SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1995
Commission file number 0-10619
HOLLYWOOD PARK, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-3667491
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1050 South Prairie Avenue, Inglewood, California 90301
(Address of Principal Executive Offices) (Zip Code)
(310) 419 - 1500
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (a) 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, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
The number of outstanding shares of the registrant's common stock, as of the
date of the close of business on August 11, 1995: 18,369,634.
Hollywood Park, Inc.
Table of Contents
Part I
Item 1. Financial Information
Consolidated Balance Sheets as of June 30, 1995
and December 31, 1994............................ 1
Consolidated Statements of Operations for the
three months ended June 30, 1995 and 1994........ 2
Consolidated Statements of Operations for the six
months ended June 30, 1995 and 1994.............. 3
Consolidated Statements of Cash Flows for the six
months ended June 30, 1995 and 1994.............. 4
Notes to Consolidated Financial Statements........ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 8
Part II
Item 1. Legal Proceedings........................................ 13
Item 3. Default Upon Senior Securities........................... 13
Item 4. Submission of Matters to a Vote of Security Holders...... 14
Item 5. Other Information........................................ 14
Item 6.a. Exhibits................................................. 15
Other Financial Information.............................. 17
Signatures............................................... 23
Hollywood Park, Inc.
Consolidated Balance Sheets
June 30, December 31,
1995 1994
----------- -----------
Assets (unaudited)
Current Assets:
Cash and cash equivalents $35,723,000 $37,122,000
Restricted cash 11,630,000 699,000
Short term investments 3,692,000 0
Casino lease and related interest receivable, net 0 11,745,000
Other receivables, net of allowance for doubtful accounts
of $157,000 in 1995 and $159,000 in 1994 8,112,000 8,224,000
Prepaid expenses and other assets 7,545,000 3,348,000
Deferred tax assets 4,865,000 4,827,000
Current portion of notes receivable 33,000 31,000
------------ ------------
Total current assets 71,600,000 65,996,000
Notes receivable 875,000 891,000
Casino lease and related interest receivable, net 18,799,000 0
Property, plant and equipment, net 159,073,000 160,264,000
Lease with TRAK East, net 1,229,000 1,110,000
Goodwill, net 5,747,000 5,813,000
Deferred tax assets 880,000 1,103,000
Other assets 9,317,000 11,396,000
------------ ------------
$267,520,000 $246,573,000
============ ============
- -----------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $9,994,000 $6,833,000
Accrued liabilities 10,556,000 7,703,000
Accrued workers' compensation 2,212,000 2,117,000
Accrued slip and fall claims 1,403,000 1,273,000
Amounts due to horsemen for purses, stakes and awards 11,765,000 516,000
Amounts payable to charities 263,000 501,000
Outstanding pari-mutuel tickets 2,785,000 1,546,000
Current portion of notes payable 28,977,000 5,299,000
Deferred tax liabilities 3,065,000 288,000
------------ ------------
Total current liabilities 71,020,000 26,076,000
Notes payable 15,726,000 42,800,000
Deferred tax liabilities 10,218,000 10,442,000
------------ ------------
Total liabilities 96,964,000 79,318,000
Commitments and contingencies -- --
Stockholders' Equity:
Capital stock --
Preferred - $1.00 par value, authorized 250,000 shares;
27,499 issued and outstanding 28,000 28,000
Common - $.10 par value, authorized 40,000,000 shares:
18,369,634 issued and outstanding in 1995 and 1994 1,837,000 1,837,000
Capital in excess of par value 166,892,000 166,892,000
Retained earnings (accumulated deficit) 1,799,000 (1,502,000)
------------ ------------
Total stockholders' equity 170,556,000 167,255,000
------------ ------------
$267,520,000 $246,573,000
============ ============
- -------------
See accompanying notes to consolidated financial statements.
1
Hollywood Park, Inc.
Consolidated Statements of Operations
For the three months ended
June 30,
--------------------------
1995 1994
----------- -----------
(unaudited)
Revenues:
Pari-mutuel commissions $21,371,000 $19,540,000
Lease and management fee - Sunflower 1,638,000 3,698,000
Lease - Casino 6,288,000 0
Admissions, programs, and other racing income 5,799,000 5,993,000
Concession sales 5,947,000 5,563,000
Other income 1,785,000 1,181,000
----------- -----------
42,828,000 35,975,000
----------- -----------
Expenses:
Salaries, wages and employee benefits 12,473,000 10,567,000
Operations of facilities 3,000,000 2,439,000
Cost of concession sales 7,593,000 4,631,000
Professional services 2,642,000 1,869,000
Rent 409,000 463,000
Utilities 1,190,000 1,048,000
Marketing 2,121,000 2,432,000
Administrative 2,273,000 1,187,000
----------- -----------
31,701,000 24,636,000
----------- -----------
Operating income 11,127,000 11,339,000
Casino pre-opening and training expenses 0 899,000
Turf Paradise acquisition costs 0 181,000
----------- -----------
Income before interest, income taxes, depreciation and
amortization 11,127,000 10,259,000
Depreciation and amortization 2,862,000 2,400,000
Interest expense 974,000 915,000
----------- -----------
Income before income tax expense 7,291,000 6,944,000
Income tax expense 2,434,000 2,089,000
----------- -----------
Net income $4,857,000 $4,855,000
=========== ===========
=======================================================================================
Dividend requirements on convertible preferred stock $481,000 $481,000
Net income available to common shareholders $4,376,000 $4,374,000
Per common share:
Net income - primary $0.24 $0.24
Net income - fully diluted $0.24 $0.24
Cash dividend per common share $0.00 $0.00
Number of shares - primary 18,369,634 18,298,477
Number of shares - fully diluted 20,661,126 20,589,939
- --------------
See accompanying notes to consolidated financial statements.
2
Hollywood Park, Inc.
Consolidated Statements of Operations
For the six months ended
June 30,
--------------------------
1995 1994
----------- -----------
(unaudited)
Revenues:
Pari-mutuel commissions $27,679,000 $25,907,000
Lease and management fee - Sunflower 3,145,000 3,698,000
Lease - Casino 12,670,000 0
Admissions, programs, and other racing income 9,272,000 9,309,000
Concession sales 10,805,000 7,561,000
Other income 3,713,000 2,406,000
----------- -----------
67,284,000 48,881,000
----------- -----------
Expenses:
Salaries, wages and employee benefits 20,237,000 15,932,000
Operations of facilities 5,580,000 4,261,000
Cost of concession sales 13,466,000 6,481,000
Professional services 4,720,000 3,514,000
Rent 678,000 895,000
Utilities 2,149,000 1,664,000
Marketing 2,684,000 2,626,000
Administrative 3,811,000 2,110,000
----------- -----------
53,325,000 37,483,000
----------- -----------
Operating income 13,959,000 11,398,000
Casino pre-opening and training expenses 0 1,614,000
Turf Paradise acquisition costs 0 181,000
----------- -----------
Income before interest, income taxes, depreciation and
amortization 13,959,000 9,603,000
Depreciation and amortization 5,654,000 4,021,000
Interest expense 1,928,000 961,000
----------- -----------
Income before income tax expense 6,377,000 4,621,000
Income tax expense 2,114,000 1,187,000
----------- -----------
Net income $4,263,000 $3,434,000
=========== ===========
=======================================================================================
Dividend requirements on convertible preferred stock $962,000 $962,000
Net income available to common shareholders $3,301,000 $2,472,000
Per common share:
Net income - primary $0.18 $0.14
Net income - fully diluted $0.18 $0.14
Cash dividend per common share $0.00 $0.00
Number of shares - primary 18,369,634 18,030,377
Number of shares - fully diluted 20,661,126 20,321,869
- --------------
See accompanying notes to consolidated financial statements.
3
Hollywood Park, Inc.
