1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 1-12168
BOYD GAMING CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 88-0242733
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2950 SOUTH INDUSTRIAL ROAD
LAS VEGAS, NEVADA
89109
(Address of principal executive offices)
(Zip Code)
(702) 792-7200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.
Yes X No
------- --------
Shares outstanding of each of the Registrant's classes of common stock as of
July 31, 1998:
Class Outstanding
----- -----------
Common stock, $.01 par value 61,825,666
2
BOYD GAMING CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1998
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page No.
--------
Item 1. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1998
and December 31, 1997 3
Condensed Consolidated Statements of Operations for the
three and six month periods ended June 30, 1998 and 1997 4
Condensed Consolidated Statement of Changes in
Stockholders' Equity for the six month period ended
June 30, 1998 5
Condensed Consolidated Statements of Cash Flows for the six
month periods ended June 30, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Signature Page 24
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) JUNE 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT SHARE DATA) 1998 1997
- ------------------------------------------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 76,657 $ 78,277
Accounts receivable, net 17,858 19,372
Inventories 9,724 9,906
Prepaid expenses 16,050 14,357
Income taxes receivable 1,119 2,787
---------- ----------
Total current assets 121,408 124,699
Property and equipment, net 757,806 771,235
Other assets and deferred charges 43,666 41,912
Deferred income taxes 2,761 6,558
Goodwill and other intangible assets, net 205,309 208,011
---------- ----------
Total assets $1,130,950 $1,152,415
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 1,532 $ 1,828
Accounts payable 33,013 28,535
Accrued liabilities
Payroll and related 28,415 26,100
Interest and other 57,860 55,879
---------- ----------
Total current liabilities 120,820 112,342
Long-term debt, net of current maturities 796,234 842,932
Other liabilities 2,500 --
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value; 5,000,000 shares authorized -- --
Common stock, $.01 par value; 200,000,000 shares authorized;
61,825,666 and 61,669,628 shares outstanding 618 617
Additional paid-in capital 139,950 139,054
Retained earnings 70,828 57,470
---------- ----------
Total stockholders' equity 211,396 197,141
---------- ----------
Total liabilities and stockholders' equity $1,130,950 $1,152,415
========== ==========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED
(UNAUDITED) JUNE 30, JUNE 30,
----------------------- -------------------------
(IN THOUSANDS, EXCEPT SHARE DATA) 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------
Revenues
Casino $181,673 $151,609 $367,537 $ 305,574
Food and beverage 40,246 37,882 82,508 77,874
Room 18,364 19,400 36,878 38,760
Other 17,474 16,371 35,741 31,428
Management fees and joint venture 9,563 11,088 20,359 22,341
-------- -------- -------- ---------
Gross revenues 267,320 236,350 543,023 475,977
Less promotional allowances 21,835 20,403 47,496 40,876
-------- -------- -------- ---------
Net revenues 245,485 215,947 495,527 435,101
-------- -------- -------- ---------
Costs and expenses
Casino 91,567 74,088 186,975 152,153
Food and beverage 27,272 27,928 53,409 55,844
Room 6,708 6,693 12,482 13,166
Other 16,377 14,787 32,276 29,121
Selling, general and administrative 37,212 28,342 75,795 61,678
Maintenance and utilities 10,618 8,560 20,113 17,710
Depreciation and amortization 18,387 18,488 36,998 36,408
Corporate expense 5,686 8,587 10,586 13,589
Impairment and restructuring charges 5,925 5,641 5,925 131,339
-------- -------- -------- ---------
Total 219,752 193,114 434,559 511,008
-------- -------- -------- ---------
Operating income (loss) 25,733 22,833 60,968 (75,907)
-------- -------- -------- ---------
Other income (expense)
Interest income 93 157 206 308
Interest expense, net of
amounts capitalized (18,747) (17,251) (38,019) (34,603)
-------- -------- -------- ---------
Total (18,654) (17,094) (37,813) (34,295)
-------- -------- -------- ---------
Income (loss) before provision (benefit)
for income taxes 7,079 5,739 23,155 (110,202)
Provision (benefit) for income taxes 3,045 2,302 9,797 (35,927)
-------- -------- -------- ---------
Net income (loss) $ 4,034 $ 3,437 $ 13,358 $ (74,275)
======== ======== ======== =========
BASIC AND DILUTED NET INCOME (LOSS)
PER COMMON SHARE $ 0.07 $ 0.06 $ 0.22 $ (1.21)
======== ======== ======== =========
Average basic shares outstanding 61,671 61,365 61,670 61,364
Average diluted shares outstanding 61,817 61,369 61,870 61,364
======== ======== ======== =========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
- ----------------------------------------------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL TOTAL
------------ PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------------------------------------------------------------------------------
Balances, January 1, 1998 61,669,628 $617 $139,054 $57,470 $197,141
Net income -- -- -- 13,358 13,358
Stock issued in connection with
employee stock purchase plan 156,038 1 896 -- 897
---------- ---- -------- ------- --------
Balances, June 30, 1998 61,825,666 $618 $139,950 $70,828 $211,396
========== ==== ======== ======= ========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
(UNAUDITED) JUNE 30,
-------------------------
(IN THOUSANDS) 1998 1997
- -----------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 13,358 $(74,275)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 36,998 36,408
Deferred income taxes 3,797 (42,250)
Impairment and restructuring charges 5,925 131,339
Changes in assets and liabilities:
Accounts receivable, net 1,514 8,930
Inventories 182 349
Prepaid expenses (1,693) 4,247
Income taxes receivable 1,668 7,144
Other assets (2,231) (1,005)
Other current liabilities 7,534 (32,396)
Income taxes payable -- 1,103
-------- --------
Net cash provided by operating activities 67,052 39,594
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES-
Acquisition of property, equipment and other assets (22,440) (19,747)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 762 669
Net borrowings under bank credit facility (45,000) (34,850)
Payments on long-term debt (1,994) (872)
-------- --------
Net cash used in financing activities (46,232) (35,053)
-------- --------
Net decrease in cash and cash equivalents (1,620) (15,206)
Cash and cash equivalents, beginning of period 78,277 70,426
-------- --------
Cash and cash equivalents, end of period $ 76,657 $ 55,220
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized $ 37,235 $ 28,606
======== ========
Cash paid for income taxes $ 4,946 $ 3,066
======== ========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying condensed consolidated financial statements include the
