UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
XX QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----EXCHANGE ACT OF 1934
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
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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 the latest practicable date.
Common Stock - $1 Par Value 15,528,415 shares outstanding
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SHOWBOAT, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1995 and December 31, 1994 1-2
Consolidated Statements of Income -
For the nine months ended September 30,
1995 and 1994 3-4
Consolidated Statements of Income -
For the three months ended September 30,
1995 and 1994 5-6
Consolidated Statements of Shareholders'
Equity - For the nine months ended
September 30, 1995 and year ended
December 31, 1994 7
Consolidated Statements of Cash Flows -
For the nine months ended September 30,
1995 and 1994 8-9
Notes to Consolidated Financial
Statements 10-12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 13-24
PART II
OTHER INFORMATION
ITEMS 1 - 6 25-31
SIGNATURES 32
Item 1. Financial Statements
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
SEPTEMBER 30, DECEMBER 31,
ASSETS 1995 1994
-------- ----------- -----------
(In thousands)
Current assets:
Cash and cash equivalents $125,594 $90,429
Receivables, net 8,645 8,890
Inventories 2,605 2,591
Prepaid expenses 5,737 4,736
Investment in unconsolidated affiliate
held for sale - 30,346
Current deferred income taxes 9,197 6,529
----------- -----------
Total current assets 151,778 143,521
----------- -----------
Property and equipment 530,024 506,199
Less accumulated depreciation
and amortization 187,365 168,531
----------- -----------
342,659 337,668
----------- -----------
Other assets, at cost:
Investments in unconsolidated affiliates 120,154 108,853
Deposits and other assets 25,716 22,537
Debt issuance costs, net of accumulated
amortization of $1,590,000 at September 30
1995 and $955,000 at December 31, 1994 11,010 11,112
----------- -----------
156,880 142,502
----------- -----------
$651,317 $623,691
=========== ===========
See accompanying notes to consolidated financial statements.
-1- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(continued)
SEPTEMBER 30, DECEMBER 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
-------------------------------------- ----------- -----------
(In thousands)
Current liabilities:
Current maturities of long-term debt $21 $19
Accounts payable 10,230 11,059
Income taxes payable 5,582 4,562
Dividends payable 388 384
Accrued liabilities 40,136 34,286
----------- -----------
Total current liabilities 56,357 50,310
----------- -----------
Long-term debt, excluding current maturities 392,281 392,016
----------- -----------
Other liabilities 4,892 5,144
----------- -----------
Deferred income taxes 23,287 18,760
----------- -----------
Minority interest 1,824 -
----------- -----------
Shareholders' equity:
Common stock, $1 par value, 50,000,000
shares authorized, 15,794,578 shares
issued at September 30, 1995 and
December 31, 1994 15,795 15,795
Additional paid-in capital 77,975 76,845
Retained earnings 82,219 68,809
----------- -----------
175,989 161,449
Foreign currency translation adjustment 1,336 3,490
Cost of common stock in treasury,
266,163 shares at September 30, 1995 and
425,823 shares at December 31, 1994 (2,103) (3,364)
Unearned compensation for restricted stock (2,546) (4,114)
----------- -----------
Total shareholders' equity 172,676 157,461
----------- -----------
$651,317 $623,691
=========== ===========
See accompanying notes to consolidated financial statements.
-2-
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(In thousands except share and per share data)
1995 1994
----------- -----------
Revenues:
Casino $292,838 $265,946
Food and beverage 41,425 38,192
Rooms 19,282 15,248
Sports and special events 2,957 3,166
Management fees 190 1,529
Other 3,938 4,686
----------- -----------
360,630 328,767
Less promotional allowances 30,518 24,709
----------- -----------
Net revenues 330,112 304,058
----------- -----------
Costs and expenses:
Casino 135,108 126,733
Food and beverage 24,955 26,810
Rooms 6,394 5,970
Sports and special events 2,506 2,537
General and administrative 88,833 82,456
Selling, advertising and promotion 7,693 7,951
Depreciation and amortization 23,909 20,680
----------- -----------
289,398 273,137
----------- -----------
Income from operations from consolidated
subsidiaries 40,714 30,921
Equity in income (loss) of unconsolidated
affiliate (22) 11,470
----------- -----------
Income from operations 40,692 42,391
----------- -----------
-3- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(In thousands except share and per share data)
(continued)
1995 1994
----------- -----------
Income from operations $40,692 $42,391
----------- -----------
Other (income) expense:
Interest income (4,547) (2,833)
Interest expense 32,019 22,582
Interest capitalized (9,916) (2,202)
Foreign currency gain (267) -
Gain on sale of unconsolidated affiliate (2,558) -
----------- -----------
14,731 17,547
----------- -----------
Income before income taxes 25,961 24,844
Income tax expense 11,393 10,135
----------- -----------
Net income $14,568 $14,709
=========== ===========
Weighted average shares outstanding 15,548,448 15,461,490
Income per common and equivalent share $0.94 $0.95
=========== ===========
See accompanying notes to consolidated financial statements.
-4-
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(In thousands except share and per share data)
1995 1994
----------- -----------
Revenues:
Casino $106,741 $99,588
Food and beverage 15,057 14,155
Rooms 7,149 5,907
Sports and special events 1,012 1,080
Management fees - 447
Other 1,385 1,580
----------- -----------
131,344 122,757
Less promotional allowances 11,775 9,526
----------- -----------
Net revenues 119,569 113,231
----------- -----------
Costs and expenses:
Casino 46,871 45,699
Food and beverage 8,905 9,468
Rooms 2,047 1,939
Sports and special events 880 931
General and administrative 31,706 31,226
Selling, advertising and promotion 2,520 2,800
Depreciation and amortization 7,646 7,484
----------- -----------
100,575 99,547
----------- -----------
Income from operations from consolidated
subsidiaries 18,994 13,684
Equity in income of unconsolidated
affiliate - 3,578
----------- -----------
Income from operations 18,994 17,262
----------- -----------
-5- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(In thousands except share and per share data)
(continued)
1995 1994
----------- -----------
Income from operations $18,994 $17,262
----------- -----------
Other (income) expense:
Interest income (1,657) (1,308)
Interest expense 10,768 9,310
Interest capitalized (3,349) (850)
Foreign currency gain (267) -
----------- -----------
5,495 7,152
----------- -----------
Income before income taxes 13,499 10,110
Income tax expense 5,673 4,195
----------- -----------
Net income 7,826 5,915
=========== ===========
Weighted average shares outstanding 15,730,786 15,488,979
Income per common and equivalent share $0.50 $0.38
=========== ===========
See accompanying notes to consolidated financial statements.
-6-
<TABLE>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' E
(unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30
AND YEAR ENDED DECEMBER 31, 1994
<CAPTION>
Cumulative
foreign
Additional currency
Common paid-in Retained translation
stock capital earnings adjustment
--------- --------- ---------- -----------
(In thousands
<S> <C> <C> <C> <C>
Balance, January 1, 1994 $15,795 $71,162 $54,628 $ -
Net income - - 15,699 -
Cash dividends
($.10 per share) - - (1,518) -
Issuance of warrants - 1,953 - -
Share transactions under
stock plans - 3,730 - -
Amortization of unearned
compensation - - - -
Foreign currency translation
adjustment - - - 3,490
--------- --------- ---------- -----------
Balance, December 31, 1994 15,795 76,845 68,809 3,490
Net income - - 14,568 -
Cash dividends
($.075 per share) - - (1,158) -
Share transactions under
stock plans - 1,130 - -
Amortization of unearned
compensation - - - -
Foreign currency translation
adjustment - - - (2,154)
--------- --------- ---------- -----------
Balance, September 30, 1995 $15,795 $77,975 $82,219 $1,336
========= ========= ========== ===========
See accompanying notes to consolidated financ
-7-
</TABLE>
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
1995 1994
----------- -----------
(In thousands)
Cash flows from operating activities:
Net income $14,568 $14,709
Adjustments to reconcile net income to
net cash provided by operating activities:
Allowance for doubtful accounts 1,241 592
Depreciation and amortization 23,909 20,680
Amortization of discount on debt and
debt issuance costs 917 521
Provision for deferred income taxes 3,019 1,804
Provision for loss on Casino Reinvestment
Development Authority obligation 924 920
Amortization of unearned compensation 1,935 1,151
Gain on sale of unconsolidated affiliate (2,558) -
(Undistributed) distributed earnings of
unconsolidated affiliate 8,362 (4,544)
Increase in receivables, net (1,326) (6,864)
Increase in inventories and
prepaid expenses (1,015) (1,804)
(Increase) decrease in deposits and
other assets 563 (1,224)
Decrease in accounts payable (537) (314)
Increase in income taxes payable 1,507 1,333
Increase in accrued liabilities 3,541 11,455
Other 458 136
----------- -----------
Net cash provided by operating activities 55,508 38,551
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (28,812) (61,567)
Proceeds from sale of equipment 288 204
Deposit for Casino Reinvestment
Development Authority obligation (2,721) (2,489)
Casino Reinvestment Development Authority
investment credit - 2,672
Restricted cash - (100,000)
Investment in unconsolidated affiliates (39,163) (9,000)
Proceeds from sale of unconsolidated
affiliate 51,366 -
Advances to unconsolidated affiliates (3,340) -
Repayments of advances to unconsolidated
affiliates 3,928 -
Increase in deposits and other assets (3,615) -
Other (42) -
----------- -----------
Net cash used in investing activities (22,111) (170,180)
----------- -----------
-8- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(continued)
1995 1994
----------- -----------
(In thousands)
Cash flows from financing activities:
Principal payments of long-term debt and
capital lease obligations ($15) ($3,491)
Proceeds from issuance of long-term debt - 120,000
Debt issuance costs (533) (4,388)
Payment of dividends (1,154) (1,125)
Distribution to bond holders - (5,176)
Proceeds from employee stock option exercises 1,767 528
Minority interest contributions 1,824 -
----------- -----------
Net cash provided by (used in)
financing activities 1,889 106,348
----------- -----------
Effect of exchange rate changes on cash (121) -
----------- -----------
Net increase (decrease) in cash and
cash equivalents 35,165 (25,281)
Cash and cash equivalents at
beginning of period 90,429 122,787
----------- -----------
Cash and cash equivalents at end of period $125,594 $97,506
=========== ===========
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $18,337 $13,199
Income taxes 6,867 6,998
Supplemental schedule of noncash investing
and financing activities:
Decrease in construction contracts and
retentions payable (604) (1,185)
Share transactions under long-term incentive
plan 617 6,122
Transfer deposits to property and equipment 777 (458)
Warrants granted for loan commitment - 1,953
Accumulated benefit obligations of the Supplemental
Executive Retirement Plan - 3,799
Foreign currency translation adjustment (2,154) -
Net liabilities of unconsolidated
affiliate assumed 1,824 -
See accompanying notes to consolidated financial statements.
