for the same period in 1993. Improvements in nongaming revenues
were due to increased hotel occupancy resulting from increased
effectiveness of certain marketing activities.
LPSI generated $1.9 million in management fee revenues in the
six months ended June 30, 1994. Star Casino generated net revenues
of $53.4 million in the first six months of 1994 consisting primarily
of casino revenues of $52.8 million. During the first six months of
1994 the total number of passengers boarding the vessel was 971,187
with an average gaming win per passenger of $54.33.
-17- (continued)
Income From Operations
The Company's income from operations increased to $25.1 million
in the six months ended June 30, 1994 from $19.7 million in the
same period in 1993, an increase of $5.5 million or 27.8% 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 $7.6 million in corporate
expenses and in expenses relating to the pursuit of expansion
opportunities in jurisdictions outside of Nevada and New Jersey in
the first six months of 1994 compared to $1.7 million in the first
six months of 1993.
Atlantic City Showboat's income from operations, before
management fees, increased $3.0 million or 18.2% to $19.6 million
for the six months ended June 30, 1994 compared to $16.6 million in
the same period in the prior year. This increase was due primarily
to the increase in net revenues. Operating expenses at the Atlantic
City Showboat increased $7.4 million, or 6.1% to $127.7 million for
the six months ended June 30, 1994 compared to $120.3 million for
the same period in the prior year. The increased operating expenses
included a $2.5 million increase in depreciation expense due to
Atlantic City Showboat's expanded facility and a $3.7 million
increase in casino division expenses. This increase in casino
division expenses was due primarily to increased slot marketing
expenses.
Income from operations at the Las Vegas Showboat declined to
$4.6 million in the six months ended June 30, 1994 from $5.0
million in the six months ended June 30, 1993, a decrease of $.4
million or 8.3%. This decrease is primarily due to increases in
promotional food costs, increased entertainment costs and increased
advertising.
SLI's equity in the earnings of Showboat Star Partnership for
the six months ended June 30, 1994 was $7.1 million. Showboat Star
Partnership had net income of $16.6 million on net revenues of $53.4
million. LPSI, which manages Showboat Star Partnership, had income
from operations for the six months ended June 30, 1994 of $1.4
million.
Other (Income) Expense
Interest expense increased to $13.3 million in the six months
ended June 30, 1994 from $12.4 million in the same period in 1993, an
increase of $.9 million or 7.0%. This increase is the result of an
increase in long-term debt. The increase in interest expense was
offset by a $.7 million increase in capitalized interest associated
with the Company's Atlantic City expansion.
-18- (continued)
Net Income (Loss)
The Company recognized net income of $8.8 million for the six
months ended June 30, 1994 or $.58 per share, compared to income
of $5.7 million or $.37 per share before an extraordinary loss of
$6.7 million or $.44 per share and the cumulative effect of a change
in accounting method of $.6 million or $.03 per share in the quarter
ended June 30, 1993. The net loss for the six months ended June 30,
1993 was $.5 million or $.04 per share.
MATERIAL CHANGES IN FINANCIAL CONDITION
As of June 30, 1994, the Company held cash and cash equivalents
of $75.3 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 $6.2 million in the six
months ended June 30, 1994 on its investigation of expansion
opportunities in new jurisdictions.
During the six months ended June 30, 1994, the Company expended
approximately $48.4 million on capital improvements at its Las
Vegas and Atlantic City facilities which were funded from
operations and cash on hand. Costs associated with the expansion
project in Atlantic City were $37.0 million at June 30, 1994.
Capital expenditures relating to the expansion project in Atlantic
City are expected to be $52.2 million in 1994.