accounts of Boyd Gaming Corporation and its wholly-owned subsidiaries,
collectively referred to herein as the "Company". At June 30, 1998, the Company
owned and operated eleven casino entertainment facilities located in Las Vegas,
Nevada, Tunica, Mississippi, Kansas City, Missouri, East Peoria, Illinois, and
Kenner, Louisiana as well as a travel agency located in Honolulu, Hawaii. In
addition, the Company manages a casino entertainment facility in Philadelphia,
Mississippi, for which it has a seven year management contract that expires in
2001. All material intercompany accounts and transactions have been eliminated.
Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the results of its operations
and cash flows for the three and six month periods ended June 30, 1998 and 1997.
It is suggested that this report be read in conjunction with the Company's
audited consolidated financial statements included in the Annual Report on Form
10-K for the transition period ended December 31, 1997. The operating results
for the three and six month periods ended June 30, 1998 and 1997 and cash flows
for the six month periods ended June 30, 1998 and 1997 are not necessarily
indicative of the results that will be achieved for the full year or for future
periods.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Significant estimates used by the Company include the
estimated useful lives for depreciable and amortizable assets, the estimated
allowance for doubtful accounts receivable, the estimated valuation allowance
for deferred tax assets, and estimated cash flows used in assessing the
recoverability of long-lived assets. Actual results could differ from those
estimates.
Reclassifications
Certain amounts in the 1997 condensed consolidated financial statements have
been reclassified to conform to the 1998 presentation. These reclassifications
had no net effect on the Company's net income.
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NOTE 2. - IMPAIRMENT AND RESTRUCTURING CHARGES
During the quarter ended March 31, 1997, the Company wrote-down the carrying
value of its fixed and intangible assets in the Missouri gaming market to fair
value, which resulted in a $126 million impairment loss. The impairment loss was
recorded due to a significant change in the competitive environment with the
January 1997 addition of a significantly larger competitor in the Kansas City
gaming market and a history of operating losses at the Company's Sam's Town
Kansas City gaming establishment. The fair value of the impaired assets was
primarily determined through a discounted cash flow analysis of the operations
of Sam's Town Kansas City.
On June 30, 1998, the Company recorded a $5.9 million restructuring charge in
connection with its announcement to cease operations at Sam's Town Kansas City.
Termination benefits of $2.6 million for substantially all of the Company's 646
employees are included as part of the restructuring charge. Other costs to exit
the Kansas City gaming market of $3.3 million are included in the restructuring
charge and principally represent the recognition of liabilities for various
long-term commitments which the Company intends to honor. The $3.4 million
current portion and the $2.5 million non-current portion of the restructuring
charge liabilities are included in "Interest and other" and "Other liabilities",
respectively, on the accompanying condensed consolidated balance sheet at June
30, 1998. During July 1998, the Company closed Sam's Town Kansas City and sold
substantially all of its tangible assets for $12.5 million, which approximated
net book value.
The Company also recorded a $5.3 million impairment loss related to its 17.4%
ownership interest in the Fremont Street Experience, Limited Liability Company
("FSE") during the quarter ended June 30, 1997. This impairment loss is
principally due to the significant levels of operating loss and operating cash
deficiency reported in May 1997 by FSE relating to its first full year of
operation. Management expects this trend to continue and, therefore, does not
expect to recover its investment in this entity.
NOTE 3. - ACQUISITION
On October 27, 1997, the Company acquired the remaining 85% equity interest in
Treasure Chest Casino, L.L.C. ("Treasure Chest") that was not owned by the
Company for approximately $103 million, plus the assumption of debt. Intangible
license rights, representing the excess of the purchase price over the fair
value of the net assets acquired, amounted to approximately $85 million.
Treasure Chest owns the Treasure Chest Casino, a riverboat casino operation on
Lake Pontchartrain in Kenner, Louisiana. The Company has managed the Treasure
Chest since its opening in September 1994. The Company funded the acquisition
and the repayment of Treasure Chest's debt with borrowings under its bank credit
facility. The Company's pro forma condensed consolidated results of operations,
as if the acquisition had occurred on January 1, 1997, are as follows:
-8-
9
Six Months Ended
June 30, 1997
----------------
Pro forma (in thousands, except per share data):
Net revenues $ 489,313
Net loss (71,829)
=========
Basic and diluted net loss per common share:
Net loss $ (1.17)
=========
NOTE 4. - NET INCOME (LOSS) PER COMMON SHARE
During the quarter ended December 31, 1997, the Company adopted SFAS No. 128,
"Earnings per Share". SFAS No. 128 requires the presentation of basic and
diluted net income (loss) per share. Basic per share amounts are computed by
dividing net income (loss) by the average shares outstanding during the period.
Diluted per share amounts are computed by dividing net income (loss) by average
shares outstanding plus the dilutive effect of common share equivalents. Since
the Company incurred a net loss during the six month period ended June 30, 1997,
both basic and diluted per share calculations are based upon average shares
outstanding of 61,364,000 during the period. The effect of options outstanding
to purchase 2,751,867 shares was not included in the diluted calculation during
the period. Diluted net income per share during the three and six month periods
ended June 30, 1998 and during the three month period ended June 30, 1997 is
determined considering the dilutive effect of outstanding stock options. The
effect of stock options outstanding to purchase 2,691,679 and 2,681,179,
respectively was not included in the diluted calculation during the three and
six month periods ended June 30, 1998 and 2,751,867 was not included in the
diluted calculation during the three month period ended June 30, 1997 since the
exercise price of such options was greater than the average price of the
Company's common shares.
NOTE 5. - GUARANTOR INFORMATION
The Company's $200 million of 9.25% Senior Notes (the "9.25% Notes") are
guaranteed by a majority of the Company's wholly-owned existing significant
subsidiaries. These guaranties are full, unconditional, and joint and several.