Consolidated Statements of Cash Flows
For the six months ended
June 30,
--------------------------
1995 1994
----------- -----------
(unaudited)
Cash flows from operating activities:
Net income $4,263,000 $3,434,000
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 5,653,000 4,021,000
Changes in assets and liabilities, net of the effects of the
purchase of a business:
Increase in restricted cash (10,931,000) (11,772,000)
Increase in casino lease and related interest receivable, net (7,054,000) 0
Decrease (increase) in other receivables, net 112,000 (995,000)
Increase in prepaid expenses and other assets (2,407,000) (6,185,000)
Decrease (increase) in deferred tax assets 185,000 (38,000)
Increase in accounts payable 3,161,000 187,000
Increase (decrease) in accrued liabilities 2,696,000 (478,000)
Increase (decrease) in accrued workers' compensation 95,000 (12,000)
Increase in slip and fall claims 130,000 0
Increase in amounts due to horsemen for purses, stakes
and awards 11,249,000 11,869,000
Decrease in amounts payable to charities (238,000) (469,000)
Increase in outstanding pari-mutuel tickets 1,239,000 1,173,000
Increase in deferred tax liabilities 2,553,000 71,000
Loss on sale or disposal of property, plant and equipment 66,000 0
----------- -----------
Net cash provided by operating activities 10,772,000 806,000
----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment (4,233,000) (20,418,000)
Receipts from sale of property, plant and equipment 96,000 0
Principal collected on notes receivable 16,000 15,000
Purchase of short term investments (12,538,000) (68,581,000)
Proceeds from short term investments 8,846,000 81,081,000
Cash acquired in the purchase of a business, net of
transaction and other costs 0 429,000
----------- -----------
Net cash used in investing activities (7,813,000) (7,474,000)
----------- -----------
Cash flows from financing activities:
Proceeds from unsecured notes payable 1,681,000 15,000
Proceeds from secured notes payable 0 1,200,000
Payment of unsecured notes payable (3,566,000) (5,000,000)
Payment of secured notes payable (1,458,000) (3,602,000)
Payments under capital lease obligations (53,000) (56,000)
Turf Paradise equity transactions 0 (109,000)
Turf Paradise net income charged to retained earnings 0 198,000
Dividends paid to preferred stockholders (962,000) (962,000)
----------- -----------
Net cash used for financing activities (4,358,000) (8,316,000)
----------- -----------
Decrease in cash and cash equivalents (1,399,000) (14,984,000)
Cash and cash equivalents at the beginning of the period 37,122,000 60,617,000
----------- -----------
Cash and cash equivalents at the end of the period $35,723,000 $45,633,000
=========== ===========
- ---------------
See accompanying notes to consolidated financial statements.
4
Hollywood Park, Inc.
Notes to Consolidated Financial Statements
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial information included herein has been prepared in conformity with
generally accepted accounting principles as reflected in the financial
statements included in the consolidated annual report on Form 10-K of Hollywood
Park, Inc. (the "Company" or "Hollywood Park") filed with the Securities and
Exchange Commission for the year ended December 31, 1994. This financial
information does not include certain footnotes and financial presentations
normally presented annually, and therefore, should be read in conjunction with
the 1994 Form 10-K.
The information furnished herein is unaudited; however, in the opinion of
management it reflects all normal recurring adjustments that are necessary to
present a fair statement of the results for the interim periods. It should be
understood that accounting measurements at the interim dates inherently involve
greater reliance on estimates than at year end. The interim racing results of
operations are not indicative of the results for the full year due to the
seasonality of the racing business.
ACQUISITION OF SUNFLOWER RACING, INC. On March 23, 1994, the Company finalized
the transaction to acquire Sunflower Racing, Inc. ("Sunflower"), a greyhound and
thoroughbred racing facility located in Kansas City, Kansas. Sunflower,
operating as the Woodlands, became a wholly owned subsidiary of Hollywood Park,
with the transaction accounted for under the purchase method of accounting. The
acquisition price was $15,000,000; paid for with 591,715 shares of Hollywood
Park common stock, with a then market price of $25.35 per share. For financial
reporting purposes, the transaction was valued at $19.00 per Hollywood Park
common share, based on the size of the block of shares issued in the acquisition
relative to the current trading volume. Immediately following the acquisition,
the Company contributed $5,000,000 in cash to Sunflower to repay a portion of
the subordinated debt Sunflower owed to Mr. Hubbard, Chief Executive Officer of
the Company, in return for more favorable terms on the balance of the
subordinated debt. In December 1994, Sunflower received notice that it was to
receive a refund of property taxes paid during periods before the acquisition of
approximately $1,484,000 (at December 31, 1994, the estimated refund was
$1,641,000). The Sunflower financial statements as of the date of acquisition
were restated to include receipt of the $1,484,000. Of the approximately
$6,782,000 of restated excess acquisition cost over the recorded value of the
assets acquired, $1,310,000 was allocated to the racing facility lease and
management agreement Sunflower has with The Racing Association of Kansas East
("TRAK East") and will be amortized over the remaining 20 years of the lease,
with the balance of $5,472,000 allocated to goodwill to be amortized over 40
years.
An additional 55,574 shares of Hollywood Park common stock were issued to Mr.
Richard Boushka, a former Sunflower shareholder, as required by the agreement of
merger, because the market price of Hollywood Park's common stock 180 days after
the close of the acquisition, was more than 10% less than the market price on
the closing date of the acquisition. The agreement of merger also provided that
under certain circumstances the former Sunflower shareholders were entitled to
receive additional shares of Hollywood Park common stock. As of March 23, 1995,
the former Sunflower shareholders transferred their rights to such additional
consideration to Hollywood Park for nominal consideration, and have no further
entitlements to additional consideration.
ACQUISITION OF TURF PARADISE, INC. On August 11, 1994, the shareholders of Turf
Paradise, Inc. ("Turf Paradise") approved the Agreement of Merger, entered into
on March 30, 1994, by Hollywood Park and Turf Paradise and as amended on May 27,
1994, pursuant to which Turf Paradise became a wholly owned subsidiary of
Hollywood Park. Turf Paradise owns and operates a thoroughbred race track in
Phoenix, Arizona. The transaction was accounted for under the pooling of
interests method of accounting, with approximately $627,000 of merger related
costs incurred in total and expensed by both the Company and Turf Paradise. In
5
connection with the merger, the Company paid a total of 1,498,016 newly issued
shares of Hollywood Park common stock, valued as of the date of issuance at
approximately $33,800,000. Each share of Turf Paradise common stock was valued
at $13.00 and was converted to approximately 0.577 shares of Hollywood Park
common stock, which had a then fair market value of $22.53 based on the weighted
average of all trades on the NASDAQ National Market System for the twenty
trading days up to and including August 10, 1994.
As required under the pooling of interests method of accounting, the
consolidated financial statements for the periods before the acquisition have
been restated to include the accounts and results of operations of Turf
Paradise.
PRO FORMA RESULTS OF OPERATIONS The following pro forma results of operations
were prepared under the assumption that the acquisition of Sunflower had
occurred at the beginning of each of the periods shown. The historical results
of operations for both Sunflower and Turf Paradise were combined with the
Company's operating results and pro forma adjustments were made for the
following: amortization of the excess purchase price allocated to the lease with
TRAK East and to goodwill; interest expense reduction related to the reduction
in both the principal and interest rate on Sunflower's subordinated debt; the
termination of the management agreement Sunflower had with a former shareholder;
the wages and payroll taxes paid to a former Sunflower shareholder; directors
fees and income taxes.
Hollywood Park, Inc.
Unaudited Pro Forma Combined Consolidated
Results of Operations
For the three months
ended June 30,
-----------------------------
1995 (a) 1994 (a)
----------- -----------
Revenues $42,828,000 $35,975,000
Operating income 11,127,000 11,339,000
Income before interest, income taxes, 11,127,000 10,259,000
depreciation and amortization
Net income $ 4,857,000 $ 4,855,000
=========== ===========
Dividend requirements on convertible
preferred stock 481,000 481,000
Net income available to common shareholders $ 4,376,000 $ 4,374,000
Per common share:
Net income - primary $ 0.24 $ 0.24
Net income - fully diluted $ 0.24 $ 0.24
For the six months
ended June 30,
-----------------------------
1995 (a) 1994
----------- -----------
Revenues $67,284,000 $54,108,000
Operating income 13,959,000 12,950,000
Income before interest, income taxes, 13,959,000 11,155,000
depreciation and amortization
Net income $ 4,263,000 $ 3,607,000
=========== ===========
Dividend requirements on convertible
preferred stock 962,000 962,000
Net income available to common shareholders $ 3,301,000 $ 2,645,000
Per common share:
Net income - primary $ 0.18 $ 0.14
Net income - fully diluted $ 0.18 $ 0.14
_____
(a) The results for these periods are actual.
PRE-OPENING EXPENSES The Company expensed pre-opening costs associated with the
Hollywood Park Casino (the "Casino") which opened on July 1, 1994, under a third
party leasing agreement with Pacific Casino Management, Inc. ("PCM"), as
incurred. These costs included such items as project salaries, hiring costs and
other pre-opening services.
6
EARNINGS PER SHARE Primary earnings per share were computed by dividing income
available to common shareholders (net income less preferred dividend
requirements) by the weighted average number of common shares outstanding during
the period. Fully diluted per share amounts were similarly computed, but
include the effect, when dilutive, of the conversion of the convertible
preferred stock and stock options.
The Company issued 1,498,016 shares of common stock to acquire Turf Paradise.
Earnings per share have been restated for prior periods as if these shares had
been outstanding during each period presented.
CASH FLOWS Cash and cash equivalents consisted of certificates of deposit and
short term investments with maturities of 90 days or less.
RECLASSIFICATIONS Certain reclassifications have been made to the 1994 balances
to be consistent with the 1995 financial statement presentation.
