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, 1996
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 12, 1996: 18,445,298.
Hollywood Park, Inc.
Table of Contents
Part I
Item 1. Financial Information
Consolidated Balance Sheets as of June 30, 1996
and December 31, 1995............................ 1
Consolidated Statements of Operations for the
three months ended June 30, 1996 and 1995........ 2
Consolidated Statements of Operations for the six
months ended June 30, 1996 and 1995.............. 3
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995.............. 4
Notes to Consolidated Financial Statements........ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 13
Part II
Item 1. Legal Proceedings................................. 17
Item 3. Default Upon Senior Securities.................... 18
Item 5. Other Information................................. 18
Item 6.a Exhibits.......................................... 18
Other Financial Information....................... 21
Signatures........................................ 26
Hollywood Park, Inc.
Consolidated Balance Sheets
June 30, December 31,
1996 1995
------------ ------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $30,830,000 $22,406,000
Restricted cash 10,154,000 3,126,000
Short term investments 4,053,000 6,447,000
Other receivables, net of allowance for doubtful accounts
of $960,000 in 1996 and $1,841,000 in 1995 8,906,000 8,147,000
Prepaid expenses and other assets 4,201,000 3,888,000
Deferred tax assets 2,204,000 4,888,000
Current portion of notes receivable 36,000 34,000
------------ ------------
Total current assets 60,384,000 48,936,000
Notes receivable 839,000 857,000
Property, plant and equipment, net 121,043,000 174,717,000
Lease with TRAK East, net 0 1,195,000
Goodwill, net 20,640,000 26,829,000
Long term gaming assets 13,191,000 19,063,000
Other assets 7,704,000 11,706,000
------------ ------------
$223,801,000 $283,303,000
============ ============
==========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $13,147,000 $12,518,000
Accrued lawsuit settlement 2,750,000 5,232,000
Accrued liabilities 9,646,000 13,607,000
Accrued workers' compensation 2,054,000 2,277,000
Accrued slip and fall claims 1,679,000 1,543,000
Gaming liabilities 2,791,000 3,998,000
Amounts due to horsemen for purses, stakes and awards 12,030,000 709,000
Outstanding pari-mutuel tickets 3,004,000 2,757,000
Current portion of notes payable 3,406,000 32,310,000
------------ ------------
Total current liabilities 50,507,000 74,951,000
Notes payable 256,000 15,629,000
Gaming liabilities 11,620,000 16,894,000
Deferred tax liabilities 4,770,000 10,083,000
------------ ------------
Total liabilities 67,153,000 117,557,000
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;
18,504,798 issued and outstanding 1,850,000 1,850,000
Capital in excess of par value 168,479,000 168,479,000
Accumulated deficit (13,709,000) (4,611,000)
------------ ------------
Total stockholders' equity 156,648,000 165,746,000
------------ ------------
$223,801,000 $283,303,000
============ ============
- -------
See accompanying notes to consolidated financial statements.
1
Hollywood Park, Inc.
Consolidated Statements of Operations
For the three months ended June 30,
-------------------------------------
1996 1995
----------- -----------
(unaudited)
REVENUES:
Pari-mutuel commissions $21,989,000 $21,371,000
Lease and management fee - Sunflower 0 1,638,000
Lease - Casino 0 6,288,000
Gaming - Casino 12,962,000 0
Admissions, programs, and other racing income 5,200,000 5,799,000
Concession sales 4,463,000 5,947,000
Other income 1,813,000 1,785,000
----------- -----------
46,427,000 42,828,000
----------- -----------
EXPENSES:
Salaries, wages and employee benefits 16,013,000 12,573,000
Operations of facilities 2,096,000 2,847,000
Cost of concession sales 5,882,000 7,593,000
Professional services 2,308,000 2,542,000
Rent 419,000 409,000
Utilities 975,000 1,190,000
Marketing 2,811,000 2,121,000
Administrative 4,294,000 2,426,000
----------- -----------
34,798,000 31,701,000
----------- -----------
Income before interest, income taxes, depreciation,
amortization and write off of investment in subsidiary 11,629,000 11,127,000
Write off of investment in Sunflower 66,000 0
Depreciation and amortization 2,487,000 2,862,000
Interest expense 54,000 974,000
----------- -----------
Income before income tax expense 9,022,000 7,291,000
Income tax expense 3,773,000 2,434,000
----------- -----------
Net income $5,249,000 $4,857,000
=========== ===========
=====================================================================================================
Dividend requirements on convertible preferred stock $481,000 $481,000
Net income available to common shareholders $4,768,000 $4,376,000
Per common share:
Net income - primary $0.26 $0.24
Net income - fully diluted $0.25 $0.24
Cash dividend per common share $0.00 $0.00
Number of shares - primary 18,612,850 18,369,634
Number of shares - fully diluted 20,904,342 20,661,126
- -------
See accompanying notes to consolidated financial statements.
2
Hollywood Park, Inc.
Consolidated Statements of Operations
For the six months ended June 30,
-----------------------------------
1996 1995
----------- -----------
(unaudited)
REVENUES:
Pari-mutuel commissions $28,707,000 $27,679,000
Lease and management fee - Sunflower 1,071,000 3,145,000
Lease - Casino 0 12,670,000
Gaming - Casino 24,803,000 0
Admissions, programs, and other racing income 8,636,000 9,272,000
Concession sales 7,637,000 10,805,000
Other income 3,426,000 3,713,000
----------- -----------
74,280,000 67,284,000
----------- -----------
EXPENSES:
Salaries, wages and employee benefits 28,614,000 20,437,000
Operations of facilities 4,404,000 5,308,000
Cost of concession sales 10,750,000 13,466,000
Professional services 4,568,000 4,520,000
Rent 701,000 678,000
Utilities 1,973,000 2,149,000
Marketing 3,684,000 2,684,000
Administrative 7,561,000 4,083,000
----------- -----------
62,255,000 53,325,000
----------- -----------
Income before interest, income taxes, depreciation,
amortization and write off of investment in subsidiary 12,025,000 13,959,000
Write off of investment in Sunflower 11,412,000 0
Depreciation and amortization 5,400,000 5,654,000
Interest expense 898,000 1,928,000
----------- -----------
Income (loss) before income tax expense (5,685,000) 6,377,000
Income tax expense 2,444,000 2,114,000
----------- -----------
Net income (loss) ($8,129,000) $ 4,263,000
=========== ===========
==========================================================================================================
Dividend requirements on convertible preferred stock $962,000 $962,000
Net income (loss) available to (allocated to) common shareholders ($9,091,000) $3,301,000
Per common share:
Net income (loss) - primary ($0.49) $0.18
Net income (loss) - fully diluted ($0.49) $0.18
Cash dividend per common share $0.00 $0.00
Number of shares - primary 18,612,850 18,369,634
Number of shares - fully diluted 20,904,342 20,661,126
- -------
See accompanying notes to consolidated financial statements.
3
Hollywood Park, Inc.
Consolidated Statements of Operations
For the six months ended June 30,
-----------------------------------
1996 1995
----------- -----------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($8,129,000) $ 4,263,000
Adjustment to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 4,901,000 5,653,000
Changes in accounts due to deconsolidation of subsidiary
in bankruptcy:
Property, plant and equipment 58,380,000 0
Secured notes payable (28,904,000) 0
Unsecured notes payable (15,373,000) 0
Goodwill and lease with TRAK East 6,908,000 0
Unrealized loss on short term bond investing (7,000) 0
(Gain) loss on sale or disposal of property, plant and equipment (5,000) 66,000
Increase in restricted cash (7,028,000) (10,931,000)
Increase in casino lease and related interest receivable, net 0 (7,054,000)
(Increase) decrease in other receivables, net (759,000) 112,000
Decrease (increase) in prepaid expenses and other assets 3,689,000 (2,407,000)
Decrease in deferred tax assets 2,684,000 185,000
Increase in accounts payable 629,000 3,161,000
Decrease in accrued lawsuit settlement (2,482,000) 0
Decrease in gaming liabilities (1,207,000) 0
(Decrease) increase in accrued liabilities (3,961,000) 2,458,000
(Decrease) increase in accrued workers' compensation (223,000) 95,000
Increase in accrued slip and fall claims 136,000 130,000
Increase in amounts due to horsemen for purses, stakes
and awards 11,321,000 11,249,000
Increase in outstanding pari-mutuel tickets 247,000 1,239,000
(Decrease) increase in deferred tax liabilities (5,313,000) 2,553,000
----------- -----------
Net cash provided by operating activities 15,504,000 10,772,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (9,132,000) (4,233,000)
Receipts from sale of property, plant and equipment 6,000 96,000
Principal collected on notes receivable 16,000 16,000
Purchase of short term investments (11,154,000) (12,538,000)
Proceeds from short term investments 13,548,000 8,846,000
Long term gaming assets 598,000 0
----------- -----------
Net cash used in investing activities (6,118,000) (7,813,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from unsecured notes payable 0 1,681,000
Payment of unsecured notes payable 0 (3,566,000)
Payment of secured notes payable 0 (1,458,000)
Payments under capital lease obligations 0 (53,000)
Dividends paid to preferred stockholders (962,000) (962,000)
----------- -----------
Net cash used for financing activities (962,000) (4,358,000)
----------- -----------
Increase (decrease) in cash and cash equivalents 8,424,000 (1,399,000)
Cash and cash equivalents at the beginning of the period 22,406,000 37,122,000
----------- -----------
Cash and cash equivalents at the end of the period $30,830,000 $35,723,000
=========== ===========
- -------
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, 1995. This financial
information does not include certain footnotes and financial presentations
normally presented annually, and therefore, should be read in conjunction with
the Company's 1995 Form 10-K.
