SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 10, 1999
HOLLYWOOD PARK, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-10619 95-3667491
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
330 N. Brand Boulevard, Suite 1110, Glendale, California 91203-2308
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (818) 662-5900
1050 South Prairie Avenue, Inglewood, California 90301
(Former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
On September 10, 1999, pursuant to an Asset Purchase Agreement (as
amended), dated May 5, 1999, Hollywood Park, Inc., a Delaware corporation
("Hollywood Park") and Churchill Downs Incorporated, a Kentucky corporation
("Churchill Downs"), Hollywood Park completed the sales of certain assets,
including the Hollywood Park Racetrack and Hollywood Park-Casino on
approximately 240 acres of land at the track site in Inglewood, California, to
Churchill Downs California Company, a wholly-owned subsidiary of Churchill
Downs.
Under terms of the Asset Purchase Agreement, Churchill Downs California
Company paid $117,000,000 in cash for the Hollywood Park Racetrack and all
related assets. In addition, Churchill Downs California Company paid $23,000,000
in cash for the Hollywood Park-Casino building (located on the 240 acres sold),
which Hollywood Park leased back from Churchill Downs California Company under a
10-year lease agreement (with one 10-year renewal option) for $3,000,000 per
annum.
Churchill Downs has guaranteed all of the obligations of Churchill Downs
California Company under the transaction documents.
On September 10, 1999, Hollywood Park issued a press release, a copy of
which is attached hereto as Exhibit 99.1 and incorporated herein by reference.
In addition, in connection with the sale of the Hollywood Park Racetrack,
Hollywood Park has leased the Hollywood Park-Casino building and related
personal property (the personal property of the Hollywood Park-Casino continues
to be owned by Hollywood Park) to Century Gaming Management, Inc., a California
corporation, for a period of twelve months. The monthly base rent is $500,000,
which Hollywood Park has the right to increase as of January 1, 2000, to
$600,000.
Item 5. Other Events.
In connection with the sale of the Hollywood Park Racetrack, Hollywood Park
moved its corporate offices to Glendale, California. The new address of its
corporate offices is 330 N. Brand Boulevard, Suite 1110, Glendale, California
91203-2308.
Item 7. Financial Statements, Pro Forma Information and Exhibits
(a) Not Applicable
(b) Pro Forma Financial Information
Introduction to Unaudited Pro Forma Consolidated Financial Statements
Unaudited Pro Forma Consolidated Balance Sheet as of
June 30, 1999
Unaudited Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 1998
Unaudited Pro Forma Consolidated Statement of Operations
for the Six Months Ended June 30, 1999
(c) The following are furnished as exhibits to this report:
2
10.1 Asset Purchase Agreement, dated May 5, 1999, between Hollywood
Park, Inc., and Churchill Downs Incorporated is hereby
incorporated by reference to Exhibit 10.41 of Hollywood Park's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1999.
10.2 Form of Amendment No. 1, dated as of August 31, 1999, to Asset
Purchase Agreement between Hollywood Park, Inc. and Churchill
Downs Incorporated.*
10.3 Form of Guaranty issued by Churchill Downs Incorporated in
favor of Hollywood Park, Inc.*
99.1 Press Release issued on September 10, 1999, by Hollywood Park,
Inc.*
_______________
* - filed herewith
3
Introduction to Unaudited Pro Forma Consolidated Financial Statements
Reflecting Dispositions of the Hollywood Park Racetrack and Hollywood
Park-Casino
The following unaudited pro forma consolidated balance sheet was prepared from
the unaudited consolidated balance sheet of Hollywood Park, Inc. ("Hollywood
Park") as of June 30, 1999.
The following unaudited pro forma consolidated statements of operations were
prepared from the audited consolidated statements of operations of Hollywood
Park for the year ended December 31, 1998, the unaudited consolidated statements
of operations of Hollywood Park for six months ended June 30, 1999, the audited
statements of operations of the Hollywood Park Racetrack ("Racetrack") and
Hollywood Park-Casino ("Casino") for the year ended December 31, 1998 and the
unaudited statements of operations of the Racetrack and Casino for the six
months ended June 30, 1999.
It was assumed the disposition of the Racetrack and the Casino occurred on
January 1, 1998 for the unaudited pro forma consolidated statements of
operations and as of June 30, 1999 for the unaudited pro forma consolidated
balance sheet. In accordance with pro forma presentation guidelines, the pro
forma statements of operations for the year ended December 31, 1998 and the six
months ended June 30, 1999 do not reflect an estimated net gain from these
transactions.
