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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000898430-01-001141.txt : 20010409
<SEC-HEADER>0000898430-01-001141.hdr.sgml : 20010409
ACCESSION NUMBER: 0000898430-01-001141
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 10
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010402
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PINNACLE ENTERTAINMENT INC
CENTRAL INDEX KEY: 0000356213
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948]
IRS NUMBER: 953667491
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-13641
FILM NUMBER: 1588729
BUSINESS ADDRESS:
STREET 1: 330 NORTH BRAND BOULEVARD
STREET 2: SUITE 1110
CITY: GLENDALE
STATE: CA
ZIP: 91203-2308
BUSINESS PHONE: 8186625900
MAIL ADDRESS:
STREET 1: 330 NORTH BRAND BOULEVARD
STREET 2: SUITE 1110
CITY: GLENDALE
STATE: CA
ZIP: 91203-2308
FORMER COMPANY:
FORMER CONFORMED NAME: HOLLYWOOD PARK INC/NEW/
DATE OF NAME CHANGE: 19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>FORM 10K405
<TEXT>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 2000
Commission file number 0-106-619
PINNACLE ENTERTAINMENT, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
95-3667491
(IRS Employer Identification No.)
330 North Brand Boulevard, Suite 1100, Glendale, California 91203
(Address of Principal Executive Offices) (Zip Code)
(818) 662-5900
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
PINNACLE ENTERTAINMENT, INC.
Common Stock, $.10 par value
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether 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, and (2) has been subject to such filing requirements
for the past 90 days. YES |X| 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 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. |X|
The aggregate market value of the voting stock held by non-affiliates (therefore
excludes officers, directors and beneficial owners of 10% or more) of the
registrant at March 23, 2001, was $190,574,726 based on a closing price of $9.70
per common share. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
The number of outstanding shares of the registrant's common stock, as of the
close of business on March 23, 2001: 26,046,744.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive 2001 proxy statement, to be filed with
the Securities and Exchange Commission within 120 days after the close of the
Registrant's fiscal year, are incorporated by reference into Part III of this
Form 10-K.
<PAGE>
PINNACLE ENTERTAINMENT, INC.
Table of Contents
<TABLE>
<CAPTION>
Part I
<S> <C> <C>
Item 1. Description of Business .........................................................................................1
General.....................................................................................................1
Company Overview............................................................................................2
Gaming - Continuing Operations..............................................................................3
Operations Sold.............................................................................................7
Expansion Plans.............................................................................................8
Competition.................................................................................................9
Government Regulation and Gaming Issues....................................................................11
Federal Income Tax Matters.................................................................................25
Employees..................................................................................................26
Other Information..........................................................................................26
Item 2. Properties......................................................................................................27
Properties.................................................................................................27
Properties Held For Sale...................................................................................28
Expansion Properties.......................................................................................28
Item 3. Legal Proceedings...............................................................................................28
Item 4. Submission of Matters to a Vote of Security Holders.............................................................32
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.......................................33
Item 6. Selected Financial Data.........................................................................................34
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...........................36
Forward-Looking Statements and Risk Factors................................................................36
Factors Affecting Future Operating Results.................................................................36
Results of Operations......................................................................................38
Liquidity, Capital Resources and Other Factors Influencing Future Results..................................43
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.....................................................44
Item 8. Financial Statements............................................................................................44
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................44
Part III
Item 10. Directors and Executive Officers of the Registrant
[Incorporated by reference from the Registrant's definitive 2001 proxy statement]......................45
Item 11. Executive Compensation
[Incorporated by reference from the Registrant's definitive 2001 proxy statement]......................45
Item 12. Security Ownership of Certain Beneficial Owners and Management
[Incorporated by reference from the Registrant's definitive 2001 proxy statement.......................45
Item 13. Certain Relationships and Related Transactions
[Incorporated by reference from the Registrant's definitive 2001 proxy statement.......................45
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..............................................45
Signatures...............................................................................................................54
</TABLE>
<PAGE>
PART I
Item 1. Description of Business
General
Pinnacle Entertainment, Inc. (the "Company" or "Pinnacle Entertainment"), a
Delaware corporation, is a diversified gaming company that owns and operates
seven casinos in Nevada, Mississippi, Louisiana, Indiana and Argentina,
including the recently opened Belterra Casino Resort. The Company also receives
lease income from two card club casinos, both in the Los Angeles metropolitan
area, and interest income with cash flow participation from an Indian gaming
facility in Yakima, Washington. The Company's active subsidiaries are as
follows: (1) Boomtown, Inc., which has three active subsidiaries: Boomtown Hotel
& Casino, Inc., Louisiana Gaming Enterprises, Inc. and Louisiana - I Gaming; (2)
Casino Magic Corp., which has seven active subsidiaries: Biloxi Casino Corp.,
Jefferson Casino Corporation, Casino Magic of Louisiana, Corp., Casino Magic
Neuquen S.A., Casino Magic Support Services S.A., Casino Magic Management
Services Corp. and Casino One Corp.; (3) HP/ Compton, Inc.; (4) HP Yakama, Inc.;
(5) Realty Investment Group, Inc.; and (6) Belterra Resort (Indiana), LLC.
The Company began as a gaming, sports and entertainment company engaged in the
operation of thoroughbred and greyhound racing facilities. Pinnacle
Entertainment is the successor to the Hollywood Park Turf Club, organized in
1938. Pinnacle Entertainment was incorporated in 1981 under the name Hollywood
Park Realty Enterprises, Inc.; in 1992, as part of a restructuring, was renamed
Hollywood Park, Inc.; and in February 2000, changed its name to Pinnacle
Entertainment, Inc. through the merger of a newly formed wholly owned
subsidiary.
In 1997, the Company began to transform itself into a major casino operator. The
Company's strategic plan is to own and operate a broad base of regionally
diversified casino entertainment facilities by developing new properties,
expanding existing facilities and making selected acquisitions in strong
markets. The strategic plan anticipates the Company will establish and maintain
a prominent position in each of the markets in which it operates. In furtherance
of this strategy, the Company completed its first strategic gaming acquisition
with its purchase of Boomtown, Inc. in June 1997. Through its Boomtown, Inc.
("Boomtown") subsidiary, the Company owns and operates land-based gaming
operations in Verdi, Nevada ("Boomtown Reno") and cruising riverboat gaming
operations in Harvey, Louisiana ("Boomtown New Orleans"), which riverboat will
be permanently docked beginning April 1, 2001 based on legislation enacted in
late March 2001 that requires riverboat casinos in Southern Louisiana to remain
dockside at all times (see "Government Regulation and Gaming Issues - Louisiana"
below). In October 1998, the Company completed its second strategic gaming
acquisition with its purchase of Casino Magic Corp. The Company currently owns
and operates, through its Casino Magic Corp. ("Casino Magic") subsidiary,
dockside gaming operations in Biloxi, Mississippi ("Casino Magic Biloxi");
dockside riverboat gaming operations in Bossier City, Louisiana ("Casino Magic
Bossier City"); and two land-based casinos in Argentina ("Casino Magic
Argentina").
On October 27, 2000, the Company opened to the public the Belterra Casino
Resort, a hotel and riverboat casino resort in Switzerland County, Indiana, in
which the Company owns a 97% interest, with the remaining 3% held by a
non-voting local partner (see Note 7 to the Notes to Consolidated Financial
Statements).
The Company receives lease income from two card clubs - the Hollywood
Park-Casino and Crystal Park Hotel and Casino. Since September 1999, the
Hollywood Park-Casino has been leased from Churchill Downs California Company
("Churchill Downs"), a wholly owned subsidiary of Churchill Downs Incorporated,
and subleased to an unaffiliated third party operator (see Note 4 to the Notes
to Consolidated Financial Statements). The Crystal Park Hotel and Casino
("Crystal Park") is owned by the Company and is leased to the same card club
operator that now leases and operates the Hollywood Park-Casino.
1
<PAGE>
The Company also receives interest income with cash flow participation from the
Legends Casino, an Indian gaming facility in Yakima, Washington.
In addition to the acquisitions of Boomtown and Casino Magic, the Company
furthered its strategic plan by hiring various experienced gaming executives in
January 1999 and completing the sale of various non-core assets in 1999 and
2000.
In September 1999, the Company completed the disposition of the Hollywood Park
Race Track and Hollywood Park-Casino to Churchill Downs (see Note 4 to the Notes
to Consolidated Financial Statements).
On June 13, 2000, the Company completed the sale of Turf Paradise, Inc. ("Turf
Paradise"), a horse racing facility in Phoenix, Arizona, to a company owned by a
private investor (see Note 4 to the Notes to Consolidated Financial Statements).
On August 8, 2000, the Company sold its dockside gaming facilities in Biloxi,
Mississippi ("Boomtown Biloxi") and in Bay St. Louis, Mississippi ("Casino Magic
Bay St. Louis") to subsidiaries of Penn National Gaming, Inc. (see Note 4 to the
Notes to Consolidated Financial Statements).
In April 2000, the Company entered into a definitive merger agreement with
respect to a proposed merger. Under the merger agreement, each outstanding share
of the Company's common stock would have been converted into $24.00 in cash,
with the possibility of an additional $1.00 per share in certain circumstances.
Consummation of the merger was subject to numerous conditions, including the
acquirer obtaining the necessary financing for the transaction and regulatory
approvals, as well as other conditions. Since all of the conditions to
consummation of the merger would not be met by the then applicable outside
closing date (January 31, 2001) and the acquirer had notified the Company that
it did not intend to extend further the outside closing date, on January 23,
2001 the Company announced that the parties to the merger agreement had mutually
agreed to terminate such agreement (see Note 3 to the Notes to Consolidated
Financial Statements).
The Company continues to pursue the growth strategy begun in 1997 through the
enhancement of current operations (such as the addition of a new Asian gaming
room at Boomtown New Orleans expected to open in the spring of 2001, the
acquisition of new slot player marketing and tracking systems, the addition and
remodeling of food and beverage outlets), capital improvements at certain of the
existing properties (such as a new dockside riverboat and land-based amenities
at Casino Magic Bossier City and a new parking garage at Casino Magic Biloxi),
and the potential development of a casino, hotel and golf course resort complex
in Lake Charles, Louisiana in the event the Company is granted the final
Louisiana gaming license to be awarded by the Louisiana Gaming Control Board
(see Note 8 to the Notes to Consolidated Financial Statements).
Company Overview
The following is an overview of the Company's gaming properties at December 31,
2000:
<TABLE>
<CAPTION>
Number of
Gaming -------------------------------
Square Slot Table Hotel
Property Type of Gaming Footage Machines Games Rooms
-------- -------------- ------- -------- ----- -----
<S> <C> <C> <C> <C> <C>
Operating Properties:
Belterra Casino Resort (a) Cruising Riverboat 38,000 1,351 57 308
Boomtown Reno Land-based 45,000 1,265 39 318
Boomtown New Orleans Cruising Riverboat (b) 30,000 1,183 35 --
Casino Magic Biloxi Dockside 47,700 1,275 35 378
Casino Magic Bossier City Dockside Riverboat 30,000 1,058 41 188
Casino Magic Argentina (c) Land-based 33,000 584 50 --
------- ------- ------- -------
Property Total 223,700 6,716 257 1,192
======= ======= ======= =======
</TABLE>
2
<PAGE>
Card Clubs Leased:
Hollywood Park-Casino (d) Card Club 30,000 -- 145 --
Crystal Park Casino (d) Card Club 30,000 -- 33 237
------ ------ ------ ---
Card Club Total 60,000 -- 178 237
====== ====== ====== ===
- ----------
(a) The Company owns 97% of Belterra Casino Resort, which opened in October
2000.
(b) The riverboat casino will remain permanently dockside beginning April 1,
2001 based on legislation enacted in late March 2001 (see "Government
Regulation and Gaming Issues - Louisiana" below).
(c) There are two separate land-based casinos in Argentina, Casino Magic
Neuqen and Casino Magic San Martin de los Andes, collectively, Casino
Magic Argentina.
(d) The Company does not operate these properties. The Company owns the
Crystal Park Casino and leases the Hollywood Park-Casino (see Note 4 to
the Notes to Consolidated Financial Statements). The Company leases both
properties to an unaffiliated operator, for a fixed monthly rent.
Gaming - Continuing Operations
Belterra Casino Resort Belterra Casino Resort opened to the public on October
27, 2000 on 315 acres of land adjacent to the Ohio River near Vevay, Indiana,
approximately 45 miles southwest of downtown Cincinnati, Ohio. Belterra is the
closest gaming facility to portions of northeast Kentucky and southeast Indiana.
The property features a cruising riverboat casino, the Miss Belterra, with
38,000 square feet of casino space, 1,351 slot machines and 57 table games. The
property also features a 15-story, 308-room hotel with 11 suites, six
restaurants, retail areas, a 1,500-seat entertainment showroom, a spa and a Tom
Fazio designed 18-hole championship golf course. The golf course is expected to
open in the summer of 2001. The property provides 2,000 parking spaces, most of
which are in a multi-level parking structure.
Belterra Casino Resort was originally scheduled to open in August 2000; however,
on July 31, 2000, the Miss Belterra riverboat casino was struck and damaged by a
barge on the Mississippi River near Caruthersville, Missouri en route to Vevay,
Indiana. The boat was repaired in New Orleans, and in October 2000 arrived at
its permanent docking site in Vevay, Indiana.
The Company owns a 97% interest in Belterra Casino Resort, with the remaining 3%
held by a non-voting local partner. On November 6, 2000, the Company entered
into an agreement with the local partner providing that the local partner has
the right to require the Company to purchase, for a purchase price determined in
accordance with the agreement, the local partner's entire ownership interest in
the Belterra Casino Resort at any time on or after January 1, 2001. The
agreement also provides that the Company has the option to require the local
partner to sell to the Company, for a purchase price determined in accordance
with the agreement, the local partner's entire ownership interest in the
Belterra Casino Resort at any time on or after January 1, 2004 or, in the event
that the state of Indiana prior to such time has enacted legislation authorizing
the conduct of full dockside gaming, the later of January 1, 2004 or the end of
the calendar quarter following the second anniversary of the effective date of
such legislation.
Boomtown Reno The Company's Boomtown subsidiary operates two Boomtown
properties: Boomtown Reno and Boomtown New Orleans. Boomtown Reno is a
land-based facility that has been operating for over 30 years on 569 acres near
Verdi, Nevada, directly off Interstate 80, the primary highway connecting Nevada
to northern California. Depending on the direction of travel, Boomtown Reno is
either the first or the last casino and hotel complex in Nevada seen when
traveling on Interstate 80.
The hotel features 318 rooms, and the 45,000 square foot casino contains 1,265
slot machines and 39 table games. In the second quarter of 1999, the Company
completed a $30,000,000 expansion and renovation project at Boomtown Reno that
added 196 hotel rooms, including 24 luxury suites, and over 10,000 square feet
of new convention space, as well as the renovation of major portions of the
casino space and certain restaurants. The property features four restaurants, an
80-seat lounge, a 25,000 square foot amusement
3
<PAGE>
center, 10,250 square feet of meeting space and an indoor pool. In addition to
the casino/ hotel, the property also includes a full-service truck stop, a gas
station/ mini-mart, a 203-space RV park and 1,351 parking spaces.
The Company owns the 569 acres in Verdi, Nevada on which Boomtown Reno is
located, with current operations of Boomtown Reno presently utilizing
approximately 61 acres. Of the 508 excess acres, the Company considers
approximately 250 acres suitable for development. The Company may seek to sell
such excess acreage to interested developers or investors. The Company owns all
of the improvements and facilities at the property, including the casino, hotel,
truck stop, recreational vehicle park and service station, along with the
related water rights.
Boomtown New Orleans Boomtown New Orleans opened in Harvey, Louisiana in August
1994 on a 54-acre site located approximately ten miles from downtown New Orleans
in the West Bank suburban area. Boomtown New Orleans is a riverboat gaming
facility that features a large riverboat, the Boomtown Belle II, containing
1,183 slot machines and 35 table games. The Company is currently evaluating
projects to expand gaming on the third floor of the riverboat with the addition
of slot machines and/or table games (and still conform to the state's 30,000
square foot gaming limitation) and to renovate and improve the land-based
facility in response to recently enacted legislation requiring riverboat casinos
in Southern Louisiana to remain dockside at all times (see "Government
Regulations and Gaming Issues - Louisiana" below). The land-based pavilion
comprises 88,000 square feet and features two restaurants, a 350-seat nightclub,
21,000 square feet of meeting space, a banquet facility, an amusement center and
a live entertainment facility on the third floor of the riverboat. The facility
also provides 1,729 parking spaces. The Company owns the 54 acres in Harvey,
Louisiana, which are utilized by Boomtown New Orleans. The Company also owns the
facilities and associated improvements at the property, including the riverboat
casino.