In connection with the October 1997 acquisition of Treasure Chest discussed in
Note 3, the Company created significant subsidiaries that do not guarantee the
9.25% Notes. Prior to October 1997, the assets, equity, income and cash flows of
the non-guarantor subsidiaries represented less than 3% of the respective
consolidated amounts and were inconsequential, individually and in the
aggregate, to the Company. As such, the following consolidating schedules
present separate condensed financial statement information on a combined basis
for the parent only, as well as the Company's guarantor subsidiaries and
non-guarantor subsidiaries, as of June 30, 1998 and for the three and six month
periods then ended. Comparative financial information is not presented since
management believes such information is not material to investors.
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CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION AS OF JUNE 30, 1998
Combined
Combined Non- Elimination
(In Thousands) Parent Guarantors Guarantors Entries Consolidated
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets
Property and equipment, net $ 9,579 $ 89,410 $ 26,004 $ (3,585){1} $ 121,408
Other assets and deferred charges 28,014 688,181 41,611 757,806
Goodwill and other intangible assets, net 945,827 (506,682) 142,517 (535,235){1}{2} 46,427
Total assets -- 120,994 84,315 -- 205,309
-------- --------- -------- --------- ----------
$983,420 $ 391,903 $294,447 $(538,820) $1,130,950
======== ========= ======== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 33,183 $ 73,800 $ 18,129 $ (4,292){1} $ 120,820
Long-term debt and other, net of
current maturities 735,148 63,519 67 -- 798,734
Stockholders' equity 215,089 254,584 276,251 (534,528){2} 211,396
-------- --------- -------- --------- ----------
Total liabilities and stockholders'
equity $983,420 $ 391,903 $294,447 $(538,820) $1,130,950
======== ========= ======== ========= ==========
Elimination Entries
- -------------------
{1} - To eliminate intercompany payables and receivables.
{2} - To eliminate investment in subsidiaries and subsidiaries' equity.
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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION FOR THE THREE MONTH
PERIOD ENDED JUNE 30, 1998
Combined
Combined Non- Elimination
(In thousands) Parent Guarantors Guarantors Entries Consolidated
- -------------------------------------------------------------------------------------------------------------------------
Revenues
Casino $ -- $151,410 $30,263 $ -- $181,673
Food and beverage -- 37,790 2,456 -- 40,246
Room -- 18,364 -- -- 18,364
Other -- 9,425 8,333 (284){1} 17,474
Management fees and joint venture 29,203 11,381 5,279 (36,300){1} 9,563
-------- -------- ------- -------- --------
Gross revenues 29,203 228,370 46,331 (36,584) 267,320
Less promotional allowances -- 20,067 1,768 -- 21,835
-------- -------- ------- -------- --------
Net revenues 29,203 208,303 44,563 (36,584) 245,485
-------- -------- ------- -------- --------
Costs and expenses
Casino -- 80,340 11,227 -- 91,567
Food and beverage -- 24,739 2,533 -- 27,272
Room -- 6,708 -- -- 6,708
Other -- 18,396 10,272 (12,291){1} 16,377
Selling, general and administrative -- 31,366 5,846 -- 37,212
Maintenance and utilities -- 9,684 934 -- 10,618
Depreciation and amortization 119 16,004 2,264 -- 18,387
Corporate expense 5,503 -- 183 -- 5,686
Restructuring charge -- 5,925 -- -- 5,925
-------- -------- ------- -------- --------
Total 5,622 193,162 33,259 (12,291) 219,752
-------- -------- ------- -------- --------
Operating income 23,581 15,141 11,304 (24,293) 25,733
Other income (expense), net (17,431) (1,572) 349 -- (18,654)
-------- -------- ------- -------- --------
Income before provision (benefit) for
income taxes 6,150 13,569 11,653 (24,293) 7,079
Provision (benefit) for income taxes (453) 3,498 -- -- 3,045
-------- -------- ------- -------- --------
Net income $ 6,603 $ 10,071 $11,653 $(24,293) $ 4,034
======== ======== ======= ======== ========
Elimination Entries
- -------------------
{1} - To eliminate intercompany revenue and expense.
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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION FOR THE SIX MONTH
PERIOD ENDED JUNE 30, 1998
Combined
Combined Non- Elimination
(In thousands) Parent Guarantors Guarantors Entries Consolidated
- --------------------------------------------------------------------------------------------------------------------------
Revenues
Casino $ -- $306,512 $61,025 $ -- $367,537
Food and beverage -- 77,726 4,782 -- 82,508
Room -- 36,878 -- -- 36,878
Other -- 19,670 16,850 (779){1} 35,741
Management fees and joint venture 58,872 24,090 10,656 (73,259){1} 20,359
-------- -------- ------- -------- --------
Gross revenues 58,872 464,876 93,313 (74,038) 543,023
Less promotional allowances -- 44,083 3,413 -- 47,496
-------- -------- ------- -------- --------
Net revenues 58,872 420,793 89,900 (74,038) 495,527
-------- -------- ------- -------- --------
Costs and expenses
Casino -- 164,480 22,495 -- 186,975
Food and beverage -- 48,387 5,022 -- 53,409
Room -- 12,482 -- -- 12,482
Other -- 38,659 19,732 (26,115){1} 32,276
Selling, general and administrative -- 63,537 12,258 -- 75,795
Maintenance and utilities -- 17,818 2,295 -- 20,113
Depreciation and amortization 197 32,329 4,472 -- 36,998
Corporate expense 9,519 373 694 -- 10,586
Restructuring charge -- 5,925 -- -- 5,925
-------- -------- ------- -------- --------
Total 9,716 383,990 66,968 (26,115) 434,559
-------- -------- ------- -------- --------
Operating income 49,156 36,803 22,932 (47,923) 60,968
Other income (expense), net (34,937) (3,225) 349 -- (37,813)
-------- -------- ------- -------- --------
Income before provision for
income taxes 14,219 33,578 23,281 (47,923) 23,155
Provision for income taxes 560 9,237 -- -- 9,797
-------- -------- ------- -------- --------
Net income $ 13,659 $ 24,341 $23,281 $(47,923) $ 13,358
======== ======== ======= ======== ========
Elimination Entries
- -------------------
{1} - To eliminate intercompany revenue and expense.
