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 September 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 November 13, 1996: 18,282,498.
Hollywood Park, Inc.
Table of Contents
Part I
Item 1. Financial Information
Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995..........1
Consolidated Statements of Operations for the three months ended
September 30, 1996 and 1995.......................................................2
Consolidated Statements of Operations for the nine months ended
September 30, 1996 and 1995.......................................................3
Consolidated Statements of Cash Flows for the nine months ended
September 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 4. Submission of Matters to a Vote of Security-Holders...................................17
Item 5. Other Information.....................................................................18
Item 6.a Exhibits..............................................................................18
Other Financial Information...........................................................21
Signatures............................................................................26
Hollywood Park, Inc.
Consolidated Balance Sheets
September 30, December 31,
1996 1995
-------------- --------------
(unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 15,683,000 $ 22,406,000
Restricted cash 834,000 3,126,000
Short term investments 3,498,000 6,447,000
Other receivables, net of allowance for doubtful accounts
of $953,000 in 1996 and $1,841,000 in 1995 6,256,000 8,147,000
Prepaid expenses and other assets 5,249,000 3,888,000
Deferred tax assets 4,878,000 4,888,000
Current portion of notes receivable 37,000 34,000
------------ ------------
Total current assets 36,435,000 48,936,000
Notes receivable 829,000 857,000
Property, plant and equipment, net 127,572,000 174,717,000
Lease with TRAK East, net 0 1,195,000
Goodwill, net 20,502,000 26,829,000
Long term gaming assets 5,845,000 19,063,000
Other assets 7,448,000 11,706,000
------------ ------------
$198,631,000 $283,303,000
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 8,598,000 $ 12,518,000
Accrued lawsuit settlement 2,750,000 5,232,000
Accrued liabilities 12,637,000 13,607,000
Accrued workers' compensation 1,906,000 2,277,000
Accrued slip and fall claims 1,652,000 1,543,000
Gaming liabilities 2,806,000 3,998,000
Amounts due to horsemen for purses, stakes and awards 433,000 709,000
Outstanding pari-mutuel tickets 720,000 2,757,000
Current portion of notes payable 28,000 32,310,000
------------ ------------
Total current liabilities 31,530,000 74,951,000
Notes payable 282,000 15,629,000
Gaming liabilities 3,970,000 16,894,000
Deferred tax liabilities 5,022,000 10,083,000
------------ ------------
Total liabilities 40,804,000 117,557,000
Minority interests 3,000,000 0
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;
18,282,498 issued and outstanding in 1996, and 1,829,000 1,850,000
18,504,798 in 1995
Capital in excess of par value 166,540,000 168,479,000
Accumulated deficit (13,570,000) (4,611,000)
------------ ------------
Total stockholders' equity 154,827,000 165,746,000
------------ ------------
$198,631,000 $283,303,000
============ ============
- ------
See accompanying notes to consolidated financial statements.
Hollywood Park, Inc.
Consolidated Statements of Operations
For the three months ended September 30,
---------------------------------------
1996 1995
------------ ------------
(unaudited)
REVENUES:
Pari-mutuel commissions $ 8,886,000 $10,066,000
Lease and management fee - Sunflower 0 1,199,000
Gaming - Casino 13,114,000 0
Lease - Casino 0 5,394,000
Admissions, programs, and other racing income 3,674,000 3,754,000
Concession sales 2,766,000 4,554,000
Other income 1,807,000 1,628,000
----------- -----------
30,247,000 26,595,000
----------- -----------
EXPENSES:
Salaries, wages and employee benefits 12,745,000 9,281,000
Operations of facilities 2,031,000 2,535,000
Cost of concession sales 4,558,000 6,038,000
Professional services 1,561,000 1,137,000
Rent 222,000 223,000
Utilities 1,229,000 1,493,000
Marketing 1,303,000 1,044,000
Administrative 2,896,000 2,828,000
----------- -----------
26,545,000 24,579,000
----------- -----------
Income before interest, income taxes, depreciation,
amortization and other non-recurring expenses 3,702,000 2,016,000
Lawsuit settlement 0 5,627,000
Depreciation and amortization 2,498,000 2,824,000
Interest expense 20,000 958,000
----------- -----------
Income (loss) before income taxes 1,184,000 (7,393,000)
Income tax expense (benefit) 581,000 (1,756,000)
----------- -----------
Net income (loss) $ 603,000 ($5,637,000)
=========== ===========
Dividend requirements on convertible preferred stock $ 481,000 $ 481,000
Net income (loss) available to (allocated to) common shareholders $ 122,000 ($6,118,000)
Per common share:
Net income (loss)- primary $ 0.01 ($0.33)
Net income (loss) - fully diluted $ 0.01 ($0.33)
Cash dividend per common share $ 0.00 $0.00
Number of shares - primary 18,534,592 18,369,634
Number of shares - fully diluted 20,826,084 20,661,126
- -----
See accompanying notes to consolidated financial statements.
2
Hollywood Park, Inc.
Consolidated Statements of Operations
For the nine months ended September 30,
-----------------------------------------
1996 1995
------------ ------------
(unaudited)
REVENUES:
Pari-mutuel commissions $ 37,593,000 $37,745,000
Lease and management fee - Sunflower 1,071,000 4,344,000
Gaming - Casino 37,917,000 0
Lease - Casino 0 18,064,000
Admissions, programs, and other racing income 12,310,000 13,026,000
Concession sales 10,403,000 15,359,000
Other income 5,233,000 5,341,000
------------ -----------
104,527,000 93,879,000
------------ -----------
EXPENSES:
Salaries, wages and employee benefits 41,359,000 29,718,000
Operations of facilities 6,435,000 7,843,000
Cost of concession sales 15,308,000 19,504,000
Professional services 6,129,000 5,657,000
Rent 923,000 901,000
Utilities 3,202,000 3,642,000
Marketing 4,987,000 3,728,000
Administrative 10,457,000 6,911,000
------------ -----------
88,800,000 77,904,000
------------ -----------
Income before interest, income taxes, depreciation,
amortization and other non-recurring expenses 15,727,000 15,975,000
Write off of investment in Sunflower 11,412,000 0
Lawsuit settlement 0 5,627,000
Depreciation and amortization 7,898,000 8,478,000
Interest expense 918,000 2,886,000
------------ -----------
Loss before income taxes (4,501,000) (1,016,000)
Income tax expense 3,025,000 358,000
------------ -----------
Net loss $ (7,526,000) $(1,374,000)
============ ===========
Dividend requirements on convertible preferred stock $ 1,443,000 $ 1,443,000
Net loss allocated to common shareholders ($8,969,000) ($2,817,000)
Per common share:
Net loss - primary ($0.48) ($0.15)
Net loss - fully diluted ($0.48) ($0.15)
Cash dividend per common share $0.00 $0.00
Number of shares - primary 18,604,755 18,369,634
Number of shares - fully diluted 20,896,247 20,661,126
- ------
See accompanying notes to consolidated financial statements.
