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, 1997
Commission file number 0-10619
HOLLYWOOD PARK, INC. HOLLYWOOD PARK OPERATING COMPANY
(Exact Name of Registrant (Exact Name of Registrant
as Specified in Its Charter) as Specified in Its Charter)
Delaware Delaware
(State or Other Jurisdiction of (State or Other Jurisdiction of
Incorporation of Organization) Incorporation of Organization)
95-3667491 95-3667220
(I.R.S. Employer Identification No.) (I.R.S. Employer 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 registrants: (a) have 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) have been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
The number of outstanding shares of the Hollywood Park, Inc.'s common stock, as
of the date of the close of business on August 13, 1997: 23,851,936.
Hollywood Park, Inc.
Table of Contents
Part I
Item 1. Financial Information
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996..................................... 1
Consolidated Statements of Operations for the
three and six months ended June 30, 1997 and 1996......... 2
Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and 1996.............................. 3
Notes to Consolidated Financial Statements................. 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General.................................................... 9
Results of Operations...................................... 10
Liquidity and Capital Resources............................ 11
Part II
Item 5. Other Information............................................. 15
Item 6.a Exhibits...................................................... 15
Other Financial Information................................... 17
Signatures.................................................... 20
Hollywood Park, Inc.
Consolidated Balance Sheets
June 30, December 31,
1997 1996
------------ ------------
(unaudited)
Assets (in thousands)
Current Assets:
Cash and cash equivalents $ 38,409 $ 11,922
Restricted cash 11,096 4,486
Short term investments 1,275 4,766
Other receivables, net of allowance for doubtful accounts
of $780,000 in 1997, and $1,089,000 in 1996 10,625 7,110
Prepaid expenses and other assets 21,686 6,215
Deferred tax assets 6,587 6,422
Current portion of notes receivable 40 38
------------ ------------
Total current assets 89,718 40,959
Notes receivable 9,464 819
Property, plant and equipment, net 277,084 130,835
Goodwill, net 32,685 20,370
Other assets 17,147 12,903
------------ ------------
$426,098 $205,886
============ ============
- ------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 13,163 $ 10,043
Accrued lawsuit settlement 2,750 2,750
Accrued compensation 4,803 4,198
Accrued liabilities 35,499 9,733
Gaming liabilities 2,545 2,499
Racing liabilities 15,672 6,106
Current portion of notes payable 6,222 35
------------ ------------
Total current liabilities 80,654 35,364
Notes payable 116,396 282
Deferred tax liabilities 9,411 9,065
------------ ------------
Total liabilities 206,461 44,711
Minority interests 3,030 3,015
Stockholders' Equity:
Capital stock --
Preferred - $1.00 par value, authorized 250,000 shares;
27,499 issued and outstanding 28 28
Common - $.10 par value, authorized 40,000,000 shares;
23,793,636 issued and outstanding in 1997, and 18,332,016
in 1996 2,380 1,833
Capital in excess of par value 221,222 167,074
Accumulated deficit (7,023) (10,775)
Total stockholders' equity 216,607 158,160
------------ ------------
$426,098 $205,886
============ ============
- --------
See accompanying notes to consolidated financial statements.
1
Hollywood Park, Inc.
Consolidated Statements of Operations
For the three months For the six months
ended June 30, ended June 30,
--------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(in thousands, except per share data - unaudited)
REVENUES:
Gaming $14,165 $12,962 $26,847 $24,803
Racing 26,239 27,128 35,868 38,353
Food and beverage 4,292 4,463 6,860 7,637
Other income 1,628 1,874 3,564 3,487
------- ------- ------- -------
46,324 46,427 73,139 74,280
------- ------- ------- -------
EXPENSES:
Gaming 8,112 7,152 15,161 14,489
Racing 10,465 10,709 15,409 15,996
Food and beverage 5,091 4,985 8,819 9,082
Administrative 9,696 11,451 18,531 21,589
Other 680 501 1,439 1,099
------- ------- ------- -------
34,044 34,798 59,359 62,255
------- ------- ------- -------
Income before interest, income taxes, depreciation,
amortization and other non-recurring expenses 12,280 11,629 13,780 12,025
Write off of investment in Sunflower 0 66 0 11,412
Depreciation and amortization 2,896 2,487 5,780 5,400
Interest expense 65 54 129 898
------- ------- ------- -------
Income (loss) before minority interests and income taxe 9,319 9,022 7,871 (5,685)
Minority interests 41 0 63 0
Income tax expense 3,675 3,773 3,100 2,444
------- ------- ------- -------
Net income (loss) $ 5,603 $ 5,249 $ 4,708 ($8,129)
======= ======= ======= =======
=====================================================================================================
Dividend requirements on convertible preferred stock $ 481 $ 481 $ 962 $ 962
Net income (loss) attributable to (allocated to)
common shareholders $ 5,122 $ 4,768 $ 3,746 ($ 9,091)
Per common share:
Net income (loss) - primary $ 0.28 $ 0.26 $ 0.20 ($ 0.49)
Net income (loss) - fully diluted $ 0.27 $ 0.25 $ 0.20 ($ 0.49)
Number of shares - primary 18,462 18,610 18,366 18,613
Number of shares - fully diluted 20,754 20,902 20,657 20,904
- --------
See accompanying notes to consolidated financial statements.
2
Hollywood Park, Inc.
Consolidated Statements of Cash Flows
For the six months ended June 30,
---------------------------------
1997 1996
------------ ------------
(in thousands - unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $4,708 ($8,129)
Adjustment to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 5,780 4,901
Issuance of note payable for repurchase of common stock 3,428 0
Retirement of repurchased common stock (3,465) 0
Issuance of common stock for Pacific Casino Management, Inc. 500 0
Changes in accounts due to deconsolidation of subsidiary
in bankruptcy:
Property, plant and equipment 0 58,380
Secured notes payable 0 (28,904)
Unsecured notes payable 0 (15,373)
Goodwill and lease with TRAK East 0 6,908
Changes in assets and liabilities, net of the effects of the
purchase of a business:
Minority interests 15 0
Unrealized gain (loss) on short term bond investing 8 (7)
Gain on sale or disposal of property, plant and equipment (24) (5)
Increase in restricted cash (6,610) (7,028)
Increase in other receivables, net (1,520) (759)
(Increase) decrease in prepaid expenses and other assets (1,287) 3,689
(Increase) decrease in deferred tax assets (165) 2,684
Increase in accounts payable 387 629
Decrease in accrued lawsuit settlement 0 (2,482)
Increase in accrued compensation 605 346
Increase (decrease) in accrued liabilities 3,001 (4,262)
Increase (decrease) in gaming liabilities 46 (1,207)
Increase in racing liabilities 9,566 11,436
Decrease in deferred tax liabilities (24) (5,313)
------- -------
Net cash provided by operating activities 14,949 15,504
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (3,927) (9,132)
Receipts from sale of property, plant and equipment 0 6
Principal collected on notes receivable 18 16
Purchase of short term investments (1,937) (11,154)
Proceeds from short term investments 5,428 13,548
Long term gaming assets 0 598
Cash acquired in the purchase of a business, net of
transaction and other costs 12,264 0
------- -------
Net cash provided by (used in) investing activities 11,846 (6,118)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock options exercised 654 0
Dividends paid to preferred stockholders (962) (962)
------- -------
Net cash provided by (used in) financing activities (308) (962)
------- -------
Increase in cash and cash equivalents 26,487 8,424
Cash and cash equivalents at the beginning of the period 11,922 22,406
------- -------
Cash and cash equivalents at the end of the period $38,409 $30,830
======= =======
- ---------
See accompanying notes to consolidated financial statements.