The information furnished herein is unaudited; however, in the opinion of
management it reflects all recurring adjustments that are necessary to present a
fair statement of the results for the interim periods. All such adjustments are
of a normal and recurring nature. 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 horse
racing business.
The Company owns and operates the Hollywood Park race track, a premier
thoroughbred racing facility located in California, Sunflower Racing, Inc.
("Sunflower"), operating as the Woodlands, a greyhound and thoroughbred racing
facility located in Kansas, and Turf Paradise, Inc. ("Turf Paradise"), a
thoroughbred racing facility located in Arizona. On the same property as the
Hollywood Park race track, the Company owns and operates the Hollywood Park-
Casino (the "Casino").
SUNFLOWER On May 2, 1996, the Kansas Legislature adjourned without passing
legislation that would have allowed additional gaming at Sunflower, thereby
permitting Sunflower to more effectively compete with Missouri riverboat gaming.
As a result of the outcome of the Kansas Legislative session, Hollywood Park
wrote off its approximately $11,412,000 investment in Sunflower. There was no
cash involved with the write off of this investment. On May 17, 1996, Sunflower
filed for reorganization under Chapter 11 of the Bankruptcy Code. Sunflower is
operating during the reorganization, but Sunflower's operating results from
April 1, 1996, forward were not consolidated with Hollywood Park's operating
results.
ACQUISITION OF PACIFIC CASINO MANAGEMENT, INC. The Hollywood Park-Casino was
opened in July 1994 under a third party leasing arrangement with Pacific Casino
Management, Inc. ("PCM"). In 1994 under the California Gaming Registration Act,
it was the position of the California Attorney General that as a publicly traded
company, Hollywood Park was not eligible to register as an operator of a card
club, but could lease the site to a registered operator unaffiliated with the
Company. On August 3, 1995, Senate Bill ("SB") 100 was enacted into law. SB
100 does the following: (i) allows for a publicly traded racing association, or
a subsidiary thereof, (hereafter the "Racing Association") to operate a gaming
club on the premises of its race track; (ii) requires the officers, directors
and shareholders of 5.0% or more of a Racing Association (excluding
institutional investors) to be licensed by the Attorney General; (iii)
provisionally licenses a Racing Association and its officers, directors, and
5.0% shareholders to operate a gaming club on the premises of its race track
pending licenses pursuant to sub-paragraph (ii) above; (iv) allows a Racing
Association and its officers, directors and 5.0% shareholders to have an
interest in gaming activities located outside California that are not legal in
California. The provisions of SB 100 are repealed effective January 1, 1999,
unless prior thereto the California legislature enacts a comprehensive scheme
for the regulation of gaming under the jurisdiction of a gaming control
commission (see Item 5. Other Information).
Pursuant to the authority provided by SB 100, on November 17, 1995, Hollywood
Park acquired substantially all the assets, property and business of PCM, and
assumed substantially all of PCM's liabilities. Prior to the acquisition, under
a lease with the Company, PCM operated the gaming floor activities of the
Hollywood
5
Park-Casino. Immediately following the acquisition, PCM was dissolved and the
gaming floor operations were incorporated into Hollywood Park's Gaming Division.
The purchase price of PCM's net assets was an aggregate $2,640,000, payable in
shares of Hollywood Park common stock, in three installments: (i) shares of
Hollywood Park common stock having a value of $1,600,000, or 135,164 common
shares, issued on November 17, 1995; (ii) shares of Hollywood Park common stock
having a value of $540,000 on the first anniversary of the execution of the
acquisition; and (iii) shares of Hollywood Park common stock having a value of
$500,000 on the second anniversary of the execution of the acquisition; provided
that Hollywood Park may accelerate the payments; provided further, the aggregate
number of shares to be paid under clauses (ii) and (iii) may not exceed the
number of shares issued on November 17, 1995. Shares to be issued in the
remaining two installments will be valued at the average market price of
Hollywood Park's common stock for the ten trading days immediately preceding the
payment date.
Virtually all of the approximately $21,568,000 of excess acquisition cost over
the recorded value of the net assets acquired was allocated to goodwill and will
be amortized over 40 years. The amortization of the goodwill is not deductible
for income tax purposes.
BOOMTOWN, INC. On April 23, 1996, the respective Board of Directors of
Hollywood Park and of Boomtown, Inc. ("Boomtown") approved and signed the
Agreement and Plan of Merger (the "Merger") among Hollywood Park, Inc., HP
Acquisition, Inc. and Boomtown, Inc., where by way of a merger with HP
Acquisition, Inc. (a wholly owned subsidiary of Hollywood Park) Boomtown will
become a wholly owned subsidiary of the Company. The Merger is expected to be
finalized by December 31, 1996, but in no event may it be finalized later than
June 30, 1997. The Merger will be accounted for under the purchase method of
accounting, with each issued and outstanding share of Boomtown common stock
converted into 0.625 shares of Hollywood Park common stock. Approximately
5,774,000 newly issued shares of the Company's common stock will be issued in
the Merger.
The Merger is subject to, among other things, the approval of the common
shareholders of both Hollywood Park and Boomtown, the consent of to the Merger,
and the Blue Diamond Swap (as defined below) by the holders of a majority of the
outstanding principal amount of Boomtown's outstanding bonds, and upon Hollywood
Park, its management and Board of Directors and Boomtown's management acquiring
all required regulatory approvals and gaming permits. As of the effective date
of the Merger, a total of eleven persons will serve on the Board of Directors of
the combined companies, four of whom will be former directors of Boomtown.
Dates have not been set for the Hollywood Park and Boomtown shareholder meeting.
The application process for the required regulatory approvals and gaming permits
is in progress.
Boomtown owns and operates land-based, dockside and riverboat gaming operations
in Verdi, Nevada ("Boomtown Reno"), Las Vegas, Nevada ("Boomtown Las Vegas"),
Biloxi, Mississippi ("Boomtown Biloxi"), and Harvey, Louisiana ("Boomtown New
Orleans"). Boomtown's properties offer hotel accommodations (at Boomtown Reno
and Boomtown Las Vegas only), gaming and other entertainment amenities to
primarily middle income, value oriented customers. The Boomtown properties have
an "old west" theme by incorporating western memorabilia in their interior
decor, country/western music and western dress of their employees.
Boomtown Reno has been operating for over a quarter century and is located seven
miles west of Reno on Interstate 80, the major highway connecting northern
California and Reno. Boomtown Reno is situated on 569 acres with approximately
61 acres used for current operations. Boomtown Reno's customer base is
primarily drawn from Interstate 80 traffic. Boomtown Reno offers its guests a
40,000 square foot casino, including 1,433 slot machines and 43 table games, a
122-room hotel, a 16-acre truck stop, a full-service recreational vehicle park,
a service station, a mini-mart and other related amenities. In addition,
Boomtown Reno offers a 35,000 square foot family entertainment center featuring
a dynamic motion theater, an indoor 18-hole western-themed miniature golf
course, a restaurant and a replica of an 1800's Ferris Wheel.
6
Boomtown Las Vegas began operations in May 1994 on a 56-acre site at the
interchange of Blue Diamond Road and Interstate 15, the principal thoroughfare
connecting Southern California to Las Vegas. Boomtown Las Vegas is four miles
from the exit for Circus Circus, Excalibur, Luxor, and MGM. Boomtown Las Vegas
includes a 30,000 square foot casino with 1,100 slot machines and 28 gaming
tables, 300 hotel rooms, a full-service recreational vehicle park, two
restaurants and a replica of an old mine where customers can pan for real gold.
On August 12, 1996, Boomtown, Blue Diamond Hotel and Casino Inc. (a wholly owned
subsidiary of Boomtown, Inc.), Hollywood Park, Industry Hills Visitor
Accommodation Center ("IVAC") (the owner/lessor of Boomtown Las Vegas), Edward
P. Roski, Jr. (a general partner of IVAC), and another affiliate of Mr. Roski
entered into the Blue Diamond Swap Agreement (the " Swap Agreement") pursuant to
which the parties agreed that, upon consummation of the Merger, Boomtown and
Blue Diamond (or any subsidiary thereof as set forth in the Swap Agreement)
would exchange their entire interest in Boomtown Las Vegas (including Boomtown's
note receivable, from IVAC, in the amount of $27,300,000) in exchange for a
$5,000,000 unsecured promissory note (the "First Note") and a $3,465,000
unsecured promissory note (the "Second Note") (the "Blue Diamond Swap") and the
termination of the Boomtown Las Vegas lease. The First Note has an interest
rate equal to the prime rate plus 1.5% per annum and provides for annual
principal payments of $1,000,000 over five years. The Second Note has an
interest rate equal to the prime rate plus 0.5% per annum and provides for a
payment of all principal on the third anniversary of the closing. In accordance
with the terms of the Swap Agreement, with certain exceptions set forth in the
Swap Agreement, Boomtown and Blue Diamond will be responsible for the
liabilities of Boomtown Las Vegas prior to the Blue Diamond Swap and Mr. Roski
will be responsible for the liabilities of Boomtown Las Vegas subsequent to the
Blue Diamond Swap. The consent of the Boomtown bondholders is required for
Boomtown to consummate the Blue Diamond Swap.