The disposition of the Racetrack was accounted for as a sale. The disposition
of the Casino was accounted for as a financing transaction and therefore not
recognized as a sale for accounting purposes as Hollywood Park will sub-lease
the Casino to a third-party operator.
The following unaudited pro forma consolidated financial statements should be
read in conjunction with the accompanying notes and assumptions. The unaudited
pro forma financial information is presented for illustrative purposes only and
is based upon an estimate of the transaction costs, closing reserves and income
taxes related to the transactions. Accordingly, the gain on the sale of the
Racetrack and the asset impairment write-down of the Casino, after taxes, are
estimated and are neither necessarily indicative of the operating results or
financial position that would have occurred if the dispositions had been
completed in an earlier period, nor necessarily indicative of future operating
results or financial position.
These pro forma financial statements are based on, and should be read in
conjunction with, the historical consolidated financial statements and the
related notes thereto of Hollywood Park (see Hollywood Park's Annual Report on
Form 10-K for 1998, and Quarterly Report on Form 10-Q, for June 30, 1999).
4
Hollywood Park, Inc.
Notes to Unaudited Pro Forma Consolidated
Balance Sheet as of June 30, 1999
Assumptions - The dispositions occurred as of June 30, 1999. The disposition of
the Racetrack was accounted for as a sale and the disposition of the Casino was
accounted for as a financing transaction.
Pro Forma Adjustments - The following adjustments have been made to the
unaudited pro forma consolidated balance sheet:
(a) To record the sales proceeds of $117 million for the Racetrack, land and
related assets.
(b) To record the Casino disposition proceeds of $23 million.
(c) To record the sale of the Racetrack, land and related assets, net of
accumulated depreciation.
(d) To record an asset impairment write-down of the Casino to estimated fair
market value.
(e) To record estimated transaction and other related costs of approximately
$10 million.
(f) To record the current and deferred federal and state income taxes payable
related to the dispositions.
(g) To record current and long-term debt related to the finance accounting of
the Casino.
(h) To record the estimated gain on the sale of the Racetrack, land and related
assets and the estimated asset impairment write-down of the Casino
building. The following is the preliminary calculation of the estimated
impact to the statement of operations resulting from these transactions (in
thousands):
Racetrack Casino Cumulative
--------- ------ ----------
Cash proceeds $117,000 $ 23,000 $140,000
Less: Estimated transaction and other related costs 8,000 2,000 10,000
Net book value of the Racetrack and Casino
assets disposed of 45,339 24,569 69,908
Goodwill, net of accumulated amortization,
related to the Racetrack and Casino 0 18,899 18,899
-------- ---------- ---------
Gain (impairment write-down) before income taxes 63,661 (22,468) 41,193
Less: Income taxes 23,400 1,600 25,000
-------- ---------- ---------
Gain (impairment write-down) $ 40,261 ($ 24,068) $ 16,193
======== ========== =========
The above calculations are preliminary, subject to final determination of the
net book value of assets disposed of, income tax consequences and transaction
and other costs. Actual accounting adjustments related to the dispositions
may differ from the pro forma adjustments.