3
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 Hollywood Park, Inc.'s ("Hollywood Park" or the
"Company") consolidated Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1996. This Quarterly Report
on Form 10-Q does not include certain footnotes and financial presentations
normally presented annually and should be read in conjunction with the Company's
1996 Annual Report on Form 10-K.
The information furnished herein is unaudited; however, in the opinion of
management reflects all normal and recurring adjustments that are necessary to
present a fair statement of the financial results for the interim periods. It
should be understood that accounting measurements at 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.
ACQUISITION OF BOOMTOWN, INC. On June 30, 1997, pursuant to the Agreement and
Plan of Merger dated as of April 23, 1996, by and among Hollywood Park, HP
Acquisition, Inc., a wholly owned subsidiary of the Company, and Boomtown, HP
Acquisition, Inc. was merged with and into Boomtown (the "Merger"). As a result
of the Merger, Boomtown became a wholly owned subsidiary of the Company and each
share of Boomtown common stock was converted into the right to receive 0.625 of
a share of Hollywood Park's common stock. Approximately 5,362,850 shares of
Hollywood Park common stock, valued at $9.8125, (excluding shares repurchased
from Edward P. Roski, Jr. ("Roski") and subsequently retired, as described
below) were issued in the Merger.
The Merger was accounted for under the purchase method of accounting for a
business combination, and thus the balance sheet of Boomtown as of June 30,
1997, is consolidated with Hollywood Park's, but not Boomtown's statement of
operations. The Merger generated approximately $2,683,000 of excess acquisition
cost over the recorded value of the net assets acquired, all of which was
allocated to goodwill, to be amortized over 40 years. The amortization of the
goodwill is not deductible for income tax purposes.
The Company acquired three of the four Boomtown properties, Boomtown Reno,
Boomtown New Orleans, and Boomtown Biloxi. Boomtown's Las Vegas property was
divested following the Merger on July 1, 1997. Boomtown's Las Vegas property was
divested because it had generated significant operating losses since it opened,
thus reducing the overall profitability of Boomtown. Boomtown and its
subsidiaries exchanged substantially all of their interest in the Las Vegas
property, including substantially all of the operating assets and notes
receivable of approximately $27,300,000 from the landowner/lessor of the Las
Vegas property, IVAC, a California general partnership of which Roski, a former
Boomtown director, is a general partner, for, among other things, two unsecured
notes receivable totaling approximately $8,465,000, cash, assumption of certain
liabilities and release from certain lease obligations. The first note
receivable is for $5,000,000, bearing interest at Bank of America National Trust
and Savings Association's ("Bank of America") reference rate plus 1.5% per year,
with annual principal receipts of $1,000,000 plus accrued interest commencing on
July 1, 1998. The second note is for approximately $3,465,000, bearing interest
at Bank of America's reference rate plus 0.5% per year, with the principal and
accrued interest payable to the Company, in full, on July 1, 2000. In addition,
concurrently with the divestiture of the Las Vegas property, Hollywood Park
purchased and retired 446,491 shares of Hollywood Park common stock received by
Roski in the Merger for a price of approximately $3,465,000, payable in the form
of a Hollywood Park promissory note. The promissory note bears interest at Bank
of America's reference rate plus 1.0%. Interest is payable quarterly
4
and annual principal payments in five equal installments of approximately
$693,000 are due commencing July 1, 1998.
Boomtown Reno is situated on 569 acres (though current operations presently
utilize approximately 61 acres) in Verdi Nevada, two miles from the California
border and seven miles west of downtown Reno, on Interstate 80, the major
highway connecting northern California and Nevada. Boomtown Reno draws a
significant portion of its customers from Interstate 80 traffic. Boomtown Reno
offers a 40,000-square foot casino, with 1,320 slot machines and 44 table games,
a 122-room hotel, a 35,000-square foot family entertainment center, a 16-acre
truck stop, a full-service recreational vehicle park, a newly renovated service
station and mini-mart, and other related amenities.
Boomtown New Orleans opened in August 1994 on a 50 acre site in Harvey,
Louisiana, approximately ten miles form the French Quarter of New Orleans.
Gaming operations are conducted from a 250-foot replica of a paddle-wheel
riverboat, offering 911 slot machines and 55 table games in a 30,000-square foot
casino. The land-based facility includes a 20,000-square foot family
entertainment center, a western saloon and dance hall, with restaurant and
buffet services.
As of August 8, 1997, Boomtown New Orleans is wholly owned by the Company.
Previously, Boomtown New Orleans was owned and operated by a Louisiana limited
partnership (the "Louisiana Partnership"), of which 92.5% was owned by Hollywood
Park with the remaining 7.5% owned by Eric Skrmetta ("Skrmetta"). On November
18, 1996, Boomtown entered into an agreement with Skrmetta under which it would
pay approximately $5,670,000 in return for Skrmetta's interest in the Louisiana
Partnership. Under the terms of the agreement, Boomtown made a down payment of
$500,000, and the Company paid the remaining $5,170,000 on August 8, 1997.
Boomtown Biloxi opened in July 1994 and occupies 19 acres on Biloxi,
Mississippi's historic Back Bay. The dockside property consists of a land-based
facility which houses all non-gaming amenities including a 20,000-square foot
family entertainment center, food and beverage facilities and a western themed
dance hall and cabaret. Gaming operations are conducted on a 40,000-square foot
barge, which is permanently moored to the land-based facility. The casino
covers 33,632-square feet, offering 1,038 slot machines, 35 table games and
related amenities.
Boomtown Biloxi is operated by a Mississippi limited partnership (the
"Mississippi Partnership"), of which 85% is owned and controlled by Hollywood
Park, with the remaining 15% owned by Skrmetta. Both Hollywood Park and
Skrmetta have an option, exercisable over a four year period beginning July
1997, to exchange Skrmetta's interest in the Mississippi Partnership, at
Skrmetta's option, for either cash and/or shares of Hollywood Park common stock
with an aggregate value equal to the value of Skrmetta's 15% interest in the
Mississippi Partnership, with such value determined by a formula set forth in
the relevant partnership agreements. In August 1997, Hollywood Park is planning
to notify Skrmetta of the Company's intention to exercise this option and
acquire Skrmetta's 15% interest in the partnership.
The Boomtown Biloxi barge and building shell were owned by National Gaming
Mississippi, Inc., a subsidiary of Chartwell Leisure, Inc. ("National Gaming").
Boomtown Biloxi leased these assets from National Gaming under a 25-year lease
with a 25-year renewal option, and also received marketing services from
National Gaming. National Gaming received 16% of the adjusted earnings before
interest, taxes, depreciation and amortization ("Adjusted EBITDA"), as defined
in the relevant contract. On August 4, 1997, Hollywood Park executed an
agreement pursuant to which one of the Hollywood Park entities repurchased the
assets for $5,250,000, payable through a down payment of approximately
$1,500,000, with the balance paid in three equal annual installments of
$1,250,000. The Adjusted EBITDA participation and other related agreements were
terminated upon repurchase of the assets.