At June 30, 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 June 30, 1994 was 7.25%. The line of credit is
guaranteed by OSI and expires in August 1994. Borrowings on this
line of credit may not be used for the payment of management fees to
SBO to fund ventures in other jurisdictions. At June 30, 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
approximately $6.1 million, the US dollar equivalent of $8.4 million
Australian dollars, 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%. The
bank's prime rate at June 30, 1994 was 7.25%. This line of credit
expires in December 1994. At June 30, 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 (Bonds) pursuant to an indenture among
the Company, as issuer, SOC, ACSI and OSI, as guarantors, and IBJ
Schroeder Bank & Trust Company, as trustee (Bond Indenture). The
Bonds are unconditionally guaranteed by OSI, ACSI and SOC. The Bond
Indenture was amended on July 18, 1994. Interest on the Bonds is
-19- (continued)
payable semi-annually on May 1 and November 1 of each year. The
Bonds are not redeemable prior to May 1, 2000. Thereafter, the Bonds
will be redeemable, in whole or in part, at redemption prices
specified in the Bond Indenture, as amended. The 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
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 guarantee is
secured by a pledge of all outstanding shares of capital stock of
ACSI. ACSI's obligation under its guarantee is secured by a
leasehold mortgage representing a first lien on the Atlantic City
hotel casino (other than certain assets). SOC's guarantee is secured
by a pledge of certain assets related to the Las Vegas hotel casino.
The Bond Indenture, as amended, 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 Bond Indenture, as
amended. The Bond Indenture, as amended, 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 Bonds, transactions with Affiliates and the investment
by SBO and its subsidiaries in certain Investments. In addition, the
terms of the Bond Indenture, as amended, 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 other than an
investment in a subsidiary in a gaming related business or a
quarterly dividend, 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 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 Bond Indenture, as amended; the
redemption, repurchase, retirement, or other acquisition of any
-20- (continued)
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; investments in Controlled Entities;
and the purchase, redemption, defeasance of any pari passu
Indebtedness with a substantially concurrent purchase, redemption,
defeasance, or retirement of the Bonds (on a pro rata basis).
Additionally, the Bond Indenture, as amended, permits the Company
to incur up to $150,000,000 in aggregate principal amount of
Indebtedness without meeting the debt incurrence test contained in
the Bond Indenture, provided that $100,000,000 of such Indebtedness
is kept in a segregated account pledged as Collateral to secure the
Bonds until receipt of the Australian Gaming Approval. Upon receipt
of the Australian Gaming Approval the segregated funds shall be used
to make the Company's A$135,000,000 investment in the Sydney Harbour
Casino. If the Australian Gaming Approval is not received within a
year of the incurrence of such Indebtedness, the segregated proceeds
shall be used to offer to redeem such Indebtedness and if any
segregated proceeds remain to offer to redeem the Bonds.
On August 10, 1994, the Company issued $120,000,000 of 13% Senior
Subordinated Notes due 2009 (Notes). The proceeds from the sale of
the Notes (Note Offering) were $116.5 million, net of underwriting
discounts and commissions. Proceeds will be used to (i) invest
approximately $100.0 million for an approximately 27% equity interest
in Sydney Harbour Casino Holdings Limited (SHCL), a subsidiary which
has been selected as the Preferred Applicant to build, manage and
operate the sole full-service casino in New South Wales, Australia
(Sydney Harbour Casino), and (ii) renovate the Las Vegas Showboat in
order to upgrade the facility to current building codes, replace the
existing power plant facility and add up to a 900-space parking
garage at an aggregate cost of approximately $15.0 million. In the
event the Company determines not to pursue any portion of the Las
Vegas renovation, the Company will use any remaining net proceeds for
other expansion opportunities, capital improvements to its existing
properties or other general corporate purposes.
