UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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OR
For the transition period from to
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Commission file number 1-7123
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SHOWBOAT, INC.
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(Exact name of registrant as specified in its charter)
Nevada 88-0090766
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2800 Fremont Street, Las Vegas, Nevada 89104-4035
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(Address of principal executive offices) (Zip Code)
(702) 385-9123
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
------ ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13, or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution under a
plan confirmed by a court.
Yes No
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of the issuer's classes
of common stock, as of May 15, 1995.
Common Stock - $1 Par Value 15,399,675 shares outstanding
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SHOWBOAT, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 1-2
Consolidated Statements of Income -
For the three months ended March 31,
1995 and 1994 3-4
Consolidated Statements of Shareholders'
Equity - For the three months ended March
31, 1995 and year ended December 31, 1994 5
Consolidated Statements of Cash Flows -
For the three months ended March 31,
1995 and 1994 6-7
Notes to Consolidated Financial Statements 8-10
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11-19
PART II
Item 2OTHER INFORMATION
Items 1 - 6 20
Signatures 21
Item 1.
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
MARCH 31, 1995 AND DECEMBER 31, 1994
Mar. 31, Dec. 31,
ASSETS 1995 1994
--------------------------- ----------- -----------
(In thousands)
Current assets:
Cash and cash equivalents $76,358 $90,429
Receivables, net 56,092 8,890
Inventories 2,619 2,591
Prepaid expenses 4,253 4,736
Investment in unconsolidated affiliate
held for sale - 30,346
Current deferred income taxes 7,029 6,529
----------- -----------
Total current assets 146,351 143,521
----------- -----------
Property and equipment 509,942 506,199
Less accumulated depreciation
and amortization 173,545 168,531
----------- -----------
336,397 337,668
----------- -----------
Other assets, at cost:
Investment in unconsolidated affiliate 106,334 108,853
Deposits and other assets 22,624 22,537
Debt issuance costs, net of accumulated
amortization of $1,156,000 at March
31, 1995 and $955,000 at December 31,
1994 10,936 11,112
----------- -----------
139,894 142,502
----------- -----------
$622,642 $623,691
=========== ===========
-1- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
MARCH 31, 1995 AND DECEMBER 31, 1994
(continued)
Mar. 31, Dec. 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
------------------------------------- ----------- -----------
(In thousands)
Current liabilities:
Current maturities of long-term debt $20 $19
Accounts payable 11,719 11,059
Income taxes payable 4,913 4,562
Dividends payable 384 384
Accrued liabilities 36,327 34,286
----------- -----------
Total current liabilities 53,363 50,310
----------- -----------
Long-term debt 392,104 392,016
----------- -----------
Other liabilities 4,450 5,144
----------- -----------
Deferred income taxes 16,840 18,760
----------- -----------
Shareholders' equity:
Common stock, $1 par value, 50,000,000
shares authorized, 15,794,578 shares
issued at March 31, 1995 and December
31, 1994 15,795 15,795
Additional paid-in capital 77,007 76,845
Retained earnings 70,208 68,809
----------- -----------
163,010 161,449
Foreign currency translation adjustment (417) 3,490
Cost of shares in treasury, 394,923
shares at March 31, 1995 and 425,823
shares at December 31, 1994 (3,120) (3,364)
Unearned compensation for restricted
stock (3,588) (4,114)
----------- -----------
Total shareholders' equity 155,885 157,461
----------- -----------
$622,642 $623,691
=========== ===========
See accompanying notes to consolidated financial statements.