PRO FORMA RESULTS OF OPERATIONS The following pro forma results of operations
were prepared under the assumption that the acquisition of Boomtown had occurred
at the beginning of the period presented. The
5
historical results of operations of Boomtown (excluding the results of
operations of Boomtown's Las Vegas property, which was divested in connection
with the Merger) were combined with Hollywood Park's. Pro forma adjustments were
made for the following: interest income earned on the excess net proceeds from
the issuance of $125,000,000 of 9.5% Hollywood Park Senior Subordinated Notes
(the "Notes") (see Item 2. Liquidity and Capital Resources); elimination of the
amortization of the issuance costs associated with Boomtown's First Mortgage
Notes; amortization of the issuance costs of the Notes; amortization of the
excess purchase price over net assets acquired in the Merger; elimination of the
amortization of the discount associated with the Boomtown First Mortgage Notes;
interest expense associated with the promissory notes from Hollywood Park to the
former lessor of Boomtown's Las Vegas property; elimination of the interest
expense associated with the Boomtown First Mortgage Notes; amortization of the
up-front loan fees associated with the Company's Bank Credit Facility; interest
expense associated with the Notes at 9.5%; and the estimated 40% tax benefit
associated with the pro forma adjustments.
HOLLYWOOD PARK, INC.
Unaudited Pro Forma Combined Consolidated Results of Operations
For the three months ended
June 30,
-------------------------------------
1997 1996
------------ -------------
Revenues:
Gaming $ 56,976,000 $ 53,521,000
Racing 26,239,000 27,128,000
Other 16,203,000 18,159,000
------------ -------------
99,418,000 98,808,000
------------ -------------
Operating income (loss) (a) 28,796,000 (19,688,000)
Net income (loss) $ 6,166,000 ($27,730,000)
============ =============
Dividend requirements on convertible preferred stock $ 481,000 $ 481,000
Net income (loss) available to (allocated to) common shareholders $ 5,685,000 ($28,211,000)
============ =============
Per common share:
Net income (loss) - primary $0.24 ($1.18)
Net income (loss) - fully diluted $0.24 ($1.18)
For the six months ended
June 30,
-------------------------------------
1997 1996
------------ -------------
Revenues:
Gaming $110,196,000 $ 103,412,000
Racing 35,868,000 38,353,000
Other 28,179,000 29,960,000
------------ -------------
174,243,000 171,725,000
------------ -------------
Operating income (loss) (b) 32,946,000 (29,607,000)
Net income (loss) $ 6,538,000 ($40,674,000)
============ =============
Dividend requirements on convertible preferred stock $ 962,000 $ 962,000
Net income (loss) available to (allocated to) common shareholders $ 5,576,000 ($41,636,000)
============ =============
Per common share:
Net income (loss) - primary $0.23 ($1.74)
Net income (loss) - fully diluted $0.23 ($1.74)
_____
(a) The 1996 operating loss included the non-recurring loss on Boomtown's sale
of its Las Vegas property of $36,562,000.
(b) The 1996 operating loss included the non-recurring write off of Hollywood
Park's investment in Sunflower of $11,412,000, and the non-recurring loss on
Boomtown's sale of its Las Vegas property of $36,562,000.
6
RESTRICTED CASH Restricted cash as of June 30, 1997, and as of December 31,
1996, was for amounts due to horsemen for purses, stakes and awards.
GAMING REVENUE AND PROMOTIONAL ALLOWANCES Hollywood Park-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 three and
six months ended June 30, 1997, was $339,000, and $665,000 respectively. The
estimated cost of providing these promotional allowances during the three and
six months ended June 30, 1996, was $888,000 and $1,668,000, respectively.
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. Actual results could differ from these estimates.
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. 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.
RECLASSIFICATIONS Certain reclassifications have been made to the 1996 balances
to be consistent with the 1997 financial statement presentation.
NOTE 2 -- SHORT TERM INVESTMENTS
As of June 30, 1997, short term investments consisted of corporate bonds valued
at $1,275,000, with Moody's ratings of B3 to BA3, and Standard and Poors ratings
of B to BB-, though some of the bonds are not rated by either agency.
Investments in corporate bonds carry a greater amount of principal risk than
other investments made by the Company, and yield a correspondingly higher
return. The corporate bond investment as of June 30, 1997, had a weighted
average maturity of 1.2 years, and because the Company reasonably expects to
liquidate these investments in its normal operating cycle, the investments are
classified as short term, are held as available for sale and are recorded in the
accompanying financial statements at their fair value, as determined by the
quoted market price.
For the six months ended June 30, 1997, proceeds from the sale or redemption of
corporate bond investments were approximately $5,428,000, and gross realized
gains and gross realized losses were $2,000 and $82,000, respectively. The net
unrealized holding gain for the six months ended June 30, 1997, was
approximately $8,000.
7
NOTE 3 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment held as of June 30, 1997, and December 31, 1996,
consisted of the following:
June 30, December 31,
1997 (a) 1996
------------ ------------
Land and land improvements $ 49,471,000 $ 32,215,000
Buildings and building improvements 259,298,000 150,935,000
Equipment 74,566,000 31,531,000
Vessel 18,925,000 0
Construction in progress 5,548,000 128,000
------------ ------------
407,808,000 214,809,000
Less accumulated depreciation 130,724,000 83,974,000
------------ ------------
$277,084,000 $130,835,000
============ ============
(a) Inclusive of Boomtown assets.
NOTE 4 -- SECURED AND UNSECURED NOTES PAYABLE
Notes payable as of June 30, 1997, and December 31, 1996, consisted of the
following:
June 30, December 31,
1997 1996
------------ -------------
Secured notes payable (a) $114,879,000 $ 0
Unsecured notes payable 3,745,000 317,000
Capital lease obligations (a) 3,994,000 0
------------ --------
122,618,000 317,000
Less current maturities 6,222,000 35,000
------------ --------
$116,396,000 $282,000
============ ========
(a) The balances as of June 30, 1997, include amounts for notes payable related
to Boomtown.
NOTE 5 -- DEVELOPMENT EXPENSES
Included in Administrative expenses for the three and six months ended June 30,
1997, was $64,000 and $114,000 of development expenses, respectively; primarily
related to the master site plan for the Inglewood property.
Included in Administrative expenses for the three and six months ended June 30,
1996, was $665,000 and $317,000 of development expenses, respectively; primarily
related to the proposed stadium, the master site plan for the Inglewood
property, and card clubs in Stockton and Hawaiian Gardens.
NOTE 6 -- 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.
8
The Company has calculated the pro forma financial results as required under
SFAS 123 and noted that the impact on net income (loss) for the three and six
months ended June 30, 1997 and 1996 was immaterial.
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 Quarterly Report on Form 10-Q 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 and Exchange Act of 1934, as amended. Such
forward-looking statements are subject to a variety of risks and uncertainties
that could cause actual results to differ materially from those anticipated by
the Company's management, including the failure to obtain or retain gaming
licenses or regulatory approvals, the inability to directly operate the
Hollywood Park-Casino beyond December 31, 1998, or to find a suitable operator
if the Company can no longer directly operate the Hollywood Park-Casino, failure
to utilize Hollywood Park's financial resources to improve the financial
position of its newly acquired subsidiary Boomtown, failure to complete or
successfully operate anticipated expansion projects, the failure to obtain
adequate financing to meet the Company's strategic goals, difficulties in
completing integration of Hollywood Park and Boomtown, and the failure to
implement a REIT/Paired-Share Structure (as described herein), or to realize the
potential benefits to be derived therefrom. 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 1996 Annual Report on Form 10-K, and the
Company's other filings including the Joint Proxy/Prospectus dated September 20,
1996.