-9-
SHOWBOAT, INC. AND SUBSIDIARIES
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, and convention facilities. On
September 13, 1995, the Sydney Harbour Casino commenced gaming
operations in Sydney, Australia. The Company, through its wholly
owned subsidiary, Showboat Australia Pty. Ltd. (SA), owns
approximately 26% of Sydney Harbour Casino Holdings Limited, the
parent corporation of the casino licensee, the Sydney Harbour
Casino Pty. Limited (SHC). SA also owns 85% of the manager of the
Sydney Harbour Casino. The Company also owns a 55.0% interest in a
general partnership formed to operate a riverboat casino in East
Chicago, Indiana and an 80% interest in a limited partnership
formed to operate a riverboat and dockside gaming facility in
Lemay, Missouri. Gaming applications for the Indiana and
Missouri projects are pending and gaming operations cannot
commence until such applications are affirmatively acted upon by
the respective regulatory agency.
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.
-10- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenues & Promotional Allowances
Casino revenues represent the net win from gaming wins and
losses. Revenues include the retail value of room, food, beverage
and other goods and services provided to customers without charge.
Such amounts are then deducted as promotional allowances. The
estimated cost of providing these promotional allowances was
charged to the casino department in the following amounts:
Nine Months Ended
September 30,
-----------------------
1995 1994
----------- -----------
Food and beverage 20,063 17,101
Room 5,314 4,149
Other 1,091 1,712
----------- -----------
Total 26,468 22,962
=========== ===========
Reclassifications
Certain prior period balances have been reclassified to
conform to the current period's presentation.
2. LONG-TERM DEBT
Long-term debt consists of the following:
September 30, December 31,
1995 1994
----------- -----------
(In thousands)
9 1/4% First Mortgage Bonds due 2008 $270,274 $269,992
13% Senior Subordinated Notes due 2009 120,000 120,000
Capitalized lease obligations 2,028 2,043
----------- -----------
392,302 392,035
Less current maturities 21 19
----------- -----------
$392,281 $392,016
=========== ===========
-11- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. LONG-TERM DEBT (continued)
On August 4, 1995, the Company obtained a two year secured line of
credit for general working capital purposes totaling $25.0
million. At the end of the two year term, the line of credit may
convert to a three year term loan. The bank received security
pari passu with the holders of the Company's $275.0 million 9 1/4%
First Mortgage Bonds due 2008. Interest is payable monthly at the
bank's prime rate plus .5% or LIBOR plus 2.5% at the election of
the Company. The interest rate charged at the date the line of
credit is converted to a term loan will be the bank's prime rate
plus 1.0% or the fixed rate designated by the bank at the election
of the Company. In the event the line of credit is utilized for
equity investments in or loans to entities constituting new
projects, the Company will be required to pay the bank a fee equal
to .75% of the advance. As of September 30, 1995, all the funds
under this line of credit were available for use by the Company.
This line of credit replaced the Atlantic City Showboat's unsecured
line of credit which expired in August of 1995.
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 the Company's total equity interest in SSP
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 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.
-12-
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, Atlantic
City, New Jersey and until March 9, 1995, in New Orleans, Louisiana.
In addition, the Company operates support services including hotel,
restaurant, bar, and convention facilities. On September 13, 1995,
the Sydney Harbour Casino commenced gaming operations in Sydney,
Australia. The Company, through its wholly owned subsidiary, Showboat
Australia Pty. Ltd. (SA), owns approximately 26% of Sydney Harbour
Casino Holdings Limited, the parent corporation of the casino
licensee, the Sydney Harbour Casino Pty Limited (SHC). SA also owns
85% of the manager of the Sydney Harbour Casino. The Company also owns
a 55.0% interest in a general partnership formed to operate a
riverboat casino in East Chicago, Indiana and an 80% interest in a
limited partnership formed to operate a riverboat and dockside gaming
facility in Lemay, Missouri. Gaming applications for the Indiana and
Missouri projects are pending and gaming operations cannot commence
until such applications are affirmatively acted upon by the respective
regulatory agency.
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.
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
the Company's total equity interest in SSP 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 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.
-13- (continued)
GENERAL (continued)
SA was formed in 1994 and, along with Leighton Properties Ltd.
formed 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 for a 26.3% equity
interest in Sydney Harbour Casino Holdings Limited (SHCH) which owns
100% of SHC. SA also owns 85% of the company engaged to manage the
casino for a fee. The Company has agreed to forego approximately
$14.1 million in fees due under the management agreement. SHC
commenced gaming operations on September 13, 1995 in a 60,000 square
foot interim casino. SHC opened with very little or no marketing. In
spite of this, table games revenues are meeting expectations although
slot and food revenues are behind forecast. In response, SHC has
commenced certain marketing programs. SHC is scheduled to open its
permanent facility in early 1998. The company's equity in earnings
of SHC's operations has been reduced to zero due to the write-off of
certain preopening and development costs. The Company does not
anticipate any contribution to earnings from SA or SHC in 1995 due to
the write-off of preopening and development costs and the foregone
management fees.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Quarter Ended September 30, 1995 Compared to Quarter Ended
September 30, 1994
Revenues
Net revenues for the Company increased to $119.5 million in the
quarter ended September 30, 1995 compared to $113.2 million in the same
period in 1994, an increase of $6.3 million or 5.6%. Casino revenues
increased $7.1 million or 7.2% to $106.7 million in the quarter ended
September 30, 1995 from $99.6 million in the same period in 1994.
Nongaming revenues, which consist principally of food, beverage, room
and bowling revenues and management fees, were $24.6 million in the
third quarter of 1995 compared to $23.2 million in 1994.
-14- (continued)
The Atlantic City Showboat generated $107.3 million of net
revenues in the quarter ended September 30, 1995 compared to $93.3
million in the same period in the prior year, an increase of $14.0
million or 15.1%. Casino revenues were $98.4 million in the three
months ended September 30, 1995 compared to $85.1 million in the same
period in the prior year, an increase of $13.3 million or 15.6%. The
increase in casino revenues was due primarily to an increase in slot
machine revenues of $9.7 million or 15.2% to $73.5 million in the
quarter ended September 30, 1995 compared to $63.8 million in the same
period in the prior year. This increase compares to a 9.5% growth in
slot machine revenues in the Atlantic City market for the quarter ended
September 30, 1995. The favorable comparison to the prior year is also
the result of the addition of 200 slot machines in May of 1995, which
were targeted toward high end slot players, and the increased hotel
room capacity. The Atlantic City Showboat also increased
its table game revenues by $3.8 million or 18.7% to $24.1
million for the quarter ended September 30, 1995 compared to $20.3
million for the same period in the prior year.
The Las Vegas Showboat realized net revenues of $12.3 million in the
quarter ended September 30, 1995, as compared to $19.5 million in the
same period in 1994, a decrease of $7.2 million or 37.2%. Casino
revenues decreased to $8.4 million in the third quarter of 1995 from
$14.5 million in the third quarter of 1994, a decrease of $6.1 million
or 42.3%. The renovation project at the Las Vegas Showboat
which commenced in late June of 1995 and the increased competition
on the Boulder Strip continued to negatively impact revenues
in the third quarter of 1995. The casino capacity at the
Las Vegas Showboat has been reduced approximately 40% due to
the construction. The renovation is expected to be completed by
the end of the year. It is anticipated that the construction will
continue to adversely affect revenue through the remainder of 1995.
Income From Operations
The Company's income from operations increased to $19.0 million
in the quarter ended September 30, 1995 from $17.3 million in the same
period in 1994, an increase of $1.7 million or 10.0%. Improvements at
the Atlantic City Showboat were offset by the cessation of operations
of SSP and lower results at the Las Vegas Showboat. In addition, the
Company incurred approximately $5.3 million in corporate expenses and
expenses relating to the pursuit of expansion opportunities in
jurisdictions outside of Nevada and New Jersey in the third quarter of
1995 compared to $5.9 million in the third quarter of 1994.
-15- (continued)
Atlantic City Showboat's income from operations, before
management fees, increased to $26.7 million in the third quarter of
1995 compared to $19.3 million in the same period in 1994, an increase
of $7.4 million or 38.7%. Operating expenses at the Atlantic City
Showboat increased $6.6 million or 8.9% to $80.6 million in the three
months ended September 30, 1995 compared to $74.0 million in 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 utility costs as a result of the expanded facility,
and increased property rent and real estate taxes. The Atlantic City
Showboat's operating margin increased to 24.9% in the quarter ended
September 30, 1995 compared to 20.7% in the same period in 1994.
For the quarter ended September 30, 1995, the Las Vegas Showboat
had a loss from operations, before management fees and intercompany
rent, of $2.4 million compared to income of $0.1 million in the same
period in 1994. Operating expenses at the Las Vegas
Showboat declined to $14.6 million in the third quarter of 1995
compared to $19.4 million in the same period in 1994, a decrease of
$4.8 million or 24.4%. Results at the Las Vegas Showboat were
adversely impacted on a broad scale by the closure of approximately 40%
of total casino floor space, the disruption to the guest experience
caused by a major casino renovation project which commenced in July
1995, and the increased competition on the Boulder Strip. The
renovation project is scheduled to be completed by the end of the year.
Other (Income) Expense
Net interest expense decreased to $5.8 million in the third
quarter of 1995 down from $7.2 million in the same period in 1994, a
decrease of $1.4 million or 19.4%. Although interest expense net of
interest income increased by $1.1 million during the quarter,
capitalized interest increased by $2.5 million resulting in an overall
decrease in net interest expense. The increase in interest expense
is primarily the result of the issuance, on August 10, 1994, of $120.0
million of 13% Senior Subordinated Notes due 2009. The increase
in the capitalized interest is due primarily to the construction by SHC
of its interim and permanent casino facilities in Sydney, Australia.
Net Income
The Company realized net income of $7.8 million or $.50 per share
in the quarter ended September 30, 1995 compared to net income of $5.9
million or $.38 per share in the quarter ended September 30, 1994.
