UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] For the fiscal year ended December 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 001-12419
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Showboat Marina Casino Partnership
Showboat Marina Finance Corporation
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(Exact name of registrant as specified in its charter)
Indiana 35-1978576
Nevada 88-0356197
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State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
One Showboat Place, East Chicago, Indiana 46312
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (219) 378-3000
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
13 1/2 % Series B First Mortgage Notes
Notes Due 2003 New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
Not Applicable Not applicable.
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Indicate by check mark whether the registrant (1) 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
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ] Not Applicable
All partnership interests of Showboat Marina Casino
Partnership and all capital stock of Showboat Marina Finance
Corporation are held by affiliates of the registrants.
Indicate the number of shares outstanding of each of the
registrants' classes of common stock: (1) Showboat Marina Casino
Partnership - Not Applicable (2) Showboat Marina Finance
Corporation - 1,000 shares of common stock, $1.00 par value as of
March 1, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Not applicable.
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PART I
ITEM 1. BUSINESS
GENERAL
The Indiana Gaming Commission (the "Indiana Commission")
issued on April 15, 1997, subject to the completion of certain
regulatory inspections, a riverboat owner's license to Showboat
Marina Casino Partnership, an Indiana general partnership ("SMCP"
or "Partnership") to operate the sole licensed gaming facility
located at East Chicago, Indiana on Lake Michigan (the "East
Chicago Showboat"). Upon successful completion of the regulatory
inspections, SMCP commenced public operations on April 18, 1997.
SMCP was organized as of March 1, 1996, and Showboat Marina
Finance Corporation, a Nevada corporation and a wholly-owned
subsidiary of SMCP ("SMFC"), was incorporated on March 7, 1996.
SMFC was formed to assist SMCP in obtaining financing for the
construction of the East Chicago Showboat. SMCP and SMFC
(collectively the "Company") own and operate the East Chicago
Showboat. Showboat, Inc., a Nevada corporation which
beneficially owns a 55% interest in SMCP ("Showboat"), designed
the East Chicago Showboat and provided assistance in developing,
constructing, equipping and opening the East Chicago Showboat.
The remaining 45% partnership interest of SMCP is beneficially
owned by Waterfront Entertainment and Development, Inc.
("Waterfront"), a corporation primarily composed of Indiana
businessmen. Showboat continues to provide assistance to SMCP in
operating the East Chicago Showboat. Showboat Marina
Partnership, an Indiana general partnership and the owner of 99%
of the partnership interests of SMCP (the "Manager," the
"Predecessor" or "SMP"), manages the East Chicago Showboat
pursuant to a management agreement. The Company's principal
offices are located at One Showboat Place, East Chicago, Indiana
46312, and its telephone number is (219) 378-3000.
SMP was organized on January 31, 1994 for the purpose of
developing the East Chicago Showboat. SMP contributed
substantially all of its assets and liabilities to SMCP following
its organization. SMP's principal offices are also located at
One Showboat Place, East Chicago, Indiana and its telephone
number is (219) 378-3000.
NARRATIVE DESCRIPTION OF BUSINESS
On April 18, 1997, the East Chicago Showboat commenced
gaming operations. Prior to commencement of operations, SMCP's
activities had been limited to applying for the appropriate
gaming licenses and securing the land for, arranging for
construction of, finalizing the design of, construction and
development and obtaining financing for the East Chicago
Showboat.
The East Chicago Showboat is located on approximately 27
acres of leased land at Pastrick Marina, approximately 12 miles
from Chicago, Illinois. The East Chicago Showboat is located
directly off Indiana State Highway 912, a six-lane divided
highway which connects 3.5 miles to the north of Interstate
Highway 90 and 5.5 miles to the north of Interstate Highway
80/94.
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The East Chicago Showboat consists of an approximately
100,000 square foot, state-of-the-art, five level casino vessel
(the "Casino Vessel"), an approximately 100,000 square foot,
land-based pavilion (the "Pavilion"), an approximately 1,800
space parking garage (which parking garage is attached to the
Pavilion via enclosed walkways which protect customers from
inclement weather) and surface parking for an additional 1,200
automobiles for use by customers and employees. There are
available 600 additional off-site parking spaces for employees.
A festive Mardi Gras party atmosphere is replicated throughout
the East Chicago Showboat by use of murals, street performers,
a highly themed hydraulic bandstand and entertainers.
The Casino Vessel which includes approximately 53,000 square
feet of gaming space on four of its five levels, features
approximately 1,700 slot machines and approximately 82 table
games (including poker tables), and accommodates approximately
3,750 passengers. The highest level of the Casino Vessel, in
addition to a gaming area, contains a passenger lounge, snack bar
and cocktail lounge. The lowest level of the Casino Vessel is
used as administrative support areas for the Casino Vessel. The
Casino Vessel resembles a modern vacation cruise vessel, with
escalators, elevators, eleven foot to twelve and one-half foot
high ceilings, and state-of-the-art design features intended to
provide customers with a smooth and comfortable ride during
cruises on Lake Michigan. The East Chicago Showboat offers
gaming 365 days per year and provides its customers a wide
variety of table games and slot machines of varying types and
denominations. SMCP operates the Casino Vessel approximately 20
hours each day in a series of excursions lasting two hours each.
The Pavilion consists of three floors. The first floor
public area consists of a lobby. Customers proceed from the
first floor lobby to the second floor public area. The second
floor public area of the Pavilion includes a reception desk, a
gift shop, a buffet, a hydraulic bandstand platform, an upscale
restaurant and a cocktail lounge and is connected to the Casino
Vessel via an enclosed walkway. The first floor of the Pavilion
also contains executive offices, administrative offices,
accounting and employee support areas and receiving platforms.
The third level houses a VIP lounge and an additional walkway to
the Casino Vessel for additional boarding during peak periods.
FINANCIAL INFORMATION
The primary source of revenue and income to the Company is
from the gaming operations of the Casino Vessel, although the
Company views the restaurants, bars, and special events and
services to be important adjuncts to the gaming operations of the
East Chicago Showboat. At December 31, 1997, the East Chicago
Showboat featured the following approximate number of slot
machines and table games: 1,700 slot machines, 43 "21" tables,
11 poker tables, 7 "Craps" tables, 8 roulette tables, 8 Caribbean
stud poker tables, 3 mini-baccarat tables and 2 big six wheels.
Slot machines accounted for 71.2% of casino revenues for the year
ended December 31, 1997. See "Item 8. Financial Statements and
Supplementary Data" for additional financial information on the
Company.
The following table sets forth the contribution to total net
revenues on a dollar and percentage basis of the Company's major
activities at the East Chicago Showboat for the year ended
December 31, 1997.
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YEAR ENDED DECEMBER 31, 1997
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AMOUNT PERCENT
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(In thousands)
Revenues:
Casino<F1>................... $108,996 94.3
Food and beverage............ 7,534 6.5
Other........................ 1,508 1.3
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Total gross revenues<F2>........ 118,038 102.1
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Less complimentaries<F1>........ 2,488 2.1
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Total net revenues.............. $115,550 100.0
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<FN>
<F1> Casino revenues are the net difference between the sums paid
as winnings and the sums received as losses. Complimentaries
consist primarily of food and beverages furnished
gratuitously to customers. The sales value of such services
is included in the respective revenue classifications
and is then deducted as complimentaries. Complimentary
rates are periodically reviewed and adjusted by management.
See Note 1 of Note to Consolidated Financial Statements in
Item 8. Financial Statements and Supplementary Data.
<F2> Does not include interest income.
</FN>
MARKETING STRATEGY
SMCP uses a broad range of marketing techniques including
multiple media placement advertising, data-based mail and
telephone marketing, publicity, a slot club, promotions, special
events, group sales, bus programs, entertainment and a variety of
other approaches. SMCP generates its business by providing
current, and potential, customers with products and services
intended to create a satisfying recreational experience, which
SMCP believes results in a high likelihood of customer return and
motivation to provide positive word-of-mouth referrals.
Complimentaries, slot club rewards and some direct mail offers
are based on customer profitability and are designed to stimulate
additional visiting and create loyalty.
GAMING CREDIT POLICY
Credit is extended to a limited number of gaming customers
at the East Chicago Showboat. At the East Chicago Showboat,
gaming receivables were $0.9 million, before deducting the
allowance for doubtful accounts of approximately $0.1 million for
the year ended December 31, 1997. The East Chicago Showboat's
gaming credit, as a percentage of total gaming revenues, is
13.1%.
The non-collectibility of gaming receivables can have a
material adverse effect on results of operations, depending upon
the amount of credit extended and the size of uncollected
amounts. SMCP maintains strict controls over the issuance of
credit and aggressively pursues collection of its customer
receivables. These collection efforts parallel those procedures
commonly followed by most large corporations, including the
mailing of statements and delinquency notices, personal contacts,
the use of outside collection agencies and civil litigation. SMCP
believes that it is reasonable to conclude that gaming debts
evidenced by credit instruments, under credit policies approved
by the Indiana Commission, should be enforceable under the laws
of Indiana. All other states are required to enforce a judgment
on a gaming debt entered in Indiana pursuant to the Full Faith
and Credit Clause of the United States Constitution. Although
gaming debts are not legally
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enforceable in some foreign countries, the United States assets
of foreign debtors may be reached to satisfy a judgment entered
in the United States. Annual gaming bad debt expense at the East
Chicago Showboat was approximately 0.05% of casino revenues for
the year ended December 31, 1997.
CONTROL PROCEDURES
In connection with its gaming activities, SMCP follows a
policy of stringent internal controls, cross-checks and recording
of all receipts and disbursements in accordance with industry
practice. The audit and cash controls developed and utilized by
SMCP include locked cash boxes, independent counters, checkers
and observers to perform the daily cash and coin counts, floor
observation of the gaming areas, closed-circuit television
observation of certain areas, daily computer tabulation of
receipts and disbursements for each slot machine, table and other
games, and the rapid identification, analysis and resolution of
discrepancies or deviations from normal performance. Dealers and
other personnel are trained by SMCP. Gaming operations are
subject to risk of loss as a result of employee or customer
dishonesty due to the large amount of cash and gaming chips
handled. However, SMCP has not experienced significant losses
related to employee dishonesty.
SEASONALITY
It is anticipated that the East Chicago Showboat's business
will be seasonal with its highest revenues typically occurring in
the summer months and lower amounts generally in the winter
months.
COMPETITION
The gaming industry includes land-based casinos, dockside
casinos, riverboat casinos, casinos located on Native American
land and other forms of legalized gaming. There is intense
competition among companies in the gaming industry, some of which
have significantly greater resources than SMCP. Although the
Indiana gaming statutes have allocated only one riverboat owner's
license to the City of East Chicago, four additional riverboat
casino operations are authorized and operating in northern
Indiana and six additional licenses have been authorized in
southern Indiana of which four licenses have been awarded and are
operating and one certificate of suitability (a precursor to a
license) has been issued for Harrison County. Additional
licenses could be issued if subsequent legislation is enacted to
increase the number of available licenses in Indiana. There is a
licensed pari-mutuel wagering facility in Merrillville, Indiana,
which is located in Lake County.
The East Chicago Showboat competes with eight other
riverboat casinos within 120 miles of the East Chicago Showboat
(the "Chicago Gaming Market"). Four of the eight operating
riverboat casinos operate in Illinois, within fifty miles of the
East Chicago Showboat. Illinois gaming statutes restrict
riverboat casinos to 1,200 gaming positions each. Although
Illinois has issued all ten riverboat casino gaming licenses
authorized by existing Illinois law, legislation has been
introduced on numerous occasions in recent years to expand
riverboat gaming in Illinois, such as the authorization of new
sites in the Chicago metropolitan area and the modification of
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existing regulations restricting the total number of gaming
positions. Additionally, legislation has been proposed which
would permit dockside gaming in Illinois. No assurance can be
given that the State of Illinois may not enact such legislation
in the future.
SMCP competes with the riverboat casinos in the Chicago
Gaming Market based on its availability of a wide variety of
table games and slot machines of varying types and denominations,
its spacious comfortable environment, and its Mardi Gras
atmosphere. Additionally, the players slot club and special
promotions are utilized to attract customers to the East Chicago
Showboat.
Potential future competition may include the Pokagon Band of
Potawatomi Indians (the "Pokagon Band") of southern Michigan and
northern Indiana, a federally recognized Indian tribe, which
signed a compact with the State of Michigan in November 1995 to
operate a casino in Southern Michigan and is proposing to enter
into a compact with the State of Indiana. As of March 1, 1998,
the Governor of Indiana has not yet begun compact negotiations
with the Pokagon Band. The legalization of casino gaming
operations in jurisdictions in close proximity to the East
Chicago Showboat would have a material adverse effect on SMCP.
Other changes in legislation could increase tax or other burdens
on the Company or could lessen restrictions on competitors of
SMCP in other jurisdictions, either of which could have a
material adverse effect on the operating results of SMCP.
Apart from local competition, SMCP also competes with gaming
facilities nationwide, including riverboat gaming in Illinois,
Southern Indiana, Iowa, Louisiana, Missouri and Mississippi and
land-based casinos in Colorado, Louisiana, Nevada, New Jersey,
and South Dakota, as well as various gaming operations on Native
American land, including those located in Arizona, Connecticut,
Louisiana, Michigan, Minnesota, New York and Wisconsin. Other
jurisdictions may legalize various forms of gaming and wagering
that may compete with the East Chicago Showboat in the future,
including those jurisdictions in close proximity to East Chicago,
Indiana. Gaming and wagering includes on-line computer gaming,
bingo, pull tab games, card clubs, pari-mutuel betting on horse
racing and dog racing, state sponsored lotteries, video lottery
terminals and video poker terminals, as well as other forms of
entertainment.
REGULATION AND LICENSING
The ownership and operation of an Indiana riverboat gaming
operation is subject to extensive regulation and supervision by
various governmental authorities, including the Indiana
Commission.
INDIANA
In 1993, the State of Indiana passed a Riverboat Gambling
Act which created the Indiana Commission. The Indiana Commission
is given extensive powers and duties for the purposes of
administering, regulating and enforcing the system of riverboat
gaming. It is authorized to award no more than 11 gaming licenses
(five to counties contiguous to Lake Michigan, five to counties
contiguous to the Ohio River and one to a county contiguous to
Patoka Lake).
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With the exception of Lake County, a county must pass a
referendum approving (by a majority of those who voted) riverboat
gaming before riverboat gaming can be legalized in that county.
If a referendum fails to pass in any county, another referendum
may not be held for another two years. Once a referendum has
passed in a county, the Riverboat Gambling Act requires any
proposed riverboat to operate from the most populous city in that
county, unless such city passes a resolution authorizing a
riverboat to operate elsewhere in the county. For Lake County,
the Riverboat Gambling Act provides that the second and third
most populous cities of the county, Hammond and East Chicago,
respectively, according to the 1990 census, may authorize
riverboat gaming within such cities, by passage of a municipal
referendum. Voters in both cities passed such referenda. Gary,
Lake County's most populous city, is exempted by the Riverboat
Gambling Act from the gaming referendum requirement altogether.
Pursuant to Indiana Commission resolution, the cost of any
referendum is to be borne by all license applicants for the
voting county or municipality.
The Indiana Commission has jurisdiction and supervision over
all riverboat gaming operations in Indiana and all persons on
riverboats where gaming operations are conducted. These powers
and duties include authority to (1) investigate all applicants
for riverboat owner's licenses, (2) select among competing
applicants those that promote the most economic development in a
home dock area and that best serve the interest of the citizens
of Indiana, (3) establish fees for licenses, and (4) prescribe
all forms used by applicants. The Indiana Commission shall adopt
rules pursuant to statute for administering the gaming statute
and the conditions under which riverboat gaming in Indiana may be
conducted. The Indiana Commission has promulgated certain final
rules and has proposed additional rules governing the application
procedure and all other aspects of riverboat gaming in Indiana.