-2-
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(In thousands except share and per share data)
1995 1994
----------- -----------
Revenues:
Casino $86,847 $76,897
Food and beverage 12,306 11,202
Rooms 5,627 4,225
Sports and special events 1,055 1,106
Management fees 190 601
Other 1,223 1,398
----------- -----------
107,248 95,429
Less complimentaries 8,569 6,997
----------- -----------
Net revenues 98,679 88,432
----------- -----------
Costs and expenses:
Casino 33,896 31,005
Food and beverage 13,905 13,567
Rooms 3,801 3,253
Sports and special events 951 878
General and administrative 27,893 23,333
Selling, advertising and promotion 2,631 2,534
Depreciation and amortization 8,156 6,361
----------- -----------
91,233 80,931
----------- -----------
Income from operations from
consolidated subsidiaries 7,446 7,501
Equity in income (loss) of
unconsolidated affiliate (22) 3,587
----------- -----------
Income from operations 7,424 11,088
----------- -----------
-3- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(In thousands except share and per share data)
(continued)
1995 1994
----------- -----------
Income from operations $7,424 $11,088
----------- -----------
Other (income) expense:
Interest income (1,199) (803)
Interest expense 10,631 6,651
Interest capitalized (3,246) (449)
Gain on sale of unconsolidated affiliate (2,558) -
----------- -----------
3,628 5,399
----------- -----------
Income before income tax expense 3,796 5,689
Income tax expense 2,013 2,249
----------- -----------
Net income $1,783 $3,440
=========== ===========
Weighted average shares outstanding 15,472,165 15,180,008
Net income per common and equivalent share $0.12 $0.23
=========== ===========
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, 1995
AND YEAR ENDED DECEMBER 31, 1994
CAPTION
Cummulative Unearned
foreign compensa-
Additional currency tion for
Common paid-in Retained translation Treasury restricted
stock capital earnings adjustment stock stock Total
--------- --------- --------- ----------- ----------- ----------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January
1, 1994 $15,795 $71,162 $54,628 - ($6,370) ($57) $135,158
Net income - - 15,699 - - - 15,699
Cash dividends
($.10 per share) - - (1,518) - - - (1,518)
Issuance of
warrants - 1,953 - - - - 1,953
Share transactions
under stock
plans - 3,730 - - 3,006 (6,021) 715
Amortization of
unearned
compensation - - - - - 1,964 1,964
Foreign currency
translation
adjustment - - - 3,490 - - 3,490
--------- --------- --------- ----------- ----------- ----------- ---------
Balance, December 15,795 76,845 68,809 3,490 (3,364) (4,114) 157,461
Net income - - 1,783 - - - 1,783
Cash dividends
($.025 per
share) - - (384) - - - (384)
Share transactions
under stock
plans - 162 - - 244 (501) (95)
Amortization of
unearned
compensation - - - - - 1,027 1,027
Foreign currency
translation
adjustment - - - (3,907) - - (3,907)
--------- --------- --------- ----------- ----------- ----------- ---------
Balance, March
31, 1995 $15,795 $77,007 $70,208 ($417) ($3,120) ($3,588) $155,885
========= ========= ========= =========== =========== =========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
1995 1994
----------- -----------
(In thousands)
Cash flows from operating activities:
Net income $1,783 $3,440
Adjustments to reconcile net income to
net cash provided by operating
activities:
Allowance for doubtful accounts 437 58
Depreciation and amortization 8,156 6,361
Amortization of original issue
discount and debt issuance costs 295 127
Provision for deferred income taxes (316) 742
Provision for loss on Casino
Reinvestment Development Authority
obligation 340 255
Amortization of unearned compensation 1,027 12
(Undistributed) distributed earnings
of unconsolidated affiliate 717 (2,340)
Gain on sale of unconsolidated
affiliate (2,558) -
(Increase) in receivables, net (730) (231)
(Increase) decrease in income taxes
payable 334 (1,996)
Decrease in inventories and prepaid
expenses 455 76
(Increase) decrease in deposits and
other assets (711) 235
Increase in accounts payable 467 1,556
Increase in accrued liabilities 2,041 7,123
Other 204 (66)
----------- -----------
Net cash provided by operating
activities 11,941 15,352
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (6,701) (19,693)
Deposit for Casino Reinvestment
Development Authority obligation (823) (792)
Investments in unconsolidated affiliates (28,246) (9,000)
Advances to unconsolidated affiliates (765) -
Cash received from unconsolidated
affiliates 10,947 -
Other (15) 47
----------- -----------
Net cash used in investing activities (25,603) (29,438)
----------- -----------