5
Hollywood Park, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
As of June 30, 1999
(in thousands)
Hollywood Pro Forma Pro Forma
Park, Inc. Adjustments Consolidated
---------- ----------- ------------
Assets
Current Assets:
Cash and cash equivalents $ 127,530 $117,000(a) $ 267,530
23,000(b)
Restricted cash 17,964 0 17,964
Short term investments 16,143 0 16,143
Other receivables, net 15,805 0 15,805
Prepaid expenses and other assets 20,979 0 20,979
Deferred tax assets 18,266 0 18,266
Current portion of notes receivable 2,320 0 2,320
---------- ---------- ----------
Total current assets 219,007 140,000 359,007
Notes receivable 12,987 12,987
Property, plant and equipment, net 597,553 (45,339)(c) 550,645
(1,569)(d)
Goodwill, net 95,585 (18,899)(d) 76,686
Gaming license, Casino Magic Bossier City, net 35,645 0 35,645
Concession agreement, Casino Magic Argentina, net 7,117 0 7,117
Debt issuance costs, net 25,300 0 25,300
Other assets 15,682 0 15,682
---------- ---------- ----------
$1,008,876 $ 74,193 $1,083,069
========== ========== ==========
====================================================================================================================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 15,466 $ 0 $ 15,466
Accrued interest 25,755 0 25,755
Other accrued liabilities 52,853 10,000(e) 64,453
1,600(f)
Accrued compensation 20,194 0 20,194
Gaming liabilities 8,998 0 8,998
Racing liabilities 17,045 0 17,045
Current portion of notes payable 8,312 1,816(g) 10,128
---------- ---------- ----------
Total current liabilities 148,623 13,416 162,039
Notes payable, less current maturities 603,702 21,184(g) 624,886
Deferred tax liabilities 1,565 23,400(f) 24,965
Other liabilities 3,649 0 3,649
---------- ---------- ----------
Total liabilities 757,539 58,000 815,539
Minority interests 3,933 0 3,933
Stockholders' Equity:
Capital stock --
Preferred - $1.00 par value, authorized 250,000 shares;
none issued and outstanding in 1999 and 1998 0 0 0
Common - $0.10 par value, authorized 40,000,000 Shares;
25,970,358 and 25,800,069 shares issued and outstanding 2,597 0 2,597
in 1999 and 1998
Capital in excess of par value 220,651 0 220,651
Retained earnings 24,182 16,193(h) 40,375
Accumulated other comprehensive loss (26) 0 (26)
---------- ---------- ----------
Total stockholders' equity 247,404 16,193 263,597
---------- ---------- ----------
$1,008,876 $ 74,193 $1,083,069
========== ========== ==========
- -------
See accompanying notes to the unaudited pro forma consolidated balance sheet.
6
Hollywood Park, Inc.
Notes to Unaudited Pro Forma Consolidated
Statements of Operations
Assumptions - The unaudited pro forma consolidated statements of operations for
the year ended December 31, 1998, and the six months ended June 30, 1999, are
presented as if the dispositions had taken place on January 1, 1998. The
results of operations of the Racetrack and Casino have been eliminated from the
Hollywood Park historical results of operations, so that only the continuing
Hollywood Park operations are reflected.
In accordance with pro forma presentation guidelines, the pro forma statements
of operations do not reflect an estimated gain or impairment write-down from
these transactions or any income generated during the periods shown from the
proceeds received. A reduction of debt, investments in other assets including
short-term investment securities or an investment in other casino operations may
have resulted which has not been reflected in these pro forma statements of
operations.
Pro Forma Adjustments - The following adjustments have been made to the
unaudited pro forma consolidated statements of operations:
(a) To eliminate the historical results of operations of the Racetrack and
Casino.
(b) To record Casino rental income to be received by Hollywood Park, Inc. In
connection with the financing transactions of the Casino, the Company
entered into a one year lease agreement with an unaffiliated third party to
operate the Casino. Rent will be received by Hollywood Park in the amount
of $500,000 per month. [Hollywood Park has the option to increase the rent
to $600,000 per month as of January 1, 2000 for the remainder of the
lease.]
(c) To record estimated operating expenses related to the Casino.
(d) To record estimated depreciation expense for the Casino and related assets
associated with the financing, as well as depreciation expense for
Hollywood Park assets sold which are not reflected in the historical
results of operations of the Racetrack and Casino.
(e) To record interest expense for the amortization of the lease financing debt
associated with the Casino.
(f) To record the federal and state income tax effect of pro forma adjustments
at the Company's effective 40% tax rate.
7
Hollywood Park, Inc.