The Indiana Commission may suspend or revoke the license of a
licensee or a certificate of suitability or impose civil
penalties, in some cases without notice or hearing for any act in
violation of the Riverboat Gambling Act or for any other
fraudulent act or if the licensee or holder of such certificate
of suitability has not begun regular riverboat excursions prior
to the end of the twelve month period following the Indiana
Commission's approval of the application for an owner's license.
In addition, the Indiana Commission may revoke an owner's license
if it is determined by the Indiana Commission that revocation is
in the best interests of the state of Indiana. The Indiana
Commission will (1) authorize the route of the riverboat and
stops that the riverboat may make, (2) establish minimum amounts
of insurance and (3) after consulting with the Corps of
Engineers, determine which waterways are navigable waterways for
purposes of the Riverboat Gambling Act and determine which
navigable waterways are suitable for the operation of riverboats.
The Riverboat Gambling Act requires an extensive disclosure
of records and other information concerning an applicant,
including disclosure of all directors, officers and persons
holding one percent (1%) or more direct or indirect beneficial
interest.
In determining whether to grant an owner's license to an
applicant, the Indiana Commission shall consider (1) the
character, reputation, experience and financial integrity of the
applicant and any person who (a) directly or indirectly controls
the applicant, or (b) is directly or indirectly controlled by
either the applicant or a person who directly or indirectly
controls the applicant, (2) the facilities or proposed facilities
for the conduct of riverboat gaming, (3) the highest total
prospective revenue to be collected by the state from the conduct
of riverboat
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gaming, (4) the good faith affirmative action plan to recruit,
train and upgrade minorities in all employment classifications,
(5) the financial ability of the applicant to purchase and
maintain adequate liability and casualty insurance, (6) whether
the applicant has adequate capitalization to provide and maintain
the riverboat for the duration of the license and (7) the extent
to which the applicant meets or exceeds other standards adopted
by the Indiana Commission. The Indiana Commission may also give
favorable consideration to applicants for economically depressed
areas and applicants who provide for significant development of a
large geographic area. Each applicant must pay an application fee
of $50,000 and additional fees may be assessed for the background
investigation. If the applicant is selected, the applicant must
pay an initial license fee of $25,000 and post a bond, and
thereafter, pay an annual license renewal fee of $5,000. The
Indiana Commission has issued eight of these eleven licenses--
four in Lake County Indiana; one in LaPorte County; one in
Vanderburgh County; one in Ohio County; and one in Dearborn
County. In addition, the Indiana Commission has issued a
certificate of suitability to an applicant in Harrison County.
The Indiana Commission has decided to delay a determination for
the tenth license, which if issued, would be located on the Ohio
River. The Indiana Commission has not considered applicants for
the eleventh license since the Patoka Lake site has been
determined by the U.S. Army Corp of Engineers as an unsuitable
site for development of a casino vessel project.
A person holding an owner's gaming license issued by the
Indiana Commission may not own more than a 10% interest in
another such license. An owner's license expires five years after
the effective date of the license; however, after three years the
holder of an owner's license will undergo a reinvestigation to
ensure continued suitability for licensure. Unless the license
has been terminated, expired or revoked, the gaming license may
be renewed if the Indiana Commission determines that the licensee
has satisfied all statutory and regulatory requirements. In
connection with the issuance of the license to SMCP, SMP,
Waterfront and Showboat and its affiliates declared to the
Indiana Commission that if SMCP received a riverboat owner's
license, they shall not commence more than one other casino
gaming operation within a fifty-mile radius of East Chicago
Showboat for a period of five years beginning on the date of
issuance of an owner's license by the Indiana Commission to SMCP.
Adherence to the non-competition declaration is a condition of
the owner's license. A gaming license is a revocable privilege
and is not a property right.
Minimum and maximum wagers on games are not established by
regulation but are left to the discretion of the licensee.
Wagering may not be conducted with money or other negotiable
currency. Riverboat gaming excursions shall be at least two
hours, but not more than four hours in duration unless expressly
approved by the Indiana Commission. No gaming may be conducted
while the boat is docked except (1) for 30-minute time periods at
the beginning and end of a cruise while the passengers are
embarking and disembarking, (2) if the master of the riverboat
reasonably determines that specific weather or water conditions
present a danger to the riverboat, its passengers and crew, (3)
if either the vessel or the docking facility is undergoing
mechanical or structural repair, (4) if water traffic conditions
present a danger to (A) the riverboat, riverboat passengers, and
crew, or (B) other vessels on the water, or (5) if the master has
been notified that a condition exists that would cause a
violation of federal law if the riverboat were to cruise. The
Indiana Commission has adopted rules governing cruising on Lake
Michigan by a riverboat casino. The period of time during which
passengers embark and disembark constitutes a portion of the
gaming excursion if gaming is allowed. At the conclusion of the
thirty-minute embarkation
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period, the gangway or its equivalent must be closed. However, a
riverboat licensee must allow patrons to disembark at anytime the
riverboat remains at the dock and gaming continues. A standard
excursion schedule for a casino vessel on Lake Michigan must
include at least one full excursion (a cruise into the open water
on Lake Michigan, not more than three statute miles from the dock
site July through September and not more than one statute mile
October through June) and one intermediate excursion during which
the vessel cruises in protected navigable water on or accessible
to Lake Michigan. An intermediate excursion is to be conducted
if the statutory conditions that permit dockside gaming are not
present and if sea conditions or weather conditions, or both, do
not permit a full excursion. If a casino vessel remains dockside
because of statutory conditions, the embarkation and
disembarkation rules still apply.
An admission tax of $3.00 for each person admitted to the
gaming excursion is imposed upon the license owner. The
admissions tax is paid by the riverboat licensee for each
excursion or part of an excursion for which the patron remains on
board. An additional 20% tax is imposed on the adjusted gross
receipts received from gaming operations, which is defined as the
total of all cash and property (including checks received by the
licensee whether collected or not) received, less the total of
all cash paid out as winnings to patrons and uncollectable gaming
receivables (not to exceed 2%). The gaming license owner shall
remit the admission and wagering taxes before the close of
business on the day following the day on which the taxes were
incurred. Riverboats are assessed for property tax purposes as
real property and are taxed at rates to be determined by local
taxing authorities of the jurisdiction in which a riverboat
operates. SMCP is contesting the timing of the initial
assessment of property taxes by Lake County on the riverboat
vessels. The Riverboat Gambling Act requires a riverboat owner
licensee to directly reimburse the Indiana Commission for the
costs of inspectors and agents required to be present during the
conduct of gaming operations. Pursuant to agreements with the
City, and as reflected in the owner's license, SMCP has agreed to
(1) provide certain fixed incentives of approximately $16.4
million to the City of East Chicago and its agencies for
transportation, job training, home buyer assistance and discrete
economic development initiatives, (2) pay 3% of adjusted gross
receipts divided equally among the City and two not-for-profit
foundations for infrastructure improvements, education and
community development, and (3) pay 0.75% of adjusted gross
receipts for community development projects, including the
completion of the Washington High School Site town home
development with a total projected cost of $5.0 million, to East
Chicago Second Century, Inc., a for-profit corporation owned by
SMP ("Second Century"). Funding for the Washington High School
Site project will be derived from contributions to Second Century
from SMCP as well as funds from other third-party sources.
The Indiana Commission is authorized to license suppliers
and certain occupations related to riverboat gaming. Gaming
equipment and supplies customarily used in conducting riverboat
gaming may be purchased or leased only from licensed suppliers.
The Indiana Commission has adopted a rule requiring employees
working on the riverboat to have a valid merchant marine document
issued by the United State Coast Guard.
The Indiana Riverboat Gambling Act places special emphasis
upon minority and women's business enterprise participation in
the riverboat industry. Any person issued a riverboat owner's
license must establish goals of expending at least 10% of the
total dollar value of the licensee's contracts for goods and
services with minority business enterprises and 5% of the total
dollar
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value of the licensee's contracts for goods and services with
women's business enterprises. The East Chicago Showboat did not
achieve these goals primarily due to the construction of the East
Chicago Showboat during the first quarter of 1997. The Indiana
Commission may suspend, limit or revoke the gaming owner's
license or impose a fine for failure to comply with statutory
requirements.
An institutional investor which acquires 5% or more of any
class of voting securities of a holding company of a licensee is
required to notify the Indiana Commission and to provide
additional information, and may be subject to a finding of
suitability. A person who acquires 5% or more of any class of
voting securities of a holding company of a licensee is required
to apply to the Indiana Commission for a finding of suitability.
Showboat entered into a merger agreement with Harrah's
Entertainment, Inc. ("Harrah's") whereby Showboat will become a
wholly-owned subsidiary of Harrah's (the "Showboat Merger"). In
connection with the Showboat Merger, Harrah's or its affiliate,
has filed an application for a transfer of Showboat's beneficial
interest in SMCP, including an investigatory fee of $50,000, and
the Indiana Commission will investigate the key persons and
substantial owners of Harrah's, and must thereafter find that
Harrah's meets the criteria for licensing and suitability of
riverboat owner licensees.
A riverboat owner licensee may not enter into or perform any
contract or transaction in which it transfers or receives
consideration which is not commercially reasonable or which does
not reflect the fair market value of the goods or services
rendered or received. All contracts are subject to disapproval
by the Indiana Commission.
A riverboat owner licensee or an affiliate may not enter
into a debt transaction of $1.0 million or more without the prior
approval of the Indiana Commission. A riverboat owner licensee
or any other person may not lease, hypothecate, borrow money
against or loan money against a riverboat owner's license.
The Indiana Commission has a rule requiring the reporting of
certain currency transactions, which is similar to that required
by federal authorities. See "Item 1. Business - Other Federal,
State and Local Legislation and Regulation."
The Riverboat Gambling Act prohibits contributions to a
candidate for a state, legislative, or local office, or to a
candidate's committee or to a regular party committee by the
holder of a riverboat owner's license or a supplier's license, by
an officer of a licensee, by an officer of a person that holds at
least a 1% interest in the licensee. The Indiana Commission has
promulgated a rule requiring quarterly reporting by the holder of
a riverboat owner's license or a supplier's license of officers
of the licensee, officers of persons that hold at least a 1%
interest in the licensee, and of persons who directly or
indirectly own a 1% interest in the licensee.
The Indiana Commission adopted a rule which prohibits a
distribution by a riverboat licensee to its partners,
shareholders, itself, or any affiliated entity, if the
distribution would impair the financial viability of the
riverboat gaming operation. The Indiana Commission has proposed
another rule, which would if adopted, require riverboat licensees
to maintain on a quarterly basis a cash reserve in the amount of
the actual payout for three days, and the cash reserve would
include
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cash in the casino cage, cash in a bank account in Indiana, or
cash equivalents not committed or obligated.
The Governor of Indiana has appointed a Gaming Impact Study
Commission chaired by the Attorney General to review the impact
of all forms of gaming in Indiana, and to issue its final report
by December 31, 1999.
A lawsuit was filed on October 25, 1996, in Harrison County
Indiana by three individuals residing in counties abutting the
Ohio River, which challenges the constitutionality of the
Riverboat Gambling Act on grounds that (i) it allegedly creates
an unequal privilege because under the Act supporters of
riverboat casino gaming, having lost a county-wide vote, are
allowed to resubmit a proposal to county voters for approval of
riverboat casino gaming while opponents of riverboat casino
gaming, having lost a county-wide vote, are not allowed to
resubmit a proposal; and (ii) it was enacted as a provision
attached to a state budget bill allegedly in violation of an
Indiana constitutional provision requiring legislative acts to be
confined to one subject and matters properly connected with the
subject. The State of Indiana filed an answer to the complaint.
Although the Indiana Supreme Court has previously upheld the
constitutionality of the Riverboat Gambling Act, the prior
challenge was on different grounds than those contained in the
recently filed lawsuit. If the Riverboat Gambling Act ultimately
was held unconstitutional it would, absent timely corrective
legislation, have a material adverse effect on SMCP's operations.
COAST GUARD
Each cruising riverboat is regulated by the Coast Guard,
whose regulations affect vessel design, construction, operation
(including requirements that each vessel be operated by a minimum
complement of licensed personnel) and maintenance, in addition to
limiting the number of passengers-customers. Since the Casino
Vessel must hold a valid Coast Guard-issued certificate of
inspection, the loss or suspension of such certificate could
preclude the use of the Casino Vessel. The Casino Vessel is
subject to annual, quarterly, as well as unannounced, inspection
by the Coast Guard and must be drydocked every five years for
inspection of the hull. Such drydockings remove the Casino
Vessel from service for a period of time and can result in
required repairs. Less stringent rules apply to permanently
moored vessels. SMCP believes that Coast Guard regulations, and
the requirements of operating and managing a cruising gaming
vessel generally, make a riverboat casino more difficult and more
expensive to conduct than a land-based casino.
All shipboard employees of SMCP -- even those with duties
entirely unrelated to the actual operation of the vessel, such as
dealers, cocktail hostesses and security personnel -- are subject
to the Jones Act which, among other things, exempts those
employees from state limits on worker's compensation awards.
SMCP has obtained insurance which it believes to be adequate to
cover employee claims.
SHIPPING ACT OF 1916; MERCHANT MARINE ACT OF 1936
In order for the Casino Vessel to be able to operate in the
United States, SMCP must be a "citizen of the United States," as
defined in the Merchant Marine Act, 1920, as amended, and the
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Shipping Act, 1916, as amended. A partnership, such as SMCP, is
considered a United States citizen for purposes of United States
coastwide requirements if at least 75% of the equity interest in
SMCP is owned by United States citizens and all general partners
are United States citizens.
OTHER FEDERAL, STATE AND LOCAL LEGISLATION AND REGULATIONS
Various federal, state and local legislation and regulations
relating to safety, health and environmental matters that apply
to businesses in general, such as the Clean Air Act, the Clean
Water Act, the Occupational Safety and Health Act, the Resource
Conservation Recovery Act and the Comprehensive Environmental
Response, Compensation and Liability Act, apply to SMCP as well.
In addition, certain legislation and regulations that apply
generally to vessels operating in United States waters, such as
the Oil Pollution Act of 1990 (which among other things, deals
with liability for oil spills and requires a certificate of
financial responsibility for vessels operating in United States
waters), or within the jurisdiction of various states would apply
to SMCP. One major development in federal legislation was the
passage of the Coast Guard Authorization Act of 1996 which amends
a provision of the Johnson Gambling Devices-Transportation Act of
1951 prohibiting gaming on federal waters, including Lake
Michigan. As a result of this amendment, riverboat casinos, such
as the Casino Vessel, will be able to conduct cruises on Lake
Michigan within boundaries of the State of Indiana and "mock
cruises" will only be permitted pursuant to the exceptions
authorized by the Riverboat Gambling Act.
SMCP is also subject to various other federal, state and
local laws and regulations and, on a periodic basis, has to
obtain various licenses and permits, including those required to
sell alcoholic beverages. In particular, the United States
Department of the Treasury has adopted regulations pursuant to
which a casino is required to file a report of each deposit,
withdrawal or exchange of currency or other payment or transfer
by, through or to a casino which involves a transaction in
currency of more than a predetermined amount ($10,000 for 1996)
per gaming day. Such reports are required to be made on forms
prescribed by the Secretary of the Treasury and must be filed
with the Commissioner of the Internal Revenue Service. In
addition, a casino is required to maintain detailed records
(including the names, addresses, social security numbers or other
information with respect to its customers) dealing with, among
other items, a customer's deposit and withdrawal of funds and the
maintenance of a line of credit.