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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION FOR THE SIX MONTH
PERIOD ENDED JUNE 30, 1998
Combined
Combined Non-
(In thousands) Parent Guarantors Guarantors Consolidated
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities $ 37,128 $ 324 $ 29,600 $ 67,052
-------- -------- -------- --------
Cash flows from investing activities (1,384) (19,896) (1,160) (22,440)
-------- -------- -------- --------
Cash flows from financing activities
Net borrowings under bank credit facility (45,000) -- -- (45,000)
Receipt (payment) of dividends 11,437 9,850 (21,287) --
Other (741) (396) (95) (1,232)
-------- -------- -------- --------
Net cash provided by (used in) in financing activities (34,304) 9,454 (21,382) (46,232)
-------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents 1,440 (10,118) 7,058 (1,620)
Cash and cash equivalents, beginning of period 2,832 58,317 17,128 78,277
-------- -------- -------- --------
Cash and cash equivalents, end of period $ 4,272 $ 48,199 $ 24,186 $ 76,657
======== ======== ======== ========
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain operating
data for the Company's properties. As used herein, "Boulder Strip Properties"
consist of Sam's Town Las Vegas, the Eldorado and Jokers Wild; "Downtown
Properties" consist of the California, the Fremont, Main Street Station and
Vacations Hawaii, the Company's wholly-owned travel agency which operates for
the benefit of the Downtown casino properties; and "Central Region Properties"
consist of Sam's Town Tunica, Sam's Town Kansas City, Par-A-Dice, management fee
income from Silver Star Resort and Casino, and management fee and joint venture
income from Treasure Chest Casino through October 27, 1997, at which time the
Company acquired the remaining 85% equity interest in Treasure Chest that it did
not already own to make it a wholly-owned subsidiary. Net revenues displayed in
this table and discussed in this section are net of promotional allowances; as
such, references to room revenue and food and beverage revenue do not agree to
the amounts on the Condensed Consolidated Statements of Operations. Operating
income from properties for the purposes of this table exclude corporate expense,
including related depreciation and amortization, and impairment and
restructuring charges.
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
1998 1997 1998 1997
-------- -------- -------- --------
(IN THOUSANDS)
- --------------
Net revenues
Stardust $ 41,102 $ 43,138 $ 82,435 $ 89,097
Boulder Strip Properties 46,247 47,355 94,304 96,247
Downtown Properties (a) 52,691 46,680 103,520 90,651
Central Region 105,445 78,774 215,268 159,106
-------- -------- -------- --------
Total properties $245,485 $215,947 $495,527 $435,101
======== ======== ======== ========
Operating income
Stardust $ 4,175 $ 5,249 $ 7,426 $ 10,744
Boulder Strip Properties 6,200 7,222 13,307 15,348
Downtown Properties 3,429 3,255 5,501 3,141
Central Region 23,886(b) 22,020 51,973(b) 41,153(b)
-------- -------- -------- --------
Total properties $ 37,690 $ 37,746 $ 78,207 $ 70,386
======== ======== ======== ========
- ------------------
(a) Includes revenues related to Vacations Hawaii, a Honolulu travel agency,
of $7,787 and $6,119, respectively, for the quarters ended June 30, 1998
and 1997, and revenues of $15,544 and $10,820, respectively, for the six
month period ended June 30, 1998 and 1997.
(b) Before impairment and restructuring charges.
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REVENUES
- --------
Consolidated net revenues increased 13.7% during the quarter ended June 30, 1998
compared to the quarter ended June 30, 1997. Company-wide casino revenue
increased 19.8%, food and beverage revenue increased 5.2% and room revenue
decreased 8.0%. Net revenues from the Stardust, Boulder Strip Properties and
Downtown Properties (the "Nevada Region") increased 2.1% during the quarter
ended June 30, 1998 compared to the quarter ended June 30, 1997 primarily as a
result of increased operating volume at each of the three Downtown casino
properties, as well as enhanced utilization of the Company's wholly-owned travel
agency, Vacations Hawaii. These increases were partially offset by declines in
net revenues experienced at the Stardust (4.7%) and Boulder Strip Properties
(2.3%) due to the competitive environment of those two markets. Net revenues in
the Central Region increased 34% during the quarter ended June 30, 1998 compared
to the quarter ended June 30, 1997 primarily as a result of the acquisition of
Treasure Chest in October 1997, as well as a 7.4% increase in net revenues from
Par-A-Dice. These increases were partially offset by declines in net revenues
experienced principally at Sam's Town Kansas City (21%) and Sam's Town Tunica
(8.0%) due to the competitive environment in each of these gaming markets. On
July 15, 1998, the Company ceased operations at Sam's Town Kansas City. See
further discussion under Impairment and Restructuring Charges later in this
section.
Consolidated net revenues increased 13.9% during the six month period ended June
30, 1998 compared to the same period in the prior year. Company-wide casino
revenue increased 20%, food and beverage revenue declined slightly (0.6%) and
room revenue declined 10.1%. Net revenues from the Nevada Region increased 1.5%
during the six month period ended June 30, 1998 compared to the six month period
ended June 30, 1997 due to a 14.2% increase in revenues from the Downtown
Properties, partially offset by declines of 7.5% and 2.0%, respectively, at the
Stardust and Boulder Strip Properties. These declines are attributable to the
competitive environment on the Las Vegas Strip, as well as increased competition
along the Boulder Strip. Net revenues in the Central Region increased 35% during
the six month period ended June 30, 1998 compared to the same period in the
prior year. This increase in net revenues is primarily attributable to the
acquisition of Treasure Chest in October 1997. This increase was partially
offset by an 18.0% decline in net revenues at Sam's Town Kansas City due to the
competitive environment in that gaming market. On July 15, 1998, the Company
ceased operations at Sam's Town Kansas City. See further discussion under
Impairment and Restructuring Charges later in this section.