Unaudited Pro Forma Consolidated Statements of Operations
For the Year Ended December 31, 1998
(in thousands, except per share data)
Less:
Hollywood Park
Hollywood Race Track Pro Forma Pro Forma
Park, Inc. and Casino (a) Adjustments Consolidated
---------- -------------- ----------- ------------
Revenues:
Gaming $293,057 $46,255 $0 $246,802
Racing 66,871 51,934 0 14,937
Food and beverage 30,510 11,110 0 19,400
Hotel and recreational vehicle park 3,076 0 0 3,076
Truck stop and service station 14,499 0 0 14,499
Other income 18,954 5,452 6,000(b) 19,502
--------- --------- --------- ----------
426,967 114,751 6,000 318,216
--------- --------- --------- ----------
Expenses:
Gaming 161,549 27,167 0 134,382
Racing 29,316 22,650 0 6,666
Food and beverage 38,860 15,722 0 23,138
Hotel and recreational vehicle park 1,213 0 0 1,213
Truck stop and service station 13,279 0 0 13,279
General and administrative 95,491 27,784 0 67,707
Other 7,995 2,026 200(c) 6,169
Depreciation and amortization 32,121 8,411 3,269(d) 26,979
Loss on write-off of assets 2,221 0 0 2,221
REIT restructuring 419 0 0 419
--------- --------- --------- ----------
382,464 103,760 3,469 282,173
--------- --------- --------- ----------
Operating income 44,503 10,991 2,531 36,043
Interest expense, net 22,518 0 1,184(e) 23,702
--------- --------- --------- ----------
Income before minority interests and
income taxes 21,985 10,991 1,347 12,341
--------- --------- --------- ----------
Minority interests 374 0 0 374
Income tax expense 8,442 4,221 539(f) 4,760
--------- --------- --------- ----------
Net income $13,169 $6,770 $808 $7,207
========= ========= ========= ==========
=============================================================================================================
Per common share:
Net income - basic $0.50 $0.28
Net income - diluted $0.50 $0.28
Number of shares - basic 26,115 26,115
Number of shares - diluted 26,115 26,115
- -------
See accompanying notes to the unaudited pro forma consolidated statements of
operations
8
Hollywood Park, Inc.
Unaudited Pro Forma Consolidated Statements of Operations
For the Six Months Ended June 30, 1999
(in thousands, except per share data)
Less:
Hollywood Park
Hollywood Race Track Pro Forma Pro Forma
Park, Inc. and Casino (a) Adjustments Consolidated
--------- -------------- ----------- ------------
Revenues:
Gaming $285,305 $24,254 $0 $261,051
Racing 38,741 29,739 0 9,002
Food and beverage 21,701 5,785 0 15,916
Hotel and recreational vehicle park 5,700 0 0 5,700
Truck stop and service station 7,534 0 0 7,534
Other income 12,546 3,449 3,000(b) 12,097
--------- --------- --------- ---------
371,527 63,227 3,000 311,300
--------- --------- --------- ---------
Expenses:
Gaming 156,499 13,050 0 143,449
Racing 15,378 11,586 0 3,792
Food and beverage 25,763 7,932 0 17,831
Hotel and recreational vehicle park 2,866 0 0 2,866
Truck stop and service station 6,900 0 0 6,900
General and administrative 73,112 13,621 0 59,491
Other 7,277 1,150 100(c) 6,227
Depreciation and amortization 27,202 4,292 1,633(d) 24,543
Indiana pre-opening 1,509 0 0 1,509
--------- --------- --------- ---------
316,506 51,631 1,733 266,608
--------- --------- --------- ---------
Operating income 55,021 11,596 1,267 44,692
Interest expense, net 30,053 0 545(e) 30,598
--------- --------- --------- ---------
Income before minority interests and
income taxes 24,968 11,596 722 14,094
--------- --------- --------- ---------
Minority interests 1,137 0 0 1,137
Income tax expense 9,987 4,638 289(f) 5,638
--------- --------- --------- ---------
Net income $13,844 $6,958 $433 $7,319
========= ========= ========= =========
================================================================================================================
Per common share:
Net income - basic $0.54 $0.28
Net income - diluted $0.54 $0.28
Number of shares - basic 25,836 25,836
Number of shares - diluted 25,836 25,836
- -----
See accompanying notes to the unaudited pro forma consolidated statements of
operations
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOLLYWOOD PARK, INC.
Date: September 27, 1999 By: /s/ Bruce C. Hinckley
-------------------------------
Bruce C. Hinckley
Vice President, Treasurer and
Chief Financial Officer
10
Exhibit Index
-------------
Exhibit Description
- ------- -----------
10.1 Asset Purchase Agreement, dated May 5, 1999, between Hollywood
Park, Inc., and Churchill Downs Incorporated is hereby
incorporated by reference to Exhibit 10.41 of Hollywood Park's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1999.
10.2 Form of Amendment No. 1, dated as of August 31, 1999, to Asset
Purchase Agreement between Hollywood Park, Inc. and Churchill
Downs Incorporated.*
10.3 Form of Guaranty issued by Churchill Downs Incorporated in favor
of Hollywood Park, Inc.*
99.1 Press Release dated September 10, 1999, by Hollywood Park, Inc.*
_______________
* - filed herewith
11