-16- (continued)
Nine Months Ended September 30, 1995 Compared to Nine Months
Ended September 30, 1994
Net revenues for the Company increased to $330.1 million in the
nine months ended September 30, 1995 compared to $304.1 million in the
same period in 1994, an increase of $26.0 million or 8.6%. Casino
revenues increased $26.9 million or 10.1% to $292.8 million in the
nine months ended September 30, 1995 from $265.9 million in the same
period in 1994. Nongaming revenues, which consist principally of food,
beverage, room and bowling revenues and management fees, were $67.8
million in the nine months ended September 30, 1995 compared to $62.8
million in the same period in 1994.
The Atlantic City Showboat generated $283.2 million of net
revenues in the nine months ended September 30, 1995 compared to $240.6
million in the same period in the prior year, an increase of $42.6
million or 17.7%. Casino revenues were $259.0 million in the nine
months ended September 30, 1995 compared to $219.5 million in the same
period in the prior year, an increase of $39.5 million or 18.0%. The
increase in casino revenues was due primarily to an increase in slot
machine revenue of $29.4 million and an increase in table game revenue
of $10.0 million compared to the same period in the prior year. The
favorable comparison to the prior year is the result of the addition
of 15,000 square feet of casino space with approximately 560 new
slot machines that opened in May 1994, the increased hotel room
capacity in November 1994, and the addition of 200 slot machines in
May 1995. Also contributing to the increase in revenues was the mild
winter weather during the first quarter of 1995 compared to the harsh
winter weather during the same period in the prior year. At the
Atlantic City Showboat, slot machine revenues were 74.2% of total
casino revenues in the nine months ended September 30, 1995 and 1994.
At the Las Vegas Showboat, net revenues decreased to $46.7
million in the nine months ended September 30, 1995 from $61.9 million
in the same period in 1994, a decrease of $15.2 million or 24.6%.
Casino revenues decreased to $33.9 million in the nine months ended
September 30, 1995 from $46.4 million in the same period of 1994, a
decrease of $12.5 million or 27.1%. The renovation project which
commenced in late June 1995 and the increased competition on the
Boulder Strip continued to negatively impact revenues in the first nine
months of 1995. The Casino capacity at the Las Vegas Showboat has been
reduced by approximately 40% during the construction period which is
expected to be completed by the end of the year. It is anticipated
that the construction will continue to adversely affect revenue
through the remainder of 1995.
-17- (continued)
Income From Operations
The Company's income from operations decreased to $40.7 million
in the nine months ended September 30, 1995 from $42.4 million in the
same period in 1994, a decrease of $1.7 million or 4.0%. This decrease
is primarily due to the cessation of operations in Louisiana due to the
Company's sale of its equity interest in SSP, lower results in Las
Vegas, and an increase in corporate and development expenses. These
decreases were partially offset by the improved performance at the
Atlantic City Showboat.
Atlantic City Showboat's income from operations, before
management fees, increased to $58.3 million in the nine months ended
September 30, 1995 compared to $38.9 million in the same period in 1994,
an increase of $19.4 million or 50.0%. Operating expenses at the
Atlantic City Showboat increased $23.2 million or 11.5% to $224.9
million in the nine months ended September 30, 1995 compared to $201.7
million in 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 and real estate taxes. The Atlantic
City Showboat's operating margin increased to 20.6% in the nine months
ended September 30, 1995 compared to 16.2% in the same period in 1994.
For the nine months ended September 30, 1995, the Las Vegas Showboat
had a loss from operations, before management fees and intercompany
rent, of $2.1 million compared to income of $4.9 million in the same
period in 1994. Operating expenses declined to $48.8 million in the
nine months ended September 30, 1995 compared to $57.0 million in the
nine months ended September 30, 1994, a decrease of $8.2 million or
14.4%. Reductions in expenses were realized as a result of the decrease
in volume of business, however, the increased competition on the Boulder
Strip resulted in the continuation of certain promotional and marketing
programs which negatively affected the overall operating results.
Other (Income) Expense
Other expense decreased to $14.7 million in the nine months ended
September 30, 1995 compared to $17.5 million in the same period in
1994, a decrease of $2.8 million or 16.0%. Contributing to this
decrease was the gain on sale of unconsolidated affiliate of $2.6
million and a foreign currency gain of $0.3 million. Net interest
expense for the nine months ended September 30, 1995 and September 30,
1994 was $17.5 million. Interest expense net of interest income
increased by $7.7 million during the nine months ended September 30,
1995 as compared to the prior period, but capitalized interest also
increased by $7.7 million. The increase in interest expense is
primarily the result of the issuance, on August 10, 1994, of $120.0
million of 13% Senior Subordinated Notes due 2009. The increase in
capitalized interest is due primarily to the construction by SHC of its
interim and permanent casino facilities in Sydney, Australia.
-18- (continued)
Income Taxes
The Company's effective income tax rate increased to 43.9% in the
nine months ended September 30, 1995 compared to 40.8% in the nine
months ended September 30, 1994, an increase of 3.1%. This increase is
primarily due to an increase in state income taxes. The Company has
utilized all of its previous state net operating loss carryforward's
and is in a state taxable position.
Net Income
The Company realized net income of $14.6 million or $.94 per share
in the nine months ended September 30, 1995 compared to net income of
$14.7 million or $.96 per share in the nine months ended
September 30, 1994.
MATERIAL CHANGES IN FINANCIAL CONDITION
As of September 30, 1995, the Company held cash and cash equivalents
of $125.6 million compared to $90.4 million at December 31, 1994. On
March 31, 1995, the Company sold all of its interest in SSP which
resulted in net proceeds available to the Company of approximately
$34.7 million.
During the nine months ended September 30, 1995 the Company expended
approximately $28.8 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 required closure of approximately
40% of the casino space for a period of up to six months commencing at
the end of June 1995. The Las Vegas renovation is being funded from
available cash. The Company expects the results of operations at the
Las Vegas facility will continue to be adversely impacted by business
disruption during the construction period.
On August 4, 1995, the Company obtained a two year secured line
of credit for general working capital purposes totaling $25.0 million.
At the end of the two year term, the line of credit may convert to a
three year term loan. The bank received security pari passu with the
holders of the Company's $275.0 million 9 1/4% First Mortgage Bonds due
2008. Interest is payable monthly at the bank's prime rate plus .5% or
LIBOR plus 2.5% at the election of the Company. The interest rate
charged at the date the line of credit is converted to a term loan will
be the bank's prime rate plus 1% or the fixed rate designated by the
bank at the election of the Company. In the event the line of credit
is utilized for equity investments in or loans to entities constituting
new projects, the Company will be required to pay the bank a fee equal
to .75% of the advance. As of September 30, 1995, all the funds under
this line of credit are available for use by the Company. This line of
credit replaced the Atlantic City Showboat's unsecured line of credit
which expired in August of 1995.
-19- (continued)
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, a wholly-owned subsidiary of
the Company, (SOC), Ocean Showboat, Inc., a wholly-owned subsidiary
of the Company, (OSI), and Atlantic City Showboat, Inc. (ACSI), a
wholly-owned subsidiary of OSI. 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
than certain assets), by a pledge of all outstanding shares of capital
stock of OSI, an intercompany note by ACSI in favor of the Company 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 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 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,
-20- (continued)
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
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 permitted to make investments in Controlled
Entities 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 Fixed
Charge Coverage Ratio for the most recently ended four full fiscal
quarters, after giving effect to such Restricted Payment must be
greater than 2.25 to 1. As of September 30, 1995, the Company's Fixed
Charge Coverage Ratio was 3.40 to 1. Additionally, the Bond
Indenture, as amended, permits the Company to issue up to $150.0
million of additional Indebtedness (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.
-21- (continued)
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 is actively pursuing potential gaming opportunities
in certain jurisdictions where gaming is legalized, as well as
jurisdictions where gaming is not yet, but is expected soon to
be legalized. There can be no assurance that gaming legislation 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, with an unrelated corporation,
formed Showboat Mardi Gras, L.L.C. (SMGLLC) to own and operate,
subject to licensing, a riverboat casino near Kansas City, Missouri.
SMGLLC is 35%-owned by the Company. In May 1995, the Missouri Gaming
Commission selected the applicants for the then current available
gaming licenses in Kansas City. SMGLLC was not selected and is
currently seeking a buyer for its riverboat. The Company has
contributed approximately $4.5 million to SMGLLC for the completion of
the riverboat, costs incurred in the licensing process and other general
and administrative expenses. SMGLLC is currently completing the
construction of the riverboat and intends to sell the riverboat.
Although additional contributions may be required from the Company in
order for SMGLLC to complete the riverboat, the Company will
receive a portion of the proceeds upon sale of the assets of SMGLLC.
The Company is evaluating whether to purchase the riverboat from
SMGLLC for the Company's opportunity in Lemay, Missouri. If the Company
does not acquire the riverboat from SMGLLC, the Company will write-off
approximately $1.5 million, or $.06 per share, in order to write-
down its investment in SMGLLC to its net realizable value.
-22- (continued)
The Company is a member of a partnership, Showboat Marina
Partnership (Indiana Partnership), consisting of Showboat Indiana
Investment Limited Partnership, a limited partnership owned by the
Company (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. The Company anticipates that it will
contribute approximately $35.0 million to the Indiana Partnership in a
combination of debt and equity of which $6.4 million has been funded as
of September 30, 1995. The Company will help the partnership obtain
debt financing for the construction of a gaming vessel and related land
site improvements. Licensing hearings for the Indiana Partnership's
gaming application were scheduled for October 1995. However, on
October 17, 1995, a complaint was filed against the Indiana Gaming
Commission seeking a preliminary injunction and a temporary restraining
order to enjoin the Indiana Gaming Commission from conducting a
hearing on the Partnership's application. The complaint alleges that
the City of East Chicago failed to hold an open public bidding process
in selecting its applicant, and that such failure is in conflict with
the Indiana gaming laws. On October 19, 1995, the Indiana Gaming
Commission commenced the hearing on the application, but was served
with a temporary restraining order and halted the proceedings. A final
decision has not been reached in this matter. Neither the Indiana
Partnership nor the Company are parties to the litigation and it is
not known when this matter will be completed. Further, the Indiana
Partnership's site location and improvements have not received
approval from the Army Corp of Engineers. The City of East Chicago
has resubmitted its application for the site location and improve-
ments and is awaiting approval from the Army Corp of Engineers. No
assurance can be given that the Indiana Partnership will be successful
in obtaining the necessary funds to finance its gaming project, that
the Indiana Partnership will successfully obtain a casino license or
that the approvals will be received from the Army Corp of Engineers.