-6- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(continued)
1995 1994
----------- -----------
(In thousands)
Cash flows from financing activities:
Principal payments of long-term debt and
capital lease obligations ($5) ($1,047)
Debt issuance costs (25) -
Payment of dividends (384) (375)
Issuance of common stock 5 179
----------- -----------
Net cash used in by financing
activities (409) (1,243)
----------- -----------
Net (decrease) in cash and cash equivalents (14,071) (15,329)
Cash and cash equivalents at beginning
of period 90,429 122,787
----------- -----------
Cash and cash equivalents at end of period $76,358 $107,458
=========== ===========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest, net of amounts capitalized $4,241 $164
Income taxes 1,995 3,503
Supplemental schedule of noncash investing
and financing activities:
Increase in construction contracts and
retentions payable 255 795
Share transactions under long-term
incentive plan 619 -
Foreign currency translation adjustment (3,907) -
Net proceeds receivable from sale of
affiliate 49,337 -
See accompanying notes to consolidated financial statements.
-7-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Showboat, Inc. and subsidiaries, collectively the Company or
SBO, conduct casino gaming operations in Las Vegas, Nevada,
Atlantic City, New Jersey and, until March 9, 1995, in New
Orleans, Louisiana. In addition, the Company operates support
services including hotel, restaurant, bar, bowling and convention
facilities.
The consolidated financial statements include all domestic
and foreign subsidiaries which are more than 50% owned and
controlled by Showboat, Inc. Investments in unconsolidated
affiliates which are at least 20% owned by Showboat, Inc. are
carried at cost plus equity in undistributed earnings or loss since
acquisition. All material intercompany balances have been
eliminated in consolidation.
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, 1994 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.
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:
Mar. 31, Dec. 31,
1995 1994
----------- -----------
(In thousands)
9 1/4% First Mortgage Bonds due 2008,
net of unamortized discount of
$4,914,000 and $5,008,000 at March 31,
1995 and December 31, 1994 respectively $270,086 $269,992
13% Senior Subordinated Notes due 2009 120,000 120,000
Capitalized lease obligations 2,038 2,043
----------- -----------
392,124 392,035
Less current maturities 20 19
----------- -----------
$392,104 $392,016
=========== ===========
At March 31, 1995, Atlantic City Showboat, Inc. (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, 1995, the bank's
prime rate was 9.0%. The line of credit expires in August 1995.
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 March 31, 1995, ACSI had all the funds under
this line of credit available for use.
3. GAIN ON SALE OF UNCONSOLIDATED AFFILIATE
In March 1995, the Company purchased an additional 50% of the
equity of Showboat Star Partnership (SSP), which operated the
Showboat Star Casino on Lake Pontchartrain in New Orleans,
Louisiana, bringing its total equity interest to 100%. The
purchase price of the additional equity interest was $25.0 million
coupled with a distribution of certain of the current assets of
SSP totaling $7.6 million to partners other than the Company. On
March 9, 1995, the Company ceased all operations at the Showboat
Star Casino as a result of certain legal issues related to
conducting dockside gaming in Orleans Parish. In a series of
unrelated transactions, the Company sold certain of the assets of
SSP and its equity interest in SSP resulting in a net pretax gain
of $2.6 million which is included in the 1995 Consolidated
Statement of Income as gain on sale of unconsolidated affiliate.
-9- (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
4. COMMITMENTS AND CONTINGENCIES
In February, 1995, the Company formed with its partner
Showboat Mardi Gras, L.L.C. (SMGLLC) to own and operate, upon
licensing, a riverboat casino near Kansas City, Missouri. SMGLLC
will be 35% owned by the Company and 65% owned by a company not
affiliated with the Company. The Company has contributed $13.0
million to an escrow account for the benefit of SMGLLC which
amount shall be distributed to SMGLLC upon the completion of
certain conditions unless otherwise wsived. Additional capital
contributions, if needed, will be made by the members of SMGLLC
pro rata with their respective interests. The Company currently
contemplates that the majority of the financing for the project
will be obtained through high yield debt and capital leases.
