ITEM 1. BUSINESS. --------
General
The Company owns and operates two hotels, casinos and bowling centers, the Showboat Hotel, Casino and Bowling Center in Las Vegas, Nevada ("Las Vegas Showboat") and the Showboat Casino Hotel in Atlantic City, New Jersey ("Atlantic City Showboat") and a riverboat casino in New Orleans, Louisiana through its respective Nevada and New Jersey subsidiaries. The Company's wholly-owned Nevada subsidiaries include Showboat Operating Company and Showboat Development Company. Showboat Development Company's wholly owned subsidiaries include Showboat Mohawk, Inc., Showboat Indiana, Inc., Lake Pontchartrain Showboat, Inc. and Showboat Louisiana, Inc. The Company commenced operations on September 9, 1954, as a partnership and was incorporated under the laws of the state of Nevada in 1960. The Company became a registered public company on December 19, 1968. It was listed in the American Stock Exchange in February 1973 and was listed on the New York Stock Exchange on May 30, 1984. The Company operated only the Las Vegas Showboat until March 30, 1987 when the Atlantic City Showboat commenced operations. The Company's New Jersey subsidiaries include its wholly- owned subsidiary Ocean Showboat, Inc. ("OSI"), and OSI's wholly-owned subsidiaries Atlantic City Showboat, Inc. ("ACSI") and Ocean Showboat Finance Corporation ("OSFC"). Unless the context otherwise requires, the "Company" or "SBO," as applicable, refers to Showboat, Inc. and its subsidiaries. The Company's executive offices are located at 2800 Fremont Street, Las Vegas, Nevada 89104, and its telephone number is (702) 385-9141.
Through its subsidiary, Showboat Louisiana, Inc., the Company acquired a 30% equity interest in Showboat Star Partnership, a Louisiana general partnership which owns a riverboat casino on Lake Pontchartrain in New Orleans, Louisiana named the "Star Casino," for a capital contribution of $18.6 million in 1993. The Star Casino commenced operations on November 8, 1993. Effective March 1, 1994, the Company purchased an additional 20% equity interest in the Showboat Star Partnership from a partner in exchange for $9.0 million. A management agreement entered into between Lake Pontchartrain Showboat, Inc., a subsidiary of the Company ("LPSI"), and Star Casino, Inc., a general partner of Showboat Star Partnership, provides that LPSI shall receive a management fee of 5% of gaming revenues, net of gaming taxes and regulatory boarding fees, in exchange for managing the Star
Casino's operations. Star Casino, Inc. assigned the management agreement to the Showboat Star Partnership.
The Company's marketing and operating strategy is to develop a high volume of traffic through its casinos, emphasizing slot machine play which accounted for 84.2%, 73.2% and 68.6% of the casino revenues of the Las Vegas Showboat, the Atlantic City Showboat, and the Star Casino, respectively, in 1993. Customers are attracted to the Las Vegas Showboat by competitive slot machines, bingo, moderately priced food and accommodations, a friendly "locals" atmosphere and a 106-lane bowling center. The Atlantic City Showboat targets the drive-in customer by providing competitive games and excellent service in an attractive convenient facility. The Star Casino, like the Las Vegas Showboat, targets "locals" with its excellent service, attractive and convenient facility and accessible location.
Fiscal Year 1993 Developments
Star Casino
In July 1993, the Company and Star Casino, Inc., a Louisiana corporation owned by Louie Roussel, III, formed the Showboat Star Partnership, a Louisiana general partnership, to own the Star Casino, a riverboat casino located on the south shore of Lake Pontchartrain in New Orleans, Louisiana. Until March 1, 1994, Showboat Louisiana, Inc. owned 30% of the partnership and Star Casino, Inc. was the managing partner. Effective March 1, 1994, Showboat Louisiana, Inc. purchased from Star Casino, Inc. an additional 20% equity interest in the partnership for $9.0 million and the partners formed a ten member managing committee on which Showboat Louisiana, Inc. appoints five members.
The Star Casino offers an aggregate of 21,900 square feet of casino space on three levels containing 762 slot machines and 41 table games. The riverboat facility also includes an approximately 34,000 square foot terminal building containing a bar, restaurant and administrative offices. The casino operations of the Star Casino are managed by the Company through LPSI, which receives a management fee of five percent of gaming revenue, net of gaming taxes and regulatory boarding fees, pursuant to a management agreement. The Star Casino commenced gaming operations on November 8, 1993, after receiving the approval of the Louisiana Riverboat Gaming Commission, the Riverboat Gaming Division of the Louisiana State Police and the U.S. Coast Guard.
Development and Management Services Division
The Company formed a Development and Management Services Division ("Development Division") in 1993 to investigate and secure new properties in the United States and around the world. The Development Division evaluates all expansion opportunities based upon certain criteria, including but not limited to, demographics, location and competition.
Showboat's Development Division also provides management services to support a new facility upon its opening. The Development Division will provide a new project with human resources, marketing, design and construction, management information systems, regulatory compliance, operations and financial services.
Expansion Opportunities
The Company is evaluating expansion opportunities in emerging gaming markets in the United States and elsewhere in the world. Announced expansion opportunities include:
East Chicago, Indiana
On February 2, 1994, the Showboat Marina Partnership, consisting of Showboat Indiana Investment Limited Partnership, a wholly-owned limited partnership ("SII"), and Waterfront Entertainment and Development, Inc., an Indiana corporation ("Waterfront"), filed Part I of its gaming application with the Indiana Riverboat Gaming Commission to operate a riverboat casino on Lake Michigan in East Chicago, Indiana. Showboat Marina Partnership intends to file Part II of its gaming application on April 12, 1994. Showboat Marina Partnership is the only applicant for the East Chicago gaming berth. Showboat Marina Partnership is owned 55% by SII and 45% by Waterfront. The Company will invest $17.5 million in the Showboat Marina Partnership and will help the partnership to obtain in excess of $50.0 million in debt financing. East Chicago residents passed a referendum on November 2, 1993 authorizing gaming in East Chicago.
St. Regis Mohawk Reservation, New York
The Company, through Showboat Mohawk Investment Limited Partnership, a wholly-owned limited partnership ("SMI"), is negotiating with the St. Regis Mohawk Tribe ("Tribe") and Native American Gaming Consultants, a corporation formed under tribal law ("NAGC"), such documents as are necessary to develop, construct, manage and operate Class III gaming on the Tribe's Reservation in Hogansburg, New York. The proposed agreements contemplate that SMI will initially operate Class III games in an approximately 19,000 square foot casino that will be expanded to approximately 40,000
square feet. An initial loan in the approximate amount of $35 million will be made to the Tribe by SMI for the purchase of an existing building, the "TVI Site," and for certain improvements to the building. SMI will receive a management fee of 20% of earnings before interest, taxes and depreciation throughout the management term, which will be five years. On October 15, 1993, New York Governor Mario Cuomo signed a Compact with the Tribe, permitting Class III gaming. Class III games include blackjack, craps, roulette, best hand poker, big six, keno, and other authorized games. Any agreements between SMI and the Tribe will be subject to approval by the National Indian Gaming Commission.
Sydney, Australia
Sydney Harbour Casino Holdings Limited, a corporation consisting of Showboat Australia Pty Limited, a wholly-owned Australian subsidiary of the Company, and Leighton Properties Pty Limited, Australia's largest publicly traded construction group, was selected by the New South Wales Casino Control Authority as one of two companies on the short list for the first casino license in Sydney, Australia. Only one license to operate a casino with table games and slot machines in Sydney, Australia will be awarded by the Casino Control Authority. Private clubs offering slot machines are currently in operation. The Casino Control Authority is expected to make its final selection on or after May 6, 1994.
Atlantic City Showboat Expansion
During 1993, the Company continued the construction of a three-part $76.2 million expansion project, after credits of $8.8 million from the Casino Reinvestment Development Authority ("CRDA"), at the Atlantic City Showboat. For a discussion of CRDA credits see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." The first stage of the expansion was completed in May 1993 and added Atlantic City's first horse race simulcasting facility. Approximately 4,500 square feet of casino space was added in June 1993. With the additional casino space, the Company added approximately 340 slot machines and 28 table games to its Atlantic City Casino in 1993.
In the second stage of the expansion, the Company anticipates adding an additional 15,000 square feet of casino space by the Summer of 1994. With the additional casino space, the Company anticipates the addition of approximately 550 slot machines and 10 table games, bringing the then total number of slot machines and table games at the Atlantic City Showboat to approximately 3,000 and 108, respectively.
The final stage of the expansion is the addition of a new 284-room hotel tower, now under construction, which is scheduled to
open in the Spring of 1995. On July 9, 1993, ACSI purchased approximately four acres of real property abutting the Atlantic City Showboat from the Atlantic City Housing Authority and Urban Redevelopment Agency. ACSI is constructing the new hotel tower on this site. (See "Item 2.
ITEM 2. PROPERTIES. ----------
Las Vegas
The Las Vegas Showboat is located on the eastern edge of the City of Las Vegas approximately two and one-half miles from both downtown Las Vegas and the area commonly known as the "Strip" where many of Las Vegas' major resort hotel casinos are located. The Las Vegas Showboat is primarily a two-story structure with an eighteen-story high-rise hotel and a 620-car parking garage. The hotel registration area, bowling center, restaurants, bars and entertainment lounge surround the casino area and are on the first floor of the Las Vegas Showboat. The 408-seat buffet, 1,300-seat bingo room, meeting and banquet facilities, employee dining room, and the Company's executive offices are located on the second floor. The Las Vegas Showboat's high-rise tower contains 352 of the Showboat's 482 guest rooms. The entire facility covers approximately 26 acres, which includes approximately 19.25 acres of improved parking area. The Company also owns and operates the 33-room Showboat Motel located immediately across the street from the Showboat on approximately one acre of land.
The facilities are constantly monitored to make sure that the needs of the Company's business and customers are met.
The Company holds fee title to all of the above-described properties. The real property, buildings and improvements comprising the Las Vegas Showboat secure the Company's First Mortgage Bonds. All of the above-mentioned land and buildings are leased to Showboat Operating Company, a wholly-owned subsidiary.
Atlantic City
The Atlantic City Showboat is located on an approximately ten and one-half acre rectangular site which ACSI leases from Resorts International, Inc. ("Resorts") pursuant to a 99-year lease dated October 26, 1983 (as amended, "Lease").
Under the New Jersey Act, both Resorts and ACSI, because of their lessor- lessee relationship, are jointly and severally liable for the acts of the other with respect to any violations of the New Jersey Act by the other. In order to limit the potential liability which could result from this provision, ACSI, OSI and Resorts have
agreed to indemnify each other from all liabilities and losses which may arise as a result of the joint and several liability imposed by the New Jersey Act. However, the New Jersey Commission could determine that the party seeking indemnification is not entitled to or is barred from such indemnification.
Pursuant to the New Jersey Act, the New Jersey Commission approved, subject to certain changes, an Assumption Agreement ("Assumption Agreement") executed by Trump Taj Mahal Associates Limited Partnership and Trump Taj Mahal Realty Corp. (collectively, "Trump Taj"), ACSI and Resorts in connection with Trump Taj's acquisition of the land on which the Taj Mahal Casino Hotel is constructed and pursuant to which Trump Taj assumed some of Resorts' obligations in the Lease. The New Jersey Commission ruled that the Assumption Agreement is a lease under the New Jersey Act for casino regulatory purposes. As a result, for casino regulatory purposes, a lessor-lessee relationship is deemed to exist among ACSI, Resorts, and Trump Taj making them jointly and severally liable for the acts of the other with respect to any violations of the New Jersey Act by the others. In order to limit their potential liability, ACSI, Resorts and Trump Taj have entered into an agreement to indemnify each other from all liabilities and losses which may arise as a result of the joint and several liability imposed upon them by the New Jersey Act. However, the New Jersey Commission could determine that the party seeking indemnification is not entitled to or is barred from such indemnification.
In the event Resorts is unable under the laws of New Jersey to act as lessor of the site to the Atlantic City Showboat ("Premises"), ACSI has an option to purchase the Premises for the greater of $66.0 million or the fair market value of the "leased fee estate" (determined by appraisal in the case of disagreement), subject to a maximum purchase price of 11 times the annual rent in the option year. However, if the appraisal is not completed within the time period specified by the New Jersey Commission, the purchase price is equal to the lesser of $66.0 million or 11 times the annual rent in the option year. If ACSI is unable to continue operating the Atlantic City Showboat under the New Jersey gaming laws, Resorts has a similar option to purchase ACSI's interest in the Premises together with the Atlantic City Showboat building and all furniture, fixtures and equipment thereon for their fair market value as of the option date (determined by appraisal in the case of disagreement). Also, should Resorts elect to sell its interest in the Lease or the Premises to an unaffiliated third party, ACSI has a first right of purchase unless such sale is made to a person who acquires all of the assets and liabilities of Resorts (subject to the Lease). Similarly, Resorts has a first right of purchase of ACSI's leasehold interest in the Premises or the Atlantic City Showboat if ACSI elects to sell the same to any person other than an affiliate of ACSI or a mortgagee of ACSI's leasehold interest
and improvements on the leased land. Any such transfer by ACSI, other than to a permitted transferee, requires Resorts' consent which cannot be unreasonably withheld.
The Lease and all amendments thereto are subject to review and approval by the New Jersey Commission, and Resorts and ACSI have agreed that they will accept any reasonable modification to the Lease that may be required by the New Jersey Commission. If either party determines that the requested Lease modifications are unduly burdensome, the Lease may be terminated, subject to arbitration in the case of disagreement. The Lease, as amended to date, has been approved by the New Jersey Commission. In addition, Resorts, pursuant to a ruling by the New Jersey Commission, in its capacity as lessor of the site of the Atlantic City Showboat, must obtain a casino service industry license. Resorts presently holds a casino service industry license, which must be renewed every three years.
The First Mortgage Bonds are also secured by a first leasehold mortgage on ACSI's interest in the Lease, the Atlantic City Showboat building and future improvements on the leased land as well as certain personal property therein. Such mortgage is subject and subordinate to Resorts' rights under the Lease and its fee interest in the Premises. Subject to certain limited excep-tions, the Lease may not be amended without the consent of the trustee under the Indenture governing the First Mortgage Bonds unless certain opinions are delivered to the effect that the amendment does not materially impair the security of the mortgage. An event of default under the Lease constitutes an event of default under the mortgage and the Indenture.
In addition to its rental payment obligations under the Lease, ACSI is obligated to contribute up to one-third of the costs of certain infrastructure improvements to be constructed on a 56-acre tract ("Urban Renewal Tract"). The Atlantic City Showboat is located on a portion of the Urban Renewal Tract owned by Resorts. ACSI is obligated to contribute only toward improvements of which it is the beneficiary or which are expected to benefit ACSI and all future occupants of the Urban Renewal Tract. ACSI has contributed to infrastructure improvements involving the construction of certain sewer and water lines and the realigning of a portion of Delaware Avenue ("Realigned Delaware Avenue") to permit direct ingress and egress from the Realigned Delaware Avenue to the Atlantic City Showboat, which improvements have been completed.
Realigned Delaware Avenue has not yet been dedicated to the City of Atlantic City. Pending dedication of the Realigned Delaware Avenue to the City, the Atlantic City Housing Authority granted to ACSI a permanent easement and right of way ("Easement") for the Realigned Delaware Avenue for the benefit of ACSI and ACSI's employees, agents, guests, suppliers, visitors, invitees and all others seeking access to the Atlantic City Showboat. Until
acceptance of a deed of dedication of the Realigned Delaware Avenue by the City of Atlantic City, ACSI shall maintain at its expense and pay, if billed separately, the real property taxes associated with the Easement, or reimburse Resorts for its allocable share of such real property taxes for the Easement.
In addition, the CRDA approved a plan effective November 1992 to widen Delaware Avenue to four traffic lanes and two parking lanes. Delaware Avenue leads directly from White Horse Pike (U.S. Route 30) to the Atlantic City Showboat. ACSI proposed and the CRDA approved that $8.0 million of ACSI's deposits with the CRDA will be used for the widening of Delaware Avenue. In connection with its approval, the CRDA required ACSI to donate $2.0 million of its deposits with the CRDA to certain CRDA programs. The Company anticipates that the widening of Delaware Avenue will be completed by the Spring of 1994.
ACSI's Board of Directors routinely authorizes capital expenditures at the Atlantic City Showboat. In addition to the three-part expansion of the Atlantic City Showboat which began in 1993, the Board has authorized expending $17.6 million for recurring annual capital improvements in 1994. None of these recurring annual capital expenditures in 1994 commit the Company to additional capital expenditures in subsequent years.
During 1993, the Company continued the construction of a three-part $76.2 million expansion project, after credits of $8.8 million from CRDA, at the Atlantic City Showboat. For a discussion of CRDA credits see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." The first stage of the expansion was completed in May 1993 and added Atlantic City's first horse race simulcasting facility. Approximately 4,500 square feet of casino space was added in June 1993. With the additional casino space, the Company added approximately 340 slot machines and 28 table games to its Atlantic City Casino in 1993.
In the second stage of the expansion, the Company anticipates adding an additional 15,000 square feet of casino space by the Summer of 1994. With the additional casino space, the Company anticipates the addition of approximately 550 slot machines and 10 table games, bringing the then total number of slot machines and table games at the Atlantic City Showboat to approximately 3,000 and 108, respectively.
The final stage of the expansion is the addition of a new 284-room hotel tower, now under construction, which is scheduled to open in the Spring of 1995. On July 9, 1993, ACSI purchased approximately four acres of real property (the "Land") abutting the Atlantic City Showboat from the Atlantic City Housing Authority and Urban Redevelopment Agency ("ACHA"). ACSI is constructing the new
hotel tower on this site. ACSI purchased the Land subject to certain conditions which, in most instances, expire upon ACSI completing the construction of the planned improvements. In the event that ACSI fails to comply with the following conditions prior to completion of the improvements, the Land shall revert and become revested in ACHA free and clear of all liens after the expiration of all cure periods including the liens created pursuant to the Indenture for the First Mortgage Bonds: (a) ACSI paying all real estate taxes or ACSI failing to keep the Land free of all liens except for permitted liens; (b) ACSI failing to commence construction of the improvements prior to October 1, 1993 (construction did commence before the required date) and to complete construction of the improvements by July 1, 1995; (c) without first obtaining the written consent of ACHA no stockholder holding 10% or more of the stock of ACSI may transfer its stock and ACSI may not (i) increase its capitalization, (ii) merge with another entity, (iii) amend its corporate documents, or (iv) issue additional stock; and (d) fail to comply with all terms and provisions of the Contract of Sale for Sale of Land for Private Redevelopment between ACHA and ACSI ("Contract of Sale"). On January 4, 1994, ACHA declared ACSI to be in default for noncompliance with certain provisions contained in the Contract of Sale pertaining to affirmative action of ACSI's general contractor's and subcontractors' workforce. Since the declaration of default, ACSI has been diligently working to cure the defaults. Although no assurance can be given in this regard, ACSI management believes that as a result of its efforts ACHA will ultimately rescind its notice of default.
