<PAGE> 1
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: January 7, 2000
BOYD GAMING CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its Charter)
NEVADA
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of
Incorporation or Organization)
1-12168 88-0242733
- ------------------------ -------------------
(Commission File Number) I.R.S. Employer
Identification No.)
2950 INDUSTRIAL ROAD
LAS VEGAS, NEVADA
89109
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(Address of principal executive offices)
(Zip Code)
(702) 792-7200
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(Registrant's telephone number, including area code)
<PAGE> 2
On November 10, 1999, Boyd Gaming Corporation (the "Company") completed
the acquisition of 100% of the equity interest in Blue Chip Casino, LLC, a
Indiana limited liability company. The acquisition was consummated following
the transfer of the Blue Chip riverboat casino and related assets from Blue
Chip Casino, Inc. ("Blue Chip") to Blue Chip Casino, LLC. This transaction was
initially reported on a Current Report on Form 8-K (the "8-K") dated November
16, 1999. By the Current Report on Form 8-K/A, the Company is updating the 8-K
to include financial statements of Blue Chip and pro forma financial
information.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of business acquired.
(i) Unaudited Condensed Financial Statements of Blue Chip, Inc.
as of September 30, 1999 and December 31, 1998 and for the
nine month periods ended September 30, 1999 and 1998
(ii) Financial Statements of Blue Chip Casino, Inc. as of and for
the years ended December 31, 1998 and 1997
(iii) Financial Statements of Blue Chip Casino, Inc. as of December
31, 1996 and 1995 and for the year ended December 31, 1996
(b) Pro forma financial information.
(i) Unaudited Proforma Condensed Consolidated Financial Statements
as of and for the nine month period ended September 30, 1999
(ii) Unaudited Proforma Condensed Consolidated Statement of
Operations for the year ended December 31, 1998
2
<PAGE> 3
(c) Exhibits
Exhibit No. Description
----------- -----------
2.6 Unit Purchase Agreement (the "Agreement") dated
as of June 27, 1999, by and among Boyd Gaming
Corporation, Boyd Indiana, Inc., Blue Chip
Casino, Inc., an Indiana corporation, Blue Chip
Casino, LLC, Kevin F. Flynn, Brian J. Flynn,
Donald Flynn, and Robert W. Flynn (incorporated
by reference to exhibit 10.29 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999).
23.1 Consent of Arthur Andersen LLP, Independent
Public Accountants.
3
<PAGE> 4
BLUE CHIP CASINO, INC.
CONDENSED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,739 $ 8,440
Accounts receivable (less allowance of $186 and $201) 468 515
Inventories 210 288
Prepaid expenses and other assets 480 568
-------- --------
Total current assets 11,897 9,811
PROPERTY AND EQUIPMENT:
Land and improvements 37,439 37,439
Buildings and improvements 20,031 20,031
Riverboat and improvements 40,403 40,717
Furniture, fixtures and equipment 24,344 23,928
-------- --------
122,217 122,115
Less: Accumulated depreciation 12,754 8,071
Plus: Construction-in-process 11,723 1,401
-------- --------
Total property and equipment, net 121,186 115,445
OTHER ASSETS, NET: -- 1,775
-------- --------
Total assets $133,083 $127,031
======== ========
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS.
4
<PAGE> 5
BLUE CHIP CASINO, INC.
CONDENSED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long term debt $ 51,856 $ 647
Accounts payable and accrued liabilities 10,018 12,912
Construction and retainage payable 2,826 3,205
-------- --------
Total current liabilities 64,700 16,764
LONG TERM DEBT:
Land and other loans -- 1,284
Credit facility -- 20,000
Senior subordinated notes -- 41,801
Junior subordinated notes -- 3,000
-------- --------
Total long term debt -- 66,085
-------- --------
Total liabilities 64,700 82,849
SHAREHOLDERS' EQUITY:
Common stock, no par value; authorized 100,000,000
shares; issued and outstanding 100,000 shares -- --
Paid-in-capital 20,104 20,104
Retained earnings 48,279 24,078
-------- --------
Total shareholders' equity 68,383 44,182
-------- --------
Total liabilities and shareholders' equity $133,083 $127,031
======== ========
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS.
5
<PAGE> 6
BLUE CHIP CASINO, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
1999 1998
-------- --------
<S> <C> <C>
REVENUE:
Casino $120,786 $103,745
Food, beverage & other 5,171 4,408
Less: promotional allowances 1,466 780
-------- --------
Total net revenue 124,491 107,373
COSTS AND EXPENSES:
Gaming and admission taxes 32,976 29,129
Casino expenses 14,248 12,494
Food, beverage & other 3,881 4,159
Advertising and marketing 7,403 7,647
Facility and property operations 4,594 4,496
General and administrative 6,845 6,707
Management fee 3,735 3,214
Depreciation 4,683 4,522
-------- --------
Total costs and expenses 78,365 72,368
-------- --------
OPERATING INCOME 46,126 35,005
OTHER INCOME (EXPENSE):
Other income, net 1,081 839
Interest expense (6,871) (10,030)
-------- --------
Total other income (expense) (5,790) (9,191)
-------- --------
Income before income taxes
and extraordinary item 40,336 25,814
Income tax expense -- 270
-------- --------
Income before extraordinary item 40,336 25,544
Extraordinary loss on early
extinguishment of debt (2,590) --
-------- --------
Net income $ 37,746 $ 25,544
======== ========
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
6
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BLUE CHIP CASINO, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income $ 37,746 $ 25,544
Adjustments to reconcile net income to net cash
Depreciation and amortization 4,801 5,723
Loss on early retirement of debt 2,590 --
Allowance for bad debts, net (15) 129
Accretion of senior subordinated notes 1,863 1,415
Changes in current assets and liabilities:
Accounts receivable 62 (42)
Inventories 78 (113)
Prepaid expenses and other assets 88 (208)
Accounts payable and accrued liabilities (2,894) (98)
-------- --------
Net cash provided from operations 44,319 32,350
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of restricted investments -- 2,869
Property and equipment additions (10,803) (6,522)
-------- --------
Net cash used in investing activities (10,803) (3,653)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long term debt, net 53,000 22,000
Premium paid on early extinguishment of debt (933) --
Shareholder tax distributions (13,545) (4,233)
Repayments of long term debt (69,739) (46,070)
-------- --------
Net cash used in financing activities (31,217) (28,303)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,299 394
CASH AND CASH EQUIVALENTS
Beginning of period 8,440 6,265
-------- --------
End of period $ 10,739 $ 6,659
======== ========
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS.
7
<PAGE> 8
BLUE CHIP CASINO, INC.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Nine Month Period Ended September 30, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Paid-in Retained
Stock Capital Earnings Total
------ ------- --------- --------
<S> <C> <C> <C> <C>
Balance as of December 31, 1998 $ -- $20,104 $ 24,078 $ 44,182
Tax distributions to shareholders (13,545) (13,545)
Net income -- -- 37,746 37,746
------ ------- -------- --------
Balance as of September 30, 1999
(Unaudited) $ -- $20,104 $ 48,279 $ 68,383
====== ======= ======== ========
</TABLE>
SEE NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS.
8
<PAGE> 9
BLUE CHIP CASINO, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1. -- Basis Of Presentation
The accompanying unaudited condensed financial statements of Blue Chip Casino,
Inc. (the "Company") contain all adjustments necessary, consisting of only
normal recurring adjustments, to present fairly the results of its operations
and its cash flows for the nine month periods ended September 30, 1999 and 1998.
This report should be read in conjunction with the Company's audited financial
statements for the year ended December 31, 1998 contained elsewhere in this
document. The operating results and cash flows for the nine month periods ended
September 30, 1999 and 1998 are not necessarily indicative of the results that
will be achieved for the full year or for future periods.
Note 2. -- Debt
In September 1999, the Company amended its credit facility to increase the
amount available for borrowing to $50.0 million. The amended credit facility
matures on the earlier of December 31, 1999 or the consummation of the sale of
Blue Chip Casino's assets to Boyd Gaming Corporation (see Note 3). At September
30, 1999, all $50.0 million was outstanding under the credit facility.
In September 1999, the Company exercised its prepayment options of $62.0 million
principal amount of senior subordinated discount notes and $3.0 million
principal amount of junior subordinated notes (collectively, the "Notes") and
retired the Notes through funds from the credit facility. The Company recognized
an extraordinary loss of $2.6 million related to the early extinguishment of
debt.