In July 1995, the Company and Rockingham Venture, Inc., which owns
the Rockingham Park, a thoroughbred racetrack in New Hampshire, entered
into agreements to develop and manage any additional gaming that may
be authorized at Rockingham Park. In December 1994, the Company loaned
Rockingham Venture, Inc. $8.85 million, which loan is secured by
a second mortgage on Rockingham Park. 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 or, if enacted, such legislation will authorize
casino gaming at Rockingham Park.
The Company through its subsidiary, Showboat Lemay, Inc., has an
80% general partner interest in Southboat Limited Partnership
(Southboat) which, subject to licensing, plans to build and operate a
riverboat and dockside gaming facility on the Mississippi River in
Lemay, Missouri. On June 1, 1995, the St. Louis County Council named
Southboat as the preferred developer/operator for the gaming facility
and on October 13, 1995, Southboat executed a 99 year lease with the
-23- (continued)
St. Louis County Port Authority for development and operation of a
dockside gaming facility in Lemay, Missouri. On October 17, 1995,
Southboat filed its application for a gaming license with the Missouri
Gaming Commission. Southboat Limited Partnership has entered into a
commitment letter to receive up to $75.0 million of financing for the
construction of a riverboat and related site improvements subject to
certain conditions. The Company expects to contribute approximately
$20.0 million to Southboat. No assurance can be given that Southboat
will be successful in obtaining the necessary funds to finance its
gaming project or that the Partnership will successfully obtain a
casino license.
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 public offerings of equity or debt securities.
-24-
SHOWBOAT, INC. AND SUBSIDIARIES
PART II, OTHER INFORMATION
ITEM 1. Legal Proceedings.
"Darling Harbour Casino Limited ("DHCL") vs. New South Wales
Casino Control Authority, New South Wales Minister for
Planning", Case No. 40227/94 and 40230/94, instituted in
December 1994, in the Land and Environment Court of the State
of New South Wales, Australia. On August 18, 1995, DHCL lodged
an appeal with the Court of Appeals of the Supreme Court of
New South Wales against the April 21, 1995 decision of the
Land and Environmental Court which dismissed this
proceeding. This legal proceeding is more fully discussed in
the Company's Form 10-Q, Part II, Item 1 "Legal Proceedings"
for the three months ended March 31, 1995.
"DHCL vs. New South Wales Casino Control Authority, Sydney
Harbour Casino Pty Limited and Cheif Secretary and Minister
for Administrative Services", Case No. 30091 of 1994,
instituted in the Supreme Court of New South Wales, Sydney
Registry, Administrative Law Division, in December 1994. On
November 8, 1995, the Court of Appeals of the Supreme Court
of New South Wales dismissed the action filed by DHCL to
revoke the issuance of the casino license to Sydney Habour
Casino Pty Limited on December 14, 1994. DHCL has a period of
21 days to file a notice of appeal to the High Court of
Australia. This legal proceeding is more fully discussed in
the Company's Form 10-K, Part I, Item 3 "Legal Proceedings"
for the year ended December 31, 1994.
"Edward H. Egipiaco (Egipiaco) v. Indiana Gaming
Commission", Case No. 45C01-95-10-MI01845, instituted on
October 17, 1995 in the Circuit Court for Lake County, Indiana.
Egipiaco filed a complaint (the Egipiaco Complaint) on behalf
of himself and the residents of the City of East Chicago
requesting a preliminary injunction to enjoin the Indiana
Gaming Commission from conducting a hearing on the Indiana
Partnership's application for the sole riverboat casino
license in East Chicago, Indiana, and from issuing a
Certificate of Suitability to the Indiana Partnership. The
Egipiaco Complaint alleges that the City of East Chicago failed
to hold an open public bidding process in selecting its
applicant, and such failure is in conflict with Indiana gaming
laws. On October 19, 1995, the Indiana Gaming Commission
commenced the hearing on the East Chicago application, but was
served with a temporary restraining order and halted the
proceedings. A final decision has not been reached in this
matter, but because neither the Company nor the Indiana
Partnership is a party to the litigation it is not known when
this matter will be completed. While neither the Company nor
the Indiana Partnership is a party to the
-25- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
PART II, OTHER INFORMATION
(continued)
Egipiaco Complaint, an unfavorable outcome of such litigation
would have a material adverse effect on the Indiana
Partnership and its proposed riverboat casino project in East
Chicago, Indiana.
"Larry Schreier v. Caesars World, Inc. et al.", Case No.
95-923-DWH (RJJ), instituted on September 26, 1995 in the United
States District Court for the District of Nevada. An
individual, purportedly representing a class, filed a complaint
against four manufacturers, three distributors and 38 casino
operators, including the Company, who manufacture, distribute or
offer for play video poker and electronic slot machines. The
individual allegedly intends to seek class certification of the
interests he claims to represent. The complaint alleges 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 complaint alleges violations of the Racketeer Influenced and
Corrupt Organizations Act, as well as claims of common law
fraud, unjust enrichment and negligent misrepresentation, and
seeks damages in excess of $1.0 billion. The complaint is
similar to the Poulos Complaint and the Ahern Complaint
referenced in the Company's Form 10-K, Part I, Item 3 "Legal
Proceedings" for the year ended December 31, 1994. The
Company has not yet responded to the complaint, but intends to
defend the action vigorously. Management believes that the
complaint is without merit and that the litigation will not have
a material adverse impact on the Company's financial condition
or operations.
"Hyland, et al. v. Griffin Investigation, et al. (the
Hyland Case)", Case No. 95-CV-2236 (JEI), instituted on May 5,
1995 in the United States District Court for the District of New
Jersey (Camden Division). The Company was served with a First
Amended Complaint on August 29, 1995. On October 25, 1995, the
plantiffs in the Hyland Case filed a "Notice of Dismissal
Without Prejudice Only As To Defendant Showboat, Inc.," with the
District Court Clerk. Seventy-six casino operators, including
the Company, and others were originally named as defendants in
the action. The action, brought on behalf of "card counters,"
alleges that the casino operators exclude "card counters" from
play and share information about "card counters." The action is
based on alleged violations of federal antitrust law, the Fair
Credit Reporting Act, and various state consumer protection
laws.
-26- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
PART II, OTHER INFORMATION
(continued)
Item 2. Changes in Securities.
On October 5, 1995, the Board of Directors of Showboat,
Inc. (the Company) declared a dividend distribution of one
Preferred Stock Purchase Right for each outstanding share of
Common Stock, par value $1.00 per share (the "Common Stock"),
of the Company. The distribution was payable as of October 16,
1995 to stockholders of record on that date. Each Right
entitles the registered holder to purchase from the Company one
one-hundredth (1/100) of a share of preferred stock of the
Company, designated as Series A Junior Preferred Stock (the
Stock") at a price of $120.00 per one one-hunderdth (1/100) of
a share ("Exercise Price"). The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and American Stock Transfer
and Trust Company, as Rights Agent (the "Rights Agent").
The Rights, unless earlier redeemed by the Board of
Directors, become exercisable upon the close of business on the
day (the "Distribution Date") which is the earlier of (i) the
tenth day following a public announcement that a person or
group of affiliated or associated persons, with certain
exceptions set forth below, has acquired beneficial ownership
of 15% or more of the outstanding voting stock of the Company
(an "Acquiring Person") or (ii) the tenth business day (or such
later date as may be determined by the Board of Directors prior
to such time as any person or group of affiliated or associated
persons becomes an Acquiring Person) after the date of the
commencement of announcement of a person's or group's intention
to commence a tender or exchange offer the consummation of
which would result in the ownership of 30% or more of the
Company's outstanding voting stock (even if no shares are
actually purchased pursuant to such offer); prior thereto, the
Rights would not be exercisable, would not be represented by a
separate certificate, and would not be transferable apart from
the Company's Common Stock, but will instead be evidenced,
with respect to any of the Common Stock certificates
outstanding as of October 16, 1995, by such Common Stock
certificate with a copy of a Summary of Rights attached
thereto. An Acquiring Person does not include (A) the Company,
(B) any subsidiary of the Company, (C) any employee benefit
plan or employee stock plan of the Company or of any
subsidiary of the Company, or any trust or other entity
organized, appointed, established or holding Common Stock for
or pursuant to the terms of any such plan or (D) any person or
group whose ownership of 15% or more of the shares of voting
stock of the Company then outstanding results solely from (i)
any action or transaction or transactions approved by the Board
of Directors before such person or group became an Acquiring
-27- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
PART II, OTHER INFORMATION
(continued)
Person or (ii) a reduction in the number of issued and
outstanding shares of voting stock of the Company pursuant to a
transaction or transactions approved by the Board of Directors
(provided that any person or group that does not become an
Acquiring Person by reason of clause (i) or (ii) above shall
become an Acquiring Person upon acquisition of an additional 1%
of the Company's voting stock unless such acquisition of
additional voting stock will not result in such person or
group becoming an Acquiring Person by reason of such clause (i)
or (ii)).
Until the Distribution Date (or earlier redemption or
expiration of the Rights), new Common Stock certificates issued
after October 16, 1995 will contain a legend incorporating
the Rights Agreement by reference. Until the Distribution Date
(or earlier redemption or expiration of the Rights), the
surrender for transfer of any of the Common Stock certificates
outstanding as of October 16, 1995, with or without a copy
of this Summary of Rights attached thereto, will also constitute
the transfer of the Rights associated with the Common Stock
represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Stock as of the close of
business on the Distribution Date and such separate certificates
alone will evidence the Rights from and after the Distribution
Date.
The Rights are not exercisable until the Distribution Date.
The Rights will expire at the close of business on October 5,
2005, unless earlier redeemed by the Company as described below.
The Preferred Stock is nonredeemable and, unless otherwise
provided in connection with the creation of a subsequent series
of preferred stock, subordinate to any other series of the
Company's preferred stock. The Preferred Stock may not be
issued except upon exercise of Rights. Each share of Preferred
Stock will be entitled to receive when, as and if declared, a
quarterly dividend in an amount equal to the greater of $120.00
per share or 100 times the cash dividends declared on the
Company's Common Stock. In addition, Preferred Stock is
entitled to 100 times any non-cash dividends (other than
dividends payable in equity securities) declared on the Common
Stock, in like kind. In the event of the liquidation of the
Company, the holders of Preferred Stock will be entitled to
receive, for each share of Preferred Stock, a payment in an
amount equal to the greater of $12,000.00 or 100 times the
payment made per share of Common Stock. Each share of Preferred
Stock will have 100 votes, voting together with the Common
Stock. In the event of any merger, consolidation or other
-28- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
PART II, OTHER INFORMATION
(continued)
transaction in which Common Stock is exchanged, each share of
Preferred Stock will be entitled to receive 100 times the amount
received per share of Common Stock. The rights of Preferred
Stock as to dividends, liquidation and voting are protected by
anti- dilution provisions.