The Company believes that it presently is utilizing the Atlantic City facilities at an acceptable level. See Item 1. "BUSINESS" p. 3. The Atlantic City facilities are constantly monitored to make sure that the needs of the Company's business and customers are met.
Other Facilities
ACSI leases a 63,200 square-foot warehouse and office in Egg Harbor Township, New Jersey, approximately 15 miles from the Atlantic City Showboat. The lease term is through July 31, 2001. ACSI holds an option to purchase the warehouse for $1.9 million. This option may be exercised by ACSI on or after January 1, 1996, and shall remain in effect until March 31, 2001.
ACSI leases a parking area for its employees from the Trump Taj Mahal Associates for 400 parking spaces. This lease expires, unless earlier terminated, on December 31, 1997. ACSI provides, through an independent contractor, a shuttle service for its employees between the two parking areas and the Atlantic City Showboat. Continued availability of such employee parking and
shuttle service facility is required as a condition to the renewal of ASCI's casino license.
During 1993, ACSI purchased an additional parcel of land nearby for approximately $1.0 million to serve as an overflow for parking.
The Company leases office space for the Development Division in Ventnor, New Jersey pursuant to a lease agreement executed on December 20, 1993 between Showboat Operating Company and Ventroy Associates. The term of the lease is five years commencing on January 1, 1994, with monthly rental payments of $11,386.
Lake Pontchartrain, Louisiana
The Star Casino is located on the south side of Lake Pontchartrain in New Orleans, Louisiana, approximately seven miles from New Orleans' "French Quarter." The terminal building and parking area are located on approximately 19.6 acres. The terminal building is a two-story structure containing approximately 34,000 square feet. The terminal building houses a restaurant and cocktail lounge on the first floor and administrative offices on the second floor. On-site parking for 1,150 cars is located immediately adjacent to the terminal building.
Showboat Star Partnership leases land, wharf and water bottom from the Orleans Levee District for use in its riverboat gaming operations. The term of the land lease agreement is for ten years, with four options to renew for a period of ten years each. Additionally, Showboat Star Partnership leases a building from the Orleans Levee District, which is adjacent to its terminal building, pursuant to a lease agreement dated February 1, 1994. The Showboat Star Partnership is currently determining the best use for the additional building. The term of the lease agreement for the additional building is one year, with nine options to renew for a period of one year each.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS. -----------------
The Company is from time to time involved in legal proceedings arising in the ordinary course of business. The Company is not a party to any material pending legal proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ---------------------------------------------------
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. ----------------------------------------- ---------------------------
The Company's common stock is listed on the New York Stock Exchange. The range of high and low sales prices for the Company's common stock for each quarter in the last two years is as follows:
On March 15, 1994, the closing price of the Company's common stock on the New York Stock Exchange was $19 5/8.
The Company has paid quarterly dividends since 1970. The declaration and payment of dividends is at the discretion of the Board of Directors. The Board of Directors considers, among other factors, the Company's earnings, financial condition and capital spending requirements in determining an appropriate dividends.
The Company is restricted in the payment of cash, dividends, loans or other similar transactions by the terms of an Indenture executed by it in connection with the issuance of First Mortgage Bonds. See Note 4 to the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA. -----------------------
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(a) In 1989, the Company sold the common stock and substantially all of the assets of Showboat Sports, Inc., a wholly-owned subsidiary, for $10.0 million. The Company recognized a gain on the sale of $4.9 million.
(b) In the years ended December 31, 1991 and 1990, the Company recognized an extraordinary gain of $.2 million and $4.0 million, respectively, net of tax, as a result of the purchase of $12.1 million and $18.5 million, respectively, of its Mortgage-Backed Bonds. See Note 10 to the Consolidated Financial Statements.
(c) In the year ended December 31, 1992, the Company recognized an extraordinary loss of $3.4 million net of tax, as a result of the planned redemption of all of its outstanding Debentures. See Note 10 to the Consolidated Financial Statements.
(d) The Company adopted FAS 109 in 1993 and reported the cumulative effect of the change in method of accounting for income taxes as of January 1, 1993 in the 1993 Consolidated Statement of Income.
(e) In the year ended December 31, 1993, the Company recognized an extraordinary loss of $6.7 million, net of tax, as a result of the redemption of all of its outstanding Mortgage-Backed Bonds. See Note 10 to the Consolidated Financial Statements.
(f) In 1993, the Company acquired a 30% equity interest in Showboat Star Partnership which was engaged in the development of a riverboat casino on Lake Pontchartrain in New Orleans, Louisiana. Operation of the riverboat casino commenced on November 8, 1993. The Company's share of the partnership's loss from the commencement of operations through December 31, 1993, including the write-off of preopening costs, of $1.3 million is included in income from operations for the quarter ended December 31, 1993.
(g) In the year ended December 31, 1992, the Company sold 3.45 million shares of its common stock in a public offering. Net proceeds of the offering were $50.4 million. Proceeds of the offering were used in January 1993 to redeem all of the Company's Debentures and to prepay the outstanding balance of its construction and term loan. See Notes 4 and 7 to the Consolidated Financial Statements.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND ------------------------------------------------- ------------- RESULTS OF OPERATIONS. ---------------------
General
The consolidated financial statements of the Company include the accounts of SBO and its wholly-owned subsidiaries, Showboat Development Company ("SDC"), Showboat Operating Company ("SOC") and OSI. They also include SDC's wholly- owned subsidiaries LPSI and Showboat Louisiana, Inc. ("SLI") and OSI's wholly- owned subsidiaries which are ACSI and OSFC. SBO and its subsidiaries operate Las Vegas Showboat, Atlantic City Showboat and Star Casino.
LPSI was formed in 1993 to manage the Star Casino on Lake Pontchartrain in New Orleans, Louisiana pursuant to a management agreement. SLI was also formed in 1993 to hold a 30% equity interest in Showboat Star Partnership ("SSP") which owns Star Casino, the riverboat casino managed by LPSI. In 1993, the Company invested $18.6 million in SSP for its 30% equity interest. Effective March 1, 1994, the Company acquired an additional 20% equity interest in SSP from a partner for $9.0 million bringing the Company's equity interest to 50%. Operation of Star Casino commenced on November 8, 1993. The investment by SLI in SSP has been accounted for under the equity method of accounting. The Company's equity in the loss of SSP is included in the Consolidated Statement of Income as equity in loss of an unconsolidated affiliate. Revenues from management fees paid by SSP to LPSI are included in other revenues in the Consolidated Statement of Income.
Material Changes in Results of Operations
Year Ended December 31, 1993 (1993) Compared to Year Ended December 31, 1992 (1992)
Revenues
Net revenues for the Company increased to $375.7 million in 1993 from $355.2 million in 1992, an increase of $20.5 million or 5.8%. Casino revenues increased $16.3 million or 5.2% to $329.5 million in 1993 from $313.2 million in 1992. Nongaming revenues, which consist principally of food, beverage, room and bowling revenues, were $78.3 million in 1993 compared to $71.2 million in 1992, an increase of $7.1 million or 10.0%.
The Atlantic City Showboat generated $294.2 million of net revenues in 1993 compared to $277.3 million in 1992, an increase of $16.9 million or 6.1%. Casino revenues were $268.8 million in 1993 compared to $254.7 million in 1992, an increase of $14.1 million or 5.5%. The increase in casino revenues was due to an increase in slot machine revenues of $14.7 million or 8.0% to $196.8 million in 1993 from $182.1 million in 1992. This compares to 4.8% growth in slot machine revenues in the Atlantic City market in 1993 compared to 1992. The improved slot revenue growth experienced by the Atlantic City Showboat is attributed to an increase in slot units throughout the year to 2,411 slot units at the end of 1993, up from 2,073 slot units at the end of 1992, an increase of 340 slot units or a weighted average rate of 9.9%. The increase in slot machine revenues was partially offset by the $4.0 million or 5.5% decrease in table games revenues which resulted primarily from the 3.2% decline in table games revenues in the Atlantic City market during 1993 compared to 1992. Casino revenues were positively impacted by the addition of simulcasting and Poker as part of the opening of Jake's Betting Parlor in the second quarter of 1993. These games contributed $2.2 million and $1.1 million, respectively, during the
year ended December 31, 1993. Nongaming revenues increased $5.6 million or 12.0% in 1993 to $52.7 million from $47.1 million in 1992. This increase was attributed to promotional programs offering casino customers rooms, food and beverage at a reduced price as well as increases in complimentary services.
At the Las Vegas Showboat, net revenues increased to $81.1 million in 1993 from $77.9 million in 1992, an increase of $3.2 million or 4.1%. Casino revenues increased $2.2 million or 3.8% in 1993 to $60.7 million from $58.5 million in 1992. Slot machine revenues showed the greatest improvement in casino revenues with an increase of $1.6 million or 3.4%. Slot machine revenues accounted for 84.2% of casino revenues in 1993 and 84.5% of casino revenues in 1992. Increases in gaming revenues were primarily the result of higher patron volume due to promotions and increased advertising. Nongaming revenues increased $1.0 million or 4.3% in 1993 to $25.1 million from $24.1 million in 1992. These increases were principally in rooms and food and beverage resulting from targeted marketing programs for rooms and promotional programs offering food at a reduced price.
LPSI generated $.4 million in management fee revenues in 1993. LPSI receives management fees of 5.0% of Star Casino's casino revenues after gaming taxes of 18.5% and boarding fees totaling $5.00 per passenger boarding the vessel. Star Casino opened November 8, 1993 and generated net revenues of $12.0 million in 1993 consisting primarily of casino revenues of $10.9 million.
Income from Operations
The Company's income from operations decreased to $45.4 million in 1993 from $46.5 million in 1992, a decrease of $1.1 million or 2.3%.
The Company incurred approximately $3.8 million in expenses relating to the pursuit of expansion opportunities in jurisdictions outside of Nevada and New Jersey in 1993 compared to $.9 million in 1992.
Income from operations at the Atlantic City Showboat, before management fees, was $44.0 million in 1993 compared to $39.6 million in 1992, an increase of $4.4 million or 11.1%. The increase in income from operations was primarily due to increased revenues which were offset by a $12.5 million or 5.3% increase in operating expenses, before management fees, to $250.3 million in 1993 compared to $237.7 million in 1992. The increase in operating expenses was primarily due to the increased capacity and volume of business. General and administrative expenses increased due to increases in utilities and maintenance costs resulting from the expanded facility. General and administrative expenses were also impacted by an $.8 million or 13.2% increase in real estate taxes
and an $.8 million parking assessment absorbed by Atlantic City Showboat. In addition, depreciation expense increased $1.3 million or 7.4% in 1993 as a result of the expansion at the Atlantic City Showboat.
Income from operations at the Las Vegas Showboat declined $1.3 million or 16.6% in 1993 to $6.5 million from $7.8 million in 1992. The decrease was primarily due to a $4.5 million or 6.4% increase in operating expenses to $74.6 million in 1993 from $70.1 million in 1992. Increased operating expenses resulted primarily from increases in payroll and payroll related expenses, increased advertising and repairs and maintenance expenses.
LPSI incurred a loss from operations of $.4 million which was primarily the result of administrative expenses incurred before the November 8, 1993 opening of Star Casino.
The loss from operations of SLI of $.9 million represents SLI's 30% share of the net loss of SLI's unconsolidated affiliate, SSP. SSP had a net loss of $2.8 million resulting primarily from preopening costs of Star Casino of $4.2 million in 1993, of which Showboat's share was $1.3 million. Before the write- off of preopening costs, SSP's income was $1.4 million of which Showboat's share was $.4 million.
Other (Income) Expense
Other (income) expense consisted of $24.7 million interest expense, net of $1.1 million of capitalized interest, and $3.2 million of interest income in 1993 compared to interest expense of $25.3 million and interest income of $1.4 million in 1992. Two offsetting factors impacted 1993 interest expense. In January 1993, the Company repurchased all of its Debentures and prepaid its construction and term loan that had an outstanding balance of $17.2 million. In June 1993, the Company repurchased all of its Mortgage-Backed Bonds. This resulted in a $14.4 million decrease in interest expense. This decrease was offset by the issuance in May 1993 of $275.0 million of First Mortgage Bonds resulting in a $15.8 million increase in interest expense. In connection with its expansion project at the Atlantic City Showboat, the Company capitalized $1.1 million of interest costs.
Income Taxes
In 1993, the Company incurred, before the income tax benefit on an extraordinary loss, income taxes of $10.5 million, or an effective rate of 43.8%, compared to $6.8 million, or an effective rate of 29.9% in 1992. Differences between the Company's effective tax rate and statutory federal tax rates are due to permanent differences between financial and tax reporting. In 1993, these differences consisted principally of $.9 million in state income
taxes resulting from the utilization, for financial reporting purposes, of New Jersey net operating loss carryforwards, a $.6 million restricted interest assessment, net of tax, resulting from an Internal Revenue Service audit of prior years and $.4 million resulting from the increase in federal tax rates.
In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes." The Company adopted the provisions of FAS 109 effective January 1, 1993 without restating prior years' financial statements. The adoption of FAS 109 resulted in a reduction of net deferred tax liability of $.6 million and this amount has been reported separately as a cumulative effect of the change in the method of accounting for income taxes in the 1993 Consolidated Statement of Income.
Net Income
In 1993, the Company realized income before an extraordinary loss on the extinguishment of debt and the cumulative effect of the change in the method of accounting for income taxes of $23.9 million or $.89 per share. On June 18, 1993, the Company redeemed all of its Mortgage-Backed Bonds at 105.7% of the principal amount plus accrued and unpaid interest up to and including the redemption date. The Company recognized an extraordinary loss, before an income tax benefit, of $11.2 million as a result of the write-off of unamortized debt issue costs of $2.7 million and payment of a 5.7% redemption premium of $8.5 million. The after tax loss was $6.7 million or $.44 per share. The Company also recognized a cumulative effect adjustment for the change in the method of accounting for income taxes of $.6 million or $.04 per share. Net income for 1993 was $7.3 million or $.49 per share.
In 1992, the Company realized income before an extraordinary loss on the extinguishment of debt of $15.9 million or $1.37 per share. As a result of the repurchase of the Company's outstanding Debentures, the Company recognized an extraordinary loss, net of tax, of $3.4 million or $.29 per share. This loss resulted from the write-off of original issue discount and issuance costs associated with the Debentures. Net income for 1992 was $12.4 million or $1.08 per share.
Year Ended December 31, 1992 (1992) Compared to Year Ended December 31, 1991 (1991)
Revenues
Net revenues for the Company increased to $355.2 million in 1992 from $331.6 million in 1991, an increase of $23.6 million or 7.1%. Casino revenues increased $24.8 million or 8.6% to $313.2 million in 1992 from $288.4 million in 1991. Nongaming revenues
were $71.2 million in 1992 compared to $71.7 million in 1991, a decrease of $.5 million or .7%.
The Atlantic City Showboat generated $277.3 million of net revenues in 1992 compared to $260.8 million in 1991, an increase of $16.5 million or 6.3%. Casino revenues were $254.7 million in 1992 compared to $237.2 million in 1991, an increase of $17.5 million or 7.4%. The increase in casino revenues was due primarily to an increase in slot machine revenues of $20.4 million or 12.6% to $182.1 million in 1992 from $161.7 million in 1991. This compares to a 14.2% growth in slot machine revenues in the Atlantic City market in 1992 compared to 1991. Slot machine revenues were also favorably impacted by a one-time reversal of a $1.2 million slot progressive jackpot accrual. Slot machine revenues at the Atlantic City Showboat accounted for 71.5% of casino revenues in 1992 and 68.2% of casino revenues in 1991. The increase in slot machine revenues was partially offset by the $2.9 million or 3.8% decrease in table games revenues to $72.6 million in 1992 from $75.5 million in 1991. The decrease in table games revenues resulted primarily from the Company decreasing the number of table games units by 24 tables in the third quarter of 1991 and by the 3.4% decline in table games revenues in the Atlantic City market during 1992 compared to 1991. Nongaming revenues declined $1.0 million or 2.2% in 1992 to $47.1 million from $48.1 million in 1991. This decrease was primarily attributed to a $3.1 million or 9.4% decline in food and beverage revenues associated with a reduction in promotional offers. The reduction in food and beverage revenues were partially offset by a $1.3 million or 12.8% increase in room revenues due to more effective room utilization and a $.9 million or 77.2% increase in entertainment revenues.
At the Las Vegas Showboat, net revenues increased to $77.9 million in 1992 from $70.8 million in 1991, an increase of $7.1 million or 10.1%. Casino revenues increased $7.3 million or 14.3% in 1992 to $58.5 million from $51.2 million in 1991. The most significant improvement in casino revenues occurred in slot machine revenues which increased $5.7 million or 13.1% in 1992. Casino revenues were also favorably impacted by a $1.1 million or 49.9% reduction in bingo losses in 1992. Slot machine revenues continued to dominate casino revenues at 84.5% of casino revenues in 1992 and 85.3% of casino revenues in 1991. Increases in casino revenues were due to an overall increase in the volume of business, principally as a result of the continuation of certain targeted marketing activities. Nongaming revenues increased $.5 million or 2.0% in 1992 to $24.1 million from $23.6 million in 1991. Increases in food and beverage revenues of $.9 million or 6.5% and hotel revenues of $.3 million or 6.3% were offset by a reduction of $.7 million in other revenues as a result of the recognition in 1991 of a one-time benefit of $.8 million from the reversal of an accrual.
Income from Operations
The Company's income from operations increased to $46.5 million in 1992 from $35.5 million in 1991, an increase of $11.0 million or 31.0%.