-10-
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL
Showboat, Inc. and subsidiaries, collectively the Company or SBO,
conduct casino gaming operations in Las Vegas, Nevada (Las Vegas
Showboat) and Atlantic City, New Jersey (Atlantic City Showboat) and
until March 31, 1995 owned an equity interest in and managed a
riverboat casino on Lake Pontchartrain in New Orleans, Louisiana
(Showboat Star Casino).
The consolidated financial statements include all domestic and
foreign subsidiaries which are more that 50% owned and controlled by
Showboat, Inc. Investments in unconsolidated affiliates which are at
least 20% owned by Showboat, Inc. are carried at cost plus equity in
undistributed earnings or loss since acquisition. All material
intercompany balances have been eliminated in consolidation.
In March 1995, the Company purchased an additional 50% of the
equity of Showboat Star Partnership (SSP), which operated the Showboat
Star Casino on Lake Pontchartrain in New Orleans, Louisiana, bringing
its total equity interest to 100%. The purchase price of the
additional equity interest was $25.0 million coupled with a
distribution of certain of the current assets of SSP totaling $7.6
million to partners other than the Company. On March 9, 1995, the
Company ceased all operations at the Showboat Star Casino as a result
of certain legal issues related to conducting dockside gaming in
Orleans Parish. In a series of unrelated transactions, the Company
sold certain of the assets of SSP and its equity interest in SSP
resulting in a net pretax gain of $2.6 million which is included in
the 1995 Consolidated Statement of Income as gain on sale of
unconsolidated affiliate.
Showboat Australia Pty Limited (SA) was formed in 1994 and, along
with Leighton Properties Ltd. formed Sydney Harbour Casino Pty. Ltd.
(SHC), to apply for the exclusive full service casino license in
Sydney, Australia. The casino license was awarded to SHC in December
1994. SA invested approximately $100.0 million in SHC for a 26.3%
equity interest. SA also owns 85% of the company engaged to manage
the casino for a fee. SHC anticipates that it will commence gaming
operations in a temporary facility in September 1995 and that the
operations at the permanent facility will commence in early 1998. As
a result of the anticipated write-off of certain preopening and
development costs subsequent to the opening of the temporary casino,
the Company anticipates minimal contribution to its earnings in 1995
from the commencement of operations at the Sydney Harbour Casino.
-11- (continued)
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Quarter Ended March 31, 1995 Compared to Quarter Ended March 31, 1994
Revenues
Net revenues for the Company increased to $98.7 million in the
quarter ended March 31, 1995 compared to $88.4 million in the same
period in 1994, an increase of $10.3 million or 11.6%. Casino
revenues increased $9.9 million or 12.9% to $86.8 million in the
quarter ended March 31, 1995 from $76.9 million in 1994. Nongaming
revenues, which consist principally of food, beverage, room and
bowling revenues and management fees, were $20.4 million in the first
quarter of 1995 compared to $18.5 million in 1994.
The Atlantic City Showboat generated $80.9 million of net
revenues in the quarter ended March 31, 1995 compared to $66.3 million
in the same period in the prior year, an increase of $14.6 million or
22.1%. Casino revenues were $73.9 million in the three months ended
March 31, 1995 compared to $60.5 million in the same period in the
prior year, an increase of $13.4 million or 22.1%. The increase in
casino revenues was due primarily to an increase in slot machine
revenues of $10.4 million or 23.6% to $54.5 million in the three
months ended March 31, 1995 compared to $44.1 million in the same
period in the prior year. This increase compares to a 22.3% growth
in slot machine revenues in the Atlantic City market for the three
months ended March 31, 1995 over the same period in 1994. The mild
winter weather during the first quarter of 1995 was a factor in the
results for the Atlantic City market compared to the harsh winter
weather during the same period in the prior year. The favorable
comparison to the prior year at the Atlantic City Showboat is also the
result of the addition of 15,000 square feet of casino space
containing approximately 560 new slot machines in the second quarter
of 1994.