On August 12, 1996, Hollywood Park and Mr. Roski further entered into a Stock
Purchase Agreement (the "Stock Purchase Agreement") pursuant to which Hollywood
Park will concurrently with the Blue Diamond Swap and the Merger, purchase
714,386 shares of Boomtown commons stock held by Mr. Roski for a purchase price
of approximately $3,465,000 paid in the form of a Hollywood Park unsecured
promissory note having an interest rate equal to the prime rate plus one percent
per annum and providing for five equal annual principal payments after the
closing.
Boomtown Biloxi, a limited partnership majority owned and controlled by
Boomtown, occupies nine acres on Biloxi, Mississippi's back bay. Boomtown
Biloxi is located one-half mile from Interstate 110, the main highway connecting
Interstate 10 (the main thoroughfare connecting New Orleans and Mobile, Alabama)
and the Gulf of Mexico. The facility, which began operations in July 1994,
consists of a land-based facility that houses non-gaming operations and a 33,000
square foot casino constructed on a 400 x 100 foot barge permanently moored to
the land-based building. The casino offers 985 slot machines, 42 table games
and other gaming amenities including restaurants, a western dance hall/cabaret
and a 20,000 square foot family entertainment center.
Boomtown New Orleans, a limited partnership majority owned and controlled by
Boomtown, began operations in August 1994 on a 50 acre site in Harvey,
Louisiana, approximately ten miles from the French Quarter of New Orleans.
Gaming operations are conducted from a 250 foot replica of a paddle wheel
riverboat, offering 865 slot machines and 51 table games in a 30,000 square foot
casino. The land-based facility next to the riverboat dock is composed of a
western-themed 88,000 square foot entertainment center
7
and a western saloon/dance hall. On November 5, 1996, local parish votes
regarding the continuation of gaming will be held. Boomtown New Orleans is
located in Jefferson Parish. Boomtown's management has no reason, at this time,
to believe that the voters of Jefferson Parish will vote against riverboat
gaming. If riverboat gaming is voted down, Boomtown would have to discontinue
its riverboat gaming operations in June 1999.
Boomtown is actively seeking to expand its operations into jurisdictions that
have legalized casino gaming at sites that are near interstate highways or major
thoroughfares near major population or tourist centers. Boomtown is currently
exploring a project in Switzerland County, Indiana through a joint venture with
Hilton Gaming Corporation. The gaming license application for this project will
be heard on August 19 and 20, 1996.
CRYSTAL PARK HOTEL AND CASINO Construction is well underway on the Crystal Park
Hotel and Casino ("Crystal Park"), California's first hotel/casino. Crystal
Park is expected to open in the fourth quarter 1996, with 110 gaming tables,
with no limit on the number of gaming tables that can be added, and
approximately 282 hotel rooms. 0n June 27, 1996, the Company signed a 20 year
License Agreement with Radisson Hotels International, Inc. to, among other
things, consult on operations and marketing of the hotel. Hollywood Park can
terminate the agreement with Radisson, at not cost, at the end of year three,
year five or year ten. Crystal Park will also include a gift shop, massage
center, a full service health spa with an outdoor pool, a state-of-the-art air
filtration system, lobby sports bar and lounge, 24 hour cafe and room service.
On July 14, 1995, the Company and Compton Entertainment, Inc. ("CEI") executed
an Amended and Restated Agreement Respecting Pyramid Casino (the "Crystal Park
Agreement") (subsequently changed to Crystal Park Hotel and Casino), finalizing
the terms concerning the development, ownership and operation of a card club in
the city of Compton (the "City"). CEI entered into an Amended and Restated
Disposition and Development Agreement (the "DDA") with the City to lease or
purchase land located within the City as the card club site. Under the terms of
the Crystal Park Agreement, on August 3, 1995, the Company paid CEI $2,000,000
for the real property rights and assignment of the DDA to Hollywood Park. On
August 3, 1995, the Company paid CEI an additional $500,000 to exercise the five
year right to purchase CEI's City gaming license. If at the end of the five
year term of the option to purchase the City gaming license, Hollywood Park is
not able to own and operate a card club at the Compton site, CEI can elect to
either negotiate a new lease, or acquire Hollywood Park's rights to the card
club site for a purchase price as determined by the Agreement. Upon opening the
card club, Hollywood Park will pay CEI up to an additional $2,500,000, under
certain conditions detailed in the Agreement. As required by the DDA, on August
2, 1995, Hollywood Park paid approximately $2,006,000 to the City to purchase
the convention center to house the card club operations and entered into a 50
year lease with the City for the hotel, parking, and expansion parcels at the
same site. Initial improvements made by Hollywood Park to construct, install
and equip Crystal Park will be credited against the annual base rent. No cash
rent payments are expected to be made until after the nineteenth year of the
lease, or 2014.
If Crystal Park opens under current California law, (see Item 5. Other
Information) which does not allow publicly traded companies, such as Hollywood
Park, to operate a card club (other than on the same property as the race
track), the Company will commence a 60 month lease with CEI. Under the terms of
the lease, as the landlord, Hollywood Park is building and furnishing a card
club suitable for CEI to operate. Hollywood Park will not be responsible for
any segment of the daily operations. Over the 60 month term, CEI will pay the
Company monthly rent of 2.65% of Hollywood Park's total investment in the card
club. If there is a change in California law, allowing the Company to operate
card clubs at sites other than its race track property, Hollywood Park would
operate the card club in partnership with CEI, with Hollywood Park owning 67% of
the business, which will be subject to the partnership described below.
CEI has received all the required City gaming licenses necessary for operation
of Crystal Park, and on April 1, 1996, received a Provisional Registration from
the California Attorney General.
Hollywood Park, Redwood Gaming LLC (controlled by the Edward J. DeBartolo
Family) and First Park Investments LLC (controlled by Leo Chu and Ivy Chu) have
are forming a 88%/8%/4% partnership, respectively, to build and operate (per the
terms and conditions outlined above) the Crystal Park property.
8
OTHER CARD CLUB ACTIVITY The Company is a 50% partner with DeBartolo
Entertainment, in a 30 table Casino and Night Club to be located in Palm
Springs, California. Hollywood Park and DeBartolo Entertainment will be
landlords in a third party leasing arrangement. Any investment required for
this project would be modest and timing has not been finalized for development.
Without legislation to expand the types of gaming which could be offered at the
Palm Springs casino, this site is not expected to generate material income, due
to the full casino gaming on nearby Indian Reservations.
The Company continues to have discussions with other card clubs as to possible
business combinations of mutual interest.
PRO FORMA RESULTS OF OPERATIONS The following pro forma results of operations
were prepared under the assumption that the acquisition of PCM had occurred on
July 1, 1994, (PCM's inception). The following pro forma adjustments were made:
the elimination of lease rent revenue due to Hollywood Park from PCM and
concession sales made to PCM at acquisition; lease rent expense recorded by PCM;
other operating expenses including consulting fees, legal and audit services and
other miscellaneous duplicate expenses; and increases for amortization of the
excess purchase price allocated to goodwill, interest expense on the unpaid rent
and income taxes.
Pro forma earnings per share reflect the 135,164 shares of Hollywood Park common
stock issued to the former PCM shareholders and an estimated 108,052 shares of
common stock due to the former PCM shareholders, based on the closing market
price of Hollywood Park's common stock on June 28, 1996.
Hollywood Park, Inc.
Unaudited Pro Forma Combined Consolidated Results of Operations
For the three months ended June 30,
---------------------------------------
1996 (a) 1995
------------------ -------------------
Revenues:
Hollywood Park, Inc. and race tracks $31,254,000 $34,001,000
Hollywood Park, Inc. - Casino Division 15,173,000 13,099,000
------------------ -------------------
46,427,000 47,100,000
------------------ -------------------
Operating income before interest,
income taxes, depreciation,
amortization and write off of 11,629,000 8,381,000
investment in subsidiary
Net income $ 5,249,000 $ 2,033,000
================== ===================
Dividend requirements on convertible $ 481,000 $ 481,000
preferred stock
Net income available to common $ 4,768,000 $ 1,552,000
shareholders
Per common share:
Net income - primary $ 0.26 $ 0.08
Net income - fully diluted $ 0.25 $ 0.08
9
Hollywood Park, Inc.