GENERAL Hollywood Park is a gaming, sports and entertainment company engaged in
the ownership and operation of casinos, California card club casinos, pari-
mutuel racing facilities, and the development of other gaming, sports and
entertainment opportunities. As of June 30, 1997, the Company owns and operates
a casino and hotel in Verdi, Nevada ("Boomtown Reno"), a riverboat casino in
Harvey, Louisiana ("Boomtown New Orleans") and a dockside casino in Biloxi,
Mississippi ("Boomtown Biloxi"). The Company also owns and operates the
Hollywood Park-Casino, a California card club located in the Los Angeles
metropolitan area, and owns 89.8% of Crystal Park Hotel and Casino Development
Company LLC, ("Crystal Park LLC") which built and presently leases, to an
unaffiliated third party, the Crystal Park Hotel and Casino ("Crystal Park"),
also located in the Los Angeles metropolitan area. Hollywood Park owns and
operates the Hollywood Park Race Track, located on the same premises as the
Hollywood Park-Casino, which for the past 58 years has been ranked among the
country's most distinguished thoroughbred racing facilities. On November 8,
1997, Hollywood Park Race Track will host the prestigious Breeders' Cup
championship racing series for a third time. In 1994, the Company acquired Turf
Paradise, Inc. ("Turf Paradise"), a thoroughbred racing facility located in
Phoenix, Arizona, and Sunflower Racing, Inc. ("Sunflower"), a greyhound and
thoroughbred racing facility located in Kansas City, Kansas. On May 17, 1996,
as a result of intense competition from Missouri riverboat gaming, Sunflower
filed for reorganization under Chapter 11 of the Bankruptcy Code. Sunflower is
operating as a debtor in possession during the bankruptcy.
Hollywood Park's strategic plan is to grow its gaming, sports and entertainment
businesses by (i) increasing the utilization of its existing properties, (ii)
developing excess real estate at its existing sites, and (iiI) making
acquisitions, principally in the gaming industry, to diversify its operations
and to achieve economies of scale.
PROPOSED EXPANSION The Company is planning an approximately $25,000,000
expansion of Boomtown Reno, to include an additional 200 hotel rooms, a 13,000-
square foot gaming floor addition, allowing for an additional 200 slot machines,
an entertainment lounge, meeting facilities, and renovation of the existing
gaming floors and food and beverage facilities. Construction is expected to
begin in the fourth quarter of 1997 and is expected to be completed by year end
1998.
9
Renovations to Boomtown New Orleans, at a cost of approximately $10,000,000,
will include the build out and furnishing of the second story of the land-based
facility, to include a second story entrance onto the gaming boat, enhanced food
and beverage services, meeting facilities and renovation of the gaming floors.
Construction is expected to begin during the fourth quarter of 1997 and conclude
in mid-1998.
The Company, through a joint venture with Hilton Gaming Corporation, has an
application pending for the remaining riverboat gaming license to be awarded for
operations on the Ohio River in Indiana. The Company filed an updated
application (as a result of the Merger) in August 1997, which will be reviewed
by the Indiana Gaming Commission over a 60-day period, as of the date of filing.
The Indiana Gaming Commission is presently scheduled to meet between October 15,
1997 and November 15, 1997, and render its decision regarding granting of the
final gaming license within three weeks of this meeting. There can be no
assurance that Hollywood Park will be granted the gaming license, and if granted
the initial gaming license will receive all other required approvals and
environmental permits to proceed with this project.
POSSIBLE RESTORATION OF REAL ESTATE INVESTMENT TRUST/PAIRED-SHARE STRUCTURE
From 1982 to 1991, the Company was operated as a Real Estate Investment Trust
("REIT") known as Hollywood Park Realty Enterprises, Inc. ("HPRE"), and its
stock was paired with, or stapled to, that of Hollywood Park Operating Company
("HPOC"). HPRE was primarily an owner and lessor of real property. HPOC was
primarily engaged in the active conduct of racing operations and leased a
significant amount of real property from HPRE to conduct those racing
operations. Generally, a REIT is required to distribute, as dividends to its
stockholders, 95% of its taxable income (other than net capital gains), and such
amounts distributed are not subject to federal income tax at the corporate
level. Effective as of January 1, 1992, as part of a corporate reorganization,
HPRE and HPOC ceased operating in a REIT/Paired-Share Structure, HPOC became a
wholly owned subsidiary of HPRE and HPRE was renamed Hollywood Park, Inc.
In May 1997, the Company announced that it was exploring the possibility of
restoring the REIT/Paired-Share Structure. Any decisions to proceed with
restoring the REIT/Paired-Share Structure will depend on a variety of factors,
including tax consequences and receipt of board, stockholder, regulatory and
other required approvals. The Company has yet to determine whether it will
submit a ruling request to the Internal Revenue Service on certain aspects of
the restored REIT/Paired-Share Structure. There can be no assurance that the
Company will elect to proceed with the restoration of the REIT/Paired-Share
Structure, or that the benefits expected from the restoration will be achieved.
RESULTS OF OPERATIONS
Three months ended June 30, 1997, compared to
---------------------------------------------
the three months ended June 30, 1996
------------------------------------
Total revenues for the three months ended June 30, 1997, decreased by $103,000
as compared with the three months ended June 30, 1996. Gaming revenues
increased by $1,203,000, or 9.3%, due primarily to Crystal Park lease rent
revenue of $900,000 recorded during the three months ended June 30, 1997, with
no corresponding lease rent revenue in the operating results for the three
months ended June 30, 1996. Crystal Park opened on October 25, 1996, under a
triple net lease between Crystal Park LLC and Compton Entertainment, Inc.
("CEI") (the lessee/operator of Crystal Park). The balance of the increase in
Gaming revenues was attributable to the Hollywood Park-Casino. Racing revenues
decreased by $889,000, or 3.3%, primarily due to one fewer live race day at
Hollywood Park and five fewer live race days at Turf Paradise in 1997 as
compared to 1996. Other income decreased by $246,000, or 13.1%, primarily due
to declines in interest earned on excess funds.
Total operating expenses decreased by $754,000, or 2.2%. Gaming expenses
increased by $960,000, or 13.4%, primarily due to increased marketing costs
associated with tournament play. Racing expenses decreased by $244,000, or
2.3%, due primarily to fewer live race days in 1997 as compared to 1996.
Administrative expenses decreased by $1,755,000, or 15.3%, due primarily to
reduced expansion disbursements in 1997 and cost savings programs implemented at
all of Hollywood Park's properties.
10
Depreciation and amortization increased by $409,000, or 16.4%, primarily due to
depreciation and amortization associated with Crystal Park recorded in 1997 with
no corresponding expense in 1996.
Six months ended June 30, 1997 compared to the six months ended June 30, 1996
-----------------------------------------------------------------------------
As of April 1, 1996, Sunflower's results of operations were no longer
consolidated with Hollywood Park's results; therefore, the results of operations
for the six months ended June 30, 1997, are exclusive of Sunflower's results of
operations and the financial results for the six months ended June 30, 1996,
included Sunflower's results of operations through March 31, 1996.
Total revenue for the six months ended June 30, 1997, decreased by $1,141,000,
or 1.5%, as compared to the six months ended June 30, 1996, due primarily to the
inclusion of $1,782,000 of Sunflower revenues in 1996 with no corresponding
revenues in the 1997 results. Gaming revenues increased by $2,044,000, or 8.2%,
primarily due to $1,500,000 of Crystal Park lease rent revenue during the six
months ended June 30, 1997, with no corresponding revenue during the six months
ended June 30, 1996. Crystal Park opened on October 25, 1996, under a triple
net lease between Crystal Park LLC and CEI (the lessee/operator of Crystal
Park). Racing revenues decreased by $2,485,000, or 6.5%, due primarily to one
fewer live race day at Hollywood Park, on-track attendance declines, and the
inclusion of $1,317,000 of Racing revenues attributable to Sunflower in 1996 and
no corresponding revenues in 1997. Food and beverage revenues declined by
$777,000, or 10.2%, due primarily to the inclusion of Sunflower revenues in
1996, and no corresponding revenues in 1997.