Boomtown, Inc. The Company acquired Boomtown, Inc. on June 30, 1997, pursuant to
the Agreement and Plan of Merger dated as of April 23, 1996, by and among the
Company, HP Acquisition, Inc., (a wholly owned subsidiary of the Company), and
Boomtown. HP Acquisition, Inc. was merged with and into Boomtown (the "Boomtown
Merger"). As result of the Boomtown Merger, Boomtown became a wholly owned
subsidiary of the Company and each share of Boomtown common stock was converted
into the right to receive 0.625 of a share of the Company's common stock.
Approximately 5,362,850 shares of the Company's common stock, valued at $9.8125
per share (excluding shares retired, as described below) were issued in the
Boomtown Merger.
The Boomtown Merger was accounted for under the purchase method of accounting
for a business combination. The purchase price of the Boomtown Merger was
allocated to identifiable assets acquired and liabilities assumed based on their
estimated fair values at the date of acquisition. Based on financial analyses,
which considered the impact of general economic, financial and market conditions
on the assets acquired and the liabilities assumed, the estimated fair values
approximated their carrying values. The Boomtown Merger generated approximately
$15,302,000 of excess acquisition cost over the recorded value of the net assets
acquired, all of which was allocated to goodwill, which is being amortized over
40 years. The unamortized goodwill was reduced by approximately $3,006,000 in
August 2000 in connection with the sale of Boomtown Biloxi (see Note 4 to the
Notes to Consolidated Financial Statements). The amortization of the goodwill is
not deductible for income tax purposes.
Casino Magic Biloxi Casino Magic Biloxi is a dockside barge located on 16 acres
on the Mississippi Gulf Coast and features a dockside casino barge. The facility
began operation in June 1993. The property is situated on the beach of the Gulf
of Mexico, in the center of a cluster of three casinos know as "Casino Row". On
May 1, 1998, the Company opened a 378-room hotel, including 86 suites, at the
property. The property features a 47,700 square foot casino providing 1,275 slot
machines and 35 table games. The facility also contains four restaurants, 6,600
square feet of convention space, a health club and retail shops. The Company is
evaluating plans to build a parking garage on the property. The property
currently provides 1,315 parking spaces.
4
<PAGE>
Of the 16 acres on which Casino Magic Biloxi is located, the Company owns
approximately 4.5 acres and leases approximately 11.5 acres, including
approximately 6.4 acres of submerged tidelands leased from the state of
Mississippi. The tidelands are under a ten-year lease that expires on May 31,
2003, with an option to extend the term for five years under the same terms and
conditions, subject to the renegotiation of annual rent. The Company owns the
barge on which the casino is located and all of the land-based facilities,
including the hotel.
Casino Magic Bossier City Casino Magic Bossier City is a dockside facility
located in Bossier City, Louisiana. The property opened in October 1996 on a
site directly off, and highly visible from, Interstate 20, a major thoroughfare
connecting Shreveport/Bossier City to Dallas/Fort Worth, a three-hour drive
away.
Gaming is conducted on a dockside riverboat that does not cruise. The 30,000
square foot casino provides 1,058 slot machines and 41 table games. In December
1998, the Company opened a 188-room hotel, including four master suites and 88
junior suites, adjacent to the land-based pavilion. The land-based pavilion
contains three restaurants, including a 300-seat buffet restaurant, a 300-seat
live entertainment venue, a gift shop and a bar and lounge area. The facility
provides 2,100 parking spaces. Due to the attractiveness of the market, and in
order to compensate for the increased gaming fees to be paid due to the recently
enacted legislation in Louisiana (see "Government Regulation and Gaming Issues -
Louisiana" below), the Company is evaluating plans to significantly remodel, re-
brand and upgrade the property to broaden its appeal to a wider customer base.
Such project, expected to be commenced during 2001, is anticipated to include a
new, larger and dramatic riverboat casino facility, as well as a complete
renovation of the pavilion building, including a new entertainment facility,
totally renovated and expanded restaurants, new retail areas and administrative
offices. As currently planned, this project is expected to cost approximately
$90,000,000 and be completed by the fall of 2002.
Casino Magic Bossier City is located on 23 acres of land owned by the Company,
adjacent to the Red River in Bossier City, Louisiana. The Company owns the
dockside riverboat casino, hotel, parking structure and other land-based
facilities on the property. The Company leases approximately one acre of water
bottoms from the state of Louisiana.
Casino Magic Argentina The Company operates two land-based casinos in the cities
of Neuquen and San Martin de los Andes in the Province of Neuquen, Argentina.
The larger of the two casinos is located in the city of Neuquen and has
approximately 29,000 square feet of gaming space and contains 38 table games,
484 slot machines and a 384-seat bingo facility. The smaller facility, located
in San Martin de los Andes, has approximately 4,300 square feet of gaming space
with 12 table games and 100 slot machines. The Company does not own any real
property at these sites.
The casinos opened in 1995 and are operated under a 12-year concession agreement
with the Province that expires in December 2006. The Company has reached an
agreement in principle, and expects to execute a written agreement in the near
future, with the Province to extend the concession agreement for at least ten
years beyond 2006, if the Company constructs a new Neuquen facility within the
next 22 months at a cost of not less than $15,000,000. The Company is currently
planning such project, but can give no assurances as to whether or when such a
project would be completed, if at all.
The Province of Neuquen is located in west-central Argentina and is the gateway
to the well-established tour destinations and ski resorts of the Andes
Mountains. There are no other gaming casino facilities within the Province.
In October 1999, the Company purchased the 49% minority interest not owned by
the Company in Casino Magic Argentina (see Note 6 to the Notes to Consolidated
Financial Statements).
Casino Magic Corp. On October 15, 1998, the Company acquired Casino Magic,
pursuant to the February 19, 1998 Agreement of Merger among Casino Magic Corp.,
the Company, and HP Acquisition II, Inc. (a wholly owned subsidiary of the
Company) (the "Casino Magic Merger"). The Company paid cash of approximately
5
<PAGE>
$80,904,000 for Casino Magic's common stock. At the date of the acquisition, the
Company had purchased 792,900 common shares of Casino Magic, on the open market,
at a total cost of approximately $1,615,000. The Company paid $2.27 per share
for the remaining 34,929,224 shares of Casino Magic common stock outstanding.
The Casino Magic Merger was accounted for under the purchase method of
accounting for a business combination. The purchase price of the Casino Magic
Merger was allocated to identifiable assets acquired and liabilities assumed
based on their estimated fair values at the date of acquisition. Assets acquired
and liabilities assumed were, when found to be necessary, written up or down to
their fair market values based on financial analyses, which considered the
impact of general economic, financial and market conditions. The Casino Magic
Merger generated approximately $43,284,000 of excess acquisition cost over the
recorded value of the net assets acquired, all of which was allocated to
goodwill, to be amortized over 40 years. The unamortized goodwill was reduced by
approximately $10,122,000 in August 2000 in connection with the sale of Casino
Magic Bay St. Louis (see Note 4 to the Notes to Consolidated Financial
Statements). The amortization of the goodwill is not deductible for income tax
purposes.
California Card Club Leases The Company receives lease income from two card
clubs in the Los Angeles, California area: the Hollywood Park-Casino and the
Crystal Park Hotel and Casino. The Company leases the Hollywood Park-Casino from
Churchill Downs California Company, a wholly owned subsidiary of Churchill Downs
Incorporated and subleases it to an unaffiliated third party operator. The
Crystal Park Hotel and Casino is owned by the Company and is leased to an
affiliate of the card club operator that leases and operates the Hollywood
Park-Casino. The Hollywood Park-Casino and Crystal Park Hotel and Casino are not
operated by the Company because public corporations that are not qualified
California Racetrack Associations may not directly operate gambling enterprises
in California (see "Government Regulation and Gaming Issues - California").
The Hollywood Park-Casino is located in Inglewood, California, and is part of
the complex which includes the Hollywood Park Race Track. The Hollywood
Park-Casino contains approximately 30,000 square feet of card club gaming space,
offering 145 table games, and 30,000 square feet of retail and restaurant space.
Since September 1999, the Hollywood Park-Casino has been leased from Churchill
Downs California Company, a wholly owned subsidiary of Churchill Downs
Incorporated, and is subleased to an unaffiliated third party operator. Prior to
September 1999, the Hollywood Park-Casino was owned and operated by the Company.
On September 10, 1999, the Company completed the dispositions of the Hollywood
Park Race Track and Hollywood Park-Casino to Churchill Downs. The Company then
entered into a 10-year leaseback of the Hollywood Park-Casino at an annual lease
rate of $3,000,000 per annum, with a 10-year renewal option. To comply with
California gaming laws, the Company then subleased the facility to an
unaffiliated third party operator for a lease payment of $6,000,000 per year.
The sublease was for a one-year period. In September 2000, the Company renewed
the sublease until the earlier of December 31, 2001 or the expiration or earlier
termination of the Company's lease with Churchill Downs.
The Crystal Park Casino, located on twenty acres in Compton, California, opened
on October 25, 1996. The Crystal Park Casino contains approximately 40,000
square feet of gaming and banquet space with approximately 33 gaming tables. The
adjoining hotel contains 237 rooms, including 32 suites.
The Company owns the approximately twenty acres on which the casino facility,
adjoining hotel and parking is located. Prior to February 2001, the Company
leased the adjoining hotel and approximate 35 acres of unimproved land from the
city of Compton under a 50-year lease. In February 2001, the Company purchased
the hotel tower and approximately 14 acres of the leased land for approximately
$3,600,000.
The Crystal Park Casino is owned by the Company but, because of California
gaming laws, is leased to an affiliate of the card club operator that now leases
and operates the Hollywood Park-Casino. The lease is a triple net lease and
expires on December 25, 2001. Rent due under the lease was scheduled to increase
as of July 1, 1998, but as a result of present market conditions, we anticipate
that the rent will remain at the
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$100,000 per month level for the foreseeable future. Redwood Gaming, LLC, a
former minority member of the wholly owned subsidiary that directly owns the
Crystal Park Casino, has an option to purchase a 6.8% membership interest in
such subsidiary for a purchase price of $2,000,000. The option expires on
December 31, 2002.
Other Gaming Pinnacle Entertainment, through its wholly owned subsidiary HP
Yakama, Inc. ("HP Yakama") loaned approximately $9,618,000 to the Yakama Tribal
Gaming Corporation (the "Tribal Corporation") to construct the Legends Casino,
located near Yakima, Washington, in 1998. The Tribal Corporation gave HP Yakama
a promissory note for the $9,618,000, payable in 84 equal installments at a 10%
rate of interest. As of December 31, 2000, the remaining balance on the note was
$6,924,000.
Pursuant to a seven year Master Lease between HP Yakama and the Confederated
Tribes and Bands of the Yakama Indian Nation (the "Tribes"), HP Yakama must pay
the Tribes monthly rent of $1,000. HP Yakama and the Tribal Corporation entered
into a corresponding seven year Sublease, under which the Tribal Corporation
owes rent to HP Yakama. Rent under the Sublease was initially set at 28% of Net
Revenues (as defined in the relevant agreements), and decreases to 22% of Net
Revenues over the seven year term of the lease. During the years ended December
31, 2000 and 1999, the Company received such rent revenue of $2,289,000 and
$622,000, respectively (the Company did not receive any rent revenue in 1998).
The Company is currently discussing with the Tribal Corporation a possible
buyout of the promissory note, Master Lease and Sublease by the Tribal
Corporation.
General All of the Company's properties are dependent upon attracting customers
within their respective geographical markets. There can be no assurance that the
Company will be able to continue to attract a sufficient number of customers
necessary to make its operations profitable. In addition, adverse regulatory
changes or changes in the gaming environment in any of the jurisdictions could
have a material adverse effect on the Company's operations, including the
recently enacted legislation in Louisiana (see "Government Regulation and Gaming
Issues - Louisiana" below).
The Company's riverboat and dockside gaming facilities in Indiana, Mississippi
and Louisiana, as well as any additional riverboat casino properties that might
be developed or acquired, are subject to risks in addition to those associated
with land-based casinos, including loss of service due to casualty, mechanical
failure, extended or extraordinary maintenance, flood, hurricane, snow and ice
storms or other severe weather conditions. For cruising riverboats there are
additional risks associated with the movement of vessels on waterways, including
risks of casualty due to river turbulence and severe weather conditions. The
Company's Boomtown Reno facility is subject to severe winter weather conditions
that can cause the closure of Interstate 80 and reduce the amount of patrons
visiting the property.
In July 2000, the Miss Belterra was struck by a barge while en route to Vevay,
Indiana. Such incident caused the opening of the Belterra Casino Resort to be
delayed from August 2000 to October 2000 (see Note 7 to the Notes to
Consolidated Financial Statements). There can be no assurance that the Miss
Belterra, or the cruising riverboat at Boomtown New Orleans, will not be struck
by other vessels while on the waterways.
In September 1998, a hurricane struck the Gulf Coast region and Boomtown Biloxi,
Boomtown New Orleans, Casino Magic Biloxi, and Casino Magic Bay St. Louis were
forced to shut down operations for approximately one week, though none of the
properties sustained significant damage. If any of the Company's casinos, be it
riverboat, dockside or land-based, cease operations for any period of time, it
could adversely affect the Company's results of operations.
Operations Sold
Boomtown Biloxi Boomtown Biloxi, located in Biloxi, Mississippi, was sold to a
subsidiary of Penn National Gaming in August 2000 (see Note 4 to the Notes to
Consolidated Financial Statements). The property opened in July 1994 and
occupied, as operated by the Company, 19 acres on Mississippi's historic Back
Bay of the
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Mississippi Gulf Coast. The Company has granted Penn National a license to use
the "Boomtown" name and trademark for its Biloxi location only, subject to
certain restrictions. The license is until the later of August 1, 2003 or two
years following the date on which the Company notifies Penn National of its
intent to abandon the "Casino Magic" name. If the Company decides to abandon all
use of the "Boomtown" name, Penn National has a right to acquire the name for a
two year period from the Company's notice of intent to abandon.
Casino Magic Bay St. Louis Casino Magic Bay St. Louis, located in Bay St. Louis,
Mississippi, was sold to a subsidiary of Penn National Gaming in August 2000
(see Note 4 to the Notes to Consolidated Financial Statements). The property
began operations in September 1992, on a permanently moored barge in a 17-acre
marina with the adjoining land-based facilities situated on 591 acres. Bay St.
Louis is approximately 46 miles east of New Orleans and 40 miles west of Biloxi.
The Company has granted Penn National a perpetual license to use the "Casino
Magic" name and trademark for its Bay St. Louis location only, subject to
certain restrictions. If the Company decides to abandon all use of the "Casino
Magic" name, Penn National has a right to acquire the name for a two-year period
from the Company's notice of intent to abandon.
Turf Paradise Race Track Turf Paradise, located in Phoenix, Arizona, was sold in
June 2000 (see Note 4 to the Notes to Consolidated Financial Statements). The
property, as operated by the Company, conducted one continuous live thoroughbred
race meet from September through May.
Hollywood Park Race Track and Hollywood Park-Casino The Hollywood Park Race
Track, at which the Company conducted live thoroughbred racing meets, and the
adjacent Hollywood Park-Casino, located in Inglewood, California, were sold in
September 1999 (see Note 4 to the Notes to Consolidated Financial Statements) to
Churchill Downs.
Expansion Plans
The following is a summary of the property enhancements and expansion projects
that the Company undertook with respect to its properties.
Belterra Casino Resort On October 27, 2000, the Company opened to the public the
Belterra Casino Resort. The property, located on 315 acres adjacent to the Ohio
River in Switzerland County, Indiana, (which is approximately 45 miles southwest
of downtown Cincinnati, Ohio), features a 15-story, 308-room hotel, a cruising
riverboat casino (the Miss Belterra) with approximately 1,800 gaming positions,
an 18-hole Tom Fazio-designed championship golf course (expected to open in the
summer of 2001), six restaurants, a 1,500-seat entertainment showroom, a spa,
retail areas and other amenities. The total cost of the project is expected to
be approximately $215,411,000 (excluding pre-opening costs, which were charged
to expense), which cost includes land, buildings, boat, riverfront improvements,
furniture and fixtures, and capitalized interest, as well as amounts anticipated
to be incurred in 2001 to complete the golf course, but excludes boat repair
expenses described below, which have been or are expected to be reimbursed by
insurance carriers (see Note 7 to the Notes to Consolidated Financial
Statements).