Unaudited Pro Forma Combined Consolidated Results of Operations
(continued)
For the six months ended June 30,
------------------------------------
1996(a) 1995
------------------ ----------------
Revenues:
Hollywood Park, Inc. and race tracks $ 45,334,000 $ 48,868,000
Hollywood Park, Inc. - Casino Division 28,946,000 26,165,000
74,280,000 75,033,000
------------------ ----------------
Operating income before interest,
income taxes, depreciation,
amortization and write off of 12,025,000 7,668,000
investment in subsidiary
Net loss $ (8,129,000) $ (2,101,000)
================== ================
Dividend requirements on convertible $ 962,000 $ 962,000
preferred stock
Net loss allocated to common $ (9,091,000) $ (3,063,000)
shareholders
Per common share before write off of
investment in subsidiary:
Income - primary $ 0.59 $ 0.36
Income - fully diluted $ 0.58 $ 0.36
Per common share:
Net loss - primary $ (0.49) $ (0.16)
Net loss - fully diluted $ (0.49) $ (0.16)
_____
(a) The results for these periods are actual.
RESTRICTED CASH Restricted cash as of June 30, 1996, was for amounts due to
horsemen for purses, stakes and awards. The balance as of December 31, 1995,
included approximately $2,482,000 related to the Class Action lawsuits (see Item
1. Legal Proceedings) and approximately $644,000 related to amounts due to
horsemen for purses, stakes and awards. In March 1996, amounts due for the
Class Action lawsuits were placed in an escrow account according to the
settlement agreement, and therefore are no longer reflected in the Company's
accounts.
CASINO REVENUE AND PROMOTIONAL ALLOWANCES Casino gaming revenue consisted of
fees collected from patrons on a per seat or per hand played basis. Revenues in
the accompanying statements of operations exclude the retail value of food and
beverage provided to players on a complimentary basis. The estimated cost of
providing these promotional allowances during the six months ended June 30,
1996, was $1,668,000. There were no such costs for the six months ended June
30, 1995.
ESTIMATES Financial statements prepared according to generally accepted
accounting principles require the use of management estimates, including
estimates used to evaluate the recoverability of property, plant and equipment,
to determine the fair value of financial instruments, to account for the
valuation allowance for deferred tax assets, and to determine litigation related
obligations.
EARNINGS PER SHARE Primary earnings per share were computed by dividing net
income (loss) available to (allocated to) common shareholders (net income (loss)
less preferred dividend requirements) by the weighted average number of common
shares outstanding during the period, inclusive of the estimated future shares
of the Company's common stock to be issued to the former PCM shareholders.
Fully diluted per share amounts were similarly computed, but include the effect,
when dilutive, of the conversion of the convertible preferred shares and
exercise of stock options.
CASH FLOWS Cash and cash equivalents consisted of certificates of deposit and
short term investments with remaining maturities of 90 days or less.
TREASURY STOCK On July 22, 1996, the Company announced its intention to
repurchase (and retire) up to 2,000,000 shares of its common stock on the open
market or in negotiated transactions. As of the August 12, 1996, the Company had
repurchased approximately 59,500 shares at a cost of approximately $510,000.
10
RECLASSIFICATIONS Certain reclassifications have been made to the 1995 balances
to be consistent with the 1996 financial statement presentation.
NOTE 2 -- SHORT TERM INVESTMENTS
Short term investments as of June 30, 1996, consisted of corporate bonds valued
at $4,053,000. The corporate bond portfolio consisted of bonds rated from Ba2
to B3 by Moody's, and from BB+ to B- by Standard and Poors, with some bonds not
rated by either agency. Investments in corporate bonds typically carry a
greater amount of principal risk than investments previously made by the Company
and yield a correspondingly higher return.
The corporate bond investments, as of June 30, 1996, had a weighted average
maturity of 1.5 years, and because the Company reasonably expects to liquidate
this investment in its normal operating cycle this investment was classified as
short term. This short term investment is held as available for sale, and was
recorded in the accompanying financial statements at fair value, determined by
the quoted market price.
For the six months ended June 30, 1996, proceeds from the sale of corporate
bonds were approximately $3,387,000, all of which was reinvested, with gross
realized gains and losses of approximately $15,000 and $8,000, respectively.
The net unrealized holding loss, as of June 30, 1996, was $7,000.
NOTE 3 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment held at June 30, 1996, and December 31, 1995,
consisted of the following:
June 30, December 31,
1996 (a) 1995
--------------- --------------
Land and land improvements $ 29,378,000 $ 42,490,000
Buildings and building improvements 134,795,000 175,960,000
Equipment 24,968,000 36,003,000
Construction in progress 11,027,000 8,394,000
--------------- --------------
200,168,000 262,847,000
Less accumulated depreciation 79,125,000 88,130,000
--------------- --------------
$121,043,000 $174,717,000
=============== ==============
_____
(a) The June 30, 1996 figures do not include Sunflower's property, plant and
equipment.
NOTE 4 -- SECURED AND UNSECURED NOTES PAYABLE
Notes payable as of June 30, 1996, and December 31, 1995, consisted of the
following:
June 30, December 31,
1996 (a) 1995
--------------- --------------
Secured notes payable (b) $ 0 $ 28,667,000
Unsecured notes payable (b) 0 15,574,000
Secured note payable - Texaco 3,358,000 3,358,000
Unsecured note payable - Gold Cup 304,000 340,000
--------------- --------------
3,662,000 47,939,000
Less current maturities 3,406,000 32,310,000
--------------- --------------
$ 256,000 $ 15,629,000
=============== ==============
_____
(a) The June 30, 1996, balances do not include Sunflower's notes payable.
(b) These notes relate to Sunflower and are non-recourse to Hollywood Park.
This table does not include the Crystal Park capital lease obligations discussed
in Note 5.
11
NOTE 5 -- LONG TERM GAMING ASSETS
The Company purchased the convention center parcel at the Crystal Park site,
which is currently under renovation to house the card club, and entered into a
capital lease with the city of Compton covering the adjoining hotel, surrounding
parking lot and expansion parcel. The capital lease was valued at approximately
$13,741,000. The lease was entered into on August 3, 1995, and has a term of up
to 50 years. The annual rent payments start at $600,000 and increase every
fifth year until year 46 when they stabilize at $2,850,000. Hollywood Park will
receive a rent payment credit equal to the costs incurred to renovate the card
club and hotel. No cash rent payments are expected to be made until the
nineteenth year of the lease, or 2014.
The balance of the long term gaming assets was related to the costs incurred for
the operating lease between Hollywood Park and CEI, and will be amortized over
the five year term of the lease.
NOTE 6 -- LONG TERM GAMING LIABILITIES
Long term gaming liabilities consisted of the Company's capital lease obligation
associated with the lease of the hotel, surrounding parking lot and the
expansion parcel from the city of Compton for Crystal Park. This liability will
be reduced as the construction disbursements are made, and upon submission of
any purchase option payment.
NOTE 7 -- SUPPLEMENTAL BALANCE SHEET INFORMATION
In 1995, Statement of Financial Accounting Standards No. 121 ("SFAS 121")
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, was issued which established accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets. SFAS 121, which became effective for Hollywood Park in
the quarter ended March 31, 1996, addresses when impairment losses should be
recognized and how impairment losses should be measured. Whenever there are
recognized events or changes in circumstances that indicate the carrying amount
of an asset may not be recoverable, management reviews the asset for possible
impairment. In accordance with current accounting standards, management uses
estimated expected future net cash flows (undiscounted and excluding interest
costs, and grouped at the lowest level for which there are identifiable cash
flows that are as independent as possible of the cash flows of other asset
groups) to measure the recoverability of the asset. If the expected future net
cash flows are less than the carrying amount of the asset an impairment loss
would be recognized. An impairment loss would be measured as the amount by
which the carrying amount of the asset exceeded the fair value of the asset,
with fair value measured as the amount at which the asset could be bought or
sold in a current transaction between willing parties, other than in a forced
liquidation sale. The estimation of expected future net cash flows is
inherently uncertain and relies to a considerable extent on assumptions
regarding current and future net cash flows and market conditions, and the
availability of capital. If, in future periods, there are changes in the
estimates or assumptions incorporated into the impairment review analysis, the
changes could result in an adjustment to the carrying amount of the asset, but
at no time would previously recognized impairment losses be restored.
NOTE 8 -- DEVELOPMENT EXPENSES
Included in Administrative expenses were development costs of approximately
$349,000 for the three months ended June 30, 1996, and approximately $705,000
for the six months ended June 30, 1996. These expenses consisted primarily of
costs related to the proposed stadium, the Inglewood site master plan and card
clubs in California.
Included in Administrative expenses were development costs of approximately
$252,000 for the three months ended June 30, 1995, and approximately $401,000
for the six months ended June 30, 1995. These expenses consisted primarily of
costs related to Kansas gaming surveys, the proposed stadium and card clubs in
California.
12
NOTE 9 -- ACCOUNTING FOR STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, ("SFAS 123") Accounting for
Stock-Based Compensation, requires that the Company disclose additional
information about employee stock-based compensation plans. The objective of
SFAS 123 is to estimate the fair value, based on the stock price at the grant
date, of the Company's stock options to which employees become entitled when
they have rendered the requisite service and satisfied any other conditions
necessary to earn the right to benefit from the stock options. The fair market
value of a stock option is to be estimated using an option-pricing model that
takes into account, as of the grant date, the exercise price and expected life
of the option, the current price of the underlying stock and its expected
volatility, expected dividends on the stock and the risk-free interest rate for
the expected term of the options.