Total operating expenses decreased by $2,896,000, or 4.7%, primarily due to the
inclusion of $1,703,000 of Sunflower expenses in 1996 with no corresponding
expenses in 1997. Gaming expenses increased by $672,000, or 4.6%, due primarily
to increased marketing expenses related to tournament play. Racing expenses
decreased by $587,000, or 3.7%, due primarily to fewer live race days in 1997 as
compared to 1996, and cost saving programs implemented at all of Hollywood
Park's properties. Administrative expenses decreased by $3,058,000, or 14.2%,
due primarily to decreased expansion disbursements in 1997, and the inclusion of
Sunflower's expenses in 1996 with no corresponding expenses in 1997.
Depreciation and amortization increased by $380,000, or 7.0%, primarily due to
depreciation and amortization associated with Crystal Park recorded in 1997 with
no corresponding expense in 1996, offset by the inclusion of Sunflower's
depreciation and amortization expenses in 1996 and not in 1997. Interest
expense decreased by $769,000, or 85.6%, due to the inclusion of Sunflower's
interest expense in 1996 and no corresponding expense in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Hollywood Park's principal source of liquidity as of June 30, 1997, was cash and
cash equivalents of $38,409,000. Cash and cash equivalents increased by
$26,487,000 during the six months ended June 30, 1997, primarily due to cash
acquired in the acquisition of Boomtown and normal operating cash flows.
Cash and cash equivalents increased by $8,424,000, during the six months ended
June 30, 1996, primarily due to normal operating cash flows, netted against
capital expenditures related to the construction of Crystal Park.
HOLLYWOOD PARK On June 30, 1997, Hollywood Park and a bank syndicate lead by
Bank of America finalized the reducing revolving credit facility (the "Bank
Credit Facility") for up to $225,000,000. On August 7, 1997, the Bank Credit
Facility was reduced to approximately $104,500,000 by the net cash proceeds
received from the issuance of the Hollywood Park Senior Subordinated Notes (the
"Notes") (as described below). The Bank Credit Facility is secured by
substantially all of the assets of Hollywood Park and its significant
subsidiaries, and imposes certain customary affirmative and negative covenants.
11
The Bank Credit Facility has been amended twice. First, among other matters, to
reduce the availability of the facility until the Bank Credit Facility was
approved by the Louisiana Gaming Control Board. The Company received this
approval on July 10, 1997. Second, among other matters, to allow the co-
issuance of the Notes by HPOC with Hollywood Park.
Debt service requirements on the Bank Credit Facility consist of current
interest payments on outstanding indebtedness through September 30, 1999. As of
September 30, 1999, and on the last day of each third calendar month thereafter,
through June 30, 2001, the Bank Credit Facility will decrease by 7.5% of the
commitment in effect on September 30, 1999. As of September 30, 2001, and on
the last day of each third calendar month thereafter, the Bank Credit Facility
will decrease by 10% of the commitment in effect on September 30, 1999. Any
principal amounts outstanding in excess of the Bank Credit Facility commitment,
as so reduced, will be payable on such quarterly reduction rates.
The Bank Credit Facility provides for a letter of credit sub-facility of
$10,000,000, of which $2,035,000 is currently outstanding for the benefit of
Hollywood Park's California self insured workers' compensation program. The
facility also provides for a swing sub-facility of up to $10,000,000.
Borrowings under the Bank Credit Facility bear interest at an annual rate
determined, at the election of the Company, by reference to the "Eurodollar
Rate" (for interest periods of 1, 2, 3 or 6 months) or the "Reference Rate", as
such terms are respectively defined in the Bank Credit Facility, plus margins
which vary depending upon Hollywood Park's ratio of funded debt to earnings
before interest, taxes, deprecation and amortization ("EBITDA"). The margins
start at 1.25% for Eurodollar loans and at 0.25% for Base Rate loans, at funded
debt to EBITDA ratio of less than 1.50%. Thereafter, the margins for each type
of loan increases by 25 basis points for each increase in the ratio of funded
debt to EBITDA of 50 basis points or more, up to 2.625% for Eurodollar loans and
1.625% for Base Rate loans. However, if the ratio of senior funded debt to
EBITDA exceeds 2.50, the applicable margins will increase to 3.25% for
Eurodollar loans, and 2.25% for Base Rate loans. Thereafter, the margins would
increase by 25 basis points for each increase in the ratio of senior funded debt
to EBITDA of 50 basis points or more, up to a maximum of 4.25% for Eurodollar
loans and 3.25% for Base Rate loans. The applicable margins as of June 30,
1997, were 1.75% with respect to the Eurodollar Rate based interest rate and
0.75% with respect to the Base Rate interest rate.
Hollywood Park pays a quarterly commitment fee for the average daily amount of
unused portions of the Bank Credit Facility. The commitment fee is also
dependent upon the Company's ratio of funded debt to EBITDA. The commitment fee
for the Bank Credit Facility starts at 31.25 basis points when the ratio is less
than 1.00, and increases by 6.25 basis points for each increase in the ratio of
0.50, up to a maximum of 50 basis points. For the quarter beginning July 1,
1997, this fee is 43.75 basis points.
On July 3, 1997, Hollywood Park borrowed $112,000,000 from the Bank Credit
Facility to fund Boomtown's offer to purchase its First Mortgage Notes, and
repaid this amount on August 7, 1997, with a portion of the proceeds from the
August 6, 1997, issuance of $125,000,000 of 9.5% Senior Subordinated Notes due
2007. The Notes were co-issued by Hollywood Park and HPOC (the "Obligors").
The balance of the proceeds from the issuance are expected to be used primarily
for expansion projects.
Interest on the Notes is payable semi-annually, on February 1st and August 1st.
The Notes will be redeemable at the option of the Company, in whole or in part,
on or after August 1, 2002, at a premium to face amount, plus accrued interest,
with the premium to the face amount decreasing on each subsequent anniversary
date. The Notes are unsecured obligations of Hollywood Park and HPOC,
guaranteed by all other material restricted subsidiaries of either Hollywood
Park or HPOC.
The indenture governing the Notes contains certain covenants that, among other
things, limit the ability of the Obligors and their restricted subsidiaries to
incur additional indebtness and issue preferred stock, pay dividends or make
other distributions, repurchase equity interests or subordinated indebtness,
create certain
12
liens, enter into certain transactions with affiliates, sell assets, issue or
sell equity interests in their respective subsidiaries or enter into certain
mergers and consolidations.
On July 1, 1997, in connection with the divestiture of Boomtown's Las Vegas
property, Hollywood Park issued an unsecured promissory note of approximately
$3,465,000. The promissory note bears interest equal to the Bank of America
reference rate plus 1.0%. Interest is payable quarterly with five annual
principal payments of approximately $693,000 commencing July 1, 1998.
During the six months ended June 30, 1997, the Company paid dividends of
$962,000 on its convertible preferred stock, representing $70.00 per share, or
$0.70 per depositary share. On July 1, 1997, the Company declared the regular
quarterly preferred stock dividend of $481,000, payable on August 15, 1997.