3
Hollywood Park, Inc.
Consolidated Statements of Cash Flows
For the nine months ended September 30,
--------------------------------------
1996 1995
------------ ------------
(unaudited)
Cash flows from operating activities:
Net loss $ (7,526,000) $ (1,374,000)
Adjustment to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 7,342,000 8,495,000
Changes in accounts due to deconsolidation of subsidiary
in bankruptcy:
Property, plant and equipment 58,380,000 0
Secured notes payable (28,918,000) 0
Unsecured notes payable (15,323,000) 0
Goodwill and lease with TRAK East 6,908,000 0
Unrealized gain on short term bond investing 11,000 4,000
(Gain) loss on sale or disposal of property, plant and equipment (3,000) 64,000
Decrease (increase) in restricted cash 2,292,000 (173,000)
Increase in casino lease and related interest receivable, net 0 (6,945,000)
Decrease in other receivables, net 1,891,000 4,417,000
Decrease (increase) in prepaid expenses and other assets 2,897,000 (4,901,000)
Decrease in deferred tax assets 10,000 467,000
(Decrease) increase in accounts payable (3,920,000) 592,000
(Decrease) increase in accrued lawsuit settlement (2,482,000) 5,200,000
Decrease in gaming liabilities (1,192,000) 0
(Decrease) increase in accrued liabilities (970,000) 1,440,000
(Decrease) increase in accrued workers' compensation (371,000) 94,000
Increase in accrued slip and fall claims 109,000 138,000
Decrease in amounts due to horsemen for purses, stakes
and awards (276,000) (479,000)
Decrease in outstanding pari-mutuel tickets (2,037,000) (525,000)
(Decrease) increase in deferred tax liabilities (5,061,000) 159,000
------------ ------------
Net cash provided by operating activities 11,761,000 6,673,000
------------ ------------
Cash flows from investing activities:
Additions to property, plant and equipment (17,969,000) (11,959,000)
Receipts from sale of property, plant and equipment 9,000 108,000
Principal collected on notes receivable 25,000 23,000
Purchase of short term investments (14,009,000) (19,829,000)
Proceeds from short term investments 16,958,000 13,619,000
Long term gaming assets 294,000 0
------------ ------------
Net cash used in investing activities (14,692,000) (18,038,000)
------------ ------------
Cash flows from financing activities:
Proceeds from unsecured notes payable 0 1,681,000
Payment of unsecured notes payable (30,000) (3,820,000)
Payment of secured notes payable (3,358,000) (1,333,000)
Payments from minority interest partners 3,000,000 0
Payments under capital lease obligations 0 (53,000)
Common stock repurchase and retirement (1,961,000) 0
Dividends paid to preferred stockholders (1,443,000) (1,443,000)
------------ ------------
Net cash used for financing activities (3,792,000) (4,968,000)
------------- -------------
Decrease in cash and cash equivalents (6,723,000) (16,333,000)
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 $ 15,683,000 $ 20,789,000
============ ============
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.
GENERAL The Company owns and operates the Hollywood Park race track, a premier
thoroughbred racing facility located in California, Turf Paradise, Inc. ("Turf
Paradise"), a thoroughbred racing facility located in Arizona, and Sunflower
Racing, Inc. ("Sunflower"), operating as the Woodlands, a greyhound and
thoroughbred racing facility located in Kansas. On May 17, 1996, under pressure
from intense competition from Missouri riverboat gaming, Sunflower filed for
reorganization under Chapter 11 of the Bankruptcy Code. On the same property as
the Hollywood Park race track, the Company owns and operates the Hollywood Park-
Casino (the "Casino"). The Company owns 88% of Crystal Park Hotel and Casino
Development Co., LLC, ("Crystal Park LLC") which built and presently leases, the
Crystal Park Hotel and Casino, ("Crystal Park"), to an unaffiliated third party.
Crystal Park began operations on October 25, 1996.
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.
5
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 Park-Casino.
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 136,008 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 Boards 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 has been approved by
both Hollywood Park's and Boomtown's common shareholders, and is expected to be
finalized in first quarter 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 the following remaining conditions: the consent of the
holders of the 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. The application process for the required regulatory
approvals and gaming permits is in progress. In addition, Boomtown intends to
seek the consent of the holders of a majority in principal amount of the
outstanding Boomtown bonds in connection with the Blue Diamond Swap (as defined
below). 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.
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 full casino gaming, hotel accommodations
(at Boomtown Reno and Boomtown Las Vegas only), and other entertainment
amenities to primarily middle income, value oriented customers.
Boomtown Reno has been operating for over a quarter century and is located
approximately two miles from the California - Nevada border 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
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, and two
restaurants.
On August 12, 1996, Boomtown, Blue Diamond Hotel and Casino, Inc. ("Blue
Diamond") (a wholly owned subsidiary of Boomtown, Inc., which leases and
operates Boomtown Las Vegas), Hollywood Park, IVAC (the owner/lessor of Boomtown
Las Vegas), Edward P. Roski, Jr. (a general partner of IVAC), and an affiliate
of Mr. Roski entered into the Blue Diamond Swap Agreement (the "Swap
Agreement"), pursuant to which the parties agreed that, immediately following
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, among other things, 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"), the termination
of the Boomtown Las Vegas lease, an estimated cash payment of $2,100,000, and
the release from liabilities and note obligations totaling approximately
$3,800,000 and from ongoing expenses of the Boomtown Las Vegas resort. 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.