Income from operations at the Atlantic City Showboat was $39.6 million in 1992 compared to $31.2 million in 1991, an increase of $8.4 million or 26.9%. This increase was primarily due to improved casino revenues caused by the 14.2% slot machine revenue growth experienced in the Atlantic City market in 1992. Operating expenses increased $8.1 million or 3.5% to $237.7 million in 1992 compared to $229.6 million in 1991. The increase in operating expenses was comprised of a $5.6 million or 28.9% increase in promotional coin incentives offered in conjunction with slot marketing programs and a 6.8% increase in general and administrative costs consisting primarily of a $3.0 million increase in payroll and benefits. Increases in operating expenses were offset by a $3.3 million or 16.0% decrease in depreciation and amortization expense to $17.5 million in 1992 from $20.8 million in 1991. Improvements in income from operations, excluding that realized from the reduction in depreciation and amortization expense, occurred principally in the quarter ended March 31, 1992.
At the Las Vegas Showboat, income from operations, increased to $7.8 million in 1992 from $4.3 million in 1991, an increase of $3.5 million or 81.4%. The improvement in operating results reflected the continued implementation of cost effective marketing programs which resulted in increased revenues of $7.2 million offset by a $3.7 million or 5.6% increase in operating expenses in 1992 to $70.1 million from $66.4 million in 1991. In general, increases in operating expenses were consistent with increases in volume of business.
Income from operations in 1992 was adversely impacted by $.9 million of expenses incurred by the Company in conjunction with the investigation of new gaming opportunities outside of Nevada and New Jersey.
Other (Income) Expense
In 1992, other (income) expense consisted of $25.3 million of interest expense and $1.4 million of interest income compared to $27.5 million and $2.1 million, respectively, in 1991. Reductions in interest expense of $1.4 million were realized as a result of the fourth quarter 1991 repurchase of $12.1 million of the Mortgage-Backed Bonds. Other reductions in interest expense were primarily a result of reduced principal balances due to scheduled principal amortization.
Income Taxes
In 1992, the Company incurred income tax expense, before income tax benefit on an extraordinary loss, of $6.8 million, or an effective tax rate of 29.9%, compared to $4.1 million, or an effective tax rate of 40.5%, in 1991. Differences between the Company's effective tax rate and statutory federal tax rates are due to permanent differences between financial and tax reporting which consisted principally of the estimated tax reporting impact of the financial reporting provision for loss on Casino Reinvestment Development Authority obligations and disallowance of certain employee meals.
Net Income
In 1992, the Company realized income before an extraordinary loss on the extinguishment of debt of $15.9 million or $1.37 per share. The Company recognized an extraordinary loss, net of tax, of $3.4 million or $.29 per share as a result of the write-off of original issue discount and issuance costs associated with the redemption of the Debentures. Net income for 1992 was $12.4 million or $1.08 per share.
In 1991, the Company realized income before an extraordinary gain on the extinguishment of debt of $6.0 million or $.53 per share. In 1991, the Company purchased $12.1 million face value of its Mortgage-Backed Bonds and realized an extraordinary gain, net of tax, of $.2 million or $.02 per share. Net income for 1991 was $6.2 million or $.55 per share.
Liquidity and Capital Resources
As of December 31, 1993, the Company held cash and cash equivalents of $122.8 million compared to $99.6 million at December 31, 1992. In January 1993, the Company utilized $34.4 million of its cash and cash investments to redeem all of its Debentures at par plus accrued interest and $17.3 million to prepay the outstanding balance of the Company's construction and term loan. In May 1993, the Company issued $275.0 million of First Mortgage Bonds. In June 1993, the Company utilized $162.3 million of the proceeds from the sale of the First Mortgage Bonds to redeem all of its outstanding Mortgage-Backed Bonds at 105.7% plus accrued interest. The remaining proceeds have been reserved by the Company to benefit existing facilities and to expand into new facilities or gaming jurisdictions. In 1993, the Company expended approximately $3.8 million in its investigation of expansion opportunities in new jurisdictions.
During 1993, the Company expended approximately $59.7 million on capital improvements at its Las Vegas and Atlantic City facilities. The Company is engaged in an $85.0 million expansion
project, before credits of $8.8 million from the CRDA, at its Atlantic City facility. During 1993 the Company expended approximately $31.8 million on the expansion project and $27.9 million on recurring capital improvements. The balance of the expansion project is expected to be completed in 1994 and 1995.
ACSI's current CRDA funding credit of approximately $8.8 million is approximately 20% of the maximum allowable expansion costs as determined by the CRDA. This percentage represents ACSI's current share of the allowable Atlantic City casino industry total for expansion-related credits. The amount of ACSI's CRDA funding credit could increase to a maximum of 35% or $14.9 million, depending upon whether or not other casino applicants in Atlantic City discontinue their expansion projects for which credit has been applied. Likewise, ACSI's allowed funding credit could decrease in the event that other casino applicants in Atlantic City increase their allowable expansion costs.
On May 18, 1993, the Company issued $275.0 million of First Mortgage Bonds. The First Mortgage Bonds are unconditionally guarantied by SOC, OSI and ACSI. Interest on the First Mortgage Bonds is payable semi-annually on May 1 and November 1 of each year. The First Mortgage Bonds are not redeemable prior to May 1, 2000. Thereafter, the First Mortgage Bonds will be redeemable at any time at the option of the Company, in whole or in part, at redemption prices specified in the Indenture. The First Mortgage Bonds are senior secured obligations of the Company and rank senior in right of payment to all existing and future subordinated indebtedness of the Company and pari passu with the Company's senior indebtedness. The First Mortgage Bonds are secured by a deed of trust representing a first lien on the Las Vegas hotel casino (other than certain assets), by a pledge of all outstanding shares of capital stock of OSI and an intercompany note by ACSI in favor of SBO and a pledge of certain intellectual property rights of the Company. OSI's obligation under its guaranty is secured by a pledge of all outstanding shares of capital stock of ACSI. ACSI's obligations under its guaranty are secured by a leasehold mortgage representing a first lien on the Atlantic City hotel casino (other than certain assets). SOC's guaranty is secured by a pledge of certain of its assets related to the Las Vegas hotel casino.
The Indenture places significant restrictions on SBO and its subsidiaries, including restrictions on making loans and advances by SBO to subsidiaries which are Non-Recourse Subsidiaries or subsidiaries in which SBO owns less than 50% of the equity. All capitalized terms not otherwise defined in this paragraph have the meanings assigned to the Indenture. The Indenture also places significant restrictions on the incurrence of additional Indebtedness by SBO and its subsidiaries, the creation of additional Liens on the Collateral securing the First Mortgage
Bonds, transactions with Affiliates and the investment of SBO and its subsidiaries in certain Investments. In addition, the terms of the Indenture prohibit SBO and its subsidiaries from making a Restricted Payment unless, at the time of such Restricted Payment: (i) no Default or Event of Default has occurred or would occur as a consequence of such restricted payment; (ii) SBO, at the time of such Restricted Payment and after giving proforma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, would have been permitted to incur at least $1.00 of additional Indebtedness; and, (iii) such Restricted Payment, together with the aggregate of all other Restricted Payments by SBO and its subsidiaries is less than the sum of (x) 50% of the Consolidated Net Income of SBO for the period (taken as one accounting period) from April 1, 1993 to the end of SBO's most recently ended fiscal quarter for which internal financial statements are available, plus (y) 100% of the aggregate net cash proceeds received by SBO from the issuance or sale of Equity Interests of SBO since the Issue Date, plus (z) Excess Non-Recourse Subsidiary Cash Proceeds received after the Issue Date. The term Restricted Payment does not include, among other things, the payment of any dividend if, at the time of declaration of such dividend, the dividend would have complied with the provisions of the Indenture; the redemption, repurchase, retirement, or other acquisition of any Equity Interest of SBO out of proceeds of, the substantially concurrent sale of other Equity Interests of SBO; Investments by SBO in an amount not to exceed $75 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 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 million in the aggregate; and the purchase, redemption, defeasance of any Pari ---- Passu Indebtedness with a substantially concurrent purchase, redemption, - ----- defeasance, or retirement of the First Mortgage Bonds (on a pro rata basis).
ACSI has available a $15.0 million line of credit guarantied by OSI. The line, which expires August 31, 1994, has interest payable at the bank's prime rate of 6.0% plus .5%. Borrowings on this line of credit may not be used for the payment of management fees or to fund ventures in other jurisdictions. At December 31, 1993, ACSI had all the funds available for use.
The Company entered into the Showboat Star Partnership agreement to own and operate a riverboat casino on the south shore of Lake Pontchartrain in New Orleans, Louisiana. The Company initially invested $18.6 million for a 30% equity interest in the
partnership and subsequently on March 1, 1994, purchased an additional 20% equity interest from a partner for $9.0 million. The Company also has a management agreement for the partnership's gaming operations which provides for a management fee of 5% of gaming revenues, net of gaming taxes of 18.5% and boarding fees totaling up to $5.00 per passenger boarding the vessel. The riverboat casino commenced operations on November 8, 1993.
The Company believes it has sufficient capital resources to cover the cash requirements of the Company. The ability of the Company to satisfy its cash requirements, however, will be dependent upon the future performance of its casino hotels which will continue to be influenced by prevailing economic conditions and financial, business and other factors, certain of which are beyond the control of the Company. The Company is evaluating potential expansion opportunities in new gaming jurisdictions. Additionally, the Company has announced that it is (i) a member of a partnership which is the only applicant for gaming berth for East Chicago, Indiana; (ii) completing negotiations for a tribal casino on the St. Regis Mohawk reservation; and (iii) one of two final applicants for the sole casino in Sydney, Australia. Each of the three identified expansion opportunities will require significant capital investment. The Company anticipates that (i) it will contribute $17.5 million to the East Chicago partnership and obtain financing in excess of $50 million for the construction of a gaming vessel and related land site improvements, (ii) it will initially loan up to $35 million for renovating and outfitting an existing building on the St. Regis Mohawk reservation for the conduct of a gaming business and for working capital purposes; and (iii) it will contribute $150 million (Australian) to the holding company of the Sydney casino licensee if the consortium to which it is a member is awarded the casino license. No assurance can be given that any of the announced opportunities will be realized. If the Company achieves any of the foregoing expansion opportunities, or others, the Company shall make a significant capital investment, and additional financing will be required. The Company anticipates that additional funds shall be obtained through loans or a public offering of equity or debt securities.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. -------------------------------------------
Independent Auditors' Report;
Consolidated Balance Sheets December 31, 1992 and 1993;
Consolidated Statements of Income for the Years Ended December 31, 1993, 1992 and 1991;
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1993, 1992 and 1991;
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991; and
Notes to Consolidated Financial Statements
Schedule II Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other Than Related Parties.
Schedule V Property and equipment
Schedule VI Accumulated Depreciation and Amortization of Property and Equipment
Schedule VIII Valuation and Qualifying Accounts
Schedule X Supplementary income statement information
All other information is omitted because it is inapplicable.
Independent Auditors' Report
The Shareholders and Board of Directors Showboat, Inc.:
We have audited the consolidated financial statements of Showboat, Inc. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Showboat, Inc. and subsidiaries as of December 31, 1993 and 1992, and the results of their operations their cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
As discussed in Notes 1 and 8 to the consolidated financial statements, the Company changed its method of accounting for income taxes in 1993 to adopt the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes".
KPMG PEAT MARWICK
Las Vegas, Nevada February 18, 1994, except for Note 1 paragraph 3 and Note 12 paragraph 2, which are as of March 1, 1994
SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 1993 and 1992
1993 1992 ASSETS --------- --------- (In thousands) Current assets: Cash and cash equivalents $122,787 $99,601 Receivables, net 5,913 5,092 Inventories 2,359 2,411 Prepaid expenses 4,044 3,969 Current deferred income taxes 4,865 3,483 --------- --------- Total current assets 139,968 114,556 --------- ---------
Property and equipment: Land 9,425 3,609 Land improvements 541 841 Buildings 261,009 246,090 Furniture and equipment 145,178 122,573 Construction in progress 27,194 7,253 --------- --------- 443,347 380,366 Less accumulated depreciation and amortization 145,527 129,183 --------- --------- 297,820 251,183 --------- ---------
Other assets, at cost: Deposits and other assets 7,892 16,074 Investment in Showboat Star Partnership 17,750 - Debt issuance costs, net of accumulated amortization of $323,000 at December 31, 1993 and $3,131,000 at December 31, 1992 7,270 3,087 --------- --------- 32,912 19,161 --------- ---------
$470,700 $384,900 ========= =========
-60- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 1993 and 1992 (continued)
1993 1992 LIABILITIES AND SHAREHOLDERS' EQUITY --------- --------- (In thousands) Current liabilities: Current maturities of long-term debt $3,574 $54,055 Accounts payable 14,173 10,096 Income taxes payable 1,752 1,453 Dividends payable 375 284 Accrued liabilities 23,664 25,167 --------- --------- Total current liabilities 43,538 91,055 --------- ---------
Long-term debt 277,043 155,061 --------- ---------
Deferred income taxes 14,961 12,766 --------- ---------
Commitments and contingencies (Note 12)
Shareholders' equity: Common stock, $1 par value; 20,000,000 shares authorized; issued 15,794,578 shares at December 31, 1993 and 1992 15,795 15,795 Additional paid-in capital 71,162 69,374 Retained earnings 54,628 48,778 --------- --------- 141,585 133,947 Less: Cost of shares in treasury, 814,483 shares and 991,043 shares at December 31, 1993 and 1992, respectively (6,370) (7,761) Unearned compensation for restricted stock (57) (168) --------- --------- Total shareholders' equity 135,158 126,018 --------- ---------
$470,700 $384,900 ========= =========
See accompanying notes to consolidated financial statements.
SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Years ended December 31, 1993, 1992 and 1991 (In thousands except per share data)
1993 1992 1991 --------- --------- --------- Revenues: Casino $329,522 $313,247 $288,442 Food and beverage 48,669 44,511 46,802 Rooms 19,355 17,280 15,612 Sports and special events 4,251 4,443 4,506 Other 5,982 4,932 4,791 --------- --------- --------- 407,779 384,413 360,153 Less complimentaries 32,052 29,177 28,593 --------- --------- --------- Net revenues 375,727 355,236 331,560 --------- --------- --------- Costs and expenses: Casino 129,898 125,773 115,468 Food and beverage 55,608 51,173 51,388 Rooms 13,083 12,169 11,282 Sports and special events 3,198 3,141 3,140 General and administrative 92,739 84,058 78,022 Selling, advertising and promotion 11,629 10,402 11,067 Depreciation and amortization 23,303 22,012 25,692 --------- --------- --------- 329,458 308,728 296,059 --------- --------- --------- Income from operations from consolidated subsidiaries 46,269 46,508 35,501
Equity in loss of unconsolidated affiliate (850) - - --------- --------- --------- Income from operations 45,419 46,508 35,501 --------- --------- ---------
-62- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Years ended December 31, 1993, 1992 and 1991 (In thousands except per share data) (continued)
1993 1992 1991 --------- --------- ---------
Income from operations 45,419 46,508 35,501 --------- --------- --------- Other (income) expense: Interest income (3,215) (1,441) (2,098) Interest expense, net of amounts capitalized 24,696 25,335 27,497 --------- --------- --------- 21,481 23,894 25,399 --------- --------- --------- Income before income tax expense, extraordinary items and cumulative effect adjustment 23,938 22,614 10,102
Income tax expense 10,474 6,757 4,088 --------- --------- --------- Income before extraordinary items and cumulative effect adjustment 13,464 15,857 6,014
Extraordinary items, net of income tax (6,679) (3,408) 180
Cumulative effect of change in method of accounting for income taxes 556 - - --------- --------- --------- Net income $7,341 $12,449 $6,194 ========= ========= =========
Income per common and equivalent share: Income before extraordinary items and cumulative effect adjustment $0.89 $1.37 $0.53
Extraordinary items, net of income tax (0.44) (0.29) 0.02
Cumulative effect of change in method of accounting for income taxes 0.04 - - --------- --------- --------- Net income $0.49 $1.08 $0.55 ========= ========= =========
See accompanying notes to consolidated financial statements
SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Years Ended December 31, 1993, 1992 and 1991
Less Additional Less Unearned Common paid-in Retained Treasury compen- stock capital earnings stock sation Total --------- --------- --------- --------- --------- --------- (In thousands)
Balance, December 31, 1990 $12,345 $22,416 $32,405 ($7,765) ($553) $58,848
Net income - - 6,194 - - 6,194
Cash divi- dends ($.10 per share) - - (1,135) - - (1,135)
Share trans- actions un- der stock plans - 27 - (19) 15 23
Amortization of un- earned compen- sation - - - - 203 203 --------- --------- --------- --------- --------- --------- Balance, December 31, 1991 $12,345 $22,443 $37,464 ($7,784) ($335) $64,133 --------- --------- --------- --------- --------- ---------
-64- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Years Ended December 31, 1993, 1992 and 1991 (continued)
Less Additional Less Unearned Common paid-in Retained Treasury compen- stock capital earnings stock sation Total --------- --------- --------- --------- --------- --------- (In thousands) Balance,
December 31, 1991 $12,345 $22,443 $37,464 ($7,784) ($335) $64,133
Net income - - 12,449 - - 12,449
Cash divi- dends ($.10 per share) - - (1,135) - - (1,135)
Issuance of 3,450,000 shares of common stock 3,450 46,916 - - - 50,366
Share trans- actions un- der stock plans - 15 - 23 11 49
Amortization of un- earned compen- sation - - - - 156 156 --------- --------- --------- --------- --------- --------- Balance, December 31, 1992 $15,795 $69,374 $48,778 ($7,761) ($168) $126,018 --------- --------- --------- --------- --------- ---------
-65- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Years Ended December 31, 1993, 1992 and 1991 (continued)
Less Additional Less Unearned Common paid-in Retained Treasury compen- stock capital earnings stock sation Total --------- --------- --------- --------- --------- --------- (In thousands) Balance, December 31, 1992 $15,795 $69,374 $48,778 ($7,761) ($168) $126,018
Net income - - 7,341 - - 7,341
Cash divi- dends ($.10 per share) - - (1,491) - - (1,491)
Share trans- actions un- der stock plans - 1,788 - 1,391 - 3,179
Amortization of un- earned compen- sation - - - - 111 111 --------- --------- --------- --------- --------- --------- Balance, December 31, 1993 $15,795 $71,162 $54,628 ($6,370) ($57) $135,158 ========= ========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements.
SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 1993, 1992 and 1991
1993 1992 1991 --------- --------- --------- (In thousands) Cash flows from operating activities: Net income $7,341 $12,449 $6,194 Adjustments to reconcile net income to net cash provided by operating activities: Allowance for doubtful accounts 1,849 1,644 2,924 Depreciation and amortization 23,303 22,012 25,692 Amortization of original issue discount and debt issuance costs 744 1,011 811 Provision for deferred income taxes 813 238 1,230 Amortization of unearned compensation 111 156 203 Provision for loss on Casino Reinvestment Development Authority obligation 1,122 1,068 1,057 Equity in loss of unconsolidated affiliate 850 - - Extraordinary (gain) loss on extinguishment of debt 11,166 5,164 (273) Loss on disposition of property and equipment 517 264 350 Increase in receivables, net (2,670) (1,537) (899) (Increase) decrease in inventories and prepaid expenses (23) (265) 599 (Increase) decrease in deposits and other assets (554) 284 (448) Increase (decrease) in accounts payable 85 395 (826) Increase in income taxes payable 968 429 2 Increase (decrease) in accrued liabilities (1,503) 400 1,007 --------- --------- --------- Net cash provided by operating activities 44,119 43,712 37,623 --------- --------- ---------
-67- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 1993, 1992 and 1991 (continued)
1993 1992 1991 --------- --------- --------- (In thousands) Cash flows from investing activities: Acquisition of property and equipment ($59,686) ($21,050) ($13,381) Proceeds from sale of property and equipment 78 105 311 Investment in Showboat Star Partnership (18,600) - - (Increase) decrease in deposits and other assets 4,046 910 (1,097) Deposit for Casino Reinvestment Development Authority obligation (3,289) (3,161) (2,892) --------- --------- --------- Net cash used in investing activities (77,451) (23,196) (17,059) --------- --------- ---------
Cash flows from financing activities: Principal payments of long-term debt (3,914) (8,879) (7,635) Proceeds from issuance of long-term debt 275,000 - 1,098 Early extinguishment of debt (208,085) - (11,696) Debt issuance costs (7,593) - (74) Payment of dividends (1,400) (1,141) (1,140) Issuance of common stock 2,510 50,366 - Other - 49 23 --------- --------- --------- Net cash provided by (used in) financing activities 56,518 40,395 (19,424) --------- --------- ---------
Net increase in cash and cash equivalents 23,186 60,911 1,140
Cash and cash equivalents at beginning of year 99,601 38,690 37,550 --------- --------- --------- Cash and cash equivalents at end of year $122,787 $99,601 $38,690 ========= ========= =========
-68- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 1993, 1992 and 1991 (continued)
1993 1992 1991 --------- --------- --------- (In thousands) Supplemental disclosures of cash flow information: Cash paid during the year for: Interest, net of amount capitalized $25,741 $24,562 $26,937 Income taxes 3,650 4,400 2,948
Supplemental schedule of non-cash investing and financing activities: Capital lease obligations incurred in connection with acquisition of equipment - 152 131 Increase (decrease) in property and equipment acquisitions included in construction contracts and reten- tions payable and long-term debt 3,914 1,890 (309) Share transactions under long-term incentive plan - 27 35 Transfer deposits for Casino Reinvestment Development Authority obligation to construction in progress 6,667 - -
See accompanying notes to consolidated financial statements.
SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Principles of Consolidation
Showboat, Inc. and subsidiaries, collectively the Company, conduct casino gaming operations in Las Vegas, Nevada, Atlantic City, New Jersey and New Orleans, Louisiana. In addition, the Company operates support services including hotel, restaurant, bar, bowling and convention facilities.
The consolidated financial statements include the accounts of Showboat, Inc. (SBO) and its wholly-owned subsidiaries which are Showboat Development Company (SDC), Showboat Operating Company (SOC) and Ocean Showboat, Inc. (OSI). They also include SDC's wholly-owned subsidiaries, Lake Pontchartrain Showboat, Inc. (LPSI) and Showboat Louisiana, Inc. (SLI), and OSI's wholly-owned subsidiaries Atlantic City Showboat, Inc. (ACSI) and Ocean Showboat Finance Corporation (OSFC). All material intercompany balances and transactions have been eliminated in consolidation.
LPSI was formed in 1993 to manage a riverboat casino in New Orleans, Louisiana pursuant to a management contract. SLI was also formed in 1993 to hold a 30% equity interest in Showboat Star Partnership (SSP) which owns the riverboat casino managed by LPSI. In 1993, the Company invested $18,600,000 in SSP for its 30% equity interest in the riverboat casino. Effective March 1, 1994, the Company purchased an additional 20% equity interest from its partner for $9,000,000 (Note 12). Operation of the riverboat casino commenced on November 8, 1993. The investment by SLI in SSP has been accounted for under the equity method of accounting. The Company's equity in the income or loss of SSP is included in the Consolidated Statement of Income as equity in loss of unconsolidated affiliate. LPSI receives a management fee from SSP of 5.0% of casino revenues net of gaming taxes of 18.5% and boarding fees. Management fees are included in other revenues in the Consolidated Statement of Income.
Casino Revenue and Complimentaries
In accordance with common industry practice, casino revenues are the net of gaming wins less losses.
Complimentaries primarily consist of rooms, food and beverage furnished gratuitously to customers. The sales values of such services are included in the respective revenue classifications and are then deducted as complimentaries. Complimentary rates are periodically reviewed and adjusted by management.
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method.
Fair Value of Certain Financial Instruments
The carrying amount of cash equivalents, accounts receivable and all current liabilities approximates fair value because of the short maturity of these instruments. See Notes 4 and 11 for additional fair value disclosures.
Property and Equipment
Property and equipment are stated at cost. Depreciation, including amortization of capitalized leases, is computed using the straight-line method. The cost of maintenance and repairs is charged to expense as incurred; significant renewals and betterments are capitalized.
Estimated useful lives for property and equipment are 5 to 15 years for land improvements, 10 to 40 years for buildings and 2 to 10 years for furniture and equipment.
Interest Costs
Interest is capitalized in connection with the construction of major facilities. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset's estimated useful life. For the year ended December 31, 1993, $1,085,000 of interest cost was capitalized. No interest was capitalized in the years ended December 31, 1992 and 1991.
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
In February 1992, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109). Under the asset and liability method of FAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.
Effective January 1, 1993, the Company adopted FAS 109 and has reported the cumulative effect of that change in accounting method in the 1993 Consolidated Statement of Income.
The Company previously used the asset and liability method under Statement of Financial Accounting Standards No. 96 (FAS 96). Under the asset and liability method of FAS 96, deferred tax assets and liabilities were recognized for all the events that had been recognized in the financial statements. Under FAS 96, the future tax consequences of recovering assets or settling liabilities at their financial statement carrying amounts were considered in calculating deferred income taxes. Generally, FAS 96 prohibited consideration of any other future events in calculating deferred income taxes.
The Company and its subsidiaries file a consolidated federal income tax return. For tax reporting purposes, the Company has elected to continue its fiscal year ending June 30.
Postemployment and Postretirement Benefits
The Company does not currently provide any significant postemployment or postretirement benefits.
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Amortization of Original Issue Discount and Debt Issuance Costs
Original issue discount is amortized over the life of the related indebtedness using the effective interest method.
Costs associated with the issuance of debt have been deferred and are being amortized over the life of the related indebtedness using a weighted average method based on retirement schedules specified in the debt indentures.
Income Per Common and Equivalent Share
Income per common and equivalent share is based on the weighted average number of shares outstanding. Such averages were 15,099,147, 11,584,275 and 11,410,208 during the years ended December 31, 1993, 1992 and 1991, respectively. Fully-diluted and primary income per common and equivalent share are the same.
Preopening and Development Costs
The Company is currently investigating expansion opportunities in new gaming jurisdictions. Costs associated with these investigations are expensed as incurred until such time as a particular opportunity is determined to be viable, generally when the Company is selected as the operator of a new gaming facility or a gaming license has been granted.
Costs incurred during the construction and preopening phase are capitalized. Types of costs capitalized include professional fees, salaries and wages, temporary office expenses, marketing expenses and training costs. When the new operation opens for business, preopening costs will be amortized over a period not to exceed 12 months using the straight-line method.
Costs associated with the preopening of the riverboat casino on Lake Pontchartrain in New Orleans, Louisiana were written-off upon commencement of operations on November 8, 1993 and totaled $4,246,000. The Company's share of those costs of $1,274,000 are included in equity in loss of unconsolidated affiliate in the December 31, 1993 Consolidated Statement of Income.
Reclassifications
Certain prior year balances have been reclassified to conform to the current year's presentation.
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. RECEIVABLES
Receivables consist of the following:
December 31, ------------------- 1993 1992 --------- --------- (In thousands)
Casino $6,816 $6,964 Hotel 1,020 715 Employees 88 86 Other 935 406 --------- --------- 8,859 8,171 Less allowance for doubtful accounts 2,946 3,079 --------- --------- Receivables, net $5,913 $5,092 ========= =========
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
December 31, ------------------- 1993 1992 --------- --------- (In thousands)
Interest $4,240 $6,029 Salaries and wages 8,289 7,540 Taxes, other than taxes on income 1,988 1,641 Medical and liability claims 2,983 3,036 Advertising and promotion 2,397 3,068 Outstanding chips and tokens 1,204 1,308 Other 2,563 2,545 --------- --------- Total accrued liabilities $23,664 $25,167 ========= =========
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. LONG-TERM DEBT
Long-term debt consists of the following:
December 31, ------------------- 1993 1992 --------- --------- (In thousands)
9 1/4% First Mortgage Bonds due 2008 (a) $275,000 $ - 11 3/8% Mortgage-Backed Bonds Due 2002 (b) - 149,444 13% Subordinated Sinking Fund Debentures Due October 1, 2004 (c) - 32,949 Construction and term loan, repaid in 1993 - 17,192 Capitalized lease obligations (Note 5) 5,617 9,531 --------- --------- 280,617 209,116 Less current maturities 3,574 54,055 --------- --------- $277,043 $155,061 ========= =========
(a) On May 18, 1993, the Company issued $275,000,000 of 9 1/4% First Mortgage Bonds due 2008 (First Mortgage Bonds). The proceeds from the sale of the First Mortgage Bonds were $268,469,000, net of underwriting discounts and commissions. Proceeds from the sale of the First Mortgage Bonds were used to redeem all of the outstanding 11 3/8% Mortgage-Backed Bonds Due 2002 at 105.7% of the principal amount plus accrued interest. The remaining proceeds were reserved by the Company to benefit existing facilities and to expand into new facilities or gaming jurisdictions.
The First Mortgage Bonds are unconditionally guarantied by OSI, ACSI and SOC. Interest on the First Mortgage Bonds is payable semi-annually on May 1 and November 1 of each year commencing November 1, 1993. The First Mortgage Bonds are not redeemable prior to May 1, 2000. Thereafter, the First Mortgage Bonds will be redeemable, in whole or in part, at redemption prices specified in the Indenture for the First Mortgage Bonds (Indenture). The First Mortgage Bonds are senior secured obligations of the Company and rank senior in right of payment to all existing and future subordinated indebtedness of the Company and pari passu with the Company's senior indebtedness. The First Mortgage Bonds are
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. LONG-TERM DEBT (continued)
secured by a deed of trust representing a first lien on the Las Vegas hotel casino (other than certain assets), by a pledge of all outstanding shares of capital stock of OSI, an intercompany note by ACSI in favor of SBO and a pledge of certain intellectual property rights of the Company. OSI's obligation under its guaranty is secured by a pledge of all outstanding shares of capital stock of ACSI. ACSI's obligation under its guaranty is secured by a leasehold mortgage representing a first lien on the Atlantic City hotel casino (other than certain assets). SOC's guaranty is secured by a pledge of certain assets related to the Las Vegas hotel casino.
The Indenture places significant restrictions on SBO and its subsidiaries, including restrictions on making loans and advances by SBO to subsidiaries which are Non-Recourse Subsidiaries or subsidiaries in which SBO owns less than 50% of the equity. All capitalized terms not otherwise defined in this paragraph have the meanings assigned to the Indenture. The Indenture also places significant restrictions on the incurrence of additional Indebtedness by SBO and its subsidiaries, the creation of additional Liens on the Collateral securing the First Mortgage Bonds, transactions with Affiliates and the investment of SBO and its subsidiaries in certain Investments. In addition, the terms of the Indenture prohibit SBO and its subsidiaries from making a Restricted Payment unless, at the time of such Restricted Payment: (i) no Default or Event of Default has occurred or would occur as a consequence of such restricted payment; (ii) SBO, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, would have been permitted to incur at least $1.00 of additional Indebtedness; and, (iii) such Restricted Payment, together with the aggregate of all other Restricted Payments by SBO and its subsidiaries is less than the sum of (x) 50% of the Consolidated Net Income of SBO for the period (taken as one accounting period) from April, 1993 to the end of SBO's most recently ended fiscal quarter for which internal financial statements are available, plus (y) 100% of the aggregate net cash proceeds received by SBO from the issuance or sale of Equity Interests of SBO since the Issue Date, plus (z) Excess Non-Recourse Subsidiary Cash Proceeds received after the Issue Date. The term Restricted Payment does not include, among other things, the payment of any dividend if, at the time of declaration of such dividend, the dividend would have complied with the
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. LONG-TERM DEBT (continued)
provisions of the Indenture; the redemption, repurchase, retirement, or other acquisition of any Equity Interest of SBO out of proceeds of, the substantially concurrent sale of other Equity Interests of SBO; Investments by SBO in an amount not to exceed $75,000,000 in the aggregate in any Non-Recourse Subsidiary engaged in a Gaming Related Business; Investments by SBO in any Non-Recourse Subsidiary engaged in a Gaming Related Business in an amount not to exceed in the aggregate 100% of all cash received by SBO from any Non-Recourse Subsidiary up to $75,000,000 in the aggregate and thereafter, 50% of all cash received by SBO from any Non-Recourse Subsidiary other than cash required to be repaid or returned to such Non-Recourse Subsidiary provided that the aggregate amount of Investments pursuant thereto does not exceed $125,000,000 in the aggregate; and the purchase, redemption, defeasance of any pari passu Indebtedness with a substantially concurrent purchase, redemption, defeasance, or retirement of the First Mortgage Bonds (on a pro rata basis).
(b) In March 1987, the Company issued $180,000,000 of 11 3/8% Mortgage-Backed Bonds Due 2002 (Mortgage-Backed Bonds). Interest was payable semi-annually on March 15 and September 15 of each year. During the years ended December 31, 1991 and 1990, the Company repurchased $12,096,000 and $18,460,000 face value, respectively, of the Mortgage-Backed Bonds (Note 10). In accordance with the provisions of the Indenture for the First Mortgage Bonds, the Mortgage-Backed Bonds were redeemed on June 18, 1993 at 105.7% of par plus accrued interest.
(c) During fiscal year 1985, the Company issued $57,500,000 of 13% (effective rate of 15.75%) Subordinated Sinking Fund Debentures Due October 1, 2004 (Debentures), with interest payable semi-annually. The Debentures were redeemable at any time at the option of the Company, in whole or in part, at par plus accrued interest or the Debentures may have been reacquired through purchases in the open market. The Debentures had a mandatory sinking fund requirement beginning October 1, 1991, designed to
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. LONG-TERM DEBT (continued)
retire 80% of the issue prior to maturity. On October 1, 1992 and 1991, the Company applied $2,875,000 of previously repurchased Debentures toward the sinking fund requirement. On October 29, 1992, the Company made a redemption of $2,875,000 of Debentures. On January 29, 1993, the Company redeemed in full the Debentures at par plus accrued interest (Note 10).
At December 31, 1993, the Company's Atlantic City subsidiary, ACSI, had available an unsecured line of credit for general working capital purposes totaling $15,000,000. Interest is payable monthly at the bank's prime rate plus .5%. The Bank's prime rate was 6.0% at December 31, 1993. The line of credit is guarantied by OSI and expires in August 1994. Borrowings on this line of credit may not be used for the payment of management fees or to fund ventures in other jurisdictions. At December 31, 1993, ACSI had all the funds under this line of credit available for use.
Maturities of the Company's long-term debt are as follows:
Year ending (In thousands) December 31, 1994 $3,574 1995 20 1996 1,950 1997 25 1998 29 Thereafter 275,019 --------- $280,617 =========
The fair value of the Company's First Mortgage Bonds was $283,250,000 at December 31, 1993 based on the quoted market price of the First Mortgage Bonds. The carrying amount of capital leases approximates fair value at December 31, 1993.
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. LEASES
The Company leases certain furniture and equipment and a warehouse under long-term lease agreements. The leases covering furniture and equipment expire in 1994 and the warehouse lease expires in 2001. The Company has the option to purchase the warehouse from January 1, 1996 through March 31, 2001 at an option price of approximately $1,928,000.
Property leased under capital leases by major classes are as follows:
December 31, ------------------- 1993 1992 --------- --------- (In thousands)
Building - warehouse $2,050 $2,050 Furniture and equipment 22,621 23,417 --------- --------- 24,671 25,467 Less accumulated amortization 19,456 21,308 --------- --------- $5,215 $4,159 ========= =========
ACSI is leasing 10 1/2 acres of Boardwalk property in Atlantic City, New Jersey for a term of 99 years commencing October 1983. Annual rent payments, which are payable monthly, commenced upon opening of the Atlantic City Showboat. The rent is adjusted annually based upon increases or decreases in the Consumer Price Index. In April 1993, the annual rent increased $243,000 to $8,118,000. ACSI is responsible for taxes, assessments, insurance and utilities.
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. LEASES (continued)
The following is a schedule of future minimum lease payments for capital leases and operating leases (with initial or remaining terms in excess of one year) as of December 31, 1993:
Capital Operating Leases Leases --------- --------- Year ending (In thousands) December 31, 1994 $4,014 $9,537 1995 286 9,773 1996 1,961 9,629 1997 33 9,783 1998 33 9,916 Thereafter 20 797,971 --------- --------- Total minimum lease payments 6,347 $846,609 ========= Less amount representing interest (10.4% to 12.9%) 730 --------- Present value of net minimum capital lease payments $5,617 =========
Rent expense for all operating leases was $9,287,000, $8,659,000 and $8,046,000 for the years ended December 31, 1993, 1992 and 1991, respectively.
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. STOCK PLANS
On May 17, 1990, the shareholders of SBO approved a long-term incentive plan in which officers and key employees of the Company participate. Up to 600,000 shares of SBO common stock may be awarded to plan participants as either restricted shares or stock options. Restricted shares and options shall vest over a five-year period. The options are exercisable, subject to vesting, over ten years at option prices determined by SBO's Compensation Committee provided that the option price is not less than 100% of the fair market value of the Company's common stock determined on the date of grant of the options. As of December 31, 1993, 127,900 restricted shares have been issued from treasury.