Effective August 28, 1997, the Company will exercise its option to covert all
2,749,900 of its outstanding depositary shares into approximately 2,291,492
shares of its common stock; thereby; eliminating the annual preferred cash
dividend payment of approximately $1,924,000.
As of June 30, 1997, the Company had invested $1,275,000 in corporate bonds,
with Moody's ratings of B3 to BA3, and Standard and Poors ratings of B to BB-,
though some of the bonds are not rated by either agency. Investments in
corporate bonds carry a greater amount of principal risk than other investments
made by the Company, and yield a corresponding higher return. The corporate
bond investment as of June 30, 1997, had a weighted average maturity of 1.2
years, and because the Company reasonably expects to liquidate these investments
in its normal operating cycle, the investments are classified as short term, are
held as available for sale, and recorded in the accompanying financial
statements at their fair value, as determined by the quoted market price.
BOOMTOWN In November 1993, Boomtown sold $103,500,000 of 11.5% First Mortgage
Notes due November 1, 2003 (the "First Mortgage Notes"). On July 3, 1997,
pursuant to a tender offer, Boomtown repurchased and retired approximately
$102,142,000 in principal amount of the First Mortgage Notes, at a purchase
price of $1,085 per $1,000 in principal amount, along with accrued interest
thereon.
As a result of the Merger, Boomtown, as required under the indenture governing
the First Mortgage Notes, initiated a change in control purchase offer at a
price of $1,010 for each $1,000 for the remaining approximately $1,358,000
aggregate principal amount of First Mortgage Notes outstanding. This change in
control purchase offer was completed on August 12, 1997, and only a portion of
the remaining First Mortgage Notes were tendered.
On August 4, 1997, Hollywood Park executed a purchase agreement pursuant to
which one of the Hollywood Park entities repurchased the barge and the building
shell at Boomtown Biloxi for at total cost of $5,250,000. A payment of
$1,500,000 was made on August 4, 1997, with the balance payable in three equal
annual installments of $1,250,000.
As of August 8, 1997, Boomtown New Orleans is wholly owned by the Company.
Previously, Boomtown New Orleans was owned and operated by the Louisiana
Partnership, of which 92.5% was owned by Hollywood Park with the remaining 7.5%
owned by Skrmetta. On November 18, 1996, Boomtown entered into an agreement
with Skrmetta under which it would pay approximately $5,670,000 in return for
Skrmetta's interest in the Louisiana Partnership. Under the terms of the
agreement, Boomtown made a down payment of $500,000, and the Company paid the
remaining $5,170,000 on August 8, 1997.
As of June 30, 1997, Boomtown had four outstanding notes payable totaling
approximately $2,704,000. Two of the notes, which total $223,000, are secured
by furniture, fixtures and equipment, bear interest at 11.5% and mature in
September 1997. One note, in the amount of $2,294,000, was secured by the
Boomtown New Orleans riverboat, bore interest at 13.0% and was set to mature in
January 1999. On August 7, 1997, Boomtown elected to pre-pay this note and
incurred a 1.0% penalty. The remaining note, in the amount of
13
$187,000, is secured by gaming equipment, bears interest at 12.25% and matures
December 1997. In addition to the notes payable, Boomtown also has capital lease
obligations for equipment with a total balance of approximately $3,994,000.
In connection with the sale its Las Vegas property, Boomtown took back two notes
receivable from Roski, the former lessor of the Las Vegas property, totaling
approximately $8,465,000. The first note receivable is for $5,000,000, bearing
interest at Bank of America's reference rate plus 1.5% per year, with annual
principal receipts of $1,000,000 plus accrued interest commencing on July 1,
1998. The second note is for approximately $3,465,000, bearing interest at Bank
of America's reference rate plus 0.5% per year, with the principal and accrued
interest payable, in full, on July 1, 2000.
SUNFLOWER On March 24, 1994, an Amended and Restated Credit and Security
Agreement (the "Sunflower Senior Credit") was executed between Sunflower and
five banks in connection with the Company's acquisition of Sunflower. As of
June 30, 1997, the outstanding balance of the Sunflower Senior Credit was
$28,667,000. The Sunflower Senior Credit is non-recourse to Hollywood Park.
On May 17, 1996, Sunflower filed for reorganization under Chapter 11 of the
Bankruptcy Code. The Cash Collateral Agreement suspended any interest or
principal payments on the Sunflower Senior Credit until August 12, 1997.
Sunflower is scheduled to appear at court on August 12, 1997, regarding the
extension of the Cash Collateral Agreement. As of the date of this filing the
court had not yet made a decision. On July 15, 1997, Sunflower presented to the
Bankruptcy Court a plan of reorganization (the "Plan") which provides for the
sale of Sunflower's property to the Wyandotte Indians of Oklahoma (the
"Wyandotte Indians"). Under the Plan, the land would be held by the United
States Government in trust for the Wyandotte Indians, and a casino would be
built on the property. Upon completion of the casino, Hollywood Park and a
partner (North American Sports Management) would operate the facility in return
for 30% of the profits. The Company would guarantee certain bank debt of
Sunflower of up to $28,667,000 to allow the property to be released as
collateral and then transferred to the Wyandotte Indians. The Company's
guaranty would not go into effect unless, and until, all material regulatory
approvals have been obtained for operation of the casino, and approval has been
obtained under the Bank Credit Facility, as well.
In 1995, under a promissory note executed in December 1994, between Hollywood
Park and Sunflower, Hollywood Park advanced $2,500,000 to Sunflower to make
certain payments due on the Sunflower Senior Credit. The amounts borrowed under
the promissory note, along with accrued interest, are subordinate to the
Sunflower Senior Credit. Although the Company will continue to pursue payment
of the promissory note, for financial reporting purposes the outstanding balance
of the promissory note was written off as of March 31, 1996.
EXPANSION In addition to the financing needs discussed above, Hollywood Park
has other capital needs with respect to the $25,000,000 Boomtown Reno expansion
and the $10,000,000 Boomtown New Orleans expansion. Longer term capital needs
may include such projects as development of the excess land at Hollywood Park
and/or Turf Paradise, and the Indiana riverboat project (see Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Proposed Expansion).
GENERAL Hollywood Park is continually evaluating future growth opportunities in
the gaming, sports and entertainment industries. The Company expects that
funding for growth opportunities, payment of interest on the Notes, 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.
14
PART II
Other Information
Item 5. OTHER INFORMATION
- ------- -----------------
Effective August 28, 1997, the Company will exercise its option to convert all
2,749,900 of its outstanding Depositary Shares into approximately 2,291,492
shares of its common stock; thereby, eliminating the annual preferred cash
dividend of approximately $1,925,000.
As previously discussed in the Company's Annual Report on Form 10-K, under
current California law Hollywood Park can own and operate a card club only on
the same premises as the Hollywood Park Race Track, and unless the California
Legislature enacts a comprehensive scheme for the regulation of gaming under the
jurisdiction of a gaming control commission, prior to January 1, 1999, the
Company will no longer be allowed to operate the Hollywood Park-Casino, and will
have to once again lease it for a fixed monthly rent to an unaffiliated third
party operator.
The Company supports Senate Bill ("SB") 990, currently pending in the California
Legislature, which would among other things, allow the Company to operate the
Hollywood Park-Casino through December 31, 1999. SB 990 has passed out of the
Senate and is pending in the Assembly. It is too early in the legislative
session to comment on the prospects of SB 990.