On August 12, 1996, Hollywood Park and Mr. Roski further entered into a Stock
Purchase Agreement pursuant to which Hollywood Park will concurrently with the
Blue Diamond Swap and the Merger, purchase 714,386 shares of Boomtown common
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. Boomtown Biloxi, began operations in July 1994, and
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, located in Jefferson Parish, 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 is composed of an 88,000
square foot entertainment center and a western saloon/dance hall. On November
5, 1996, there was a parish by parish vote regarding the continuation of gaming,
and the voters of Jefferson Parish overwhelmingly approved retaining riverboat
gaming.
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 was
heard on August 19 and 20, 1996, and the decision to grant the gaming license
was deferred until a hearing scheduled for January 1997.
CRYSTAL PARK HOTEL AND CASINO Crystal Park, California's first hotel and
casino, opened on October 25, 1996, with 110 gaming tables, with no limit on the
number of gaming tables that can be added, with approximately 282 hotel rooms,
including 41 VIP suites, a restaurant, gift shop, full service health spa with
massage center and outdoor pool, and a lobby sports bar and lounge. The hotel
operates under a Radisson Hotels
7
International, Inc. ("Radisson") flag, under a 20 year License Agreement the
Company signed with Radisson on June 27, 1996. Hollywood Park can terminate the
License Agreement, at no cost to the Company, at the end of the third, fifth or
tenth year.
On July 14, 1995, the Company and Compton Entertainment, Inc. ("CEI") executed
an Amended and Restated Agreement Respecting Pyramid Casino (the "Crystal Park
Agreement") (Pyramid Casino was 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. On October 24, 1996, CEI paid Hollywood Park approximately
$1,203,000, as reimbursement for non-construction related pre-opening costs
incurred on CEI's behalf by the Company. Upon the October 25, 1996 opening of
the card club, Hollywood Park paid CEI an additional $2,499,000, as required by
the Crystal Park 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.
Hollywood Park, Redwood Gaming LLC (controlled by the Edward J. DeBartolo
Family) and First Park Investments LLC (controlled by Leo Chu and Ivy Chu)
formed Crystal Park Hotel and Casino Development Co., LLC, an 88%, 8%, 4%
partnership, respectively, which built and now leases the Crystal Park property.
Current California law 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); therefore, the Crystal Park LLC executed a 60 month lease with CEI.
Under the terms of the lease, as the landlord, Crystal Park LLC built and
furnished the card club for CEI to operate. Crystal Park LLC is not responsible
for any segment of the daily operations. Over the 60 month term, the fixed
monthly rent payments are as follows: $200,000 per month for months one through
six; $350,000 per month for months seven through twelve; and approximately
$759,000 per month for the balance of the lease. If there is a change in
California law, allowing the Company to operate card clubs at sites other than
its race track property, Crystal Park LLC would operate the card club in
partnership with CEI, (the "Crystal Park Partnership") with Crystal Park LLC
owning 67% of the business. Under the terms of the Crystal Park Partnership,
Crystal Park LLC would receive 90% of the distributable cash flow until it had
received its approximately $26,000,000 initial investment back, together with an
annualized 20% return on that investment.
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 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.
8
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 136,008 shares of Hollywood Park common
stock issued to the former PCM shareholders and an estimated 134,194 shares of
common stock due to the former PCM shareholders, based on the closing market
price of Hollywood Park's common stock on September 30, 1996.
HOLLYWOOD PARK, INC.
Unaudited Pro Forma Combined Consolidated Results of Operations
For the three months ended Sept. 30,
-------------------------------------
1996 (a) 1995
------------ ------------
Revenues:
Hollywood Park, Inc. and race tracks $ 15,042,000 $ 18,615,000
Hollywood Park, Inc. - Casino Division 15,205,000 14,934,000
------------ ------------
$ 30,247,000 $ 33,549,000
------------ ------------
Income before interest, income taxes, depreciation,
amortization and other non-recurring expenses 3,702,000 1,780,000
Net income (loss) $ 603,000 $ (5,837,000)
============ ============
Dividend requirements on convertible preferred stock $ 481,000 $ 481,000
Net income (loss) available to (allocated to) common shareholders $ 122,000 $ (6,318,000)
Per common share before interest, income taxes, depreciation,
amortization, and other non-recurring expenses:
Income - primary $ 0.17 $ 0.07
Income - fully diluted $ 0.17 $ 0.07
Per common share:
Net income (loss) - primary $ 0.01 ($0.34)
Net income (loss) - fully diluted $ 0.01 ($0.34)
For the nine months ended Sept. 30,
-------------------------------------
1996 (a) 1995
Revenues:
Hollywood Park, Inc. and race tracks $ 60,376,000 $ 67,483,000
Hollywood Park, Inc. - Casino Division 44,151,000 41,099,000
------------ ------------
$104,527,000 $108,582,000
------------ ------------
Income before interest, income taxes, depreciation,
amortization and other non-recurring expenses 15,727,000 9,448,000
Net loss $ (7,526,000) $ (7,966,000)
============ ============
Dividend requirements on convertible preferred stock $ 1,443,000 $ 1,443,000
Net loss allocated to common shareholders $ (8,969,000) $ (9,409,000)
Per common share before interest, income taxes, depreciation,
amortization, and other non-recurring expenses:
Income - primary $ 0.77 $ 0.43
Income - fully diluted $ 0.75 $ 0.43
Per common share:
Net loss - primary ($0.48) ($0.50)
Net loss - fully diluted ($0.48) ($0.50)
_____
(a) The results for these periods are actual.
9
RESTRICTED CASH Restricted cash as of September 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 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 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 nine months ended September
30, 1996, was $2,583,000. There were no comparable costs for the nine months
ended September 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 maturities of 90 days or less.
STOCK REPURCHASE 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 November 13, 1996, the Company had
repurchased, and retired 222,300 common shares at a cost of approximately
$1,960,000.
RECLASSIFICATIONS Certain reclassifications have been made to the 1995 balances
to be consistent with the 1996 financial statement presentation.