At the Las Vegas Showboat, net revenues decreased to $17.6
million in the quarter ended March 31, 1995 from $21.6 million in the
same period in 1994, a decrease of $4.0 million or 18.5%. Casino
revenues decreased to $12.9 million in the first quarter of 1994 from
$16.4 million in the first quarter of 1994, a decrease of $3.5 million
or 21.0%. The increased slot machine capacity on the Boulder Strip
continued to negatively impact revenues in the first quarter of 1995.
The Las Vegas Showboat has commenced an $18.5 million renovation
project that will require the closure of approximately 40% of its
casino space for up to six months. The Company expects the
construction to have a negative impact on revenues commencing in the
second quarter of 1995 and continuing through the end of the year.
-12- (continued)
Income From Operations
The Company's income from operations decreased to $7.4 million in
the quarter ended March 31, 1995 from $11.1 million in the same period
in 1994, a decrease of $3.7 million or 33.0%. Improvements at the
Atlantic City Showboat were offset by the cessation of operations of
SSP, lower results in Las Vegas and an increase in corporate and
development expenses. The Company incurred approximately $4.7 million
in corporate expenses and expenses relating to the pursuit of
expansion opportunities in jurisdictions outside of Nevada and New
Jersey in the first quarter of 1995 compared to $2.8 million in the
first quarter of 1994.
Atlantic City Showboat's income from operations, before
management fees, increased to $12.5 million in the first quarter of
1995 compared to $7.0 million for the same period in 1994, an increase
of $5.5 million or 77.1%. Operating expenses at the Atlantic City
Showboat increased $9.2 million or 15.5% to $68.4 million for the
three months ended March 31, 1995 compared to $59.2 million for the
same period in the prior year. Increases in operating expenses at the
Atlantic City Showboat primarily relate to increased casino capacity
and volume of business as a result of the expansion of the Atlantic
City facility. General and administrative expenses increased
primarily as a result of increased incentive compensation, higher
maintenance and utilities costs as a result of the expanded facility,
and increased property rent and real estate taxes. The Company's
operating margin increased to 15.4% in the quarter ended March 31,
1995 compared to 10.6% in the same period in 1994.
Income from operations, before management fees and intercompany
rent, at the Las Vegas Showboat declined to a $0.1 million loss in the
first quarter of 1995 from income of $2.8 million in the first quarter
of 1994, a decrease of $2.9 million. Operating expenses at the Las
Vegas Showboat declined to $17.6 million in the first quarter of 1995
compared to $18.7 million in the same period in 1994, a decrease of
$1.1 million or 5.7%. Although certain reductions in expenses were
realized as a result of the decrease in volume of business, increased
capacity on the Boulder Strip resulted in the continuation or increase
in certain promotional and marketing expenses.
-13- (continued)
The Company's Louisiana operations contribution to income from
operations declined to a $.2 million loss in the first quarter of 1995
compared to income of $4.0 million in the same period in 1994. This
decrease was due to the temporary shut down of operations of the
Showboat Star Casino in February and the permanent cessation of gaming
operations on March 9, 1995 due to certain legal issues relating to
dockside gaming operations in Orleans Parish. Additionally, during
the first quarter of 1995, in a series of unrelated transactions, the
Company sold certain of the assets of SSP and its equity interest in
SSP resulting in a net pretax gain of $2.6 million which is included
in the 1995 Consolidated Statement of Income as gain on sale of
unconsolidated affiliate.