OPERATING INCOME (LOSS)
- -----------------------
Consolidated operating income before impairment and restructuring charges
increased by 11.2% to $31.7 million during the quarter ended June 30, 1998 from
$28.5 million during the quarter ended June 30, 1997. Operating income in the
Nevada Region declined 12.2% due to declines experienced at the Stardust and
Boulder Strip Properties, partially offset by a slight gain experienced at the
Downtown Properties. In the Central Region, operating income increased 8.5% due
primarily to the acquisition of Treasure Chest in October 1997, partially offset
by declines experienced principally at Sam's Town Tunica and Sam's Town Kansas
City.
For the six month period ended June 30, 1998, consolidated operating income
before impairment and restructuring charges increased by 21% to $66.9 million
compared to $55.4 million in the same period from the prior year. Operating
income in the Nevada Region declined 10.3% as the competitive Las Vegas
environment caused reductions in operating income at the Stardust and Boulder
Strip Properties, which was partially offset by gains experienced at the
Downtown Properties. In the Central Region, operating income increased 26% due
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primarily to the October 1997 acquisition of Treasure Chest, partially offset by
the decline experienced at Sam's Town Tunica.
STARDUST
- --------
Net revenues at the Stardust declined by 4.7% during the quarter ended June 30,
1998 compared to the quarter ended June 30, 1997. The majority of the decline is
attributable to a 12.8% reduction in non-gaming revenues due to a corresponding
decline in the number of occupied rooms. The decline in the number of occupied
rooms is primarily attributable to a $9 million suite remodel project which
reduced the number of available rooms by 8.0% during the quarter. The project
began toward the end of the first quarter and is expected to be substantially
complete by the end of the third quarter. Casino revenue remained relatively
unchanged as a 6.1% decline in wagering volume was offset by an increase in both
slot and table game win percentages. Operating income declined by 21% or $1.1
million during the quarter ended June 30, 1998 compared to the quarter ended
June 30, 1997, and operating income margin declined to 10.2% during the quarter
ended June 30, 1998 from 12.2% during the quarter ended June 30, 1997. These
declines in operating income and operating income margin are primarily the
result of the reduction in net revenues coupled with an increase in marketing
expenses due to the competitive environment on the Las Vegas Strip.
For the six month period ended June 30, 1998, net revenues at the Stardust
declined by 7.5% versus the comparable period in the prior year. Casino revenue
declined by 3.9% due primarily to a decline in slot and table game wagering.
Non-gaming revenues declined 13.4% due to a 9.6% decline in the number of
occupied rooms. As discussed above, a portion of the decline in the number of
occupied rooms is attributable to a $9 million suite remodel project which
reduced the number of available rooms by 4.8% during the six month period.
Operating income declined by 31% or $3.3 million during the six month period
ended June 30, 1998 compared to the same period in the prior year. Operating
income margin declined to 9.0% during the six month period ended June 30, 1998
from 12.1% during the six month period ended June 30, 1997. These declines in
operating income and operating income margin are attributable to the reduction
in net revenues, coupled with an increase in marketing expenses due to the
competitive environment on the Las Vegas Strip.
BOULDER STRIP PROPERTIES
- ------------------------
Net revenues at the Boulder Strip Properties decreased 2.3% during the quarter
ended June 30, 1998 compared to the quarter ended June 30, 1997 due to increased
competition with the recent openings of two new properties along the Boulder
Strip. Casino revenue remained flat due primarily to an increase in slot win
percentage being offset by a decline in slot wagering volume. Food and beverage
revenue and room revenue decreased 11.1% and 8.5%, respectively, from the prior
period's levels. Operating income at the Boulder Strip Properties declined by
14.2% or $1.0 million during the quarter ended June 30, 1998 compared to the
quarter ended June 30, 1997, and operating income margin declined to 13.4%
during the quarter ended June 30, 1998 from 15.3% during the quarter ended June
30, 1997. These declines are primarily attributable to the reduction in net
revenues.
Net revenues at the Boulder Strip Properties declined by 2.0% during the six
month period ended June 30, 1998 compared to the same period from the prior
year. The decline is attributable to increased competition with the recent
openings of two new properties along the Boulder Strip. Casino revenue remained
virtually unchanged due primarily to an increase in slot win percentage being
offset by a decline in wagering volume. Food and beverage revenue and room
revenue declined by 10.0% and 3.7%, respectively, from the prior period. During
the six month period ended June 30, 1998, operating income at the Boulder Strip
Properties declined 13.3% or $2.0 million versus the comparable period in 1997.
Operating income margin declined to 14.1% for the six
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month period ended June 30, 1998 compared to 15.9% for the same period in 1997.
These reductions are primarily attributable to the decline in net revenues.
DOWNTOWN PROPERTIES
- -------------------
Net revenues at the Downtown Properties increased 12.9% during the quarter ended
June 30, 1998 compared to the quarter ended June 30, 1997 due primarily to
casino revenue, which increased 11.4% as a result of increased slot wagering
volume at Main Street Station and the Fremont. Non-gaming revenues at the
Downtown Properties increased 15.3% during the quarter ended June 30, 1998
versus the comparable quarter in 1997 due to the enlargement of the Company's
Honolulu travel agency, Vacations Hawaii, as well as increases in food and
beverage revenue and room revenue. Operating income at the Downtown Properties
increased 5.3% to $3.4 million during the quarter ended June 30, 1998 compared
to the quarter ended June 30, 1997 as improvements in operating results at the
California and Vacations Hawaii were partially offset by a decline in operating
income at the Fremont and a slight increase in the operating loss at Main Street
Station. Operating income margin declined slightly to 6.5% during the quarter
ended June 30, 1998 versus 7.0% during the comparable quarter in the prior year.
The increase in net revenue and the decline in operating income margin are
primarily attributable to the implementation of various marketing programs and
related expenses.
Net revenues at the Downtown Properties increased 14.2% during the six month
period ended June 30, 1998 compared to the same period in the prior year. Casino
revenue increased 12.3% due primarily to increased slot wagering volumes at each
of the Downtown casino properties. Non-gaming revenues at the Downtown
Properties increased 17.4% during the six month period ended June 30, 1998
versus the comparable prior year period due primarily to the enlargement of the
Company's Honolulu travel agency, Vacations Hawaii, as well as increases in food
and beverage revenue and room revenue. Operating income at the Downtown
Properties increased $2.4 million or 75% during the six month period ended June
30, 1998 compared to the same period in the prior year. Operating income margin
increased to 5.3% during the six month period ended June 30, 1998 versus 3.5% in
the comparable prior year period. These increases are primarily attributable to
the implementation of various marketing programs to enhance operating volumes at
the Downtown Properties.