9
<PAGE> 10
Note 3. -- Acquisition by Boyd Gaming Corporation
On June 27, 1999, the Company entered into a definitive Unit Purchase Agreement
(the "Agreement") by and among the Company, Blue Chip Casino, LLC, Boyd Gaming
Corporation, Boyd Indiana, Inc. and certain individuals, to sell 100% of the
equity interests in Blue Chip Casino, LLC, following the transfer of the Blue
Chip riverboat casino and related assets from the Company to Blue Chip Casino,
LLC. On November 10, 1999, the Company completed the sale of 100% of the equity
interests in Blue Chip Casino, LLC for approximately $266 million.
10
<PAGE> 11
BLUE CHIP CASINO, INC.
Annual report for the years ended December 31, 1998 and 1997
Together with Auditors' Report
11
<PAGE> 12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Shareholders and Board of Directors of
Blue Chip Casino, Inc. and the Indiana Gaming Commission:
We have audited the accompanying balance sheets of BLUE CHIP CASINO, INC. (the
"Company") (an Indiana corporation) as of December 31, 1998 and 1997, and the
related statements of operations, changes in shareholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BLUE CHIP CASINO, INC., as of
December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Chicago, Illinois
February 26, 1999
12
<PAGE> 13
BLUE CHIP CASINO, INC.
BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
As of
December 31,
ASSETS 1998 1997
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,440 $ 6,265
Restricted investments -- 2,869
Accounts receivable (less allowance of $201 and $30) 515 549
Inventories 288 147
Prepaid expenses and other assets 568 508
-------- --------
Total current assets 9,811 10,338
PROPERTY AND EQUIPMENT:
Land and improvements 37,439 37,456
Buildings and improvements 20,031 20,034
Riverboat and improvements 40,717 39,784
Furniture, fixtures and equipment 23,928 22,427
-------- --------
122,115 119,701
Less: Accumulated depreciation 8,071 1,989
Plus: Construction-in-process 1,401 --
-------- --------
Total property and equipment, net 115,445 117,712
OTHER ASSETS, NET: 1,775 3,128
-------- --------
Total assets $127,031 $131,178
======== ========
</TABLE>
SEE NOTES TO AUDITED FINANCIAL STATEMENTS
13
<PAGE> 14
BLUE CHIP CASINO, INC.
BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
As of
December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long term debt $ 647 $ 6,757
Accounts payable and accrued liabilities 12,912 8,926
Construction and retainage payable 3,205 6,343
--------- ---------
Total current liabilities 16,764 22,026
LONG TERM DEBT:
Land and other loans 1,284 1,941
Credit facility 20,000 32,000
Capital lease financing -- 13,383
Senior subordinated notes 41,801 45,760
Junior subordinated notes 3,000 3,000
--------- ---------
Total long term debt 66,085 96,084
--------- ---------
Total liabilities 82,849 118,110
SHAREHOLDERS' EQUITY:
Common stock, no par value; authorized 100,000,000
shares; issued and outstanding 100,000 shares -- --
Paid-in-capital 20,104 20,104
Retained earnings (deficit) 24,078 (7,036)
--------- ---------
Total shareholders' equity 44,182 13,068
--------- ---------
Total liabilities and shareholders' equity $ 127,031 $ 131,178
========= =========
</TABLE>
SEE NOTES TO AUDITED FINANCIAL STATEMENTS
14
<PAGE> 15
BLUE CHIP CASINO, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
REVENUE: 1998 1997
--------- ---------
<S> <C> <C>
Casino $ 141,672 $ 39,517
Food, beverage and other 6,221 1,841
Less: promotional allowances 1,301 248
--------- ---------
Total net revenue 146,592 41,110
COSTS AND EXPENSES:
Gaming and admission taxes 39,498 11,414
Casino expenses 17,386 5,970
Food, beverage and other 5,559 2,037
Advertising and marketing 10,183 4,137
Facility and property operations 6,089 2,165
General and administrative 10,243 2,505
Management fee 4,398 1,232
Depreciation 6,082 1,974
--------- ---------
Total costs and expenses 99,438 31,434
--------- ---------
OPERATING INCOME: 47,154 9,676
OTHER INCOME (EXPENSE):
Other income, net 1,165 354
Interest expense (12,702) (4,541)
Pre-opening expense -- (7,517)
Loss on disposition of assets -- (3,745)
--------- ---------
Income (loss) before income taxes 35,617 (5,773)
Income tax expense 270 --
--------- ---------
Net Income (loss) $ 35,347 $ (5,773)
========= =========
</TABLE>
SEE NOTES TO AUDITED FINANCIAL STATEMENTS
15
<PAGE> 16
BLUE CHIP CASINO, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended December 31, 1998 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Retained
Common Paid-in Earnings
Stock Capital (Deficit) Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance as of December 31, 1996 $ -- $ 20,104 $ (1,263) $ 18,841
Net (loss) -- -- (5,773) (5,773)
-------- -------- -------- --------
Balance as of December 31, 1997 -- 20,104 (7,036) 13,068
Tax distributions to shareholders -- -- (4,233) (4,233)
Net income -- -- 35,347 35,347
-------- -------- -------- --------
Balance as of December 31, 1998 $ -- $ 20,104 $ 24,078 $ 44,182
======== ======== ======== ========
</TABLE>
SEE NOTES TO AUDITED FINANCIAL STATEMENTS
16
<PAGE> 17
BLUE CHIP CASINO, INC.
STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATIONS: 1998 1997
--------- ---------
<S> <C> <C>
Net income (loss) $ 35,347 $ (5,773)
Adjustments to reconcile net income (loss) to net cash
provided from operations:
Depreciation and amortization 6,710 2,131
Allowance for bad debts 171 30
Accretion of senior subordinated notes 2,203 670
Loss on disposition of assets -- 3,745
Changes in current assets and liabilities:
Accounts receivable (137) (579)
Inventories (141) (147)
Prepaid expenses and other assets (60) (508)
Accounts payable and accrued liabilities 3,986 8,661
Other assets 724 129
--------- ---------
Net cash provided from operations 48,803 8,359
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of assets -- 8,255
Restricted investments 2,869 (2,869)
Property and equipment additions (6,953) (100,181)
--------- ---------
Net cash used in investing activities (4,084) (94,795)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long term debt, net 22,000 101,378
Net change in loans from affiliates -- (9,600)
Tax distributions to shareholders (4,233) --
Repayments of long term debt (60,311) (4,676)
--------- ---------
Net cash provided (used) by financing activities (42,544) 87,102
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,175 666
CASH AND CASH EQUIVALENTS:
Beginning of period 6,265 5,599
--------- ---------
End of period $ 8,440 $ 6,265
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 10,296 $ 5,064
</TABLE>
SEE NOTES TO AUDITED FINANCIAL STATEMENTS
17
<PAGE> 18
BLUE CHIP CASINO, INC.
NOTES TO AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Note 1 - Basis of Presentation
Blue Chip Casino, Inc., an Indiana corporation (the "Company"), was formed on
July 23, 1993, for the purpose of applying for a riverboat casino license in
Michigan City, Indiana. On April 17, 1996, the Company received a Certificate of
Suitability from the Indiana Gaming Commission (the "IGC") to develop, own and
operate a riverboat gaming facility and other related amenities in Michigan
City, Indiana. The Company received its riverboat owner's license (the
"License") on August 19, 1997 and opened to the general public on August 22,
1997. The License is valid for five years and must be renewed by the IGC
annually thereafter.
Certain reclassifications have been made to the financial statements as
previously presented to conform to current classifications.
Note 2 - Summary of Significant Accounting Policies
a. CASH AND CASH EQUIVALENTS -The Company considers all highly
liquid investments with original maturities of three months or
less as cash equivalents. The carrying amount of cash and cash
equivalents approximates their fair value.
b. PROPERTY AND EQUIPMENT - Property and equipment are stated at
cost. Interest incurred during construction is capitalized and
amortized over the life of the related asset. Costs of
improvements are capitalized. Costs of normal repairs and
maintenance are charged to expense as incurred. Depreciation of
property and equipment is provided on a straight-line method over
the estimated useful lives of the respective assets. Useful lives
for financial reporting purposes are as follows: i) 30 years for
buildings, riverboat and land improvements; and ii) 3 to 15 years
for furniture, fixtures and equipment.
c. OTHER ASSETS, NET - Other assets include deferred taxes, deposits
and amounts incurred in connection with the Company's various
debt financings. The debt financing amounts are being amortized
over a maximum of five years or the term of the related debt, if
shorter.
d. ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities (and disclosure of contingent
assets and liabilities) at the date of the financial statements
and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates, but management believes any differences should not be
material.