-21- (continued)
The Company is required to place $100.0 million of the net
Proceeds of the Note offering into an escrow account, which may only
be used to fund the Company's investment in SHCL. In the event that
(i) SHCL (or a subsidiary of SHCL) has not been officially selected
as the sole licensee of the Sydney Harbour Casino, or (ii) the
Company (or a subsidiary of the Company) has not entered into a
binding agreement with SHCL to manage the gaming operations of the
Sydney Harbour Casino for a period of not less than 12 years, within
12 months of the issuance of the Notes, then the Company shall first
offer to purchase the Notes up to an aggregate of $100.0 million
principal amount and then if any portion of the $100.0 million
remains (First Remaining Portion), then offer to purchase up to an
aggregate of the First Remaining Portion of the Bonds from the
Bondholders. Following such offers, if any portion of the $100
million remains, such portion may be used for general corporate
purposes.
The Notes are unconditionally guaranteed by OSI, ACSI and SOC.
Interest on the Notes is payable semi-annually on February 1 and
August 1 of each year commencing on February 1, 1995. The Notes
are not redeemable prior to August 1, 2001. Thereafter, the Notes
will be redeemable, in whole or in part, at redemption prices
specified in the Indenture for the Notes (Note Indenture). The
Notes are unsecured general obligations of the Company
subordinated in right of payment to all Senior Debt (as defined in
the Note Indenture) of the Company.
The Note Indenture places significant restrictions on the
Company, many of which are similar to the restrictions placed on the
Company by the Bond Indenture, as amended, including covenants
restricting or limiting the ability of the Company and its Restricted
Subsidiaries (as defined in the Note Indenture) to, among other
things, (i) pay dividends or make other restricted payments, (ii)
incur additional indebtedness and issue preferred stock, (iii) create
liens, (iv) create dividend and other payment restrictions affecting
Restricted Subsidiaries, (v) enter into mergers, consolidations or
make sales of all or substantially all assets, (vi) enter into
transactions with affiliates and (vii) engage in other lines of
business.
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 in certain expansion opportunities. No
assurance can be given that any of the announced projects, or any
project under development or any unannounced projects under
development will be completed, licensed or result in any significant
contribution to the Company's cash flow or earnings. Casino gaming
operations are highly regulated and new casino development is subject
to a number of risks.
-22- (continued)
Announced expansion opportunities include:
1. On May 6, 1994 the New South Wales Casino Control Authority
(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 during
the next six months will seek to obtain all the necessary planning
agency approvals and obtain the casino license. No assurance can be
given that Sydney Harbour Casino Pty Limited will obtain all planning
agency approvals or the casino license. 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 November
or December 1994.
2. The Company is a member of a partnership which is the only
applicant for the sole riverboat gaming license allocated by statute
to East Chicago, Indiana. Subject to available financial resources,
the Company anticipates that it will contribute approximately $30.0
million to the East Chicago partnership and will help the
partnership 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 or source of the
contribution or financing for the East Chicago gaming opportunity.
Issuance of the gaming license is subject to the resolution of
certain legal challenges to the Indiana gaming statute.
3. In April 1994, the Company entered into a management
agreement and related agreements to manage a casino (the St. Regis
Casino) on the St. Regis Mohawk Tribal Reservation in Hogansburg,
New York. The agreements are subject to the approval of the National
Indian Gaming Commission (NIGC). In July 1994, the St. Regis Mohawk
Tribe withdrew all gaming contracts submitted for approval to the
NIGC, including the agreements with the Company, to permit tribal
members to review such contracts. Certain tribal leaders have
announced publicly that they may amend certain provisions of the
agreements. No assurance can be given that the proposed agreements
will be consummated in their present form or that the St. Regis
Mohawk Tribe or the Company will pursue the St. Regis Casino
development. Subject to available financial resources and NIGC
approval, the Company may lend up to $30 million for a term of five
years, at a rate of 15% per annum to the St. Regis Mohawk Tribe.
The Company is actively pursuing potential gaming opportunities
in certain jurisdictions where gaming has recently been legalized,
as well as jurisdictions where gaming is not yet, but is expected
soon to be legalized. There can be no assurance that legislation to
legalize gaming will be enacted in any additional jurisdictions,
that any properties in which the Company may have invested will be
compatible with any gaming legislation so enacted, that legalized
gaming will continue to be authorized in any jurisdiction or that
the Company will be able to obtain the required licenses in any
jurisdiction.