The number of shares of Preferred Stock issuable upon
exercise of the Rights is subject to certain adjustments from time
to time in the event of a stock dividend on, or a subdivision or
combination of, the Common Stock. The Exercise Price for the
Rights is subject to adjustment in the event of extraordinary
distributions of cash or other property to the holders of Common
Stock.
Unless the Rights are earlier redeemed or the transaction is
approved by the Board of Directors and the Continuing Directors,
if the Company at any time after the Distribution Date were to
be acquired in a merger or other business combination (in which
any shares of Common Stock are changed into or exchanged for other
securities or assets) or more than 50% of the assets or earning
power of the Company and its subsidiaries (taken as a whole)
were to be sold or transferred in one or a series of related
transactions, the Rights Agreement provides that proper provision
will be made so that each holder of record of a Right will from
and after such date have the right to receive, upon payment of
the Exercise Price, that number of shares of common stock of the
acquiring company having a market value at the time of such
transaction equal to two times the Exercise Price. In addition,
unless the Rights are earlier redeemed, in the event that a person
or group becomes the beneficial owner of 15% or more of the
Company's voting stock (other than pursuant to a tender or
exchange offer (a "Qualifying Tender Offer") for all outstanding
shares of Common Stock that is approved by the Board of Directors,
after taking into account the long-term value of the Company and
all other factors they consider relevant in the circumstances),
the Rights Agreement provides that proper provisions will be
made so that each holder of record of a Right, other than the
Acquiring Person (whose Rights will thereupon become null and
void), will thereafter have the right to receive, upon payment
of the Exercise Price, that number of shares of the Preferred
Stock having a market value at the time of the transaction
equal to two times the Exercise Price (such market value to be
determined with reference to the market value of the Company's
Common Stock as provided in the Rights Agreement).
Fractions of shares of Preferred Stock (other than fractions
which are integral multiples of one one-hundredth of a share) may,
at the election of the Company, be evidenced by depositary
-29- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
PART II, OTHER INFORMATION
(continued)
receipts. The Company may also issue cash in lieu of fractional
shares which are not integral multiples of one one-hundredth of
a share.
At any time on or prior to the close of business on the
earlier of (i) the tenth day after the time that a person has
become an Acquiring Person (or such date as a majority of the
Board of Directors and a majority of the Continuing Directors
(as defined in the Rights Agreement) may determine) or (ii)
October 5, 2005, the Company may redeem the Rights in whole, but
not in part, at a price of $.01 per Right (the "Redemption
Price"). The Rights may be redeemed after the time that any
Person has become an Acquiring Person only if approved by a
majority of the Continuing Directors. Immediately upon the
effective time of the action of the Board of Directors of the
Company authorizing redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the
holders of the Rights will be to receive the Redemption Price.
For as long as the Rights are then redeemable, the Company
may, except with respect to the redemption price or date of
expiration of the Rights, amend the Rights in any manner,
including an amendment to extend the time period in which the
Rights may be redeemed. At any time when the Rights are not
then redeemable, the Company may amend the Rights in any manner
that does not materially affect the interests of holders of the
Rights as such. Amendments to the Rights Agreement from and
after the time that any Person becomes an Acquiring person
requires the approval of a majority of the Continuing Directors
(as provided in the Rights Agreement).
Until a Right is exercised, the holder, as such, will have no
rights as a stockholder of the Company, including, without
limitation, the right to vote or receive dividends.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information
None
-30- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
PART II, OTHER INFORMATION
(continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.01 Restated Bylaws of Showboat, Inc., Dated
October 24, 1995.
27.01 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K, Items 5 and 7, dated October 13, 1995, reporting
the execution of a lease and development agreement by and
between Southboat Limited Partnership and the St. Louis County
Port Authority.
Form 8-K, Items 5 and 7, dated October 5, 1995, reporting
a dividend of Preferred Stock Purchase Rights.
Form 8-K, Items 5, dated September 13, 1995, reporting the
opening of the Sydney Harbour Casino temporary facility.
-31-
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: November 13, 1995 s/H. Gregory Nasky
------------------- ----------------------------------
H. GREGORY NASKY, Executive Vice
President and Secretary
Date: November 13, 1995 s/ Leann Schneider
------------------- ----------------------------------
LEANN SCHNEIDER, Vice President -
Finance and Chief Financial Officer
-32-
EXHIBIT INDEX
Exhibit No. Description
3.01 Restate Bylaws of Showboat, Inc., dated October 24,
1995
27.01 Financial Data Schedule
RESTATED BYLAWS
OF
SHOWBOAT, INC.
ARTICLE I
OFFICES
1. The principal office shall be in the City of Las Vegas,
County of Clark, State of Nevada, and the name of the resident
agent in charge thereof is H. Gregory Nasky, Esq. [Amended May
15, 1973]
2. The corporation may also have offices at such other
places as the Board of Directors may from time to time determine
or the business of the corporation may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
1. Annual Meetings.
All meetings of the stockholders for the election of
Directors shall be held at the office of the corporation in Las
Vegas, Nevada, or as may be specified in the notice or waiver of
notice of meeting. Meetings of stockholders for any other
purpose may be held at such place and time as shall be stated in
the notice of the meeting or in a duly executed waiver of notice
thereof.
2. Time of Annual Meeting.
An annual meeting of stockholders shall be held on the
fourth Tuesday in April each year if not a legal holiday, and if
a legal holiday then on the next secular day following, at ten
o'clock a.m., or the annual meeting of shareholders may be held
on such other date and time as may be set by the Board of
Directors from time to time. The stockholders shall elect by a
majority vote a Board of Directors and they may transact such
other business as may properly be brought before the annual
meeting. [Amended February 27, 1990]
3. Notice of Annual Meeting.
Written or printed notice of the annual meeting shall be
served upon or mailed to each stockholder entitled to vote
thereat at such address as appears on the books of the
corporation, at least ten days prior to the meeting.
4. List of Stockholders.
At least ten days before every election of Directors, a
complete list of the stockholders entitled to vote at said
election with the address of each and the number of voting shares
held by
<PAGE>
each, shall be prepared. Such list shall be open at the
place where the election is to be held for said ten days, to the
examination of any stockholder, and shall be produced and kept at
the time and place of election during the whole time thereof and
subject to the inspection of any stockholder who may be present.
[Amended August 17, 1982]
5. Special Meetings.
Special meetings of the stockholders for any purpose or
purposes may be called by the President, or by the President or
Secretary upon a requisition in writing therefor, stating the
purpose or purposes thereof, delivered to the President or
Secretary, signed by a majority of the Directors or by resolution
of the Directors. [Amended October 5, 1995]
6. Notice of Special Meetings.
Written or printed notice of a special meeting of
stockholders, stating the time and place and object thereof,
shall be served upon or mailed to each stockholder entitled to
vote thereat at such address as appears on the books of the
corporation, at least ten days before such meeting. In addition
to the notice of any specific matters to be considered by the
stockholders at any special meeting, there may also be included
in said notice a reference to the fact that other matters may be
considered at said meeting.
7. Business at Special Meeting.
Business transacted at all special meetings shall be
confined to the objects stated in the call. In addition to the
business to be transacted at said special meetings as specified
in the notice thereof, there may be considered and acted upon at
said meeting any other business which may come before the meeting
if the notice thereof so specifies.
8. Quorum.
The holders of fifty per cent of the stock issued and
outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a
quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute, by the
Certificate of Incorporation or by these Bylaws. If, however,
such quorum shall not be present or represented at any meeting of
the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than
announcement at the meeting until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might
have been transacted at the meeting as originally notified.
9. Action of Stockholders.
When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by
express provision of the statutes or of the Certificate of
Incorporation or of these Bylaws a different vote is required, in
which case such express provision shall govern and control the
decision of such question.
2
<PAGE>
10. Voting.
At any meeting of the stockholders every stockholder having
the right to vote shall be entitled to vote in person, or by
proxy appointed by an instrument in writing subscribed by such
stockholder and bearing a date not more than three years prior to
said meeting, unless said instrument provides for a longer
period. Each stockholder shall have one vote for each share of
stock having voting power, registered in his name on the books of
the corporation, and except where the transfer books of the
corporation shall have been closed or a date shall have been
fixed as a record date for the determination of its stockholders
entitled to vote, no share of stock shall be voted on at any
election of Directors which shall have been transferred on the
books of the corporation within twenty days next preceding such
election of Directors.
11. No Action By Written Consent in Lieu of Meeting.
No action may be taken by Stockholders by written consent in
lieu of a meeting. [Amended October 5, 1995]
12. Stock Ledger.
The stock ledger of the Corporation shall be the only
evidence as to the stockholders entitled to examine the stock
ledger, the list required by section 4 of this Article II or the
books of the Corporation, or to vote in person or by proxy at any
meeting of Stockholders. [Amended October 5, 1995]
13. Conduct of Meetings of Stockholders.
The meetings of stockholders shall generally follow
reasonable and fair procedure. Subject to the foregoing, the
conduct of any meeting and the determination of procedure and
rules shall be within the absolute discretion of the chairman of
the meeting, and there shall be no appeal from any ruling of the
Chairman of the meeting with respect to procedure or rules.
Accordingly, in any meeting of stockholders or part thereof, the
Chairman of the meeting shall have the absolute power to
determine appropriate rules or dispense with theretofore
prevailing rules. The Chairman of the Board or his designee
shall serve as Chairman of the meeting and preside at the
meeting. Without limiting the foregoing, the following rules
shall apply:
(a) Within his sole discretion, the Chairman of the
meeting may adjourn such meeting by declaring such meeting
adjourned. Upon his doing so, the meeting shall be immediately
adjourned.
(b) The Chairman of the meeting may ask or require
that anyone not a bona fide stockholder or proxy leave the
meeting.
(c) A resolution or motion shall be considered for
vote only if proposed by a stockholder or duly authorized proxy,
and seconded by an individual, who is a stockholder or a duly
authorized proxy, other than the individual who proposed the
resolution or motion. The Chairman may propose any motion for
vote.