18
<PAGE> 19
e. INCOME TAXES - For federal income tax purposes, the Company was a
subchapter C corporation for all of 1997 but qualified for
subchapter S corporation status effective January 1, 1998. As of
December 31, 1997, the Company had a net operating loss
carryforward of approximately $7.0 million for financial
reporting purposes, which had not been benefited due to the
pending S-corporation election. This loss carryforward resulted
primarily from charging pre-opening costs to expense in the
period in which they were incurred and a loss on the disposition
of assets held for sale. In 1997 the federal tax liability was
zero, but the Company was subject to the alternative minimum tax
and recorded a liability and a deferred tax asset of $270,000.
Since the Company became a subchapter S corporation, the deferred
tax asset has been fully reserved and all federal and state
income tax liability flows through to its shareholders.
f. ADVERTISING COSTS - The Company expenses advertising costs as
incurred. Advertising costs totaled approximately $3.4 million
and $2.7 million for the years ended December 31, 1998 and 1997,
respectively.
g. DISTRIBUTIONS TO SHAREHOLDERS - Under the terms of the credit
facility, distributions to shareholders are limited to amounts
necessary for the shareholders to pay taxes on their respective
shares of the Company's income. Subsequent to year end,
management expects the Company to make distributions to
shareholders approximating $5.0 million (plus a true-up of
approximately $500,000) relating to the final tax distribution
for 1998 income.
Note 3 - Casino Revenue and Promotional Allowances
Casino revenue is the net of gaming wins less losses. Total net revenue includes
the retail value of complimentary food and other items furnished to customers,
which totaled approximately $1.3 million and $248,000 for the twelve months
ended December 31, 1998 and 1997, respectively.
The estimated cost of providing such complimentary food and other items is
charged to the casino department.
Note 4 - Gaming Taxes
The Company pays a statutory admission tax ($3.00 per admission) and a 20% tax
on its casino revenue as reported to the state of Indiana, as well as a one-half
of one percent (0.5%) tax on its casino revenue to the Michigan City Community
Enrichment Corporation ("MCCEC") pursuant to a development agreement.
Note 5 - Pre-opening Expenses
Expenses incurred prior to the opening of the casino in August of 1997 have been
classified as pre-opening. These expenses include organization costs, payroll
and recruiting, consulting, office and furniture rental and costs incurred in
applying for a gaming license.
19
<PAGE> 20
Note 6 - Interest
All interest incurred during the casino's development and construction phase has
been capitalized. For the year ended December 31, 1997, approximately $3.4
million was capitalized. Capitalized interest expense for the year ended
December 31, 1998 was immaterial.
Note 7 - Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following (dollars in
thousands) as of December 31:
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------
Accrued interest $ 1,988 $ 2,413
- -------------------------------------------------------------------------------
Accrued salaries, wages and other payroll 4,084 1,737
- -------------------------------------------------------------------------------
Accrued taxes other than income taxes 2,014 1,381
- -------------------------------------------------------------------------------
Income taxes payable - 270
- -------------------------------------------------------------------------------
Outstanding gaming chips and tokens 261 114
- -------------------------------------------------------------------------------
Progressive jackpot liability 369 566
- -------------------------------------------------------------------------------
Employee insurance claims accrual 1,335 113
- -------------------------------------------------------------------------------
Other accrued liabilities 1,035 518
- -------------------------------------------------------------------------------
Operating payables 1,826 1,814
- -------------------------------------------------------------------------------
Total $12,912 $ 8,926
- -------------------------------------------------------------------------------
</TABLE>
Note 8 - Commitments and Contingencies
a. COMPANY GUARANTEES - The Company is the primary guarantor of a
surety bond issued to the IGC in the amount of $7.4 million (the
"IGC Bond"). The Company is also the obligor under a $142,000
letter of credit issued to a lessor to collateralize
approximately $440,000 of operating lease financing.
b. AGREEMENT WITH THE CITY OF MICHIGAN CITY (THE "CITY") - In
connection with its gaming license application, the Company
agreed to contribute a percentage of its gaming revenue to the
MCCEC which serves as a vehicle for identifying and funding
projects for the benefit of the local community. MCCEC will be
funded on an on-going basis by semi-annual payments from the
Company. The amount of this payment is equal to one-half of one
percent (0.5%) of the Company's gaming revenue through December
31, 2001 with minimum guaranteed payments in each year. The
minimum guaranteed payments through 2001 are: 1998 - $500,000,
1999 - $600,000, 2000 - $700,000 and 2001 - $800,000. Beginning
on January 1, 2002 and for each subsequent year, the Company is
required to pay one-half of one percent (0.5%) on the first $90.0
million of gaming revenue and one and one-half percent (1.5%) of
the amount of gaming revenue in excess of $90.0 million with a
minimum guaranteed payment of $800,000. The Company has accrued
approximately $700,000 and $200,000 in 1998 and 1997,
respectively.
20
<PAGE> 21
c. ADDITIONAL CONSTRUCTION - Under the development agreement with
the City, the Company agreed to construct a 200-room hotel and a
parking garage (the "Project"). During the fourth quarter of
1998, the Company commenced construction of the Project. The
Company has entered into various contracts or agreements relative
to the Project and expects to enter into several more as the
Project develops. The Project is estimated to cost approximately
$18.0 million and will be financed with the existing credit
facility and cash flow from operations. Through December 31,
1998, the Company had incurred approximately $1.4 million on the
Project.
d. REAL ESTATE TAXES - Real estate taxes are paid one year in
arrears based on an assessed valuation and tax rates determined
in the year of billing. The Company has received notification of
its assessed valuation for 1998, which valuation was
substantially greater than the prior year, however tax rates will
not be determined until mid-1999. As a result, the final tax
liability for 1998 will not be known until mid-1999. The Company
has accrued approximately $1.1 million for 1998 real estate
taxes. The Company does not expect the difference between the
final tax liability and this estimate to have a material impact
on the financial position of the Company.
e. MICHIGAN CITY PORT AUTHORITY (THE "MCPA") - In conjunction with
the development of the casino, the Company entered into a real
estate exchange agreement (the "Agreement") with the MCPA.
Pursuant to the Agreement, the Company constructed improvements
on land on the opposite shore of its development and delivered
such land and improvements to the MCPA in exchange for real
estate within the boundaries of the Company's development. The
terms and conditions of the Agreement were satisfied and the
Company consummated the exchange in April 1998.
f. ABANDONMENT FEE - Under the development agreement with the City,
in the event that gaming operations cease and are abandoned by
the Company earlier than five years from the date of the receipt
of its License, the Company agreed to pay the City an abandonment
penalty of $1.0 million for each such year.
g. LEASE COMMITMENTS - As of December 31, 1998 future minimum lease
payments required under operating leases, primarily for
administrative office locations, that have non-cancelable lease
terms in excess of one year are as follows:
<TABLE>
<S> <C>
1999 $ 328,516
2000 256,706
2001 226,230
2002 100,750
2003 79,083
Thereafter 39,813
----------
Total $1,031,098
</TABLE>
21
<PAGE> 22
Note 9 - Long Term Debt
The debt financing for the design, development and construction of the Company's
casino included a $40.0 million senior secured credit facility, $62.0 million of
senior subordinated discount notes (the "Notes"), an $18.6 million equipment
lease financing agreement, $3.0 million of junior subordinated notes and $3.1
million of seller-provided real estate financing. Management believes the
carrying amount of the aggregate long-term debt approximated its fair value at
December 31, 1998.
The Company entered into its credit facility with a bank during the third
quarter of 1997. The terms of the $40.0 million senior secured credit facility,
as amended, provide that the amount available for borrowing thereunder is
permanently reduced pursuant to scheduled principal reductions. Amounts
outstanding under the credit facility are secured by substantially all of the
fixed assets of the Company not otherwise subject to liens and encumbrances.
Outstanding borrowings and letter of credit exposure reduce the maximum
available principal balance under the Company's credit facility. At December 31,
1998, the amount of the facility had been reduced to $35.0 million, outstanding
borrowings under the facility amounted to $20.0 million and letter of credit
exposure amounted to $142,000, leaving approximately $14.8 million available.
The current interest rate under the facility is LIBOR plus 1%.