On May 17, 1990, the shareholders of SBO approved the Directors' Stock Option Plan whereby options to purchase up to 120,000 shares of SBO common stock may be granted at an option price no less than 100% of the fair market value of the shares on the date of grant. Under the terms of the Directors' Plan, each option shall be exercisable in full one year after the date of grant. Unless special circumstances exist, each option shall expire on the tenth anniversary of the date of grant or two years after the director's retirement.
In April 1992, the Board of Directors of the Company adopted the 1992 Employee Stock Option Plan (Plan) for all full-time and part-time employees. The Company reserved an aggregate of 1,000,000 shares of SBO common stock for issuance under the Plan. The exercise price of an option awarded under the Plan cannot be less than the fair market value of the Company's common stock on the date of grant. The number of options granted to an employee is based on the employee's years of service with the Company. Options, all of which expire ten years from the date of grant, are subject to vesting and continued affiliation with the Company.
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. STOCK PLANS (continued)
A summary of certain stock option information is as follows:
Year ended December 31, ----------------------------- 1993 1992 1991 --------- --------- ---------
Options outstanding at January 1 901,080 393,570 386,850
Granted 96,550 521,550 21,000 Exercised (176,560) (6,840) (2,280) Forfeited (8,750) (7,200) (12,000) --------- --------- --------- Options outstanding at December 31 812,320 901,080 393,570 ========= ========= =========
Option price range at December 31 $6.50 to $6.50 to $6.50 to $18.00 $14.50 $8.00
Options exercisable at December 31 529,495 120,430 82,245
Unearned compensation in connection with restricted stock issued for future services was recorded on the date of grant at the fair market value of SBO's common stock and is being amortized ratably from the date of grant over the five-year vesting period as it is earned. Compensation expense of $111,000, $156,000 and $203,000 was recognized during the years ended December 31, 1993, 1992 and 1991, respectively. Unearned compensation has been shown as a reduction of shareholders' equity in the accompanying Consolidated Balance Sheets.
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. SHAREHOLDERS' EQUITY
On December 24, 1992, the Company issued 3,450,000 shares of its $1.00 par value common stock in a public offering. The price to the public was $15.50 per share. Net proceeds of the offering, after deducting all associated costs, was $50,366,000 or $14.60 per newly issued share. Proceeds of the offering were used in January 1993 to redeem all of SBO's 13% Subordinated Sinking Fund Debentures Due 2004 and to fully prepay the balance outstanding on the construction and term loan.
8. INCOME TAXES
As discussed in Note 1, the Company adopted FAS 109 effective January 1, 1993. The cumulative effect of the change in method of accounting for income taxes of $556,000 is determined as of January 1, 1993 and is reported separately in the Consolidated Statement of Income for the year ended December 31, 1993. Prior year financial statements have not been restated to apply the provisions of FAS 109.
Total income tax expense for the year ended December 31, 1993 was allocated as follows:
(In thousands) Continuing operations $10,474
Extraordinary item (4,487)
Shareholders' equity, related to compensation expense deferred and reported as a reduction of shareholders' equity for financial reporting purposes (661) --------- $5,326 =========
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. INCOME TAXES (continued)
Income tax expense attributable to income from continuing operations consists of:
Year ended December 31, ----------------------------- 1993 1992 1991 --------- --------- --------- (In thousands) U.S. federal Current $7,910 $6,519 $2,858 Deferred 965 238 1,230 --------- --------- --------- 8,875 6,757 4,088 --------- --------- --------- State and local Current 1,195 - - Deferred 404 - - --------- --------- --------- 1,599 - - --------- --------- --------- Total Current 9,105 6,519 2,858 Deferred 1,369 238 1,230 --------- --------- --------- $10,474 $6,757 $4,088 ========= ========= =========
In 1992 and 1991, income tax expense of $6,757,000 and $4,088,000, respectively, represents income tax expense from continuing operations before extraordinary items. In 1992, as a result of an extraordinary loss of $5,164,000 (Note 10), the Company recognized an income tax benefit of $1,756,000 resulting in total income tax expense of $5,001,000. In 1991, as a result of an extraordinary gain of $273,000 (Note 10), the Company recognized additional income tax expense of $93,000 resulting in total income tax expense of $4,181,000.
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. INCOME TAXES (continued)
Income tax expense attributable to income from continuing operations differed from the amounts computed by applying the U.S. federal income tax rate of 35% for the year ended December 31, 1993 and 34% for the years ended December 31, 1992 and 1991 to pretax income from continuing operations as a result of the following:
Year ended December 31, ----------------------------- 1993 1992 1991 --------- --------- --------- (In thousands)
Computed "expected" tax expense $8,378 $7,689 $3,435 Increase (reduction) in income taxes resulting from: Change in the beginning of the year balance of the valuation allowance for deferred tax assets allocated to income tax expense 224 - - Adjustment to deferred tax assets and liabilities for enacted changes in tax rates 383 - - State and local income taxes, net of federal tax benefit 930 - - Impact of settlement of Internal Revenue Service examination - (102) - Restricted interest assessment, net of tax 619 - - Impact of graduated tax rates (90) - - Other, net 30 (830) 653 --------- --------- --------- Income tax expense $10,474 $6,757 $4,088 ========= ========= =========
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. INCOME TAXES (continued)
The significant components of deferred income tax expense attributable to income from continuing operations for the year ended December 31, 1993 are as follows:
(In thousands) Deferred tax expense (exclusive of other components listed below) $762 Adjustment to deferred tax assets and liabilities for enacted changes in tax rates 383 Change in beginning of the year balance of the valuation allowance for deferred tax assets 224 --------- $1,369 =========
For the years ended December 31, 1992 and 1991, deferred income tax expense of $238,000 and $1,230,000, respectively, results from temporary differences in the recognition of income and expenses for income tax and financial reporting purposes. The sources and tax effects of these temporary differences are as follows:
Year ended December 31, ------------------- 1992 1991 --------- --------- (In thousands)
Depreciation and amortization $1,250 $556 Utilization of credit carryforwards, net 1,145 (676) Provision for loss on Casino Reinvestment Development Authority obligation (1,496) 31 Allowance for doubtful accounts 309 342 Preopening costs 369 1,511 Accrued vacations (359) (149) Impact of settlement of Internal Revenue Service examination (625) - Other, net (355) (385) --------- --------- $238 $1,230 ========= =========
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. INCOME TAXES (continued)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1993 are as follows:
(In thousands) Deferred tax assets: Casino Reinvestment Development Authority obligation ($1,566) Accrued vacations (1,621) Allowance for doubtful accounts (1,210) Alternative minimum tax credit carryforwards (2,423) Other (3,606) --------- Total gross deferred tax assets (10,426) Less valuation allowance 601 --------- Net deferred tax assets (9,825) --------- Deferred tax liabilities: Depreciation and amortization 17,350 Capitalized interest 2,571 --------- Total gross deferred tax liabilities 19,921 ---------
Net deferred tax liability $10,096 =========
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. INCOME TAXES (continued)
Temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities that give rise to significant portions of the net deferred tax liability at December 31, 1992 relate to the following:
(In thousands)
Depreciation and amortization $13,931 Utilization of credit carryforwards (2,032) Capitalized interest 2,572 Allowance for doubtful accounts (1,047) Accrued vacations (1,328) Provision for loss on Casino Reinvestment Development Authority obligation (1,496) Other (1,317) --------- Net deferred tax liability $9,283 =========
The valuation allowance for deferred tax assets as of January 1, 1993 was $377,000. The net change in the total valuation allowance for the year ended December 31, 1993 was an increase of $224,000.
At December 31, 1993, the Company had available $2,423,000 of alternative minimum tax credit carryforwards which are available to reduce future federal regular income taxes, if any, over an indefinite period.
For State of New Jersey income tax purposes, the Company has available $1,144,000 of net operating loss carryforwards which expire through 1997.
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. EMPLOYEE BENEFIT PLANS
The Company maintains a profit sharing and retirement plan for eligible employees who are not covered by a collective bargaining agreement or by another retirement plan to which the Company is required to contribute. Contributions to the plan are made at the discretion of the Board of Directors of SBO. The benefits are limited to the allocated interest in the fund assets and each participant's account vests over a seven-year period. Contributions accrued by the Company were $195,000, $175,000 and $150,000 for the years ended December 31, 1993, 1992 and 1991, respectively.
The Company maintains a retirement and savings plan for eligible employees of ACSI and OSI. Under the terms of the plan, eligible employees may defer up to 3% of their compensation, as defined, of which 100% of the deferral is matched by ACSI. Eligible employees may contribute an additional 12% of their compensation which will not be matched by the Company. Contributions by the Company vest over a five-year period. The Company contributed $1,330,000, $1,110,000 and $776,000 to this plan for the years ended December 31, 1993, 1992 and 1991, respectively.
Effective January 1, 1994, SOC and LPSI adopted the provisions of the retirement and savings plan previously available to the eligible employees of ACSI and OSI. The Company has requested a determination letter from the Internal Revenue Service to allow the Company to merge the present profit sharing plan and the retirement and savings plan.
The Company's union employees are covered by union-sponsored, collectively-bargained, multi-employer pension plans. The Company contributed and charged to expense $1,197,000, $1,182,000 and $1,184,000 during the years ended December 31, 1993, 1992 and 1991, respectively. These contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of hours worked.
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. EXTRAORDINARY ITEMS
On June 18, 1993, the Company redeemed all of its remaining Mortgage-Backed Bonds at 105.7% plus accrued and unpaid interest up to and including the redemption date. The Company recognized an extraordinary loss before any income tax benefit of $11,166,000 as a result of the write-off of the unamortized debt issuance costs of $2,666,000 and the payment of a 5.7% redemption premium of $8,500,000. The after tax loss was $6,679,000 or $.44 per share.
On December 30, 1992, the Company notified debentureholders of its intent to redeem all of the outstanding Debentures at par plus accrued interest on January 29, 1993. Accordingly, at December 31, 1992, the Company reclassified the outstanding principal balance of $32,949,000 to current maturities of long-term debt and recognized an extraordinary loss of $5,164,000 before an income tax benefit of $1,756,000 as a result of the write-off of the unamortized discount and debt issuance costs. The after tax loss was $3,408,000 or $.29 per share.
In 1991, OSI purchased $12,096,000 face value of the Company's Mortgage-Backed Bonds for $11,696,000. Accordingly, after a charge of $127,000 for unamortized bond issuance costs, the Company realized an extraordinary gain of $273,000 before income taxes of $93,000 resulting in an after tax gain of $180,000 or $.02 per share.
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. NEW JERSEY INVESTMENT OBLIGATION
The New Jersey Casino Control Act (Act) provides, among other things, for an assessment on a gaming licensee based upon its gross casino revenues after completion of its first full year of operation. This assessment may be satisfied by investing in qualified direct investments, purchasing bonds issued by the Casino Reinvestment Development Authority (CRDA), or paying an "alternative tax". In order for direct investments to be eligible, they must be approved by the CRDA.
Deposits with the CRDA bear interest at two-thirds of market rates resulting in a current value lower than cost. At December 31, 1993 and 1992, deposits and other assets include $5,010,000 and $9,431,000, respectively, representing the Company's deposit with the CRDA of $7,488,000 as of December 31, 1993 and $14,121,000 as of December 31, 1992, net of a valuation allowance of $2,478,000 and $4,690,000, respectively. The carrying value of these deposits, net of the valuation allowance, approximates fair value.
The CRDA, as an agency of the City of Atlantic City, is responsible for the redevelopment of the area surrounding the Boardwalk. The Company has requested and the CRDA has approved that $8,000,000 of the Company's deposits with the CRDA will be used in connection with the expansion of a City street leading to the Atlantic City Showboat. In connection with its approval, the CRDA required the Company to donate $2,000,000 of its deposits with the CRDA to certain public programs. Construction of the City street commenced in the fourth quarter of 1993 and is expected to be completed in 1994. The Company has reclassified these CRDA deposits, net of the valuation allowance, totaling $6,667,000 to construction in progress. When construction is complete, these costs will be amortized over seven years. The CRDA has set aside these deposits in a restricted account and the Company no longer receives the benefit of investment income on these funds.
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. NEW JERSEY INVESTMENT OBLIGATION (continued)
The Company has applied for and received approval for approximately $8,800,000 in funding credits from the CRDA in connection with the construction of Atlantic City Showboat's additional hotel rooms. Pending the execution of a Credit Agreement with the CRDA, which states the terms and conditions by which the Company may receive funding credit, the Company may begin applying for and receiving funds from the CRDA as expenditures are made for the construction of the hotel rooms to the extent ACSI has available funds on deposit with the CRDA. The Company has approximately $2,500,000 in available deposits with the CRDA which they may apply for upon execution of the Credit Agreement, with the balance being applied to portions of future CRDA deposits.
12. COMMITMENTS AND CONTINGENCIES
During 1993, the Company entered into construction contracts which commit the commit the Company to approximately $39,000,000 in expenditures in 1994 and approximately $7,000,000 in 1995.
In December 1993, the Company agreed to purchase an additional 20% equity interest in Showboat Star Partnership from a partner for $9,000,000, increasing the Company's interest in the partnership to 50% subject to the approval of the Louisiana Riverboat Gaming Commission. The Louisiana Riverboat Gaming Commission approved the transaction in February 1994 and effective March 1, 1994, the Company acquired the additional 20% equity interest in Showboat Star Partnership.
-92- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. COMMITMENTS AND CONTINGENCIES (continued)
In February 1994, Showboat and Waterfront Entertainment and Development, Inc. formed the Showboat Marina Partnership (SMP). SMP has filed a gaming application with the Indiana Gaming Commission to operate a riverboat on Lake Michigan in East Chicago, Indiana. Under the terms of the partnership agreement, Showboat will own 55% of SMP and is required to make an initial capital contribution of $1,000,000 and an additional contribution of $16,500,000 at such later dates as specified in the initial development budget.
On January 4, 1994 the Atlantic City Housing Authority and Urban Redevelopment Agency (ACHA) declared ACSI to be in default for noncompliance with certain provisions contained in the contract between the two parties for ACSI's purchase of the land in Atlantic City for a new hotel tower currently under construction. Since the declaration of default, ACSI has been diligently working to cure the defaults. Management believes that as result of such efforts ACHA will ultimately rescind its notice of default.
The Company is involved in various claims and legal actions arising in the ordinary course of business. Additionally, the Company is presently undergoing an audit by the Internal Revenue Service for the tax years ending June 30, 1989 and 1990. The State of New Jersey is currently auditing the Company's state income tax returns for the tax years ended June 30, 1986 through 1992. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position or results of operations.
-93- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. SELECTED QUARTERLY DATA (Unaudited)
Summarized unaudited financial data for interim periods for the years ended December 31, 1993 and 1992 are as follows:
Quarter ended (a) Year --------------------------------------- ended 3/31/93 6/30/93 9/30/93 12/31/93 12/31/93 --------- --------- --------- --------- --------- (In thousands except per share data)
Net revenues $85,496 $92,706 $108,005 $89,520 $375,727 Income from operations (b) 7,685 11,983 18,250 7,501 45,419 Income before extraordinary loss and cumula- tive effect adjustment(c)(d) 1,921 3,751 7,356 436 13,464 Net income (loss) 2,477 (2,928) 7,356 436 7,341 Income before extraordinary loss and cumulative effect adjustment per share(c)(d) 0.13 0.24 0.48 0.03 0.89 Net income (loss) per share 0.16 (0.20) 0.48 0.03 0.49
Quarter ended (a) Year --------------------------------------- ended 3/31/92 6/30/92 9/30/92 12/31/92 12/31/92 --------- --------- --------- --------- --------- (In thousands except per share data)
Net revenues $85,523 $89,250 $99,105 $81,358 $355,236 Income from operations 10,074 12,224 18,981 5,229 46,508 Income before extraordinary loss(e) 2,628 3,973 8,426 830 15,857 Net income (loss) 2,628 3,973 8,426 (2,578) 12,449 Income before extraordinary loss per share (e) 0.23 0.34 0.73 0.07 1.37 Net income (loss) per share 0.23 0.34 0.73 (0.22) 1.08
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SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. SELECTED QUARTERLY DATA (Unaudited) (continued)
(a) Quarterly results may not be comparable due to the seasonal nature of the Atlantic City operation. (b) In 1993, the Company acquired a 30% equity interest in Showboat Star Partnership which was engaged in the development of a riverboat casino on Lake Pontchartrain in New Orleans, Louisiana. Operation of the riverboat casino commenced on November 8, 1993. The Company's share of the partnership's loss from the commencement of operations through December 31, 1993, including the write-off of preopening costs of $1,274,000, is included in income from operations for the quarter ended December 31, 1993. (c) The Company adopted FAS 109 in 1993 and reported the cumulative effect of the change in method of accounting for income taxes as of January 1, 1993 in the 1993 Consolidated Statement of Income. (d) In the quarter ended June 30, 1993, the Company recognized an extraordinary loss of $6,679,000, net of tax, as a result of the redemption of all of its outstanding Mortgage-Backed Bonds (Note 10). (e) In the quarter ended December 31, 1992, the Company recognized an extraordinary loss of $3,408,000, net of tax, as a result of the planned redemption of all of its outstanding Debentures (Note 10).
Schedule VI
SHOWBOAT, INC. AND SUBSIDIARIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT (In thousands) Years Ended December 31, 1993, 1992 and 1991
Balance Additions at charged to Balance beginning costs and Retire- at end Classification of year expenses ments of year - ------------------------------- --------- --------- --------- --------- For the year ended December 31, 1993: Land improvements $741 $24 ($304) $461 Buildings 42,658 7,019 (293) 49,384 Furniture and equipment 85,784 16,260 (6,362) 95,682 --------- --------- --------- --------- $129,183 $23,303 ($6,959) $145,527 ========= ========= ========= =========
For the year ended December 31, 1992: Land improvements $713 $28 $ - $741 Buildings 36,374 6,288 (4) 42,658 Furniture and equipment 73,010 15,696 (2,922) 85,784 --------- --------- --------- --------- $110,097 $22,012 ($2,926) $129,183 ========= ========= ========= =========
For the year ended December 31, 1991: Land improvements $685 $28 $ - $713 Buildings 30,234 6,143 (3) 36,374 Furniture and equipment 61,632 19,521 (8,143) 73,010 --------- --------- --------- --------- $92,551 $25,692 ($8,146) $110,097 ========= ========= ========= =========
Schedule VIII
SHOWBOAT, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS (In thousands) Years Ended December 31, 1993, 1992 and 1991
Balance Charged at to costs Charged Balance beginning and to other Deductions at end Description of year expenses accounts (a) of year - --------------------- --------- --------- --------- --------- --------- Year ended December 31, 1993: Allowance for doubtful accounts $3,079 $1,849 $ - $1,982 $2,946
Year ended December 31, 1992: Allowance for doubtful accounts 3,988 1,644 - 2,553 3,079
Year ended December 31, 1991: Allowance for doubtful accounts 5,021 2,924 - 3,957 3,988
(a) Accounts written-off.