Other (Income) Expense
Net interest expense increased to $6.2 million in the first
quarter of 1995 up from $5.4 million in the same period in 1994, an
increase of $0.8 million or 14.6%. This increase is primarily the
result of the issuance, on August 10, 1994, of $120.0 million of 13%
Senior Subordinated Notes due 2009. This increase was offset by a
$2.8 million increase in capitalized interest associated with the
construction of SHC's temporary casino in Sydney, Australia and a $.4
million increase in interest income.
Net Income
The Company recognized net income of $1.8 million for the quarter
ended March 31, 1995 or $.12 per share, compared to income of $3.4
million for the quarter ended March 31, 1994 or $.23 per share.
MATERIAL CHANGES IN FINANCIAL CONDITION
As of March 31, 1995 the Company held cash and cash equivalents
of $76.4 million compared to $90.4 million at December 31, 1994. On
March 3, 1995 the Company expended $25.0 million for the purchase of
the remaining 50% partnership interest of SSP not previously owned by
it. The purchase of the additional partnership interest was offset by
the receipt of $8.5 million in partnership distributions in the first
three months of 1995. On March 31, 1995, the Company sold all of its
interest in SSP for $52.0 million, subject to certain adjustments. On
April 2, 1995 the Company received $42.0 million of proceeds from the
sale of SSP and on April 7, 1995 received the balance of the proceeds
of $10.4 million.
-14- (continued)
During the quarter ended March 31, 1995 the Company expended
approximately $6.7 million on capital improvements at its Las Vegas
and Atlantic City facilities which were funded from operations. The
Company has commenced an $18.5 million renovation of its Las Vegas
facility. The construction project will require the closure of
approximately 40% of casino space for a period of up to six months
commencing in June 1995. As a result the Company anticipates that
revenues and results of operations at the Las Vegas facility will be
adversely impacted by business disruption during the construction
period.
At March 31, 1995, 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,
1995, the bank's prime rate was 9.0%. The line of credit expires in
August 1995. 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 March 31, 1995, ACSI had all the funds under this
line of credit available for use. The Company received a commitment
from a bank to replace its existing ACSI line of credit with a $25.0
million line of credit which may be used by the Company for general
corporate purposes. No assurance can be given that the Company will
be successful in obtaining this line of credit.
On May 18, 1993, the Company issued $275.0 million of 9 1/4%
First Mortgage Bonds due 2008 (Bonds). The Bonds are unconditionally
guaranteed by Showboat Operating Company (SOC), a wholly-owned
subsidiary of the Company, ACSI and Ocean Showboat, Inc. (OSI), a
wholly-owned subsidiary of the Company. The Bond Indenture was
amended in July, 1994. Interest on the Bonds is 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 Indenture for
the Bonds (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 that 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.
-15- (continued)
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 them in 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 pro forma 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 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 $75.0 million 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 $75.0 million 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
-16- (continued)
Non-Recourse Subsidiary provided that the aggregate amount of
Investments pursuant thereto does not exceed $125.0 million 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). Notwithstanding the
foregoing, the Company is only permitted to make investments in a
Controlled Entity only if from July 18, 1994 until December 31, 1996,
the Company's Fixed Charge Coverage Ratio for the Company's most
recently ended twelve months is greater than 1.5 to 1 and for the
period commencing after December 31, 1996 the Company's Fixed Charge
Coverage Ratio is greater than 1.75 to 1. For all other Restricted
Payments, other than a Regular Quarterly Dividend or a Restricted
Investment in a Subsidiary engaged in a Gaming Related Business, the
Company's most recently ended four full fiscal quarters, after giving
effect to such Restricted Payment must be greater than 2.25 to 1. As
of March 31, 1995, the Company's Fixed Charge Coverage Ratio was 2.37
to 1. Additionally, the Bond Indenture, as amended, permits the
Company to issue up to $150.0 million of debt (of which $120.0 million
has been issued) without compliance with the debt incurrence tests
stated therein.
On August 10, 1994 the Company issued $120.0 million of 13%
Senior Subordinated Notes due 2009 (Notes). 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
permits the issuance of an additional $30.0 million of Notes at the
discretion 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.