CENTRAL REGION
- --------------
Net revenues from the Central Region increased 34% during the quarter ended June
30, 1998 compared to the quarter ended June 30, 1997. The majority of the
increase is attributable to the acquisition of the remaining interest in
Treasure Chest on October 27, 1997, as well as a 7.4% increase in net revenues
from Par-A-Dice. Treasure Chest produced net revenues for the Company of $31.2
million during the quarter ended June 30, 1998 compared to $1.3 million during
the quarter ended June 30, 1997. Prior to the acquisition of Treasure Chest, the
Company accounted for its 15% minority interest under the equity method.
However, since the acquisition of the remaining 85% equity interest in Treasure
Chest, the revenues and expenses generated by that property are now included in
the Company's condensed consolidated statement of operations. These increases in
net revenues during the June 30, 1998 quarter were partially offset by a 21%
decline in net revenues at Sam's Town Kansas City due to a reduction in market
share caused by the competitive environment in Kansas City. Pending the
consummation of the sale of the property, management ceased operations at Sam's
Town Kansas City on July 15, 1998. See further discussion under Impairment and
Restructuring Charges later in this section. In addition, net revenues at Sam's
Town Tunica declined by 8.0% due to increased competition which came on line in
the Tunica gaming market toward the end of the quarter ended March 31, 1998.
Operating income for the Central Region increased to $23.9 million during the
quarter ended June 30, 1998 from $22.0 million during the comparable quarter in
1997
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due primarily to the acquisition of Treasure Chest, partially offset by declines
in operating results experienced primarily at Sam's Town Tunica and Sam's Town
Kansas City.
Net revenues from the Central Region increased 35% during the six month period
ended June 30, 1998 compared to the same period in the prior year. The majority
of the increase is attributable to the acquisition of the remaining interest in
Treasure Chest on October 27, 1997, as well as 5.6% increase in management fees
from Silver Star and a 2.4% increase in net revenues from Par-A-Dice. Treasure
Chest produced net revenues for the Company of $62.9 million during the six
month period ended June 30, 1998 versus $3.1 million during the comparable prior
year period. Prior to the acquisition of Treasure Chest, the Company accounted
for its 15% minority interest under the equity method. However, since the
acquisition of the remaining 85% equity interest in Treasure Chest, the revenues
and expenses generated by that property are now included in the Company's
condensed consolidated statement of operations. The increases in net revenues
were partially offset by an 18.0% decline in net revenues at Sam's Town Kansas
City due to a reduction in market share caused by the competitive environment in
Kansas City. Pending the consummation of the sale of the property, management
ceased operations at Sam's Town Kansas City on July 15, 1998. See further
discussion under Impairment and Restructuring Charges later in this section. In
addition, Sam's Town Tunica experienced a 3.0% decline in net revenues due to
increased competition which came online in the Tunica gaming market toward the
end of the quarter ended March 31, 1998. Operating income for the Central Region
increased to $52.0 million during the six month period ended June 30, 1998 from
$41.2 million during the comparable prior year period primarily to the
acquisition of Treasure Chest, partially offset by a decline in operating
results at Sam's Town Tunica.
IMPAIRMENT AND RESTRUCTURING CHARGES
- ------------------------------------
During the quarter ended March 31, 1997, the Company, in accordance with SFAS
No. 121, recorded an impairment loss of $126 million to adjust the carrying
value of its fixed and intangible assets in the Missouri gaming market to fair
value. The impairment loss was recorded due to a significant change in the
competitive environment with the January 1997 addition of a significantly larger
facility in the Kansas City gaming market and a history of operating losses at
the Company's Sam's Town Kansas City gaming establishment. On June 30, 1998, the
Company recorded a $5.9 million restructuring charge in connection with its
announcement to cease operations at Sam's Town Kansas City. During July 1998,
the Company closed Sam's Town Kansas City and sold substantially all of its
tangible assets for $12.5 million, which approximated net book value.
During the quarter ended June 30, 1997, the Company recorded a $5.3 million
impairment loss related to its 17.4% ownership interest in Fremont Street
Experience, Limited Liability Company ("FSE"), which is the entity that operates
the downtown Las Vegas tourist attraction known as the Fremont Street
Experience. This impairment loss is principally due to the significant levels of
operating loss and operating cash deficiency reported in May 1997 by FSE
relating to its first full year of operations. Management expects this trend to
continue and, therefore, does not expect to recover its investment in this
entity.
OTHER EXPENSES
- --------------
Depreciation and amortization expense declined slightly ($.1 million) during the
quarter ended June 30, 1998 versus the comparable quarter in 1997, and increased
by $.6 million during the six month period ended June 30, 1998 compared to the
corresponding 1997 period. The slight increase in depreciation and amortization
expense during the six month period ended June 30, 1998 is due to the increase
in intangible and fixed assets related to the acquisition of Treasure Chest in
October 1997, offset by the reduction in fixed and intangible assets related to
the impairment loss recorded during the quarter ended March 31, 1997.
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The marginal decline in depreciation and amortization expense during the quarter
ended June 30, 1998 is primarily attributable to an increase in fully
depreciated assets, as well as the Treasure Chest acquisition and the March 1997
impairment loss discussed above.
OTHER INCOME (EXPENSE)
- ----------------------
Other income and expense is primarily comprised of interest expense. Interest
expense increased by $1.5 million and $3.4 million, respectively, during the
quarter and six month period ended June 30, 1998 compared to the corresponding
periods in 1997. The increase is primarily attributable to higher levels of debt
outstanding due to the October 1997 acquisition of Treasure Chest, partially
offset by a decline in interest rates on certain fixed and floating rate debt.