In addition, Congress enacted a bill which established a
National Gambling Impact and Policy Commission (the "Policy
Commission") to study the economic impact of gaming on the United
States, the individual States and Native American tribes.
Additional federal regulation may occur due to the initiation of
hearings by the Policy Commission. Any new federal legislation
could have a material adverse effect on the Company. Although
SMCP does not anticipate making material expenditures with
respect to such laws and regulations, the applicability of such
laws and regulations may result in additional costs to SMCP.
EMPLOYEES AND LABOR RELATIONS
As of March 1, 1998, the East Chicago Showboat employed
approximately 1,405 persons, of which 190 or 13.5% are subject to
collective bargaining agreements. The agreement covering these
employees expires on June 30, 2001. The East Chicago Showboat
considers its current
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labor relations to be satisfactory. However, the East Chicago
Showboat's marine service provider, Riverboat Services, Inc., is
involved in a dispute with its maritime employees, who maintain,
operate and navigate the Casino Vessel on its cruises. On March
18, 1997 the Marine Engineers Beneficial Association filed a
petition with the National Labor Relations Board seeking to
represent certain employees of Riverboat Services, Inc. On
August 21, 1997, the petition was amended to name the East
Chicago Showboat as a joint employer of the employees in the
petitioned for unit. The petition was withdrawn by the Union on
November 18, 1997, the day prior to the scheduled hearing at the
Regional Office of the Board regarding the petition. As of the
date hereof the petition has not been refiled.
FORWARD-LOOKING INFORMATION
Certain information included in this Annual Report on Form
10-K and in other materials filed or to be filed by the Company
with the Securities and Exchange Commission (as well as
information included in oral statements or other written
statements made or to be made by the Company) contain or will
contain or include, forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as
amended. Such forward-looking statements address, among other
things, the effects of competition, plans for projects currently
under development, plans for property enhancements, business
development activities, financing sources and the effects of
regulation (including gaming licensure and regulation and state
and local regulation). Such forward looking information is based
upon management's current plans or expectations and is subject to
a number of uncertainties and risks that could significantly
affect current plans, anticipated actions and the Company's
future financial condition and results. As a consequence,
current plans, anticipated actions and future financial condition
and results may differ from those expressed in any forward-
looking statements made by or on behalf of the Company. These
uncertainties and risks include, but are not limited to, those
relating to conducting operations at a newly or recently
developed site or in a jurisdiction for which gaming has recently
been permitted, changes in gaming, state and local laws and
regulations, development and construction activities, leverage
and debt service requirements (including sensitivity to
fluctuation in interest rates), general economic conditions,
changes in federal or state tax laws, action taken under
application for licenses (including renewals) and approvals under
applicable laws and regulations (including gaming laws and
regulations) and the legalization of gaming in certain
jurisdictions.
ITEM 2. PROPERTIES
The East Chicago Showboat is located on Lake Michigan
approximately 12 miles from downtown Chicago, Illinois. The
Company believes that the East Chicago Showboat is generally in
good condition, well maintained, and is generally suitable and
adequate to carry on the Company's business.
On October 19, 1995, SMP entered into a Redevelopment
Project Lease ("the Project Lease") with the City of East
Chicago, Department of Redevelopment, pursuant to which the City
of East Chicago granted SMP a leasehold interest for
approximately 27 acres in East Chicago, Indiana (the "Leased
Premises") to construct and operate the East Chicago Showboat for
a period of thirty (30) years from the date SMP received the
certificate of suitability from the Indiana
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Commission (the "Commencement Date"). SMP assigned the Lease
Agreement to SMCP when SMP transferred all of its assets and
liabilities to SMCP. SMCP may elect to renew the term for two
additional thirty year terms. The Project Lease obligates SMCP
to pay the City of East Chicago $400,000 in annual rent with an
adjustment every three years by the same percentage as the
percentage increase in the Consumer Price Index over the previous
three years not to exceed 105% of the previous annual rental.
The interests of SMCP in the Project Lease are subject to a
leasehold mortgage executed in conjunction with the Company's 13
1/2% Series B First Mortgage Notes Due 2003. See "Item 8.
Financial Statements and Supplementary Data - Notes to Financial
Statements."
On October 22, 1996, SMCP entered into a lease (the "Lease")
with 3600 Michigan Company, Ltd. which granted SMCP with a
leasehold interest in certain property in East Chicago, Indiana
for the purposes of using the land for off-site employee parking.
The Lease is for a term of three (3) years and may be renewed at
the option of SMCP for two (2) additional five (5) year terms.
The Lease obligates SMCP to pay 3600 Michigan Company, Ltd. a
monthly rent of $4,631.28 with an adjustment on the first of May
of each year of the lease term to reflect increases or decreases
in real estate taxes per acre assessed against the leased
premises.
In addition to these leasehold interests, SMCP owns the
Casino Vessel. SMCP's interests in the Casino Vessel are also
subject to a first preferred ship mortgage executed in
conjunction with the Company's 13 1/2% Series B First Mortgage
Notes Due 2003. See "Item 8. Financial Statements and
Supplementary Data - Notes to Financial Statements."
ITEM 3. LEGAL PROCEEDINGS
In addition to the following, SMCP is also a defendant in
various other lawsuits, most of which relate to routine matters
incidental to its business. Management does not believe that the
outcome of such pending litigation, in the aggregate, will have a
material adverse effect on the Company.
GAFFNEY, ET AL. V. SHOWBOAT MARINA CASINO PARTNERSHIP, ET
AL., Case No. 2:98 CV 010JM, instituted January 26, 1998 in the
United States District Court for the Northern District of
Indiana. The First Amended Complaint is also an IN REM
proceeding against the M/V Showboat. Plaintiffs, terminated
employees of defendant Riverboat Services Inc. and/or defendant
Riverboat Services of Indiana, Inc. filed a First Amended
Complaint alleging that they were discharged in violation of
federal maritime law and Indiana state law for challenging an
amendment to the Certificate of Inspection for the M/V Showboat
(or the Casino Vessel) permitting the M/V Showboat to staff the
maritime crew with engineers possessing limited licenses rather
than unlimited licenses. Riverboat Services Inc. and/or
Riverboat Services of Indiana, Inc. provide maritime seaman to
SMCP pursuant to a contract. Plaintiffs are requesting damages
for back pay, compensatory damages for emotional pain and
suffering, an injunction restraining from any future violation of
46 USC Section 2114 which provides, in material part, that seaman
may not be terminated due to retaliation for reporting violations
to regulatory authorities, that a judgement be entered IN REM
against M/V Showboat and that the vessel be arrested and sold to
satisfy the judgement. SMCP filed a Motion to Dismiss for
Failure to State a Claim, and such motion is
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expected to be considered in April 1998. Management believes
that the substantive allegations in the First Amended Complaint
are without merit and intends to vigorously defend the
allegations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
SMCP does not possess a class of common equity and its
partnership interests have not been registered under the
Securities Act of 1933 nor under Section 12 of the Securities
Exchange Act of 1934, and the partnership interests are not
publicly traded. As of the date hereof, a subsidiary of Showboat
beneficially owns 55% of the partnership interests of SMCP and
Waterfront beneficially owns 45% of the partnership interests of
SMCP. With respect to SMFC, all 1,000 shares of common stock,
$1.00 par value as of December 31, 1997, outstanding, is owned by
SMCP and has not been registered under the Securities Act of 1933
nor under Section 12 of the Securities Exchange Act of 1934, and
it is not publicly traded.
To date, SMCP has not made any distributions on its
partnership interests, other than distributions permitted by the
Indenture which relate to distributions equal to the good faith
estimate of maximum federal and state income tax liability of
SMCP if SMCP was a taxable person. The First Mortgage Note
Indenture restricts the ability of SMCP to declare or make
distributions on the partnership interests. See "Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" and
"Item 8. Financial Statements and Supplementary Data - Notes to
Financial Statements. In addition, distributions by SMCP are
subject to rules of the Indiana Commission. See "Item1. Business
- - Regulation and Licensing - Indiana."
ITEM 6. SELECTED FINANCIAL DATA
As noted in "Part I Item 1. Business--General," SMP
contributed all of its assets (except for the capital stock of
East Chicago Second Century, Inc.) and liabilities to SMCP as of
March 28, 1996. The selected financial data presented below for
the year ended December 31, 1997 and for the period from March
29, 1996 (commencement of development) to December 31, 1996 have
been derived from the consolidated financial statements of SMCP
and SMP. The selected financial data should be read in
conjunction with "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Item 8.
Financial Statements and Supplementary Data."
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SMCP
--------------------------------------------------
Period from March 29, 1996
Year ended (commencement of development)
December 31, 1997 through December 31, 1996
------------------- ------------------------------
(in thousands) (in thousands)
STATEMENT OF OPERATIONS<F1> DATA:
Net revenues...................... $115,550 $ -
Loss from continuing operations... (5,612) -
Interest Income................... 911 4,919
Interest Expense.................. 20,971 14,327
Capitalized Interest.............. 4,418 4,991
Net Loss.......................... (21,254) (4,417)
Cash Distributions Declared....... 232 -
SMCP
-----------------------------------------
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
(in thousands) (in thousands)
BALANCE SHEET DATA:
Cash and Cash Equivalents......... $ 7,246 $ 599
Short-Term Investments held in
Escrow........................... - 69,002
Total assets...................... 187,941 187,894
Long-term debt (excluding current
maturities)....................... 151,968 140,000
Total liabilities................. 173,844 153,311
Partners' capital................. 14,097 34,583
<FN>
<F1> There were no operations prior to March 29, 1996; therefore,
there is no Statement of Operations.
</FN>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Showboat Marina Casino Partnership ("SMCP" or the
"Partnership"), owns and operates a riverboat casino, the
Showboat Mardi Gras Casino, located in East Chicago, Indiana (the
"East Chicago Showboat"). The East Chicago Showboat began
operations on April 18, 1997.
The Partnership is a general partnership which was formed as
of March 1, 1996 for the purpose of developing and operating the
East Chicago Showboat on Lake Michigan. Prior to the formation
of the Partnership, the complex was developed by Showboat Marina
Partnership, (the "Predecessor" or "SMP") which was formed on
January 31, 1994. On March 28, 1996, the Predecessor contributed
substantially all of its assets and liabilities to the
Partnership. Showboat Marina Finance Corporation ("SMFC") is a
wholly owned subsidiary of the Partnership and was formed on
March 7, 1996 to assist the Partnership in the financing of the
East Chicago Showboat. The Partnership is owned 99% by the
Predecessor and 1% by Showboat Marina Investment
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Partnership. The Partnership is effectively owned 55% by
Showboat, Inc. and 45% by Waterfront Entertainment and
Development, Inc. through various partnership interests.
YEAR ENDED DECEMBER 31, 1997 (1997)
COMPARED TO YEAR ENDED DECEMBER 31, 1996 (1996)
Prior to the commencement of operations on April 18, 1997,
the activities of the Partnership and the Predecessor were
limited to applying for the gaming license, securing the land
for, arranging for the financing of and completing the design and
construction of the East Chicago Showboat. All costs, except for
some interest expense, have been capitalized. As a result, the
Partnership has no operating history for the year ended December
31, 1996.
YEAR ENDED DECEMBER 31, 1997 (1997)
REVENUES
For the year ended December 31, 1997, the Partnership had
gross revenues of $118.0 million. This was offset by $2.4
million of complimentaries, resulting in net revenues of $115.6
million.
Casino revenues for the year ended December 31, 1997 were
$109.0 million, and consisted of $31.4 million in table games
revenue and $77.6 million in slot revenue. Slot revenue
represents 71.2% of the total casino win and table game revenue
makes up the remaining 28.8% of the total casino win for the East
Chicago Showboat.
LOSS FROM OPERATIONS
SMCP had income from operations of $4.0 million, exclusive
of $9.6 million of preopening costs for the year ended December
31, 1997. Including the preopening costs, SMCP had a loss from
operations of $5.6 million for the year ended December 31, 1997.
Total expenses, including the write-off upon opening of the
preopening costs, for 1997 were $121.2 million. This was
comprised principally of casino expenses which totaled $54.8
million and included $32.4 million of gross revenue and admission
taxes, as well as $4.2 million of community benefit levies.
SMCP is currently reviewing its operations in an effort to
improve financial performance and more properly align expenses to
the volume of business. SMCP has identified and implemented
certain cost controls and is continuing to evaluate all
opportunities to manage costs. SMCP is also evaluating its
marketing programs and activities in order to improve marketing
efficiency by eliminating unprofitable or marginally profitable
programs. Additionally, greater emphasis will be placed on
stimulating new customer trial. Over the past twelve months, the
Chicago gaming market has had capacity growth of 59.2% , while
revenue has grown at 30.9% rate, resulting in a slower than
anticipated absorption of additional gaming capacity. As of
March 15, 1998 there have been no announced future capacity
increases in this market.
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NET LOSS
For year ended December 31, 1997, the Partnership recorded a
net loss of $21.3 million. This loss was primarily attributable
to inadequate income from operations to offset the write-off of
preopening costs in the amount of $9.6 million and net interest
expense in the amount of $15.6 million.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, SMCP held cash and cash equivalents
of $7.2 million compared to $.6 million in cash and cash
equivalents and $69.0 million in short term investments at
December 31, 1996. Since its inception, SMCP has met its capital
requirements through the $40.0 million capital contribution (the
"Capital Contribution"), the $133.7 million net proceeds from the
offering (the "Offering") of its 13-1/2% First Mortgage Notes due
2003 (the "Notes") and equipment financing of approximately $20.6
million provided by PDS Financial Corporation and FINOVA Capital
Corporation. The funds provided by these sources provided
sufficient amounts to develop and commence operations of the East
Chicago Showboat.
The East Chicago Showboat was constructed at a total
approximate cost of $201.1 million. In 1997, the partnership
expended approximately $55.9 million on capital improvements.
Management is currently developing a 1998 capital budget.
SMCP issued the Notes in order to obtain funds to construct
the East Chicago Showboat. The Notes mature on March 15, 2003.
Interest payment dates under the Notes are March 15 and
September 15 of each year with the first payment made on
September 15, 1996. The Notes are senior secured obligations of
SMCP. The Notes rank PARI PASSU, or on a parity with, in right
of payment with all existing and future senior indebtedness of
SMCP and senior in right of payment to all future Subordinated
Indebtedness of SMCP. The Notes are without recourse to the
general partners of SMCP or to Showboat. Terms not otherwise
defined herein have the meanings assigned to them in the First
Mortgage Note Indenture. The Notes are secured by a first lien
on substantially all of SMCP's assets. The First Mortgage Note
Indenture places significant restrictions on SMCP for the
incurrence of additional Indebtedness, the creation of additional
Liens on the Collateral securing the Notes, transactions with
Affiliates and making Restricted Payments unless certain
conditions are met. Restricted Payments include paying a
management fee to SMP. In order to pay the management fee, among
other things, SMCP's Fixed Charge Coverage Ratio must be greater
than 1.5 to 1.0 for the most recently ended four full fiscal
quarters, after giving effect to such Restricted Payment. To
make any other Restricted Payment SMCP must, among other things,
have a Fixed Charge Coverage Ratio of 2.0 to 1.0 for the most
recently ended four full fiscal quarters, after giving effect
to such Restricted Payment.
In March 1997, PDS Financial Corporation provided an
equipment lease of approximately $11.0 million. The lease is
secured by the equipment purchased with the proceeds. The lease
is for a term of 48 months and the rate was fixed at 11.0%.