NOTE 2 -- SHORT TERM INVESTMENTS
As of June 30, 1995, the Company had invested $3,692,000 in corporate bonds with
an average maturity of approximately two years. The portfolio consisted of
bonds rated from B1 to Caa by Moody's and from B+ to B- by Standard & Poors,
though some bonds are not rated by either agency. Investments in corporate
bonds carry a greater amount of principal risk than investments previously made
by the Company and yield a correspondingly higher return.
The Company holds short term investments as available for sale as needed. On
the basis of the short term nature of the assets and their relative liquidity,
market value approximated cost.
NOTE 3 -- CASINO LEASE AND RELATED INTEREST RECEIVABLE, NET
On August 3, 1995, California Governor Pete Wilson signed Senate Bill 100 ("SB"
100), which was effective upon signing. SB 100 allows Hollywood Park (and all
other pari-mutuel wagering facilities) to operate a card club on the premises of
the race track. Additionally, SB 100 places a state-wide, three year moratorium
(beginning January 1, 1996) on public votes or referendums to approve the
enactment of any city ordinance to allow additional card clubs, and prohibits
the amendment of any existing ordinances. With the passage of SB 100, the
Company intends to give notice of cancellation under the terms of its lease
agreement and assume operations of the Casino.
The Casino opened on July 1, 1994, under a third party leasing arrangement
between Hollywood Park and PCM. Under current California law the lease rent
must be at a fixed amount. Recognizing that there was a maturing process for
the business, the lease allowed unpaid rent to accrue for up to nine months, or
$27,000,000, as computed under the original lease, and for PCM to retain a cash
reserve equivalent to six months of operating expenses. PCM has elected to
defer all of the lease rent due during the Casino's first nine months of
operations. In April 1995, the Company and PCM executed an Amended and Restated
Lease Agreement, subject to approval by the California Attorney General (there
can be no assurance that approval will be given) which retroactively lowers the
monthly fixed lease payment from $3,000,000 to $2,000,000 (or from $27,000,000
as computed under the original lease down to $18,000,000 as computed under the
revised lease, for the first nine months of operations) and a further reduction
to $1,500,000 is likely. In addition, PCM executed a promissory note to
Hollywood Park for $18,690,000, representing nine months of revised fixed
monthly rent of $18,000,000 (formerly $27,000,000 as computed under the original
lease) with related interest at 8.0%, and approximately $197,000 of additional
rent. Principal and accrued interest are due and payable the earlier of
September 30, 1996, or the termination of the lease, and may be repaid sooner
without penalty. On April 17, 1995, PCM paid Hollywood Park $3,000,000 for
additional rent related to PCM's use of food and beverage services from
Hollywood Park for the nine months ended March 31, 1995. PCM paid Hollywood
Park $6,000,000 of rent during the three months ended June 30, 1995.
7
For the six months ended June 30, 1995, $12,670,000 of lease revenue was
recognized representing $9,000,000 of rent, accounted for under the original
lease less a valuation allowance of $3,000,000; $6,000,000 of lease rent revenue
due and paid by PCM for the three months ended June 30, 1995, under the revised
lease; and accrued interest of $670,000.
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment held at June 30, 1995, and December 31, 1994,
consisted of the following:
June 30, December 31,
1995 1994
------------ ------------
Land and land improvements $ 30,541,000 $ 29,621,000
Buildings and building improvements 175,057,000 166,516,000
Equipment 34,887,000 31,286,000
Construction in progress 1,495,000 983,000
------------ ------------
241,980,000 228,406,000
Less accumulated depreciation 82,907,000 68,142,000
------------ ------------
$159,073,000 $160,264,000
============ ============
NOTE 5 -- SECURED AND UNSECURED NOTES PAYABLE
June 30, December 31,
1995 1994
------------ ------------
Secured notes payable (a) $ 28,666,000 $ 30,011,000
Unsecured notes payable (a) 15,700,000 15,825,000
Unsecured notes payable 11,000 1,850,000
Capital lease obligations 0 52,000
Unsecured note payable - Gold Cup 326,000 361,000
------------ ------------
44,703,000 48,099,000
Less current maturities 28,977,000 5,299,000
------------ ------------
$ 15,726,000 $ 42,800,000
============ ============
_____
(a) These notes relate to Sunflower and are non-recourse to Hollywood
Park.
NOTE 6 -- SUPPLEMENTAL BALANCE SHEET INFORMATION
In 1995, Statement of Financial Accounting Standards No. 121 ("SFAS" 121) was
issued which establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets.
SFAS 121, which will be effective in 1996, addresses when impairment losses
should be recognized and how impairment losses should be measured. The adoption
of SFAS 121 is not expected to have a material effect on the Company's
consolidated financial statements. Though the adoption of SFAS 121 is not
expected to have a material effect on the Company's consolidated financial
statements, Sunflower continues to experience intense competition from Missouri
riverboat gaming, which has had and continues to have a very significant
negative impact on Sunflower's earning. (See Item 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations, Liquidity and
Capital Resources, Sunflower.)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
RESULTS OF OPERATIONS
Three months ended June 30, 1995 compared to the three months ended
-------------------------------------------------------------------
June 30, 1994
-------------
The 1995 consolidated financial statements include the results of operations at
Hollywood Park, Sunflower, Turf Paradise and the Casino. The Casino began
operations on July 1, 1994; therefore there are no comparable results of
operations for the three months ended June 30, 1994.
8
Total revenues increased by $6,853,000, or 19.0%, for the three months ended
June 30, 1995, compared to the three months ended June 30, 1994. The Casino
generated lease rent revenue of $6,288,000 during the three months ended June
30, 1995, with no comparable amount in the corresponding period in 1994. Pari-
mutuel commissions increased by $1,831,000, or 9.4%. This increase was
primarily attributable to the removal of all restrictions on simulcasting
between northern and southern California, generating a significant increase in
simulcast and off-track pari-mutuel commissions. Lease and management fee -
Sunflower decreased by $2,060,000, or 55.7%. The June 1994 introduction of
riverboat gaming on the nearby Missouri river has had and continues to have a
very significant negative impact on the results of operations at Sunflower.
Sunflower's total pari-mutuel handle for the three months ended June 30, 1995,
was $24,457,000, a $22,367,000, or 47.7%, decrease compared to total pari-mutuel
handle for the three months ended June 30, 1994. Casino lease revenue of
$6,288,000 was recorded for the three months ended June 30, 1995. This amount
represents the $2,000,000 per month of lease rent revenue due and paid by PCM
under the terms of the Amended and Restated Lease Agreement signed by Hollywood
Park and PCM in April 1995, and associated interest. The Amended and Restated
Lease Agreement is subject to the approval of the California Attorney General
and there can be no assurance that such approval will be granted. With the
August 3, 1995, signing of SB 100 (see Item 5. Other Information) the Company
intends to give notice of cancellation under its lease agreement and assume
operation of the Casino. Admissions, programs and other racing income decreased
by $194,000, or 3.2%, due primarily to decreased on-track attendance at
Hollywood Park of 8.2%, and at Sunflower of 49.3%. Concession sales increased
by $384,000, or 6.9%. Racing related concession sales decreased due to
decreases in on-track attendance, with the net increase attributable to sales at
the Casino. Other income increased by $604,000, or 5.1%, primarily due to
Casino gift shop and health club sales with no comparable activity in the same
period of 1994.
Total operating expenses, exclusive of acquisition costs associated with Turf
Paradise and Casino pre-opening and training expenses and inclusive of
$6,519,000 of Casino operating expenses (of which there are no comparable
expenses in the corresponding period in 1994), increased by $7,065,000, or
28.7%, during the three months ended June 30, 1995, as compared to the three
months ended June 30, 1994. Salaries, wages and employee benefits increased by
$1,906,000, or 18.0%, due primarily to salaries, wages and employee benefits
paid at the Casino. Operations of facilities expense increased by $561,000, or
23.0%, due primarily to costs associated with operating the Casino, increased
slip and fall insurance claims and normal race track maintenance. Cost of
concession sales increased by $2,962,000, or 64.0%, due to the Casino. Cost of
concession sales decreased at the race tracks because of declines in on-track
attendance. Professional services increased by $773,000, or 41.4%, primarily
due to increased legal costs related to the Company's expansion strategy and
pending class action law suits (see Item 1. Legal Proceedings). With the Casino
in full operation during the three months ended June 30, 1995, utilities expense
increased by $142,000, or 13.5%. Marketing costs decreased by $311,000, or
12.8%, essentially due to decreased marketing at Hollywood Park for Friday night
racing. Administrative expenses increased by $1,086,000, or 91.5%, primarily
because of a change in the California racing law regarding the method of
reporting expenses for charity days, (charity day expense was $263,000 in 1995
and $366,000 in 1994) the 1994 receipt of a refund of overpayment of purses
(there was no similar refund in 1995) and costs associated with operating the
Casino.