The Company has calculated the pro forma financial results as required under the
implementation rule of SFAS 123 and noted that the impact on net income for the
six months ended June 30, 1996 and 1995 was immaterial.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
RESULTS OF OPERATIONS
Three months ended June 30, 1996, compared to the three months ended June 30,
-----------------------------------------------------------------------------
1995
----
Except for the historical information contained herein, the matters addressed in
this Item 2 constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements
are subject to a variety of risks and uncertainties, including those discussed
in this Report on Form 10-Q, that could cause actual results to differ
materially from those anticipated by the Company's management. The Private
Securities Litigation Reform Act of 1995 (the "Act") provides certain "safe
harbor" provisions for forward-looking statements. All forward-looking
statements made in this Quarterly Report on Form 10-Q are made pursuant to the
Act.
The results of operations for the three months ended June 30, 1996, included the
results of Hollywood Park operating all aspects of the Casino, including the
gaming floors, whereas, during the three months ended June 30, 1995, the Company
leased the gaming floor activities to PCM for a fixed monthly rent, and directly
operated all other aspects of the business. The results of operations for the
three months ended June 30, 1996, exclude the results of operations for
Sunflower, as this subsidiary is no longer consolidated due to Hollywood Park's
non-cash write off of its approximately $11,412,000 investment in Sunflower, and
Sunflower's May 17, 1996, filing for reorganization under Chapter 11 of the
Bankruptcy code.
Total revenues increased by $3,599,000, or 8.4%, during the three months ended
June 30, 1996, as compared to the three months ended June 30, 1995. Pari-mutuel
commissions increased by $618,000 or 2.9%, primarily due to three additional
1996 live race days at Hollywood Park. Gaming - Casino revenues of $12,962,000
were generated from the gaming floor activities, which Hollywood Park acquired
from PCM on November 17, 1995. While there are no comparable gaming floor
revenues in the 1995 results, during the three months ended June 30, 1995, the
Company recorded Lease - Casino revenue of $6,288,000, and concession sales to
the former lessee of approximately $548,000. Admissions, programs and other
racing income declined by $599,000, or 10.3%, with $409,000 of the decline
related to the exclusion of Sunflower's 1996 operating results. Concession
sales decreased by $1,484,000, or 25.0%, with $777,000 of the decline a result
of the exclusion of Sunflower's 1996 results, with the remainder primarily due
to the 1995 financial results including sales to the former Casino lessee, PCM,
(as mentioned earlier) with no such revenues in the 1996 results.
Total operating expenses, inclusive of Casino gaming floor operating expenses
(with no corresponding gaming floor operating expenses in the 1995 results) and
with the 1996 financial results exclusive of
13
Sunflower's operating expenses, increased by $3,097,000, or 9.8%, for the three
months ended June 30, 1996, as compared to the three months ended June 30, 1995.
Salaries, wages and employee benefits increased by $3,440,000, or 27.3%,
primarily because of wages and benefits associated with the gaming floor staff
(hired November 17, 1995). Operations of facilities costs decreased by $751,000,
or 26.4%, primarily due to the exclusion of Sunflower's expenses in the 1996
results. Cost of concession sales decreased by $1,711,000, or 22.5%, with
$640,000 of the decrease related to the exclusion of Sunflower's 1996 operating
expenses, with the remainder due to cost saving measures implemented at the
Hollywood Park race track and Casino. Professional services decreased by
$234,000, or 9.2%, primarily due to the exclusion of Sunflower's results and
efforts at Turf Paradise and Hollywood Park to reduce racing related costs.
Utilities decreased by $215,000, or 18.1%, primarily due to the exclusion of
Sunflower's 1996 results. Marketing costs increased by $690,000, or 32.5%,
mainly due to Casino marketing costs. Administrative expenses increased by
$1,868,000, or 77.0%, primarily due to costs associated with the operation of
the gaming floors, including the city of Inglewood monthly gaming license fee.
Depreciation and amortization decreased by $375,000, or 13.1%, primarily due to
the exclusion of Sunflower's 1996 expenses, netted against the amortization of
the goodwill associated with the PCM acquisition. Interest expense decreased by
$920,000, or 94.5%, due entirely to the exclusion of Sunflower's 1996 interest
expense.
Income tax expense increased by $1,339,000, or 55.0%, due to higher pre-tax
income in 1996, and an anticipated slightly higher effective tax rate in 1996.
Six months ended June 30, 1996, compared to the six months ended June 30, 1995
------------------------------------------------------------------------------
The results of operations for the six months ended June 30, 1996, included the
results of Hollywood Park operating all aspects of the Casino, including the
gaming floors whereas, during the six months ended June 30, 1995, the Company
leased the gaming floor activities to PCM for a fixed monthly rent, and directly
operated all other aspects of the business. The results of operations for the
six months ended June 30, 1996, excluded the second quarter results of
operations for Sunflower, as this subsidiary is no longer consolidated due to
Hollywood Park's non-cash write off of its approximately $11,412,000 investment
in Sunflower, and Sunflower's May 17, 1996, filing for reorganization under
Chapter 11 of the Bankruptcy Code. Sunflower's results of operations are
included in the financial statements for the six months ended June 30, 1995.
Total revenues increased by $6,996,000, or 10.4%, during the six months ended
June 30, 1996, as compared to the six months ended June 30, 1995. Pari-mutuel
commissions increased by $1,028,000, or 3.7%, primarily due to three additional
1996 live race days at Hollywood Park. Gaming - Casino revenues of $24,803,000
were generated from the gaming floor activities, which Hollywood Park acquired
from PCM on November 17, 1995. While there are no comparable gaming floor
revenues in the 1995 results, during the six months ended June 30, 1995, the
Company recorded Lease - Casino revenue of $12,670,000, and concession sales to
the former lessee of approximately $1,766,000. Lease and management fee -
Sunflower, decreased by $2,074,000, or 65.9%, with $1,638,000 of the decrease
attributable to the exclusion of Sunflower's second quarter 1996 results and the
remainder of the decline was due to the continued competition from riverboat
gaming on the nearby Missouri River. Admissions, programs and other racing
income declined by $636,000 or 6.9%, with $409,000 of the decline related to the
exclusion of Sunflower's second quarter 1996 results, with the balance primarily
due to a 4.9% decrease in on-track attendance at Hollywood Park. Concession
sales decreased by $3,168,000, or 29.3%, with $1,051,000 of the decline due to
(i) the exclusion of Sunflower's second quarter 1996 results and riverboat
gaming competition in Missouri, and (ii) the fact that the 1995 results included
sales to PCM, the former gaming floor lessee (as mentioned earlier), with no
such sales in the 1996 results. Other income decreased by $287,000, or 7.7%,
primarily due to the cancellation of the initial Forum Parking Agreement, and a
decrease in interest income earned on excess cash reserves. A new Forum Parking
Agreement was executed on October 24, 1995, covering the one year from October
1, 1995, through September 30, 1996, providing for a minimum annual rent of
$1,200,000, compared to $1,800,000 under the prior Forum Parking Agreement. The
one year term of the new Forum Parking Agreement, which is substantially
shorter than the twelve year term of the prior Forum Parking Agreement, is
intended to provide flexibility regarding the proposed stadium development and
to gain other cross marketing benefits.
14
Total operating expenses, inclusive of Casino gaming floor expenses (with no
corresponding gaming floor operating expenses in the 1995 results) and with the
1996 financial results exclusive of Sunflower's second quarter 1996 operating
expenses, increased by $8,930,000, or 16.7%, for the six months ended June 30,
1996, as compared to the six months ended June 30, 1995. Salaries, wages and
employee benefits increased by $8,177,000, or 40.0%, primarily because of wages
and benefits associated with the gaming floor staff (hired November 17, 1995).
Operations of facilities costs decreased by $904,000, or 17.0%, with $533,000 of
the decline attributable to the exclusion of Sunflower's second quarter 1996
results, and with the balance primarily due to reduction in property taxes at
Hollywood Park. Cost of concession sales decreased by $2,716,000, or 20.2%,
principally due to staff reductions at the Casino and the exclusion of
Sunflower's second quarter 1996 results. Marketing costs increased by
$1,000,000, or 37.3%, primarily due to Casino marketing costs. Administrative
costs increased by $3,478,000, or 85.2%, due primarily to costs associated with
the operation of the gaming floors, including the city of Inglewood monthly
gaming license fee.
Depreciation and amortization decreased by $254,000, or 4.5%, due primarily to
the exclusion of Sunflower's second quarter 1996 results, netted against the
amortization of the goodwill associated with the PCM acquisition. Interest
expense decreased by $1,030,000, or 53.4%, due to the exclusion of Sunflower's
second quarter 1996 results.
Income tax expense increased by $330,000, or 15.6%, due to higher pre-tax income
in 1996, and an anticipated slightly higher effective tax rate in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Hollywood Park's principal source of liquidity at June 30, 1996, was cash and
cash equivalents of approximately $30,830,000 which reflected an increase of
$8,424,000 from December 31, 1995. The increase was primarily a result of a
seasonally strong second quarter, maturity of short term investments, and the
release of the Company's workers' compensation self insurance deposit, netted
against Crystal Park construction disbursements and the convertible preferred
dividend payments. Cash and cash equivalents decreased by $1,399,000 during the
six months ended June 30, 1995, primarily due to debt service payments on
secured and unsecured loan facilities, netted against increases in accounts
payable and accrued liabilities.