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In June 1997, FINOVA Capital Corporation provided a loan of
approximately $9.6 million. The loan is secured by certain
equipment purchased during the construction of the riverboat
casino complex. The loan is for a term of 36 months and the rate
was fixed at 11.1%.
In October 1997, the Partnership entered into an unsecured
line of credit agreement with Fleet Bank in the amount of $3.0
million. The line of credit is secured by Showboat with funds on
deposit with Fleet Bank. The term of the line is for a period of
one year, renewable annually at the rate of LIBOR plus 75 basis
points. The line is available for general partnership purposes.
As of December 31, 1997, the Partnership had not drawn funds
against this facility; however, all funds were drawn on the
facility in March 1998.
SMP and its subsidiaries are parties to letter agreements
dated April 8, 1994 and April 18, 1995, with the City of East
Chicago (which agreements were also included in the Owner's
license issued to SMCP). SMCP is committed, pursuant to the
letter agreements and its Owner's license to reimburse the City
of East Chicago for expenses incurred in connection with the
development of East Chicago Showboat including, but not limited
to, professional planning and design fees, engineering,
construction of infrastructure (including the construction of a
proposed on/off ramp from Highway 912), utilities or other
improvements at the Pastrick Marina or elsewhere related to the
East Chicago Showboat, legal fees and costs, financial and other
professional fees deemed necessary by the City. Additionally,
SMCP has further committed to general and equipment funding for
support and enhancement of neighborhood improvement programs, law
enforcement operations, public safety programs, the East Chicago
School system and infrastructure of East Chicago. SMCP has
fulfilled all but approximately $.9 million of these obligations.
Additionally, pursuant to its letter agreements with the
City, SMCP is committed to contribute annually an aggregate 3.75%
of its adjusted gross receipts to fund economic and community
development projects for the City of East Chicago. Through
December 31, 1997, a total of $4.2 million had been contributed.
SMCP has also agreed to the creation of a $5.0 million pool
for a mortgage guarantee program to assist a minimum of 250
residents of East Chicago by guaranteeing up to 25% of the
purchase price of a home; and the creation of a $500,000 pool to
provide for its employees (who have been employed for at least
six months) who are first time home buyers, down payment
assistance of 5% of the purchase price of a home up to a maximum
of $5,000. As of the date hereof, no East Chicago resident or
employee has received or obtained funds in connection with the
mortgage guarantee program or home down payment assistance
program.
SMCP has purchased a surety bond naming the City of East
Chicago and the Indiana Gaming Commission as beneficiaries for
the amount of the commitments outstanding at the time of opening
plus approximately $2.0 million related to the rental payment to
the City pursuant to the Project Lease over the 5 year license
plus approximately $2.0 million required by the Indiana
Commission.
During 1997, SMCP evaluated its various systems to determine
whether or not those systems were year 2000 compliant. Based
upon this review, SMCP has identified those systems
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which are not compliant and has implemented a plan to update
those systems. SMCP expects the cost to update the affected
systems will not exceed $2.0 million. SMCP is currently
evaluating the effect a failure to bring its systems into
compliance will have on SMCP.
Showboat, Inc. and the Partnership entered into a standby
equity commitment which requires that if, during any of the first
three Operating Years (as defined), SMCP's Combined Cash Flow (as
defined) is less than $35.0 million, Showboat will be required to
make additional capital contributions to SMCP in the lesser of
(a) $15.0 million, or (b) the difference between the $35.0
million and the Operating Year's Combined Cash Flow. Showboat's
aggregate potential obligation under the standby equity
commitment is $30.0 million. The Partnership anticipates that
the Combined Cash Flow of SMCP for the first full four quarters
of operation will not achieve the $35.0 million threshold and
Showboat will be required to contribute approximately $15.0
million pursuant to its standby equity commitment. As of March
15, 1998, Showboat has contributed $1.0 million to SMCP as part
of this standby equity commitment. There can be no assurance
that the Combined Cash Flow for any future Operating Year will
exceed $35.0 million and that Showboat will not be required to
make additional capital contributions to SMCP in accordance with
the standby equity commitment. The Standby Equity Commitment is
subject to certain limitations, qualifications, and exceptions.
SMCP expects to fund its operating, debt service and capital
needs from operating cash flow, the standby equity commitment and
from its line of credit. Based upon SMCP's anticipated
operations and other available sources of cash, management
believes that the foregoing sources of cash will be adequate to
meet SMCP's anticipated future requirements for working capital,
capital expenditures and scheduled payments of principal and
interest on the Notes for the foreseeable future. No assurance
can be given, however, that these sources of cash will be
sufficient for that purpose. SMCP intends to establish initial
working capital reserves to provide for anticipated short-
term liquidity needs. Although no additional financing beyond
the line of credit described above is contemplated, SMCP will
seek, if necessary and to the extent permitted under the
Indenture, additional financing through bank borrowings, debt
or equity financing. There can be no assurance that additional
financing, if needed, will be available to SMCP, or that, if
available, the financing will be on terms favorable to SMCP.
There is no assurance that SMCP's estimate of its reasonably
anticipated liquidity needs is accurate or that new business
developments or other unforeseen events will not occur, resulting
in the need to raise additional funds.
All statements contained herein that are not historical
facts, including but not limited to, statements regarding SMCP's
current business strategy, and SMCP's plans for future
development and operations, are based upon current expectations.
These statements are forward-looking in nature and involve a
number of risks and uncertainties. Actual results may differ
materially. Among the factors that could cause actual results to
differ materially are the following: the availability of
sufficient capital to finance SMCP's business plan on terms
satisfactory to SMCP; competitive factors, such as expansion of
gaming in Illinois, Indiana and Michigan, states from which
SMCP draws significant numbers of patrons and an increase in
the number of casinos serving the Chicago metropolitan area;
changes in labor, equipment and capital costs; general
business and economic conditions; and other factors described
from time to time in SMCP's reports filed with the Securities
and Exchange Commission. SMCP wishes to caution
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the readers not to place undue reliance on any such
forward-looking statements, which statements are made pursuant
to the Private Litigation Reform Act of 1995 and, as such, speak
only as of the date made.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable to the Company as of the date of filing.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
Consolidated Balance Sheets as of December 31,
1997 and 1996.
Consolidated Statements of Operations for the year
ended December 31, 1997 and for the Period from
March 29, 1996 (commencement of development)
through December 31, 1996.
Consolidated Statements of Partners' Capital for
the year ended December 31, 1997 and for the
Period from March 29, 1996 (commencement of
development) through December 31, 1996.
Consolidated Statements of Cash Flows for the year
ended December 31, 1997 and for the Period from
March 29, 1996 (commencement of development)
through December 31, 1996 - Partnership, and the
Period from January 1, 1996 through March 28, 1996
and year ended December 31, 1995 - Predecessor.
Notes to Consolidated Financial Statements.
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INDEPENDENT AUDITORS' REPORT
The Partners
Showboat Marina Casino Partnership:
We have audited the accompanying consolidated balance sheets of
Showboat Marina Casino Partnership and subsidiary (Partnership)
as of December 31, 1997 and 1996, and the related consolidated
statements of operations, partners' capital, and cash flows for
the year ended December 31, 1997, and for the period from
March 29, 1996 (commencement of development) through December 31,
1996, the related statements of cash flows of Showboat Marina
Partnership (Predecessor) for the period from January 1, 1996
through March 28, 1996 and the year ended December 31, 1995.
These consolidated financial statements are the responsibility of
SMCP's and Predecessor's management. Our responsibility is to
express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Showboat Marina Casino Partnership and subsidiary as
of December 31, 1997 and 1996, and the results of their
operations and cash flows for the year ended December 31, 1997
and for the period from March 29, 1996 (commencement of
development) through December 31, 1996, the cash flows of the
Predecessor for the period from January 1, 1996 through March 28,
1996 and the year ended December 31, 1995, in conformity with
generally accepted accounting principles.
Las Vegas, Nevada KPMG PEAT MARWICK LLP
February 2, 1998
-23-
SHOWBOAT MARINA CASINO PARTNERSHIPAND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1997 and 1996
(In thousands)
ASSETS 1997 1996
-------------- --------------
Current assets:
Cash and cash equivalents $ 7,246 599
Short-term investments held in escrow - 69,002
Interest receivable - 1,601
Accounts receivable, net 931 -
Inventories 337 -
Prepaid expenses 805 -
-------------- --------------
Total current assets 9,319 71,202
-------------- --------------
Property and equipment:
Buildings 56,304 -
Vessel 82,528 -
Furniture, fixtures and equipment 26,533 764
Land improvements 2,123 2,123
Construction in progress - 97,714
-------------- --------------
167,488 100,601
Less accumulated depreciation and amortization (7,833) -
-------------- --------------
Net property and equipment 159,655 100,601
-------------- --------------
Other assets:
Licensing costs, net of accumulated amortization of $340 and $-0- at
December 31, 1997 and 1996, respectively 2,061 2,373
Economic development costs, net of accumulated amortization of $432
and $-0- at December 31, 1997 and 1996, respectively 8,662 5,264
Debt issuance costs, net of accumulated amortization of $778 and $-0-
at December 31, 1997 and 1996, respectively 5,664 6,296
Other assets, net of accumulated amortization of $197 and $-0- at
December 31, 1997 and 1996, respectively 2,580 2,158
-------------- --------------
18,967 16,091
-------------- --------------
$ 187,941 187,894
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current maturities of long-term debt $ 5,555 -
Accounts payable 2,766 3,717
Construction payable - 4,037
Payable to affiliates 2,712 -
Accrued expenses 5,331 -
Accrued interest 5,512 5,557
-------------- --------------
Total current liabilities 21,876 13,311
Long-term debt, excluding current maturities 151,968 140,000
-------------- --------------
Total liabilities 173,844 153,311
Partners' capital 14,097 34,583
-------------- --------------
$ 187,941 187,894
============== ==============
See accompanying notes to consolidated financial statements.
-24-
SHOWBOAT MARINA CASINO PARTNERSHIP AND SUBSIDIARY
Consolidated Statements of Operations
(In thousands)
PERIOD FROM
MARCH 29, 1996
(COMMENCE-
MENT OF
DEVELOPMENT)
YEAR THROUGH
ENDED DECEMBER 31,
1997 1996
------------- ----------------
Revenues:
Casino $ 108,996 -
Food and beverage 7,534 -
Other 1,508 -
------------- ----------------
118,038 -
Less complimentaries (2,488) -
------------- ----------------
Net revenues 115,550 -
------------- ----------------
Operating costs and expenses:
Casino 54,803 -
Food and beverage 7,151 -
General and administrative 24,315 -
Selling, advertising and promotion 16,514 -
Depreciation and amortization 8,802 -
Preopening costs 9,577 -
------------- ----------------
121,162 -
------------- ----------------
Loss from operations (5,612) -
------------- ----------------
Other income (expense):
Interest income 911 4,919
Interest expense (20,971) (14,327)
Interest capitalized 4,418 4,991
------------- ----------------
(15,642) (4,417)
------------- ----------------
Net loss $ (21,254) (4,417)
============= ================
See accompanying notes to consolidated financial statements.
-25-
SHOWBOAT MARINA CASINO PARTNERSHIP AND SUBSIDIARY
Consolidated Statements of Partners' Capital
Period from March 29, 1996 (commencement of development)
through December 31, 1997
(In thousands)
SHOWBOAT
SHOWBOAT MARINA
MARINA INVESTMENT
PARTNERSHIP PARTNERSHIP TOTAL
------------- --------------- ------------
Balance at beginning of period $ - $ - $ -
Capital contributions 21,897 390 22,287
Net loss accumulated during the
development stage (4,373) (44) (4,417)
Transfer of net assets from Showboat Marina
Partnership 16,713 - 16,713
------------- --------------- ------------
Balance at December 31, 1996 34,237 346 34,583
Capital contributions 1,000 - 1,000
Distributions to partners (230) (2) (232)
Net loss (21,042) (212) (21,254)
------------- --------------- ------------
Balance at December 31, 1997 $ 13,965 $ 132 $ 14,097
============= =============== ============
See accompanying notes to consolidated financial statements.
-26-
SHOWBOAT MARINA CASINO PARTNERSHIP AND SUBSIDIARY (PARTNERSHIP)
AND
SHOWBOAT MARINA PARTNERSHIP (PREDECESSOR)
Consolidated Statements of Cash Flows
(In thousands)
PARTNERSHIP PREDECESSOR
-------------------------------- ------------------------------
PERIOD FROM PERIOD FROM
MARCH 29, 1996 JANUARY 1,
(COMMENCEMENT 1996
OF DEVELOPMENT) THROUGH
YEAR ENDED THROUGH MARCH 28, YEAR ENDED
DECEMBER 31, DECEMBER 31, 1996 DECEMBER 31,
1997 1996 1995
--------------- --------------- ------------- ---------------
Cash flows from operating activities:
Net loss $ (21,254) (4,417) - -
Depreciation and amortization 8,802 - - -
Amortization of debt issuance costs 778 - - -
Loss on sale of investments - 6 - -
Decrease in interest receivable 1,601 (1,601) - -
Increase in inventory (337) - - -
Increase in prepaid expense (805) - - -
Increase in accounts receivable (931) - - -
Increase in licensing costs (28) - (276) (1,467)
Increase in other assets (619) (1,733) (68) (337)
Decrease in accounts payable (951) 2,771 443 503
Decrease in construction payable (4,037) 4,037 - -
Increase in accrued expense 5,331 - - -
Decrease in accrued interest (45) 5,557 - -
Net cash provided by (used in) --------------- --------------- ------------- ---------------
operating activities (12,495) 4,620 99 (1,301)
--------------- --------------- ------------- ---------------
Cash flows from investing activities:
Economic development costs (3,830) (4,144) (7) (1,113)
Land improvements - - (286) (1,790)
Purchase of property and equipment (55,903) (110) (198) (456)
Purchase of short-term investments (133,114) (869,164) - -
Proceeds from sale of short-term investment 202,116 800,156 - -
Payments for construction in progress - (87,300) (5,246) (4,239)
Net cash provided by (used in) --------------- --------------- ------------- ---------------
investing activities 9,269 (160,562) (5,737) (7,598)
--------------- --------------- ------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of notes payable,
net of issuance costs 9,490 134,254 (550) -
Payments on long-term debt (3,097) - - -
Borrowings from affiliate 2,712 - - -
Partnership distributions (232) - - -
Capital contributions 1,000 22,287 5,830 9,257
Net cash provided by financing --------------- --------------- ------------- ---------------
activities 9,873 156,541 5,280 9,257
--------------- --------------- ------------- ---------------
Net increase (decrease) in cash 6,647 599 (358) 358
Cash at beginning of period 599 - 358 -
--------------- --------------- ------------- ---------------
Cash at end of period $ 7,246 599 - 358
=============== =============== ============= ===============
(Continued)
-27-
SHOWBOAT MARINA CASINO PARTNERSHIP AND SUBSIDIARY (PARTNERSHIP)
AND
SHOWBOAT MARINA PARTNERSHIP (PREDECESSOR)
Consolidated Statements of Cash Flows, Continued
(In thousands)
PERIOD FROM PERIOD FROM
MARCH 29, 1996 JANUARY 1,
(COMMENCEMENT OF 1996
YEAR ENDED DEVELOPMENT) THROUGH YEAR ENDED
DECEMBER 31, THROUGH DECEMBER 31, MARCH 28, DECEMBER 31,
1997 1996 1996 1995
--------------- --------------------- ------------- -------------
Supplemental disclosures of cash flow
information and non-cash investing and
financing activities:
Cash paid for interest, net of amounts
capitalized $ 15,823 - - -
=============== ===================== ============= =============
Equipment purchased with capital lease $ 10,984 - - -
=============== ===================== ============= =============
See accompanying notes to consolidated financial statements.