PROVISION (BENEFIT) FOR INCOME TAXES
- ------------------------------------
The Company's effective tax rates were 43% and 40%, respectively, during the
quarters ended June 30, 1998 and 1997, and 42% and (33%), respectively, during
the six month periods ended June 30, 1998 and 1997. The fluctuation in the rates
during the comparable quarters ended June 30, 1998 and 1997 is primarily
attributable to state taxes, which have increased due to the enhanced earnings
generated from the Company's Central Region properties. The Company's Nevada
properties are not subject to state income tax. The fluctuation in the rates
during the comparable six month periods ended June 30, 1998 and 1997 is
primarily attributable to the impairment loss recorded during the quarter ended
March 31, 1997.
NET INCOME (LOSS)
- -----------------
As a result of these factors, the Company reported net income of $4.0 million
and $13.4 million, respectively, during the quarter and six month period ended
June 30, 1998 compared to net income of $3.4 million during the quarter ended
June 30, 1997 and a net loss of $74 million during the six month period ended
June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW AND WORKING CAPITAL
- -----------------------------
During the six month period ended June 30, 1998, the Company generated operating
cash flows of $67 million compared to $40 million during the comparable prior
year period. The increase in operating cash flows is primarily attributable to
the operations of Treasure Chest, which was acquired in October 1997. As of June
30, 1998 and 1997, the Company had balances of cash and cash equivalents of $77
million and $55 million, respectively, and working capital of $.6 million and a
working capital deficit of $3.5 million, respectively. The Company has
historically operated with minimal or negative levels of working capital in
order to minimize borrowings and related interest costs under its five-year,
$500 million reducing revolving credit facility (the "Bank Credit Facility").
The working capital deficits, if any, are funded through cash generated from
operations as well as borrowings under the Bank Credit Facility.
In connection with the July 1998 sale of certain tangible assets of Sam's Town
Kansas City, the Company will be able to realize the benefit of approximately
$35 million in deferred tax assets. The realization of these deferred tax assets
will benefit operating cash flows by reducing the amount of future federal
income tax payments beginning in the quarter ended September 30, 1998.
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CAPITAL EXPENDITURES
- --------------------
The Company is committed to continually maintaining and enhancing its existing
facilities, most notably by upgrading and remodeling its casinos, hotel rooms,
restaurants and other public space and by providing the latest slot machines for
its customers. The Company's capital expenditures for these purposes were
approximately $22 million and $20 million, respectively, during the six month
periods ended June 30, 1998 and 1997.
DEBT FACILITIES AND EQUITY FINANCING
- ------------------------------------
Much of the funding for the Company's renovation and expansion projects has come
from debt and equity financings, as well as cash flows from existing operations.
Cash flows used for financing activities totaled $46 million during the six
month period ended June 30, 1998, compared to $35 million during the
corresponding period in 1997, as the Company paid down outstanding debt with its
free cash flow generated from operations. At June 30, 1998, outstanding
borrowings and unused availability under the Bank Credit Facility were $345
million and $155 million, respectively. Interest on the Bank Credit Facility is
based upon the agent bank's quoted reference rate or the London Interbank
Offered Rate, at the discretion of the Company. The blended rate under the Bank
Credit Facility at June 30, 1998 was 7.9%.
The Bank Credit Facility contains certain financial and other covenants,
including, without limitation, various covenants (i) requiring the maintenance
of a minimum tangible net worth, (ii) requiring the maintenance of a minimum
fixed charge coverage ratio, (iii) establishing a maximum permitted funded debt
to EBITDA ratio, (iv) imposing limitations on the incurrence of additional
indebtedness and the creation of liens, (v) imposing limitations on the maximum
permitted expansion capital expenditures during the term of the Bank Credit
Facility, (vi) imposing limits on the maximum permitted maintenance capital
expenditures during the term of the Bank Credit Facility, and (vii) imposing
restrictions in investments, the purchase or redemption of subordinated debt
prior to its stated maturity, dividends and other distributions, and the
redemption or purchase of capital stock of the Company.
As of June 30, 1998, the Company had outstanding $200 million principal amount
of 9.25% Senior Notes (the "9.25% Notes") due October 1, 2003 and $250 million
principal amount of 9.50% Senior Subordinated Notes (the "9.50% Notes") due July
2007. The 9.25% and 9.50% Notes contain limitations on, among other things, (a)
the ability of the Company and its Restricted Subsidiaries (as defined in the
Indenture Agreements) to incur additional indebtedness, (b) the payment of
dividends and other distributions with respect to the capital stock of the
Company and its Restricted Subsidiaries and the purchase, redemption or
retirement of capital stock of the Company and its Restricted Subsidiaries, (c)
the making of certain investments, (d) asset sales, (e) the incurrence of liens,
(f) transactions with affiliates, (g) payment restrictions affecting restricted
subsidiaries and (h) certain consolidations, mergers and transfers of assets.
Management believes the Company and its subsidiaries are in compliance with all
covenants contained in its long-term debt agreements at June 30, 1998.
The Company's ability to service its debt will be dependent on its future
performance, which will be affected by, among other things, prevailing economic
conditions and financial, business and other factors, certain of which are
beyond the Company's control.
EXPANSION PROJECTS
- ------------------
The Company, as part of its ongoing strategic planning process, is currently
establishing its priorities for the future. In Nevada, the Company continues to
examine and explore alternatives to improve
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the Stardust and its 61-acre site on the Las Vegas Strip. In addition, the
Company is exploring opportunities for both the expansion of its Sam's Town Las
Vegas property and the expansion of the Sam's Town concept to other sites in
the Las Vegas locals market.
Outside of Nevada, the Company continues to monitor acquisition opportunities in
many of the newer gaming markets as the industry continues to consolidate. In
addition, on July 14, 1998, the Company, through a wholly-owned subsidiary,
entered into an amended joint venture agreement (the "Amended Agreement") with
Mirage Resorts, Incorporated ("Mirage") to jointly develop and own a casino
hotel entertainment facility in Atlantic City, New Jersey (the "Atlantic City
Project"). Among other things, the Amended Agreement provides for the settlement
of litigation between the Company and Mirage relating to the joint venture
agreement that the Company and Mirage entered into in May 1996. The Atlantic
City Project is expected to cost $750 million and contemplates a hotel of at
least 1,200 rooms and a casino and related amenities adjacent and connected to
Mirage's planned wholly-owned resort. The Amended Agreement provides for at
least $150 million in capital contributions by the Company. Funding of the
Company's Atlantic City Project capital contributions are expected to be funded
from cash flow from operations and availability under the Company's Bank Credit
Facility.