NOTE 2 -- SHORT TERM INVESTMENTS
As of September 30, 1996, short term investments consisted of corporate bonds
valued at $3,498,000. 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.
As of September 30, 1996, corporate bond investments had a weighted average
maturity of 1.3 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 nine months ended September 30, 1996, proceeds from the sale of
corporate bonds were approximately $6,785,000, all of which were reinvested,
with gross realized gains and losses of approximately $21,000 and $39,000,
respectively. The net unrealized holding gain, as of September 30, 1996, was
$11,000.
10
NOTE 3 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment held at September 30, 1996, and December 31, 1995,
consisted of the following:
September 30, December 31,
1996 (a) 1995
------------ ------------
Land and land improvements $ 30,016,000 $ 42,490,000
Buildings and building improvements 135,085,000 175,960,000
Equipment 25,229,000 36,003,000
Construction in progress 18,662,000 8,394,000
------------ ------------
208,992,000 262,847,000
Less accumulated depreciation 81,420,000 88,130,000
------------ ------------
$127,572,000 $174,717,000
============ ============
_____
(a) The September 30, 1996 figures do not include Sunflower's property,
plant and equipment.
NOTE 4 -- SECURED AND UNSECURED NOTES PAYABLE
Notes payable as of September 30, 1996, and December 31, 1995, consisted of the
following:
September 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 0 3,358,000
Unsecured note payable - Gold Cup 310,000 340,000
------------ ------------
310,000 47,939,000
Less current maturities 28,000 32,310,000
------------ ------------
$ 282,000 $ 15,629,000
============ ============
_____
(a) The September 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.
NOTE 5 -- LONG TERM GAMING ASSETS
The Company purchased the convention center parcel at the Crystal Park site,
which was renovated 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 60 month 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
11
liability was reduced as the construction disbursements were 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
$466,000 for the nine months ended September 30, 1996, and for the three months
ended September 30, 1996, there was a credit balance of approximately $197,000.
During the three months ended September 30, 1996, the Company was reimbursed for
development expenses of approximately $250,000, from a potential partner related
to an abandoned project. Expenses incurred year-to-date primarily consisted of
costs related to the Inglewood site master plan and card clubs in California.
Included in Administrative expenses were development costs of approximately
$1,636,000 for the nine months ended September 30, 1995, and approximately
$1,293,000 for the three months ended September 30, 1995. Development expenses
for both the three and the nine months ended September 30, 1995, consisted
primarily of costs related to the environmental impact study for the proposed
stadium at Hollywood Park, and card clubs in California.
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
SFAS 123 and noted that the impact on net loss for the nine months ended
September 30, 1996 and 1995 was immaterial.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
- -------------
Except for the historical information contained herein, the matters addressed in
this Item 2 and in Note 1 to the Consolidated Financial Statements, Summary of
Significant Accounting Policies, may 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,
including the failure to obtain gaming licenses or to complete anticipated
expansion projects, and the failure to obtain adequate financing to meet the
Company's strategic goals. 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. For more information on the potential
factors which could affect the Company's financial results, please review the
Company's filings with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K, and the Company's other filings including
the Joint Proxy Statement/Prospectus dated September 20, 1996.
RESULTS OF OPERATIONS
Three months ended September 30, 1996, compared to the three months ended
- -------------------------------------------------------------------------
September 30, 1995
- ------------------
The results of operations for the three months ended September 30, 1996,
included the results of Hollywood Park operating all aspects of the Casino,
including the gaming floors, whereas, during the three months ended September
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 September 30, 1996, excluded
the results of operations for Sunflower, due to Sunflower's May 17, 1996, filing
for reorganization under Chapter 11 of the Bankruptcy code. Sunflower's results
of operations are included for the three months ended September 30, 1995.
Total revenues increased by $3,652,000, or 13.7%, during the three months ended
September 30, 1996, as compared to the three months ended September 30, 1995.
Pari-mutuel commissions decreased by $1,180,000, or 11.7%, primarily due to
three fewer live race days at Hollywood Park during the three months ended
September 30, 1996, as compared to the same period in 1995. Gaming - Casino
revenues of $13,114,000 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 of operations, during the
three months ended September 30, 1995, the Company recorded Lease - Casino
revenue of $5,394,000, and concession sales to PCM of approximately $649,000.
Concession sales decreased by $1,788,000, or 39.3%, with $777,000 of the decline
attributable to the exclusion of Sunflower's 1996 concession sales, with the
remainder primarily due to the 1995 sales to the former Casino lessee (as
previously mentioned), with no corresponding sales in the 1996 operating
results.
Total operating expenses increased by $1,966,000, or 8.0%, for the three months
ended September 30, 1996, as compared to the three months ended September 30,
1995. Total operating expenses for the three months ended September 30, 1996,
included the Casino gaming floor expenses, with no corresponding expenses in the
operating results for the three months ended September 30, 1995. Also,
Sunflower's operating expenses for the three months ended September 30, 1996,
are not included in the operating results, though these expenses are included in
the operating results for the three months ended September 30, 1995. Salaries,
wages and employee benefits increased by $3,464,000, or 37.3%, primarily because
of wages and benefits associated with the gaming floor staff, for which there
are no comparable expenses in the 1995 operating results. Operations of
facilities costs decreased by $504,000, or 19.9%, primarily due to the exclusion
of Sunflower's expenses in the 1996 operating results. Cost of concession sales
decreased by $1,480,000, or 24.5%, with $682,000 of the decrease related to the
exclusion of Sunflower's 1996 operating expenses, with the remainder primarily
due to cost saving measures implemented at the Hollywood Park race track and
Casino. Professional services increased by $424,000, or 37.3%, due primarily to
increased legal expenses.
13
Utilities decreased by $264,000, or 17.7%, primarily due to the exclusion of
Sunflower's 1996 operating expenses. Marketing costs increased by $259,000, or
24.8%, mainly due to Casino marketing costs, offset by the exclusion of
Sunflower's 1996 marketing expenses. Included in the 1995 expenses was
$5,627,000 for the lawsuit settlement, with no corresponding expense in the 1996
results of operations.