-23-
SHOWBOAT, INC. AND SUBSIDIARIES
PART II, OTHER INFORMATION
ITEM 1. Legal Proceedings.
William H. Ahern v. Caesar's World, Inc., et al., Case No.
94-532-Civ-Orl-22, instituted May 10, 1994 (Ahern Complaint) and
William Poulos v. Caesar's World, Inc., et al., Case No.
94-478-Civ-Orl-22, instituted April 26, 1994 (Poulos Complaint)
(collectively, the Complaints). Two individuals, each purportedly
representing a class, filed the Complaints in the United States
District Court, Middle District of Florida, against numerous
manufacturers, distributors and casino operators of video poker and
electronic slot machines, including the Company. The plaintiffs
intend to seek class certification of the interests they claim to
represent. The Complaints allege that the defendants have engaged
in a course of conduct intended to induce persons to play such
games based on a false belief concerning how the gaming machines
operate, as well as the extent to which there is an opportunity to
win on a given play. The Poulos Complaint alleges violations of
the Racketeer Influenced and Corrupt Organizations Act (the RICO
Act), as well as claims of common law fraud, unjust enrichment and
negligent misrepresentation, and seeks damages in excess of $1.0
billion. The Ahern Complaint alleges violations of the RICO Act
and seeks damages in excess of $1.0 billion. The cases have been
consolidated. Management believes that the Complaints are without
merit and intends to vigorously defend the allegations in the
Complaints. The Company has filed a motion to dismiss the
Complaints on grounds of lack of jurisdiction and improper venue.
Pursuant to court order, the parties are presently engaging in
discovery with respect to those issues.
ITEM 2. Changes in Securities.
(a) On June 23, 1994, the Company amended its Articles of
Incorporation to increase the number of authorized shares of
Common Stock, $1.00 par value, of the Company, from 20,000,000
to 50,000,000.
(b) On August 10, 1994, the Company issued $120,000,000 of 13%
Senior Subordinated Notes due 2009 (Notes) pursuant to the Note
Indenture. All capitalized terms used herein have the meaning
assigned to them in the Note Indenture. The Note Indenture will
not permit the Company, or any of its Restricted Subsidiaries to
directly or indirectly make certain Restricted Payments, which
include, among other things, the following: (i) declare or pay
any dividend or make any distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity
Interests; or (ii) purchase, redeem or otherwise acquire or
retire for value any Equity Interests of the Company or any
Subsidiary or other Affiliate of the Company; unless, at the
-24- (continued)
time of such Restricted Payment: (i) no Default or Event of
Default shall have occurred and be continuing or would occur as
a consequence thereof; (ii) the Company would, at the time of
such Restricted Payment and after giving pro forma effect
thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional indebtedness
pursuant to the Fixed Charge Coverage Ratio Test; and, (iii)
such Restricted Payment, together with the aggregate of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Note Indenture is less than
the sum of (x) 50% of the Consolidated Net Income of the Company
for the period (taken as one accounting period) from April 1,
1993 to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at
the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, 100% of such deficit),
plus (y) 100% of the aggregate net cash proceeds received by the
Company from the issuance or sale of Equity Interests of the
Company (other than Equity Interests sold to a Restricted
Subsidiary of the Company and other than Disqualified Stock)
from and including the date of the Bond Indenture, plus (z)
Excess Non-Recourse Subsidiary Cash Proceeds received after the
date of the Bond Indenture.
The foregoing does not prohibit (i) the payment of any
dividends within sixty (60) days after the date of declaration
thereof, if at said date of declaration such payment would have
complied with the provisions of the Note Indenture; and (ii) the
redemption, repurchase, retirement or other acquisition of any
Equity Interests of the Company in exchange for, or out of the
proceeds of, the substantially concurrent sale of other Equity
Interests of the Company.