3
<PAGE>
(d) The Chairman of the meeting may impose any
reasonable limits with respect to participation in the meeting
by stockholders, including, but not limited to, limits on the
amount of time at the meeting taken up by the remarks or
questions or any stockholder, limits on the numbers of questions
per stockholder, and limits as to the subject matter and limits
as to the subject matter and timing of questions and remarks
by stockholders. [Amended December 22, 1987]
14. Advance Notice of Stockholder/Proposed Business at any
Meeting of Stockholders.
To be properly brought before any meeting of the
stockholders, business must be either (a) specified in the notice
of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (b) otherwise properly
brought before the meeting by or at the direction of the Board of
Directors, or (c) otherwise properly brought before the meeting
by a stockholder. In addition to any other applicable
requirements, including (without limitation) requirements imposed
by Federal Securities Laws pertaining to proxies, for business to
be properly brought before any meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the
principal executive offices of the corporation, at least seventy
five (75) days prior to the meeting, provided, however, that in
the event that less than ninety (90) days' notice or prior public
disclosure of the date of. any annual meeting of stockholders is
given or made to stockholders by the Corporation, notice by the
stockholder to be timely must be so received not later than the
close of business on the 15th day following the day on which such
notice of the date of the annual meeting was mailed or such
public disclosure was made, whichever first occurs. A
stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before any meeting of
the stockholders (i) a brief description of the business desired
to be brought before the meeting and the reasons for conducting
such business at the meeting, (ii) the name and record address of
the stockholder proposing such business, (iii) the class and
number of shares of the Corporation which are beneficially owned
by the stockholder, and (iv) any material interest of the
stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any meeting of the stockholders
except in accordance with the procedures set forth in this
Article II, Section 14, provided, however, that nothing in this
Article II, Section 14 shall be deemed to preclude discussion by
any stockholder as to any business properly brought before any
meeting.
The Chairman of the meeting shall, if the facts warrant,
determine and declare at any meeting of the stockholders that
business was not properly brought before the meeting in
accordance with the provisions of this Article II, Section 14,
and if he should so determine, he shall so declare to the meeting
and any such business not properly brought before the meeting
shall not be transacted. [Amended December 22, 1987]
4
<PAGE>
ARTICLE III
DIRECTORS
1. Number, Term, Quorum.
Effective February 25, 1993, the number of directors which
shall constitute the whole Board shall be nine (9). All
directors of the corporation shall be of full age and at least
one of whom shall be a citizen of the United States. The number
of Directors which shall not be less than three (3), may be
decreased from time to time by amendment to the Bylaws and in
such event thereafter may be increased to not more than twelve
(12) from time to time by amendment to the Bylaws. Directors need
not be stockholders or residents of Nevada. [Amended February
25, 1993]
(a) Beginning with the 1993 annual meeting of
stockholders, there shall be three (3) categories of Directors
and the categories of Directors shall be entitled "A," "B,"
and "C," respectively. Each category of Directors shall be
elected for the following term of office and each category shall
consist of the following number of Directors.
<TABLE>
<CAPTION>
NUMBER OF
CATEGORY TERM DIRECTORS
<S> <C> <C>
A Three (3) years Two (2)
B Three (3) years Four (4)
C Three (3) years Three (3)
</TABLE>
Each category of Directors the term of which expires at
said annual meeting shall thereafter be elected for three (3)
year terms. [Amended February 25, 1993]
(b) Each category of Directors shall be elected at the
annual meeting of stockholders for the year in which the term of
each respective category expires. Each Director shall be elected
to serve until the successor shall have been elected or
qualified, provided that in the event of failure to hold the
annual meeting or to hold such election at such annual meeting,
it may be held at any special meeting of the stockholders
called for that purpose.
(c) The majority of the Directors shall constitute a
quorum for the transaction of business. If at any meeting of the
Board there shall be less than a quorum present, a majority of
those present may adjourn the meeting from time to time until
a quorum is obtained, and no further notice thereof may be given
other than by announcement at the meeting which shall be so
adjourned.
(d) The Directors of the corporation shall at each
annual meeting or any subsequent special or regular meeting,
elect from among their number a Chairman and a Vice-Chairman of
the Board of Directors to serve until the next annual meeting of
the Board of Directors or until their successors are named at a
regular or special meeting. The duties of the Chairman and of
the Vice-Chairman of the Board are set out in Article V.
[Amended August 18, 1983]
5
<PAGE>
(e) Directors of the Company who have served as
directors for ten (10) or more years are eligible to be appointed
upon their retirement or resignation as a director emeritus.
Directors emeritus shall stand for reappointment each year at the
Annual Organizational Meeting of the Board for up to five (5)
years. They shall serve in an advisory capacity to the Board, be
invited to each regular meeting of the Board, and enjoy such
other privileges, other than the right to vote, as the Board
shall from time to time determine. [Amended January 21, 1986]
2. First Meeting.
The newly elected Directors may hold their first meeting for
the purpose of organization and the transaction of business. If
a quorum be present, immediately after the annual meeting of the
stockholders; or the time and place of such meeting may be fixed
by consent in writing of all the Directors.
3. Regular Meetings.
Regular meetings of the Board may be held without notice at
such time and place, either within or without the State of
Nevada, as shall from time to time be determined by the Board.
4. Special Meetings.
Special meetings of the Board of Directors may be called by
the Chairman of the Board, Vice Chairman of the Board, the
President or any four (4) Directors. Notice thereof stating the
place, date and hour of the meeting shall be given to each
Director not less than 48 hours before the date of the meeting,
by telephone or telegram on at least three (3) hours notice.
[Amended December 22, 1987]
5. Place of Meeting.
The Board of Directors may hold its meetings, regular or
special, within or without the State of Nevada, at such place as
is indicated in the notice or waiver of notice thereof.
6. Election of Officers.
The officers of the corporation shall be elected by the
Board of Directors at its first meeting after the election of
Directors each year. If any office becomes vacant during the
year, the Board of Directors shall fill the same for the
unexpired term. The Board of Directors shall fix the
compensation of the officers of the corporation.
7. Authority.
The Board of Directors shall have entire charge of the
property, interests, business and transactions of the
corporation, with full power and authority to manage and conduct
the same; and, subject to the restrictions imposed by law, by the
Certificate of Incorporation, or by these Bylaws, may exercise
all the powers of the corporation.
8. Compensation.
Directors shall not receive any stated salary for their
services as Directors, but by resolution of the Board a fixed fee
and expenses of attendance may be allowed for attendance at each
6
<PAGE>
meeting. Nothing herein contained shall be construed to preclude
any Director from serving the corporation in any other capacity
as an officer, agent or otherwise and receiving compensation
therefor.
9. Removal of Directors.
Any Director may be removed at any time, upon the
affirmative vote of the holders of not less than two-thirds (2/3)
of the outstanding voting shares of the corporation, at a special
meeting of stockholders called for such purpose, and the term for
which any Director shall be elected shall be subject to this
provision. [Amended by shareholders April 26, 1988]
10. Resignations and Filling of Vacancies.
Any Director may resign at any time. Such resignation shall
be made in writing, and shall take effect at the time specified
therein, and if no time be specified, at the time of its receipt
by the President or Secretary. The acceptance of a resignation
shall not be necessary to make it effective.
11. Eligibility of Directors.
No director is eligible to continue to serve as a director
of the corporation who is required under Nevada gaming laws to be
found suitable to serve as a director and who is not found
suitable or whose finding of suitability is suspended or revoked
by Nevada gaming authorities or who is required under New Jersey
gaming laws to be qualified to serve as a director and who is not
found qualified or whose qualification is suspended or revoked by
New Jersey gaming authorities. Such eligibility shall cease
immediately following whatever act or event terminates the
director's eligibility under the laws and gaming regulations of
the States of Nevada or New Jersey. [Amended August 25, 1987]
If the office of any Director or Directors becomes vacant by
reason of death, resignation or retirement, disqualification,
removal from office or otherwise, a majority of the remaining
Directors, though less than a quorum, shall choose a successor or
successors, who shall hold office until the next Annual Meeting
of Stockholders, at which time election shall be had to elect a
Director to serve until the expiration of the term or terms of
such Director or Directors for which the vacancy occurred.
[Amended September 20, 1983, retroactive to August 18, 1983]
12. Nomination of Directors.
Only persons who are nominated in accordance with the
procedures set forth in this Section 12 of Article III shall be
eligible for election as Directors. Nominations of persons for
election to the Board of Directors of the Corporation at the
Annual Meeting may be made at a meeting of stockholders by or at
the direction of the Board of Directors by any nominating
committee or person appointed by the Board or by any stockholder
of the Corporation entitled to vote for the election of Directors
at the meeting who complies with the Notice procedures set forth
in this Section 12 of Article III. Such nominations, other than
those made by or at the direction of the Board, shall be made
pursuant to timely notice in writing to the secretary of the
Corporation. To be timely, unless waived by the Board of
Directors, no person not already a Director shall be eligible to
be elected or to serve as a Director unless such person's notice
of
7
<PAGE>
nomination shall be delivered to or mailed and received at the
principal executive offices of the Corporation at least seventy
five (75) days before initiation of solicitation to the
stockholders for election in the event of an election other than
at an Annual Meeting and seventy five (75) days before the
corresponding date that had been the record date for the previous
year's Annual Meeting or seventy five (75) days before the date
of the next Annual Meeting of shareholders announced in the
previous year's proxy materials in the event of an election at an
Annual Meeting. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive
offices of the Corporation not less than seventy five (75) days
nor more than ninety (90) days prior to the meeting; provided,
however, that in the event that less than ninety (90) days'
notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business
on the 15th day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was
made, whichever first occurs. such stockholder's notice to the
Secretary shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a
Director, (i) the name, age, business address, residence address
of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of capital stock of
the Corporation which are beneficially owned by the person, (iv)
a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination
or nominations are to be made by the stockholder, and (b) any
other information relating to the person that is required to be
disclosed in solicitations for proxies for election of Directors
pursuant to Rule 14a under the securities Exchange Act of 1934,
as amended (vi) the consent of such nominee to serve as Director
of the Corporation, if he is so elected; and (b) as to the
stockholder giving the notice, (i) the name and record address of
stockholder, and (ii) the class and number of shares of capital
stock of the Corporation which are beneficially owned by the
stockholder. The Corporation may require any proposed nominee to
furnish such other information as may reasonably be required by
the Corporation to determine the eligibility of such proposed
nominee to serve as Director of the Corporation. No person shall
be eligible for election as a Director of the Corporation unless
nominated in accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not
made in accordance with the foregoing procedure, and if he should
so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded. [Amended December 22,
1987]
ARTICLE IV
COMMITTEES
1. Executive Committee.
The Board of Directors may appoint from among its members an
Executive Committee of not less than two members, one of whom
shall be the President and shall designate one of such members as
Chairman. The Board may also designate one or more of its
members as alternates to serve as a member or members of the
Executive Committee in the absence of a regular member or
8
<PAGE>
members. The Board of Directors reserves to itself alone the
power to declare dividends, issue stock, recommend to
stockholders any action requiring their approval, change the
membership of any committee at any time, fill vacancies therein,
and discharge any committee either with or without cause at any
time. Subject to the foregoing limitations, the Executive
Committee shall possess and exercise all other powers of the
Board of Directors during the intervals between meetings.