HOLLYWOOD PARK As a condition of the April 23, 1996, Merger Agreement with
Boomtown, Hollywood Park must secure adequate funding to repurchase Boomtown's
First Mortgage notes (if required to be redeemed) and at least $60,000,000 to
fund various gaming projects; the Company has appointed Bank of America to act
as lead bank in securing a credit agreement in excess of $165,000,000.
During the six months ended June 30, 1996, Hollywood Park did not draw any funds
under its credit facilities with Bank of America National Trust and Savings
Association ("Bank of America"), except for the issuance of a standby letter of
credit on May 1, 1996, mentioned below. On April 14, 1995, the Company executed
an unsecured loan facility of up to $75,000,000 with Bank of America (the
"Business Loan Agreement"). 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, revolving facility, under which the
Company may borrow, pay and reborrow principal amounts without penalty. On or
before September 1, 1996, per Amendment Two (as defined below) 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 bears interest at the option of the
Company at Bank of America's prime rate plus 0.25% or the offshore rate plus
2.0%, and the Company may further elect an agreed upon fixed rate.
The Revolver, inclusive of a within line facility for standby letters of credit
of up to a maximum of $5,000,000, is available during the two years ending May
1, 1997, during which the Company can borrow, pay and reborrow principal amounts
without penalty. The Revolver bears interest at the option of the Company at
15
Bank of America's prime rate or the offshore rate plus 1.75%, and the Company
may further elect an agreed upon fixed rate.
On May 1, 1996, Hollywood Park issued a standby letter of credit in the amount
of $2,617,000, as security for its self insurance workers' compensation program
with the state of California.
On July 1, 1996, Hollywood Park and Bank of America executed Amendment Two to
the Business Loan Agreement, which among other things, extended the date for
drawing down on the line of credit from July 1, 1996, to September 1, 1996. On
April 30, 1996, Hollywood Park and Bank of America executed Amendment One to the
Business Loan Agreement, which among other things, extended the date for drawing
down on the Line of Credit from May 1, 1996, to July 1, 1996, and adjusted the
tangible net worth covenant requirement for December 31, 1996.
As of March 31, 1996, Hollywood Park did not meet the quick assets to current
liabilities bank covenant contained in the Business Loan Agreement, and as of
December 31, 1995, did not meet the tangible net worth and quick ratio covenants
in the Business Loan Agreement. On May 10, 1996, Bank of America waived
compliance with the quick ratio covenant, through June 29, 1996, and on March
20, 1996, the Bank waived compliance with both covenants. As of June 30, 1996,
the Company was in compliance with all financial covenants.
Capital expenditures of $9,132,000, for the six months ended June 30, 1996, were
primarily related to construction of Crystal Park. With Hollywood Park
increasing its ownership interest in Crystal Park to 88% from 40%, the Company
will be responsible for the corresponding greater amount of the construction
costs.
Dividends of $962,000 were paid on the convertible preferred stock during the
six months ended June 30, 1996. Such dividends were made in payments of
approximately $481,000 (representing $17.50 per convertible preferred share) on
May 15, 1996, and February 15, 1996. On July 1, 1996, the Company declared its
regular preferred quarterly dividend of $481,000, payable on August 15, 1996.
As of January 1, 1996, shares of the convertible preferred stock can be redeemed
at the option of the Company, though at no time will the convertible preferred
stock be redeemed for cash. The Company may exercise this option, only if,
among other requirements, for 20 trading days, within any period of 30
consecutive trading days, the closing price of the Company's common stock
exceeds $15.00, subject to adjustments in certain circumstances. The conversion
price is equal to 83.33 common shares for each convertible preferred share. The
Company anticipates converting the convertible preferred stock into common stock
at the earliest possible date.
In 1995, the Company began investing in corporate bonds, with approximately
$4,053,000 invested as of June 30, 1996, with Moody's ratings of Ba2 to B3 and
Standard and Poors ratings of BB+ 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. The corporate bond investments, as of June 30,
1996, had a weighted average maturity of 1.5 years, and because the Company
reasonably expects to liquidate this investment in its normal operating cycle
this investment was classified as short term. This short term investment is
held as available for sale, and was recorded in the accompanying financial
statements at fair value, determined by the quoted market price.
SUNFLOWER On March 24, 1994, an Amended and Restated Credit and Security
Agreement (the "Senior Credit") was executed between Sunflower and five banks
(the "Banks") in connection with the Company's acquisition of Sunflower. The
Senior Credit has been amended three times, most recently in October 1995 by the
Standstill Agreement (discussed below). The Senior Credit was non-recourse to
Hollywood Park, except for the Company's guarantee of the interest payments
required under the Standstill Agreement. The guarantee was terminated, without
any payments by the Company, by reason of the termination of the Standstill
Agreement. As of June 30, 1996, the Senior Credit had an outstanding balance of
$28,667,000.
16
In December 1994, 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. In 1995, Hollywood Park advanced $2,500,000 to Sunflower,
which along with accrued interest is subordinated to the Senior Credit
obligations.
In October 1995, Sunflower and the Banks executed a Standstill Agreement, which
among other things, provided for the extension of the Senior Credit maturity.
The Standstill Agreement provided for the deferral of 100% of the principal
payments and 50% of the interest payments due under the Senior Credit from April
1995 through the termination date of the Standstill Agreement. The Standstill
Agreement terminated on May 2, 1996, because the Kansas Legislature concluded
its 1996 session without passing legislation that would have permitted slot
machines or other casino gaming at Kansas race tracks, including Sunflower. On
May 17, 1996, Sunflower filed for reorganization under Chapter 11 of the
Bankruptcy Code.
GENERAL Hollywood Park is continually evaluating future growth opportunities in
the gaming, sports and entertainment industries. 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 anticipated cash requirements
for the foreseeable future (in any event for at least the next 12 months).
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
As previously reported by the Company, and described in the Company's Annual
Report on Form 10-K for 1994, six purported class actions (the "Class Actions")
were filed beginning in September 1994, against the Company and certain of its
directors and officers in the United States District Court, Central District of
California (the "District Court") and consolidated in a single action entitled
In re Hollywood Park Securities Litigation. On September 15, 1995, a related
- ------------------------------------------
stockholder derivative action, entitled Barney v. Hubbard, et al. (the
-------------------------
"Derivative Action"), was filed in the California Superior Court for the County
of San Diego (the "State Court").
The Company and other defendants each denied any liability or wrongdoing and
asserted various defenses. The District Court ordered the parties to engage in
non-binding mediation in an effort to settle all related claims. As previously
reported, as a result of the court ordered mediation, the parties reached an
agreement-in-principle to settle all claims raised in the Class and Derivative
Actions. The Company entered into the settlements in order to avoid the
expense, uncertainty and distraction of further litigation.
On November 6 and 13, 1995, respectively, the parties executed definitive
settlement agreements in the Derivative and Class Actions. Those agreements
provided for the release and dismissal of all claims raised or which might have
been raised in the Class and Derivative actions, subject to approval by each of
the respective courts. In settlement of the Class Actions, a settlement fund in
the principal amount of $5,800,000 has been created for the benefit of the
alleged class with contributions from the Company and the insurance carrier for
its directors and officers. After giving consideration to the amounts to be
received by the Company in settlement of the Derivative Action, the Company's
net settlement payment in the Class Actions was less than $2,500,000. Under
settlement of the Derivative Action, the Company will receive a $2,000,000
payment from the insurance carrier which the Company will use to pay plaintiff's
attorneys fees and expenses and partially to defray the Company's payment in the
settlement of the Class Actions. The Derivative Action settlement also includes
provisions enhancing the Company's financial controls and modifying certain
terms of its acquisition of Sunflower.
On February 26, 1996, the District Court approved the settlement of the Class
Actions and entered a judgment dismissing the Class Actions in their entirety.
On May 6, 1996, the State Court approved the settlement of the Derivative Action
and entered a judgment dismissing the Derivative Action in its entirety. On or
about July 2,
17
1996, a notice of appeal was filed in connection with the Derivative Action
judgment. The Company intends to oppose the purported appeal.
The Company also executed a separate settlement as to all purported claims
against the Company and its officers and directors by the former controlling
stockholder of Turf Paradise (the "Walkers") in connection with the Company's
acquisition of Turf Paradise. Under the terms of the consummation of the
settlement of the Class and Derivative Actions, the Walkers were excluded from
participating in the Class Actions settlement fund, agreed to release all of
their potential threatened claims, and are to receive a payment in the principal
amount of $2,750,000.
The accrued lawsuit settlement recorded in the accompanying financial statements
as of June 30, 1996, of $2,750,000 represents the settlement with the Walkers.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
- ------- ------------------------------
On May 17, 1996, Sunflower filed for reorganization under chapter 11 of the
Bankruptcy Code. As of May 17, 1996, the outstanding balance of Sunflower's
Senior Credit was $28,667,000. The Senior Credit is non-recourse to the parent
company, Hollywood Park, Inc.