(c) On July 1, 1994 the Company obtained consents to amend
its Indenture governing its 9 1/4% First Mortgage Bonds due
2008 (see Item 4.2).
ITEM 4. Submission of Matters to a Vote of Security
Holders.
1(a) The Company's annual meeting of shareholders was held on
May 25, 1994.
1(b) Directors elected at the meeting for a term expiring in
1997: John D. Gaughan, Frank A. Modica, H. Gregory Nasky and J.
Kell Houssels, III. Directors continuing in office after the
meeting: J.K. Houssels (term expires in 1995), William C.
Richardson (term expires in 1995), Jeanne S. Stewart (term
expires in 1995), George A. Zettler (term expires in 1996) and
Carolyn M. Sparks (term expires in 1996).
-25- (continued)
1(c) Election of directors:
Nominees For Against Abstain
-------------- ---------- ----------- -----------
John D. Gaughan 12,428,532 282,932 -0-
Frank A. Modica 12,428,846 282,618 -0-
H. Gregory Nasky 12,428,446 283,018 -0-
J. Kell Housells, III 12,428,696 282,768 -0-
Amendment to Articles of Incorporation to increase the number of
authorized shares of Common Stock from 20,000,000 to 50,000,000
Broker
For Against Abstain Non-Voter
----------- ---------- ----------- -----------
11,415,350 1,248,556 47,557 -0-
Approval and ratification of 1994 Executive Long-Term Incentive
Plan as adopted by the Board of Directors
Broker
For Against Abstain Non-Voter
----------- ---------- ----------- -----------
8,283,061 2,086,424 193,538 2,143,434
Ratification and Selection of Auditors for year ended December
31, 1994
For Against Abstain
---------- ----------- -----------
KPMG Peat Marwick 12,617,256 21,256 67,943
1(d) Not Applicable
2(a) Consent Solicitation Statement dated June 17, 1994,
soliciting the consent of holders of its 9 1/4% First Mortgage
Bonds due 2008 (Bonds).
2(b) Not Applicable
2(c) The proposed amendments (a) permit the Company or its
subsidiaries to invest in Controlled Entities, the equity
investment and management fees (subject to certain approvals) of
which will be pledged as additional collateral to secure the Bonds;
(b) permit the Company to incur up to $150.0 million in
subordinated indebtedness and at least $100.0 million of the
proceeds thereof will be used to fund the Company's investment in
SHCL; (c) permit the Company to pay its regular quarterly dividend
and make certain Restricted Payments permitted by Section 4.09(b),
as amended, without meeting the debt incurrence requirement
contained in the Bond Indenture; (d) limit the Company from
incurring no more than 50% of the cost of improvements to either
the Las Vegas Showboat or the Atlantic City Showboat with
indebtedness which is pari passu to the Bonds. The Company
received consents from holders of $244,760,000 or 89% of the Bonds.
-26- (continued)
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) The following Current Reports on Form 8-K were filed with
the Securities and Exchange Commisssion during the quarter ended
June 30, 1994: (i) The Company filed a Current Report on Form 8-K
on or about May 19, 1994 disclosing that certain sections of the
Indiana Riverboat Gaming Act were unconstitutional under the
Indiana Constitution; and (ii) the Company filed a Current Report
on Form 8-K on or about July 8, 1994 disclosing the withdrawal by
the St. Regis Mohawk Tribe of its request for approval from the
National Indian Gaming Commission.
-27-
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: August 15,1994 s/Frank A. Modica
------------------- ------------------------------------------
FRANK A. MODICA, Executive Vice-President,
and Chief Operating Officer
Date: August 15,1994 s/Leann Schneider
------------------- ------------------------------------------
LEANN SCHNEIDER, Vice President - Finance
and Chief Financial Officer
-28-