Schedule X
SHOWBOAT, INC. AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION Years ended December 31, 1993, 1992 and 1991
Charged to costs and expenses Year ended December 31, ----------------------------- 1993 1992 1991 --------- --------- --------- (In thousands)
Maintenance and repairs $9,455 $9,128 $8,571 ========= ========= ========= Taxes other than payroll and income taxes: Gaming taxes and licenses $26,580 $26,523 $24,378 Property taxes 7,374 6,529 6,088 Other 588 735 712 --------- --------- --------- $34,542 $33,787 $31,178 ========= ========= =========
Advertising costs $14,085 $11,864 $13,923 ========= ========= =========
Amortization of intangible assets is not set forth inasmuch as such items do not exceed one percent of total sales as shown in the related Consolidated Statements of Income.
The Company pays no royalties.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND ------------------------------------------------ -------------- FINANCIAL DISCLOSURE. --------------------
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. --------------------------------------------------
The following information is furnished with respect to each member of the Board of Directors of the Company, each of whom, unless otherwise indicated, has served as a director continuously since the year shown opposite his or her name. Similar information is presented for the executive officers who are not directors. There are no family relationships between or among any of the Company's directors, nominees to the Board of Directors or executive officers, except: (a) J.K. Houssels and Jeanne S. Stewart formerly were married and are the parents of J. Kell Houssels, III; and (b) Carolyn M. Sparks is the daughter of Fred L. Morledge who was a director from 1960 until July 1990, and Mr. Morledge currently holds the title of Director Emeritus of the Company.
IDENTIFICATION OF DIRECTORS - ---------------------------
- --------------- /1/ Positions held with the Company and any other business experience since 1989 and other directorships in companies with a class of securities registered under Section 12 of the Securities Exchange Act of 1934 ("Exchange Act") or subject to the requirements of Section 15(d) of the Exchange Act and companies registered under the Investment Company Act of 1940.
/2/ Mr. Gaughan also owns the Nevada Hotel and Casino, the Gold Spike Inn and Casino, and a controlling interest in the Las Vegas Club Hotel & Casino, each of which is located in Las Vegas, Nevada.
NON-DIRECTOR EXECUTIVE OFFICERS - -------------------------------
G. Clifford Taylor, Jr., 48, has been Executive Vice President and Chief Operating Officer of the Company's Nevada subsidiaries since December 1, 1988. He has served as Assistant Secretary of the Company since May 1990. He has also served as Treasurer of the Company and Showboat Operating Company since February 1981, and Showboat Development Company since June 1983. He has been Treasurer of Ocean Showboat, Inc. since December 1983, Atlantic City Showboat, Inc. since June 1984 and Ocean Showboat Finance Corporation since December 1986. He serves at the pleasure of the respective boards of directors.
R. Craig Bird, 47, has been Vice President-Financial Administration of the Company since February 1988 and the Executive Vice President and Chief Operating Officer of Showboat Development Company since October 1993. Mr. Bird was Vice President-Financial Administration of Atlantic City Showboat, Inc. from March 1990 to October 1993. He serves at the pleasure of the respective boards of directors.
Leann K. Schneider, 40, has been Vice President-Finance and Chief Financial Officer of the Company; Vice President-Finance and Chief Financial Officer of Showboat Operating Company since May 1990; Chief Financial Officer and Treasurer of Showboat Development Company since May 1993; and Treasurer of Showboat Mohawk, Inc., Showboat Louisiana, Inc. and Showboat Grande, Inc. since July 1993 and Treasurer of Showboat Indiana, Inc. since September 1993. From December 1989 until May 1990, she served as Vice President-Financial Relations and Chief Financial Officer of the Company. From December 1988 until December 1989, she served as Vice President-Financial Relations and Acting Chief Financial Officer of the Company. She serves at the pleasure of the respective boards of directors.
Mark J. Miller, 37, has served as Executive Vice President and Chief Operating Officer of Atlantic City Showboat, Inc. since October 1993. Vice President-Finance of Ocean Showboat, Inc. since April 1988; and Vice President- Finance and Chief Financial Officer of Ocean Showboat Finance Corporation since April 1991. He served as Vice President-Finance and Chief Financial Officer of Atlantic City Showboat, Inc. from December 1988 to October 1993. He serves at the pleasure of the respective boards of directors.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 - --------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than ten percent of the Common Stock, to file with the Securities and Exchange Commission and the New York Stock Exchange initial reports of ownership and reports of changes in ownership of Common Stock. Directors, executive officers and greater than ten percent shareholders are required by Securities and Exchange Commission regulation to furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely upon review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended December 31, 1993, all Section 16(a) filing requirements were complied with except that one report of ownership for one transaction, covering an aggregate of 500 shares, was filed late by J.K. Houssels, and one report of ownership for one
transaction, covering an aggregate of three shares, was filed late by George A. Zettler. Mr. Houssels' late filing disclosed a disposition by gift of 500 shares which was inadvertently not timely reported on Mr. Houssels' Forms 4, and Mr. Zettler's late filing disclosed a purchase of Common Stock due to a dividend reinvestment which also was inadvertently not timely reported on Mr. Zettler's Forms 4.
The following tables set forth compensation received by J.K. Houssels, the Company's Chief Executive Officer, and the four other highest paid executive officers of the Company during the last fiscal year for each year of the three- year period ended December 31, 1993 for services rendered in all capacities to the Company and its subsidiaries:
SUMMARY COMPENSATION TABLE
*Pursuant to the transitional provisions applicable to the revised rules on executive officer and director compensation disclosure adopted by the Securities and Exchange Commission, for the amounts of "Other Annual Compensation" and "All Other Compensation" for fiscal years ended before December 15, 1992, no disclosure is required.
/1/Amounts represented in this column were received by the named individuals under either the Ocean Showboat, Inc. Stock Exchange Plan ("Stock Exchange Plan") or the Company's 1989 Executive Long-Term Incentive Plan ("1989 Plan") or both. Under the Stock Exchange Plan, the Company exchanged restricted shares of Common Stock for shares of Ocean Showboat, Inc. common stock. The restricted shares of Common Stock vested over a seven-year period, with the last of the restricted shares of Common Stock vesting in March 1992. The 1989 Plan is a Company-maintained incentive plan which provides for awards of restricted stock and stock options to key executives of the Company's operating subsidiaries.
/2/This amount represents excess coverage life insurance costs.
/3/This amount represents the Company's contribution to the named individual's 401(K) Plan account.
/4/This amount includes $25,200 in costs for excess coverage life insurance and a $16,176 automobile allowance.
/5/This amount represents the vesting of 4,800 shares under the 1989 Plan.
/6/Of this amount, $73,806.63 (5,417 shares) vested under the Stock Exchange Plan and $21,800.00 (1,600 shares) vested under the 1989 Plan.
/7/This amount represents the vesting of 5,417 shares under the Stock Exchange Plan.
/8/Of this amount, $23,612.13 (1,733 shares) vested under the Stock Exchange Plan and $21,800.00 (1,600 shares) vested under the 1989 Plan.
/9/Of this amount, $13,005.00 (1,734 shares) vested under the Stock Exchange Plan and $12,000.00 (1,600 shares) vested under the 1989 Plan.
/10/This amount represents the vesting of 1,500 shares under the 1989 Plan.
/11/This amount represents the vesting of 500 shares under the 1989 Plan.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
Compensation Committee Interlocks and Insider Participation. - -----------------------------------------------------------
The Company's executive compensation is determined by the Compensation Committee ("Compensation Committee") of the Board of Directors. Until November 1993, the Compensation Committee consisted of Messrs. Zettler and Nasky. In January 1994, the Compensation Committee was reconstituted to consist of Messrs. Zettler and Richardson.
At all times during 1993, H. Gregory Nasky was a director of the Company and the Secretary of the Company and its subsidiaries. Mr. Nasky was appointed Chief Executive Officer and Managing Director of Showboat Australia Pty Limited in November 1993. Additionally, Mr. Nasky was a member of the law firm of Vargas & Bartlett, previous general counsel to the Company. On March 1, 1994, Vargas & Bartlett was reorganized from which the law firm of Kummer Kaempfer Bonner & Renshaw was formed and proceeded as general counsel to the Company. Mr. Nasky is of counsel to Kummer Kaempfer Bonner & Renshaw. During 1993, the law firm of Vargas & Bartlett was paid $57,696.61 by the Company's Nevada gaming subsidiary, $53,872.48 by the Company's New Jersey subsidiaries, $350,247.97 by Showboat Development, $196,182.12 by the Company for its public bond offering, and $122,288.25 by the Company for other parent company matters.
Compensation of Directors - -------------------------
Remuneration of Non-Employee Directors. For 1993, each non-employee -------------------------------------- director received a retainer of $1,500 per quarter plus attendance fees of $1,000 per meeting attended. Such fees are paid by the Company and OSI, as applicable. In addition, non-employee members of the Compensation Committee and the Audit Committee are paid $850 for each committee meeting attended. Only non-employee directors receive the retainer or attendance fees. Reasonable out- of-pocket expenses incurred in attending scheduled meetings are reimbursed as to all directors.
1989 DIRECTORS' STOCK OPTION PLAN. The Company maintains a director --------------------------------- stock option plan entitled the 1989 Directors' Stock Option Plan ("Option Plan"). The Option Plan is designed to encourage non-employee directors to take a long-term view of the affairs of the Company; to attract and retain new superior non-employee directors; and to aid in compensating non-employee directors for their services to the Company. The Company's non-employee directors are William C. Richardson, John D. Gaughan, Jeanne S. Stewart, George A. Zettler and Carolyn M. Sparks.
Stock options granted under the Option Plan are intended to be designated non-qualified options or options not qualified as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended. Subject to adjustment by reason of stock
dividend or split or other similar capital adjustments, an aggregate of 120,000 shares of Common Stock are reserved for issuance under the Option Plan.
The administration of the Option Plan is carried out by a committee ("Committee") consisting of not less than two non-employee directors of the Company selected by and serving at the pleasure of the Company's Board of Directors. The Committee, unless permitted by holders of the majority of outstanding Common Stock, shall not have any discretion to determine or vary any matters which are fixed under the terms of the Option Plan. Fixed matters include, but are not limited to, which non-employee directors shall receive awards, the number of shares of the Common Stock subject to each option award, the exercise price of any option, and the means of acceptable payment for the exercise of the option. The Committee shall have the authority to otherwise interpret the Option Plan and make all determinations necessary or advisable for its administration. All decisions of the Committee are subject to approval of the Company's Board of Directors. Current members of the Committee are Mr. Zettler and Mr. Richardson.
Under the terms of the Option Plan, each option shall be exercisable in full one year after the date of grant. Unless special circumstances exist, each option shall expire on the later of the tenth anniversary of the date of its grant or two years after the non-employee director retires. Each non-employee director initially receives a one-time option to purchase 5,000 shares of Common Stock following his or her election to the Board of Directors. Thereafter, each non-employee director receives a grant to purchase 1,000 shares of Common Stock each year, for five years following his or her election to the Board of Directors.
The option exercise price is the greater of $7.625 or the fair market value, as defined under the Option Plan, of the Common Stock on the date such options are granted. The per share exercise price of options granted during 1993 pursuant to the Option Plan was $18.00.
As of March 1, 1994, options representing 66,000 shares have been granted to the current five non-employee directors and three former non-employee directors and a director who has since become an employee. Of the outstanding options, options representing 60,000 shares are currently exercisable. The balance may not be exercised until April 27, 1994. As of December 31, 1993, none of the options granted pursuant to the Option Plan have been exercised.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. ----------------------------------------------- --------------
The following table sets forth the number of shares of Common Stock and the number of shares of Common Stock subject to options held by the Company's directors and those executive officers named in the Summary Compensation Table (See "Item 11.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. ----------------------------------------------
The Company made an unsecured loan to Frank A. Modica, Chief Operating Officer, Executive Vice President and Director of the Company, in the amount of $64,659.50 on September 30, 1993. Effective January 1, 1994, the loan was reduced to $56,801.75. The loan is payable on demand, or if no demand is made, on December 31, 1994, unless extended. The loan bears no interest, but interest is imputed to Mr. Modica at a rate of 3.91% per annum, compounded monthly.
The Company made an unsecured loan to R. Craig Bird, Vice President- Financial Administration of the Company, and his spouse in the amount of $20,400.69 on August 5, 1993. The loan is payable on demand, or if no demand is made on August 4, 1994, unless extended. The loan bears no interest, but interest is imputed to Mr. and Mrs. Bird at a rate of 3.85% per annum, compounded monthly. The Company's subsidiary, Atlantic City Showboat, Inc., leases space at the Atlantic City Showboat to Mr. Bird for the operation of a gift shop and certain vending machines. During 1993, Mr. Bird paid rent and vending commissions to Atlantic City Showboat, Inc. in the amount of $112,888.29 and $39,793.89, respectively.
The Company entered into a five-year lease agreement with Exber, Inc. commencing on February 15, 1994, for land nearby the Las Vegas Showboat. Exber, Inc., a Nevada corporation controlled by John D. Gaughan, a Director of the Company, has rights to the land pursuant to a sublease agreement dated November 5, 1966. The Company pays monthly rent of $13,095.80 and has an option to purchase the land and all of Exber, Inc.'s rights thereto for the purchase price of $1.4 million.
Carolyn M. Sparks, a Director of the Company, is a co-owner of International Insurance Services, Ltd. The Company engaged International Insurance Services, Ltd. as its insurance adjuster for the Company's Nevada subsidiaries. During 1993, the Company paid International Insurance Services, Ltd. $115,858 for services rendered to the Company.
Mr. Nasky was a member of the law firm of Vargas & Bartlett, previous general counsel to the Company. For information regarding fees paid to Vargas & Bartlett, see "Item 11. Executive Compensation -- Compensation Committee Interlocks and Insider Participation."
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. ------------------------------------------- -------------------
(a)(l) The following consolidated financial statements of the Company and its subsidiaries have been filed as a part of this report (See "Item 8: Financial Statements and Supplementary Data"):
Independent Auditors' Report;
Consolidated Balance Sheets at December 31, 1993 and 1992;
Consolidated Statements of Income for the Years Ended December 31, 1993, 1992 and 1991;
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1993, 1992 and 1991;
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991; and
Notes to Consolidated Financial Statements
(2) The following additional information for the Years Ended December 31, 1993, 1992 and 1991 is submitted herewith/ SEE ITEM 8., FINANCIAL STATEMENT AND SUPPLEMENTARY DATA:
Schedule II Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other Than Related Parties
Schedule V Property and equipment
Schedule VI Accumulated Depreciation and Amortization of Property and Equipment
Schedule VIII Valuation and Qualifying Accounts
Schedule X Supplementary income statement information
All other schedules are omitted because they are not required, inapplicable, or the information is otherwise shown in the financial statements or notes thereto.
(3) Exhibits/1/
Exhibit Number Description/2/ - ------- -----------
3.01 Restated Articles of Incorporation of the Company dated June 28, 1988 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1988, Part IV, Item 14(a)(3), Exhibit 3.01.
3.02 Restated Bylaws of the Company dated February 25, 1993, is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1992, Part IV, Item 14(a)(3), Exhibit 3.02.
4.01 Specimen common stock certificate for the common stock of the Company, is incorporated herein by reference from the Company's Form 10-Q for the Quarter Ended March 31, 1985, Part II, Item 6(a), Exhibit 4.01.
4.02 Form of Indenture for the 9 1/4% First Mortgage Bonds due 2008 among the Company, OSI, ACSI, SBOC, and Trustee dated May 18, 1993; Guaranty in favor of the Trustee issued by OSI, ACSI and SBOC; and Form of Bond Certificate for the 9 1/4% First Mortgage Bonds due 2008 are incorporated herein by reference from the Company's Form 8-K, dated May 18, 1993, Item 5, Exhibit 28.01.
10.01 Ground Lease between OSI and Resorts International, Inc. ("Resorts") dated October 26, 1983 is incorporated by reference herein from the Company's Form 8-K, as amended by the Form 8, filed with the Securities and Exchange Commission on November 28, 1983. Assignment and Assumption of Leases between OSI and ACSI dated December 3, 1985; First Amendment to Agreement between Resorts and ACSI dated January 15, 1985; Second Amendment to Lease
- ---------------- /1/Copies of exhibits to this Form 10-K will be furnished to any requesting security holder who furnishes the Company a list identifying the exhibits to be copied by the Company at a charge of $.25 per page.
/2/All exhibits which are incorporated by reference are incorporated from the Company's respective periodic reports, Securities and Exchange Commission File Number 1-7123.
Agreement between Resorts and ACSI dated July 5, 1985 are incorporated herein by reference from the Form 10-K for the Year Ended June 30, 1985, Part IV, Item 14(a)(3), Exhibit 10.02. Restated Third Amendment to Lease Agreement dated August 28, 1986 between Resorts and ACSI is incorporated herein by reference from the Form 10-K for the Year Ended June 30, 1986, Part IV, Item 14(a)(3), Exhibit 10.08; Fourth Amendment to Lease Agreement by and between Resorts and ACSI dated December 16, 1986; Fifth Amendment to Lease Agreement between Resorts and ACSI dated March 2, 1987; Sixth Amendment to Lease Agreement between Resorts and ACSI dated March 13, 1987; Indemnity Agreement among Resorts, ACSI, and OSI dated January 15, 1985; Amended Indemnity Agreement among Resorts, ACSI, and OSI dated December 3, 1985 are incorporated herein by reference from the Company's Form 10-K for the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.02; and Seventh Amendment to Lease Agreement between Resorts and ACSI dated October 18, 1988 is incorporated herein by reference from the Company's Form 8-K dated November 16, 1988, Item 7(c), Exhibit 28.01; and Eighth Amendment to Lease Agreement by and between ACSI and Resorts International, Inc. dated May 18, 1993 are incorporated by reference from the Company's Form 8-K, dated May 18, 1993, Item 5, Exhibit 28.06.