2. Other Committees.
The Board of Directors may also appoint from among its own
members such other committees as the Board may determine, which
shall in each case consist of not less than two directors, and
which shall have such powers and duties as shall from time to
time be prescribed by the Board. The President shall be a member
ex officio of such committee appointed by the Board of Directors.
3. Rules of Procedure.
A majority of the members of any committee may fix its rules
of procedure. All action by any committee shall be reported to
the Board of Directors at a meeting succeeding such action and
shall be subject to revision, alteration and approval by the
Board of Directors; provided that no rights or acts of third
parties shall be affected by any such revision or alteration.
[Article IV amended in its entirety October 20, 1970]
ARTICLE V
OFFICERS AND DEFINITION OF DUTIES
1. Officers.
(a) The general officers of the corporation shall
consist of a Chairman and a Vice-Chairman of the Board of
Directors, a President, one or more Vice-Presidents, a Secretary
and one or more Assistant Secretaries, a Treasurer and one or
more Assistant Treasurers, and such other officers as may from
time to time be elected or appointed by the Board. Any two or
more of said offices may be held by the same person, except the
offices of Chairman and Vice-Chairman of the Board of Directors
and the offices of President and Secretary. All officers shall
be subject to removal or suspension at any time by the affirmative
vote of at least a majority of the entire Board of Directors.
[Amended October 20, 1970]
(b) The Board of Directors at its first meeting after
each annual meeting of stockholders shall choose a Chairman and a
Vice-Chairman of the Board of Directors from among its number,
and shall also choose a President, one or more Vice-Presidents,
a Secretary and a Treasurer, none of whom need be a member of the
Board of Directors. [Amended October 20, 1970]
(c) The Board may appoint such other officers and
agents as it shall deem necessary, who shall hold their offices
for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board.
9
<PAGE>
(d) The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
(e) Any officer may resign at any time by giving
written notice to the Board of Directors or to the Chairman of
the Board or to the President. Any such resignation shall take
effect at the date of receipt of such notice, or at any later
time specified therein; and unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make
it effective.
A vacancy in any office because of death, resignation,
removal, disqualification or any other cause, shall be filled for
the unexpired portion of the term in the manner prescribed by
these Bylaws for regular election or appointment to such office.
2. Chairman and Vice-Chairman of the Board.
(a) The Chairman of the Board shall preside at all
meetings of the stockholders of the corporation and of the
Board of Directors, and shall be responsible to the Board for
presentation at each Board meeting of proper informative
reports by the President, the Treasurer, the Secretary, the
Chairman of the Executive Committee, and the Chairman of any
special committee of the Board. He shall be responsible for
presentation of any proposed changes in the major policies of the
corporation to the Board of Directors for action. He shall
appoint, subject to the approval of the Board of Directors, or
recommend to the Board for appointment, all members of committees
of the Board of Directors.
He shall have authority to sign contracts and other
documents within the ordinary scope of the business or as
specifically authorized by the Board of Directors or the
Executive Committee.
He may, by mutual agreement with the President, assume
additional specific executive duties, and such agreement when
made shall continue during the term of their respective offices
unless such agreement is dissolved by mutual consent.
(b) The Vice-Chairman of the Board shall, in the
absence or disability of the Chairman, perform the duties and
exercise the powers of the Chairman, and shall perform such
other duties as the Board of Directors shall prescribe.
3. Chairman of the Executive Committee.
The Chairman of the Executive Committee shall preside at all
meetings of the Executive Committee and shall perform such duties
as may be prescribed from time to time by the Board of Directors
or by the Bylaws. [Amended October 20, 1970]
4. The President.
The President shall have the general powers and duties of
supervision and management usually vested in the office of a
president of a corporation. He shall carry into effect all
orders and resolutions of the Board of Directors or of the
Executive Committee. He shall have authority to execute all
contracts and other documents within the ordinary scope of the
business or as specifically authorized by the Board of Directors
or by the Executive Committee. He shall also submit a complete
and detailed report of the operations of the corporation for its
fiscal or calendar
10
<PAGE>
year, and this report shall also be submitted to the stockholders
at their annual meeting. The President shall also from time to
time report to the Board of Directors all matters within his
knowledge which the interests of the corporation may require
to be brought to its notice. [Amended September 20, 1983,
retroactive to August 18, 1983]
5. The Chief Executive Officer.
The Chief Executive Officer shall be the chief policy-making
officer of the corporation and shall be the supreme officer of
the corporation in the general supervision, direction and active
management of the business of the corporation. [Amended Septem
ber 20, 1983, retroactive to August 18, 1983]
6. The Chief Operating Officer.
The Chief Operating Officer shall be the officer of the
corporation charged with supervision and management of the daily
operations of the corporation in support of the Chief Executive
Officer. [Amended September 20, 1983, retroactive to August 18,
1983]
7. The Vice-Presidents.
Each Vice-President shall perform such duties and have such
powers and designations as may from time to time be prescribed by
the Board of Directors or be delegated to him by the President.
One or more Vice-Presidents may be designated "Senior Vice-
President."
One or more Vice-Presidents may be designated "Executive
Vice-President."
One Vice-President may be designated "Vice-President/
Finance." The Vice-President/Finance shall be in charge of
finances, securities, accounting and claims, with administrative
supervision and control over the Secretary and the Treasurer and
their departments. [Amended May 17, 1990]
8. The Secretary and Assistant Secretaries.
The Secretary shall attend all sessions of the Board and all
meetings of the stockholders and record all votes and the minutes
of all proceedings in a book to be kept for that purpose, and
shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be
prescribed by the Board of Directors or the President, under
whose supervision he shall be. He shall keep in safe custody the
seal of the corporation and, when authorized by the Board, affix
the same to any instrument requiring it and, when so affixed, it
shall be attested by his signature or by the signature of the
Treasurer or an Assistant Secretary.
The Assistant Secretaries shall, in the absence or
disability of the Secretary, perform the duties and exercise the
powers of the Secretary, and shall perform such other duties as
the Board of Directors shall prescribe.
11
<PAGE>
9. The Treasurer and Assistant Treasurers.
The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation,
and shall deposit all moneys and other valuable effects in the
name and to the credit of the corporation in such depositories as
may be designated by the Board of Directors.
He shall disburse the funds of the corporation as may be
ordered by the Board, taking proper vouchers for such dis
bursements, and shall render to the President and Directors, at
the regular meetings of the Board or whenever they may require
it, an account of all his transactions as Treasurer and of the
financial condition of the corporation.
If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed each year) in such sum
and with such surety or sureties as shall be satisfactory to the
Board for the faithful performance of the duties of his office
and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in
his possession or under his control belonging to the corporation.
The Assistant Treasurers shall, in the absence or disability
of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties as the Board of
Directors shall prescribe.
ARTICLE VI
STOCK
1. Certificates of Stock.
The certificates of stock of the corporation shall be
numbered and shall be entered in the books of the corporation as
they are issued. They shall exhibit the holder's name and number
of shares and shall be signed by the President or a Vice-
President and the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary. The designations,
preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the
face or back of the certificates which the corporation shall
issue to represent such class or series of stock. The signature
of any officer authorized to sign certificates of stock of the
corporation may be by a facsimile thereof in such method and
under such circumstances as may be approved by the Board of
Directors from time to time. If any stock certificate is signed
by a transfer agent or an assistant transfer agent or a transfer
clerk acting on behalf of the corporation, and a registrar, the
signature of any such officer may be by a facsimile.
2. Transfer of Stock.
Upon surrender to the corporation or to the transfer agent
of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or
12
<PAGE>
authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
3. Record Date.
The Board of Directors may fix in advance a date not
exceeding 60 days nor less than 10 days preceding the date of any
meeting of stockholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall
go into effect, as a record date for the determination of the
stockholders entitled to notice of and to vote at any such
meeting, and any adjournment thereof, or entitled to receive
payment of any such dividend, and in such case, such
stockholders, and only such stockholders as shall be stockholders
of record on the date so fixed, shall be entitled to notice of
and to vote at such meeting, or any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, notwithstanding any transfer
of any stock on the books of the corporation after any such
record date fixed as aforesaid. [Amended October 5, 1995]
4. Registered Stockholders.
The corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact
thereof, and accordingly shall not be bound to recognize any
equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of
Nevada.
5. Lost Certificates.
The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to
have been lost or destroyed, upon the making of an affidavit of
that fact by the person claiming the certificate or certificates
of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in
its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost or destroyed certificate
or certificates, or his legal representative, to advertise the
same in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with
respect to the certificate or certificates alleged to have been
lost or destroyed.
6. Dividends.
Dividends upon the capital stock of the corporation, subject
to the provisions of the Certificate of Incorporation, if any,
may be declared by the Board of Directors at any regular or
special meeting, pursuant to law. Dividends may be paid in cash,
in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation.
Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum
or sums as the Directors from time to time, in their absolute
discretion, think proper as a reserve fund to meet contingencies,
or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other
13
<PAGE>
purpose as the Directors shall think conducive to the interest
of the corporation, and the Directors may modify or abolish any
such reserve in the manner in which it was created.
ARTICLE VII
MISCELLANEOUS
1. Corporate Seal.
The corporate seal shall have inscribed thereon the name of
the corporation, and the words "Corporate Seal, Nevada". Said
seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
2. Fiscal Year.
The fiscal year of the corporation shall commence January 1
and end December 31 next following. [Amended August 25, 1987]
3. Checks, Drafts, Notes.
All checks, drafts or other orders for the payment of money,
notes or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer or officers, or
agent or agents of the corporation, and in such manner, as shall
from time to time be determined by resolution of the Board of
Directors.