The Notes were issued during the third quarter of 1997 and bear interest, from
the date of issuance, at the rate of 9.5% per annum. Gross proceeds from these
Notes were approximately $45.1 million. The Notes accrete at a predetermined
rate until maturity in September 2002. The terms of the Notes require
semi-annual cash payments of interest, which began in March 1998. The first
interest payment was escrowed with a portion of the gross proceeds from these
Notes and was recorded as restricted investments at December 31, 1997. During
1998, the Company repurchased approximately $8.1 million of Notes and
immediately retired them by borrowing funds available under the senior secured
credit facility.
During the fourth quarter of 1997, the Company entered into its $18.6 million
equipment lease financing agreement, which required repayments of principal and
interest in 48 equal monthly installments beginning in October 1997. Interest
under this financing agreement was incurred at 9%. The equipment lease financing
agreement was secured by all of the furniture, fixtures and equipment financed
under the agreement. On July 15, 1998 the Company exercised its prepayment
option and retired its equipment lease financing obligation by borrowing funds
available under the senior secured credit facility.
In conjunction with the offering of its Notes, the Company issued $3.0 million
of junior subordinated notes to certain affiliates. These notes have a five-year
maturity, bear a 16% interest rate and require semi-annual cash payments of
interest, which began in March 1998. The $3.0 million of principal is due in
2002.
22
<PAGE> 23
Prior to the beginning of the casino's construction, the Company entered into
several real estate purchase agreements under which certain sellers provided
partial financing. The maturity dates of these financings ranged from two to
five years. These loans require the Company to pay fixed amounts (representing
portions of the negotiated real estate purchase prices) without interest. For
financial reporting purposes, these loans have been discounted at an 8% interest
rate.
Aggregate annual maturities of long term debt (dollars in thousands), based on
amounts borrowed as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Years ending December 31, Additional accretion*
- ------------------------------------------------------------------------------------------
<S> <C> <C>
1999 $ 647 $ 2,620
- ------------------------------------------------------------------------------------------
2000 20,635 3,005
- ------------------------------------------------------------------------------------------
2001 648 3,570
- ------------------------------------------------------------------------------------------
2002 44,802 2,953
- ------------------------------------------------------------------------------------------
Total $66,732 $ 12,148
- ------------------------------------------------------------------------------------------
</TABLE>
* If the Notes are outstanding until maturity, the total additional accretion
from December 31, 1998 would be due for a total of approximately $54.0 million.
Note 10 - Disposition of Assets
In November 1996, the Company altered certain plans for its Michigan City
development. The changes resulted in the elimination of a previously proposed
interim casino facility, which resulted in the Company no longer requiring a
riverboat it owned and gaming equipment thereon. In connection with these
changes, the Company decided to put the riverboat up for sale. In May 1997, the
Company sold the riverboat to an unaffiliated third party for $8.3 million in
cash, resulting in a $3.7 million loss.
Note 11 - Employee Benefit Plans
- - 401 (k) PLAN - During the third quarter 1998, the Company initiated a
defined contribution retirement plan for all full-time employees who have
at least one year of continuous employment and 1,000 hours of service. The
Company contributes amounts equal to 100% of each eligible employee's
voluntary contributions. For purposes of determining the Company's required
contribution to the plan, the employee's voluntary contribution cannot
exceed 3% of the employee's qualified compensation. The Company's
contribution expense for the year ended 1998 was $134,000.
- - INCENTIVE COMPENSATION PLAN - In 1998 the Company adopted a long-term
incentive plan for key employees. Under the plan, incentive amounts are
accrued based upon the achievement of annual operating results and
performance. These incentive amounts will be paid over three years provided
participants maintain continuous employment with the Company. As of
December 31, 1998 the amount accrued for plan participants was
approximately $1.6 million.
23
<PAGE> 24
- - INSURANCE PLANS - The Company provides a minimum premium insurance plan for
employee health coverage. The Company also provides statutory disability
insurance coverage for the benefit of its employees. Estimated accrued
obligations under these insurance plans as of December 31, 1998 and 1997
were approximately $1.3 million and $113,000, respectively. The Company's
maximum liability under the plans is limited by stop-loss agreements with
insurance companies.
Note 12 - Stock Option Plan and Warrants
Under the Company's Amended and Restated Stock Option Plan (the "Plan"),
eligible persons may be granted options to purchase an aggregate of not more
than 8.5% of the Company's outstanding shares of common stock, subject to
anti-dilution adjustments.
The Company's Board of Directors administers the Plan, which has granted options
for an aggregate of 8.375% of the Company's common stock. The options have an
exercise price of $200 per share of the Company's common stock. Options under
the plan are not intended to be treated as incentive stock options as defined in
Section 422 of the Internal Revenue Code of 1986.
Each option has a term of ten years. No option is exercisable until the earliest
of (i) the closing date of an initial public offering of the Company's common
stock, (ii) one year prior to the expiration of the term of the option or (iii)
a change in control of the Company's ownership.
In conjunction with the issuance of the Notes, the Company issued warrants to
purchase 1,427 shares of the Company's common stock to affiliates of Libra
Investments, Inc., which served as placement agent in the Notes transaction. The
warrants have an exercise price of $166 per share of the Company's common stock.
The holders of the warrants can require the Company to purchase the warrants in
September 2004 at a price based upon the Company's cash flow and outstanding
liabilities.
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation" provides, among other things, that
companies may elect to either record expense based on the fair value of
stock-based compensation upon issuance or continue to apply methods prescribed
by Accounting Principles Board Opinion No. 25 ("APB No. 25") whereby no
compensation expense is recognized upon grant if certain requirements are met.
The Company has elected to continue to account for stock-based compensation in
accordance with APB No. 25. Had the Company recorded stock-based compensation
cost consistent with the provisions of SFAS No. 123, the Company's net income
would have been reduced by less than $100,000.
24
<PAGE> 25
Note 13 - Related Party Transactions
a. MANAGEMENT AGREEMENT - The Company entered into a management
agreement in October 1996 with Towerton Company, LLC (the
"Manager"), an affiliate of the Company. The primary
responsibility of the Manager is to supervise and control the
Company's operations. The management fee payable under the
agreement is 3% of the Company's net revenue. In addition, the
Company reimburses the Manager for its direct expenses.
Approximately $4.7 million and $1.9 million was incurred during
1998 and 1997, respectively under the management agreement.
b. ADVISORY FEE - Flynn Enterprises, Inc., an affiliate of the
Company, acted as the Company's financial adviser in connection
with the 1997 issuance of the Notes and received an advisory fee
of $250,000 for its services.
c. AFFILIATE GUARANTEE AGREEMENTS - The Company entered into
agreements with certain affiliates who personally guaranteed and
partially collateralized the Company's obligations under its
credit facility, equipment lease financing and the IGC Bond. For
these guarantees, these affiliates received an annual fee of 2%,
0% and 2%, respectively, of the amounts guaranteed. Amounts
incurred under the guarantees during 1998 and 1997 were
approximately $656,000 and $271,000, respectively. As of December
31, 1998 only the IGC Bond was subject to a personal guarantee.
d. INTEREST EXPENSE - During 1997, approximately $3.6 million in
interest payments were made to certain affiliates who provided
early stage construction credit facilities. These facilities were
refinanced with the Company's current capital structure.
e. LKQ CORPORATION ("LKQ") - The Company currently subleases a
portion of its Chicago, Illinois office space to LKQ, a related
entity. The sublease is on substantially the same terms as the
sublease between the Company and its lessor.
Management believes that the aforementioned related party transactions are on
terms and conditions no less favorable to the Company than would reasonably be
obtainable were such contract, arrangement or transaction with a non-affiliate.
Note 14 - Litigation
In 1997, a construction contractor filed a complaint against the Company
relating to the total liabilities arising under a contract between the parties.
The contractor's complaint alleges that the Company owes approximately $2.3
million (exclusive of interest and collection costs) under the contract. The
Company's construction and retainage payable includes $2.3 million for this
alleged liability. The Company has filed a counterclaim alleging that the
contractor breached the contract.
25
<PAGE> 26
In July 1997, the owners of three homes located across the street from the
Company's parking lot filed a motion for a temporary restraining order and a
complaint for damages and declaratory and injunctive relief against the City,
the Company, and a construction company. The homeowners sought to restrain and
enjoin certain construction activities that allegedly damaged their homes. In
August 1997, the homeowner's motions for a temporary restraining order and
preliminary injunctive relief were denied. The complaint for damages seeks $5.0
million of compensatory damages and $50.0 million of punitive damages from the
defendants. The Company has certain contractual indemnification rights from the
construction company under its construction contract with the construction
company, and the Company believes that its insurance coverages are adequate to
cover any actual damages that may have occurred to the three homes.