On May 2, 1996, the Kansas Legislature concluded its 1996 legislative session
without adoption of legislation permitting slot machines or other casino gaming
at Kansas race tracks. This resulted in the termination of the Standstill
Agreements (see Liquidity and Capital Resources) as of May 2, 1996.
ITEM 5. OTHER INFORMATION
- ------- -----------------
As of June 30, 1996, there were several bills pending in the California State
Legislature that could have an effect on the Company. SB 1887 is a
comprehensive card gaming regulatory bill which would, among other things: (i)
establish a gaming commission to comprehensively regulate card club gaming in
California; (ii) remove the sunset clause in SB 100 (see Note 1, Acquisition of
PCM); (iii) allow the Company to operate Crystal Park in addition to the
Hollywood Park-Casino; (iv) establish an annual regulatory fee to be paid by all
card clubs in California, and (v) place a moratorium on the passage of local
ordinances authorizing new card clubs until January 1, 2001. There can be no
assurance that SB 1887 will be enacted this year or that it will be enacted in
its present form. The Company is supporting SB 1887 in its present form.
SB 2000 and Assembly Bill ("AB") 3205, both seek to reduce the state tax on
pari-mutuel wagers made in California and to distribute the savings: (i) to the
horsemen by way of purses and (ii) to the race track's by allowing them to
retain higher pari-mutuel commissions. Again, it is too soon to determine
whether either of these bills will be enacted this year, and if so, to what
extent the tax will be reduced. The Company supports both SB 2000 and AB 3205.
ITEM 6.a EXHIBITS
- -------- --------
Exhibit
Number Description of Exhibit
- ------- ----------------------
2.1 Agreement and Plan of Reorganization, by and among Hollywood Park,
Inc., and Pacific Casino Management, Inc., dated November 17, 1995, is
hereby incorporated by reference to the Company's Current Report on
Form 8-K, filed November 30, 1995, and to the Company's Current Report
on Form 8-K/A, filed January 25, 1996.
2.2 Agreement and Plan of Merger, by and among Hollywood Park, Inc., HP
Acquisition, Inc. and Boomtown, Inc., dated April 23, 1996, is hereby
incorporated by reference to the Company's Current Report of Form 8-K,
filed May 3, 1996.
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.
18
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.
10.3 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.
10.4 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.
10.5 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 10.4) is hereby
incorporated by reference to the Company's Quarterly Report on Form
10-Q for quarter ended June 30, 1994.
10.6 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.
10.7 Amendment of Oil and Gas Lease dated January 10, 1995, by and among
Hollywood Park, Inc., 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.
10.8 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.
10.9 Amendment No. One, dated April 30, 1996, by and between Hollywood
Park, Inc. and Bank of America National Trust and Savings Association,
to the Business Loan Agreement dated April 14, 1995, is hereby
incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996.
10.10 Amendment No. Two, dated July 1, 1996, by and between Hollywood Park,
Inc., and Bank of America National Trust and Savings Association, to
the Business Loan Agreement dated April, 14, 1995.
10.11 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.
10.12 Amended and Restated Agreement Respecting Pyramid Casino dated July
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
September 30, 1995.
10.13 Amended and Restated Disposition and Development Agreement of Purchase
and Sale, and Lease with Option to Purchase, dated August 2, 1995, by
and between The Community Redevelopment Agency of the City of Compton
and Compton Entertainment, Inc., is hereby incorporated by reference
to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995.
19
10.14 Guaranty, dated July 31, 1995, by Hollywood Park, Inc. in favor of the
Community Redevelopment Agency of the City of Compton, is hereby
incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995.
10.15 Lease, by and between HP Compton, Inc. and Compton Entertainment,
Inc., dated August 3, 1995, is hereby incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995.
10.16 Standstill Agreement, dated October 27, 1995, by and between Sunflower
Racing, Inc., and First Union National Bank of Florida, Bank One
Lexington, N.A., Bank Midwest, N.A., Intrust Bank, N.A., and FCLT
Loans, L.P., is hereby incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1995.
10.17 License Agreement, dated June 27, 1996, by and between HP Compton,
Inc. and Radisson Hotels International, Inc.
10.18 Blue Diamond Swap Agreement, dated August 12, 1996, by and among
Boomtown, Inc., Blue Diamond Hotel and Casino, Inc., Hollywood Park,
Inc., Edward P. Roski, Jr., Industry Hills Visitor Accommodation
Center, and Majestic Realty, Co.
10.19 Stock Purchase Agreement, dated August 12, 1996, by and between
Hollywood Park, Inc. and Edward P. Roski, Jr.
22.1 Subsidiaries of Hollywood Park, Inc.: HP Compton, Inc., a California
corporation, HP Casino, Inc., a California corporation, 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 SR
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
A Current Report on Form 8-K was filed on May 3, 1996, to report the
April 23, 1996, execution of the Agreement and Plan of Merger relating
to the strategic combination of Hollywood Park, Inc. and Boomtown,
Inc.
20
HOLLYWOOD PARK, INC.
Racing Data
HOLLYWOOD PARK RACE TRACK
1996 1995
------------------------------ ------------------------------
LIVE RACING DATES:
Spring/Summer meeting ("S/S") April 26 through July 22 April 28 through July 24
Autumn meeting ("A") Nov. 11 through Dec. 22 Nov. 15 through Dec. 24
LIVE RACE DAYS INCLUDING CHARITY DAYS (a):
Spring/Summer meeting 67 67
Autumn meeting 36 30
-------- --------
103 97
======== ========
LIVE RACE DAYS BY QUARTER:
First quarter 0 0
Second quarter (S/S) 51 48
Third quarter (S/S) 16 19
Fourth quarter (A) 36 30
-------- --------
103 97
======== ========
SIMULCAST RACE days by quarter 1996: 1Q 2Q 3Q 4Q TOTAL
-------- -------- -------- -------- --------
Santa Anita thoroughbred 66 16 0 4 86
Del Mar thoroughbred 0 0 43 0 43
Fairplex Pomona thoroughbred 0 0 18 0 18
Oak Tree from Santa Anita thoroughbred 0 0 0 27 27
Los Alamitos Harness - night races 51 4 0 0 55
Los Alamitos Quarter Horse - night races 0 45 52 48 145
Cal Expo Harness - night races 0 35 9 0 44
Bay Meadows - northern California (b) 40 0 23 26 89
Golden Gate Fields - northern California (b) 5 59 0 35 99
Fairs - northern California (b) 0 15 53 10 78
-------- -------- -------- -------- --------
TOTAL 162 174 198 150 684
======== ======== ======== ======== ========
SIMULCAST RACE DAYS BY QUARTER 1995: 1Q 2Q 3Q 4Q TOTAL
-------- -------- -------- -------- --------
Santa Anita thoroughbred 65 19 0 5 86
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 5 41
Los Alamitos Quarter Horse - night races 0 45 54 53 152
Cal Expo Harness - night races 1 36 11 16 64
Bay Meadows - northern California (b) 19 11 28 45 103
Golden Gate Fields - northern California (b) 44 55 0 15 114
Fairs - northern California (b) 0 16 60 12 88
-------- -------- -------- -------- --------
TOTAL 165 182 213 185 745
======== ======== ======== ======== ========
______
(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.
TURF PARADISE
Turf Paradise has one continuous live thoroughbred race meet that starts in
September and runs through May. During 1996 Turf Paradise raced live for the
period January 1 through May 7 and resumes live racing on September 28 and will
run through December 31. Turf Paradise operates as a simulcast facility for
Arizona's
21
Prescott Downs during the period May 24 through September 2. In 1995, Turf
Paradise raced live from January 1 through May 22, operated as a simulcast
facility for the period May 26 through September 4, and resumed live racing on
September 30 running through December 31. Along with 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 typically accepts simulcast
signals during live racing on Fridays, Saturdays and Sundays, and operates 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 DARK DAY SIMULCASTING -
DAYS SIMULCASTING PRESCOTT
---------------------- ----------------------- ---------------------
1996 1995 1996 1995 1996 1995
--------- --------- --------- --------- --------- ---------
First quarter 71 67 20 23 0 0
Second quarter 27 37 24 14 33 30
Third quarter 3 1 18 18 56 56
Fourth quarter 66 66 24 25 0 0
--------- --------- --------- --------- --------- ---------
167 171 86 80 89 86
========= ========= ========= ========= ========= =========
22
Hollywood Park, Inc.