Depreciation and amortization decreased by $326,000, or 11.5%, primarily due to
the exclusion of Sunflower's 1996 depreciation and amortization expense, netted
against the amortization of the goodwill associated with the November 17, 1995,
PCM acquisition. Interest expense decreased by $938,000, or 97.9%, due entirely
to the exclusion of Sunflower's 1996 interest expense.
Income tax expense increased by $2,337,000 due to pre-tax income being generated
during the three months ended September 30, 1996, as compared to a pre-tax loss
generated during the three months ended September 30, 1995, and an anticipated
slightly higher effective tax rate in 1996.
Nine months ended September 30, 1996, compared to the nine months ended
- -----------------------------------------------------------------------
September 30, 1995
- ------------------
The results of operations for the nine months ended September 30, 1996, included
the results of Hollywood Park operating all aspects of the Casino, including the
gaming floors whereas, during the nine months ended September 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 nine months ended September 30, 1996, included Sunflower's results of
operations for the three months ended March 31, 1996, and due to Sunflower's May
17, 1996, filing for reorganization under Chapter 11 of the Bankruptcy Code,
excluded Sunflower's results of operations for the six months ended September
30, 1996. Sunflower's results of operations are included in the financial
statements for the entire nine months ended September 30, 1995.
Total revenues increased by $10,648,000, or 11.3%, for the nine months ended
September 30, 1996, as compared to the nine months ended September 30, 1995.
Lease and management fee - Sunflower decreased by $3,273,000, or 75.3%, due to
the exclusion of Sunflower's operating results for the six months ended
September 30, 1996. Gaming - Casino revenues of $37,917,000 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
financial results, during the nine months ended September 30, 1995, the Company
recorded Lease - Casino revenues of $18,064,000, and concession sales to PCM of
approximately $2,415,000. Admissions, programs and other racing income declined
by $716,000, or 5.5%, primarily related to the exclusion of Sunflower's
operating results for the six months ended September 30, 1996. Concession sales
decreased by $4,956,000, or 32.3%, with $1,561,000, or 31.5%, of the decline
attributable to the exclusion of Sunflower's concession sales for the six months
ended September 30, 1996, with the remaining decrease primarily related to the
fact that the 1995 results included sales to PCM, the former gaming floor lessee
(as previously mentioned), with no corresponding concession sales in the 1996
revenues.
Total operating expenses, inclusive of Casino gaming floor expenses, (with no
corresponding gaming floor operating expenses in the 1995 results of operations)
and with the 1996 financial results exclusive of Sunflower's operating expense
for the six months ended September 30, 1996, increased by $10,896,000, or 14.0%,
for the nine months ended September 30, 1996, as compared to the nine months
ended September 30, 1995. Salaries wages and employee benefits increased by
$11,641,000, or 39.2%, primarily because of wages and benefits associated with
the gaming floor staff, for which there are no corresponding expenses in the
results of operations for the nine months ended September 30, 1995. Operations
of facilities costs decreased by $1,408,000, or 18.0%, primarily a result of the
exclusion of Sunflower's expenses for the six months ended September 30, 1996.
Cost of concession sales decreased by $4,196,000, or 21.5%, primarily due to the
exclusion of Sunflower's expenses for the six months ended September 30, 1996,
and staff reductions at the Casino. Professional services increased by
$472,000, or 8.3%, primarily due to gaming floor costs at the Casino, for which
there are no corresponding costs in the 1995 operating expenses. Utilities
costs decreased by $440,000, or 12.1%, primarily because of the exclusion of
Sunflower's expenses for the six months ended September 30, 1996. Marketing
costs increased by $1,259,000, or 33.8%, primarily due to
14
Casino marketing costs. Administrative costs increased by $3,546,000, or 51.3%,
primarily a result of costs associated with the operation of the gaming floors,
including the city of Inglewood monthly gaming license fees. Included in the
1995 results of operations was $5,627,000 of expenses related to the lawsuit
settlement with no corresponding expense in 1996.
Depreciation and amortization costs decreased by $580,000, or 6.8%, primarily
due to the exclusion of Sunflower's expense for the six months ended September
30, 1996, netted against the amortization of the goodwill associated with the
November 17, 1995, PCM acquisition. Interest expense decreased by $1,968,000, or
68.2%, due to the exclusion of Sunflower's interest expense for the six months
ended September 30, 1996.
Income tax expense increased by $2,667,000, due to higher pre-tax income in 1996
(excluding the write-off of the investment in Sunflower) and an anticipated
higher effective tax rate in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Hollywood Park's principal source of liquidity at September 30, 1996, was cash
and cash equivalents of approximately $15,683,000. Cash and cash equivalent
decreased by $6,723,000, during the nine months ended September 30, 1996, as
compared to cash and cash equivalents as of December 31, 1995, primarily a
result of Crystal Park construction disbursements, payment of secured notes
payable, and the payment of the convertible preferred dividends, netted against
cash provided by operating activities, the maturity of short term investments,
the return of the Company's workers' compensation self-insurance cash deposit,
and capital contributions from the Crystal Park LLC minority interest partners.
Cash and cash equivalents decreased by $16,333,000 during the nine months ended
September 30, 1995, as compared to cash and cash equivalents as of December 31,
1994, primarily due to disbursements for land acquisitions, debt service
payments on secured and unsecured loan facilities, and payment of convertible
preferred dividends.
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 National
Trust and Savings Association ("Bank of America") to act as lead bank in
securing a credit facility of up to $225,000,000.
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 Business Loan agreement has been
amended four times to, among other matters, extend the date for drawing down on
the Line of Credit to November 15, 1996, and to adjust the tangible net worth
covenant requirement at December 31, 1996.
During the nine months ended September 30, 1996, Hollywood Park did not draw any
funds under its credit facilities with Bank of America, except for the May 1,
1996, issuance of a standby letter of credit, in the amount of $2,617,000, as
security for the Company's workers' compensation self-insurance program with the
state of California.