Boomtown New Orleans Improvements that were completed in 2000 include a totally
remodeled buffet and a Cajun steak and seafood restaurant. The Company is
currently evaluating projects to expand gaming operations on the third floor of
the riverboat with the addition of slot machines and/or table games (while still
conforming to the state of Louisiana's 30,000 square foot gaming limitation) and
to renovate and improve the land-based facility in response to recently enacted
legislation requiring riverboat casinos in Southern Louisiana to remain dockside
at all times (see "Government Regulations and Gaming Issues - Louisiana" below).
Casino Magic Bossier City Casino Magic Bossier City completed its 188-room
luxury hotel in December 1998, as well as other improvements to the 55,000
square foot Pavilion. Based on the attractiveness of the market, and in order to
compensate for the increased gaming fees to be paid due to the recently enacted
legislation in Louisiana (see "Government Regulation and Gaming Issues -
Louisiana" below), the Company is evaluating
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plans to significantly remodel, re-brand and upgrade the property to broaden its
appeal to a wider customer base. Such an expansion would include: i) a new
riverboat casino, ii) a completely redesigned pavilion building, including the
buffet and other restaurants, iii) a 1,200-seat entertainment venue, and iv)
administrative areas.
Casino Magic Biloxi Based on the anticipated growth of the Gulf Coast market and
the favorable location of the Casino Magic Biloxi property, the Company is
evaluating the construction of a 1,500-space parking garage adjacent to the
hotel on land owned by the Company.
Lake Charles In November 1999, the Company filed an application for the
fifteenth and final gaming license to be issued by the Louisiana Gaming Control
Board. In July 2000, the Company was one of three groups that presented their
proposed projects to the Louisiana Gaming Control Board. The Company's
application is seeking the approval to construct and operate a cruising
riverboat casino, hotel and golf course resort complex in Lake Charles,
Louisiana. The Company anticipates amending such application to reflect
legislation recently enacted in Louisiana (see "Legislation Regarding Dockside
Gaming in Louisiana" below). The Louisiana Gaming Control Board has not awarded
such license and there is no assurance that such license will be issued to the
Company or to any other applicant. At the July 2000 meeting, the Louisiana
Gaming Control Board indicated that another meeting to address the applications
for the license would be held at such time as the Louisiana State Police shall
have completed their suitability investigations of the applicants. At the
January 2001 meeting of the Louisiana Gaming Control Board, the Louisiana State
Police reported it would have its investigation completed by the end of March
2001, with a report to the Louisiana Gaming Control Board expected at the April
or May 2001 Louisiana Gaming Control Board meeting.
In connection with the application, the Company entered into an option agreement
with the Lake Charles Harbor and Terminal District (the "District") to lease 225
acres of unimproved land from the District upon which such resort complex would
be constructed. The initial lease option was for a six-month period ending
January 2000, with three six-month renewal options (all of which have been
exercised), at a cost of $62,500 per six-month renewal option. Representatives
of the District have indicated that it will continue to extend the option period
until the Louisiana Gaming Control Board awards the fifteenth license. If the
lease option were exercised, the annual rental payment would be $815,000, with a
maximum annual increase of 5%. The term of the lease would be for a total of up
to 70 years, with an initial term of 10 years and six consecutive renewal
options of 10 years each. The lease would require the Company to develop certain
on- and off-site improvements at the location. If awarded the license by the
Louisiana Gaming Control Board, the Company anticipates building a resort
similar in design and scope to the Belterra Casino Resort and incorporating the
benefits of dockside gaming legislation recently enacted in Louisiana.
There can be no assurance that the Company will be successful in completing any
currently contemplated or future expansion projects or, even if they are
completed, that the projects will be successful. Numerous factors, including
regulatory or financial constraints, could intervene and cause the Company to
alter, delay or abandon expansion plans. Such risks include an inability to
secure required financing or required local gaming approvals or other permits
and approvals, as well as risks typically associated with any construction
project, including possible shortages of materials or skilled labor, unforeseen
engineering, environmental or geological problems, work stoppages, weather
interference and unanticipated costs overruns. In addition, the Company is
subject to state and local laws and regulations, ordinances and similar
provisions relating to zoning and other matters that may restrict the possible
uses of the Company's land and other assets. Any additional development of the
Company's land, including the expansion plans described above, may require
approval of such items as environmental impact reports or other similar
certifications. There can be no assurance that other requisite approvals would
be obtained.
Competition
The Company faces significant competition in each of the jurisdictions in which
it has established gaming operations, and such competition is expected to
intensify in some of these jurisdictions as new gaming operations enter these
markets and existing competitors expand their operations. The Company's
properties
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compete directly with other gaming properties in Indiana, Nevada, Mississippi,
Louisiana, California, and Argentina. To a lesser extent, the Company also
competes for customers with other casino operators in North American markets,
including casinos located on Indian reservations, and other forms of gaming such
as lotteries and Internet gaming. Many of the Company's competitors are larger,
have substantially greater name recognition and marketing resources as well as
access to lower cost sources of financing. Moreover, consolidation of companies
in the gaming industry could increase the concentration of large gaming
companies in the markets in which the Company operates, and may result in the
Company's competitors having even greater resources, name recognition and
licensing prospects than such competitors currently enjoy.
Ohio River Valley Market The Company operates the Belterra Casino Resort in the
Ohio River Valley market, which competes with four other cruising riverboats.
The primary competitors are the Rising Sun riverboat casino, operated by Hyatt,
the Caesar's riverboat casino, operated by Park Place Entertainment, and the
Argosy riverboat casino, which is currently the most successful cruising
riverboat in the country.
Gulf Coast Market The Company operates Casino Magic Biloxi in the Gulf Coast
Market. The Mississippi gaming industry is ranked fourth in the United States,
behind Nevada, New Jersey and Connecticut. The Gulf Coast Market for 2000 was
estimated to have generated gaming revenues of $1.1 billion, which was
approximately 45% of the revenue generated by the entire Mississippi gaming
market. One of the major reasons for the growth was the entry of MGM/Mirage
Resorts Beau Rivage Resort, which opened in March 1999. Currently, Mississippi
law does not limit the number of gaming licenses that may be granted.
Competition is negatively affecting the Company in this market.
Bossier City/Shreveport Market The Company operates Casino Magic Bossier City in
this market. The property competes directly with four other riverboat gaming
facilities, one of which, the Hollywood Casino, opened in December 2000, and
another of which, Harrah's Casino, opened a new 500-room hotel tower in January
2001. The largest and most successful is Horseshoe Casino, which has a 606-room
luxury hotel and has the largest riverboat, at 62,400 square feet (though all of
the casinos in Louisiana are limited to 30,000 square feet of gaming space).
Isle of Capri Casinos completed construction of a 305-room hotel in mid-1999.
Additionally, if gaming were legalized in jurisdictions near the property where
gaming currently is not permitted, the Company could face additional
competition. For example, the Arkansas Attorney General certified for the
November 2000 general election ballot at least three ballot initiatives,
including a proposed constitutional amendment that would have permitted casino
gambling in Arkansas. Although none of the initiatives were approved in the
November 2000 election, there can be no assurance that similar initiatives will
not be proposed in the future. The Bossier City property could be negatively
impacted by the existence of gaming in Arkansas. Competition is negatively
affecting the Company in this market.
New Orleans Market The Company operates its Boomtown New Orleans property in
Harvey, Louisiana, approximately ten miles from downtown New Orleans, on the
"Westbank" in Jefferson Parish. In October 1999, Harrah's Jazz Casino opened a
significant land-based casino and entertainment facility in downtown New
Orleans. The Harrah's Jazz Casino has 100,000 square feet and approximately
4,200 gaming positions compared with Boomtown New Orleans, which has 30,000
square feet and approximately 1,300 positions.
California and Reno Markets, Proposition 1A In California, the Company leases
the Hollywood Park-Casino and the Crystal Park Casino (both which are California
card clubs) to a third party operator, and operates Boomtown Reno in Nevada.
Indian tribes have operated casinos in California for approximately ten years,
and currently there are approximately 40 Indian tribes operating gambling halls,
though most are significantly smaller than the typical Las Vegas casino. In
March 2000, California voters passed Proposition 1A, a ballot initiative that
allows Indian tribes to conduct various gaming activities including horse race
wagering, gaming devices (including slot machines), banked card games (as in
traditional Las Vegas card games) and lotteries. As a result of the passage of
Proposition 1A in California, the Company expects that increased Indian gaming
competition will adversely affect the Company's gaming operations in Reno,
Nevada and the California Card Clubs which are run by a third party operator.
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The Hollywood Park-Casino and the Crystal Park Casino also face competition from
other card club casinos in neighboring cities.
General While the Company believes that it has been able to effectively compete
in these markets to date, increasing competition may adversely affect gaming
operations in the future. The Company believes that increased legalized gaming
in other states, particularly in areas close to our existing gaming properties,
such as in Texas, Alabama, Arkansas or Kentucky, could create additional
competition for the Company and could adversely affect its operations.
Government Regulation and Gaming Issues
Indiana On October 23, 2000, the Company's affiliate, Belterra Casino Resort
(Indiana), LLC ("Belterra") received an Indiana Riverboat Owner's License from
the Indiana Gaming Commission ("Indiana Commission"). The license was awarded as
the final step in the regulatory process surrounding the development of a
riverboat gaming resort, including a hotel and golf course, in Switzerland
County, Indiana. The Belterra development in Switzerland County is substantially
complete and opened for business shortly after the license was awarded. The only
item remaining to complete is the golf course; it is anticipated that the golf
course will open in the summer of 2001.
The license awarded to Belterra is the fifth and final license authorized under
Indiana law for riverboat gaming operations conducted from sites on the Ohio
River. The Company owns a ninety-seven percent (97%) interest in Belterra.
The ownership and operation of riverboat casinos at Indiana-based sites are
subject to extensive state regulation under the Indiana Riverboat Gaming Act
("Indiana Act"), as well as regulations which the Indiana Commission has adopted
pertaining to the Indiana Act. The Indiana Act and regulations are significant
to the Company's prospects for successfully operating the Belterra facility.
The Indiana Act grants broad and pervasive regulatory powers and authority to
the Indiana Commission. Comprehensive regulations have been adopted covering
ownership and reporting for licensed riverboat casinos together with "rules of
the game" governing riverboat casino operations. The Indiana Commission has also
adopted a set of regulations under the Indiana Act which govern a series of
operational matters for Indiana riverboat casinos.
Among the regulations adopted by the Indiana Commission is one dealing with
riverboat excursions, routes and public safety. The Indiana Act requires
licensed riverboat casinos to be cruising vessels, and the regulations carry out
the legislative intent by requiring cruising with appropriate recognition of
public safety needs. The regulations explicitly preclude "dockside gambling".
Riverboat gaming excursions are limited to a maximum duration of four hours
unless otherwise expressly approved by the Indiana Commission. Excursion routes
and schedules are subject to the approval of the Indiana Commission. No gaming
may be conducted while the boat is docked except: (1) for thirty-minute
embarkment and disembarkment periods at the beginning and end of a cruise; (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 the
riverboat, riverboat passengers and crew, or to 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.
For Ohio River excursions, such as those Belterra conducts from its Switzerland
County development, "full excursions" must be conducted at all times during the
year unless the master determines otherwise, for the above-stated reasons. A
"full excursion" is a cruise on the Ohio River. The Ohio River has waters in
both Indiana and Kentucky. The cruise route employed by Belterra is completely
in Indiana waters on the Ohio River with no need or likelihood of entering
Kentucky waters. Therefore, Kentucky laws precluding any kind of casino gaming
should have no impact on the Belterra's operations.
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An Indiana riverboat owner's license has an initial effective period of five
years; thereafter, a license is subject to annual renewal. The Indiana
Commission has broad discretion over the initial issuance of licenses and over
the renewal, revocation, suspension and control of riverboat owner's licenses.
Belterra will be subject to a reinvestigation in 2003 to ensure it continues to
be in compliance with the Indiana Act. Officers, directors and principal owners
of the actual license holder and employees who are to work on the riverboat are
subject to substantial disclosure requirements as a part of securing and
maintaining necessary licenses. Significant contracts to which Belterra is party
are subject to disclosure and approval processes imposed by the regulations. A
riverboat owner's 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. Suppliers of gaming equipment and materials must also
be licensed under the Indiana Act.
Licensees are statutorily required to disclose to the Indiana Commission the
identity of all directors, officers and persons holding direct or indirect
beneficial interests of 1% or greater. The Indiana Commission also requires a
broad and comprehensive disclosure of financial and operating information on
licensees and their principal officers, and their parent corporations and other
upstream owners. The Company and Belterra have provided full information and
documentation to the Indiana Commission, and they must continue to do so
throughout the period of licensure. The Indiana 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 or by a person holding
at least a 1% interest in the licensee. The Indiana Commission has promulgated a
rule requiring quarterly reporting by such licensees, officers, and persons.
The Company has obtained permits and approvals from the United States Army Corp
of Engineers, the Indiana Department of Natural Resources, and other agencies
necessary to develop Belterra. There may be incidental permit modifications
required in the future, but any future permit modification requirements are not
anticipated to be material to Belterra's operations.
Adjusted gross receipts from gambling games authorized under the Indiana Act are
subject to a tax at the rate of 20% on adjusted gross receipts. "Adjusted gross
receipts" means the total of all cash and property received from gaming
operations less cash paid out as winnings and uncollectible gaming receivables
(not to exceed 2%). The Indiana Act also prescribes an additional tax for
admissions, based upon $3 per person per excursion. Property taxes may be
imposed on riverboats at rates determined by local taxing authorities. Income to
the Company from Belterra will be subject to the Indiana gross income tax, the
Indiana adjusted gross income tax and the Indiana supplemental corporate net
income tax. Sales on a riverboat and at related resort facilities are subject to
applicable use, excise and retail taxes. The Indiana Act requires a riverboat
owner licensee to directly reimburse the Indiana Commission for the costs of
inspectors and agents required to be present while authorized gaming is
conducted.
Through the establishment of purchasing "goals," the Indiana Act encourages
minority and women's business enterprise participation in the riverboat gaming
industry. Each riverboat licensee must establish goals of at least 10% of total
dollar value of the licensee's contracts for goods and services with women's
business enterprises and 5% with minority business enterprises. The Indiana
Commission may suspend, limit or revoke the owner's license or impose a fine for
failure to comply with the statutory requirements. The Indiana Commission has
indicated it will be vigilant in monitoring attainment of these goals. The
Company continues in its efforts to bring Belterra into compliance with the
purchasing goals.
Minimum and maximum wagers on games on the riverboat are left to the discretion
of the licensee. Wagering may not be conducted with money or other negotiable
currency. There are no statutory restrictions on extending credit to patrons;
however, the matter of credit continues to be a matter of potential legislative
action.
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If an institutional investor acquires 5% or more of any class of voting
securities of a holding company of a licensee, the investor is required to
notify the Indiana Commission and to provide additional information, and may be
subject to a finding of suitability. Any other person who acquired 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. A riverboat
licensee or an affiliate may not enter into a debt transaction of $1,000,000 or
more without approval of the Indiana Commission. The Indiana Commission has
taken the position that a "debt transaction" includes increases in maximum
amount available under reducing revolving credit facilities. A riverboat owner's
license is a revocable privilege and is not a property right under the Indiana
Act. A riverboat owner licensee or any other person may not lease, hypothecate,
borrow money against or loan money against or otherwise scrutinize a riverboat
owner's license.
Currently pending before the Indiana General Assembly are proposals which would
eliminate the cruising requirement for Indiana riverboat casinos and allow
unrestricted "come and go" access and egress from Indiana-based riverboat
casinos. Under the bill which has moved through the Indiana House of
Representatives, elimination of the cruising requirement would come at the cost
of increased admission taxes and increased taxes on adjusted gross gaming
receipts. As passed in the House, the admissions tax would be increased to $4
per person and the adjusted gross gaming receipts tax would be increased on a
"sliding scale" basis up to a maximum of 32.5% on adjusted gross gaming receipts
in excess of $125,000,000. If enacted, these tax increases could have a
significant impact on Belterra.