Substantial funds would be required for the expansion projects discussed above.
There are no assurances that any of the above mentioned projects will go forward
or ultimately become operational. The source of funds required to meet the
Company's working capital needs (including maintenance capital expenditures) is
expected to be cash flow from operations and availability under the Company's
Bank Credit Facility. The source of funds for the Company's expansion projects
may come from cash flow from operations and availability under the Company's
Bank Credit Facility, additional debt or equity offerings, joint venture
partners or other sources. No assurance can be given that additional financing
will be available or that, if available, such financing will be obtainable on
terms favorable to the Company or its stockholders.
YEAR 2000 PROJECT
- -----------------
The Company is conducting a review of its computer systems to identify those
areas that could be affected by the "Year 2000" issue and is in the process of
replacing many of its existing systems to improve overall business performance
and to accommodate business for the "Year 2000". However, given the inherent
risks for a project of this magnitude and the resources required, the timing and
costs involved could differ materially from that anticipated by the Company. The
Company expects its "Year 2000" date conversion project to be completed on a
timely basis. However, there can be no assurance that the conversion project
will be completed on schedule, and that the systems of other companies on which
the Company may rely also will be timely converted or that such failure to
convert by another company would not have an adverse impact on the Company's
systems. The estimated costs directly or indirectly associated with the
conversion project is currently expected to be approximately $16 million, a
significant majority of which will be in the form of capital expenditures. At
June 30, 1998, the Company had incurred costs of $2.7 million which were
directly or indirectly related to the "Year 2000" project.
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PRIVATE SECURITIES LITIGATION REFORM ACT
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward looking statements. Certain information included in this Form 10-Q
and other materials filed or to be filed by the Company with the Securities and
Exchange Commission (as well as information included in oral statements or other
written statements made or to be made by the Company) contains statements that
are forward looking, such as statements relating to plans for future expansion
and other business development activities as well as other capital spending,
financing sources, and the effects of regulation (including gaming and tax
regulation) and competition. Such forward looking statements involve important
risks and uncertainties that could significantly affect anticipated results in
the future, and accordingly, actual results may differ materially from those
expressed in any forward looking statements made by or on behalf of the Company.
These risks and uncertainties include, but are not limited to, those related to
construction, expansion and development activities, economic conditions, changes
in tax laws, changes in laws or regulations affecting gaming licenses, changes
in competition, and factors affecting leverage and debt service including
sensitivity to fluctuation in interest rates, risks related to the "Year 2000"
project and other factors described from time to time in the Company's reports
filed with the Securities and Exchange Commission, including the Company's
Transition Report on Form 10-K for the transition year ended December 31, 1997.
Any forward looking statements are made pursuant to the Private Securities
Litigation Reform Act of 1995 and, as such, speak only as of the date made.
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Part II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting was held May 21, 1998. The stockholders
re-elected Messrs. William S. Boyd, Philip J. Dion, Perry B. Whitt and
William G. Yates, Jr. to three year terms, ending on the date of the
Company's Annual Meeting in 2001. The following persons remain
directors of the Company: Messrs. William R. Boyd, Michael O. Maffie,
Warren L. Nelson, Donald D. Snyder, Robert L. Boughner and Billy G.
McCoy and Ms. Marianne Boyd Johnson. The number of shares, voting as
to the election of each nominee and the ratification of the
appointment of Deloitte & Touche LLP to serve as independent auditors
for fiscal 1998 is set forth below:
Votes
---------------------------
Election of Class I Directors For Withheld
----------------------------- ----------- --------
William S. Boyd 52,570,088 269,783
Philip J. Dion 52,562,437 277,434
Perry B. White 52,563,320 276,551
William G. Yates, Jr. 52,571,966 267,905
The stockholders ratified the selection of Deloitte & Touche LLP as
independent auditors for the Company for the year ending December 31,
1998 with voting as follows: [52,528,761] for; [281,848] against;
[29,262] non-votes.
ITEM 5. OTHER INFORMATION
(a) During July 1998, the Company ceased operations at Sam's Town
Kansas City and consummated the sale of substantially all of
its tangible assets. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Impairment
and Restructuring Charges."
(b) Any shareholder proposal submitted with respect to Boyd Gaming's
1999 Annual Meeting of Shareholders, which proposal is submitted
outside the requirements of Rule 14a-8 under the Securities
Exchange Act of 1934, will be considered untimely for purposes of
Rule 14a-4 and 14a-5 if notice thereof is received by Boyd
Gaming after February 27, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.55 Amended and Restated Joint Venture Agreement
of Stardust A.C., dated as of July 14, 1998,
by and between MAC, CORP., a New Jersey
corporation which is a wholly-owned
subsidiary of Mirage Resorts, Incorporated,
a Nevada corporation, and Boyd Atlantic
City, Inc., a New Jersey corporation which
is a wholly-owned subsidiary of the Company.
27. Financial Data Schedule
(b) Reports on Form 8-K.
(i) The Company filed a current report on Form 8-K dated
July 14, 1998 related to the Amended and Restated
Joint Venture Agreement of Stardust A.C.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOYD GAMING CORPORATION
(Registrant)
Date: August 13, 1998 By /s/ Ellis Landau
-------------------------------------
Ellis Landau,
Executive Vice President,
Chief Financial Officer, and
Treasurer (Principal Financial
Officer)
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EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.55 Amended and Restated Joint Venture Agreement of Stardust A.C., dated
as of July 14, 1998, by and between MAC, CORP., a New Jersey
corporation which is a wholly-owned subsidiary of Mirage Resorts,
Incorporated, a Nevada corporation, and Boyd Atlantic City, Inc., a
New Jersey corporation which is a wholly-owned subsidiary of the
Company.
27. Financial Data Schedule.