10.02 Equipment Lease Agreement by and between Tri-Continental Leasing Corporation and ACSI dated as of April 29, 1986; and Guarantee of SBO dated April 29, 1986 are incorporated herein by reference from the Company's Form 8-K dated April 21, 1986, Item 7(c), Exhibit 10.02; Progress Payment Agreement among Tri-Continental Leasing Corporation, ACSI, Tele-Measurements, Inc. dated April 29, 1986; Purchase Agreement Assignment among Tri-Continental Leasing Corporation, ACSI and Tele-Measurements, Inc. dated April 29, 1986; and Amendment to Lease Agreement dated April 10, 1986 between Tri-Continental Leasing Corporation and ACSI dated April 29, 1987 are incorporated herein by reference from the Company's Form 10-K for the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.05.
10.03 Agreement dated June 26, 1986 between Tri-Continental Leasing Corporation and ACSI; Corporate Guaranty dated June 9, 1986 of SBO are incorporated herein by reference from the Company's Form 8-K, dated June 17, 1986, Item 7(c), Exhibit 10.01; Commitment letter to ACSI from Tri-Continental Leasing Corporation dated May 19, 1986; Purchase Agreement Assignment among Tri-Continental Leasing Corporation, ACSI and DCA Incorporated dated August 1, 1986; Progress Payment Agreement among Tri-
Exhibit Number Description - ------- -----------
Continental Leasing Corporation, ACSI and DCA Incorporated dated August 1, 1986; and Amendment to Lease Agreement dated May 22, 1986 between Tri-Continental Leasing Corporation and ACSI among Bell- Atlantic Tri-Con Leasing Corporation, ACSI and SBO dated April 29, 1987 are incorporated herein by reference from the Company's Form 10-K for the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.06.
10.04 Corporate Guaranty of SBO dated June 9, 1986; Equipment Lease between Tri-Continental Leasing Corporation and ACSI dated June 26, 1986; Purchase Agreement Assignment among Tri-Continental Leasing Corporation, ACSI and Bally Manufacturing Corporation dated August 1, 1986; Progress Payment Agreement among Tri-Continental Leasing Corporation, ACSI, and Bally Manufacturing Corporation dated September 1, 1986; Amendment to Lease Agreement dated May 22, 1986 between Tri- Continental Leasing Corporation and ACSI among Bell-Atlantic Tri-Con Leasing Corporation, ACSI and SBO dated April 29, 1987 are incorporated herein by reference from the Company's Form 10-K for the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.07.
10.05 Equipment Lease and Addendum between Bell-Atlantic Tri-Con Leasing Corporation and ACSI dated May 29, 1987; and Corporate Guaranty of SBO dated May 7, 1987 are incorporated herein by reference from the Company's Form 10-K for the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.08.
10.06 Corporate Guaranty of SBO dated May 28, 1987; and Equipment Lease between Bell-Atlantic Tri-Con Leasing Corporation, ACSI and SBO dated August 19, 1987 are incorporated herein by reference from the Company's Form 10-K for the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.09.
10.07 Tax Allocation Agreement among SBO and each of its subsidiaries dated effective May 10, 1993 is incorporated herein by reference from the Company's Form 10-K for the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.11. First Amendment to Tax Allocation Agreement among SBO and each of its subsidiaries dated effective May 10, 1993.
Exhibit Number Description - ------- -----------
10.08 Promissory Note in the principal amount of $56,801.75 between the Company and Frank A. Modica dated December 31, 1993.
10.09 Form of Indemnification Agreement between SBO and each director and officer of the Company is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1987, Part IV, Item 14(a)(3), Exhibit 10.13.
10.10 Statement regarding the Company's Incentive Bonus Plans is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1992, Part IV, Item 14(a)(3), Exhibit 10.12.
10.11 Parent Services Agreement by and between Company and ACSI dated November 21, 1985 is incorporated herein by reference from the Company's Form 8-K, dated November 25, 1985, Item 7(c), Exhibit 10.01. Amendment No. 1 to Parent Services Agreement by and between the Company and ACSI dated February 1, 1987 is incorporated herein by reference from the Company's Form 10-K for the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.17. Amendment No. 2 to Parent Services Agreement by and between the Company and ACSI dated December 31, 1990 is incorporated herein by reference from the Company's Form 8-K, dated December 31, 1990, Item 7(c), Exhibit 28.01; and Amendment No. 3 to Parent Services Agreement by and between the Company and ACSI dated May 8, 1991 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1991, Part IV, Item 14(a)(3), Exhibit 10.14. Agreement No. 4 to Parent Services Agreement by and between the Company and ACSI dated August 17, 1993.
10.12 Closing Escrow Agreement among Housing Authority and Urban Redevelopment Agency of the City of Atlantic City, Resorts, ACSI, Trump Taj Mahal Associates Limited Partnership, and Clapp & Eisenberg, P.C. dated as of September 21, 1988; Agreement as to Assumption of Obligations with Respect to Properties among ACSI, Trump Taj Mahal Realty Corp. dated as of September 21, 1988; First Amendment of Agreement as to Assumption of Obligations with Respect to Properties among ACSI, Trump Taj Mahal Associates Limited Partnership, and Trump Taj Mahal Realty Corp. dated as of September 21, 1988;
Exhibit Number Description - ------- -----------
Settlement Agreement among ACSI, Trump Taj Mahal Associates Limited Partnership, Trump Taj Mahal Realty Corp., Resorts and the Housing Authority and Urban Renewal Redevelopment Agency of the City of Atlantic City dated October 18, 1988; Tri-Party Agreement among Resorts International, Inc., ACSI and Trump Taj Mahal Associates Limited Partnership dated October 18, 1988; Declaration of Easement and Right of Way Agreement between the Housing Authority and Redevelopment Agency of the City of Atlantic City, as grantor, and ACSI, as grantee, dated October 18, 1988; and Certificate of Trump Taj Mahal Associates Limited Partnership and Resorts, dated November 16, 1988 are incorporated herein by reference from the Company's Form 8-K dated November 16, 1988, Item 7(c), Exhibit 28.01; Revised Second Amendment to Agreement as to Assumption of Obligations with Respect to Properties among ACSI, Trump Taj Mahal Associates Limited Partnership and Trump Taj Mahal Realty Corp. dated as of May 24, 1989, is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1989, Part IV, Item 14(a)(3), Exhibit 10.17.
10.13 Lease between the Company and Showboat Operating Company, dated January 1, 1989 is incorporated herein by reference from the Company's Form 8-K, dated January 1, 1989, Item 7(c), Exhibit 28.01.
10.14 Management Services Agreement between SBO and Showboat Operating Company, dated January 1, 1989, is incorporated herein by reference from the Company's Form 8-K, dated January 1, 1989, Item 7(c), Exhibit 28.03.
10.15 Promissory Note in the principal amount of $20,400.69 among SBO, R. Craig Bird and Debra E. Bird, dated August 5, 1993.
10.16 Securities Purchase Contract between the Casino Reinvestment Development Authority and ACSI dated March 29, 1988 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1988, Part IV, Items 14(a)(3), Exhibit 10.23.
10.17 Lease of Retail Store #7 among ACSI, R. Craig Bird and Debra E. Bird dated April 10, 1987; Guaranty of Lease among ACSI, R. Craig Bird and Debra E. Bird are incorporated herein by reference from the Company's Form
Exhibit Number Description - ------- -----------
10-K for the Year Ended December 31, 1988, Part IV, Item 14(a)(3), Exhibit 10.24.
10.18 ACSI Executive Health Examinations Plan effective date January 1, 1989 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1989, Part IV, Item 14(a)(3), Exhibit 10.24.
10.19 ACSI Executive Medical Reimbursement Plan, effective date August 15, 1991, is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1991, Part IV, Item 14(a)(3), Exhibit 10.23.
10.20 SBO, Showboat Operating Company, and ACSI 1989 Long Term Incentive Plan As Amended and Restated February 25, 1993 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1992, Part IV, Item 14(a)(3), Exhibit 10.23.
10.21 Letter agreement dated September 23, 1992 between Trump Taj Mahal Associates and Atlantic City Showboat, Inc. and letter agreement dated October 26, 1992 to Trump Taj Mahal Associates from Atlantic City Showboat, Inc. is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1992, Part IV, Item 14(a)(3), Exhibit 10.24.
10.22 Aircraft Services Agreement by and between SCG Travel, Inc. and ACSI, dated as of October 6, 1989; and First Amendment to Aircraft Services Agreement by and between SCG Travel, Inc. and ACSI dated as of December 18, 1990 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1990, Part IV, Item 14(a)(3), Exhibit 10.30; and Second Amendment to Aircraft Services Agreement by and between SCG Travel, Inc. and ACSI dated as of October 28, 1991 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1991, Part IV, Item 14(a)(3), Exhibit 10.26.
10.23 Equipment Lease Agreement between Valley Leasing Company, Inc. ("Valley"), as lessor, and Showboat Operating Company, as lessee, Lease No. 7700140-1, dated August 15, 1990, Amendments to Equipment Lease Agreement between Valley, as lessor, and Showboat Operating Company, as lessee, Lease No. 7700140-1, dated August 22, 1990,
Exhibit Number Description - ------- -----------
Purchase Option between Valley, as lessor, and Showboat Operating Company, as lessee, Lease No. 7700140-1, dated August 15, 1990, Certificate of Guarantor and Authorization of Guaranty between Valley, as lessor, Showboat Operating Company, as lessee, and SBO, as guarantor, Lease No. 7700140-1, dated December 24, 1990, and Continuing Guaranty between Valley, as lessor, Showboat Operating Company, as lessee, and SBO, as guarantor, Lease No. 7700140-1; Equipment Lease Agreement between Valley, as lessor, and Showboat Operating Company, as lessee, Lease No. 7700140-2, dated September 14, 1990, Purchase Option between Valley, as lessor, and Showboat Operating Company, as lessee, for Lease No. 7700140-2, dated September 14, 1990, Certificate of Guarantor and Authorization of Guaranty between Valley, as lessor, Showboat Operating Company, as lessee, and SBO, as guarantor, Lease No. 7700140-2, dated December 24, 1990, and Continuing Guaranty between Valley, as lessor, Showboat Operating Company, as lessee, and SBO as guarantor, Lease No. 7700140-2; Equipment Lease Agreement between Valley, as lessor, and Showboat Operating Company, as lessee, Lease No. 7700140-3, dated December 24, 1990, and Purchase Option between Valley, as lessor, and Showboat Operating Company, as lessee, dated December 24, 1990 are incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1990, Part IV, Item 14(a)(3), Exhibit 10.31.
10.24 SBO 1989 Directors' Stock Option Plan As Amended and Restated February 25, 1993 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1992, Part IV, Item 14(a)(3), Exhibit 10.27.
10.25 Deed of Trust, Assignment of Rents, Security Agreement made by the Company to Nevada Title Company for the benefit of Trustee dated as of May 18, 1993; Showboat, Inc. Security and Pledge Agreement between the Company and the Trustee dated as of May 18, 1993; Trademark Security Agreement by SBO in favor of the Trustee dated as of May 18, 1993; Unsecured Indemnity Agreement executed by the Company in favor of the Trustee dated May 18, 1993; and Showboat Operating Company Security Agreement between SBOC and the Trustee dated as of May 18, 1993 are incorporated by reference from the Company's Form 8-K, dated May 18, 1993, Item 5, Exhibit 28.02.
Exhibit Number Description - ------- -----------
10.26 Leasehold Mortgage, Assignment of Rents, Security Agreement ("Guaranty") made by ACSI for the benefit of Trustee dated May 18, 1993; Assignment of Leases and Rents by and between ACSI and Trustee dated as of May 18, 1993; and Ocean Showboat, Inc. Security and Pledge Agreement between OSI and the Trustee dated as of May 18, 1993 are incorporated by reference from the Company's Form 8-K, dated May 18, 1993, Item 5, Exhibit 28.03.
10.27 Intercompany Note in the principal amount of $215.0 million, dated as of May 18, 1993; Assignment of Lease and Rents by and between ACSI and the Company dated as of May 18, 1993; and Issuer Collateral Assignment executed by ACSI in favor of Trustee dated May 18, 1993 are incorporated by reference from the Company's Form 8-K, dated May 18, 1993, Item 5, Exhibit 28.04.
10.28 First Amendment to the Leasehold Mortgage, Assignment of Rents and Security Agreement among AACSI and the Company dated July 9, 1993 is incorporated by reference from the Company's Form 8-K, dated July 7, 1993, Item 5, Exhibit 28.01.
10.29 First Amendment to the Leasehold Mortgage, Assignment of Rents and Security Agreement among ACSI and IBJ Schroder Bank & Trust Company dated July 9, 1993 is incorporated by reference from the Company's Form 8-K, dated July 7, 1993, Item 5, Exhibit 28.02.
10.30 Assignment of Rights under Agreement by ACSI, as assignee, to IBJ Schroder Bank & Trust Company dated July 9, 1993 is incorporated by reference from the Company's Form 8-K, dated July 7, 1993, Item 5, Exhibit 28.03.
10.31 Form of Deed for Sale of Land for Private Redevelopment for Tract 1 and Tract 2 each dated July 7, 1993 is incorporated by reference from the Company's Form 8-K, dated July 7, 1993, Item 5, Exhibit 28.04.
10.32 Use and Occupancy Agreement between ACHA and ACSI dated July 7, 1993 is incorporated by reference from the Company's Form 8-K, dated July 7, 1993, Item 5, Exhibit 28.05.
Exhibit Number Description - ------- -----------
10.33 Standard Form of Agreement between Owner and Contractor (AIA Document A111) executed by ACSI and T.N. Ward Company dated July 2, 1993 is incorporated by reference from the Company's Form 8-K, dated July 2, 1993, Item 5, Exhibit 28.01.
10.34 Standard Form of Agreement Between Owner and Contractor (AIA Document A111) executed by ACSI and T.N. Ward Company dated September 15, 1993 is incorporated by reference from the Company's Form 8-K, dated July 2, 1993, Item 5, Exhibit 28.02.
10.35 Showboat Star Partnership Agreement between Star Casino, Inc. and Showboat Louisiana, Inc. dated July 2, 1993 and First Amendment to Showboat Star Partnership Agreement between Star Casino, Inc. and Showboat Louisiana, Inc. dated July 20, 1993 is incorporated by reference from the Company's Form 8-K, dated July 2, 1993, Item 5, Exhibit 28.01; Second Amendment to Showboat Star Partnership Agreement between Star Casino, Inc. and Showboat Louisiana, Inc. dated August 1, 1993; and Third Amendment to Showboat Star Partnership Agreement between Star Casino, Inc and Showboat Louisiana, Inc. dated March 1, 1994.
10.36 Management Agreement by and between Lake Pontchartrain Showboat, Inc. and Star Casino, Inc. dated May 24, 1993 is incorporated by reference from the Company's Form 8-K, dated July 2, 1993, Item 5, Exhibit 28.02.
10.37 Marine Management Services Agreement between Louisiana Riverboat Services, Inc. and Showboat Star Partnership dated September 30, 1993.
10.38 Agreement between Showboat, Inc., Showboat Indiana, Inc., Showboat Operating Company, Showboat Development Company, Showboat Indiana Investment Limited Partnership and Waterfront Entertainment and Development, Inc. dated September 13, 1993; and Showboat Marina Partnership Agreement between Waterfront Entertainment and Development, Inc. and Showboat Investment Limited Partnership dated January 31, 1994.
10.39 Lease between the Company and Exber, Inc. effective January 14, 1994; and Sublease between Dodd Smith and
Exhibit Number Description - ------- -----------
John D. Gaughan and Leslie C. Schwartz, dated November 5, 1966.
10.40 Lease between Showboat Star Partnership and Orleans Levee District dated February 18, 1993; First Amendment to Lease dated August 27, 1993.
10.41 Lease between Showboat Star Partnership and Orleans Levee District dated February 1, 1994.
10.42 Lease between Showboat Operating Company and Ventroy Associates executed on December 20, 1993.
21.01 List of Subsidiaries.
23.01 Consent of KPMG Peat Marwick dated March 30, 1994.
(b) Reports on Form 8-K. -------------------
None.
SIGNATURES ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by this undersigned, thereunto duly authorized.
REGISTRANT: SHOWBOAT, INC.
By: /s/ J.K. Houssels ------------------------------- J.K. HOUSSELS, President and Chief Executive Officer (principal executive officer)
DATE: March 29, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
March 29, 1994 By: /s/ J.K. Houssels ---------------------------------- J.K. Houssels,President and Chief Executive Officer (principal executive officer)
March 29, 1994 By: /s/ Leann K. Schneider ------------------------------------ Leann K. Schneider, Vice President- Finance and Chief Financial Officer (principal accounting officer)
March 29, 1994 By: /s/ William C. Richardson ----------------------------------- William C. Richardson, Director
March 29, 1994 By: /s/ John D. Gaughan ---------------------------------- John D. Gaughan, Director
March 29, 1994 By: /s/ Jeanne S. Stewart ------------------------------------ Jeanne S. Stewart, Director
March 29, 1994 By: /s/ Frank A. Modica ----------------------------------- Frank A. Modica, Director, Chief Operating Officer and Executive Vice President
March __, 1994 By: ___________________________________ H. Gregory Nasky, Director and Secretary
March 29, 1994 By: /s/ J. Kell Houssels III ------------------------------------- J. Kell Houssels III, Director and Vice President
March 29, 1994 By: /s/ George A. Zettler ----------------------------------- George A. Zettler, Director
March 29, 1994 By: /s/ Carolyn M. Sparks ----------------------------------- Carolyn M. Sparks, Director
EXHIBIT INDEX -------------
Exhibit Sequential Number Description/1/ Page Number - ------- ----------- -----------
3.01 Restated Articles of Incorporation of the Company dated June 28, 1988 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1988, Part IV, Item 14(a)(3), Exhibit 3.01.
3.02 Restated Bylaws of the Company dated February 25, 1993, is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1992, Part IV, Item 14(a)(3), Exhibit 3.02.
4.01 Specimen common stock certificate for the common stock of the Company, is incorporated herein by reference from the Company's Form 10-Q for the Quarter Ended March 31, 1985, Part II, Item 6(a), Exhibit 4.01.