The Line of Credit is an interest only, revolving facility, under which the
Company may borrow, pay and reborrow principal amounts without penalty. Per
Amendment Four to the Business Loan Agreement the Line of Credit terminates as
of November 15, 1996, and the Company must repay amounts then outstanding under
the Line of Credit in eighty-four equal monthly installments starting from
December 15, 1996. The Company is in negotiations with Bank of America to
extend the termination date of the Line of Credit to June 30, 1997. 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
15
reborrow principal amounts without penalty. The Revolver bears interest, at the
option of the Company, at Bank of America's prime rate or the offshore rate plus
1.75%, and the Company may further elect an agreed upon fixed rate.
As of March 31, 1996, and September 30, 1996, primarily due to a greater than
anticipated percentage ownership in the Crystal Park LLC (as discussed below),
the Company did not meet the quick assets to current liabilities covenant. Bank
of America has waived compliance with this covenant, for the quarter ended March
31, 1996, and September 30, 1996.
Capital expenditures of $17,969,000, for the nine months ended September 30,
1996, were primarily related to construction of Crystal Park. Hollywood Park
increased its ownership interest in the Crystal Park LLC to 88% from 40%;
therefore; the Company is responsible for a proportionately greater amount of
the construction costs.
On September 3, 1996, the Company paid $3,358,000, on the secured non-interest
bearing promissory note, related to the October 27, 1995, purchase of 37.33
acres of land adjacent to the Inglewood property.
During the nine months ended September 30, 1996, the Company paid dividends of
$1,443,000 on its convertible preferred stock. On August 15, 1996, May 15,
1996, and February 15, 1996, the Company paid dividends of $481,000,
respectively, representing $17.50 per share (or $0.175 per depositary share).
On October 1, 1996, the Company declared its regular quarterly preferred
dividend of $481,000, payable on November 15, 1996. Dividends of $1,443,000
were paid during the nine months ended September 30, 1995.
As of January 1, 1996, shares of the convertible preferred stock can be
converted into common stock at the option of the Company. 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
$3,498,000 invested as of September 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 September
30, 1996, had a weighted average maturity of 1.3 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 is 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 September 30, 1996, the Senior
Credit had an outstanding balance of $28,667,000.
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
16
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 (and in any event for at least the next twelve
months). In the event that the Merger with Boomtown is consummated, Hollywood
Park believes that the proposed $225,000,000 credit facility will be sufficient
to meet Hollywood Park's and Boomtown's anticipated cash requirements for the
foreseeable future (and in any event, for at least the twelve months following
consummation of the Merger).
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
- ------- ---------------------------------------------------
At the Company's Annual Meeting of Stockholders, held October 30, 1996,
Hollywood Park stockholders approved the following:
Proposal One: Proposal to approve the issuance of shares of the Company's
common stock pursuant to the terms of the Agreement and Plan of Merger dated as
of April 23, 1996, among the Company, HP Acquisition, Inc., a wholly owned
subsidiary of the Company ("Sub"), and Boomtown, Inc. ("Boomtown"), providing
for Sub to merge with and into Boomtown, with Boomtown becoming a wholly owned
subsidiary of the Company.
For Votes 12,419,225
Against Votes 1,587,264
Abstain Votes 110,649
Broker Non-Votes 2,566,902
Proposal Two: Election of seven directors
For Votes Against Votes
---------- -------------
R.D. Hubbard 15,020,860 1,663,180
J.R. Johnson 15,080,695 1,603,345
Robert T. Manfuso 15,071,349 1,612,691
Harry Ornest 15,071,830 1,612,210
Lynn P. Reitnouer 15,082,540 1,601,500
Herman Sarkowsky 15,069,862 1,614,178
Warren B. Williamson 15,078,981 1,605,059
Proposal Three: Proposal to approve the adoption of the Hollywood Park
1996 Stock Option Plan.
For Votes 13,330,169
Against Votes 2,810,023
Abstain Votes 136,905
Broker Non-Votes 406,943
17
ITEM 5. OTHER INFORMATION
- ------- -----------------
On September 30, 1996, SB 2000 was signed into law, and provides for a 1/2 of 1%
reduction in the state tax on pari-mutuel wagers made in California, and for the
distribution of the savings as follows: (i) 55% to the horsemen by way of
purses; (ii) 40% to the race tracks by allowing them to retain higher pari-
mutuel commissions; and (iii) 5% to the official registering agency for
thoroughbreds.
SB 1887, a comprehensive card gaming regulatory bill, was approved by the State
Assembly, but was not considered by the Senate.
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.
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 D to the Notice of Annual Meeting of Stockholders and Proxy
Statement relating to the Annual Meeting of Stockholders of Hollywood
Park, Inc., held on October 30, 1996.
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.
18
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, is hereby
incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1996.
*10.11 Amendment No. Three, dated August 30, 1996, by and between Hollywood
Park, Inc., and Bank of America National Trust and Savings
Association, to the Business Loan Agreement dated April 30, 1996.
*10.12 Amendment No. Four, dated October 1, 1996, by and between Hollywood
Park, Inc., and Bank of America National Trust and Savings
Association, to the Business Loan Agreement dated April 30, 1996.
10.13 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.
10.14 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.
10.15 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.
10.16 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.
10.17 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.
*10.18 First Amendment to Lease by and between HP Compton, Inc. and Compton
Entertainment, Inc., dated March 12, 1996.
*10.19 Second Amendment to Lease by and between Crystal Park Hotel and Casino
Development Company, LLC, and Compton Entertainment, Inc., dated
September 13, 1996.
*10.20 Assignment, Assumption and Consent Agreement, by and among HP Compton,
Inc., Crystal Park Hotel and Casino Development Company, LLC,
Hollywood Park, Inc. and The Community Redevelopment Agency of the
City of Compton, dated July 18, 1996.
*10.21 Consent of Compton Entertainment, Inc. and Rouben Kandilian, by and
between Hollywood Park, Inc., and Compton Entertainment, Inc., dated
August 29, 1996.
10.22 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.
10.23 License Agreement, dated June 27, 1996, by and between HP Compton,
Inc. and Radisson Hotels International, Inc., is hereby incorporated
by reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996.
19
*10.24 Operating Agreement for Crystal Park Hotel and Casino Development
Company, LLC a California Limited Liability Company, dated July 18,
1996, effective August 28, 1996.
10.25 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., is hereby incorporated by reference
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996.