Louisiana The ownership and operation of a riverboat gaming vessel is subject to
the Louisiana Riverboat Economic Development and Gaming Control Act (the
"Louisiana Act"). As of May 1, 1996, gaming activities are regulated by the
Louisiana Gaming Control Board (the "Board"). The Board is responsible for
issuing the gaming license and enforcing the laws, rules and regulations
relative to riverboat gaming activities. The Board is empowered to issue up to
fifteen licenses to conduct gaming activities on a riverboat of new construction
in accordance with applicable law. However, no more than six licenses may be
granted to riverboats operating from any one parish.
An initial license to conduct gaming operations is valid for a term of five
years. The Louisiana Act provides for successive five year renewals after the
initial five year term.
The laws and regulations of Louisiana seek to (i) prevent unsavory or unsuitable
persons from having any direct or indirect involvement with gaming at any time
or in any capacity; (ii) establish and maintain responsible accounting practices
and procedures; (iii) maintain effective control over the financial practices of
licensees, including establishing procedures for reliable record keeping and
making periodic reports to the Board; (iv) prevent cheating and fraudulent
practices; (v) provide a source of state and local revenues through fees; and
(vi) ensure that gaming licensees, to the extent practicable, employ and
contract with Louisiana residents, women and minorities.
The Louisiana Act specifies certain restrictions and conditions relating to the
operation of riverboat gaming, including but not limited to the following: (i)
in parishes bordering the Red River, such as the Company's Casino Magic property
in Bossier, gaming may be conducted dockside; however, prior to the passage of
legislation legalizing dockside gaming effective April 1, 2001 in the 2001
Special Session of the Louisiana Legislature, in all other authorized locations
such as Boomtown New Orleans, gaming is not permitted while a riverboat is
docked, other than for forty-five minutes between excursions, unless dangerous
weather or water conditions exist; (ii) prior to the passage of legislation
legalizing dockside gaming effective April 1, 2001 in the 2001 Special Session
of the Louisiana Legislature, each round trip riverboat cruise may not be less
than three nor more than eight hours in duration, subject to specified
exceptions; (iii) agents of the Board are permitted on board at any time during
gaming operations; (iv) gaming devices, equipment and supplies may be purchased
or leased from permitted suppliers; (v) gaming may only take place in the
designated river or waterway; (vi) gaming equipment may not be possessed,
maintained, or exhibited by any person on a riverboat except in the specifically
designated gaming area, or a secure area used for inspection, repair, or storage
of such equipment; (vii) wagers may be received only from a person present on a
licensed riverboat; (viii) persons under 21 are not permitted in designated
gaming areas; (ix) except for slot machine play,
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wagers may be made only with tokens, chips, or electronic cards purchased from
the licensee aboard a riverboat; (x) licensees may only use docking facilities
and routes for which they are licensed and may only board and discharge
passengers at the riverboat's licensed berth; (xi) licensees must have adequate
protection and indemnity insurance; (xii) licensees must have all necessary
federal and state licenses, certificates and other regulatory approvals prior to
operating a riverboat; and (xiii) gaming may only be conducted in accordance
with the terms of the license and the rules and regulations adopted by the
Board.
No person may receive any percentage of the profits from the Company's
operations in Louisiana without first being found suitable. In March 1994,
Boomtown New Orleans, its officers, key personnel, partners and persons holding
a 5% or greater interest in the partnership were found suitable by the
predecessor to the Board. In April 1996, the Board's predecessor confirmed that
Casino Magic Bossier's officers, key personnel, partners and persons holding a
5% or greater interest in the corporation were suitable and authorized to
acquire an existing licensee. In July 1999, the Board renewed Boomtown New
Orleans' license to conduct gaming operations. In January 2000, Casino Magic
Bossier filed an application to renew its license to conduct gaming operations.
A gaming license is deemed to be a privilege under Louisiana law and as such may
be denied, revoked, suspended, conditioned or limited at any time by the Board.
In issuing a license, the Board must find that the applicant is a person of good
character, honesty and integrity and the applicant is a person whose prior
activities, criminal record, if any, reputation, habits and associations do not
pose a threat to the public interest of the State of Louisiana or to the
effective regulation and control of gaming, or create or enhance the dangers of
unsuitable, unfair or illegal practices, methods, and activities in the conduct
of gaming or the carrying on of business and financial arrangements in
connection therewith. The Board will not grant any licenses unless it finds
that: (i) the applicant is capable of conducting gaming operations, which means
that the applicant can demonstrate the capability, either through training,
education, business experience, or a combination of the above, to operate a
gaming casino; (ii) the proposed financing of the riverboat and the gaming
operations is adequate for the nature of the proposed operation and from a
source suitable and acceptable to the Board; (iii) the applicant demonstrates a
proven ability to operate a vessel of comparable size, capacity and complexity
to a riverboat in its application for a license; (v) the applicant designates
the docking facilities to be used by the riverboat; (vi) the applicant shows
adequate financial ability to construct and maintain a riverboat; (vii) the
applicant has a good faith plan to recruit, train and upgrade minorities in all
employment classifications; and (viii) the applicant is of good moral character.
The Board may not award a license to any applicant who fails to provide
information and documentation to reveal any fact material to qualifications or
who supplies information which is untrue or misleading as to a material fact
pertaining to the qualification criteria; who has been convicted of or pled nolo
contendere to an offense punishable by imprisonment of more than one year; who
is currently being prosecuted for or regarding whom charges are pending in any
jurisdiction of an offense punishable by more than one year imprisonment; if any
holder of 5% or more in the profits and losses of the applicant has been
convicted of or pled guilty or nolo contendere to an offense which at the time
of conviction is punishable as a felony.
The transfer of a license is prohibited. The sale, assignment, transfer, pledge,
or disposition of securities which represent 5% or more of the total outstanding
shares issued by a holder of a license is subject to prior Board approval. A
security issued by a holder of a license must generally disclose these
restrictions.
Section 2501 of the regulations enacted by the Louisiana State Police Riverboat
Gaming Division pursuant to the Louisiana Act (the "Regulations") requires prior
written approval of the Board of all persons involved in the sale, purchase,
assignment, lease, grant or foreclosure of a security interest, hypothecation,
transfer, conveyance or acquisition of an ownership interest (other than in a
corporation) or economic interest of five percent (5%) or more in any licensee.
Section 2523 of the Regulations requires notification to and prior approval from
the Board of the (a) application for, receipt, acceptance or modification of a
loan, or the (b) use of any cash, property, credit, loan or line of credit, or
the (c) guarantee or granting of other forms of security for a loan by a
licensee or person acting on a licensee's behalf. Exceptions to prior written
approval include without limitation to any transaction for less than $2,500,000
in which all of the lending institutions are federally regulated, the
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transaction modifies the terms of an existing, previously approved loan
transaction, or if the transaction involves publicly registered debt and
securities sold pursuant to a firm underwriting agreement.
The failure of a licensee to comply with the requirements set forth above may
result in the suspension or revocation of that licensee's gaming license.
Additionally, if the Board finds that the individual owner or holder of a
security of a corporate license or intermediary company or any person with an
economic interest in a licensee is not qualified under the Louisiana Act, the
Board may require, under penalty of suspension or revocation of the license,
that the person not (a) receive dividends or interest on securities of the
corporation, (b) exercise directly or indirectly a right conferred by securities
of the corporation, (c) receive remuneration or economic benefit from the
licensee, or (d) continue in an ownership or economic interest in the licensee.
A licensee must periodically report the following information to the Board,
which is not confidential and is to be available for public inspection: the
licensee's net gaming proceeds from all authorized games; the amount of net
gaming proceeds tax paid; and all quarterly and annual financial statements
presenting historical data that are submitted to the Board, including annual
financial statements that have been audited by an independent certified public
accountant.
The Louisiana Act restricts gaming space on riverboats to no more than 30,000
square feet. The Board has adopted rules governing the method for approval of
the area of operations and the rules and odds of authorized games and devices
permitted, and prescribing grounds and procedures for the revocation, limitation
or suspension of licenses and permits.
On April 19, 1996, the Louisiana legislature adopted legislation requiring
statewide local elections on a parish-by-parish basis to determine whether to
prohibit or continue to permit licensed riverboat gaming, licensed video poker
gaming, and licensed land-based gaming in Orleans Parish. The applicable local
election took place on November 5, 1996, and the voters in the parishes of
Boomtown New Orleans and Casino Magic Bossier voted to continue licensed
riverboat and video poker gaming. However, it is noteworthy that the current
legislation does not provide for any moratorium on future local elections on
gaming.
Prior to the passage of legislation in the 2001 Special Session of the Louisiana
Legislature, fees to the state of Louisiana for conducting gaming activities on
a riverboat include (i) $50,000 per riverboat for the first year of operation
and $100,000 per year, per riverboat thereafter, plus (ii) 18.5% of net gaming
proceeds. In the 2001 Special Session of the Louisiana Legislature, a law was
passed legalizing dockside gaming and increasing the fees paid to the state of
Louisiana to 21.5% of net gaming proceeds effective April 1, 2001 for the nine
riverboats in the southern region of the state, including the Company's Boomtown
New Orleans property, while the fee increase to 21.5% of net gaming proceeds
will be phased in over an approximately two year period for the riverboats
operating in parishes bordering the Red River, including the Company's Casino
Magic Bossier City property.
Mississippi The ownership and operation of casino facilities in Mississippi are
subject to extensive state and local regulation, but primarily the licensing and
regulatory control of the Mississippi Gaming Commission (the "Mississippi
Commission") and the Mississippi State Tax Commission (the "Mississippi Gaming
Authorities").
The Mississippi Gaming Control Act (the "Mississippi Act"), which legalized
dockside casino gaming in Mississippi, was enacted June 29, 1990. Although not
identical, the Mississippi Act is similar to the Nevada Gaming Control Act. The
Mississippi Commission adopted regulations which are also similar in many
respects to the Nevada gaming regulations.
The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Commission seek to: (i) prevent unsavory or unsuitable persons from
having any direct or indirect involvement with gaming at any time or in any
capacity; (ii) establish and maintain responsible accounting practices and
procedures; (iii) maintain effective control over the financial practices of
licensees, including establishing minimum procedures for internal fiscal affairs
and safeguarding of assets and revenues, providing reliable record keeping and
making periodic reports to the Mississippi Commission; (iv) prevent cheating and
fraudulent
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practices; (v) provide a source of state and local revenues through taxation and
licensing fees; and (vi) ensure that gaming licensees, to the extent
practicable, employ Mississippi residents. The regulations are subject to
amendment and interpretation by the Mississippi Commission. Changes in
Mississippi laws or regulations may limit or otherwise materially affect the
types of gaming that may be conducted and such changes, if enacted, could have
an adverse effect on the Company and the Company's Mississippi gaming operation.
The Mississippi Act provides for legalized dockside gaming at the discretion of
the fourteen counties that border the Gulf Coast or the Mississippi River, but
only if the voters in such counties have not voted to prohibit gaming in that
county. In recent years, certain anti-gaming groups proposed for adoption
through the initiative and referendum process certain amendments to the
Mississippi Constitution, which would prohibit gaming in the state. The
proposals were declared illegal by Mississippi courts on constitutional and
procedural grounds. The latest ruling was appealed to the Mississippi Supreme
Court, which affirmed the decision of the lower court. If another such proposal
were to be offered and if a sufficient number of signatures were to be gathered
to place a legal initiative on the ballot, it is possible for the voters of
Mississippi to consider such a proposal in November of 2002. As of January 1,
2001, dockside gaming was permissible in nine of the fourteen eligible counties
in the state and gaming operations had commenced in Adams, Coahoma, Hancock,
Harrison, Tunica, Warren and Washington counties. Under Mississippi law, gaming
vessels must be located on the Mississippi River or on navigable waters in
eligible counties along the Mississippi River or in the waters lying south of
the counties along the Mississippi Gulf Coast. The law permits unlimited stakes
gaming on permanently moored vessels on a 24-hour basis and does not restrict
the percentage of space which may be utilized for gaming. There are no
limitations on the number of gaming licenses which may be issued in Mississippi.
The Mississippi Act permits substantially all traditional casino games and
gaming devices, and, on August 11, 1997, a Mississippi Circuit Court judge
issued a ruling that the Mississippi Act permits race books on the premises of
licensed casinos. The Mississippi Commission appealed the decision to the
Mississippi Supreme Court, which has not yet rendered a decision.
The Company and Biloxi Casino Corp (the "Mississippi Gaming Subsidiary") which
operates Casino Magic Biloxi, is subject to the licensing and regulatory control
of the Mississippi Commission. The Company must be registered under the
Mississippi Act as a publicly traded holding company for the Mississippi Gaming
Subsidiary and is required periodically to submit detailed financial and
operating reports to the Mississippi Commission and furnish any other
information which the Mississippi Commission may require. If the Company is
unable to continue to satisfy the registration requirements of the Mississippi
Act, the Company and its Mississippi Gaming Subsidiary cannot own or operate
gaming facilities in Mississippi.
The Mississippi Gaming Subsidiary must maintain a gaming license from the
Mississippi Commission to operate a casino in Mississippi. Such licenses are
issued by the Mississippi Commission subject to certain conditions, including
continued compliance with all applicable state laws and regulations. Gaming
licenses are not transferable, are issued for a three-year period and must be
renewed periodically thereafter. Casino Magic Biloxi's license is due to expire
in January 2004. No person may become a stockholder of or receive any percentage
of profits from a licensed subsidiary of a registered holding company without
first obtaining licenses and approvals from the Mississippi Commission. The
Company has obtained such approvals in connection with the licensing of its
Mississippi Gaming Subsidiary, and the registration of the Company as a
publicly-traded holding company.
Certain officers and employees of the Company and the officers, directors and
certain key employees of the Company's Mississippi Gaming Subsidiary must be
found suitable to be licensed by the Mississippi Commission. The Company
believes that it has obtained, applied for or is in the process of applying for
all necessary findings of suitability with respect to such persons associated
with the Company or its Mississippi Gaming Subsidiary, although the Mississippi
Commission in its discretion may require additional persons to file applications
for findings of suitability. In addition, any person having a material
relationship or involvement with the Company or its Mississippi Gaming
Subsidiary may be required to be found suitable, in which case those persons
must pay the costs and fees associated with such investigation. The Mississippi
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Commission may deny an application for a finding of suitability for any cause
that it deems reasonable. Changes in certain licensed positions must be reported
to the Mississippi Commission. In addition to its authority to deny an
application for a finding of suitability, the Mississippi Commission has
jurisdiction to disapprove a change in a person's corporate position or title
and such changes must be reported to the Mississippi Commission. The Mississippi
Commission has the power to require the Mississippi Gaming Subsidiary and the
Company to suspend or dismiss officers, directors and other key employees or
sever relationships with other persons who refuse to file appropriate
applications or whom the authorities find unsuitable to act in such capacities.
Employees associated with gaming must obtain work permits that are subject to
immediate suspension under certain circumstances. The Mississippi Commission
shall refuse to issue a work permit to a person convicted of a felony and it may
refuse to issue a work permit to a gaming employee if the employee has committed
certain misdemeanors, or knowingly violated the Mississippi Act, or for any
other reasonable cause.