In addition to the matters described above, the Company is involved in various
inquiries, proceedings, litigation and other matters arising in the normal
course of business. While any proceeding or litigation has an element of
uncertainty, management believes that the final outcome of these matters will
not have a material adverse impact on the financial position or results of
operations of the Company.
26
<PAGE> 27
BLUE CHIP CASINO, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
27
<PAGE> 28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
BLUE CHIP CASINO, INC.:
We have audited the accompanying balance sheets of BLUE CHIP CASINO, INC. (the
"Company") (an Indiana corporation) as of December 31, 1996 and 1995, and the
related statements of operations, changes in shareholders' equity and cash flows
for the year ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BLUE CHIP CASINO, INC. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 17, 1997
(except with respect to the matters
discussed in Note 8, as to which the
date is March 3, 1997)
28
<PAGE> 29
BLUE CHIP CASINO, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS 1996 1995
------- ----
<S> <C> <C>
CASH AND CASH EQUIVALENTS (Notes 2a) $ 5,599 $--
PROPERTY AND EQUIPMENT (Notes 2b, 4a and 7):
Land 10,303 --
Land improvements 6,499 --
Vessel under construction 4,099
Furniture, fixtures and office equipment
(net of accumulated depreciation of $14) 404
------- ---
Total property and equipment 21,305 --
ASSET HELD FOR SALE (Note 3)
Riverboat and gaming equipment 12,000 --
DEFERRED COSTS (Note 2c) 1,086 62
------- ---
Total assets $39,990 $62
======= ===
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses $ 7,795 $--
Retainage payable 527 --
Accrued real estate taxes (Note 4i) 85 --
Land loans (Note 7) 3,142 --
Loan from affiliates (Note 3) 9,600 --
------- ---
Total liabilities 21,149 --
------- ---
SHAREHOLDERS' EQUITY:
Common stock, no par value; authorized 100,000,000
shares; issued and outstanding 100,000 and 1,000
shares in 1996 and 1995, respectively -- --
Paid-in-capital 20,104 62
Retained earnings (deficit) (1,263) --
------- ---
Total shareholders' equity 18,841 62
------- ---
Total liabilities and shareholders' equity
$39,990 $62
======= ===
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
29
<PAGE> 30
BLUE CHIP CASINO, INC.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (Note 1)
(Dollars in thousands)
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Interest income $ 117
Interim facility expense (417)
Payroll expense (382)
Rent expense (99)
Real estate taxes (85)
Offering cost expense (150)
Other expense (233)
Depreciation (14)
-------
Income (loss) before income taxes (1,263)
Income tax expense --
-------
Net income (loss) $(1,263)
=======
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
30
<PAGE> 31
BLUE CHIP CASINO, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED
DECEMBER 31, 1996 (Note 1)
(Dollars in thousands)
<TABLE>
<CAPTION>
RETAINED
COMMON PAID-IN- EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
------ -------- --------- -------
<S> <C> <C> <C> <C>
Balance as of
December 31,1995 -- $ 62 -- $ 62
Purchase of shares
(Note 3) -- 20,042 -- 20,042
Net (loss) -- -- (1,263) (1,263)
--- ------- ------- -------
Balance as of
December 31, 1996 -- $20,104 $(1,263) $18,841
=== ======= ======= =======
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
31
<PAGE> 32
BLUE CHIP CASINO, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 (Note 1)
(Dollars in thousands)
<TABLE>
<CAPTION>
1996
-------
<S> <C>
CASH FLOWS FROM OPERATIONS:
Net (Loss): $(1,263)
Adjustments to reconcile net loss to net cash used in
operations-
Depreciation 14
Deferred costs (1,024)
Increase in accrued real estate taxes 85
-------
Net cash used in operations (2,188)
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (9,855)
-------
Net cash used in investing activities (9,855)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans 9,600
Proceeds from contributed capital 8,042
-------
Net cash provided in financing activities 17,642
-------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,599
CASH AND CASH EQUIVALENTS:
Beginning of period --
-------
End of period $ 5,599
=======
Non-cash transactions:
Contribution of riverboat in return for equity interests $12,000
Land purchased subject to land financing $ 3,142
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
32
<PAGE> 33
BLUE CHIP CASINO, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION, BUSINESS AND OPERATIONS
Blue Chip Casino, Inc., an Indiana corporation (the "Company"), was
formed under the name Indiana Blue Chip Hotel and Riverboat Casino
Resort Corporation on July 23, 1993, for the purpose of applying for a
riverboat casino license in Michigan City, Indiana. On April 17, 1996,
the Company received a Certificate of Suitability from the Indiana
Gaming Commission (the "IGC") to develop, own and operate a riverboat
gaming facility and other related amenities in Michigan City, Indiana.
In October, 1996, the Company changed its name to Blue Chip Casino, Inc.
The Company believes it will commence operations of a riverboat gaming
vessel (the "Vessel") and related facilities (collectively, the "Gaming
Complex") in late summer of 1997. The Gaming Complex will be located in
Michigan City on a site (the "Trail Creek Site")(which is an
approximately 32-acre site adjacent to Trail Creek) less than one mile
from the Lake Michigan shoreline.
During 1994 and 1995, the primary activity of the Company was the
application process for the gaming license. As a result, a statement of
operations, changes in shareholders' equity and cash flow are not
presented for 1994 or 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with
original maturity of three months or less as cash equivalents. The
carrying amount of cash and cash equivalents approximates their fair
value.
b. Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
of the Vessel and Gaming Complex will not start until the Gaming Complex
is opened. Estimated useful lives for financial reporting purposes are
expected to be as follows:
<TABLE>
<S> <C>
Land improvements 15 years
Furniture, fixtures and equipment 3-8 years
Riverboats and structures 30 years
</TABLE>
c. Deferred Costs
Deferred costs include costs incurred applying for a gaming license,
organizational costs, project salaries and other pre-opening costs
incurred during the pre-opening phase of the Gaming Complex. All
pre-opening costs directly related to gaming operations are capitalized
as incurred as deferred costs on the balance sheet and will be charged
to expense in the period the project's operations commence (estimated to
be in 1997). Pre-opening expenses, payroll
33
<PAGE> 34
and inventory for the Gaming Complex are estimated to be approximately
$8.0 million.
Costs incurred in connection with an anticipated debt offering (See Note
8) are being deferred and will be amortized over the term of the related
debt. Certain costs incurred in connection with a proposed debt offering
which was not consummated and which will not benefit the anticipated
debt offering were expensed in 1996.
d. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
(and disclosure of contingent assets and liabilities) at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
e. Income Taxes
For Federal income tax purposes, the Company is currently a C
Corporation but it may attempt to qualify as an S Corporation or as a
qualified subchapter S subsidiary effective on or before January 1, 1998
either by merging with or into its principal shareholder, HP of Indiana,
Inc., an Indiana Corporation ("HPI") or by redeeming the interests of
all its shareholders other than HPI. As an S Corporation or as a
qualified subchapter S subsidiary, the Company generally will not be
subject to Federal income taxes on its earnings after the effective date
of such qualification. Rather, its shareholders (or, if it is a
qualified subchapter S subsidiary, the shareholder of its parent) will
be directly subject to tax on their respective proportionate shares of
the Company's taxable income.
As of December 31, 1996, the Company has a net operating loss
carryforward of approximately $1,263,000 for financial reporting
purposes, which has not been benefited due to the uncertainty regarding
future operations.
3. RELATED PARTY TRANSACTIONS
Subject to IGC approval, the Company entered into a management agreement
in October, 1996, with Blue Chip Management Company, LLC (the
"Manager"),an affiliate of the Flynn Group (defined in Note 6).
Employees and affiliates of the Manager have agreed to acquire
controlling interest in HPI, which owns 70.7% of the Company. The
primary responsibility of the Manager is to supervise and control the
Company's operations. The Management Agreement is for a seven year term
through December 31, 2003. If the Company terminates the Management
Agreement without cause, the Manager shall be entitled to receive $5.0
million from the Company.