10.26 Stock Purchase Agreement, dated August 12, 1996, by and between
Hollywood Park, Inc. and Edward P. Roski, Jr., is here by incorporated
by reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996.
22.1 Subsidiaries of Hollywood Park, Inc.: Crystal Park Hotel and
Development Company, LLC, a California Limited Liability Company; 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
____
*Filed herewith
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed on October 28, 1996, to report
the October 21, 1996, resignation of one of Hollywood Park, Inc.'s
directors.
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. 6 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 19 0 19
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 51 48 144
Cal Expo Harness - night races 0 35 9 27 71
Bay Meadows - northern California (b) 40 0 23 26 89
Golden Gate Fields - northern California (b) 5 59 0 39 103
Fairs - northern California (b) 0 15 53 10 78
--- --- --- --- ---
TOTAL 162 174 198 181 715
=== === === === ===
SIMULCAST RACE DAYS BY QUARTER 1995: 1Q 2Q 3Q 4Q TOTAL
---- ---- ---- ---- -----
Santa Anita thoroughbred 65 19 0 5 89
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 resumed live racing on September 28 and will
run through December 31. Turf Paradise operates as a simulcast facility for
21
Arizona's 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 2 1 20 18 52 56
Fourth quarter 66 66 24 25 0 0
----- ----- ----- ----- ----- -----
166 171 88 80 85 86
===== ===== ===== ===== ===== =====
22
Hollywood Park, Inc.
Calculation of Earnings Per Share
For the three months ended September 30,
---------------------------------------------------------
Primary Assuming full dilution (a)
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
Average number of common shares outstanding 18,534,592 18,369,634 18,534,592 18,369,634
Average common shares due to assumed conversion
of convertible preferred shares 0 0 2,291,492 2,291,492
----------- ----------- ----------- -----------
Total shares 18,534,592 18,369,634 20,826,084 20,661,126
=========== =========== =========== ===========
Net income (loss) $603,000 $(5,637,000) $ 603,000 $(5,637,000)
Less dividend requirements on convertible preferred shares 481,000 481,000 0 0
----------- ----------- ----------- -----------
Net income (loss) available to (allocated to) common shareholders $ 122,000 $(6,118,000) $ 603,000 $(5,637,000)
=========== =========== =========== ===========
Net income (loss) per share $ 0.01 $ (0.33) $ 0.03 $ (0.27)
=========== =========== =========== ===========
For the nine months ended September 30,
---------------------------------------------------------
Primary Assuming full dilution (a)
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
Average number of common shares outstanding 18,604,755 18,369,634 18,604,755 18,369,634
Average common shares due to assumed conversion
of convertible preferred shares 0 0 2,291,492 2,291,492
----------- ----------- ----------- -----------
Total shares 18,604,755 18,369,634 20,896,247 20,661,126
=========== =========== =========== ===========
Net loss $(7,526,000) $(1,374,000) $(7,526,000) $(1,374,000)
Less dividend requirements on convertible preferred shares 1,443,000 1,443,000 0 0
----------- ----------- ----------- -----------
Net loss allocated to common shareholders $(8,969,000) $(2,817,000) $(7,526,000) $(1,374,000)
=========== =========== =========== ===========
Net loss per share $ (0.48) $ (0.15) $ (0.36) $ (0.07)
=========== =========== =========== ===========
(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 Location
For the nine months ended For the three months ended
September 30, September 30,
---------------------------- --------------------------
1996 1995 1996 1995
------------- ----------- ----------- -----------
(unaudited)
REVENUES:
Hollywood Park, Inc. and Race Track $ 47,232,000 $48,078,000 $13,496,000 $14,750,000
Sunflower Racing, Inc. 1,782,000 7,858,000 0 2,385,000
Turf Paradise, Inc. 11,362,000 11,547,000 1,546,000 1,480,000
Hollywood Park, Inc. - Casino Division 44,151,000 26,396,000 15,205,000 7,980,000
------------- ----------- ----------- -----------
104,527,000 93,879,000 30,247,000 26,595,000
------------- ----------- ----------- -----------
EXPENSES:
Hollywood Park, Inc. and Race Track 40,713,000 41,848,000 11,856,000 13,634,000
Sunflower Racing, Inc. 1,703,000 7,146,000 0 2,544,000
Turf Paradise, Inc. 8,835,000 9,537,000 2,013,000 1,859,000
Hollywood Park, Inc. - Casino Division 37,549,000 19,373,000 12,676,000 6,542,000
------------- ----------- ----------- -----------
88,800,000 77,904,000 26,545,000 24,579,000
------------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INTEREST, INCOME TAXES, DEPRECIATION,
AMORTIZATION AND OTHER NON-RECURRING EXPENSES:
Hollywood Park, Inc. and Race Track 6,519,000 6,230,000 1,640,000 1,116,000
Sunflower Racing, Inc. 79,000 712,000 0 (159,000)
Turf Paradise, Inc. 2,527,000 2,010,000 (467,000) (379,000)
Hollywood Park, Inc. - Casino Division 6,602,000 7,023,000 2,529,000 1,438,000
------------- ----------- ----------- -----------
15,727,000 15,975,000 3,702,000 2,016,000
------------- ----------- ----------- -----------
NON-RECURRING EXPENSES:
Write off of investment in Sunflower Racing, Inc. 11,412,000 0 0 0
Lawsuit settlement 0 5,627,000 0 5,627,000
DEPRECIATION AND AMORTIZATION:
Hollywood Park, Inc. and Race Track 4,300,000 4,097,000 1,457,000 1,378,000
Sunflower Racing, Inc. 536,000 1,853,000 0 616,000
Turf Paradise, Inc. 911,000 1,009,000 301,000 311,000
Hollywood Park, Inc. - Casino Division 2,151,000 1,519,000 740,000 519,000
------------- ----------- ----------- -----------
7,898,000 8,478,000 2,498,000 2,824,000
------------- ----------- ----------- -----------
INTEREST EXPENSE:
Hollywood Park, Inc. and Race Track 137,000 142,000 20,000 44,000
Sunflower Racing, Inc. 781,000 2,723,000 0 913,000
Turf Paradise, Inc. 0 21,000 0 1,000
------------- ----------- ----------- -----------
918,000 2,886,000 20,000 958,000
------------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT):
Hollywood Park, Inc. and Race Track 2,082,000 1,991,000 163,000 (306,000)
Write off of Investment in Sunflower Racing, Inc. (11,412,000) 0 0 0
Lawsuit settlement 0 (5,627,000) 0 (5,627,000)
Sunflower Racing, Inc. (1,238,000) (3,864,000) 0 (1,688,000)
Turf Paradise, Inc. 1,616,000 980,000 (768,000) (691,000)
Hollywood Park, Inc. - Casino Division 4,451,000 5,504,000 1,789,000 919,000
------------- ----------- ----------- -----------
(4,501,000) (1,016,000) 1,184,000 (7,393,000)
Income tax expense (benefit) 3,025,000 358,000 581,000 (1,756,000)
------------- ----------- ----------- -----------
Net income (loss) ($7,526,000) ($1,374,000) $ 603,000 ($5,637,000)
============= =========== =========== ===========
Dividend requirements on convertible preferred stock $ 1,443,000 $ 1,443,000 $ 481,000 $ 481,000
------------- ----------- ----------- -----------
Net income (loss) available to (allocated to) common shareholders ($8,969,000) ($2,817,000) $ 122,000 ($6,118,000)
============= =========== =========== ===========
Per common share:
Net income (loss) - primary ($0.48) ($0.15) $ 0.01 ($0.33)
Net income (loss) - fully diluted ($0.48) ($0.15) $ 0.01 ($0.33)
Number of shares - primary 18,604,755 18,369,634 18,534,592 18,369,634
Number of shares - fully diluted 20,896,247 20,661,126 20,826,084 20,661,126
24
Hollywood Park Inc.