At any time, the Mississippi Commission has the power to investigate and require
the finding of suitability of any record or beneficial stockholder of the
Company. Mississippi law requires any person who acquires more than 5% of the
common stock of a publicly traded corporation registered with the Mississippi
Commission to report the acquisition to the Mississippi Commission, and such
person may be required to be found suitable. Also, any person who becomes a
beneficial owner of more than 10% of the common stock of such a company, as
reported to the Securities and Exchange Commission, must apply for a finding of
suitability by the Mississippi Commission and must pay the costs and fees that
the Mississippi Commission incurs in conducting the investigation. The
Mississippi Commission has generally exercised its discretion to require a
finding of suitability of any beneficial owner of more than 5% of a registered
publicly-traded holding company's common stock. However, pursuant to Mississippi
Gaming Commission Policy on Findings of Suitability of Institutional
Shareholders dated January 20, 2000, an "institutional investor", as defined by
the policy, which acquires more than 10%, but not more than 15%, of a registered
publicly-traded holding company's voting securities may apply to the Mississippi
Commission for a waiver of finding of suitability if such institutional investor
holds the voting securities for investment purposes only. An institutional
investor shall not be deemed to hold voting securities for investment purposes
only unless the voting securities were acquired and are held in the ordinary
course of business as an institutional investor and not for the purpose of
causing, directly or indirectly, the election of a majority of the members of
the board of directors, any change in the corporate charter, bylaws, management,
policies or operations of the registered publicly-traded holding company or any
of its affiliates, or any other action which the Mississippi Commission finds to
be inconsistent with investment purposes only. The following activities shall
not be deemed to be inconsistent with holding voting securities for investment
purposes only: (i) voting, directly or indirectly through the delivery of a
proxy furnished by the board of directors, on all matters voted upon by the
holders of such voting securities; (ii) serving as a member of any committee of
creditors or security holders; (iii) nominating any candidate for election or
appointment to the board of directors in connection with a debt restructuring;
(iv) accepting appointment or election (or having a representative accept
appointment or election) as a member of the board of directors in connection
with a debt restructuring and serving in that capacity until the conclusion of
the member's term; (v) making financial and other inquiries of management of the
type normally made by securities analysts for informational purposes and not to
cause a change in its management, policies or operations; and (vi) such other
activities as the Mississippi Commission may determine to be consistent with
such investment intent. If a stockholder who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information, including a list of beneficial owners.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Mississippi
Commission may be found unsuitable. The same restrictions apply to a record
owner, if the record owner, after request, fails to identify the beneficial
owner. Management believes that compliance by the Company with the licensing
procedures and regulatory requirements of the Mississippi Commission will not
affect the marketability of the Company's securities. Any person found
unsuitable and who holds, directly or indirectly, any beneficial ownership of
the securities of the Company
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beyond such time as the Mississippi Commission prescribes, may be guilty of a
misdemeanor. The Company is subject to disciplinary action if, after receiving
notice that a person is unsuitable to be a stockholder or to have any other
relationship with the Company or its Mississippi Gaming Subsidiary, the Company:
(i) pays the unsuitable person any dividend or other distribution upon the
voting securities of the Company; (ii) recognizes the exercise, directly or
indirectly, of any voting rights conferred by securities of the Company held by
the unsuitable person; (iii) pays the unsuitable person any remuneration in any
form for services rendered or otherwise, except in certain limited and specific
circumstances; or (iv) fails to pursue all lawful efforts to require the
unsuitable person to divest himself of the securities, including, if necessary,
the immediate purchase of the securities for cash at a fair market value.
The Company may be required to disclose to the Mississippi Commission upon
request the identities of the holders of any of the Company's debt or other
securities. In addition, under the Mississippi Act the Mississippi Commission
may, in its discretion, (i) require holders of securities of registered
corporations, including debt securities such as the Company's 9.5% Notes and the
9.25% Notes, to file applications, (ii) investigate such holders, and (iii)
require such holders to be found suitable to own such securities. If the
Mississippi Commission determines that a person is unsuitable to own such
security, then the issuer may be sanctioned, including the loss of its
approvals, if without the prior approval of the Mississippi Commission, it (i)
pays to the unsuitable person any dividend, interest, or any distribution
whatsoever; (ii) recognizes any voting right by such unsuitable person in
connection with such securities; (iii) pays the unsuitable person remuneration
in any form; or (iv) makes any payment to the unsuitable person by way of
principal, redemption, conversion, exchange, liquidation, or similar
transaction. Although the Mississippi Commission generally does not require the
individual holders of obligations such as the Notes to be investigated and found
suitable, the Mississippi Commission retains the discretion to do so for any
reason, including but not limited to a default, or where the holder of the debt
instrument exercises a material influence over the gaming operations of the
entity in question. Any holder of debt securities required to apply for a
finding of suitability must pay all investigative fees and costs of the
Mississippi Commission in connection with such an investigation.
The Mississippi Gaming Subsidiary must maintain in Mississippi a current ledger
with respect to ownership of its equity securities, and the Company must
maintain in Mississippi a current list of stockholders of the Company which must
reflect the record ownership of each outstanding share of any class of equity
security issued by the Company. The ledger and stockholder lists must be
available for inspection by the Mississippi Commission at any time. If any
securities of the Company are held in trust by an agent or by a nominee, the
record holder may be required to disclose the identity of the beneficial owner
to the Mississippi Commission. A failure to make such disclosure may be grounds
for finding the record holder unsuitable. The Company must also render maximum
assistance in determining the identity of the beneficial owners.
The Mississippi Act requires that the certificates representing securities of a
publicly-traded corporation bear a legend to the general effect that such
securities are subject to the Mississippi Act and the regulations of the
Mississippi Commission. The Company has received from the Mississippi Commission
a waiver from this legend requirement. The Mississippi Commission has the power
to impose additional restrictions on the holders of the Company's securities at
any time.
Substantially all loans, leases, sales of securities and similar financing
transactions by the Mississippi Gaming Subsidiary must be reported to or
approved by the Mississippi Commission. The Mississippi Gaming Subsidiary may
not make a public offering of its securities, but may pledge or mortgage casino
facilities. The Company may not make a public offering of its securities without
the prior approval of the Mississippi Commission if any part of the proceeds of
the offering is to be used to finance the construction, acquisition or operation
of gaming facilities in Mississippi or to retire or extend obligations incurred
for one or more such purposes. Such approval, if given, does not constitute a
recommendation or approval of the investment merits of the securities subject to
the offering.
Under the regulations of the Mississippi Commission, a gaming licensee may not
guarantee a security issued by an affiliate company pursuant to a public
offering, or pledge its assets to secure payment or performance
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of the obligations evidenced by the security issued by the affiliated company,
without the prior approval of the Mississippi Commission. A pledge of stock of a
gaming licensee and the foreclosure of such a pledge are ineffective without the
prior approval of the Mississippi Commission. Moreover, restrictions on the
transfer of an equity security issued by a Mississippi licensee and agreements
not to encumber such securities are ineffective without the prior approval of
the Mississippi Commission.
Changes in control of the Company through merger, consolidation, acquisition of
assets, management or consulting agreements or any form of takeover, cannot
occur without the prior approval of the Mississippi Commission. The Mississippi
Commission may also require controlling stockholders, officers, directors and
other persons having a material relationship or involvement with the entity
proposing to acquire control, to be investigated and licensed as part of the
approval process relating to the transaction.
The Mississippi legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other corporate
defense tactics that affect corporate gaming licensees in Mississippi and
corporations whose stock is publicly traded that are affiliated with those
licensees, may be injurious to stable and productive corporate gaming. The
Mississippi Commission has established a regulatory scheme to ameliorate the
potentially adverse effects of these business practices upon Mississippi's
gaming industry and to further Mississippi's policy to: (i) assure the financial
stability of corporate gaming operators and their affiliates; (ii) preserve the
beneficial aspects of conducting business in the corporate form; and (iii)
promote a neutral environment for the orderly governance of corporate affairs.
Approvals are, in certain circumstances, required from the Mississippi
Commission before the Company may make exceptional repurchases of voting
securities in excess of the current market price of its common stock (commonly
called "greenmail") or before a corporate acquisition opposed by management may
be consummated. Mississippi's gaming regulations will also require prior
approval by the Mississippi Commission if the Company adopts a plan of
recapitalization proposed by its Board of Directors opposing a tender offer made
directly to the shareholders for the purpose of acquiring control of the
Company.
Neither the Company nor any subsidiary may engage in gaming activities in
Mississippi while also conducting gaming operations outside of Mississippi
without approval of the Mississippi Commission. The Mississippi Commission may
require determinations that, among other things, there are means for the
Mississippi Commission to have access to information concerning the out-of-state
gaming operations of the Company and its affiliates. The Mississippi Commission
has approved the Company's current operations in other jurisdictions but must
approve the Company's future gaming operations in any new jurisdictions.
If the Mississippi Commission decides that the Mississippi Gaming Subsidiary
violated a gaming law or regulation, the Mississippi Commission could limit,
condition, suspend or revoke the license of the Mississippi Gaming Subsidiary,
subject to compliance with certain statutory and regulatory procedures. In
addition, the Mississippi Gaming Subsidiary, the Company and the persons
involved could be subject to substantial fines for each separate violation.
Because of such a violation, the Mississippi Commission could attempt to appoint
a supervisor to operate the casino facilities. Limitation, conditioning or
suspension of any gaming license or the appointment of a supervisor could (and
revocation of any gaming license would) materially adversely affect the Company,
the Mississippi Gaming Subsidiary's gaming operations and the Company's results
of operations.
License fees and taxes, computed in various ways depending on the type of gaming
involved, are payable to the State of Mississippi and to the counties and cities
in which the Mississippi Gaming Subsidiary's respective operations will be
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon (i) a
percentage of the gross gaming revenues received by the casino operation, (ii)
the number of slot machines operated by the casino, or (iii) the number of table
games operated by the casino. The license fee payable to the State of
Mississippi is based upon "gaming receipts" (generally defined as gross receipts
less pay outs to customers as winnings) and equals 4% of gaming receipts of
$50,000 or less per month, 6% of gaming receipts over $50,000 and less than
$134,000 per month, and 8% of gaming receipts over $134,000. The foregoing
license fees are allowed as a credit against the licensee's Mississippi income
tax liability for the year paid. The gross revenue fee
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imposed by the Mississippi communities in, which the Company's casino operations
are located, equals approximately 4% of the gaming receipts.
In October 1994, the Mississippi Commission adopted two new regulations. Under
the first regulation, as a condition of licensure or license renewal, casino
vessels on the Mississippi Gulf Coast that are not self-propelled must be moored
to withstand a Category 4 hurricane with 155 mile-per-hour winds and 15-foot
tidal surge. The Company believes that the Mississippi Gaming Subsidiary
currently meets this requirement. The second regulation requires as a condition
of licensure or license renewal that a gaming establishment's plan include a
500-car parking facility in close proximity to the casino complex and
infrastructure facilities, the expenditures for which will amount to at least
25% of the casino cost. Such facilities shall include any of the following: a
250-room hotel of at least a two-star rating as defined by the current edition
of the Mobil Travel Guide, a theme park, golf courses, marinas, tennis complex,
entertainment facilities, or any other such facility as approved by the
Mississippi Commission as infrastructure. Parking facilities, roads, sewage and
water systems, or facilities normally provided by cities and/or counties are
excluded. The Mississippi Commission may in its discretion reduce the number of
rooms required, where it is shown to the Commission's satisfaction that
sufficient rooms are available to accommodate the anticipated visitor load. The
Company believes that the Mississippi Gaming Subsidiary currently meets such
requirements. The Mississippi Commission has recently adopted amendments to the
regulation that increase the infrastructure development requirement from 25% to
100% for new casinos (or upon acquisition of a closed casino), but grandfather
existing licensees.
The sale of food or alcoholic beverages at the Mississippi Gaming Subsidiary is
subject to licensing, control and regulation by the applicable state and local
authorities. The agencies involved have full power to limit, condition, suspend
or revoke any such license, and any such disciplinary action could (and
revocation would) have a materially adverse effect upon the operations of the
affected casino or casinos. Certain officers and managers of the Company and the
Mississippi Gaming Subsidiary must be investigated by the Alcoholic Beverage
Control Division of the State Tax Commission (the "ABC") in connection with the
Mississippi Gaming Subsidiary's liquor permits. Changes in licensed positions
must be approved by the ABC.
Mississippi Anti-Gaming Initiative In 1998, two referenda were proposed which,
if approved, would have amended the Mississippi Constitution to ban gaming in
Mississippi and would have required all currently legal gaming entities to cease
operations within two years of the ban. A Mississippi State Circuit Court judge
ruled that the first of the proposed referenda was illegal because, among other
reasons, it failed to include required information regarding its anticipated
effect on government revenues. The Mississippi Supreme Court affirmed the
Circuit Court ruling, but only on procedural grounds. The second referendum
proposal included the same language on government revenues as the first
referendum and was struck down by another Mississippi State Circuit Court judge
on the same grounds as the first.
On March 22, 1999, another such referendum was filed with the Mississippi
Secretary of State. The Circuit Court of Hinds County struck down this third
referendum on May 6, 1999 because the initiative failed once again to include
language pertaining to the initiative's negative economic impact. The latest
ruling was appealed to the Mississippi Supreme Court, which affirmed the
decision of the lower court. Any such referendum must be approved by the
Mississippi Secretary of State and signatures of approximately 98,000 registered
voters must be gathered and certified in order for such a proposal to be
included on a statewide ballot for consideration by the voters. The next
election, for which the proponents could attempt such a proposal on the ballot,
would be November 2002. It is likely at some point that a revised initiative
will be filed which would adequately address the issues regarding the effect on
government revenues of prohibition of gaming in Mississippi. However, while it
is too early in the process for the Company to make any predictions with respect
to whether such a referendum will appear on a ballot or the likelihood of such a
referendum being approved by the voters, if such a referendum were passed and
gaming were prohibited in Mississippi, it would have a materially adverse effect
on the Company.
Nevada The ownership and operation of casino gaming facilities in Nevada are
subject to: (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, "Nevada Act"); and (ii) various
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local regulations. The Company's gaming operations are subject to the licensing
and regulatory control of the Nevada Gaming Commission ("Nevada Commission"),
the Nevada State Gaming Control Board ("Nevada Board") and Washoe County. The
Nevada Commission, the Nevada Board and Washoe County are collectively referred
to as the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) providing a source of state and local revenues
through taxation and licensing fees. Changes in such laws, regulations and
procedures could have an adverse effect on Boomtown Reno's gaming operations.
Boomtown Hotel & Casino, Inc. (the "Gaming Subsidiary"), which operates Boomtown
Reno and two other gaming operations with slot machines only, is required to be
licensed by the Nevada Gaming Authorities. The gaming licenses require the
periodic payment of fees and taxes and are not transferable. The Company is
currently registered by the Nevada Commission as a publicly traded corporation
(a "Registered Corporation") and has been found suitable to own the stock of
Boomtown, which is registered as an intermediary company ("Intermediary
Company"). Boomtown has been found suitable to own the stock of the Gaming
Subsidiary, which is a corporate licensee (a "Corporate Licensee") under the
terms of the Nevada Act. As a Registered Corporation, the Company is required
periodically to submit detailed financial and operating reports to the Nevada
Commission and furnish any other information which the Nevada Commission may
require. No person may become a stockholder of, or holder of an interest of, or
receive any percentage of profits from an Intermediary Company or a Corporate
Licensee without first obtaining licenses and approvals from the Nevada Gaming
Authorities. The Company, Boomtown and the Gaming Subsidiary have obtained from
the Nevada Gaming Authorities the various registrations, findings of
suitability, approvals, permits and licenses required in order to engage in
gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a material
relationship to, or material involvement with, the Company, Boomtown or the
Gaming Subsidiary in order to determine whether such individual is suitable or
should be licensed as a business associate of a gaming licensee. Officers,
directors and certain key employees of the Company, Boomtown and the Gaming
Subsidiary must file applications with the Nevada Gaming Authorities and may be
required to be licensed or found suitable by the Nevada Gaming Authorities.
Officers, directors and key employees of the Company and Boomtown who are
actively and directly involved in gaming activities of the Gaming Subsidiary may
be required to be licensed or found suitable by the Nevada Gaming Authorities.
The Nevada Gaming Authorities may deny an application for licensing for any
cause which they deem reasonable. A finding of suitability is comparable to
licensing, and both require submission of detailed personal and financial
information followed by a thorough investigation. The applicant for licensing or
a finding of suitability must pay all the costs of the investigation. Changes in
licensed positions must be reported to the Nevada Gaming Authorities and, in
addition to their authority to deny an application for a finding of suitability
or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, Boomtown or the Gaming Subsidiary, the companies
involved would have to sever all relationships with such person. In addition,
the Nevada Commission may require the Company, Boomtown or the Gaming Subsidiary
to terminate the employment of any person who refuses to file appropriate
applications. Determinations of suitability or of questions pertaining to
licensing are not subject to judicial review in Nevada.
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The Company and the Gaming Subsidiary are required to submit detailed financial
and operating reports to the Nevada Commission. Substantially all material
loans, leases, sales of securities and similar financing transactions by the
Company, Boomtown and the Gaming Subsidiary must be reported to or approved by
the Nevada Commission.
If it were determined that the Nevada Act was violated by the Gaming Subsidiary,
the gaming licenses it holds could be limited, conditioned, suspended or
revoked, subject to compliance with certain statutory and regulatory procedures.
In addition, the Company, Boomtown, the Gaming Subsidiary and the persons
involved could be subject to substantial fines for each separate violation of
the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor
could be appointed by the Nevada Commission to operate Boomtown Reno and, under
certain circumstances, earnings generated during the supervisor's appointment
(except for reasonable rental value of the casino) could be forfeited to the
State of Nevada. Limitation, conditioning or suspension of the gaming licenses
of the Gaming Subsidiary or the appointment of a supervisor could (and
revocation of any gaming license would) materially adversely affect the
Company's gaming operations.