-28-
SHOWBOAT MARINA CASINO PARTNERSHIP AND SUBSIDIARY (PARTNERSHIP)
AND
SHOWBOAT MARINA PARTNERSHIP (PREDECESSOR)
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
(All amounts in thousands, except per share data)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The accompanying consolidated financial statements present
the financial position, results of operations and cash flows
of Showboat Marina Casino Partnership (SMCP) and its wholly
owned subsidiary, Showboat Marina Finance Corporation
(Finance Corporation) as of and for the year ended December
31, 1997 and as of December 31, 1996 and for the period from
March 29, 1996 (commencement of development) through
December 31, 1996. These financial statements also present
the cash flows of Showboat Marina Partnership (Predecessor)
for the period from January 1, 1996 through March 28, 1996,
and the year ended December 31, 1995. The Predecessor had
no operations through March 28, 1996 other than development
and licensing activities, the costs of which were
capitalized and subsequently contributed to SMCP as
described below. Therefore a statement of operations is not
applicable.
SMCP is a general partnership and was formed as of March 1,
1996 for the purpose of developing a riverboat casino
complex in East Chicago, Indiana (East Chicago Showboat).
The East Chicago Showboat has approximately 53,000 square
feet of gaming space with approximately 1,700 slot machines
and approximately 82 table games. The land based facility
consists of a 100,000 square foot pavilion, an 1,800 space
parking garage and surface parking for 1,200 vehicles. The
pavilion contains a buffet, upscale restaurant, cocktail
lounge, gift shop, hydraulic bandstand platform, ticket
promotions area and administrative offices. East Chicago
Showboat Finance Corporation was incorporated on March 7,
1996 to assist SMCP in financing the East Chicago Showboat.
The Predecessor was formed on January 31, 1994 and had been
developing the project prior to the formation of SMCP.
SMCP is owned 99% by the Predecessor and 1% by Showboat
Marina Investment Partnership. SMCP is effectively owned
55% by Showboat, Inc. (Showboat) and 45% by Waterfront
Entertainment and Development, Inc. (Waterfront) through
various partnership interests. On December 18, 1997,
Showboat Harrah's Entertainment, Inc. (Harrah's) and HEI
Acquisition Corp. (HEI), a wholly owned subsidiary of
Harrah's, entered into a Definitive Agreement and Plan of
Merger whereby Showboat will merge, subject to shareholder
and regulatory approval into HEI with Showboat surviving the
merger as a wholly owned subsidiary of Harrah's. Predecessor
will manage the East Chicago Showboat through December 31,
2023 and will receive fees equal to 2% of net
-29-
revenue and 5% of EBITDA limited to excess cash flow, all as
defined in the management agreement. Showboat, the
beneficial owner of 55% of the Predecessor, will be the
Managing Partner of the Predecessor. The payment of these
fees is subject to certain restrictions set forth in the
Indenture for the 13 1/2% First Mortgage Notes. Due to
these restrictions, no management fees were earned or paid
during 1997.
CASINO REVENUE AND COMPLIMENTARIES
Casino revenues represent the net win from gaming wins and
losses. Revenues include the retail value of food, beverage
and other goods and services provided to customers without
charge. Such amounts are then deducted as promotional
allowances. The estimated cost of providing these
promotional allowances charged to the casino department in
1997 was approximately $1,244.
CASH EQUIVALENTS
SMCP considers all highly liquid investments purchased with
an original maturity of three months or less to be cash
equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation,
including amortization of capitalized leases, is computed
using the straight-line method. The costs of maintenance
and repairs is charged to expense as incurred; significant
renewals and betterments are capitalized.
Estimated useful lives for property and equipment are 30
years for land improvements, 10-40 years for building and
vessel and 5-7 years for furniture and equipment.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost
is determined using the first-in, first-out method.
INTEREST COSTS
Interest is capitalized during the construction phase of
major facilities. The capitalized interest is recorded as
part of the asset to which it relates and is amortized over
the asset's useful life.
FAIR VALUE OF CERTAIN FINANCIAL INSTRUMENTS
The carrying amount of cash equivalents, receivables and all
current liabilities approximates fair value because of the
short term maturity of these instruments. The fair value of
a financial instrument is the amount at which the instrument
could be exchanged
-30-
in a current transaction between willing parties. See Note
7 for additional fair value disclosures.
PREOPENING COSTS
Preopening costs were capitalized until operations of the
riverboat casino complex commenced, at which time the costs
were written off upon opening on April 18, 1997. The
preopening costs consist primarily of salaries and wages,
temporary office expenses, marketing expenses, professional
fees, training costs and related travel costs.
ECONOMIC DEVELOPMENT COSTS
SMCP has incurred certain costs pursuant to an agreement
with the City of East Chicago to fund various projects and
programs for the benefit of East Chicago residents. Fifty
percent of a portion of these costs may be credited as an
offset against taxes due to East Chicago based on gross
receipts for a period not to exceed two years. Any costs
incurred which are not eligible to be offset are amortized
over fifteen years which approximates the estimated time
period of the enhanced revenue stream created by entrance
into the Chicago area gaming market.
LICENSING COSTS
SMCP incurred costs in order to obtain the necessary gaming
licenses, including legal costs, filing and investigation
fees, which were capitalized until commencement of
operations, at which time such licensing costs are amortized
over five years, the initial term of the gaming license.
DEBT ISSUANCE COSTS
Costs associated with the issuance of debt have been
deferred and are amortized over the life of the related
indebtedness using the straight line method.
INCOME TAXES
A provision for income taxes is not recorded because, as a
partnership, taxable income or loss is allocated and taxed
to the partners based on their respective percentage of
ownership. There is a net difference of approximately
$1,655 between bases of assets and liabilities for tax
purposes and financial reporting purposes.
USE OF ESTIMATES
Management of SMCP has made estimates and assumptions
relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenues and expenses during the
-31-
reporting period to prepare these financial statements in
conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
LONG LIVED ASSETS
Management of SMCP reviews all long-lived assets for
impairment on an annual basis. The carrying value is
compared to future net undiscounted cash flows expected to
be generated by the assets to ascertain whether or not the
carrying value can be recovered during the expected life of
the asset. If an impairment exists, the write down will be
recorded during the current period. There have been no
write downs through December 31, 1997.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board
issued SFAS No. 130, "Reporting Comprehensive Income" (SFAS
No. 130). SFAS No. 130 requires companies to classify items
of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other
comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a
statement of financial position, and is effective for
financial statements issued for fiscal years beginning after
December 15, 1997.
In June 1997, the Financial Accounting Standards Board
issued SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information" (SFAS No. 131). SFAS
No. 131 establishes additional standards for segment
reporting in the financial statements and is effective for
fiscal years beginning after December 15, 1997.
The Company believes there is no impact of these
pronouncements on SMCP's Financial Statements.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to
conform to current year's presentation.
(2) SHORT-TERM INVESTMENTS
Short-term investments as of December 31, 1996 consists of
U.S. Treasury bills and mortgage-backed corporate debt
securities which mature at various dates through July 1997.
SMCP classifies these securities as available-for-sale as
they will be liquidated as needed to fund construction
contracts. These securities are recorded at fair value as
of December 31, 1996. SFAS 115 requires unrealized holding
gains and losses, net of the related tax effect, on
available-for-sale securities to be excluded from earnings
and are reported as a separate component of partner's
capital until realized. Unrealized losses of approximately
$-0- and $6 as of December 31, 1997 and 1996, respectively,
were not
-32-
material and were therefore included in interest income.
Realized gains and losses from the sale of available-for-
sale securities are determined on a specific identification
basis.
(3) RECEIVABLES
As of December 31, 1997 and 1996, receivables consist of the
following:
1997 1996
------------ -----------
Casino $ 908 -
Interest - 1,601
Other 75 -
------------ -----------
983 1,601
Less allowance for doubtful accounts (52) -
------------ -----------
$ 931 1,601
============ ===========
(4) ACCRUED EXPENSES
As of December 31, 1997, accrued expenses consist of the following:
Salaries and wages $ 1,757
Taxes, other than taxes on income 1,041
Other 2,533
----------
$ 5,331
==========
(5) LAND IMPROVEMENTS
On October 19, 1995, the Predecessor entered into a
Redevelopment Project Lease (which was transferred to SMCP)
with the City of East Chicago, Department of Redevelopment
pursuant to which the City of East Chicago granted SMCP a
leasehold interest in certain property in East Chicago,
Indiana and the exclusive right to dock and operate a
riverboat casino in East Chicago, Indiana and to construct
ancillary land based facilities, which may include
restaurants, entertainment facilities and parking areas.
In exchange for such exclusivity, SMCP is obligated to pay
the City of East Chicago $400,000 in annual rental with such
rental being adjusted every three years by the same
percentage as the percentage increase in the Consumer Price
Index (CPI) over the previous three years subject to a
maximum 5% increase for each adjustment. The term of the
lease agreement is thirty years from the date SMCP received
the Certificate of Suitability from the Indiana Gaming
Commission which occurred on January 8, 1996, which term may
be renewed for two additional thirty year terms at the
election of SMCP.
-33-
(6) ECONOMIC DEVELOPMENT AGREEMENT
SMP and its subsidiaries are parties to letter agreements
dated April 8, 1994 and April 18, 1995, with the City of
East Chicago (which agreements were also included in the
Owner's license issued to SMCP). SMCP is committed,
pursuant to the letter agreements and its Owner's license to
reimburse the City of East Chicago for expenses incurred in
connection with the development of East Chicago Showboat
including, but not limited to, professional planning and
design fees, engineering, construction of infrastructure
(including the construction of a proposed on/off ramp from
Highway 912), utilities or other improvements at the
Pastrick Marina or elsewhere related to the East Chicago
Showboat, legal fees and costs, financial and other
professional fees deemed necessary by the City.
Additionally, SMCP has further committed to general and
equipment funding for support and enhancement of
neighborhood improvement programs, law enforcement
operations, public safety programs, the East Chicago School
system and infrastructure of East Chicago. SMCP has
fulfilled all but approximately $.9 million of these
obligations.
Additionally, pursuant to its letter agreements with the
City, SMCP is committed to contribute annually an aggregate
3.75% of its adjusted gross receipts to fund economic and
community development projects for the City of East Chicago.
Through December 31, 1997, a total of $4.2 million had been
contributed.
SMCP has also agreed to the creation of a $5.0 million pool
for a mortgage guarantee program to assist a minimum of 250
residents of East Chicago by guaranteeing up to 25% of the
purchase price of a home; and the creation of a $500,000
pool to provide for its employees (who have been employed
for at least six months) who are first time home buyers,
down payment assistance of 5% of the purchase price of a
home up to a maximum of $5,000. As of the date hereof, no
East Chicago resident or employee has received or obtained
funds in connection with the mortgage guarantee program or
home down payment assistance program.
(7) LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31,
-----------------------
1997 1996
----------- ----------
13-1/2% First Mortgage Notes due 2003 $ 140,000 140,000
11.1% Note Payable 8,244 -
Capital lease obligation 9,279 -
----------- ----------
157,523 140,000
Less current maturities (5,555) -
----------- ----------
$ 151,968 140,000
=========== ==========
-34-
On March 28, 1996, SMCP and Finance Corporation issued
$140.0 million 13-1/2% First Mortgage Notes (Notes) due
2003. The proceeds from the offering were approximately
$133.7 million, net of underwriting discounts and
commissions. The net proceeds were used to develop the East
Chicago Showboat.
The Notes are senior secured obligations of SMCP and rank
senior in right of payment to all existing and future
subordinated indebtedness of SMCP and pari passu with SMCP's
senior indebtedness. The Notes are secured by a first lien
on substantially all of SMCP's assets and are without
recourse to the general partners of SMCP or to Showboat.
Interest is payable on the Notes semiannually on March 15,
and September 15 of each year commencing September 15, 1996.
The Notes will not be redeemable prior to March 15, 2000,
except as otherwise required by a gaming authority. On and
after March 15, 2000, the Notes will be redeemable at the
option of SMCP, in whole or in part, at redemption prices
ranging from 106.750% in 2000 through 100.000% in 2002 and
thereafter, as defined in the Note Indenture for the Notes,
plus accrued and unpaid interest and liquidated damages, if
any.
The Note Indenture places significant restrictions on the
incurrence of additional indebtedness, the creation of
additional liens on the collateral securing the Notes,
transactions with affiliates and payment of certain
restricted payments.
In June 1997, the Partnership obtained a loan of
approximately $9.6 million from FINOVA Capital Corporation
secured by certain equipment. The loan is for a term of
36 months with a fixed rate of 11.1%.
In October 1997, SMCP entered into an unsecured line of
credit agreement with Fleet Bank in the amount of $3.0
million. The line of credit is secured by Showboat with
funds on deposit with Fleet Bank. The term of the line is
for a period of one year, renewable annually at an interest
rate of LIBOR plus 75 basis points. The line is available
for general partnership purposes. As of December 31, 1997,
the Partnership had not drawn funds against this facility.
On March 13, 1998, SMCP borrowed the $3.0 million for the
interest payment on the Notes due March 15, 1998.
Maturities of the Partnership's long-term debt are as
follows:
Year ending December 31:
1998 $ 5,555
1999 6,187
2000 4,950
2001 831
2002 -
Thereafter 140,000
-------------
$ 157,523
=============
-35-
The fair value of the Notes was $166.6 million at December
31, 1997 based on quoted market prices. The carrying amount
of the capital lease and equipment loan approximates fair
value at December 31, 1997.
(8) LEASES
SMCP leases certain equipment under a long-term capital
lease agreement that expires in 2001.
As of December 31, 1997, equipment under capital leases is
as follows:
Equipment $ 10,984
Less accumulated amortization (1,240)
--------------
$ 9,744
==============
Amortization of assets held under capital lease is included
with depreciation expense.
SMCP is obligated to pay the City of East Chicago $400
annual rent for a leasehold interest in approximately 27
acres in East Chicago, Indiana, with such rentals being
adjusted every 3 years based upon changes in the Consumer
Price Index subject to a maximum of 5% increase for each
adjustment.
SMCP holds a leasehold interest in certain property in East
Chicago, Indiana for land used for offsite employee parking.
The lease is for a term of three years and may be renewed at
the option of SMCP for two additional five year terms.
Payments of $5 are due monthly with an adjustment on the
first of May of each year of the lease term to reflect
changes in real estate taxes.
-36-
The following is a schedule of future minimum lease payments
for capital leases and operating leases (with initial or
remaining terms in excess of one year) as of December 31,
1997:
CAPITAL OPERATING
LEASE LEASE
------------ -----------
December 31,
1998 $ 3,382 619
1999 3,382 598
2000 3,382 400
2001 845 400
2002 - 400
Thereafter - 9,200
------------ -----------
Total minimum payments 10,991 11,617
===========
Less amount representing interest (at 11%) (1,712)
------------
9,279
Less current installments of obligations under
capital lease (2,528)
------------
Obligations under capital lease excluding current
portion $ 6,751
============
Rent expense for all operating leases was $664 and $9 for
the years ended December 31, 1997 and 1996, respectively.
(9) COMMITMENTS AND CONTINGENCIES
SMCP is involved in various claims and legal actions arising
in the ordinary course of business. In the opinion of
management these matters will not have a material effect on
SMCP's financial position.
On November 3, 1997, SMCP amended its agreement with
Riverboat Services, Inc. ("RSI") whereby RSI will operate
and maintain the riverboat. RSI will be reimbursed for all
expenses and will receive a management fee of $60 per month.