Calculation of Earnings Per Share
For the three months ended June 30,
--------------------------------------------------------
Primary Assuming full dilution (a)
------------------------- --------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Average number of common shares outstanding 18,612,850 18,369,634 18,612,850 18,369,634
Average common shares due to assumed conversion
of convertible preferred shares 0 0 2,291,492 2,291,492
---------- ---------- ---------- ----------
Total shares 18,612,850 18,369,634 20,904,342 20,661,126
========== ========== ========== ==========
Net income $5,249,000 $4,857,000 $5,249,000 $4,857,000
Less dividend requirements on convertible preferred shares 481,000 481,000 0 0
---------- ---------- ---------- ----------
Net income available to common shareholders $4,768,000 $4,376,000 $5,249,000 $4,857,000
========== ========== ========== ==========
Net income per share $0.26 $0.24 $0.25 $0.24
========== ========== ========== ==========
For the six months ended June 30,
---------------------------------------------------------
Primary Assuming full dilution (a)
-------------------------- ---------------------------
1996 1995 1996 1995
---------- ----------- ----------- ----------
Average number of common shares outstanding 18,612,850 18,369,634 18,612,850 18,369,634
Average common shares due to assumed conversion
of convertible preferred shares 0 0 2,291,492 2,291,492
---------- ---------- ----------- ----------
Total shares 18,612,850 18,369,634 20,904,342 20,661,126
========== ========== =========== ==========
Net income (loss) ($8,129,000) $4,263,000 ($8,129,000) $4,263,000
Less dividend requirements on convertible preferred shares 962,000 962,000 0 0
----------- ---------- ----------- ----------
Net income (loss) available to (allocated to) common shareholders ($9,091,000) $3,301,000 ($8,129,000) $4,263,000
=========== ========== =========== ==========
Net income (loss) per share ($0.49) $0.18 ($0.39) $0.21
=========== ========== =========== ==========
- -------
(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.
23
Hollywood Park, Inc.
Selected Financial Data by Operational Site
For the six months ended For the three months ended
June 30, June 30,
------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
(unaudited)
REVENUES:
Hollywood Park, Inc. and Race Track $33,736,000 $33,328,000 $28,035,000 $27,542,000
Sunflower Racing, Inc. 1,782,000 5,473,000 0 2,835,000
Turf Paradise, Inc. 9,816,000 10,067,000 3,219,000 3,624,000
Hollywood Park, Inc. - Casino Division 28,946,000 18,416,000 15,173,000 8,827,000
----------- ----------- ----------- -----------
74,280,000 67,284,000 46,427,000 42,828,000
----------- ----------- ----------- -----------
EXPENSES:
Hollywood Park, Inc. and Race Track 28,857,000 28,214,000 19,522,000 19,697,000
Sunflower Racing, Inc. 1,703,000 4,602,000 0 2,337,000
Turf Paradise, Inc. 6,822,000 7,678,000 2,700,000 3,148,000
Hollywood Park, Inc. - Casino Division 24,873,000 12,831,000 12,576,000 6,519,000
----------- ----------- ----------- -----------
62,255,000 53,325,000 34,798,000 31,701,000
----------- ----------- ----------- -----------
INCOME BEFORE INTEREST, INCOME TAXES, DEPRECIATION,
AMORTIZATION AND WRITE OFF OF INVESTMENT IN SUBSIDIARY:
Hollywood Park, Inc. and Race Track 4,879,000 5,114,000 8,513,000 7,845,000
Sunflower Racing, Inc. 79,000 871,000 0 498,000
Turf Paradise, Inc. 2,994,000 2,389,000 519,000 476,000
Hollywood Park, Inc. - Casino Division 4,073,000 5,585,000 2,597,000 2,308,000
----------- ----------- ----------- -----------
12,025,000 13,959,000 11,629,000 11,127,000
----------- ----------- ----------- -----------
WRITE OFF OF INVESTMENT IN SUBSIDIARY:
Write off of investment in Sunflower Racing, Inc. 11,412,000 0 66,000 0
DEPRECIATION AND AMORTIZATION:
Hollywood Park, Inc. and Race Track 2,843,000 2,719,000 1,450,000 1,368,000
Sunflower Racing, Inc. 536,000 1,237,000 0 616,000
Turf Paradise, Inc. 610,000 698,000 301,000 369,000
Hollywood Park, Inc. - Casino Division 1,411,000 1,000,000 736,000 509,000
----------- ----------- ----------- -----------
5,400,000 5,654,000 2,487,000 2,862,000
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Hollywood Park, Inc. and Race Track 117,000 98,000 54,000 49,000
Sunflower Racing, Inc. 781,000 1,810,000 0 922,000
Turf Paradise, Inc. 0 20,000 0 3,000
----------- ----------- ----------- -----------
898,000 1,928,000 54,000 974,000
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE:
Hollywood Park, Inc. and Race Track 1,919,000 2,297,000 7,009,000 6,428,000
Write off of Investment in Sunflower Racing, Inc. (11,412,000) 0 (66,000) 0
Sunflower Racing, Inc. (1,238,000) (2,176,000) 0 (1,040,000)
Turf Paradise, Inc. 2,384,000 1,671,000 218,000 104,000
Hollywood Park, Inc. - Casino Division 2,662,000 4,585,000 1,861,000 1,799,000
----------- ----------- ----------- -----------
(5,685,000) 6,377,000 9,022,000 7,291,000
Income tax expense 2,444,000 2,114,000 3,773,000 2,434,000
----------- ----------- ----------- -----------
Net income (loss) ($8,129,000) $4,263,000 $5,249,000 $4,857,000
=========== =========== =========== ===========
Dividend requirements on convertible preferred stock $962,000 $962,000 $481,000 $481,000
----------- ----------- ----------- -----------
Net income (loss) available to (allocated to) common shareholders ($9,091,000) $3,301,000 $4,768,000 $4,376,000
=========== =========== =========== ===========
Per common share:
Net income (loss) - primary ($0.49) $0.18 $0.26 $0.24
Net income (loss) - fully diluted ($0.49) $0.18 $0.25 $0.24
Number of shares - primary 18,612,850 18,369,634 18,612,850 18,369,634
Number of shares - fully diluted 20,904,342 20,661,126 20,904,342 20,661,126
24
Hollywood Park, Inc.
Pari-mutuel Wagering Data
For the six months ended For the three months ended
June 30, June 30,
------------------------------ ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
(unaudited)
HOLLYWOOD PARK
--------------
Pari-mutuel handle:
On-track $90,716,000 $94,351,000 $90,716,000 $94,351,000
Off-track - shared handle wagering 277,802,000 229,650,000 277,802,000 229,650,000
Simulcast 191,516,000 194,042,000 105,358,000 111,636,000
------------ ------------ ------------ ------------
Total $560,034,000 $518,043,000 $473,876,000 $435,637,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $5,860,000 $5,985,000 $5,860,000 $5,985,000
Off-track - shared handle wagering 8,105,000 7,436,000 8,105,000 7,436,000
Off-track - independent handle 1,214,000 1,076,000 1,214,000 1,076,000
Simulcast 6,022,000 5,794,000 4,353,000 4,192,000
------------ ------------ ------------ ------------
Total $21,201,000 $20,291,000 $19,532,000 $18,689,000
============ ============ ============ ============
TURF PARADISE
-------------
Pari-mutuel handle:
On-track $16,193,000 $18,268,000 $4,421,000 $6,291,000
Off-track - shared handle wagering 69,189,000 46,492,000 20,224,000 15,979,000
Simulcast 31,203,000 29,124,000 13,272,000 12,284,000
------------ ------------ ------------ ------------
Total $116,585,000 $93,884,000 $37,917,000 $34,554,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $1,926,000 $2,483,000 $539,000 $1,131,000
Off-track - shared handle wagering 2,958,000 2,956,000 857,000 1,303,000
Off-track - independent handle 103,000 507,000 49,000 139,000
Simulcast 2,519,000 1,442,000 1,012,000 109,000
------------ ------------ ------------ ------------
Total $7,506,000 $7,388,000 $2,457,000 $2,682,000
============ ============ ============ ============
COMBINED
--------
Pari-mutuel handle:
On-track $106,909,000 $112,619,000 $95,137,000 $100,642,000
Off-track - shared handle wagering 346,991,000 276,142,000 298,026,000 245,629,000
Simulcast 222,719,000 223,166,000 118,630,000 123,920,000
------------ ------------ ------------ ------------
Total $676,619,000 $611,927,000 $511,793,000 $470,191,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $7,786,000 $8,468,000 $6,399,000 $7,116,000
Off-track - shared handle wagering 11,063,000 10,392,000 8,962,000 8,739,000
Off-track - independent handle 1,317,000 1,583,000 1,263,000 1,215,000
Simulcast 8,541,000 7,236,000 5,365,000 4,301,000
------------ ------------ ------------ ------------
Total $28,707,000 $27,679,000 $21,989,000 $21,371,000
============ ============ ============ ============
25
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 13, 1996
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ G. Michael Finnigan
---------------------------- Dated: August 13, 1996
G. Michael Finnigan
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
26
HOLLYWOOD PARK, INC.
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
10.10 Amendment No. Two, dated July 1, 1996, by 1
and between Hollywood Park, Inc. and Bank
of America National Trust and Savings
Association, to the Business Loan
Agreement dated April 14, 1995.
10.17 License Agreement, dated June 27, 1996, 3
by and between HP Compton, Inc. and
Radisson Hotels International, Inc.
10.18 Blue Diamond Swap Agreement, dated August 36
12, 1996, by and among Boomtown, Inc.,
Blue Diamond Hotel and Casino, Inc.,
Hollywood Park, Inc., Edward P. Roski,
Jr., Industry Hills Visitor Accommodation
Center, and Majestic Realty, Co.
10.19 Stock Purchase Agreement, dated August 50
12, 1996, by and between Hollywood Park,
Inc. and Edward P. Roski, Jr.
27.1 Financial Data Schedule