Any beneficial holder of the Company's voting securities, regardless of the
number of shares owned, may be required to file an application, be investigated,
and be found suitable as a beneficial holder of the Company's voting securities
if the Nevada Commission has reason to believe that such ownership would
otherwise be inconsistent with the declared policies of the State of Nevada. The
applicant must pay all costs of investigation incurred by the Nevada Gaming
Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires beneficial ownership of more
than 5% of a Registered Corporation's voting securities to report the
acquisition to the Nevada Commission. The Nevada Act requires that beneficial
owners of more than 10% of a Registered Corporation's voting securities apply to
the Nevada Commission for a finding of suitability within thirty days after the
Chairman of the Nevada Board mails the written notice requiring such filing.
Under certain circumstances, an "institutional investor," as defined in the
Nevada Act, which acquires more than 10%, but not more than 15%, of a Registered
Corporation's voting securities may apply to the Nevada Commission for a waiver
of such finding of suitability if such institutional investor holds the voting
securities for investment purposes only. An institutional investor shall not be
deemed to hold voting securities for investment purposes unless the voting
securities were acquired and are held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the board of directors
of the Registered Corporation, any change in the Registered Corporation's
corporate charter, bylaws, management, policies or operations of the Registered
Corporation, or any of its gaming affiliates, or any other action which the
Nevada Commission finds to be inconsistent with holding the Registered
Corporation's voting securities for investment purposes only. Activities which
are not deemed to be inconsistent with holding voting securities for investment
purposes only include: (i) voting on all matters voted on by stockholders; (ii)
making financial and other inquiries of management of the type normally made by
securities analysts for informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other activities as the
Nevada Commission may determine to be consistent with such investment intent. If
the beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information, including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada Commission
or the Chairman of the Nevada Board, may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the common stock
beyond such period of time as may be prescribed by the Nevada Commission may be
guilty of a criminal offense. The Company is subject to disciplinary action if,
after it receives notice that a person is unsuitable to be a stockholder or to
have any other relationship with the Company, Boomtown or the Gaming Subsidiary,
the Company (i) pays that person any dividend or interest upon voting securities
of the Company, (ii) allows that person to exercise, directly or indirectly, any
voting right
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conferred through securities held by that person, (iii) pays remuneration in any
form to that person for services rendered or otherwise, or (iv) fails to pursue
all lawful efforts to require such unsuitable person to relinquish his voting
securities including, if necessary, the immediate purchase of said voting
securities for cash at fair market value.
The Nevada Commission may, in its discretion, require the holder of any debt
security of a Registered Corporation to file applications, be investigated and
be found suitable to own the debt security of a Registered Corporation. If the
Nevada Commission determines that a person is unsuitable to own such security,
then pursuant to the Nevada Act, the Registered Corporation can be sanctioned,
including the loss of its approvals, if without the prior approval of the Nevada
Commission, it (i) pays to the unsuitable person any dividend, interest, or any
distribution whatsoever; (ii) recognizes any voting right by such unsuitable
person in connection with such securities; (iii) pays the unsuitable person
remuneration in any form; or (iv) makes any payment to the unsuitable person by
way of principal, redemption, conversion, exchange, liquidation, or similar
transaction.
The Company is required to maintain a current stock ledger in Nevada which may
be examined by the Nevada Gaming Authorities at any time. If any securities are
held in trust by an agent or by a nominee, the record holder may be required to
disclose the identity of the beneficial owner to the Nevada Gaming Authorities.
A failure to make such disclosure may be grounds for finding the record holder
unsuitable. The Company is also required to render maximum assistance in
determining the identity of the beneficial owner. The Nevada Commission has the
power to require that the Company's stock certificates bear a legend indicating
that the securities are subject to the Nevada Act. However, to date the Nevada
Commission has not imposed such a requirement on the Company.
The Company is not permitted to make a public offering of its securities without
the prior approval of the Nevada Commission if the securities or the proceeds
there from are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. On March 22, 2001, the Nevada Commission granted the Company prior
approval to make public offerings for a period of two years, subject to certain
conditions (the "Shelf Approval"). The Shelf Approval also applies to any
affiliated company wholly owned by the Company (an "Affiliate"), which is a
publicly traded corporation or would thereby become a publicly traded
corporation pursuant to a public offering. The Shelf Approval also includes
approval for Boomtown and the Gaming Subsidiary to guarantee any security issued
by, and for the Gaming Subsidiary to hypothecate its assets to secure the
payment or performance of any obligations evidenced by a security issued by the
Company or an Affiliate in a public offering under the Shelf Approval. The Shelf
Approval also includes approval to place restrictions upon the transfer of and
enter into agreements not to encumber the equity securities of Boomtown and the
Gaming Subsidiary. The Shelf Approval, however, may be rescinded for good cause
without prior notice upon the issuance of an interlocutory stop order by the
Chairman of the Nevada Board. The Shelf Approval does not constitute a finding,
recommendation or approval of the Nevada Gaming Authorities as to the accuracy
or the adequacy of the prospectus or the investment merits of the securities
offered thereby. Any representation to the contrary is unlawful.
Changes in control of a Registered Corporation through merger, consolidation,
stock or asset acquisitions, management or consulting agreements, or any act or
conduct by a person whereby he obtains control, may not occur without the prior
approval of the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Nevada Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control to be investigated and
licensed as part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions opposed by
management, repurchases of voting securities and corporate defense tactics
affecting Nevada corporate gaming licensees, and Registered Corporations that
are affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate
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the potentially adverse effects of these business practices upon Nevada's gaming
industry and to further Nevada's policy to: (i) assure the financial stability
of corporate gaming licensees and their affiliates; (ii) preserve the beneficial
aspects of conducting business in the corporate form; and (iii) promote a
neutral environment for the orderly governance of corporate affairs. Approvals
are, in certain circumstances, required from the Nevada Commission before the
Registered Corporation can make exceptional repurchases of voting securities
above the current market price thereof and before a corporate acquisition
opposed by management can be consummated. The Nevada Act also requires prior
approval of a plan of recapitalization proposed by the Registered Corporation's
Board of Directors in response to a tender offer made directly to the Registered
Corporation's stockholders for the purposes of acquiring control of the
Registered Corporation.
License fees and taxes, computed in various ways depending on the type of gaming
or activity involved, are payable to the State of Nevada and to Washoe County,
in which the Gaming Subsidiary's operations are conducted. Depending upon the
particular fee or tax involved, these fees and taxes are payable either monthly,
quarterly or annually and are based upon either: (i) a percentage of the gross
revenues received; (ii) the number of gaming devices operated; or (iii) the
number of table games operated. A casino entertainment tax is also paid by
casino operations where entertainment is furnished in a cabaret, nightclub,
cocktail lounge or casino showroom in connection with the serving or selling of
food or refreshments, or the selling of any merchandise.
Any person who is licensed, required to be licensed, registered, required to be
registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation by
the Nevada Board of such Licensee's participation in such foreign gaming. The
revolving fund is subject to increase or decrease in the discretion of the
Nevada Commission. Thereafter, Licensees are required to comply with certain
reporting requirements imposed by the Nevada Act. Licensees are also subject to
disciplinary action by the Nevada Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engage in activities or
enter into associations that are harmful to the State of Nevada or its ability
to collect gaming taxes and fees, or employ, contract with, or associate with a
person in the foreign operation who has been denied a license or finding of
suitability in Nevada on the ground of unsuitability.
California Operation of California card club casinos such as the Hollywood
Park-Casino and the Crystal Park Casino is governed by the Gambling Control Act
(the "GCA") and is subject to the oversight of the California Attorney General
and the California Gambling Control Commission. Under the GCA, a California card
club casino may only offer certain forms of card games, including Poker, Pai
Gow, and California Blackjack. A card club casino may not offer many of the card
games and other games of chance permitted in Nevada and other jurisdictions
where the Company conducts business.
Although the California Attorney General takes the position that, under the GCA,
only individuals, partnerships or privately-held companies (as opposed to
publicly-traded companies such as the Company) are eligible to operate card club
casinos, the enactment of California Senate Bill 100 ("SB-100") in 1995, and the
subsequent enactment of Senate Bill-8 permit a publicly-owned racing association
to own and operate a card club casino if it also owns and operates a race track
on the same premises.
In September 1995, the Attorney General granted the Company a provisional
registration under SB-100 to operate the Hollywood Park-Casino, which
provisional registration was renewed effective January 1, 1999. Pursuant to the
GCA, on September 10, 1999, in connection with the sale of the Hollywood Park
Race Track (see Note 4 to the Notes to Consolidated Financial Statements), the
Company was no longer eligible to operate the Hollywood Park-Casino and
therefore entered into a sublease arrangement of the Hollywood Park-Casino with
the same third party operator which leases the Crystal Park Casino. In the event
the GCA were to be amended to permit publicly-traded companies such as the
Company to operate card clubs, the
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Company, and its officers, directors and certain stockholders, would likely have
to file the necessary licensing applications with the Attorney General, if it
wished to operate the Hollywood Park-Casino or the Crystal Park Casino.
Pursuant to the GCA, the operator of a card club casino, and its officers,
directors and certain stockholders are required to be registered by the Attorney
General and licensed by the municipality in which it is located. A permanent
registration will not be granted until the California Department of Justice
completes its review of the applications of the Company and its corporate
officers and directors. The Attorney General has broad discretion to deny a
gaming registration and may impose reasonably necessary conditions upon the
granting of a gaming registration. Grounds for denial include felony
convictions, criminal acts, convictions involving dishonesty, illegal gambling
activities, and false statements on a gaming application. Such grounds also
generally include having a financial interest in a business or organization that
engages in gaming activities that are illegal under California law. In addition,
the Attorney General possesses broad authority to suspend or revoke a gaming
registration on any of the foregoing grounds, as well as for violation of any
federal, state or local gambling law, failure to take reasonable steps to
prevent dishonest acts or illegal activities on the premises of the card club
casino, failure to cooperate with the Attorney General in its oversight of the
card club casino and failure to comply with any condition of the registration.
The City of Inglewood and the City of Compton have granted the operator of the
Hollywood Park-Casino and the Crystal Park Casino all municipal gaming licenses
necessary for operation of such facilities, and the operator has received
provisional registrations for both locations from the California Department of
Justice.
Argentina The Provincial Government of Neuquen, Argentina enacted a casino
privatization program to issue twelve-year exclusive concession agreements to
operate existing casinos. The Company's two casinos are the only casinos in the
province of Neuquen, in west central Argentina, and are located in Neuquen City
and San Martin de los Andes. The casinos had previously been operated by the
provincial government. The Ministry of Finance of Argentina has adopted a
modified regulatory system for casinos, based somewhat on the regulatory system
utilized by the State of Nevada, and such regulatory system is being
administered by the Provincial Government of Neuquen. The Company cannot predict
what effect the enactment of other laws, regulations or pronouncements relating
to casino operations may have on the operations of Casino Magic Argentina.
Federal Income Tax Matters
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 Accounting for Income Taxes, whereby deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases.
As of December 31, 2000, the Company had federal net operating loss ("NOL") and
capital loss ("CL") carry-forwards of approximately $34,767,000, and $1,293,000,
respectively, comprised principally of NOL carry-forwards acquired in the Casino
Magic Merger, and CL carry-forwards resulting from the disposition of Boomtown's
Las Vegas property. The NOL carry-forwards expire on various dates through 2018,
and the CL carry-forwards expire on various dates through 2002. In addition, the
Company has approximately $4,811,000 of alternative minimum tax credits which do
not expire. The alternative minimum tax credits can reduce future federal income
taxes but generally cannot reduce federal income taxes paid below the amount of
alternative minimum tax.
Under several provisions of the Internal Revenue Code (the "Code") and the
regulations promulgated there under, the utilization of NOL, CL and tax credit
carry-forwards to reduce tax liability is restricted under certain
circumstances. Events which cause such a limitation include, but are not limited
to, certain changes in the ownership of a corporation. The Casino Magic Merger
caused such a change in ownership with respect to Casino Magic. As a result, the
Company's use of approximately $34,767,000 of Casino Magic's NOL carry-forwards,
and $4,811,000 of Casino Magic's tax credit carry-forwards at December 31, 2000,
is subject to
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certain limitations imposed by Sections 382 and 383 of the Code. Section 382 of
the Code generally provides that in each taxable year following an ownership
change with respect to a corporation, the corporation (or consolidated group of
which the corporation is a part) is subject to a limitation on the amount of the
corporation's pre-ownership change NOLs which may be used equal to the value of
the stock of the corporation (determined immediately prior to the ownership
change and subject to certain adjustments) multiplied by the "long term tax
exempt rate" which is in effect at the time of the ownership change. For
ownership changes occurring during October 1998 (Casino Magic), the long-term
tax exempt rate was 5.15%. Section 383 of the Code imposes a comparable and
related set of rules for limiting the use of CL and tax credit carry-forwards in
the event of an ownership change. These various limitations restrict the amount
of NOL, CL and tax credit carry-forwards that may be used by the Company in any
taxable year and, consequently, are expected to defer the Company's use of a
substantial portion of such carry-forwards and may ultimately prevent the
Company's use of a portion thereof. Therefore, a valuation allowance has been
recorded related to the Casino Magic carry-forwards.
For California tax purposes, as of December 31, 2000, the Company also had
approximately $11,717,000 of Los Angeles Revitalization Zone ("LARZ") tax
credits. The LARZ tax credits can only be used to reduce certain California tax
liability and cannot be used to reduce federal tax liability. A valuation
allowance has been recorded with respect to the LARZ tax credits because the
Company may not generate enough income subject to California tax to utilize the
LARZ tax credits before they expire.
Employees
The following is a summary of the Company's employees by property at December
31, 2000:
Permanent
Property Staff
- -------------------------- ---------
Belterra 1,500
Boomtown Reno 1,100
Boomtown New Orleans 1,124
Casino Magic Biloxi 1,297
Casino Magic Bossier City 1,436
Casino Magic Argentina 256
Corporate 35
-----
Total 6,748
=====
The Company does not employ the staff at the Hollywood Park-Casino or the
Crystal Park Casino. Additionally, during the busier summer months, each casino
property supplements its permanent staff with part-time employees.
The Company's staff is non-union. The Company believes that it has good
relationships with its employees.
Other Information
Information concerning backlog, sources and availability of raw materials is not
essential to an understanding of the Company's business.
The Company does not engage in material research activities relating to
development of new products or services or improvement of existing products or
services.
Compliance with federal, state and local provisions which have been enacted or
adopted regulating the discharge of materials into the environment or otherwise
relating to the protection of the environment have not had a material effect
upon capital expenditures, earnings or the competitive position of the Company.
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The Company owns two land-based casinos in Argentina. Casino Magic Argentina's
contribution to the Company's net income is immaterial as compared with the
contributions of the Company's domestic gaming operations.
Item 2. Properties
The following describes the Company's principal real estate properties:
Properties
Pinnacle Entertainment, Inc. The Company leases approximately 10,000 square feet
for its corporate offices in Glendale, California under a sublease agreement
that expires in May 2005.
Hollywood Park-Casino As discussed in Note 4 to the Notes to Consolidated
Financial Statements, upon the sale of the Hollywood Park-Casino to Churchill
Downs, the Company entered into a 10-year leaseback agreement with Churchill
Downs, and immediately subleased the facility to an unaffiliated third party
tenant to operate the card club casino. The Hollywood Park-Casino contains
approximately 30,000 square feet of card club gaming space and 30,000 square
feet of retail and restaurant space.
The Crystal Park Casino The Company owns the approximately twenty acres on which
the casino facility, adjoining hotel and parking is located. Prior to February
2001, the Company leased the adjoining hotel and approximate 35 acres of
unimproved land from the city of Compton under a 50-year lease. In February
2001, the Company purchased the hotel tower and approximately 14 acres of the
leased land for approximately $3,600,000. An unaffiliated third party operates
the Crystal Park Casino under a triple net lease which expires on December 25,
2001.
Belterra Casino Resort Belterra Casino Resort is located on approximately 315
acres in Switzerland County, Indiana, of which 167 acres are owned and 148 acres
are leased. The facility consists of a 15-story, 308-room hotel, a cruising
riverboat casino with approximately 1,800 gaming positions, an 18-hole
championship golf course, a 1,500-seat entertainment facility, six restaurants,
retail areas and other amenities. In addition, in October 1999, the Company
acquired the Ogle Haus Inn, a 54-room hotel operation in Vevay, for $2,500,000.