The initial term of the agreement is five years commencing
January 1997, with two renewal periods of five years each at
the option of RSI.
(10) PARTNERS' CAPITAL
Showboat, the beneficial owner of 55% of SMCP, has committed
to a standby equity commitment of up to $30.0 million. The
terms of this agreement are as follows:
-37-
The standby equity commitment provides that if during any of
the first three full four-quarter periods after the
riverboat is operating SMCP's combined cash flow is less
than $35.0 million for any such full fiscal four-quarter
period, Showboat will cause to be contributed capital equal
to the shortfall. However, in no event shall Showboat be
required to cause to be contributed more than $15.0 million
in any one such full fiscal four-quarter period or more than
$30.0 million in the aggregate. SMCP anticipates that its
combined cash flow for the first full four quarters of
operation will not achieve the $35.0 million threshold and
Showboat will be required to contribute approximately $15.0
million under the standby equity commitment. As of March
12, 1998, Showboat has contributed $1.0 million to SMCP as
part of this commitment.
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES.
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following individuals are the directors and executive
officers of the partners of SMCP and the directors and executive
officers of SMFC. SMFC is wholly owned by SMCP. SMCP is 99%
beneficially owned by SMP and 1% beneficially owned by Showboat
Marina Investment Partnership ("SMIP"). Showboat Indiana
Investment Limited Partnership ("SIILP") beneficially owns 55% of
SMP and SMIP, and Waterfront beneficially owns the remaining 45%
of each entity. Showboat Indiana, Inc. is the sole general
partner of SIILP, and SIILP is 100% beneficially owned by
Showboat through a chain of subsidiaries of Showboat.
Additionally, SMCP is managed by an Executive Committee comprised
of representatives of Showboat and Waterfront and the members of
SMCP's Executive Committee are also noted below. There are no
family relations between or among any of the directors and
executive officers, except J.K. Houssels is the father of J. Kell
Houssels, III.
J. Kell Houssels, III, age 48, is a member of the Executive
Committee of SMCP and the President, Chief Executive Officer and
Chairman of the Board of Directors of SMFC and, has held such
position since March 1996.. Mr. Houssels, III, has also been a
director of Showboat Indiana, Inc. since its formation. HeMr.
Houssels, III has been a director of Showboat, Inc. since 1983.
He is the He is currently President and, Chief Executive Officer
of Showboat, Inc. and Ocean Showboat, Inc. and director of
Showboat, Inc. and all of its subsidiaries, including Finance
Corporation since March 1996. From May 1993 to May 1995, he
served as President and Chief Executive Officer of Showboat
Development Company. From January 1990 to May 1994, Mr.
Houssels, III served as Vice President of Showboat, Inc. From
May 1993 to June 1994, he served as President and Chief Executive
Officer of Atlantic City Showboat, Inc. and from January 1990 to
May 1993, he served as President and Chief Operating Officer of
Atlantic City Showboat, Inc.
J.K. Houssels, age 75, is the Chairman of the Board of
Directors of Showboat and a director of all subsidiaries of
Showboat, including Showboat Indiana, Inc. He has been a
director
-38-
of Showboat Indiana, Inc. since its formation. Mr. Houssels has
also been a director of Showboat, Inc. since 1960. Until May
1994, Mr. Houssels was the President and Chief Executive Officer
of Showboat. He is also Vice Chairman of the Board of Union
Plaza Hotel and Casino, Inc., Las Vegas, Nevada.
John D. Gaughan, age 77, is a director of Showboat and a
director of all of Showboat's subsidiaries, including Showboat
Indiana, Inc. He has been a director of Showboat Indiana, Inc.
since its formation. Mr. Gaughan has also been a director of
Showboat, Inc. since 1978. Mr. Gaughan is also the Chairman of
the Board and President of Exber, Inc., doing business as the El
Cortez Hotel and the Western Hotel and Casino, Las Vegas, Nevada
and the Chairman of the Board of the Union Plaza Hotel and
Casino, Inc., Las Vegas, Nevada.
Frank A. Modica, age 70, is a director of Showboat and all
of its subsidiaries, including Showboat Indiana, Inc. He has
been a director of Showboat Indiana, Inc. since its formation.
Mr. Modica has also been a director of Showboat, Inc. since 1980.
Until May 1995, Mr. Modica was Chairman of the Board of Atlantic
City Showboat, Inc.; until February 1995, he was the Executive
Vice President and Chief Operating Officer of Showboat and
President and Chief Executive Officer of Showboat Operating
Company. Mr. Modica is also Director Emeritus of First Security
Bank, Las Vegas, Nevada and since April 1997 a director of
Monarch Casino & Resort, Inc.
H. Gregory Nasky, age 55, is a director of Showboat and all
of its subsidiaries, including Showboat Indiana, Inc. He has
been a director of Showboat Indiana, Inc. since its formation.
Mr. Nasky has also been a director of Showboat, Inc. since 1983.
Mr. Nasky is also the Executive Vice President of Showboat and
Showboat Operating Company; the President and Chief Executive
Officer of Showboat Development Company; and the Secretary of
Showboat and all of Showboat's subsidiaries. From October 1993
to February 1995, Mr. Nasky was the Managing Director and Chief
Executive Officer of Showboat Australia Pty Limited and from
March 1994 to February 1995 he was the Managing Director and
Chief Executive Officer of Sydney Harbour Casino. Since March
1994, he has been of counsel to the law firm of Kummer Kaempfer
Bonner & Renshaw, Las Vegas, Nevada, outside legal counsel to
Showboat and until February 1994, a member of the law firm of
Vargas & Bartlett, Las Vegas and Reno, Nevada, previous general
counsel to Showboat.
Mark J. Miller, age 41, is a member of the Executive
Committee of SMCP and Director and the Treasurer of SMFC and he
has held such positions since March 1996. HeMr. Miller has been
the Executive Vice President Financial Administration of Showboat
and Showboat Operating Company since November 1997; Vice
President-Finance of Ocean Showboat, Inc. since April 1988; and
Vice President-Finance, Chief Financial Officer of Ocean
Showboat, Inc. since April 1991. Mr. Miller previously served as
Executive Vice President-Operations of Showboat from June 1995
until November 1997 and as the Executive Vice President-
Operations of Showboat Operating Company from May 1996 to
November 1997. and Treasurer and Director of Finance Corporation
since March 1 1996. From July 1994 to June 1995, Mr. Miller
served as the President and Chief Executive Officer of Atlantic
City Showboat, Inc. From October 1993 to June 1994, he served as
Executive Vice President and Chief Operating Officer of Atlantic
City Showboat, Inc. and he was Vice President-Finance and Chief
Financial Officer of Atlantic City Showboat, Inc. from December
1988 to October 1993.
-39-
Carlton Geer, age 44, has been President and Chief Executive
Officer of SMCP and Showboat Indiana, Inc., Member of the
Executive Committee of SMCP and Director of SMFC since February
1998. Mr. Geer previously served as President and Chief
Executive Officer of Showboat Operating Company from August 1996
until February 1998. From December 1983 to April 1996, Mr. Geer
held various positions with Peppermill Hotel Casino, Reno,
Nevada, including General Manager from June 1993 to April 1996
and Executive Vice President of Hospitality Operations from
September 1989 to June 1993. He serves at the pleasure of the
respective board of directors.
J. Keith Wallace, age 56, served as President and Chief
Executive Officer of SMCP from March 1996 until February 1998,
and Showboat Indiana, Inc. from January 1996 until February 1998.
Mr. Wallace served as a Member of the Executive Committee of SMCP
and a Director of SMFC from March 1996 until February 1998. Mr.
Wallace currently serves as the President and Chief Executive
Officer of Showboat Operating Company. From February 1995 to
January 1996, Mr. Wallace was the President and Chief Executive
Officer of Showboat Operating Company. From May 1993 to February
1995, he was the President and Chief Executive Officer of Lake
Pontchartrain Showboat, Inc. and Showboat Louisiana, Inc. From
June 1993 to February 1995, Mr. Wallace served as Executive Vice
President and Chief Operating Officer of Showboat Louisiana, Inc.
and Lake Pontchartrain Showboat, Inc., respectively. From August
1990 to April 1993, Mr. Wallace was the Vice President and
General Manager of Showboat Operating Company. He serves at the
pleasure of the boards of directors,
David M. Zamarin, age 55, has been the Vice President-
Marketing for SMCP since February 1998. Previously, Mr. Zamarin
served as Vice President-Marketing for Showboat Operating Company
from August 1996 until February 1998; Director of Marketing for
the Peppermill Hotel & Casino, Reno, Nevada, from March 1993
until July 1996.
Jon D. Zimmerman, age 45, has been the Vice President Casino
Operations for SMCP since February 1998. Previously, Mr.
Zimmerman served as Vice-President Casino Operations for Showboat
Operating Company from December 1996 until February 1998;
Director of Slots, Bingo, Pull Tabs for Mystic Lake Casino, Prior
Lake, Minnesota from May 1996 until December 1996, and Director
of Slot Operations for Peppermill Hotel & Casino, Reno, Nevada,
from November 1988 until May 1996.
Dominick Gullo, age 55, was the Vice President of Gaming
Operations for SMCP from May 1996 until February 1998, the Vice
President-Special Projects for Showboat Operating Company from
May 1995 to May 1996, and the Casino Manager of Lake
Pontchartrain Showboat, Inc. from May 1993 to May 1995. Prior to
joining Lake Pontchartrain Showboat, Inc., Mr. Gullo was
President and Owner of Gullo Associates, Inc. in Las Vegas,
Nevada, from February 1993 to May 1993. Mr. Gullo currently
serves as the Vice President-Gaming Operations of Showboat
Operating Company.
Leann Schneider, age 44, has been the Vice President of
Finance and Administration for SMCP, and the Vice President-
Finance, Treasurer and Chief Financial Officer of Showboat
Indiana, Inc. since February 1998. She was the Vice President-
Finance of Showboat Operating Company from March 1997 until
February 1998; Vice President Special Projects of Showboat,
-40-
Inc. from May 1996 to February 1997; President and Chief
Executive Officer of the Las Vegas Showboat from January 1996
until April 1996; Chief Financial Officer and Treasurer of
Showboat Development Company from May 1993 until May 1996; and
Treasurer of Showboat Indiana, Inc. from September 1993 until May
1996. From March 1995 to January 1996, she served as Treasurer
of Showboat. From May 1990 until January 1996, she served as
Vice President-Finance and Chief Financial Officer of Showboat
and Showboat Operating Company. She serves at the pleasure of
the respective boards of directors.
Joseph G. O'Brien, III, age 35, was the Vice President of
Finance and Administration for SMCP from May 1995 until February
1998, the Chief Financial Officer of Showboat Indiana, Inc. from
April 1996 until February 1998, the Treasurer of Showboat
Indiana, Inc. from May 1996 until February 1998 and the Vice
President - Finance and Chief Financial Officer of SMFC from
March 1996 until February 1998. . Mr. O'Brien currently serves as
the Vice-President Finance of Showboat Operating Company. From
April 1996 until February 1998 Mr. O'Brien served as Vice
President-Finance for Showboat Indiana, Inc. Mr. O'Brien is a
certified public accountant and has been Vice President of
Finance and Administration for the Company since May 1995. From
June 1993 until April 1995, Mr. O'Brien served on the Executive
Committee of the Showboat Star Partnership in New Orleans,
Louisiana; from February 1995 until April 1995 he served as
Acting Chief Operating Officer of the Showboat Star Partnership;
and from June 1993 until February of 1995 he served as Controller
of the Showboat Star Partnership. Prior to joining the Showboat
Star Partnership, Mr. O'Brien was a certified public
accountantCPA public with the firm of Ericksen, Krentel, Canton &
LaPorte in New Orleans, Louisiana from July 1984 to June 1993.
Dominick J. Burzichelli, age 35, is the Vice President
of Human Resources for SMCP since May 1996. Mr.Burzichelli
has been employed by Showboat since 1986 and has served in the
Human Resources department in various capacities including
Director and Manager levels.
Michael A. Pannos, age 49, is a member of the Executive
Committee of SMCP, has been Secretary and Director of SMFC since
March 1996 and has been Director and President of Waterfront
since July 3, 1993. Mr. Pannos was a practicing attorney with
the law firm of Pannos & Mindel from 1980 to 1997 and since
1997 he has been a practicing attorney in the law firm of Michael
A. Pannos. Mr. Pannos was elected as Chairman of the Indiana
Democratic Party in 1988. He was also elected Vice-President
of the Association of Democratic Chairs, and has served as a
member of the Rules Committee of the Democratic National
Committee.
Thomas S. Cappas, age 63, is a member of the Executive
Committee of SMCP, has been a Director of SMFC since March 1996
and has beenhas been Director, Treasurer and Secretary of
Waterfront since July 3, 1993. and a Director of Finance
Corporation since March 1, 1996. Since 1959, Mr. Cappas has been
a practicing attorney in East Chicago, Indiana. Mr. Cappas has
held a variety of public sector positions in East Chicago.
-41-
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by SMCP
during 1995, 1996 and 1997 to the officers and other persons of
SMCP, in all capacities in which they served.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- --------------------------------------
AWARDS PAYOUTS<F1>
------------------------- -----------
SECURI- LONG- TERM
OTHER RESTRICTED TIES UNDER- INCENTIVE
NAME AND ANNUAL STOCK LYING OPTIONS/ PLANS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS SARS<F2> PAYOUTS COMPENSATION
- ------------------ ---- ---------- ---------- ------------ ---------- -------------- ----------- --------------
J. Keith Wallace......... 1997 $ 241,500 $ 37,494 59,294<F3> - - $ 29,625<F4> $ 15,970<F5>
President and Chief 1996 $ 226,604 $ 150,000 86,429 - 0/48,546 $ 36,750 $ 4,036
Executive Officer 1995 $ --- $ --- - - - $ --- $ ---
Jess Hinkle.............. 1997 $ 97,455 $ 7,176 - - - $ 11,850<F6> $ 117,850<F7>
Vice President of 1996 $ 149,737 $ 50,077 - - - $ 14,700 $ 11,398
Operations 1995 $ --- $ --- - - - $ --- $ ---
Dominick Gullo........... 1997 $ 112,615 $ 8,999 - - - $ 11,850<F6> $ 9,214<F8>
Vice President of 1996 $ 104,548 $ 20,473 - 24,630 8,000/0 $ 14,700 $ 30,122
Gaming Operations 1995 $ --- $ --- - - - $ --- $ ---
Joseph G. O'Brien, III... 1997 $ 103,680 $ 8,999 - - - $ 11,850<F6> $ 5,264<F9>
Vice President Finance 1996 $ 96,300 $ 36,000 - - - $ 14,700<F8> $ 1,426
and Administration 1995 $ 85,833 $ 21,120 - - - $ 9,000<F8> $ 24,622
Dominick J. Burzichelli.. 1997 $ 99,983 $ 8,999 - - - $ 11,850<F6> $ 4,496<F10>
Vice President of 1996 $ 88,018 $ 36,000 - 49,260 10,000/0 $ 14,700 $ 1,896
Human Resources 1995 $ 62,468 $ 21,120 - - - $ 3,000 $ 12,846
<FN>
<F1> Amounts represented in this column were received by the
named individuals under the Showboat, Inc. 1994 Executive
Long Term Incentive Plan ("1994 Plan"). The 1994 Plan is an
incentive plan of Showboat which provides for awards of
restricted stock options to key executives of Showboat's
operating subsidiaries, including SMCP executive officers.
The restricted shares granted under the 1994 Plan vests
over a five-year period, with the last of the restricted
shares of common stock vesting in March 1999; provided,
however, that vesting on all such restricted shares will
accelerate to the date of any change in control of Showboat.