4. Control of Stock and Securities.
All shares of stock, bonds, obligations, certificates of
indebtedness and other securities of any corporation or
association owned by the corporation shall, so far as
practicable, or unless otherwise ordered by the Board of
Directors or the Executive Committee thereof, be registered in
the name of the corporation, and shall be kept with such
depository as the Board of Directors or the Executive Committee
thereof may from time to time designate.
The Treasurer or an Assistant Treasurer of the corporation
shall be authorized to collect and receive on behalf of the
corporation all money dividends paid on shares of stock owned by
it, and all moneys becoming due, whether for principal or
interest, upon all bonds, obligations, certificates of
indebtedness, or other securities owned by the corporation, and
shall deposit all amounts so collected to the credit of the
corporation in depositories designated by the Board of Directors
or the Executive Committee thereof, and shall make such reports
and statements from time to time as may be required by the Board
of Directors, the Executive Committee or the President.
The right to vote upon shares of stock at any time owned by
the corporation or in any other way to exercise the rights of
ownership of or in respect to any such shares, or of or in
respect to any bonds, obligations, certificates of indebtedness
or other securities owned by the corporation (except to collect
and receive money dividends upon stock and moneys becoming due
upon bonds, obligations, certificates of indebtedness or other
securities) is vested exclusively in the Board of Directors or
the Executive Committee thereof, their nominees or appointees,
and
14
<PAGE>
shall be exercised only pursuant to resolutions adopted by
the Board or by the Executive Committee or by some person or
persons designated by like resolutions. Provided always, that
nothing herein shall be deemed or construed to impair the normal
and regular course of business in respect of such stock, bonds,
issues, securities, trust receipts or other evidence of
indebtedness as authorized in the Certificate of Incorporation.
5. Notice and Waiver of Notice.
Whenever any notice is required by these Bylaws to be given
it shall not be deemed or construed to mean personal notice
unless expressly stated; and any notice so required shall be
deemed to be delivered when deposited in the United States mail
in a sealed envelope addressed to the stockholder at his address
as shown on the records of the corporation, with postage prepaid.
Any notice required to be given under these Bylaws may be waived
by the person entitled thereto. Stockholders not entitled to
vote shall not be entitled to receive notice of any meetings
except as otherwise provided by statute. No failure of or
irregularity of notice of any annual meeting of stockholders
shall invalidate such meeting or any proceeding thereat.
6. Disqualified Security Holders.
Pursuant to the requirements of Section 82(d)(7) of the New
Jersey Casino Control Act (N.J.S.A. 5:12-82(d)(7)) (the "Act"),
if this corporation becomes, and so long as it remains, either a
holding company or intermediary company as to the holder of a
casino licensee, all securities of this corporation shall be held
subject to the condition that if a holder thereof is found to be
disqualified by the New Jersey Casino Control Commission pursuant
to the Act, such holder shall dispose of his interest in this
corporation. [Amended March 19, 1985]
7. Liability for Gaming License Fees and Investigation Costs.
In the event that any person or entity is required by the
New Jersey Casino Control Commission ("New Jersey Commission") to
be found qualified pursuant to the New Jersey Casino Control Act
(the "New Jersey Act") or by the Nevada Gaming Commission or
Nevada Gaming Control Board (collectively the "Nevada
Commission") pursuant to the Nevada Gaming Control Act ("Nevada
Act") by virtue of his, her or its beneficial ownership of
securities of the Company, such person or entity shall indemnify
the Company against all license fees, investigation costs and all
expenses and charges related thereto, which are billed to the
Company or any of its affiliates or subsidiaries by the New
Jersey Commission or New Jersey Division of Gaming Enforcement or
Nevada Commission on account of the processing and/or inves
tigation of the application of such person or entity (and
individuals or affiliates associated therewith) for quali
fication, suitability or licensing. The required sums shall be
paid to the Company (or directly to the New Jersey Commission or
Nevada Commission, or both at the Company's option) within
fifteen days of demand by the Company. The requirement of
indemnification shall not apply to natural persons who are
officers, directors or key employees of the Company at the time
the New Jersey Commission or the Nevada Commission or both
determines that qualification, suitability or licensing of said
person as a security holder is required, so long as such
officers, directors or key employees of the Company continue to
serve in such position and capacity. [Amended December 22, 1987]
15
<PAGE>
ARTICLE VIII
INDEMNIFICATION
[Amended May 26, 1992]
1. Power to Indemnify in Actions, Suits or Proceedings Other
Than Those by or in the Right of the Corporation.
Subject to Section 3 of this Article VIII, the Corporation
shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, adminis
trative or investigative (except an action by or in the right of
the Corporation) by reason of the fact that he is or was a
director, officer, legal spouse (whether such status is derived
by reason of statutory law, common law or otherwise of any
applicable jurisdiction) of a director or officer, employee or
agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer (including the legal
spouse of such director or officer), employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of NOLO
CONTENDERE or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and that, with respect to
any criminal action or proceeding, he had reasonable cause to
believe that his conduct was unlawful. The indemnification of a
legal spouse of a director or officer shall not extend to any
claim for any actual or alleged wrongful act of the spouse, but
shall apply only to actual or alleged wrongful acts of a director
or officer as provided in this Article VIII.
2. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation.
Subject to Section 3 of this Article VIII, the Corporation
shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a
director, officer, legal spouse of a director or officer,
employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer (including the
legal spouse of such officer or director), employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and
in a manner which he reasonably believed to be in or not opposed
to the best interests of the Corporation; but no indemnification
shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which
such action or suit was brought
16
<PAGE>
shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for
such expenses as the court shall deem proper. The
indemnification of a legal spouse of a director or officer shall
not extend to any claim for any actual or alleged wrongful act
of the spouse, but shall apply only to actual or alleged
wrongful acts of a director or officer as provided in this
Article VIII.
3. Authorization of Indemnification.
Any indemnification under this Article VIII (unless ordered
by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of
the director, officer, legal spouse of a director or officer,
employee or agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in Section 1 or
Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by the stockholders, (ii) by the
Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such act, suit or proceeding,
(iii) if such a quorum of disinterested directors so orders, or
(iv) if such a quorum of disinterested directors cannot be
obtained, by independent legal counsel in a written opinion. To
the extent, however, that a director, officer, employee or agent
of the Corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding described above, or
in defense of any claim, issue or matter therein, he (including
the legal spouse of such director or officer) shall be
indemnified by the Corporation against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with such defense, without the necessity of
authorization in the specific case.
4. Good Faith Defined.
For purposes of any determination under Section 3 of this
Article VIII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with
respect to any criminal action or proceeding, to have had no
reasonable cause to believe his conduct was unlawful, if his
action is based on the records or books of account of the
Corporation or another enterprise, or on information supplied to
him by the officers of the Corporation or another enterprise in
the course of their duties, or on the advice of legal counsel for
the Corporation or another enterprise or on information or
records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an
appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise"
as used in this Section 4 shall mean any other corporation or any
partnership, joint venture, trust or other enterprise of which
such person is or was serving at the request of the Corporation
as a director, officer, employee or agent. The provisions of
this Section 4 shall not be deemed to be exclusive or to limit in
any way the circumstances in which a person may be deemed to have
met the applicable standard of conduct set forth in Sections 1 or
2 of this Article VIII, as the case may be.
5. Indemnification by a Court.
Notwithstanding any contrary determination in the specific
case under Section 3 of this Article VIII, and notwithstanding
the absence of any determination thereunder, any director,
officer, legal spouse of a director or officer, employee or agent
may apply to any court of
17
<PAGE>
competent jurisdiction in the State of Nevada for indemnification
to the extent otherwise permissible under Sections 1 and 2 of
this Article VIII. The basis of such indemnification by a court
shall be a determination by such court that indemnification of
the director, officer, legal spouse of a director or officer,
employee or agent is proper in the circumstances because
he has met the applicable standards of conduct set forth in
Sections 1 or 2 of this Article VIII, as the case may be.
Notice of any application for indemnification pursuant to this
Section 5 shall be given to the Corporation promptly upon the
filing of such application.
6. Expenses Payable in Advance.
Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding as
authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of the director,
officer, legal spouse of a director or officer, employee or agent
to repay such amount unless it shall ultimately be determined
that he is entitled to be indemnified by the Corporation as
authorized in this Article VIII.
7. Non-exclusivity and Survival of Indemnification.
The indemnification provided by this Article VIII shall not
be deemed exclusive of any other rights to which a person seeking
indemnification may be entitled under any agreement, vote of
stockholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another
capacity while holding such office, it being the policy of the
Corporation that indemnification of the persons specified in
Sections 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by law. The provisions of this Article
VIII shall not be deemed to preclude the indemnification of any
person who is not specified in Sections 1 or 2 of this Article
VIII but whom the Corporation has the power or obligation to
indemnify under the provisions of the General Corporation Law of
the State of Nevada, or otherwise. The indemnification provided
by this Article VIII shall continue as to a person who has ceased
to be a director, officer (including the legal spouse of such
director or officer), employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such
person.
8. Insurance.
The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, legal
spouse of a director or officer, employee or agent of the
Corporation, or is or was serving at the request of the
Corporation as a director, officer (including the legal spouse of
such director or officer), employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the
power or the obligation to indemnify him against such liability
under the provisions of this Article VIII.
18
<PAGE>
ARTICLE IX
AMENDMENT OF BYLAWS
1. These Bylaws may be amended, repealed or altered, in
whole or in part, at any regular meeting of the Board of
Directors or at any special meeting, provided the substance of
the proposed amendment or amendments shall have been stated in
the notice thereof, by a majority of the Board of Directors at
such duly constituted meeting.
2. The Bylaws may be amended, repealed or altered, in
whole or in part, upon the affirmative vote of the holders of not
less than two-thirds (2/3) of the outstanding voting shares of
the corporation. [Amended by shareholders April 26, 1988]
* * * * *
The undersigned as Secretary does hereby certify that the
foregoing is a true and correct copy of the Restated Bylaws of
Showboat, Inc. as amended at a regular meeting of the Board of
Directors held on the 5th day of October, 1995.
DATED this 24th day of October, 1995.
SHOWBOAT, INC.
By /s/ H. Gregory Nasky
H. Gregory Nasky
Its Secretary
19
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