The Company has utilized the facility principally for the Belterra Casino
Resort's pre-opening operations. Going forward, the Ogle Haus will provide
on-going housing for some employees and also may be operated as a hotel and
restaurant facility providing overflow capacity for the Belterra Casino Resort
during peak visitation periods.
Boomtown Reno The Company owns 569 acres in Verdi, Nevada, with current
operations presently utilizing approximately 61 acres. Of the 508 excess acres,
the Company considers approximately 250 as available for development. The
Company may seek to sell such excess acreage to interested developers or
investors. The Company owns all of the improvements and facilities at the
property, including the casino, hotel, truck stop, recreational vehicle park and
service station, along with the related water rights.
Boomtown New Orleans The Company owns approximately 54 acres in Harvey,
Louisiana which are utilized by Boomtown New Orleans. The Company owns the
facilities and associated improvements at the property, including the riverboat
casino.
Casino Magic Biloxi Casino Magic Biloxi is located on approximately 16 acres, of
which 4.5 acres are owned and approximately 11.5 acres are leased, inclusive of
approximately 6.4 acres of submerged tidelands leased from the state of
Mississippi. The tidelands are under a ten year lease that expires on May 31,
2003, with an option to extend the term for five years under the same terms and
conditions, subject to the renegotiation of annual rent. The Company owns the
barge on which the casino is located and all of the land-base facilities
including the hotel.
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Casino Magic Bossier City The Company owns 23 acres on the banks of the Red
River in Bossier City, Louisiana. The property contains a dockside riverboat
casino, hotel, parking structure and other land-based facilities, all of which
are owned by the Company. The Company also leases approximately one acre of
water bottoms from the State of Louisiana.
Casino Magic Argentina The Company operates two casinos in west central
Argentina, in the cities of Neuquen and San Martin de los Andes. The Company
does not own any real property at these sites.
Properties Held For Sale
Inglewood, California The Company owns approximately 97 acres of unimproved land
adjacent to the Hollywood Park Race Track in Inglewood, California. On April 18,
2000, the Company announced it had entered into an agreement with Casden
Properties, Inc. for the sale of the 97 acres for $63,050,000 in cash. The sale
of the 97 acres is subject to a number of conditions, including the receipt by
Casden Properties, Inc. of certain entitlements to develop the property. On July
31, 2000, the Company announced Casden Properties, Inc. had completed its due
diligence phase of the transaction and was moving forward with the entitlements
necessary to complete the transaction. The sale is expected to close on or
before April 18, 2001, unless extended by both parties, and is expected to
generate an after-tax gain in excess of $28,836,000. No assurances can be given
that the sale of the Inglewood land will be completed on such terms, or at all
(see Note 5 to the Notes to Consolidated Financial Statements).
Expansion Properties
Lake Charles In November 1999, the Company filed an application for the
fifteenth and final gaming license to be issued by the Louisiana Gaming Control
Board. In July 2000, the Company was one of three groups that presented their
proposed projects to the Louisiana Gaming Control Board. The Company's
application is seeking the approval to construct and operate a cruising
riverboat casino, hotel and golf course resort complex in Lake Charles,
Louisiana. The Company anticipates amending such application to reflect
legislation recently enacted in Louisiana (see "Government Regulation and Gaming
Issues - Louisiana" above). The Louisiana Gaming Control Board has not awarded
such license and there is no assurance such license will be issued to the
Company or to any other applicant. At the July 2000 meeting, the Louisiana
Gaming Control Board indicated that another meeting to address the applications
for the license would be held at such time as the Louisiana State Police shall
have completed their suitability investigations of the applicants. At the
January 2001 meeting of the Louisiana Gaming Control Board, the Louisiana State
Police reported it would have its investigation completed by the end of March
2001, with a report to the Louisiana Gaming Control Board expected at the April
or May 2001 Louisiana Gaming Control Board meeting.
In connection with the application, the Company entered into an option agreement
with the Lake Charles Harbor and Terminal District (the "District") to lease 225
acres of unimproved land from the District upon which such resort complex would
be constructed. The initial lease option was for a six-month period ending
January 2000, with three six-month renewal options (all of which have been
exercised), at a cost of $62,500 per six-month renewal option. Representatives
of the District have indicated that it will continue to extend the option period
until the Louisiana Gaming Control Board awards the fifteenth license. If the
lease option were exercised, the annual rental payment would be $815,000, with a
maximum annual increase of 5%. The term of the lease would be for a total of up
to 70 years, with an initial term of 10 years and six consecutive renewal
options of 10 years each. The lease would require the Company to develop certain
on- and off-site improvements at the location. If awarded the license by the
Louisiana Gaming Control Board, the Company anticipates building a resort
similar in design and scope to the Belterra Casino Resort and incorporating the
benefits of dockside gaming legislation recently enacted in Louisiana.
Item 3. Legal Proceedings
Poulos Lawsuit A class action lawsuit was filed on April 26, 1994, in the United
States District Court, Middle District of Florida (the "Poulos Lawsuit"), naming
as defendants 41 manufacturers, distributors and casino
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operators of video poker and electronic slot machines, including Casino Magic.
The lawsuit alleges that the defendants have engaged in a course of fraudulent
and misleading conduct intended to induce people to play such games based on
false beliefs concerning the operation of the gaming machines and the extent to
which there is an opportunity to win. The suit alleges violations of the
Racketeer Influenced and Corrupt Organization Act ("RICO"), as well as claims of
common law fraud, unjust enrichment and negligent misrepresentation, and seeks
damages in excess of $6 billion. On May 10, 1994, a second class action lawsuit
was filed in the United States District Court, Middle District of Florida (the
"Ahern Lawsuit"), naming as defendants the same defendants who were named in the
Poulos Lawsuit and adding as defendants the owners of certain casino operations
in Puerto Rico and the Bahamas, who were not named as defendants in the Poulos
Lawsuit. The claims in the Ahern Lawsuit are identical to the claims in the
Poulos Lawsuit. Because of the similarity of parties and claims, the Poulos
Lawsuit and Ahern Lawsuit were consolidated into one case file (the
"Poulos/Ahern Lawsuit") in the United States District Court, Middle District of
Florida. On December 9, 1994 a motion by the defendants for change of venue was
granted, transferring the case to the United States District Court for the
District of Nevada, in Las Vegas. In an order dated April 17, 1996, the court
granted motions to dismiss filed by Casino Magic and other defendants and
dismissed the Complaint without prejudice. The plaintiffs then filed an amended
Complaint on May 31, 1996 seeking damages against Casino Magic and other
defendants in excess of $1 billion and punitive damages for violations of RICO
and for state common law claims for fraud, unjust enrichment and negligent
misrepresentation.
At a December 13, 1996 status conference, the Poulos/Ahern Lawsuit was
consolidated with two other class action lawsuits (one on behalf of a smaller,
more defined class of plaintiffs and one against additional defendants)
involving allegations substantially identical to those in the Poulos/Ahern
Lawsuit (collectively, the "Consolidated Lawsuits") and all pending motions in
the Consolidated Lawsuits were deemed withdrawn without prejudice. The
plaintiffs in the Consolidated Lawsuits filed a consolidated amended complaint
on February 14, 1997, which the defendants moved to dismiss. On December 19,
1997, the court granted the defendants' motion to dismiss certain allegations in
the RICO claim, but denied the motion as to the remainder of such claim; granted
the defendants' motion to strike certain parts of the consolidated amended
complaint; denied the defendants' remaining motions to dismiss and to stay or
abstain; and permitted the plaintiffs to substitute one of the class
representatives. On January 9, 1998, the plaintiffs filed a second consolidated
amended complaint containing claims nearly identical to those in the previously
dismissed complaints. The defendants answered, denying the substantive
allegations of the second consolidated amended complaint. On March 19, 1998, the
magistrate judge granted the defendants' motion to bifurcate discovery into
"class" and "merits" phases. "Class" discovery was completed on July 17, 1998.
The magistrate judge recommended denial of the plaintiffs' motion to compel
further discovery from the defendants, and the court affirmed in part. "Merits"
discovery is stayed until the court decides the motion for class certification
filed by the plaintiffs on March 18, 1998, which motion the defendants opposed.
In January 2001, the plaintiffs filed a supplement to their motion for class
certification. The defendants' response is due by late March or early April,
2001.
The claims are not covered under the Company's insurance policies. While the
Company cannot predict the outcome of this litigation, management believes that
the claims are without merit and does not expect that the lawsuit will have a
materially adverse effect on the financial condition or results of operations of
the Company.
Casino America Litigation On or about September 6, 1996, Casino America, Inc.
commenced litigation in the Chancery Court of Harrison County, Mississippi,
Second Judicial District, against Casino Magic Corp., and James Edward Ernst,
its then Chief Executive Officer. In the complaint, as amended, the plaintiff
claims, among other things, that the defendants (i) breached the terms of an
agreement they had with the plaintiff; (ii) tortuously interfered with certain
of the plaintiff's contracts and business relations; and (iii) breached
covenants of good faith and fair dealing they allegedly owed to the plaintiff,
and seeks compensatory damages in an amount to be proven at trial as well as
punitive damages. On or about October 8, 1996, the defendants interposed an
answer, denying the allegations contained in the Complaint. On June 26, 1998,
defendants filed a motion for summary judgment, as well as a motion for partial
summary judgment on damages issues. Thereafter, the plaintiff, in July of 1998,
filed a motion to reopen discovery. The court
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granted the plaintiff's motion, in part, allowing the parties to conduct
additional limited discovery. The motion for summary judgment and partial
summary judgment are pending. On November 30, 1999, the matter was transferred
to the Circuit Court for the Second Judicial District for Harrison County,
Mississippi. A trial date has been set for October 2001. The Company's insurer
has essentially denied coverage of the claim against Mr. Ernst under the
Company's directors and officers insurance policy, but has reserved its right to
review the matter as to tortious interference at or following trial. The Company
believes that the insurer should not be permitted to deny coverage, although no
assurances can be given that the insurer will change its position. While the
Company cannot predict the outcome of this action, management believes the
lawsuit will not have a material adverse effect and intends to vigorously defend
this action.
Bus Litigation On May 9, 1999, a bus owned and operated by Custom Bus Charters,
Inc. was involved in an accident in New Orleans, Louisiana while en route to
Casino Magic in Bay St. Louis, Mississippi. To date, multiple deaths and
numerous injuries are attributed to this accident and the Company's
subsidiaries, Casino Magic Corp. and / or Mardi Gras Casino Corp., together with
several other defendants (including the State of Louisiana, the manufacturer of
the bus and the doctor who treated the driver of the bus and released him to
return to work), have been named in fifty-four (54) lawsuits, each seeking
unspecified damages due to the deaths and injuries sustained in this accident.
Most of the cases filed in the Louisiana state courts were removed and
consolidated with the cases which were filed and are pending in the United
States District Court for the Eastern District of Louisiana. Casino Magic has
denied liability in the cases. The federal district court entered a case
management/scheduling order which fixes pretrial scheduling deadlines and
preliminary trial dates have been set for the fall of 2001. The proceedings are
in the early stages of discovery. While the Company cannot predict the outcome
of the litigation, the Company believes Casino Magic is not liable for any
damages arising from this accident and the Company, together with its applicable
insurers, intend to vigorously defend these actions.
Skrmetta Lawsuit A suit was filed on August 14, 1998 in the Circuit Court of
Harrison County, Mississippi by the ground lessor of property underlying the
Boomtown Biloxi land based improvements in Biloxi, Mississippi (the "Project").
The lawsuit alleges that the plaintiff agreed to exchange the first two years'
ground rentals for an equity position in the Project based upon defendants'
purported assurances that a hotel would be constructed as a component of the
Project. Plaintiff seeks recovery in excess of $4,000,000 plus punitive damages.
At trial of the matter in March 2000, the judge granted the Company's motion to
dismiss the case. On April 26, 2000, plaintiff appealed the court's dismissal to
the Mississippi Supreme Court. The claim is not covered under the Company's
insurance policies. While the Company cannot predict the outcome of this
lawsuit, management does not expect that the lawsuit will have a materially
adverse effect on the financial condition or results of operations of the
Company.
Purported Class Action Lawsuits On March 14, 2000, Harbor Finance Partners filed
a purported class action lawsuit in the Chancery Court of the State of Delaware
against the Company and each of its directors, claiming that the defendants
breached their fiduciary duty to the stockholders of the Company by agreeing to
negotiate exclusively with Harveys, an affiliate of Colony Capital, LLC (see
Note 3). On June 2, 2000, the action was dismissed without prejudice.
On March 21, 2000, a similar purported class action lawsuit was filed by Leta
Hilliard in the Superior Court of the State of California. The lawsuit claims
that the Company and its directors failed to undertake an appropriate process
for evaluating the Company's worth and eliciting bids from third parties, and
that the price for the stock is inadequate. The Company believes that the
plaintiff's claims are without merit. The parties in the Hilliard lawsuit filed
a stipulation in which the plaintiff agreed to file and serve a First Amended
Complaint on or before September 15, 2000 and the defendants agreed to respond
thereto within sixty days of such filing. On September 15, 2000, an agreement in
principle was reached with respect to settlement of the purported Hilliard class
action litigation. The settlement is subject to the execution of a definitive
settlement agreement and court approval of that agreement. In the settlement,
the Company agreed to make specific amendments to the PHCR Merger Agreement (see
Note 3 to the Notes to Consolidated Financial Statements) and also agreed to pay
attorney's fees and costs to the plaintiff's counsel, subject to court approval.
As of December 31, 2000, the Company had incurred estimated costs of
approximately
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<PAGE>
$2,000,000 in connection with the negotiation and settlement of this lawsuit.
The other parties to the PHCR Merger Agreement have consented to the settlement.
The defendants' agreement to the settlement does not constitute, and should not
be construed as, an admission that the defendants have any liability to or acted
wrongfully in any way with respect to the plaintiff or any other person.
Casino Magic Bay St. Louis Wrongful Death Litigation On February 17, 2000, three
Mardi Gras Casino Corp. (dba Casino Magic Bay St. Louis) patrons, after leaving
the casino property, were involved in a vehicular accident which resulted in the
death of two of the individuals and injury to the third. On April 13, 2000, a
lawsuit was filed on behalf of the injured individual and one of the deceased
individuals against Mardi Gras Casino Corp. seeking compensatory damages in the
amount of $2,000,000 and punitive damages, attorney fees, costs and expenses in
the amount of $10,000,000. The suit alleges, among other things, that Mardi Gras
Casino Corp. employees negligently served alcoholic beverages to the three
individuals and the acts and omissions of the employees were the proximate cause
of the accident. The Company has submitted a claim to its insurer under its
general liability insurance policy. While the Company cannot predict the outcome
of this lawsuit, management believes the claims are without merit and intends to
vigorously defend this action.
Casino Magic Biloxi Patron Shooting Incident On January 13, 2001, three Casino
Magic Biloxi patrons were shot, sustaining serious injuries as a result of a
shooting incident involving another Casino Magic Biloxi patron, who then killed
himself. Several other patrons sustained minor injuries while attempting to exit
the casino. To date, no lawsuits relating to this incident have been filed
against Casino Magic Biloxi. However, the Company has notified its insurance
carriers of the incident, and the Company will submit any claims relating to the
incident to its insurer under its general liability insurance policy, subject to
a deductible.
Actions by Greek Authorities In 1995, a Dutch subsidiary of Casino Magic Corp.,
Casino Magic Europe B.V. ("CME"), performed management services for Porto Carras
Casino, S.A. ("PCC"), a joint venture in which CME had a minority interest.
Effective December 31, 1995, CME with the approval of PCC, assigned its
interests and obligations under the PCC management agreement to a Greek
subsidiary, Casino Magic Hellas S.A. "(Hellas"). Hellas issued invoices to PCC
for management fees which accrued during 1995, but had not been billed by CME.
In September 1996, local Greek tax authorities in Thessaloniki assessed a
penalty of approximately $3,500,000 against Hellas, and an equal amount against
PCC, arising out of the presentation and payment of the invoices. The
Thessaloniki tax authorities asserted that the Hellas invoices were fictitious,
representing an effort to reduce the taxable income of PCC.
PCC and Hellas each appealed their respective assessments. The assessment of the
fine against PCC was overturned by the Administrative court of Thessaloniki on
December 11, 2000. The court determined that the actions taken by Hellas and PCC
were not fictitious but constituted a legitimate business transaction and
accordingly overturned the assessment of the fine. The taxing authorities may
appeal the court's decision. Hellas's appeal was dismissed for technical
procedural failures and has not been reinstated; presumably, however, the
rationale of the court in the PCC fine matter would apply equally to the Hellas
fine matter.