Pari-mutuel Wagering Data
For the nine months ended For the three months ended
September 30, September 30,
------------------------------- -------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
(unaudited)
HOLLYWOOD PARK
--------------
Pari-mutuel handle:
On-track $120,027,000 $135,461,000 $ 29,311,000 $ 41,110,000
Off-track - shared handle wagering 368,890,000 328,954,000 91,088,000 99,304,000
Simulcast 290,857,000 299,217,000 99,341,000 105,175,000
------------ ------------ ------------ ------------
Total $779,774,000 $763,632,000 $219,740,000 $245,589,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $ 7,665,000 $ 8,567,000 $ 1,805,000 $ 2,582,000
Off-track - shared handle wagering 10,695,000 10,544,000 2,590,000 3,108,000
Off-track - independent handle 1,575,000 1,524,000 361,000 448,000
Simulcast 8,993,000 8,605,000 2,971,000 2,811,000
------------ ------------ ------------ ------------
Total $ 28,928,000 $ 29,240,000 $ 7,727,000 $ 8,949,000
============ ============ ============ ============
TURF PARADISE
-------------
Pari-mutuel handle:
On-track $ 16,633,000 $ 18,609,000 $ 440,000 $ 341,000
Off-track - shared handle wagering 69,662,000 46,772,000 473,000 280,000
Simulcast 40,739,000 38,152,000 9,536,000 9,028,000
------------ ------------ ------------ ------------
Total $127,034,000 $103,533,000 $ 10,449,000 $ 9,649,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $ 2,009,000 $ 2,550,000 $ 83,000 $ 67,000
Off-track - shared handle wagering 3,008,000 2,993,000 50,000 37,000
Off-track - independent handle 103,000 507,000 0 0
Simulcast 3,545,000 2,455,000 1,026,000 1,013,000
------------ ------------ ------------ ------------
Total $ 8,665,000 $ 8,505,000 $ 1,159,000 $ 1,117,000
============ ============ ============ ============
COMBINED
--------
Pari-mutuel handle:
On-track $136,660,000 $154,070,000 $ 29,751,000 $ 41,451,000
Off-track - shared handle wagering 438,552,000 375,726,000 91,561,000 99,584,000
Simulcast 331,596,000 337,369,000 108,877,000 114,203,000
------------ ------------ ------------ ------------
Total $906,808,000 $867,165,000 $230,189,000 $255,238,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $ 9,674,000 $ 11,117,000 $ 1,888,000 $ 2,649,000
Off-track - shared handle wagering 13,703,000 13,537,000 2,640,000 3,145,000
Off-track - independent handle 1,678,000 2,031,000 361,000 448,000
Simulcast 12,538,000 11,060,000 3,997,000 3,824,000
------------ ------------ ------------ ------------
Total $ 37,593,000 $ 37,745,000 $ 8,886,000 $ 10,066,000
============ ============ ============ ============
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: November 13, 1996
--------------------------------
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ G. Michael Finnigan Dated: November 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
- ------- ----------- ----
10.11 Amendment No. Three, dated August 30, 1996, by and 1
between Hollywood Park, Inc., and Bank of America
National Trust and Savings Association, to the Business
Loan Agreement dated April 30, 1996.
10.12 Amendment No. Four, dated October 1, 1996, by and 2
between Hollywood Park, Inc., and Bank of America
National Trust and Savings Association, to the Business
Loan Agreement dated April 30, 1996.
10.18 First Amendment to Lease by and between HP Compton, Inc. 3
and Compton Entertainment, Inc., dated March 12, 1996.
10.19 Second Amendment to Lease by and between Crystal Park Hotel 7
and Development Company, LLC, and Compton Entertainment,
Inc., dated July 18, 1996.
10.20 Assignment, Assumption and Consent Agreement, by and 14
among HP Compton, Inc., Crystal Park Hotel and
Casino Development Company LLC, Hollywood Park, Inc., and
The Community Redevelopment Agency of the City of Compton,
dated July 18, 1996.
10.21 Consent of Compton Entertainment, Inc. and Rouben Kandilian, 18
by and between Hollywood Park, Inc., and Compton Entertainment,
Inc., dated August 29, 1996.
10.24 Operating Agreement for Crystal Park Hotel and Casino Development 20
Company LLC, a California Limited Liability Company, dated July 18,
1996, effective August 28, 1996.
27.1 Financial Data Schedule 104
All other exhibits previously submitted.