The 1994 Casino pre-opening and training costs of $899,000 were primarily
related to wages and benefits for senior management and the on-the-job training
of staff hired to open the Casino on July 1, 1994. There were no similar costs
in 1995. The Turf Paradise acquisition costs were a result of the August 11,
1994, acquisition of Turf Paradise by Hollywood Park; there were no similar
costs in 1995. Casino related depreciation generated a $462,000, or 24.2%
increase in 1995.
Income tax expense increased by $345,000, due to increased income before income
tax expense in 1995 and the 1994 utilization of the valuation allowance
associated with the investment tax credits.
9
Six months ended June 30, 1995 compared to the six months ended June 30, 1994
- -----------------------------------------------------------------------------
The 1995 consolidated financial statements include the results of operations at
Hollywood Park, Sunflower, Turf Paradise and the Casino. Sunflower was a newly
acquired subsidiary as of March 23, 1994, accounted for under the purchase
method of accounting. Hollywood Park's historical results of operations were
not restated to include Sunflower's operating results; therefore, the 1994
statement of operations does not include Sunflower's results for the first
quarter. Turf Paradise was a newly acquired subsidiary as of August 11, 1994,
accounted for under the pooling of interests method of accounting, and as
required under this method of reporting the 1994 results have been restated to
include the operating results of Turf Paradise. The Casino began operations on
July 1, 1994; therefore, there are no comparable results of operations for the
six months ended June 30, 1994.
Total revenues increased by $18,403,000, or 37.6%, during the six months ended
June 30, 1995, as compared to the six months ended June 30, 1994. Included in
the 1995 revenues was $12,670,000 of lease rent income generated by the Casino
for which there is no comparable amount in the corresponding period in 1994.
Pari-mutuel commissions increased by $1,772,000, or 6.8%. The 1995 Hollywood
Park Spring/Summer race meet was run under the new California racing law that
removes all restrictions on simulcasting between northern and southern
California, generating a significant increase in simulcast and off-track pari-
mutuel commissions. Pari-mutuel commissions decreased at Turf Paradise
primarily because of the timing of recognizing the revenue associated with
uncashed winning pari-mutuel tickets. Under Arizona racing law, Turf Paradise
retains the revenue related to uncashed winning pari-mutuel tickets (in
California the unclaimed outstanding pari-mutuel winning tickets are paid to the
state). Historically this revenue was recognized in May. Unclaimed pari-mutuel
winnings of approximately $366,000 will be recorded as revenue in the third
quarter of 1995. Lease and management fee - Sunflower decreased by 15.0%. The
June 1994 introduction of riverboat gaming, complete with slot machines, on the
nearby Missouri river, has had and continues to have a very significant negative
impact on Sunflower's operating results. For the six months ended June 30,
1995, compared to the six months ended June 30, 1994, Sunflower's total pari-
mutuel handle, including live greyhound racing and simulcasting of both
greyhounds and horses, declined by $39,800,000, or 45.5%. On April 29, 1995,
the Kansas Legislature adjourned, leaving Senate Bill 27 ("SB" 27), which would
have permitted slot machines at race tracks in conjunction with the Kansas
Lottery, in the Senate Federal and State Affairs Committee. SB 27 passed the
House of Representatives and carries over to 1996 in the Senate Committee. The
Company is currently conducting a rigorous examination of its legislative, legal
and operational options with the goal of enabling Sunflower to sustain itself
through the next legislative session and compete with riverboat gaming in the
longer term. This will require the co-operation of employees, horsemen, dogmen,
regulators, bankers and creditors. Casino lease revenue of $12,670,000 was
recorded for the six months ended June 30, 1995. This amount represents the
$9,000,000 of lease rent revenue due under the original lease agreement, less a
valuation allowance of $3,000,000, plus $6,000,000 in lease rent due and paid by
PCM, under the terms of the Amended and Restated Lease Agreement signed by
Hollywood Park and PCM in April 1995, and associated interest. The Amended and
Restated Lease Agreement is subject to the approval of the California Attorney
General and there can be no assurance that such approval will be granted. With
the August 3, 1995, signing of SB 100 (see Item 5. Other Information) the
Company intends to give notice of cancellation under its lease agreement and
assume operation of the Casino. Concession sales increased by $3,244,000, or
42.9%. Racing related concession sales decreased due to declines in on-track
attendance, with the net increase attributable to sales at the Casino. Other
income increased by $1,307,000, or 54.3%, primarily due to Casino gift shop and
health club sales with no comparable activity in 1994.
Total operating expenses, exclusive of acquisition costs associated with Turf
Paradise and Casino pre-opening and training expenses and inclusive of
$12,831,000 of Casino operating expenses (for which there are no comparable
expenses in the corresponding period in 1994), increased by $15,842,000, or
42.3%, during the six months ended June 30, 1995, as compared to the six months
ended June 30, 1994. Salaries, wages and employee benefits increased by
$4,305,000, or 27.0%, primarily because of increased workers' compensation costs
and expenses generated with operating the Casino. Operations of facilities
expense increased by $1,319,000, or 31.0%, essentially due to increased slip and
fall insurance claims, normal race
10
track maintenance, and Casino operations. Cost of concession sales increased by
$6,985,000, or 108%, due to Casino operations. Race track costs of concession
sales decreased due to the decline in on-track attendance. Professional services
increased by $1,206,000, or 34.3%, primarily because of increased legal costs
associated with pursuing the Company's expansion strategy and the class action
law suits pending against Hollywood Park (see Item 1. Legal Proceedings), and
costs associated with the Casino. Rent expenses decreased by $217,000, or 24.2%,
primarily due to the conclusion of Hollywood Park's lease on the infield message
board. Due to Casino operations utilities expense increased by $485,000, or
29.1%. Administrative expense increased by $1,701,000, or 80.6%, due primarily
to a change in the California racing law related to reporting charity day
expense, (charity day expense was $263,000 in 1995 and $366,000 in 1994) the
1994 receipt of a refund of overpayment of purses (there was no similar refund
in 1995) and costs generated by the Casino.
The 1994 Casino pre-opening and training costs of $1,614,000 were primarily
related to wages and benefits for senior management and the on-the-job training
of staff hired to open the Casino on July 1, 1994. There were no similar costs
in 1995. The Turf Paradise acquisition costs were a result of the August 11,
1994, acquisition by Hollywood Park; there were no similar costs in 1995.
Depreciation expense increased by $1,633,000, or 40.6%, a result of Casino
operations and costs associated with the first quarter of 1995 at Sunflower with
no corresponding amount in 1994. Interest expense increased by $967,000, or
100%, due to interest expense from the first quarter of 1995 at Sunflower with
no corresponding amount in 1994.
Income tax expense increased by $927,000, due to increased income before income
tax expense in 1995 and the 1994 utilization of the valuation allowance
associated with the investment tax credits.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $1,399,000 during the six months ended
June 30, 1995, as compared to the same period in 1994. The decline was
primarily attributable to debt service payments on both secured and unsecured
loan facilities, capital expenditures at the various properties and dividends
paid on the Company's convertible preferred stock, off-set by increases in
accounts payable and accrued liabilities, and $9,000,000 in lease rent payments
by PCM. Cash and cash equivalents decreased by $14,984,000 during the six
months ended June 30, 1994, primarily because of capital expenditures for the
Casino and the acquisition of Sunflower.
HOLLYWOOD PARK During the six months ended June 30, 1995, Hollywood Park did
not draw any funds from its various credit facilities with Bank of America
National Trust and Savings Association ("Bank of America"). On April 14, 1995,
the Company executed an unsecured loan of up to $75,000,000 with Bank of
America. The loan facility consists of a $60,000,000 line of credit (the "Line
of Credit") and a $15,000,000 revolver (the "Revolver").
The Line of Credit is an interest only, one year revolving facility, under which
the Company may borrow, pay and reborrow principal amounts without penalty. On
or before April 14, 1996, the Company has the option to convert the Line of
Credit to a term repayment line of credit, at a maximum amount of $60,000,000,
with a seven year term period from the date of conversion, which would require
repayment in eighty-four successive equal monthly installments. The Line of
Credit has a maximum interest rate equal to Bank of America's prime rate plus
0.25%.
The Revolver, inclusive of a within line facility for standby letters of credit
of up to a maximum of $5,000,000, is available for two years, ending May 1,
1997, during which the Company can borrow, pay and reborrow principal amounts
without penalty. The Revolver has an interest rate equal to Bank of America's
prime rate.
The Casino opened on July 1, 1994, under a third party lease agreement with PCM.
With the August 3, 1995, signing of SB 100 (see Item 5. Other Information) the
Company intends to give notice of cancellation under the terms of its lease and
assume operation of the Casino. Consistent with the terms of the lease, PCM
deferred all the original lease rent due of $27,000,000 through March 31, 1995.