<F2> Amounts represented in this column equal the number of
shares of common stock of Showboat underlying the stock
options and stock appreciation rights granted to the named
individuals under the 1994 Plan and the 1996 Stock
Appreciation Rights Plan, respectively.
<F3> Of this amount, $21,512 represents a gross-up for state
income taxes incurred, $18,750 represents a housing
allowance and $19,032 represents spousal travel expenses.
<F4> This amount represents the vesting of 1,500 shares under the
1994 Plan.
<F5> This amount represents $8,712 in excess coverage life
insurance, $3,161 in medical reimbursement costs and $4,097
in SMCP's contribution to Mr. Wallace's 401(k) account.
<F6> This amount represents the vesting of 600 shares under the
1994 Plan.
<F7> Of this amount, $68,158 represents a severance payment,
$35,991 represents relocation expenses, $3,241 represents
excess coverage life insurance, $6,778 represents medical
reimbursement costs and $3,682 represents SMCP's
contribution to Mr. Hinkle's 401(k) account.
<F8> This amount represents $4,054 in excess coverage life
insurance, $1,569 in medical reimbursement costs, and $3,591
for SMCP's contribution to Mr. Gullo's 401(k) account.
<F9> This amount represents $1,145 in excess coverage life and
$4,119 in SMCP's contribution to Mr. O'Brien's 401(k)
account.
<F10>Of this amount, $902 represents excess coverage life
insurance and $3,594 represents SMCP's contribution to Mr.
Burzichelli's 401(k) account.
</FN>
-42-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth: (1) the beneficial
ownership of the interests in SMCP and SMFC as of December 31,
1997 by each person known by SMCP and SMFC to beneficially own 5%
or more of the outstanding SMCP and SMFC interests; (2) each
officer and director of Waterfront; and (3) each executive
officer and director of Showboat Indiana, Inc., the general
partner of Showboat Indiana Investment Limited Partnership
("SIILP").
% BENEFICIAL % BENEFICIAL % BENEFICIAL
NAME AND ADDRESS OF % OWNERSHIP OWNERSHIP OWNERSHIP OWNERSHIP
BENEFICIAL OWNER WATERFRONT SHOWBOAT SMCP SMFC
---------------- ---------- -------- ---- ----
SMCP - - - 100.0%
One Showboat Place
East Chicago, Indiana 46312
Showboat Marina Partnership<F1> - - 99.0% 99.0%
One Showboat Place
East Chicago, Indiana 46312
Showboat Marina Investment Partnership<F1> - - 1.0% 1.0%
One Showboat Place
East Chicago, Indiana 46312
SIILP<F2> - - 55.0% 55.0%
2800 Fremont Street
Las Vegas, Nevada 89104
Waterfront<F3> - - 45.0% 45.0%
8101 Polo Club Drive, Suite D
Merrillville, Indiana 46410
J. Keith Wallace<F4> - * - -
One Showboat Place
East Chicago, Indiana 46312
John D. Gaughan<F5> - 1.1 * *
2800 Fremont Street
Las Vegas, Nevada 89104
J.K. Houssels<F5> - 7.0 3.9 3.9
2800 Fremont Street
Las Vegas, Nevada 89104
Frank A. Modica<F5> - * - -
2800 Fremont Street
Las Vegas, Nevada 89104
H. Gregory Nasky<F6> - * - -
2800 Fremont Street
Las Vegas, Nevada 89104
J. Kell Houssels, III<F7> - * - -
2800 Fremont Street
Las Vegas, Nevada 89104
Joseph G. O'Brien, III<F8> - * - -
One Showboat Place
East Chicago, Indiana 46312
Michael A. Pannos<F9> 37.3% - 16.8% 16.8%
8101 Polo Club Drive, Suite D
Merrillville, Indiana 46410
Thomas S. Cappas<F10> 28.4% - 12.8% 12.8%
1802 E. Columbus Drive
East Chicago, Indiana 46312
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*Beneficial ownership does not exceed 1% of the outstanding
equity interests.
<FN>
<F1> Showboat Marina Partnership and Showboat Marina Investment
Partnership are owned 55% by SIILP and 45% by Waterfront.
<F2> SIILP is wholly owned by subsidiaries of Showboat. Showboat
Indiana, Inc., a Nevada subsidiary of Showboat, is the sole
general partner of SIILP.
<F3> Waterfront, an Indiana corporation, is owned by 13
individual investors. Investment and voting control of
Waterfront are vested in its stockholders and its board of
directors.
<F4> Mr. Wallace is the President and Chief Executive Officer of
SMCP, Showboat Indiana, Inc. and a Director of SMFC.
<F5> A Director of Showboat Indiana, Inc.
<F6> Mr. Nasky is the Secretary and a Director of Showboat
Indiana, Inc.
<F7> Mr. Houssels, III is the Chairman of the Board of Directors
of Showboat Indiana, Inc. and SMFC.
<F8> Mr. O'Brien is the Vice President-Finance, Chief Executive
Officer and Treasurer of Showboat Indiana, Inc. and the Vice
President-Finance and Chief Financial Officer of SMFC.
<F9> Michael A. Pannos is a Director and the President of
Waterfront and is Secretary and Director of SMFC. Mr.
Pannos' beneficial ownership in Waterfront and the Company
includes common stock of Waterfront owned by his wife.
<F10>Thomas S. Cappas is a Director, Secretary and Treasurer of
Waterfront and is a Director of SMFC. Mr. Cappas' beneficial
ownership includes common stock of Waterfront owned by his
wife.
</FN>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of March 1, 1996 SMCP entered into the Management
Agreement with SMP for a term through December 31, 2023. SMP
holds a 99% ownership interest in SMCP. In consideration for the
services provided under the Management Agreement, SMCP has agreed
to pay SMP a management fee equal to (i) 2% of Net Revenues (as
defined in the Management Agreement) and (ii) 5% of EBITDA (as
defined in the Management Agreement), subject to the limitations
set forth in the "Restricted Payments" covenant of the Indenture.
To date, no management fees have been paid to SMP since SMCP has
not yet met the requirements set forth in the First Mortgage Note
Indenture. Michael A. Pannos, a Director and Secretary of SMFC,
beneficially owns 16.8% of SMCP and Thomas S. Cappas, a Director
of SMFC, beneficially owns 12.8% of SMCP.
SMCP's Partnership Agreement (the "Partnership Agreement")
provides that each Partner and its Indemnified Persons (as
defined therein) will not be liable, responsible or accountable
in damages or otherwise to SMCP, or to any of the Partners (as
defined therein), for any act or omission performed or omitted by
them in good faith on behalf of SMCP and in a manner reasonably
believed by them to be within the scope of their authority and in
the best interests of SMCP unless the acts or omissions
constitute either fraud, bad faith, gross negligence, or willful
misconduct as determined by final decision of a court of
competent jurisdiction or which occurred prior to the formation
of SMCP.
In addition, to the extent that, at law or in equity, a
Partner or its Indemnified Persons have duties (including
fiduciary duties) and liabilities relating thereto to the Partner
or to the Partners, and their Indemnified Persons acting under
SMCP Agreement or otherwise will not be liable to SMCP or to any
Partner for its good faith reliance on the provisions of SMCP
Agreement.
Michael A. Pannos and Thomas S. Cappas, who are both members
of the Executive Committee of SMCP and Directors and Executive
Officers of Waterfront, entered into employment agreements
commencing as of October 1, 1997 and terminating on September 30,
1998. Each receives a monthly salary of $15,000 in connection
with providing services related to civic and public affairs
duties, governmental relations duties and special projects.
-44-
At all times during 1997, H. Gregory Nasky was a Director
and Secretary of Showboat Indiana, Inc. Additionally, Mr. Nasky
was of counsel to the law firm of Kummer Kaempfer Bonner &
Renshaw, outside legal counsel to the Company. At all times
during 1997, John N. Brewer, a partner of the law firm of Kummer
Kaempfer Bonner & Renshaw, was an Assistant Secretary of Showboat
Indiana, Inc. and an Assistant Secretary of SMFC since March
1996. During 1997, the law firm of Kummer Kaempfer Bonner &
Renshaw was paid $123,781 by Showboat Marina Casino Partnership.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of
SMCP and its Predecessor (where applicable) are
included in Part II, Item 8: Financial Statements and
Supplementary Data, of this report:
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1997 and
1996.
Consolidated Statements of Operations for the year
ended December 31, 1997 and for the Period from
March 29, 1996 (commencement of development) through
December 31, 1996.
Consolidated Statements of Partners ' Capital for
the year ended December 31, 1997 and for the Period
from March 29, 1996 (commencement of development)
through December 31, 1996.
Consolidated Statements of Cash Flows for the year
ended December 31, 1997 and for the Period from
March 29, 1996 (commencement of development) through
December 31, 1996 - Partnership, and the Period from
January 1, 1996 through March 28, 1996 and year ended
December 31, 1995 - Predecessor.
Notes to Consolidated Financial Statements.
2. FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not
required, inapplicable, or the information is otherwise
shown in the financial statements or notes thereto.
-45-
3. EXHIBITS
NUMBER EXHIBIT DESCRIPTION
3.01 Articles of Incorporation of Showboat Marina Finance
Corporation, filed March 7, 1996, are incorporated
herein by reference from the Company's (SEC File No. 33-
4402) Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 3.01.
3.02 Bylaws of Showboat Marina Finance Corporation certified
March 21, 1996, are incorporated herein by reference
from the Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 3.02.
3.03 Partnership Agreement by and between Showboat Marina
Partnership and Showboat Marina Investment Partnership
dated as of March 1, 1996, is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3, 1996,
Part II, Item 21, Exhibit 3.03.
4.01 Indenture dated as of March 28, 1996, among Showboat
Marina Casino Partnership, Showboat Marina Finance
Corporation, Donaldson, Lufkin & Jenrette Securities
Corporation, Nomura Securities International, Inc.,
Bear, Stearns & Co. Inc. and American Bank National
Association, as trustee, relating to the 13 1/2 Series A
and Series B First Mortgage Notes due 2003, is
incorporated herein by reference from the Company's (SEC
File No. 33-4402) Registration Statement on Form S-4
filed on May 3, 1996, Part II, Item 21, Exhibit 4.01.
4.02 Specimen of 13 1/2% Series B First Mortgage Notes due
2003 is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration Statement
on Form S-4, Amendment No. 1, filed on June 24, 1996,
Part II, Item 21, Exhibit 4.03.
10.01 Management Agreement dated March 28, 1996, by and
between Showboat Marina Casino Partnership and Showboat
Marina Partnership is incorporated herein by reference
from the Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 10.01.
10.02 Standby Equity Commitment dated March 28, 1996, by and
among Showboat Marina Casino Partnership, Showboat
Marina Finance Corporation and Showboat, Inc., is
incorporated herein by reference from the Company's (SEC
File No. 33-4402) Registration Statement on Form S-4
filed on May 3, 1996, Part II, Item 21, Exhibit 10.04.
10.03 Manager's Consent and Subordination of Management
Agreement dated March 28, 1996, by and between Showboat
Marina Casino Partnership and Showboat Marina
Partnership, is incorporated herein by reference from
the Company's (SEC File No. 33-4402) Registration
Statement on Form S-4, Amendment No. 1, filed on June
24, 1996, Part II, Item 21, Exhibit 10.05.
-46-
10.04 Leasehold Mortgage, Assignment of Rents and Security
Agreement dated March 28, 1996 and made by Showboat
Marina Casino Partnership to American Bank National
Association, as trustee, is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3, 1996,
Part II, Item 21, Exhibit 10.06.
10.05 Security Agreement dated March 28, 1996, among Showboat
Marina Casino Partnership, Showboat Marina Finance
Corporation and American Bank National Association, as
trustee, is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration Statement
on Form S-4 filed on May 3, 1996, Part II, Item 21,
Exhibit 10.08.
10.06 Environmental Indemnity Agreement dated March 28, 1996,
by and between Showboat, Inc. and American Bank National
Association is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration Statement
on Form S-4 filed on May 3, 1996, Part II, Item 21,
Exhibit 10.09.
10.07 Assignment of Contracts and Documents dated March 28,
1996, by and between Showboat Marina Casino Partnership
and American Bank National Association, as trustee, is
incorporated herein by reference from the Company's (SEC
File No. 33-4402) Registration Statement on Form S-4
filed on May 3, 1996, Part II, Item 21, Exhibit 10.10.
10.08 Economic Betterment Commitment Letter Agreement between
the City of East Chicago, Indiana and Showboat Marina
Casino Partnership, dated April 8, 1994, is incorporated
herein by reference from the Company's (SEC File No. 33-
4402) Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 10.12.
10.09 Economic Betterment Commitment Letter Agreement between
the City of East Chicago, Indiana and Showboat Marina
Casino Partnership, dated April 18, 1995, is
incorporated herein by reference from the Company's (SEC
File No. 33-4402) Registration Statement on Form S-4
filed on May 3, 1996, Part II, Item 21, Exhibit 10.13.
10.10 Noncompetition Agreement by and between the Indiana
Gaming Commission, Showboat, Inc., Waterfront
Entertainment and Development, Inc., and Showboat Marina
Partnership, dated December 15, 1995, is incorporated
herein by reference from the Company's (SEC File No. 33-
4402) Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 10.14.
10.11 Redevelopment Project Lease by and between Showboat
Marina Partnership and the City of East Chicago
Department of Redevelopment, dated October 19, 1995, is
incorporated herein by reference from the Company's (SEC
File No. 33-4402) Registration Statement on Form S-4
filed on May 3, 1996, Part II, Item 21, Exhibit 10.15.
-47-
10.12 Asset Transfer Agreement by and between Showboat Marina
Partnership and Showboat Marina Casino Partnership,
dated as of March 27, 1996, is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3, 1996,
Part II, Item 21, Exhibit 10.16.
10.13 Ground Lease, dated as of October 22, 1996, by and
between Showboat Marina Casino Partnership and 3600
Michigan Company Ltd. is incorporated herein by
reference to the Company's (SEC File No. 33-4402) Form
10-K for the year ended December 31, 1996, Part IV, Item
14(c)(3), Exhibit 10.20.
10.14 Master Lease Agreement dated February 21, 1997, by and
between PDS Financial Corporation and Showboat Marina
Casino Partnership; Lease Schedule No. 1 to Master Lease
Agreement dated February 21, 1997, by and between PDS
Financial Corporation and Showboat Marina Casino
Partnership; Lease Schedule No. 2 to Master Lease
Agreement dated February 21, 1997, by and between PDS
Financial Corporation and Showboat Marina Casino
Partnership; Lease Schedule No. 3 to Master Lease
Agreement dated February 21, 1997, by and between PDS
Financial Corporation and Showboat Marina Casino
Partnership; Lease Schedule No. 4 to Master Lease
Agreement dated February 21, 1997, by and between PDS
Financial Corporation and Showboat Marina Casino
Partnership; Purchase/Renewal Option to Lease Schedule
No. 1 dated February 21, 1997, by and between PDS
Financial Corporation and Showboat Marina Casino
Partnership; Purchase/Renewal Option to Lease Schedule
No. 2 dated February 21, 1997, by and between PDS
Financial Corporation and Showboat Marina Casino
Partnership; Purchase/Renewal Option to Lease Schedule
No. 3 dated February 21, 1997, by and between PDS
Financial Corporation and Showboat Marina Casino
Partnership; Purchase/Renewal Option to Lease Schedule
No. 4 dated February 21, 1997, by and between PDS
Financial Corporation and Showboat Marina Casino
Partnership; First Preferred Ship Mortgage dated
February 21, 1997, by and between PDS Financial
Corporation and Showboat Marina Casino Partnership;
Intercreditor Agreement dated February 21, 1997, by and
among PDS Financial Corporation, Showboat Marina Casino
Partnership and Firstar Bank of Minnesota, N.A., a
national banking association are incorporated herein by
reference to the Company's (SEC File No. 33-4402) Form
10-Q for the three month period ended March 31, 1997,
Part II, Item 6(a), Exhibit 10.01.