4.02 Form of Indenture for the 9 1/4% First Mortgage Bonds due 2008 among the Company, OSI, ACSI, SBOC, and Trustee dated May 18, 1993; Guaranty in favor of the Trustee issued by OSI, ACSI and SBOC; and Form of Bond Certificate for the 9 1/4% First Mortgage Bonds due 2008 are incorporated herein by reference from the Company's Form 8-K, dated May 18, 1993, Item 5, Exhibit 28.01.
10.01 Ground Lease between OSI and Resorts International, Inc. ("Resorts") dated October 26, 1983 is incorporated by reference herein from the Company's Form 8-K, as amended by the Form 8, filed with the Securities and Exchange Commission on November 28, 1983. Assignment and Assumption of Leases between OSI and ACSI dated December 3, 1985; First Amendment to Agreement between Resorts and ACSI dated January 15, 1985; Second Amendment to Lease Agreement between Resorts and ACSI dated July 5, 1985 are incorporated herein by reference
- ----------- /1/All exhibits which are incorporated by reference are incorporated from the Company's respective periodic report, Securities and Exchange Commission File Number 1-7123.
from the Form 10-K for the Year Ended June 30, 1985, Part IV, Item 14(a)(3), Exhibit 10.02. Restated Third Amendment to Lease Agreement dated August 28, 1986 between Resorts and ACSI is incorporated herein by reference from the Form 10-K for the Year Ended June 30, 1986, Part IV, Item 14(a)(3), Exhibit 10.08; Fourth Amendment to Lease Agreement by and between Resorts and ACSI dated December 16, 1986; Fifth Amendment to Lease Agreement between Resorts and ACSI dated March 2, 1987; Sixth Amendment to Lease Agreement between Resorts and ACSI dated March 13, 1987; Indemnity Agreement among Resorts, ACSI, and OSI dated January 15, 1985; Amended Indemnity Agreement among Resorts, ACSI, and OSI dated December 3, 1985 are incorporated herein by reference from the Company's Form 10-K for the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.02; and Seventh Amendment to Lease Agreement between Resorts and ACSI dated October 18, 1988 is incorporated herein by reference from the Company's Form 8-K dated November 16, 1988, Item 7(c), Exhibit 28.01; and Eighth Amendment to Lease Agreement by and between ACSI and Resorts International, Inc. dated May 18, 1993 are incorporated by reference from the Company's Form 8-K, dated May 18, 1993, Item 5, Exhibit 28.06.
10.02 Equipment Lease Agreement by and between Tri-Continental Leasing Corporation and ACSI dated as of April 29, 1986; and Guarantee of SBO dated April 29, 1986 are incorporated herein by reference from the Company's Form 8-K dated April 21, 1986, Item 7(c), Exhibit 10.02; Progress Payment Agreement among Tri-Continental Leasing Corporation, ACSI, Tele-Measurements, Inc. dated April 29, 1986; Purchase Agreement Assignment among Tri-Continental Leasing Corporation, ACSI and Tele-Measurements, Inc. dated April 29, 1986; and Amendment to Lease Agreement dated April 10, 1986 between Tri-Continental Leasing Corporation and ACSI dated April 29, 1987 are incorporated herein by reference from the Company's Form 10-K for the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.05.
Exhibit Number Description - ------- -----------
10.03 Agreement dated June 26, 1986 between Tri-Continental Leasing Corporation and ACSI; Corporate Guaranty dated June 9, 1986 of SBO are incorporated herein by reference from the Company's Form 8-K, dated June 17, 1986, Item 7(c), Exhibit 10.01; Commitment letter to ACSI from Tri-Continental Leasing Corporation dated May 19, 1986; Purchase Agreement Assignment among Tri-Continental Leasing Corporation, ACSI and DCA Incorporated dated August 1, 1986; Progress Payment Agreement among Tri-Continental Leasing Corporation, ACSI and DCA Incorporated dated August 1, 1986; and Amendment to Lease Agreement dated May 22, 1986 between Tri-Continental Leasing Corporation and ACSI among Bell- Atlantic Tri-Con Leasing Corporation, ACSI and SBO dated April 29, 1987 are incorporated herein by reference from the Company's Form 10-K for the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.06.
10.04 Corporate Guaranty of SBO dated June 9, 1986; Equipment Lease between Tri-Continental Leasing Corporation and ACSI dated June 26, 1986; Purchase Agreement Assignment among Tri-Continental Leasing Corporation, ACSI and Bally Manufacturing Corporation dated August 1, 1986; Progress Payment Agreement among Tri-Continental Leasing Corporation, ACSI, and Bally Manufacturing Corporation dated September 1, 1986; Amendment to Lease Agreement dated May 22, 1986 between Tri- Continental Leasing Corporation and ACSI among Bell-Atlantic Tri-Con Leasing Corporation, ACSI and SBO dated April 29, 1987 are incorporated herein by reference from the Company's Form 10-K for the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.07.
10.05 Equipment Lease and Addendum between Bell-Atlantic Tri-Con Leasing Corporation and ACSI dated May 29, 1987; and Corporate Guaranty of SBO dated May 7, 1987 are incorporated herein by reference from the Company's Form 10-K for
Exhibit Number Description - ------- -----------
the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.08.
10.06 Corporate Guaranty of SBO dated May 28, 1987; and Equipment Lease between Bell-Atlantic Tri-Con Leasing Corporation, ACSI and SBO dated August 19, 1987 are incorporated herein by reference from the Company's Form 10-K for the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.09.
10.07 Tax Allocation Agreement among SBO and each of its subsidiaries dated effective May 10, 1993 is incorporated herein by reference from the Company's Form 10-K for the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit 10.11. First Amendment to Tax Allocation Agreement among SBO and each of its subsidiaries dated effective May 10, 1993.
10.08 Promissory Note in the principal amount of $56,801.75 between the Company and Frank A. Modica dated December 31, 1993.
10.09 Form of Indemnification Agreement between SBO and each director and officer of the Company is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1987, Part IV, Item 14(a)(3), Exhibit 10.13.
10.10 Statement regarding the Company's Incentive Bonus Plans is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1992, Part IV, Item 14(a)(3), Exhibit 10.12.
10.11 Parent Services Agreement by and between Company and ACSI dated November 21, 1985 is incorporated herein by reference from the Company's Form 8-K, dated November 25, 1985, Item 7(c), Exhibit 10.01. Amendment No. 1 to Parent Services Agreement by and between the Company and ACSI dated February 1, 1987 is incorporated herein by reference from the Company's Form 10-K for the Year Ended June
Exhibit Number Description - ------- -----------
30, 1987, Part IV, Item 14(a)(3), Exhibit 10.17. Amendment No. 2 to Parent Services Agreement by and between the Company and ACSI dated December 31, 1990 is incorporated herein by reference from the Company's Form 8-K, dated December 31, 1990, Item 7(c), Exhibit 28.01; and Amendment No. 3 to Parent Services Agreement by and between the Company and ACSI dated May 8, 1991 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1991, Part IV, Item 14(a)(3), Exhibit 10.14. Agreement No. 4 to Parent Services Agreement by and between the Company and ACSI dated August 17, 1993.
10.12 Closing Escrow Agreement among Housing Authority and Urban Redevelopment Agency of the City of Atlantic City, Resorts, ACSI, Trump Taj Mahal Associates Limited Partnership, and Clapp & Eisenberg, P.C. dated as of September 21, 1988; Agreement as to Assumption of Obligations with Respect to Properties among ACSI, Trump Taj Mahal Realty Corp. dated as of September 21, 1988; First Amendment of Agreement as to Assumption of Obligations with Respect to Properties among ACSI, Trump Taj Mahal Associates Limited Partnership, and Trump Taj Mahal Realty Corp. dated as of September 21, 1988; Settlement Agreement among ACSI, Trump Taj Mahal Associates Limited Partnership, Trump Taj Mahal Realty Corp., Resorts and the Housing Authority and Urban Renewal Redevelopment Agency of the City of Atlantic City dated October 18, 1988; Tri-Party Agreement among Resorts International, Inc., ACSI and Trump Taj Mahal Associates Limited Partnership dated October 18, 1988; Declaration of Easement and Right of Way Agreement between the Housing Authority and Redevelopment Agency of the City of Atlantic City, as grantor, and ACSI, as grantee, dated October 18, 1988; and Certifi-cate of Trump Taj Mahal Associates Limited Partnership and Resorts, dated November 16, 1988 are incorporated herein by reference from the Company's Form 8-K dated November 16,
Exhibit Number Description - ------- -----------
1988, Item 7(c), Exhibit 28.01; Revised Second Amendment to Agreement as to Assumption of Obligations with Respect to Properties among ACSI, Trump Taj Mahal Associates Limited Partnership and Trump Taj Mahal Realty Corp. dated as of May 24, 1989, is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1989, Part IV, Item 14(a)(3), Exhibit 10.17.
10.13 Lease between the Company and Showboat Operating Company, dated January 1, 1989 is incorporated herein by reference from the Company's Form 8-K, dated January 1, 1989, Item 7(c), Exhibit 28.01.
10.14 Management Services Agreement between SBO and Showboat Operating Company, dated January 1, 1989, is incorporated herein by reference from the Company's Form 8-K, dated January 1, 1989, Item 7(c), Exhibit 28.03.
10.15 Promissory Note in the principal amount of $20,400.69 among SBO, R. Craig Bird and Debra E. Bird, dated August 5, 1993.
10.16 Securities Purchase Contract between the Casino Reinvestment Development Authority and ACSI dated March 29, 1988 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1988, Part IV, Items 14(a)(3), Exhibit 10.23.
10.17 Lease of Retail Store #7 among ACSI, R. Craig Bird and Debra E. Bird dated April 10, 1987; Guaranty of Lease among ACSI, R. Craig Bird and Debra E. Bird are incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1988, Part IV, Item 14(a)(3), Exhibit 10.24.
10.18 ACSI Executive Health Examinations Plan effective date January 1, 1989 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1989, Part IV, Item 14(a)(3), Exhibit 10.24.
Exhibit Number Description - ------- -----------
10.19 ACSI Executive Medical Reimbursement Plan, effective date August 15, 1991, is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1991, Part IV, Item 14(a)(3), Exhibit 10.23.
10.20 SBO, Showboat Operating Company, and ACSI 1989 Long Term Incentive Plan As Amended and Restated February 25, 1993 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1992, Part IV, Item 14(a)(3), Exhibit 10.23.
10.21 Letter agreement dated September 23, 1992 between Trump Taj Mahal Associates and Atlantic City Showboat, Inc. and letter agreement dated October 26, 1992 to Trump Taj Mahal Associates from Atlantic City Showboat, Inc. is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1992, Part IV, Item 14(a)(3), Exhibit 10.24.
10.22 Aircraft Services Agreement by and between SCG Travel, Inc. and ACSI, dated as of October 6, 1989; and First Amendment to Aircraft Services Agreement by and between SCG Travel, Inc. and ACSI dated as of December 18, 1990 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1990, Part IV, Item 14(a)(3), Exhibit 10.30; and Second Amendment to Aircraft Services Agreement by and between SCG Travel, Inc. and ACSI dated as of October 28, 1991 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1991, Part IV, Item 14(a)(3), Exhibit 10.26.
10.23 Equipment Lease Agreement between Valley Leasing Company, Inc. ("Valley"), as lessor, and Showboat Operating Company, as lessee, Lease No. 7700140-1, dated August 15, 1990, Amendments to Equipment Lease Agreement between Valley, as lessor, and Showboat
Exhibit Number Description - ------- -----------
Operating Company, as lessee, Lease No. 7700140-1, dated August 22, 1990, Purchase Option between Valley, as lessor, and Showboat Operating Company, as lessee, Lease No. 7700140-1, dated August 15, 1990, Certificate of Guarantor and Authorization of Guaranty between Valley, as lessor, Showboat Operating Company, as lessee, and SBO, as guarantor, Lease No. 7700140-1, dated December 24, 1990, and Continuing Guaranty between Valley, as lessor, Showboat Operating Company, as lessee, and SBO, as guarantor, Lease No. 7700140-1; Equipment Lease Agreement between Valley, as lessor, and Showboat Operating Company, as lessee, Lease No. 7700140-2, dated September 14, 1990, Purchase Option between Valley, as lessor, and Showboat Operating Company, as lessee, for Lease No. 7700140-2, dated September 14, 1990, Certificate of Guarantor and Authorization of Guaranty between Valley, as lessor, Showboat Operating Company, as lessee, and SBO, as guarantor, Lease No. 7700140-2, dated December 24, 1990, and Continuing Guaranty between Valley, as lessor, Showboat Operating Company, as lessee, and SBO as guarantor, Lease No. 7700140-2; Equipment Lease Agreement between Valley, as lessor, and Showboat Operating Company, as lessee, Lease No. 7700140-3, dated December 24, 1990, and Purchase Option between Valley, as lessor, and Showboat Operating Company, as lessee, dated December 24, 1990 are incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1990, Part IV, Item 14(a)(3), Exhibit 10.31.
10.24 SBO 1989 Directors' Stock Option Plan As Amended and Restated February 25, 1993 is incorporated herein by reference from the Company's Form 10-K for the Year Ended December 31, 1992, Part IV, Item 14(a)(3), Exhibit 10.27.
10.25 Deed of Trust, Assignment of Rents, Security Agreement made by the Company to Nevada Title Company for the benefit of Trustee dated as of
Exhibit Number Description - ------- -----------
May 18, 1993; Showboat, Inc. Security and Pledge Agreement between the Company and the Trustee dated as of May 18, 1993; Trademark Security Agreement by SBO in favor of the Trustee dated as of May 18, 1993; Unsecured Indemnity Agreement executed by the Company in favor of the Trustee dated May 18, 1993; and Showboat Operating Company Security Agreement between SBOC and the Trustee dated as of May 18, 1993 are incorporated by reference from the Company's Form 8-K, dated May 18, 1993, Item 5, Exhibit 28.02.
10.26 Leasehold Mortgage, Assignment of Rents, Security Agreement ("Guaranty") made by ACSI for the benefit of Trustee dated May 18, 1993; Assignment of Leases and Rents by and between ACSI and Trustee dated as of May 18, 1993; and Ocean Showboat, Inc. Security and Pledge Agreement between OSI and the Trustee dated as of May 18, 1993 are incorporated by reference from the Company's Form 8-K, dated May 18, 1993, Item 5, Exhibit 28.03.
10.27 Intercompany Note in the principal amount of $215.0 million, dated as of May 18, 1993; Assignment of Lease and Rents by and between ACSI and the Company dated as of May 18, 1993; and Issuer Collateral Assignment executed by ACSI in favor of Trustee dated May 18, 1993 are incorporated by reference from the Company's Form 8-K, dated May 18, 1993, Item 5, Exhibit 28.04.
10.28 First Amendment to the Leasehold Mortgage, Assignment of Rents and Security Agreement among AACSI and the Company dated July 9, 1993 is incorporated by reference from the Company's Form 8-K, dated July 7, 1993, Item 5, Exhibit 28.01.
10.29 First Amendment to the Leasehold Mortgage, Assignment of Rents and Security Agreement among ACSI and IBJ Schroder Bank & Trust Company dated July 9, 1993 is incorporated by
Exhibit Number Description - ------- -----------
reference from the Company's Form 8-K, dated July 7, 1993, Item 5, Exhibit 28.02.
10.30 Assignment of Rights under Agreement by ACSI, as assignee, to IBJ Schroder Bank & Trust Company dated July 9, 1993 is incorporated by reference from the Company's Form 8-K, dated July 7, 1993, Item 5, Exhibit 28.03.
10.31 Form of Deed for Sale of Land for Private Redevelopment for Tract 1 and Tract 2 each dated July 7, 1993 is incorporated by reference from the Company's Form 8-K, dated July 7, 1993, Item 5, Exhibit 28.04.
10.32 Use and Occupancy Agreement between ACHA and ACSI dated July 7, 1993 is incorporated by reference from the Company's Form 8-K, dated July 7, 1993, Item 5, Exhibit 28.05.
10.33 Standard Form of Agreement between Owner and Contractor (AIA Document A111) executed by ACSI and T.N. Ward Company dated July 2, 1993 is incorporated by reference from the Company's Form 8-K, dated July 2, 1993, Item 5, Exhibit 28.01.
10.34 Standard Form of Agreement Between Owner and Contractor (AIA Document A111) executed by ACSI and T.N. Ward Company dated September 15, 1993 is incorporated by reference from the Company's Form 8-K, dated July 2, 1993, Item 5, Exhibit 28.02.
10.35 Showboat Star Partnership Agreement between Star Casino, Inc. and Showboat Louisiana, Inc. dated July 2, 1993 and First Amendment to Showboat Star Partnership Agreement between Star Casino, Inc. and Showboat Louisiana, Inc. dated July 20, 1993 is incorporated by reference from the Company's Form 8-K, dated July 2, 1993, Item 5, Exhibit 28.01; Second Amendment to Showboat Star Partnership Agreement between Star Casino, Inc. and Showboat Louisiana, Inc. dated August 1, 1993; and Third Amendment to Showboat Star
Exhibit Number Description - ------- -----------
Partnership Agreement between Star Casino, Inc and Showboat Louisiana, Inc. dated March 1, 1994.
10.36 Management Agreement by and between Lake Pontchartrain Showboat, Inc. and Star Casino, Inc. dated May 24, 1993 is incorporated by reference from the Company's Form 8-K, dated July 2, 1993, Item 5, Exhibit 28.02.
10.37 Marine Management Services Agreement between Louisiana Riverboat Services, Inc. and Showboat Star Partnership dated September 30, 1993.
10.38 Agreement between Showboat, Inc., Showboat Indiana, Inc., Showboat Operating Company, Showboat Development Company, Showboat Indiana Investment Limited Partnership and Waterfront Entertainment and Development, Inc. dated September 13, 1993; and Showboat Marina Partnership Agreement between Waterfront Entertainment and Development, Inc. and Showboat Investment Limited Partnership dated January 31, 1994.
10.39 Lease between the Company and Exber, Inc. effective January 14, 1994; and Sublease between Dodd Smith and John D. Gaughan and Leslie C. Schwartz, dated November 5, 1966.
10.40 Lease between Showboat Star Partnership and Orleans Levee District dated February 18, 1993. First Amendment to Lease dated August 27, 1993.
10.41 Lease between Showboat Star Partnership and Orleans Levee District dated February 1, 1994.
10.42 Lease between Showboat Operating Company and Ventroy Associates executed on December 20, 1993.
21.01 List of Subsidiaries.
Exhibit Number Description - ------- -----------
23.01 Consent of KPMG Peat Marwick dated March 30, 1994.
(b) Reports on Form 8-K. -------------------
None.