-17- (continued)
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. Further,
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.
In February, 1995, the Company formed Showboat Mardi Gras, L.L.C.
(SMGLLC) to own and operate, subject to licensing, a riverboat casino
near Kansas City, Missouri. SMGLLC will be 35% owned by the Company.
The Company has contributed $13.0 million to an escrow account for the
benefit of SMGLLC. Additional capital contributions, if needed, shall
be made by the partners of SMGLLC pro rata with their respective
interests. However, it is intended that the majority of financing for
the project, approximately $80.0 million, will be obtained by SMGLLC
through high yield debt and capital leases. No assurance can be
given that SMGLLC will be successful in obtaining funds to finance the
project or that SMGLLC will obtain a casino license.
The Company is a member of a partnership, the Indiana
Partnership, consisting of Showboat Indiana Investment Limited
Partnership, a wholly owned limited partnership (SII) and Waterfront
Entertainment and Development, Inc., an unrelated Indiana corporation
(Waterfront). The Indiana Partnership 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 $28.0 million to the
Indiana Partnership and will help the partnership obtain debt
financing of approximately $90.0 million for the construction of a
gaming vessel and related land site improvements. The Indiana
Partnership application for a casino license is expected to be
considered by the Indiana Gaming Commission in late 1995. Subject to
licensing, the Indiana Partnership shall commence gaming operations in
1996. No assurance can be given that the Indiana Partnership will be
successful in obtaining the necessary funds to finance its gaming
project or that the Indiana Partnership will successfully obtain a
casino gaming license.
-18- (continued)
In January 1995, the Company and Rockingham Venture, Inc., the
operator of Rockingham Park, a thoroughbred racetrack in New
Hampshire, entered into negotiations to finalize agreements to develop
and manage any additional gaming that may be authorized at Rockingham
Park. In connection therewith, the Company loaned Rockingham Venture,
Inc. $8.85 million, which loan is secured by a second mortgage on
Rockingham Park, in December 1994. At this time, casino gaming is not
permitted in the State of New Hampshire. No assurance can be given
that casino gaming legislation will be enacted in the State of New
Hampshire.
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. As the Company realizes expansion
opportunities, the Company shall make significant capital investments
in such opportunities and additional financing will be required. The
Company anticipates that additional funds shall be obtained through
loans or a public offering of equity or debt securities.
-19-
SHOWBOAT, INC. AND SUBSIDIARIES
PART II, OTHER INFORMATION
ITEM 1. Legal Proceedings.
"Darling Harbour Casino Limited v. New South Wales
Control Authority, New South Wales Minister for Planning"
On April 21, 1995, the Land and Environment Court of
the State of New South Wales, Australia dismissed proceedings
which had been initiated by Darling Harbour Casino Limited in
the Land & Environment Court of the State of New South Wales,
Australia, case numbers 40277 of 1994 and 402309 of 1994,
which were instituted against the New South Wales Casino
Control Authority, the New South Wales Minister of Planning
and Sydney Harbour Casino Pty Limited (SHC). The Company owns
26.3% of the equity of SHC.
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 on Reports on Form 8-K
(a) Exhibits
None
(b) Current Report on Form 8-K, Item 5, dated April 20,
1995, reporting the sale of 100% of the partnership
interests of the Showboat Star Partnership, a
Louisiana general partnership wholly-owned by Lake
Pontchartrain Showboat, Inc. and Showboat Louisiana,
Inc. to Players Riverboat L.L.C., a Louisiana
limited liability company and Players Riverboat
Management, Inc., a Nevada corporation for $520
million, subject to adjustment.
-20-
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 15, 1995
--------------------- -----------------------------------
H. GREGORY NASKY, Executive Vice
President and Secretary
Date: May 15, 1995
--------------------- -----------------------------------
LEANN SCHNEIDER, Vice President -
Finance and Chief Financial Officer
-21-
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