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10.15 Loan and Security Agreement dated June 30,1997, by and
between Showboat Marina Casino Partnership and Finova
Capital Corporation; Intercreditor and Subordination
Agreement dated June 30, 1997, by and among Finova
capital Corporation, Firstar Bank of Minnesota, N.A. and
Showboat Marina Casino Partnership; DLJ Intercreditor
and Subordination Agreement dated June 30, 1997, by and
among Finova Capital Corporation, Donaldson Lufkin &
Jenrette Securities Corporation, DLJ Capital Funding,
Inc. and Showboat Marina Casino Partnership; Secured
Promissory Note dated June 30, 1997, by and between
Showboat Marina Casino Partnership and Finova Capital
Corporation; and Vessel Chattel Mortgage dated June 30,
1997, by and between Showboat Marina Casino Partnership
and Finova Capital Corporation are incorporated herein
by reference to the Company's (SEC File No. 33-4402)
Form 10-Q for the six month period ended June 30, 1997,
Part II, Item 6(a), Exhibit 10.01.
10.16 Interest Bearing Grid Note dated September 1, 1997, in
principal amount of $3,000,000, by and between Showboat
Marina Casino Partnership and Fleet Bank, National
Association, is incorporated herein by reference to the
Company's (SEC File No. 33-4402) Form 10-Q for the nine
month period ended September 30, 1997, Part II, Item
6(a), Exhibit 10.01.
10.17 Marine Management Services Agreement dated October 28,
1996, by and between Showboat Marina Casino Partnership
and Riverboat Services, Inc.; First Amendment to Marine
Management Services Agreement dated November 3, 1997, by
and between Showboat Marina, Inc. [sic] and Riverboat
Services, Inc.
21.01 List of the Showboat Marina Casino Partnership's
Subsidiaries.
27.01 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed by the Company during
the last quarter of the period covered by this Form 10-K.
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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. Date: March 30, 1998.
SHOWBOAT MARINA CASINO
PARTNERSHIP, an Indiana general partnership
By: SHOWBOAT MARINA By: SHOWBOAT MARINA
INVESTMENT PARTNERSHIP, an PARTNERSHIP, an Indiana general
Indiana general partnership, a general partnership, a general partner
partner
By: SHOWBOAT INDIANA By: SHOWBOAT INDIANA
INVESTMENT LIMITED INVESTMENT LIMITED
PARTNERSHIP, a Nevada limited PARTNERSHIP, a Nevada limited
partnership, a general partner partnership, a general partner
By: SHOWBOAT INDIANA, INC., a By: SHOWBOAT INDIANA, INC., a
Nevada corporation, its general partner Nevada corporation, its general partner
/s/ Carlton L. Geer /s/ Carlton L. Geer
Carlton L. Geer Carlton L. Geer
President and Chief Executive Officer President and Chief Executive Officer
By: WATERFRONT ENTERTAINMENT By: WATERFRONT ENTERTAINMENT
AND DEVELOPMENT, INC., an AND DEVELOPMENT, INC., an
Indiana corporation, a general partner Indiana corporation, a general partner
/s/ Michael A. Pannos /s/ Michael A. Pannos
Michael A. Pannos Michael A. Pannos
President President
SHOWBOAT MARINA FINANCE
CORPORATION, a Nevada corporation
/s/ Michael A. Pannos
By: Michael A. Pannos
Secretary
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Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
SHOWBOAT MARINA General Partner of Showboat March 30, 1998
PARTNERSHIP, an Indiana general Marina Casino Partnership
partnership
By: SHOWBOAT INDIANA
INVESTMENT LIMITED
PARTNERSHIP, a Nevada
limited partnership, a general
partner of Showboat Marina
Partnership
By: SHOWBOAT INDIANA, INC.,
a Nevada corporation, its general
partner
/s/ Carlton L. Geer
Carlton L. Geer
President and
Chief Executive Officer
By: WATERFRONT
ENTERTAINMENT AND
DEVELOPMENT, INC., an
Indiana corporation, a general
partner of Showboat Marina
Partnership
/s/ Michael A. Pannos
Michael A. Pannos
President
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SIGNATURES TITLE DATE
---------- ----- ----
SHOWBOAT MARINA General Partner of March 30, 1998
INVESTMENT PARTNERSHIP Showboat Marina Casino Partnership
By: SHOWBOAT INDIANA
INVESTMENT LIMITED
PARTNERSHIP, a Nevada
limited partnership, a general
partner of Showboat Marina
Investment Partnership
By: SHOWBOAT INDIANA, INC.,
a Nevada corporation, its general
partner
/s/ Carlton L. Geer
Carlton L. Geer
President and
Chief Executive Officer
By: WATERFRONT
ENTERTAINMENT AND
DEVELOPMENT, INC., an
Indiana corporation, a general
partner of Showboat Marina
Investment Partnership
/s/ Michael A. Pannos
Michael A. Pannos
President
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SIGNATURES TITLE DATE
---------- ----- ----
/s/ Carlton L. Geer President and Chief Executive March 30, 1998
Carlton L. Geer Officer of Showboat Indiana, Inc.
(Principal Executive Officer of
Showboat Indiana, Inc.)
Vice President Finance and Chief March 30, 1998
Financial Officer of Showboat
Indiana, Inc. (Principal Financial
/s/ Leann Schneider and Accounting Officer
Leann Schneider of Showboat Indiana, Inc.)
/s/ J.K. Houssels Director of Showboat Indiana, Inc. March 30, 1998
J.K. Houssels
/s/ John D. Gaughan Director of Showboat Indiana, Inc. March 30, 1998
John D. Gaughan
/s/ Frank A. Modica Director of Showboat Indiana, Inc. March 30, 1998
Frank A. Modica
/s/ H. Gregory Nasky Director of Showboat Indiana, Inc. March 30, 1998
H. Gregory Nasky
/s/ J.K. Houssels, III Director of Showboat Indiana, Inc. March 30,1998
J.K. Houssels, III
Director and President of March 30, 1998
/s/ Michael A. Pannos Waterfront Entertainment and
Michael A. Pannos Development, Inc. (Principal
Executive Officer of Waterfront
Entertainment and Development, Inc.
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SIGNATURES TITLE DATE
---------- ----- ----
/s/ Thomas S. Cappas Director and Treasurer (Principal March 30, 1998
Thomas S. Cappas Financial and Accounting
Officer) of Waterfront
Entertainment and
Development, Inc.
/s/ Leann Schneider Vice President Finance and March 30, 1998
Leann Schneider Chief Financial Officer
(Principal Financial and
Accounting Officer) of SMFC
/s/ J. Kell Houssels, III Director, President and Chief March 30, 1998
J. Kell Houssels, III Executive Officer of SMFC
/s/ Mark J. Miller Director of SMFC March 30, 1998
Mark J. Miller
/s/ Michael A. Pannos Director of SMFC March 30, 1998
Michael A. Pannos
/s/ Thomas S. Cappas Director of SMFC March 30, 1998
Thomas S. Cappas
/s/ Carlton L. Geer Director of SMFC March 30, 1998
Carlton L. Geer
-54-
EXHIBIT INDEX
NUMBER EXHIBIT DESCRIPTION PAGE
3.01 Articles of Incorporation of Showboat Marina Finance
Corporation, filed March 7, 1996, are incorporated
herein by reference from the Company's (SEC File No.
33-4402) Registration Statement on Form S-4 filed on
May 3, 1996, Part II, Item 21, Exhibit 3.01.
3.02 Bylaws of Showboat Marina Finance Corporation
certified March 21, 1996, are incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 3.02.
3.03 Partnership Agreement by and between Showboat Marina
Partnership and Showboat Marina Investment
Partnership dated as of March 1, 1996, is
incorporated herein by reference from the Company's
(SEC File No. 33-4402) Registration Statement on
Form S-4 filed on May 3, 1996, Part II, Item 21,
Exhibit 3.03.
4.01 Indenture dated as of March 28, 1996, among Showboat
Marina Casino Partnership, Showboat Marina Finance
Corporation, Donaldson, Lufkin & Jenrette Securities
Corporation, Nomura Securities International, Inc.,
Bear, Stearns & Co. Inc. and American Bank National
Association, as trustee, relating to the 13 1/2
Series A and Series B First Mortgage Notes due 2003,
is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 4.01.
4.02 Specimen of 13 1/2% Series B First Mortgage Notes
due 2003 is incorporated herein by reference from
the Company's (SEC File No. 33-4402) Registration
Statement on Form S-4, Amendment No. 1, filed on
June 24, 1996, Part II, Item 21, Exhibit 4.03.
10.01 Management Agreement dated March 28, 1996, by and
between Showboat Marina Casino Partnership and
Showboat Marina Partnership is incorporated herein
by reference from the Company's (SEC File No. 33-
4402) Registration Statement on Form S-4 filed on
May 3, 1996, Part II, Item 21, Exhibit 10.01.
10.02 Standby Equity Commitment dated March 28, 1996, by
and among Showboat Marina Casino Partnership,
Showboat Marina Finance Corporation and Showboat,
Inc., is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 10.04.
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10.03 Manager's Consent and Subordination of Management
Agreement dated March 28, 1996, by and between
Showboat Marina Casino Partnership and Showboat
Marina Partnership, is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4, Amendment No. 1,
filed on June 24, 1996, Part II, Item 21, Exhibit
10.05.
10.04 Leasehold Mortgage, Assignment of Rents and Security
Agreement dated March 28, 1996 and made by Showboat
Marina Casino Partnership to American Bank National
Association, as trustee, is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 10.06.
10.05 Security Agreement dated March 28, 1996, among
Showboat Marina Casino Partnership, Showboat Marina
Finance Corporation and American Bank National
Association, as trustee, is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 10.08.
10.06 Environmental Indemnity Agreement dated March 28,
1996, by and between Showboat, Inc. and American
Bank National Association is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 10.09.
10.07 Assignment of Contracts and Documents dated March
28, 1996, by and between Showboat Marina Casino
Partnership and American Bank National Association,
as trustee, is incorporated herein by reference from
the Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 10.10.
10.08 Economic Betterment Commitment Letter Agreement
between the City of East Chicago, Indiana and
Showboat Marina Casino Partnership, dated April 8,
1994, is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 10.12.
10.09 Economic Betterment Commitment Letter Agreement
between the City of East Chicago, Indiana and
Showboat Marina Casino Partnership, dated April 18,
1995, is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 10.13.
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10.10 Noncompetition Agreement by and between the Indiana
Gaming Commission, Showboat, Inc., Waterfront
Entertainment and Development, Inc., and Showboat
Marina Partnership, dated December 15, 1995, is
incorporated herein by reference from the Company's
(SEC File No. 33-4402) Registration Statement on
Form S-4 filed on May 3, 1996, Part II, Item 21,
Exhibit 10.14.
10.11 Redevelopment Project Lease by and between Showboat
Marina Partnership and the City of East Chicago
Department of Redevelopment, dated October 19, 1995,
is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 10.15.
10.12 Asset Transfer Agreement by and between Showboat
Marina Partnership and Showboat Marina Casino
Partnership, dated as of March 27, 1996, is
incorporated herein by reference from the Company's
(SEC File No. 33-4402) Registration Statement on
Form S-4 filed on May 3, 1996, Part II, Item 21,
Exhibit 10.16.
10.13 Ground Lease, dated as of October 22, 1996, by and
between Showboat Marina Casino Partnership and 3600
Michigan Company Ltd. is incorporated herein by
reference to the Company's (SEC File No. 33-4402)
Form 10-K for the year ended December 31, 1996, Part
IV, Item 14(c)(3), Exhibit 10.20.
10.14 Master Lease Agreement dated February 21, 1997, by
and between PDS Financial Corporation and Showboat
Marina Casino Partnership; Lease Schedule No. 1 to
Master Lease Agreement dated February 21, 1997, by
and between PDS Financial Corporation and Showboat
Marina Casino Partnership; Lease Schedule No. 2 to
Master Lease Agreement dated February 21, 1997, by
and between PDS Financial Corporation and Showboat
Marina Casino Partnership; Lease Schedule No. 3 to
Master Lease Agreement dated February 21, 1997, by
and between PDS Financial Corporation and Showboat
Marina Casino Partnership; Lease Schedule No. 4 to
Master Lease Agreement dated February 21, 1997, by
and between PDS Financial Corporation and Showboat
Marina Casino Partnership; Purchase/Renewal Option
to Lease Schedule No. 1 dated February 21, 1997, by
and between PDS Financial Corporation and Showboat
Marina Casino Partnership; Purchase/Renewal Option
to Lease Schedule No. 2 dated February 21, 1997, by
and between PDS Financial Corporation and Showboat
Marina Casino Partnership; Purchase/Renewal Option
to Lease Schedule No. 3 dated February 21, 1997, by
and between PDS Financial Corporation and Showboat
Marina Casino Partnership; Purchase/Renewal Option
to Lease Schedule No. 4 dated February 21, 1997, by
and between PDS Financial Corporation and Showboat
Marina Casino Partnership; First Preferred Ship
Mortgage dated February 21, 1997, by and between PDS
Financial Corporation and Showboat Marina Casino
Partnership; Intercreditor Agreement dated February
21, 1997, by and among PDS Financial Corporation,
Showboat Marina Casino Partnership and Firstar Bank
of Minnesota, N.A., a national banking association
-57-
are incorporated herein by reference to the
Company's (SEC File No. 33-4402) Form 10-Q for the
three month period ended March 31, 1997, Part II,
Item 6(a), Exhibit 10.01.
10.15 Loan and Security Agreement dated June 30,1997, by
and between Showboat Marina Casino Partnership and
Finova Capital Corporation; Intercreditor and
Subordination Agreement dated June 30, 1997, by and
among Finova capital Corporation, Firstar Bank of
Minnesota, N.A. and Showboat Marina Casino
Partnership; DLJ Intercreditor and Subordination
Agreement dated June 30, 1997, by and among Finova
Capital Corporation, Donaldson Lufkin & Jenrette
Securities Corporation, DLJ Capital Funding, Inc.
and Showboat Marina Casino Partnership; Secured
Promissory Note dated June 30, 1997, by and between
Showboat Marina Casino Partnership and Finova
Capital Corporation; and Vessel Chattel Mortgage
dated June 30, 1997, by and between Showboat Marina
Casino Partnership and Finova Capital Corporation
are incorporated herein by reference to the
Company's (SEC File No. 33-4402) Form 10-Q for the
six month period ended June 30, 1997, Part II, Item
6(a), Exhibit 10.01.
10.16 Interest Bearing Grid Note dated September 1, 1997,
in principal amount of $3,000,000, by and between
Showboat Marina Casino Partnership and Fleet Bank,
National Association, is incorporated herein by
reference to the Company's (SEC File No. 33-4402)
Form 10-Q for the nine month period ended September
30, 1997, Part II, Item 6(a), Exhibit 10.01.
10.17 Marine Management Services Agreement dated October 59
28, 1996, by and between Showboat Marina Casino
Partnership and Riverboat Services, Inc.; First
Amendment to Marine Management Services Agreement
dated November 3, 1997, by and between Showboat
Marina, Inc. [sic] and Riverboat Services, Inc.
21.01 List of the Showboat Marina Casino Partnership's 82
Subsidiaries.
27.01 Financial Data Schedule 84
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