In April 1995, Hollywood Park and PCM
11
executed an Amended and Restated Lease Agreement, which retroactively lowered
the monthly lease rent from $3,000,000 to $2,000,000, and a further reduction to
$1,500,000 is likely. In addition, PCM executed a promissory note to Hollywood
Park for $18,690,000, representing nine months of revised monthly rent of
$18,000,000, (formerly $27,000,000 as computed under the original lease) with
related interest at 8.0%, and approximately $197,000 of additional rent. The
promissory note with accrued interest is due and payable the earlier of
September 30, 1996, or the termination of the lease, and may be repaid earlier
without penalty. On April 17, 1995, PCM paid Hollywood Park $3,000,000 for
additional rent related to PCM's use of food and beverage services from
Hollywood Park for the nine months ended March 31, 1995. PCM paid the Company
$6,000,000 for lease rent due during the three months ended June 30, 1995.
Capital expenditures of $4,233,000 for the six months ended June 30, 1995, were
for normal and necessary improvements at Hollywood Park race track and Casino,
Sunflower and Turf Paradise.
During the six months ended June 30, 1995, the Company paid dividends of
$962,000 on its convertible preferred stock. Dividend payments of $481,000 were
made on February 15, 1995, and May 15, 1995, representing $17.50 per share
($0.175 per depositary share) per payment date. On July 1, 1995, Hollywood Park
declared a quarterly dividend of $481,000, or $17.50 per share of convertible
preferred stock ($0.175 per depositary share), payable August 15, 1995, to
holders of record on July 15, 1995. Dividends of $962,000 were paid during the
six months ended June 30, 1994.
On April 20, 1995, Hollywood Park Operating Company purchased a U.S. Treasury
Security with a par value of $2,401,000, as security for its self-insurance
workers' compensation program with the state of California. On June 12, 1995,
the Company began investing in corporate bonds, ($3,692,000 invested as of June
30, 1995) with a Moody's rating of B1 to Caa and Standard & Poors rating of B+
to B-, though some of the bonds are not rated by either agency. Investments in
corporate bonds carry a greater amount of principal risk than investments
historically made by the Company and yield a correspondingly higher return.
SUNFLOWER In 1991, Sunflower converted a $40,000,000 construction loan to a
term note payable with a group of five local and national banks (the "Banks").
On March 24, 1994, an Amended and Restated Credit and Security Agreement (the
"Senior Credit") was executed due to the change in ownership of Sunflower. The
Senior Credit has been amended twice, most recently on December 19, 1994, to
allow for the Sunflower promissory note (discussed below) and for the waiver of
default or event of default resulting from the failure to maintain a fixed
charge coverage ratio as of December 31, 1994. The Senior Credit matures on
January 22, 1996, and is non-recourse to Hollywood Park.
During the six months ended June 30, 1995, Sunflower experienced intense
competition from riverboat gaming in Missouri, which has had and continues to
have a very significant negative impact on Sunflower's earnings, and thus its
ability to meet its obligations on the Senior Credit. On December 19, 1994, in
anticipation of insufficient cash flow from daily operations, Sunflower executed
a promissory note to Hollywood Park, allowing for the advancement of up to
$3,000,000, for the payment of its Senior Credit obligations. On January 3,
1995, and again on March 31, 1995, Hollywood Park advanced $1,250,000, to
Sunflower, for a total transfer of $2,500,000.
As of June 30, 1995, the outstanding balance of the Senior Credit was
$28,666,000. On March 31, 1995, though current on principal and interest due on
the Senior Credit, Sunflower was in technical default of the fixed charge
coverage ratio covenant: however, Sunflower was unable to pay the July 3, 1995,
Senior Debt principal and interest due of approximately $1,200,000. To date,
the Banks have not declared Sunflower in default. Sunflower has had on-going
discussions with the Banks, seeking restructuring of the Senior Credit.
On April 29, 1995, the Kansas Legislature adjourned, leaving SB 27, which would
have permitted slot machines at race tracks in conjunction with the Kansas
Lottery, in the Senate Federal and State Affairs Committee. SB 27 passed the
House of Representatives and now carries over to 1996 in the Senate Committee.
The Company is currently conducting a rigorous examination of its legislative,
legal and operational options with the goal of enabling Sunflower to sustain
itself through the next legislative session
12
and get other gaming approved which will allow it to compete with riverboat
gaming in the longer term. If the Kansas Legislature does not approve other
forms of gaming at Sunflower, possible alternatives that may allow for continued
operations at Sunflower would require restructuring of the Senior Credit, and
modifications to track operations, which would be contingent on legislative
concessions. There can be no assurance that Sunflower will successfully
negotiate a restructuring of the Senior Credit or get the legislative relief it
seeks.
TURF PARADISE On April 13, 1995, Turf Paradise repaid the outstanding balance
of its unsecured revolving loan facility with Bank One of Arizona, and
terminated the $2,500,000 facility. On June 1, 1995, Turf Paradise executed a
$2,500,000 promissory note to Hollywood Park. On June 13, 1995, July 3, 1995,
and August 1, 1995, Hollywood Park transferred $400,000, $500,000 and $500,000,
respectively, to Turf Paradise.
Hollywood Park is continually evaluating future growth opportunities in the
gaming and entertainment industry. The Company expects that funding for growth
opportunities, dividend requirements on the convertible preferred stock,
payments on notes payable or capital expenditure needs will come from existing
cash balances, cash generated from operating activities and borrowings from the
credit facilities. In the opinion of management these resources will be
sufficient to meet the Company's future cash requirements.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
Since filing the Annual Report on Form 10-K for the year ended December 31,
1994, the Company has not become a party to any new material legal proceedings
nor, except as set forth below, have there been any material developments with
respect to any of the material legal proceedings reported therein.
There currently are six purported class actions (collectively the "Actions")
pending against the Company in the United States District Court for the Central
District of California (the "Court"). The Actions are entitled: (1) William R.
----------
Barney, Jr., et al. v. Randall D. Hubbard, et al., filed September 28, 1994; (2)
- -------------------------------------------------
Larry David, IRA v. Hollywood Park, Inc., et al., Randall D. Hubbard, et al.,
- ----------------------------------------------------------------------------
filed September 29, 1994; (3) Edward L. Loev, et al. v. Randall D. Hubbard, et
------------------------------------------------
al., filed September 30, 1994; (4) Harold R. Farrow v. Hollywood Park, Inc., et
- --- --------------------------------------------
al., filed October 11, 1994; (5) Mary Rosen, et al. v. Randall D. Hubbard, et
- --- --------------------------------------------
al., filed October 17, 1994; and (6) Mary Boyajian, et al. v. Randall D.
- --- -----------------------------------
Hubbard, et al., filed October 18, 1994. All the Actions are substantively
- ---------------
similar and have been ordered to be consolidated into a single action.
The Court has ordered the parties to the Actions to engage in mediation to
explore the possibility of settlement at these early stages of the Actions, and
that process is continuing. If a resolution of the Actions on terms acceptable
and not materially adverse to the Company cannot be achieved, then the Company
will assert various defenses and vigorously defend the Actions.
ITEM 2. CHANGE IN SECURITIES
- ------- --------------------
None
- ----
ITEM 3. DEFAULT UPON SENIOR SECURITIES
- ------- ------------------------------
As of June 30, 1995, the outstanding balance of Sunflower's Senior Credit was
$28,666,000. The Senior Credit is non-recourse to the parent company, Hollywood
Park, Inc. On March 31, 1995, though current on principal and interest due on
the Senior Credit, Sunflower was in technical default of the fixed charge
coverage ratio covenant; however, Sunflower was unable to pay the July 3, 1995,
Senior Debt principal and interest payment
13
of approximately $1,200,000. To date, the Banks have not declared Sunflower in
default. Sunflower has had on-going discussions with the Banks, seeking
restructuring of the Senior Credit.
On April 29, 1995, the Kansas Legislature adjourned, leaving SB 27, which would
have permitted slot machines at race tracks in the conjunction with the Kansas
Lottery, in the Senate Federal and State Affairs Committee. SB 27 passed the
House of Representatives and now carries over to 1996 in the Senate Committee.
The Company is currently conducting a rigorous examination of its legislative,
legal and operational options with the goal of enabling Sunflower to sustain
itself through the next legislative session and get other gaming opportunities
approved which will allow it to compete with riverboat gaming in the longer
term. There can be no assurance that Sunflower will successfully negotiate a
restructuring of the Senior Credit or receive the legislative relief it seeks.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
At the Company's Annual Meeting of Stockholders, held July 18, 1995, Hollywood
Park stockholders approved the election of the eleven nominated directors. The
table below summarizes the out come of the vote:
Election of Directors (a) Votes For Votes Against
------------------------- --------- -------------
John J. Brunetti 15,787,812 3,255
R.D. Hubbard 15,775,995 15,072
J.R. Johnson 15,787,837 3,230
Howard W. Koch 15,773,630 17,437
Robert T. Manfuso 15,788,186 2,881
John V. Newman 15,787,725 3,342
Harry Ornest 15,787,924 3,143
Kjell H. Qvale 15,785,249 5,818
Lynn P. Reitnouer 15,788,426 2,641
Herman Sarkowsky 15,788,154 2,913
Warren B. Williamson 15,789,067 2,000
_____
(a) There were no abstentions or broker non-votes.