In addition to SB 990, there are two other bills pending in the California
Legislature (SB 8 and Assembly Bill 28) which would comprehensively regulate the
card gaming industry and at the same time allow the Company to operate the
Hollywood Park-Casino in perpetuity. Both bills are proceeding through the
legislative process, although no assurance can be given that either will be
enacted this year.
ITEM 6.a EXHIBITS
- -------- --------
Exhibit
Number Description of Exhibit
- --------- ----------------------
10.28 Agreement of Limited Partnership for Huron Gaming, LP, a Delaware
Limited Partnership, Kansas Project, dated July 14, 1997.
10.29 Amendment No. 1 to Reducing Revolving Loan Agreement, dated
June 30, 1997.
10.30 Amendment No. 2 to Reducing Revolving Loan Agreement, dated
July 30, 1997.
10.31 Amended and Restated Agreement of Limited Partnership of Mississippi
Gaming-I Gaming, L.P.
10.32 Amended Equity Conversion Agreement, dated July 18, 1994, by and
between Boomtown, Inc., and Eric Skrmmetta.
10.33 Ground Lease, dated October 19, 1993, between Raphael Skrmetta as
Landlord and Mississippi-I Gaming, L.P. as Tenant.
10.34 First Amendment to Ground Lease dated October 19, 1993, between
Raphael Skrmetta and Mississippi-I Gaming, L.P.
10.35 Second Amendment to Ground Lease dated October 19, 1993, between
Raphael Skrmetta and Mississippi-I Gaming, L.P.
10.36 Purchase Agreement, dated August 1, 1997, by and among the Company,
HPOC, Hollywood Park Food Services, Inc., HP/Compton, Inc., Crystal
Park Hotel and Casino Development Company, LLC, Hollywood Park Fall
Operating Company, HP Yakama, Inc., Turf Paradise, Inc., Boomtown,
Inc., Boomtown Hotel & Casino, Inc., Louisiana-I Gaming, Louisiana
Gaming Enterprises, Inc., Mississippi-I Gaming, L.P., Bayview Yacht
Club, Inc., and the Initial Purchasers named therein.
10.37 Indenture, dated August 1, 1997, by and among the Company, HPOC,
Hollywood Park Food Services, Inc., HP/Compton, Inc., Crystal Park
Hotel and Casino Development Company, LLC, HP Yakama, Inc., Turf
Paradise, Inc., Boomtown, Inc., Boomtown Hotel & Casino, Inc.,
Louisiana-I Gaming, Louisiana Gaming Enterprises, Inc., Mississippi-I
Gaming, L.P., Bayview Yacht Club, Inc. and The Bank of New York, as
trustee.
10.38 Registration Rights Agreement, dated August 1, 1997, by and among the
Company, HPOC, Hollywood Park Food Services, Inc., HP/Compton, Inc.,
Crystal Park Hotel and Casino Development Company, LLC, Hollywood
Park Fall Operating Company, HP Yakama, Inc., Turf Paradise, Inc.,
Boomtown, Inc., Boomtown Hotel & Casino, Inc., Louisiana-I Gaming,
Louisiana Gaming Enterprises, Inc., Mississippi-I Gaming, L.P.,
Bayview Yacht Club, Inc., and the Initial Purchasers named therein.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed July 15, 1997, to report the
June 30, 1997, acquisition of Boomtown, Inc. and the disposition of
Boomtown's Las Vegas property. A Current Report on Form 8-K was filed
August 12, 1997, to report the redemption of each Depositary Share in
exchange for 0.8333 shares of Common Stock.
16
Hollywood Park, Inc.
Calculation of Earnings Per Share
For the three months ended June 30,
---------------------------------------------------------
Primary Assuming full dilution (a)
------------------------- ---------------------------
1997 1996 1997 1996
------------ ---------- ------------ ------------
(in thousands, except per share data)
Average number of common shares outstanding 18,462 18,613 18,462 18,613
Average common shares due to assumed conversion
of convertible preferred shares 0 0 2,291 2,291
------------ ---------- ------------ ------------
Total shares 18,462 18,613 20,753 20,904
============ ========== ============ ===========
Net income $5,603 $5,249 $5,603 $5,249
Less dividend requirements on convertible preferred shares 481 481 0 0
------------ ---------- ------------ ------------
Net income available to common shareholders $5,122 $4,768 $5,603 $5,249
============ ========= =========== ===========
Net income per share $0.28 $0.26 $0.27 $0.25
============ ========= =========== ===========
For the six months ended June 30,
---------------------------------------------------------
Primary Assuming full dilution (a)
------------------------- ---------------------------
1997 1996 1997 1996
------------ ---------- ------------ ------------
(in thousands, except per share data)
Average number of common shares outstanding 18,366 18,613 18,366 18,613
Average common shares due to assumed conversion
of convertible preferred shares 0 0 2,291 2,291
------------ ---------- ------------ ------------
Total shares 18,366 18,613 20,657 20,904
============ ========== ============ ============
Net income (loss) $4,708 ($8,129) $4,708 ($8,129)
Less dividend requirements on convertible preferred shares 962 962 0 0
------------ ---------- ------------ ------------
Net income (loss) attributable to (allocated to) common
shareholders $3,746 ($9,091) $4,708 ($8,129)
============ ========== ============ ============
Net income (loss) per share $0.20 ($0.49) $0.23 ($0.39)
============ ========== ============ ============
- ------------------------
(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.
17
Hollywood Park, Inc.