The management fee under the agreement will be 3% of Net Revenue (as
defined therein) and shall be paid monthly. In addition, the Company
shall reimburse the Manager for compensation paid to the Manager's
management team. Under the terms of the proposed debt agreement, no
management fee will be payable unless a certain fixed charge coverage
ratio is met. If the management fee cannot be paid because of the
restriction, the management fee will accrue and will be paid over time
in amounts that will not violate the fixed charge coverage ratio
34
<PAGE> 35
restriction. Notwithstanding the foregoing limitation, the Company may,
in any event, pay management fees for direct expenses in an amount equal
to $1.2 million per calendar year.
The agreement requires that sufficient amounts be maintained in a Casino
Bank Account as working capital for all financial needs of the casino.
Key executives of the Manager have been working with the Company in the
design, development, construction, marketing and management of the
Michigan City riverboat gaming project. Since June, 1996, certain of the
same executives have also been managing an affiliated riverboat casino
in East Dubuque, Illinois.
Pursuant to an agreement with the Company and its eight other
shareholders, HPI was obligated to contribute, at its option, $12.0
million or the Silver Eagle riverboat with gaming equipment thereon (the
"Silver Eagle") to the Company in exchange for 60% of the Company's
common stock, and the eight other shareholders were obligated to
contribute $8.0 million to the Company in exchange for 40% of the
Company's common stock. HPI elected to acquire the Silver Eagle from an
affiliated company for $12.0 million (which represents its appraised
value) and contributed the Silver Eagle to the Company. In November
1996, the Company altered certain of its plans for its Michigan City
development. The changes resulted in the elimination of the previously
proposed interim casino facility (which resulted in the Company no
longer requiring the Silver Eagle). In connection with these changes,
the Company decided to put the Silver Eagle up for sale. If full value
is not received in a sale, the shareholders have agreed to contribute
the difference between the sale price and book value as additional
equity. If the Silver Eagle is not sold by June 30, 1997, the
shareholders have agreed to contribute $12.0 million as additional
equity.
Flynn Enterprises, Inc., an affiliate of the Flynn Group, will serve as
the Company's financial adviser in connection with the debt offering
(See Note 8) and will receive an advisory fee of $250,000 for its
services.
Members of the Flynn Group will obtain irrevocable letters of credit in
the amount of $5.0 million, $12.0 million and $5.0 million issued by a
bank to secure certain guarantees and potential future equity infusions
by the Company's shareholders.
The Company has entered into a credit agreement with an affiliate of the
Flynn Group whereby the Company can borrow up to $15 million to finance
the development of the Gaming Complex. The outstanding borrowing bears
interest at the rate of 15% and is due on the earlier of (i) the
consummation of any equity or debt offering by the Company in excess of
$15 million or (ii) the first anniversary of the opening of the Gaming
Complex to the public. The loan is secured by a security interest in
substantially all of the assets of the Company except for the gaming
license and those parcels of land secured by the land loans. The loan
agreement prevents the Company from paying a dividend as long as the
agreement exists, except for dividends payable in common stock of the
Company.
35
<PAGE> 36
As of December 31, 1996, the Company had borrowed $9.6 million under
terms of this agreement. Interest in the amount of $180,000 was incurred
during 1996 and was capitalized as a cost of construction. Management
believes the carrying value of the borrowings under the credit agreement
approximated their fair value at December 31, 1996.
4. COMMITMENTS AND CONTINGENCIES
a. Construction - The Company is committed to develop the Gaming Complex
through acquisition of land, construction of the Vessel, erecting and
finishing the interior of the pavilion, site improvements, construction
of the parking garage and surface parking, and the acquisition of gaming
equipment and aesthetic enhancements. The Company has acquired all the
parcels of real estate comprising the Trail Creek Site, other than one
parcel of real estate for which the Company has executed acquisition
contract. The Company has completed its design and began construction of
the Gaming Complex in November, 1996 and believes it will commence
operations in the late summer of 1997.
As of December 31, 1996, the Company estimates that approximately 77% of
the budgeted costs ($102.3 million) of the Gaming Complex had been
committed or expended.
After the Gaming Complex is operating, the Company expects to construct
a 200-room hotel (at an additional cost of approximately $10.0 million)
financed through operating cash flow.
b. Agreement with the City of Michigan City - In connection with its
gaming license application, the Company agreed to establish a captive
entity, Michigan City Community Endowment Corporation ("MCCEC"), to
serve as a vehicle for identifying and funding projects for the benefit
of the local community. MCCEC will be funded on an on-going basis by a
semi-annual payment from the Company over a guaranteed period of five
years. The amount of this payment will be equal to one-half of one
percent (0.5%) of the Company's adjusted gross receipts (as defined).
Decisions regarding how these amounts will be spent will be made by
MCCEC's board of directors. This board will include representatives of
the Company but will consist primarily of representatives of the
government of Michigan City and citizens from the local community.
If the Company abandons the Gaming Complex earlier than five years from
the date of receipt of its gaming license, the Company must pay the City
of Michigan City an abandonment penalty of $1.0 million for each
remaining year.
The agreement has yet to be executed.
c. Gaming License - The Company is currently operating under the terms
of a Certificate of Suitability (which expires on August 22, 1997),
which the Company believes will mature into a riverboat gaming license
if the conditions set forth in the Certificate of Suitability are
satisfied. The Certificate of Suitability requires, among other things,
compliance with the requirements of the Indiana gaming law, expeditious
commencement, investment of at least $86.5 million in the Gaming Complex
and finalization of all requisite licenses, permits and certification
needed to commence gaming operations, commitments
36
<PAGE> 37
to hire minority and female employees, obtaining the requisite insurance
by the Company and the posting of a bond, letter of credit or other form
of guaranty in an amount to be determined to guarantee the Company's
performance of certain of its obligations to the City of Michigan City
and the State of Indiana. The Company believes that it will be able to
obtain all necessary permits, licenses and approvals in a timely manner
in order to construct, open and operate the Gaming Complex; however, no
assurance can be given in this regard.
d. Environmental - The Company has conducted environmental assessments
(including soil and groundwater sampling and analysis) of certain of the
former commercial parcels on a portion of the Trail Creek Site. Such
assessments have revealed that prior operations or activities at the
Trail Creek Site may have resulted in pollution or contamination of the
environment. As the owner and operator of the Gaming Complex, the
Company could be held liable under certain legal theories for the costs
of addressing pollution or contamination, as well as certain damages
resulting from such pollution or contamination. Based on the results of
such environmental assessments, the Company is not aware of any material
contamination resulting from the prior operations or activities. The
Company is not entitled to contractual indemnification from the prior
owners or operators of the Trail Creek Site with respect to
environmental matters.
e. Insurance - The Company expects to maintain insurance against
casualty losses during construction and when the Gaming Complex
commences operations. However, the Company does not intend to maintain
insurance against business interruptions and believes the costs outweigh
the benefits from such insurance.
f. Lease Commitments - Future minimum lease payments required under
operating leases that have non-cancelable lease terms in excess of one
year as of December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997 $ 95,330
1998 100,750
1999 100,750
2000 100,750
2001 100,750
Thereafter 219,645
--------
Total $717,975
========
</TABLE>
g. Legal Matters - On October 25, 1996, a lawsuit was filed in Harrison
County Indiana by three individuals residing in counties abutting the
Ohio River which challenges the constitutionality of the Indiana
Riverboat Gambling Act. The Indiana Supreme Court has previously
upheld the constitutionality of the Indiana Riverboat Gambling Act,
although the prior challenge was on different grounds than those
filed in this lawsuit. The Company cannot predict the ultimate
outcome of this lawsuit.
The Company is involved in one legal proceeding. Management does not
believe that such proceeding should have a material adverse impact on
the financial position or results of operations of the Company.
37
<PAGE> 38
h. Real Estate Taxes - Real estate taxes are paid one year in arrears
based on an assessed valuation and tax rates determined in the year
of billing. The Company has not yet received notification of its
assessed valuation for 1996, and the tax rates will not be determined
until mid-1997. As a result, the final tax liability for 1996 will
not be known until mid-1997. The Company has accrued $85,000 for 1996
taxes. The Company does not expect the difference between the final
bill and this estimate to have a material impact on the financial
statements.
5. 1996 STOCK OPTION PLAN
The Board of Directors of the Company has adopted and the shareholders
have approved the Company's 1996 Employee Stock Option Plan (the
"Plan"). Under the Plan, eligible persons may be granted options to
purchase an aggregate of not more than 8.5% of the Company's outstanding
shares of common stock, subject to anti-dilution adjustments.