ITEM 5. OTHER INFORMATION
- ------- -----------------
On August 3, 1995, California Governor Pete Wilson signed SB 100, which was
effective upon signing. SB 100 allows Hollywood Park (and all other pari-mutuel
wagering facilities) to operate a card club on the premises of the race track.
Additionally, SB 100 places a state-wide, three year moratorium (beginning
January 1, 1996) on public votes or referendums to approve the enactment of any
city ordinance to allow additional card clubs, and prohibits the amendment of
any existing ordinances.
The Hollywood Park Casino opened on July 1, 1994, under a third party lease
arrangement with PCM. The Company intends to give notice of cancellation under
its lease agreement and assume operation of the Casino.
On June 23, 1995, Hollywood Park executed a Purchase and Sale Agreement with
Texaco Exploration and Production, Inc. to purchase approximately 38 acres
adjacent to the existing Inglewood property, for $7,466,680. The purchase is
expected to be finalized in the fourth quarter of 1995.
14
In April 1995, the Company and PCM executed an Amended and Restated Lease
Agreement (the "Agreement"), subject to approval by the California Attorney
General ("Attorney General"), which retroactively lowers the fixed monthly lease
rent payment from $3,000,000 to $2,000,000 and a further reduction to $1,500,000
is likely. The Agreement was scheduled to terminate on September 30, 1996,
while the termination date for the original lease was June 30, 1997. With the
signing of SB 100 Hollywood Park intends to give notice of cancellation under
the terms of the lease agreement and assume the operation of the gaming floors.
As of the filing date of this document the Attorney General has not approved the
Agreement and there can be no assurance that approval will be granted. PCM
executed a promissory note to Hollywood Park for $18,690,000, representing nine
months of revised fixed monthly lease rent of $18,000,000 (formerly $27,000,000
under the original lease) with related interest at 8.0%, and approximately
$197,000 of additional rent. Principal and accrued interest are due and payable
the earlier of September 30, 1996, or the termination of the lease, and may be
repaid sooner without penalty. On April 17, 1995, PCM paid Hollywood Park
$3,000,000 for additional rent related to PCM's use of food and beverage
services from Hollywood Park for the nine months ended March 31, 1995. PCM paid
Hollywood Park $6,000,000 of lease rent during the three months ended June 30,
1995.
On April 29, 1995, the Kansas Legislature adjourned, leaving SB 27, which would
have allowed slot machines at race tracks in conjunction with the Kansas
Lottery, in the Senate Federal and State Affairs Committee. SB 27 passed the
House of Representatives and carries over to 1996 in the Senate committee. The
Company is currently conducting a rigorous examination of its legislative, legal
and operational options with the goal of enabling Sunflower to sustain itself
through the next legislative session and get other gaming opportunities approved
which will allow it to compete with riverboat gaming in the longer term. This
will require the co-operation of employees, horsemen, dogmen, regulators,
bankers and creditors. There can be no assurance that Sunflower will
successfully negotiate a restructuring of the Senior Credit or receive the
legislative relief it seeks.
ITEM 6.a EXHIBITS
- -----------------
Exhibit
Number Description of Exhibit
- ------- ----------------------
2.1 Agreement of Merger by and among Hollywood Park, Inc., HP Acquisition,
Inc., Sunflower Racing, Inc., R.D. Hubbard and Richard J. Boushka,
dated February 24, 1994, executed on March 23, 1994, is hereby
incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993.
2.2 Agreement of Merger by and among Hollywood Park, Inc., HP Acquisition,
Inc., and Turf Paradise, Inc., dated March 30, 1994, is hereby
incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1994.
3.1 Certificate of Incorporation of Hollywood Park, Inc., is hereby
incorporated by reference to the Company's Registration Statement on
Form S-1 dated January 29, 1993.
3.2 Amended By-laws of Hollywood Park, Inc. are hereby incorporated by
reference to the Company's Registration Statement on Form S-1 dated
January 29, 1993.
4.5 Convertible Preferred Stock Depository Stock Agreement between
Hollywood Park, Inc. and Chemical Trust Company of California, dated
February 9, 1993, is hereby incorporated by reference to the Company's
Registration Statement on Form S-1 dated January 29, 1993.
4.6 Hollywood Park Stock Option Plan is hereby incorporated by reference
to Exhibit A to the Notice of Annual Meeting of Stockholders and Proxy
Statement relating to the Annual Meeting of Stockholders of Hollywood
Park, Inc., held on May 17, 1993.
10.1 Directors Deferred Compensation Plan for Hollywood Park, Inc. is
hereby incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1991.
10.2 Lease Agreement dated January 1, 1989, by and between Hollywood Park
Realty Enterprises, Inc. and Hollywood Park Operating Company, as
amended, is hereby incorporated by reference to the Joint Annual
Report on Form 10-K for the fiscal year ended December 31, 1989, of
Hollywood Park Operating Company and Hollywood Park Realty
Enterprises, Inc.
15
10.3 Forum Parking License Agreement dated July 1, 1991, by and among
Hollywood Park Operating Company, Hollywood Park Realty Enterprises,
Inc. and California Forum, a California limited partnership, is hereby
incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1991.
10.4 Aircraft rental agreement dated November 1, 1993, by and between
Hollywood Park, Inc., and R.D. Hubbard Enterprises, Inc., is hereby
incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993.
10.5 Hollywood Park Casino lease agreement dated June 15, 1994, by and
between Hollywood Park, Inc. and Pacific Casino Management, Inc., is
hereby incorporated by reference to the Current Report on Form 8-K
dated June 15, 1994.
10.6 Amended and Restated Credit Agreement dated March 23, 1994, by and
between Sunflower Racing, Inc. and First Union National Bank of North
Carolina, Bank One Lexington, Texas Commerce Bank, Home State Bank of
Kansas City and Intrust Bank, N.A., is hereby incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994.
10.7 Pledge Agreement dated March 23, 1994, by and between Hollywood Park,
Inc., First Union National Bank of North Carolina, (as agent for the
ratable benefit of itself and the Banks named in the Amended and
Restated Credit Agreement included as Exhibit 10.6) is hereby
incorporated by reference to the Company's Quarterly Report on
Form 10-Q for quarter ended June 30, 1994.
10.8 Subordination and Amendment Agreement dated March 23, 1994, by and
between R.D. Hubbard and Sunflower Racing, Inc., is hereby
incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994.
10.9 Ground Lease Agreement dated August 4, 1994, by and between Hollywood
Park, Inc. and QBM Investment Corporation, is hereby incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
10.10 Agreement Respecting Pyramid Casino dated December 3, 1994, by and
between Hollywood Park, Inc. and Compton Entertainment, Inc., is
hereby incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.
10.11 Amendment of Oil and Gas Lease dated January 10, 1995, by and among
Hollywood Park, Inc., and Casex Co., Nunn Ltd., and Votex Energy &
Mineral is hereby incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
10.12 Agreement to sell contingent rights to additional consideration
payable by Hollywood Park, Inc. related to the Agreement of Merger by
and among Hollywood Park, Inc., HP Acquisition Inc., Sunflower Racing,
Inc., R.D. Hubbard and Richard J. Boushka, dated February 24, 1994,
executed on March 23 1994, by and among Hollywood Park, Inc., R.D.
Hubbard and Richard J. Boushka, dated March 23, 1995, is hereby
incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994.
10.13 Business Loan Agreement dated April 14, 1995, by and between Hollywood
Park, Inc., and Bank of America National Trust and Savings
Association, is hereby incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
10.14 Amendment to Agreement Respecting Pyramid Casino dated April 14, 1995,
by and between Hollywood Park, Inc., and Compton Entertainment, Inc.,
is hereby incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1995.
22.1 Subsidiaries of Hollywood Park, Inc.: Hollywood Park Operating
Company, a Delaware corporation (and its subsidiaries: Hollywood Park
Fall Operating Company, a Delaware corporation and Hollywood Park Food
Services, Inc., a California corporation): Sunflower Racing, Inc., a
Kansas corporation (and its subsidiary Sunflower Food and Beverage,
Inc., a Kansas corporation): and Turf Paradise, Inc., an Arizona
corporation.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no Reports on Form 8-K filed during the quarter.
16
Hollywood Park, Inc.