Selected Financial Data by Operational Location
For the three months ended For the six months ended
June 30 June 30,
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(in thousands, except per share data - unaudited)
REVENUES:
Hollywood Park, Inc. - Casino Division $15,323 $15,173 $29,317 $28,946
HP/Compton, Inc. - Crystal Park Hotel and Casino 900 0 1,500 0
Hollywood Park Race Track 26,747 27,710 32,193 32,992
Turf Paradise, Inc. 3,143 3,219 9,705 9,816
Hollywood Park, Inc. - Corporate 211 325 424 744
Sunflower Racing, Inc. 0 0 0 1,782
------- ------- ------- -------
46,324 46,427 73,139 74,280
------- ------- ------- -------
EXPENSES:
Hollywood Park, Inc. - Casino Division 12,927 12,576 25,506 24,873
HP/Compton, Inc. - Crystal Park Hotel and Casino 18 0 41 0
Hollywood Park Race Track 16,735 17,034 24,018 25,224
Turf Paradise, Inc. 2,670 2,700 6,900 6,822
Hollywood Park, Inc. - Corporate 1,558 2,488 2,894 3,633
Sunflower Racing, Inc. 0 0 0 1,703
------- ------- ------- -------
33,908 34,798 59,359 62,255
------- ------- ------- -------
INCOME (LOSS) BEFORE INTEREST, INCOME TAXES, DEPRECIATION,
AMORTIZATION AND OTHER NON-RECURRING EXPENSES:
Hollywood Park, Inc. - Casino Division 2,396 2,597 3,811 4,073
HP/Compton, Inc. - Crystal Park Hotel and Casino 882 0 1,459 0
Hollywood Park Race Track 10,012 10,676 8,175 7,768
Turf Paradise, Inc. 473 519 2,805 2,994
Hollywood Park, Inc. - Corporate (1,347) (2,163) (2,470) (2,889)
Sunflower Racing, Inc. 0 0 0 79
------- ------- ------- -------
12,416 11,629 13,780 12,025
------- ------- ------- -------
NON-RECURRING EXPENSES:
Write off of investment in Sunflower Racing, Inc. 0 66 0 11,412
DEPRECIATION AND AMORTIZATION:
Hollywood Park, Inc. - Casino Division 900 736 1,530 1,411
HP/Compton, Inc. - Crystal Park Hotel and Casino 402 0 802 0
Hollywood Park Race Track 1,001 1,008 1,991 1,960
Turf Paradise, Inc. 297 301 592 610
Hollywood Park, Inc. - Corporate 431 442 865 883
Sunflower Racing, Inc. 0 0 0 536
------- ------- ------- -------
3,031 2,487 5,780 5,400
------- ------- ------- -------
INTEREST EXPENSE:
Hollywood Park Race Track 7 7 13 14
Hollywood Park, Inc. - Corporate 58 47 116 103
Sunflower Racing, Inc. 0 0 0 781
------- ------- ------- -------
65 54 129 898
------- ------- ------- -------
MINORITY INTERESTS:
HP/Compton, Inc. - Crystal Park Hotel and Casino 42 0 63 0
INCOME (LOSS) BEFORE INCOME TAXES:
Hollywood Park, Inc. - Casino Division 1,496 1,861 2,281 2,662
HP/Compton, Inc. - Crystal Park Hotel and Casino 480 0 657 0
Hollywood Park Race Track 9,004 9,661 6,171 5,794
Turf Paradise, Inc. 176 218 2,213 2,384
Hollywood Park, Inc. - Corporate (1,836) (2,652) (3,451) (3,875)
Minority interests (42) 0 (63) 0
Sunflower Racing, Inc. 0 0 0 (1,238)
Write off of investment in Sunflower Racing, Inc. 0 (66) 0 (11,412)
------- ------- ------- -------
9,278 9,022 7,808 (5,685)
Income tax expense 3,675 3,773 3,100 2,444
------- ------- ------- -------
Net income (loss) $ 5,603 $ 5,249 $ 4,708 ($8,129)
======= ======= ======= =======
Dividend requirements on convertible preferred stock $ 481 $ 481 $ 962 $ 962
------- ------- ------- -------
Net income (loss) attributable to (allocated to) common shareholders $ 5,122 $ 4,768 $ 3,746 ($9,091)
======= ======= ======= =======
Per common share:
Net income (loss) - primary $ 0.28 $ 0.26 $ 0.20 ($0.49)
Net income (loss) - fully diluted $ 0.27 $ 0.25 $ 0.20 ($0.49)
Number of shares - primary 18,462 18,613 18,366 18,613
Number of shares - fully diluted 20,754 20,904 20,657 20,904
18
Boomtown, Inc.
Selected Pro Forma Data by Operational Location
Excludes Financial Results of Boomtown's Las Vegas Property
For the three months ended For the six months ended
June 30, June 30,
------------------------------- -----------------------------
1997 1996 1997 1996
------------- ------------- ------------ ------------
(in thousands, unaudited)
REVENUES:
Boomtown - Reno $17,314 $18,838 $31,783 $32,271
Boomtown - New Orleans 19,908 18,111 38,731 37,125
Boomtown - Biloxi 14,480 13,339 28,934 25,708
Boomtown - Corporate 749 1,218 1,509 1,957
------------- ------------- ------------ ------------
52,451 51,506 100,957 97,061
------------- ------------- ------------ ------------
EXPENSES (EXCLUDING NON-RECURRING EXPENSES)
Boomtown - Reno 15,227 15,403 28,344 28,414
Boomtown - New Orleans 13,950 13,022 27,421 26,689
Boomtown - Biloxi 12,321 12,235 24,613 23,648
Boomtown - Corporate 477 908 884 1,313
------------- ------------- ------------ ------------
41,975 41,568 81,262 80,064
------------- ------------- ------------ ------------
INCOME BEFORE INTEREST, INCOME TAXES, DEPRECIATION,
AMORTIZATION AND OTHER NON-RECURRING EXPENSES:
Boomtown - Reno 2,087 3,435 3,439 3,857
Boomtown - New Orleans 5,958 5,089 11,310 10,436
Boomtown - Biloxi 2,159 1,104 4,321 2,060
Boomtown - Corporate 272 310 625 644
------------- ------------- ------------ ------------
$10,476 $9,938 $19,695 $16,997
============= ============= ============ ============
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 13,1997
---------------------------------------
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/G. Michael Finnigan Dated: August 13, 1997
---------------------------------------
G. Michael Finnigan
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
HOLLYWOOD PARK OPERATING COMPANY
(Registrant)
By: /s/R.D. Hubbard Dated: August 13,1997
---------------------------------------
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/G. Michael Finnigan Dated: August 13, 1997
---------------------------------------
G. Michael Finnigan
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
20
HOLLYWOOD PARK, INC.
EXHIBIT INDEX
Exhibit Description Page
- ------ ----------- ----
10.28 Agreement of Limited Partnership for Huron Gaming, LP, a Delaware Limited Partnership, Kansas
Project, dated July 14, 1997.
10.29 Amendment No. 1 to Reducing Revolving Loan Agreement, dated June 30, 1997.
10.30 Amendment No. 2 to Reducing Revolving Loan Agreement, dated July 30, 1997.
10.31 Amended and Restated Agreement of Limited Partnership of Mississippi Gaming-I Gaming, L.P.
10.32 Amended Equity Conversion Agreement, dated July 18, 1994, by and between Boomtown, Inc., and Eric
Skrmmetta.
10.33 Ground Lease, dated October 19, 1993, between Raphael Skrmetta as Landlord and Mississippi-I Gaming,
L.P. as Tenant.
10.34 First Amendment to Ground Lease dated October 19, 1993, between Raphael Skrmetta and Mississippi-I
Gaming, L.P.
10.35 Second Amendment to Ground Lease dated October 19, 1993, between Raphael Skrmetta and Mississippi-I
Gaming, L.P.
10.36 Purchase Agreement, dated August 1, 1997, by and among the Company, HPOC, Hollywood Park Food
Services, Inc., HP/Compton, Inc., Crystal Park Hotel and Casino Development Company, LLC, Hollywood
Park Fall Operating Company, HP Yakama, Inc., Turf Paradise, Inc., Boomtown, Inc., Boomtown Hotel &
Casino, Inc., Louisiana-I Gaming, Louisiana Gaming Enterprises, Inc., Mississippi-I Gaming, L.P.,
Bayview Yacht Club, Inc., and the Initial Purchasers named therein.
10.37 Indenture, dated August 1, 1997, by and among the Company, HPOC, Hollywood Park Food Services, Inc.,
HP/Compton, Inc., Crystal Park Hotel and Casino Development Company, LLC, HP Yakama, Inc., Turf
Paradise, Inc., Boomtown, Inc., Boomtown Hotel & Casino, Inc., Louisiana-I Gaming, Louisiana Gaming
Enterprises, Inc., Mississippi-I Gaming, L.P., Bayview Yacht Club, Inc. and The Bank of New York, as
trustee.
10.38 Registration Rights Agreement, dated August 1, 1997, by and among the Company, HPOC, Hollywood Park
Food Services, Inc., HP/Compton, Inc., Crystal Park Hotel and Casino Development Company, LLC,
Hollywood Park Fall Operating Company, HP Yakama, Inc., Turf Paradise, Inc., Boomtown, Inc.,
Boomtown Hotel & Casino, Inc., Louisiana-I Gaming, Louisiana Gaming Enterprises, Inc., Mississippi-I
Gaming, L.P., Bayview Yacht Club, Inc., and the Initial Purchasers named therein.
27.1 Financial Data Schedule