The Plan will be administered by the Board of Directors or a committee
consisting of at least two members of the Board of Directors, each of
whom will be "non-employee directors" (as defined under Rule 16b-3 of
the SEC Act of 1934, as amended). No option may be granted under the
Plan and no one may exercise any such option without the approval of the
IGC. Options under the Plan are not intended to be treated as incentive
stock options as defined in Section 422 of the Internal Revenue Code of
1986.
Subject to IGC approval, the administrator has granted options for an
aggregate of 5.625% of the Company's common stock. The options have an
exercise price of $200 per share of the Company's common stock. These
options are not subject to the disclosure requirements of Financial
Accounting Standards Board's Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation, until they are
approved by the IGC.
6. STOCK PURCHASE AGREEMENTS
As a result of agreements that HPI entered into with the eight other
shareholders of the Company, HPI currently owns 70.7% of the issued and
outstanding common stock of the Company as of December 31, 1996. Eight
individuals owned the remaining 29.3%.
Pursuant to agreements by and among the Kevin F. Flynn June, 1992
Non-Exempt Trust, and the Brian J. Flynn June, 1992 Non-Exempt Trust,
Donald F. Flynn, Robert W. Flynn and certain other affiliates
(collectively, the "Flynn Group") and HPI (the "Flynn Group Agreement"),
the Flynn Group has agreed to purchase shares of common stock of HPI
representing an indirect 57.15% equity interest in the Company. Within
30 days after the closing date of the Offering (see Note 8), the Company
will raise an additional $5.0 million of equity capital.
7. REAL ESTATE LOANS
In connection with the acquisition of real estate comprising the Trail
Creek Site, the Company secured $3.9 million of interest free purchase
money notes secured by mortgages, $2.9 million of which rank senior to
the mortgage which will be held on behalf of the holders of the notes
described below. Using an imputed interest rate of 8%, the principal
amount of these notes is approximately $3.2 million. Principal payments
requirements for
38
<PAGE> 39
these notes are $599,000; $647,000; $648,000; $600,000 and $648,000 for
the years 1997 through 2001, respectively. Management believes the
carrying value of these real estate loans is approximately equal to its
estimated fair value at December 31, 1996.
8. SUBSEQUENT EVENTS
In March 1997, the Company intends to issue $100 million in aggregate
principal amount of Senior Secured Notes Due 2004 With Contingent
Interest (the Notes"). The net proceeds from the offering of the Notes
will be used to refinance existing indebtedness and fund in part, the
acquisition, design, development, construction, equipping and opening of
the riverboat gaming vessel, which includes the casino and related
amenities. $20 million principal amount of the Notes will be sold to
shareholders of the Company. The purchasers of such Notes agreed to
certain provisions including, upon certain circumstances, the exchange
of such Notes for subordinated notes. Fixed interest will be payable on
the Notes at certain percentage per annum, payable semi-annually
starting in 1997. Contingent Interest is payable on the Notes, on each
such interest payment date, in aggregate amount equal to certain
percentage of the Company's consolidated earnings before interest,
taxes, depreciation and amortization ("EBITDA" as defined) subject to
certain restrictions.
Subject to certain limitations and Permitted Liens (as defined), the
Notes will be senior secured obligations of the Company secured by
substantially all of the assets of the Company. Under certain
circumstances, the Company or the holders of the Notes may require that
the Notes be redeemed prior to the maturity date at various prices
and/or amount.
The Notes will limit the ability of the Company to pay dividends, incur
new debt, enter into transactions with affiliates, enter into mergers
and sell certain assets.
The IGC extended the Company's Certificate of Suitability for 182 days
on February 21, 1997. The Certificate of Suitability also provides that
failure to commence excursions prior to April 17, 1997, may result in
the revocation of the Certificate of Suitability.
The Company's credit agreement with an affiliate of the Flynn Group was
increased from $15 million to $25 million, subsequent to December 31,
1996.
New legislation has been introduced in the 1997 Session of the Indiana
General Assembly which, if enacted, would prohibit the expansion of
gambling until the earlier of December 31, 1999, or the date the
National Gambling Impact Study Commission has completed its study. As
originally introduced in both the Indiana Senate and House of
Representatives, the legislation included a provision that could be
interpreted to prohibit the IGC from issuing riverboat licenses after
January 1, 1997. The Senate subsequently amended the bill to delete this
provision and passed the bill as amended. The original legislation is
still pending in the Indiana House of Representatives. The Company
received its Certificate of Suitability from the IGC prior to January 1,
1997, but a gaming license was not issued to the Company prior to
January 1, 1997.
39
<PAGE> 40
BOYD GAMING CORPORATION
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying pro forma condensed consolidated financial statements present
pro forma information for Boyd Gaming Corporation (the "Company") and Blue Chip
Casino, Inc. ("Blue Chip") giving effect to the acquisition of Blue Chip using
the purchase method of accounting. The pro forma condensed consolidated
financial statements of the Company are based on the historical consolidated
financial statements of the Company and Blue Chip as of and for the nine months
ended September 30, 1999 and for the year ended December 31, 1998.
The accompanying pro forma condensed consolidated income statements for the nine
months ended September 30, 1999 and the year ended December 31, 1998 have been
presented as if the Blue Chip acquisition occurred on January 1, 1998. The
accompanying pro forma condensed consolidated balance sheet as of September 30,
1999 has been presented as if the Blue Chip acquisition occurred on September
30, 1999.
The pro forma adjustments are based on currently available information and upon
certain assumptions that management of the Company believes are reasonable under
the circumstances. In the accompanying pro forma consolidated condensed
financial statements, the purchase price of Blue Chip excludes a contingent
purchase price payment of $5.0 million. The contingent purchase price payment
will be made to the former owners of Blue Chip Casino, Inc. in the event that,
over a period of 36 months, Blue Chip's combined earnings before interest,
taxes, depreciation and amortization and certain other qualified expenses
exceeds a specified amount. If paid, the effect of the contingent purchase price
payment on the pro forma condensed consolidated financial statements would
increase the value of the intangible license rights by $5.0 million and the
related amortization of the intangible license rights.
The accompanying pro forma condensed consolidated financial statements are
provided for informational purposes only and are not necessarily indicative of
the results that will be achieved for future periods. The accompanying pro forma
condensed consolidated financial statements do not purport to represent what the
Company's results of operations or financial position would actually have been
if the Blue Chip acquisition in fact had occurred at January 1, 1998 or
September 30, 1999. The accompanying pro forma condensed consolidated financial
statements and the related notes thereto should be read in conjunction with the
Company's audited financial statements included in its Annual Report on Form
10-K for the year ended December 31, 1998 and the financial statements of Blue
Chip included in this filing.
40
<PAGE> 41
BOYD GAMING CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
COMPANY BLUE CHIP AND COMPANY
HISTORICAL HISTORICAL ELIMINATIONS PROFORMA
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 63,946 $ 10,739 $ 277,600 (a) $ 74,685
(273,600)(c)
(4,000)(b)
Accounts receivable, net 17,735 468 18,203
Inventories 7,278 210 7,488
Prepaid expenses and other 16,949 480 17,429
Income taxes receivable 647 -- 647
Deferred tax asset 18,777 -- 18,777
---------- -------- --------- ----------
Total current assets 125,332 11,897 -- 137,229
Property and equipment, net 775,433 121,186 7,283 (c) 891,254
(12,648)(c)
Other assets and deferred charges, net 43,644 -- 4,000 (b) 45,216
(2,428)(c)
Intangible assets, net 198,550 -- 158,019 (c) 356,569
---------- -------- --------- ----------
Total assets $1,142,959 $133,083 $ 154,226 $1,430,268
========== ======== ========= ==========
LIABILITIES AND EQUITY
Current maturities of long-term debt $ 2,097 $ 51,856 $ (51,856)(c) $ 2,097
Accounts payable 30,858 3,959 (2,826)(c) 31,991
Accrued liabilities:
Payroll and related 26,974 3,056 30,030
Interest and other 54,630 5,829 (309)(c) 60,150
---------- -------- --------- ----------
Total current liabilities 114,559 64,700 (54,991) 124,268
Long-term debt, net 714,041 -- 277,600 (a) 991,641
Deferred income taxes and other 56,803 -- 56,803
Commitments and contingencies
Stockholders' equity:
Common stock 622 -- 622
Additional paid in capital 141,920 20,104 (20,104)(c) 141,920
Retained earnings 115,014 48,279 (48,279)(c) 115,014
---------- -------- --------- ----------
Total equity 257,556 68,383 (68,383) 257,556
---------- -------- --------- ----------
Total liabilities and equity $1,142,959 $133,083 $ 154,226 $1,430,268
========== ======== ========= ==========
</TABLE>
The accompanying notes are an integral part of these
pro forma condensed consolidated financial statements.