Racing Data
HOLLYWOOD PARK RACE TRACK
1995 1994
------------------------- --------------------------
LIVE RACING DATES:
Spring/Summer meeting ("S/S") April 28 through July 24 April 27 through July 25
Autumn meeting ("A") Nov. 15 through Dec. 24 Nov. 9 through Dec. 24
LIVE RACE DAYS INCLUDING CHARITY
DAYS (a):
Spring/Summer meeting 67 68
Autumn meeting 30 34
--- ---
97 102
=== ===
LIVE RACE DAYS BY QUARTER:
First quarter 0 0
Second quarter (S/S) 48 48
Third quarter (S/S) 19 20
Fourth quarter (A) 30 34
--- ---
97 102
=== ===
SIMULCAST RACE DAYS BY QUARTER 1995:
1Q 2Q 3Q 4Q TOTAL
----- ---- ---- ---- -----
Santa Anita thoroughbred 65 19 0 6 90
Del Mar thoroughbred 0 0 43 0 43
Fairplex Pomona thoroughbred 0 0 17 2 19
Oak Tree from Santa Anita thoroughbred 0 0 0 32 32
Los Alamitos Harness - night races 36 0 0 0 36
Los Alamitos Quarter Horse - night races 0 45 53 53 151
Cal Expo Harness - night races 1 36 11 0 48
Bay Meadows - northern California (b) 21 11 26 46 104
Golden Gate Fields - northern California (b) 44 47 0 15 106
Fairs - northern California (b) 0 16 60 12 88
--- --- --- --- ---
TOTAL 167 174 210 166 717
=== === === === ===
SIMULCAST RACE DAYS BY QUARTER 1994:
1Q 2Q 3Q 4Q TOTAL
----- ---- ---- ---- -----
Santa Anita thoroughbred 66 19 0 5 90
Del Mar thoroughbred 0 0 43 0 43
Fairplex Pomona thoroughbred 0 0 16 3 19
Oak Tree from Santa Anita thoroughbred 0 0 0 27 27
Los Alamitos Harness - night races 36 2 0 2 40
Los Alamitos Quarter Horse - night races 0 48 49 44 141
Cal Expo Harness - night races -- -- -- -- --
Bay Meadows - northern California (b) -- -- -- -- --
Golden Gate Fields - northern California (b) -- -- -- -- --
Fairs - northern California (b) -- -- -- -- --
--- --- --- --- ---
TOTAL 102 69 108 81 360
=== === === === ===
______
(a) There are three charity days in both the Spring/Summer and Autumn meetings,
for a total of six charity days per year.
(b) Simulcasting from northern California runs year round and is simulcast
concurrently with either live on-track racing or with southern California
simulcasting.
17
SUNFLOWER -- OPERATING AS THE WOODLANDS
Sunflower, operating as the Woodlands race track, under Kansas racing law is not
granted any race days and does not generate any pari-mutuel commissions. The
Kansas Racing Commission granted Sunflower the facility ownership and manager
licenses, with all race days until 2014 granted to TRAK East, a Kansas not-for-
profit corporation. Sunflower has an agreement with TRAK East to provide the
physical race tracks along with management and consulting services for twenty-
five years with options to renew for one or more successive five year terms.
The Agreement and Restatement of Lease and Management Agreement was entered into
as of September 14, 1989. Sunflower had guaranteed that the minimum net
revenues to be retained by TRAK East, which are for distribution to charities,
would not be less than $500,000, but in the absence of legislative relief (see
Part II, Item 5. Other Information) Sunflower is currently having discussions
with TRAK East to reduce the amount retained for charities.
1995 RACE DAYS AND PERFORMANCES BY QUARTER:
Live On-track Simulcast
------------------------ ---------
Race Days Performances Race Days
--------- ------------ ---------
GREYHOUNDS
First quarter 73 103 44
Second quarter 78 104 77
Third quarter 78 107 78
Fourth quarter 71 96 71
--------- ------------ ---------
300 410 270
========= ============ =========
THOROUGHBREDS
First quarter 0 -- 63
Second quarter 0 -- 66
Third quarter 35 -- 65
Fourth quarter 10 -- 65
--------- ------------ ---------
45 -- 259
========= ============ =========
1994 RACE DAYS AND PERFORMANCES BY QUARTER:
Live On-track Simulcast
------------------------ ---------
Race Days Performances Race Days
--------- ------------ ---------
GREYHOUNDS
First quarter 69 104 68
Second quarter 82 123 80
Third quarter 78 107 71
Fourth quarter 71 102 69
--------- ------------ ---------
300 436 288
========= ============ =========
THOROUGHBREDS
First quarter 0 -- 60
Second quarter 0 -- 76
Third quarter 36 -- 77
Fourth quarter 26 -- 65
--------- ------------ ---------
62 -- 278
========= ============ =========
18
The following pari-mutuel wagering data is related to TRAK East at Sunflower.
Sunflower does not generate any pari-mutuel wagering related revenue, but
instead receives a lease and management fee from TRAK East.
TRAK EAST - AT SUNFLOWER For the three months ended June 30,
------------------------------------------------------
1995 1994 1995 1994
----------- ----------- ----------- ------------
GREYHOUNDS HORSES
------------------------- --------------------------
Pari-mutuel handle:
On-track $13,212,000 $33,117,000 $ 0 $ 0
Simulcast 3,019,000 2,867,000 8,226,000 10,840,000
----------- ----------- ----------- -----------
$16,231,000 $35,984,000 $ 8,226,000 $10,840,000
=========== =========== =========== ===========
Pari-mutuel commissions:
On-track $ 1,690,000 $ 4,076,000 $ 0 $ 0
Simulcast 819,000 796,000 2,261,000 2,884,000
----------- ----------- ----------- -----------
$ 2,509,000 $ 4,872,000 $ 2,261,000 $ 2,884,000
=========== =========== =========== ===========
For the six months ended June 30,
-----------------------------------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
GREYHOUNDS HORSES
------------------------- -------------------------
Pari-mutuel handle:
On-track $27,320,000 $62,536,000 $ 0 $ 0
Simulcast 4,582,000 5,555,000 15,762,000 19,373,000
----------- ----------- ----------- -----------
$31,902,000 $68,091,000 $15,762,000 $19,373,000
=========== =========== =========== ===========
Pari-mutuel commissions:
On-track $ 3,494,000 $ 7,704,000 $ 0 $ 0
Simulcast 980,000 1,055,000 3,047,000 3,783,000
----------- ----------- ----------- -----------
$ 4,474,000 $ 8,759,000 $ 3,047,000 $ 3,783,000
=========== =========== =========== ===========
TURF PARADISE
Turf Paradise has one continuous live thoroughbred race meet that starts in
September and runs through May. During 1995 Turf Paradise raced live for the
period January 1 through May 22 and will resume live racing on September 23 and
run through December 31. Turf Paradise operates as a simulcast facility for
Arizona's Prescott Downs during the period May 26 through September 4. In 1994,
Turf Paradise raced live from January 1 through May 23 and resumed live racing
on September 23 running through December 31. Turf Paradise operated as a
simulcast facility for the period May 27 through September 5, in 1994. In
addition to running live thoroughbred races, Turf Paradise offers two quarter
horse races a day during the first three months of the live meet (September
through November) and a limited number of arabian races each spring. Turf
Paradise also accepts simulcast signals during live racing on Fridays, Saturdays
and Sundays. As of September 1994, Turf Paradise began operating as a simulcast
facility during the two dark days (days without live racing during the live race
meet) of each week during the live on-track racing season.
LIVE ON-TRACK RACE DAYS DARK DAY SIMULCASTING SIMULCASTING - PRESCOTT
----------------------- ----------------------- -----------------------
1995 1994 1995 1994 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
First quarter 67 75 23 0 0 0
Second quarter 37 40 14 0 30 29
Third quarter 3 4 13 11 53 56
Fourth quarter 66 65 24 25 0 0
---------- ---------- ---------- ---------- ---------- ----------
173 184 74 36 83 85
========== ========== ========== =========== ========== ==========
19
Hollywood Park, Inc.