41
<PAGE> 42
BOYD GAMING CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS
COMPANY BLUE CHIP AND COMPANY
HISTORICAL HISTORICAL ELIMINATIONS PRO FORMA
---------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Revenues
Casino $ 533,533 $ 120,786 $ 654,319
Food and beverage 118,779 4,828 123,607
Room 53,812 -- 53,812
Other 53,560 1,424 54,984
Management fee 34,820 -- 34,820
--------- --------- --------- ---------
Gross revenues 794,504 127,038 -- 921,542
Less promotional allowances 69,795 1,466 71,261
--------- --------- --------- ---------
Net revenues 724,709 125,572 -- 850,281
--------- --------- --------- ---------
Costs and expenses
Casino 268,777 47,224 316,001
Food and beverage 77,242 3,797 81,039
Room 17,978 -- 17,978
Other 48,843 84 48,927
Selling, general and administrative 104,652 14,248 118,900
Maintenance and utilities 30,974 4,594 35,568
Depreciation and amortization 54,744 4,683 4,473 (e) 63,900
Corporate expense 18,098 -- 18,098
Management fee -- 3,735 (3,735)(d) --
Preopening expense 1,208 -- 1,208
--------- --------- --------- ---------
Total 622,516 78,365 738 701,619
--------- --------- --------- ---------
Operating income 102,193 47,207 (738) 148,662
--------- --------- --------- ---------
Other income (expense)
Interest income 240 -- 240
Interest expense, net (50,332) (6,871) (9,241)(f)(g) (66,444)
--------- --------- --------- ---------
Total (50,092) (6,871) (9,241) (66,204)
--------- --------- --------- ---------
Income before provision for income taxes 52,101 40,336 (9,979) 82,458
Provision for income taxes 21,419 -- 12,446 (h) 33,865
--------- --------- --------- ---------
Income before cumulative effect and
extraordinary item $ 30,682 $ 40,336 $ (22,425) $ 48,593
========= ========= ========= =========
Basic and diluted earnings per share:
Income before cumulative effect and
extraordinary item $ 0.50 $ 0.78
========= =========
</TABLE>
The accompanying notes are an integral part of these pro forma
condensed consolidated financial statements.
42
<PAGE> 43
BOYD GAMING CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS
COMPANY BLUE CHIP AND COMPANY
HISTORICAL HISTORICAL ELIMINATIONS PRO FORMA
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Revenues
Casino $ 722,124 $141,672 $ 863,796
Food and beverage 161,582 5,873 167,455
Room 74,053 1,513 75,566
Other 70,903 -- 70,903
Management fee 40,206 -- 40,206
------------------------------------ ----------
Gross revenues 1,068,868 149,058 -- 1,217,926
Less promotional allowances 93,772 1,301 95,073
------------------------------------ ----------
Net revenues 975,096 147,757 -- 1,122,853
------------------------------------ ----------
Costs and expenses
Casino 366,746 56,884 423,630
Food and beverage 106,195 5,508 111,703
Room 24,724 -- 24,724
Other 65,626 51 65,677
Selling, general and administrative 147,647 20,426 168,073
Maintenance and utilities 41,144 6,089 47,233
Depreciation and amortization 73,407 6,082 $ 6,126 (e) 85,615
Corporate expense 19,994 -- 19,994
Management fee -- 4,398 (4,398)(d) --
Preopening expense -- -- --
Restructuring charge 5,925 -- 5,925
------------------------------------ ----------
Total 851,408 99,438 1,728 952,574
------------------------------------ ----------
Operating income 123,688 48,319 (1,728) 170,279
Other income (expense)
Interest income 365 -- 365
Interest expense, net of amts cap. (74,162) (12,702) (8,781)(f)(g) (95,645)
------------------------------------ ----------
Total (73,797) (12,702) (8,781) (95,280)
------------------------------------ ----------
Income before provision for income taxes 49,891 35,617 (10,509) 74,999
Provision for income taxes 21,291 270 10,451 (h) 32,012
------------------------------------ ----------
Income from continuing operations $ 28,600 $ 35,347 $(20,960) $ 42,987
==================================== ==========
Basic and diluted earnings per share:
Income from continuing operations $ 0.46 $ 0.70
========== ==========
</TABLE>
The accompanying notes are an integral part of these
pro forma condensed consolidated financial statements.
43
<PAGE> 44
BOYD GAMING CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
The pro forma adjustments contained in the accompanying pro forma condensed
consolidated financial statements reflect:
(a) The proceeds from borrowings under the Bank Credit Facility to fund the
acquisition of Blue Chip and the remaining estimated constructions costs
for the hotel.
(b) The payment of costs related to the acquisition of Blue Chip.
(c) The payment of approximately $266,317 to the owners of Blue Chip Casino,
Inc., the payment of $7,283 for construction costs related to the
completion of the hotel, the adjustment of fixed assets to fair value, the
elimination of certain assets and liabilities not included as part of the
purchase, the elimination of Blue Chip's equity ($20,104 in paid-in capital
and $48,279 in retained earnings), and the allocation of the excess
purchase price over the fair value of acquired assets ($158,019 allocated
to intangible license rights based on the Company's estimates of the fair
market values of the net assets being acquired).
(d) The elimination of Blue Chip's historical management fee expense for the
nine-month period ended September 30, 1999 and the year ended December 31,
1998.
(e) Depreciation and amortization expense is adjusted as follows:
<TABLE>
<CAPTION>
Twelve
Life Nine Months Months
In Depreciation Depreciation
Amount Years and Amortization and Amortization
----------------------------------------------------
<S> <C> <C> <C> <C>
Land $ 8,117 -- $ -- $ --
Land improvements 20,446 8 1,917 2,556
Buildings 18,904 38 373 497
Riverboat 36,840 23 1,201 1,602
Furniture, fixtures and equipment 12,914 3-5 2,627 3,503
Construction in process 18,600 -- -- --
------------------------------------------------
Total property and equipment 115,821 6,118 8,158
Other assets 4,000 40 75 100
Intangible license rights 158,019 40 2,963 3,950
-------- --------------------------
Total $277,840 9,156 12,208
========
Historical depreciation and
amortization expense recorded
by Blue Chip (4,683) (6,082)
--------------------------
Net adjustment for depreciation
and amortization expense $ 4,473 $ 6,126
==========================
</TABLE>
44
<PAGE> 45
(f) The elimination of Blue Chip's historical interest expense for the
nine-month period ended September 30, 1999 and the year ended December 31,
1998.
(g) Interest expense on $277,600 in debt at an assumed interest rate of 7.75%.
(h) Adjustments to the provision for income taxes to result in an effective
rate of 41% for the nine-month period ended September 30, 1999 and an
effective rate of 42.7% for the year ended December 31, 1998.
45
<PAGE> 46
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.
BOYD GAMING CORPORATION
(Registrant)
Date: January 7, 2000 By /s/ Ellis Landau
-----------------------------------
Ellis Landau,
Executive Vice President,
Chief Financial Officer, and
Treasurer (Principal Financial Officer)
46
<PAGE> 47
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2.6 Unit Purchase Agreement (the "Agreement") dated
as of June 27, 1999, by and among Boyd Gaming
Corporation, Boyd Indiana, Inc., Blue Chip
Casino, Inc., an Indiana corporation, Blue Chip
Casino, LLC, Kevin F. Flynn, Brian J. Flynn,
Donald Flynn, and Robert W. Flynn (incorporated
by reference to exhibit 10.29 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999).
23.1 Consent of Arthur Andersen LLP, Independent
Public Accountants.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
Form 8-K/A of our reports dated February 26, 1999 and January 17, 1997 (except
with respect to the matters discussed in Note 8, of the December 31, 1996 and
1995 financial statements of Blue Chip Casino, Inc., as to which the date is
March 3, 1997). It should be noted that we have not audited any financial
statements of Blue Chip Casino, Inc. subsequent to December 31, 1998 or
performed any audit procedures subsequent to February 26, 1999.
ARTHUR ANDERSEN LLP
January 4, 2000
Chicago, Illinois