Calculation of Earnings Per Share
For the three months ended June 30,
-------------------------------------------------------
Primary Assuming full dilution
------------------------- -------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
Average number of common shares outstanding 18,369,634 18,298,447 18,369,634 18,298,447
Average common shares due to assumed conversion
of convertible preferred shares 0 0 2,291,492 2,291,492
---------- ---------- ---------- ----------
Total shares 18,369,634 18,298,447 20,661,126 20,589,939
========== ========== ========== ==========
Net income $4,857,000 $4,855,000 $4,857,000 $4,855,000
Less dividend requirements on convertible preferred shares 481,000 481,000 0 0
---------- ---------- ---------- ----------
Net income available to common shareholders $4,376,000 $4,374,000 $4,857,000 $4,855,000
========== ========== ========== ==========
Net income per share $0.24 $0.24 $0.24 $0.24
========== ========== ========== ==========
For the six months ended June 30,
-------------------------------------------------------
Primary Assuming full dilution(a)
------------------------- -------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
Average number of common shares outstanding 18,369,634 18,030,377 18,369,634 18,030,377
Average common shares due to assumed conversion
of convertible preferred shares 0 0 2,291,492 2,291,492
---------- ---------- ---------- ----------
Total shares 18,369,634 18,030,377 20,661,126 20,321,869
========== ========== ========== ==========
Net income $4,263,000 $3,434,000 $4,263,000 $3,434,000
Less dividend requirements on convertible preferred shares 962,000 962,000 0 0
---------- ---------- ---------- ----------
Net income available to common shareholders $3,301,000 $2,472,000 $4,263,000 $3,434,000
========== ========== ========== ==========
Net income per share $0.18 $0.14 $0.21 $0.17
========== ========== ========== ==========
- ------------
(a) The computed values assuming full dilution are anti-dilutive; therefore, the
primary share values are presented on the face of the consolidated
statements of operations.
20
Hollywood Park, Inc.
Selected Financial Data by Operational Location
(unaudited)
For the six months ended For the three months ended
June 30, June 30,
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
Revenues:
Hollywood Park, Inc. and Race Track $33,328,000 $32,084,000 $27,542,000 $25,847,000
Sunflower Racing, Inc. 5,473,000 6,207,000 2,835,000 6,207,000
Turf Paradise, Inc. 10,067,000 10,590,000 3,624,000 3,921,000
Hollywood Park, Inc. - Casino Division 18,416,000 0 8,827,000 0
----------- ----------- ----------- -----------
67,284,000 48,881,000 42,828,000 35,975,000
----------- ----------- ----------- -----------
Expenses:
Hollywood Park, Inc. and Race Track 28,214,000 26,473,000 19,697,000 17,951,000
Casino pre-opening and training costs 0 1,614,000 0 899,000
Turf Paradise acquisition costs 0 181,000 0 181,000
Sunflower Racing, Inc. 4,602,000 3,558,000 2,337,000 3,558,000
Turf Paradise, Inc. 7,678,000 7,452,000 3,148,000 3,127,000
Hollywood Park, Inc. - Casino Division 12,831,000 0 6,519,000 0
----------- ----------- ----------- -----------
53,325,000 39,278,000 31,701,000 25,716,000
----------- ----------- ----------- -----------
Income (loss) before interest, income taxes,
depreciation and amortization:
Hollywood Park, Inc. and Race Track 5,114,000 5,611,000 7,845,000 7,896,000
Casino pre-opening and training costs 0 (1,614,000) 0 (899,000)
Turf Paradise acquisition costs 0 (181,000) 0 (181,000)
Sunflower Racing, Inc. 871,000 2,649,000 498,000 2,649,000
Turf Paradise, Inc. 2,389,000 3,138,000 476,000 794,000
Hollywood Park, Inc. - Casino Division 5,585,000 0 2,308,000 0
----------- ----------- ----------- -----------
13,959,000 9,603,000 11,127,000 10,259,000
----------- ----------- ----------- -----------
Depreciation and amortization:
Hollywood Park, Inc. and Race Track 2,719,000 2,679,000 1,368,000 1,371,000
Sunflower Racing, Inc. 1,237,000 705,000 616,000 705,000
Turf Paradise, Inc. 698,000 637,000 369,000 324,000
Hollywood Park, Inc. - Casino Division 1,000,000 0 509,000 0
----------- ----------- ----------- -----------
5,654,000 4,021,000 2,862,000 2,400,000
----------- ----------- ----------- -----------
Interest expense:
Hollywood Park, Inc. and Race Track 98,000 68,000 49,000 30,000
Sunflower Racing, Inc. 1,810,000 823,000 922,000 823,000
Turf Paradise, Inc. 20,000 70,000 3,000 62,000
Hollywood Park, Inc. - Casino Division 0 0 0 0
----------- ----------- ----------- -----------
1,928,000 961,000 974,000 915,000
----------- ----------- ----------- -----------
Income (loss) before income tax expense:
Hollywood Park, Inc. and Race Track 2,297,000 2,864,000 6,428,000 6,495,000
Casino pre-opening and training costs 0 (1,614,000) 0 (899,000)
Turf Paradise acquisition costs 0 (181,000) 0 (181,000)
Sunflower Racing, Inc. (2,176,000) 1,121,000 (1,040,000) 1,121,000
Turf Paradise, Inc. 1,671,000 2,431,000 104,000 408,000
Hollywood Park, Inc. - Casino Division 4,585,000 0 1,799,000 0
----------- ----------- ----------- -----------
6,377,000 4,621,000 7,291,000 6,944,000
Income tax expense 2,114,000 1,187,000 2,434,000 2,089,000
----------- ----------- ----------- -----------
Net income $4,263,000 $3,434,000 $4,857,000 $4,855,000
=========== =========== =========== ===========
Dividend requirements on convertible preferred stock $962,000 $962,000 $481,000 $481,000
----------- ----------- ----------- -----------
Net income available to common shareholders $3,301,000 $2,472,000 $4,376,000 $4,374,000
=========== =========== =========== ===========
Per common share:
Net income - primary $0.18 $0.14 $0.24 $0.24
Net income - fully diluted $0.18 $0.14 $0.24 $0.24
Number of shares - primary 18,369,634 18,030,377 18,369,634 18,298,477
Number of shares - fully diluted 20,661,126 20,321,869 20,661,126 20,589,939
21
Hollywood Park, Inc.
Pari-mutuel Wagering Data
(unaudited)
For the six months ended For the three months ended
June 30, June 30,
---------------------------- ----------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
Hollywood Park
- ------------------------------------
Pari-mutuel handle:
On-track $94,351,000 $118,481,000 $94,351,000 $118,481,000
Off-track - shared handle wagering 229,650,000 235,034,000 229,650,000 235,034,000
Simulcast 194,042,000 128,241,000 111,636,000 50,836,000
------------ ------------ ------------ ------------
Total $518,043,000 $481,756,000 $435,637,000 $404,351,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $5,985,000 $6,777,000 $5,985,000 $6,777,000
Off-track - shared handle wagering 7,436,000 7,823,000 7,436,000 7,823,000
Off-track - independent handle 1,076,000 707,000 1,076,000 707,000
Simulcast 5,794,000 2,881,000 4,192,000 1,351,000
------------ ------------ ------------ ------------
Total $20,291,000 $18,188,000 $18,689,000 $16,658,000
============ ============ ============ ============
Turf Paradise
- ------------------------------------
Pari-mutuel handle:
On-track $18,268,000 $23,942,000 $6,291,000 $8,000,000
Off-track - shared handle wagering 46,492,000 36,176,000 15,979,000 12,225,000
Simulcast 29,124,000 22,412,000 12,284,000 9,478,000
------------ ------------ ------------ ------------
Total $93,884,000 $82,530,000 $34,554,000 $29,703,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $2,483,000 $2,976,000 $1,131,000 $1,083,000
Off-track - shared handle wagering 2,956,000 3,025,000 1,303,000 1,162,000
Off-track - independent handle 507,000 159,000 139,000 4,000
Simulcast 1,442,000 1,559,000 109,000 633,000
------------ ------------ ------------ ------------
Total $7,388,000 $7,719,000 $2,682,000 $2,882,000
============ ============ ============ ============
Combined
- ------------------------------------
Pari-mutuel handle:
On-track $112,619,000 $142,423,000 $100,642,000 $126,481,000
Off-track - shared handle wagering 276,142,000 271,210,000 245,629,000 247,259,000
Simulcast 223,166,000 150,653,000 123,920,000 60,314,000
------------ ------------ ------------ ------------
Total $611,927,000 $564,286,000 $470,191,000 $434,054,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $8,468,000 $9,753,000 $7,116,000 $7,860,000
Off-track - shared handle wagering 10,392,000 10,848,000 8,739,000 8,985,000
Off-track - independent handle 1,583,000 866,000 1,215,000 711,000
Simulcast 7,236,000 4,440,000 4,301,000 1,984,000
------------ ------------ ------------ ------------
Total $27,679,000 $25,907,000 $21,371,000 $19,540,000
============ ============ ============ ============
22
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 the undersigned, thereunto duly authorized.
HOLLYWOOD PARK, INC.
(Registrant)
By: /s/ R.D. Hubbard Dated: August 11, 1995
----------------------------------------------
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By /s/ G. Michael Finnigan Dated: August 11, 1995
----------------------------------------------
G. Michael Finnigan
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
23
Hollywood Park, Inc.
Exhibit Index
Exhibit Description Page
- ---------- ----------------------- ----
27.1 Financial Data Schedule 1
24