Under Greek law, shareholders are not liable for the liabilities of a Greek
company in which they hold shares, even if the entity is later liquidated or
dissolved, and assessments such as these generally are treated as liabilities of
the company. Additionally, all of PCC's stock was sold to an unrelated company
in December of 1996, and the buyer assumed all of PCC's liabilities. Therefore,
management does not expect that this matter will have a materially adverse
effect on the financial condition or results of operations of the Company.
In June 2000, Greek authorities issued a warrant to appear at a September 29,
2000 criminal proceeding to Marlin Torguson (a member of the Company's board of
directors and Chairman of the Board of Casino Magic since its inception) and
Robert Callaway (former Associate General Counsel for the Company and, prior to
its acquisition by the Company, Casino Magic's General Counsel). They were
charged under Greek law, and convicted in absentia, as being culpable criminally
for corporate misconduct based solely on their status as
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alleged executive board members of PCC. The Company is advised that they are
not, and have never been, managing (active) executive directors of PCC.
Accordingly, the Company believes that they were improperly named in the
proceedings. The defendants have a right of appeal for a de novo trial under
Greek law.
Upon being notified of the convictions, the Company's compliance committee
suspended Mr. Callaway and Mr. Torguson from their respective duties, other than
to assist in the investigation of actions described above, and sought the
resignation of Mr. Torguson from the Company board of directors. At the time
that the Greek court overturned the PCC fine, and based upon (1) the
determination of the court that the Hellas/PCC transaction was a legitimate
transaction and (2) the fact that neither Mr. Torguson nor Mr. Callaway were
properly named, the compliance committee reinstated Messsrs. Torguson and
Callaway. In February 2001, Mr. Callaway left the employ of the Company.
The Company has been advised that the resolution of the related civil penalties
may sometimes resolve criminal issues in Greece. The Company is actively working
to resolve the civil and criminal actions related to this matter.
The Company is party to a number of other pending legal proceedings, though
management does not expect that the outcome of such proceedings, either
individually or in the aggregate, will have a material effect on the Company's
financial results.
Item 4. Submission of Matters to a Vote of Security Holders
An Annual Meeting of Stockholders, held September 19, 2000, was adjourned until
October 10, 2000. At the reconvened meeting on October 10, 2000, the Company's
stockholders approved the following:
Proposal One: Proposal to approve and adopt the agreement and plan of merger by
and between Pinnacle Entertainment, Inc., PH Casino Resorts, Inc. and Pinnacle
Acquisition Corporation, as amended.
Shares % of Shares Outstanding
------ -----------------------
For votes 20,721,466 78.66%
Against votes 104,929 0.40%
Abstain votes 89,136 0.34%
Broker non-votes 3,412,533 12.95%
Proposal Two: Proposal to elect the following nine (9) directors:
Nominee For votes Votes Withheld
- ------- --------- --------------
R.D. Hubbard 21,970,561 2,357,503
Paul R. Alanis 24,141,374 186,690
Robert T. Manfuso 24,142,621 185,443
James L. Martineau 24,142,720 185,344
Gary G. Miller 24,142,649 185,415
Michael Ornest 24,142,706 185,358
Timothy J. Parrott 24,141,980 186,084
Lynn P. Reitnouer 24,141,680 186,384
Marlin Torguson 24,142,706 185,358
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<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Company's common stock is listed on the New York Stock Exchange and is
traded under the name Pinnacle Entertainment, Inc., identified by the symbol
"PNK". Prior to February 28, 2000, the Company's common stock was traded on the
New York Stock Exchange under the name Hollywood Park, Inc., identified by the
symbol "HPK".
The following table sets forth the high and low sales prices per common share of
the Company's common stock on the New York Stock Exchange.
Price Range
------------------------
High Low
-------- --------
2000
----
First Quarter $ 23.81 $ 16.31
Second Quarter 20.81 18.44
Third Quarter 22.13 19.38
Fourth Quarter 22.81 12.38
1999
----
First Quarter $ 10.44 $ 8.25
Second Quarter 17.00 10.50
Third Quarter 18.69 14.75
Fourth Quarter 23.13 15.13
As of March 23, 2001, there were approximately 3,056 stockholders of record of
the Company's common stock.
Dividends The Company did not pay any dividends in 2000 or 1999. Payments of
future dividends would be at the discretion of the Company's Board of Directors
and would depend upon, among other things, future earnings, operational and
capital requirements, the overall financial condition of the Company and general
business conditions. The Board of Directors does not anticipate paying any cash
dividends on the Company's common stock in the foreseeable future.
33
<PAGE>
Item 6. Selected Financial Data
The following selected financial information for the years 1996 through 2000 was
derived from the consolidated financial statements of the Company. The Belterra
Casino Resort was built by the Company and opened to the public on October 27,
2000. Boomtown Biloxi and Casino Magic Bay St. Louis were sold in August 2000,
Turf Paradise was sold in June 2000, surplus land was sold in March 2000 and the
Hollywood Park Race Track and Hollywood Park-Casino were disposed of in
September 1999. The Company leased the Hollywood Park-Casino back from Churchill
Downs California Company ("Churchill Downs"), a wholly owned subsidiary of
Churchill Downs Incorporated, and immediately subleased the facility to an
unaffiliated third party (see Note 4 to the Notes to Consolidated Financial
Statements). Casino Magic was acquired on October 15, 1998 and Boomtown was
acquired on June 30, 1997, with both acquisitions accounted for under the
purchase method of accounting for a business combination, and therefore Casino
Magic's and Boomtown's financial results were not included in periods prior to
their respective acquisitions (see Note 6 to the Notes to Consolidated Financial
Statements). The Crystal Park Casino began operations on October 25, 1996, under
a lease to an unaffiliated third party. As of March 31, 1996, Sunflower Racing,
Inc.'s (a horse and greyhound racing facility in Kansas) results of operations
were no longer consolidated with the Company's due to Sunflower Racing, Inc.'s
May 17, 1996, filing for reorganization under Chapter 11 of the Bankruptcy Code.
The information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations", the
financial statements and related notes thereto.
Included in the table is a presentation of earnings before interest, taxes,
depreciation, amortization and non-recurring items ("EBITDA"). EBITDA is not a
measure of financial performance under accounting principles generally accepted
in the United States ("GAAP"), but is used by some investors to determine a
company's ability to service or incur indebtedness. EBITDA is not calculated in
the same manner by all entities and accordingly, may not be an appropriate
measure of comparable performance. EBITDA should not be considered in isolation
from, or as a substitute for, net income (loss), cash flows from operations or
cash flow data prepared in accordance with GAAP. EBITDA is calculated by adding
income taxes, minority interests, net interest expense, depreciation and
amortization, extraordinary items and non-recurring items to net income (loss).
Non-recurring items include: a) the extraordinary item (the loss incurred on the
early extinguishment of debt), net of income tax benefit, in the year ended
December 31, 2000; b) the gain (loss) on disposition of assets incurred in the
years ended December 31, 2000, 1999, 1998 and 1996; c) the impairment write-down
of the Hollywood Park-Casino in the year ended December 31, 1999; d) the
pre-opening expenses for Belterra Casino Resort incurred in the years ended
December 31, 2000, 1999 and 1998; e) the terminated merger costs incurred in the
year ended December 31, 2000; f) the minority interest in the years ended
December 31, 1999, 1998, 1997 and 1996; and g) the REIT restructuring expenses
incurred in the years ended December 31, 1998 and 1997.
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Pinnacle Entertainment, Inc.
Selected Financial Data
<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Gaming $ 483,398 $ 557,526 $ 293,057 $ 137,659 $ 50,717
Food and beverage 31,920 39,817 30,510 19,894 13,947
Racing 9,452 55,209 66,871 68,844 71,308
Other 59,852 54,305 36,529 21,731 7,253
----------- ----------- ----------- ----------- -----------
584,622 706,857 426,967 248,128 143,225
----------- ----------- ----------- ----------- -----------
Expenses:
Gaming 279,843 309,508 161,549 74,733 27,249
Food and beverage 35,180 46,558 38,860 25,745 19,573
Racing 4,133 22,694 29,316 30,304 30,167
General, administrative and other 145,519 171,010 117,576 77,370 43,962
Depreciation and amortization 46,102 51,924 32,121 18,157 10,695
(Gain) loss on disposition of assets (118,816) (62,507) 2,221 0 11,412
Impairment write-down of Hollywood
Park-Casino 0 20,446 0 0 0
Belterra Casino Resort pre-opening costs 15,030 3,020 821 0 0
Terminated merger costs 5,727 0 0 0 0
----------- ----------- ----------- ----------- -----------
412,718 562,653 382,464 226,309 143,058
----------- ----------- ----------- ----------- -----------
Operating income 171,904 144,204 44,503 21,819 167
Interest expense, net 40,016 57,544 22,518 7,302 942
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes, minority
interests and extraordinary item 131,888 86,660 21,985 14,517 (775)
Minority interests 0 1,687 374 (3) 15
Income tax expense 52,396 40,926 8,442 5,850 3,459
----------- ----------- ----------- ----------- -----------
Net income (loss) before extraordinary item 79,492 44,047 13,169 8,670 (4,249)
Extraordinary item, net of taxes 2,653 0 0 0 0
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 76,839 $ 44,047 $ 13,169 $ 8,670 ($ 4,249)
=========== =========== =========== =========== ===========
=================================================================================================================================
Dividends on convertible preferred stock $ 0 $ 0 $ 0 $ 1,520 $ 1,925
----------- ----------- ----------- ----------- -----------
Net income (loss) available to (allocated to)
common stockholders $ 76,839 $ 44,047 $ 13,169 $ 7,150 ($ 6,174)
=========== =========== =========== =========== ===========
Net income (loss) per common share:
Basic $ 2.92 $ 1.70 $ 0.50 $ 0.33 ($ 0.33)
Diluted $ 2.80 $ 1.67 $ 0.50 $ 0.32 ($ 0.33)
Other Data:
EBITDA (see definition above) $ 119,947 $ 157,087 $ 80,085 $ 42,459 $ 22,274
Cash flows (used in) provided by:
Operating activities ($ 25,484) $ 74,207 $ 37,224 $ 14,365 $ 13,677
Investing activities 193,277 (51,063) (136,532) (16,226) (19,895)
Financing activities (118,287) 55,984 119,386 9,609 (4,268)
Capital expenditures 194,627 58,321 54,605 32,505 23,786
Balance Sheet Data:
Cash, cash equivalents and
short-term investments $ 172,868 $ 246,790 $ 47,413 $ 24,156 $ 21,174
Total assets 961,475 1,045,408 891,339 419,029 205,886
Current liabilities 93,375 145,008 128,592 57,317 35,364
Long term notes payable 497,162 618,698 527,619 132,102 282
Total liabilities 600,299 764,532 656,611 195,729 44,711
Stockholders' equity 361,176 280,876 230,976 221,354 158,160
</TABLE>
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<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of financial condition, results of
operations, liquidity and capital resources should be read in conjunction with
the Company's audited Consolidated Financial Statements and the notes thereto.
Forward-Looking Statements and Risk Factors
Except for the historical information contained herein, the matters addressed in
this Annual Report on Form 10-K may constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities and Exchange Act of 1934, as amended. Such
forward-looking statements are subject to a variety of risks and uncertainties
that could cause actual results to differ materially from those anticipated by
Pinnacle Entertainment, Inc.'s management. Factors that may cause actual
performance of Pinnacle Entertainment, Inc. to differ materially from that
contemplated by such forward-looking statements include, among others: the
effect of future weather conditions and other natural events; the performance of
the Belterra Casino Resort, which has a limited operating history and is in a
new market for the Company; the failure to complete the pending asset sale
transaction (discussed below); the failure to complete (on time or otherwise) or
successfully operate planned expansion and development projects; the failure to
obtain adequate financing to meet strategic goals; the failure to obtain or
retain gaming licenses or regulatory approvals; increased competition by casino
operators who have more resources and have built or are building competitive
casino properties, particularly at Boomtown New Orleans, Casino Magic Biloxi and
Casino Magic Bossier City; the failure to meet Pinnacle Entertainment, Inc.'s
debt service obligations; change in gaming legislation in Louisiana or Indiana;
and other adverse changes in the gaming markets in which Pinnacle Entertainment,
Inc. operates (particularly in the southeastern United States). The Private
Securities Litigation Reform Act of 1995 (the "Act") provides certain "safe
harbor" provisions for forward-looking statements. All forward-looking
statements made in this Annual Report on Form 10-K are made pursuant to such
Act.
Factors Affecting Future Operating Results
Belterra Casino Resort On October 27, 2000, Pinnacle Entertainment, Inc. (the
"Company" or "Pinnacle Entertainment") opened the Belterra Casino Resort located
on 315 acres adjacent to the Ohio River in Switzerland County, Indiana, which is
approximately 45 miles southwest of downtown Cincinnati, Ohio. The Belterra
Casino Resort features a 15-story, 308-room hotel, a cruising riverboat casino
(the "Miss Belterra") with approximately 1,800 gaming positions, an 18-hole Tom
Fazio-designed championship golf course (expected to open in the summer of
2001), six restaurants, a 1,500-seat entertainment venue, a spa, retail areas
and other amenities. The total cost of the project (excluding pre-opening costs)
is expected to be approximately $215,411,000, which cost includes land,
buildings, boat, riverfront improvements, furniture and fixtures, and
capitalized interest, as well as approximately $9,111,000 anticipated to be
incurred in 2001 to complete the golf course and final construction of the
resort.
On July 31, 2000, the Company's Miss Belterra riverboat casino was struck by a
barge on the Mississippi River near Caruthersville, Missouri en route to its
berthing site in Southern Indiana. There were no serious injuries to the persons
on the boat or barge. As a result of the accident, the expected August 2000
opening of the Belterra Casino Resort was delayed until late October 2000. The
repair costs relating to the riverboat, as well as the replacement of damaged or
lost equipment, has been or will be covered by insurance less a $425,000
deductible. At December 31, 2000, the Company recorded an insurance receivable
of $1,857,000 primarily for replacement equipment relating to the property
damage claim which had been paid by the Company but not yet reimbursed by the
insurance carrier.
The Company also maintains business interruption insurance applicable to the
Miss Belterra incident, subject to a maximum per-day limitation and to a
deductible (which was included in pre-opening expenses during the year ended
December 31, 2000). The Company anticipates that such insurance will cover a
significant portion of the additional pre-opening expenses and lost profits of
the Belterra Casino Resort between the date of the accident, July 31, 2000, and
the date of opening, October 27, 2000. The Company has not yet
36
<PAGE>
submitted a claim on its business interruption insurance policy for the
pre-opening costs and lost profits during this period and, accordingly, the
precise amount of any recovery on this aspect of the policy has not yet been
determined. During the fourth quarter of 2000, the Company received a $2,000,000
advance from the insurance carrier for business interruption and at December 31,
2000, the Company recorded an insurance receivable of $4,357,000, of which
$1,875,000 was received in January 2001. Management believes the remaining
business interruption insurance receivable recorded at December 31, 2000 is
collectible based on discussions with the insurance carrier and that the amount
of insurance ultimately received could be greater than the amount recorded as of
December 31, 2000.
Assets Held for Sale Assets held for sale of $12,164,000 as of December 31, 2000
consist of 97 acres of surplus land in Inglewood, California. On April 18, 2000,
the Company announced it had entered into an agreement with Casden Properties,
Inc. for the sale of the 97 acres for $63,050,000 in cash. The sale of the 97
acres is subject to a number of conditions, including the receipt by Casden
Properties, Inc. of certain entitlements to develop the property. On July 31,
2000, the Company announced Casden Properties, Inc. had completed its due
diligence phase of the transaction and was moving forward with the entitlements
necessary to complete the transaction. The sale is expected to close on or
before April 18, 2001, unless extended by both parties, and is expected to
generate an after-tax gain in excess of $28,836,000. No assurances can be given
that the sale of the Inglewood land will be completed on such terms, or at all.
Assets held for sale of $154,649,000 at December 31, 1999 consisted of two
casinos in Mississippi (sold in August 2000), the Turf Paradise Race Track in
Arizona (sold in June 2000) and other undeveloped parcels of land (some of which
were sold in March 2000). See Note 4 to the Notes to Consolidated Financial
Statements for details of assets sold in 2000.
Lake Charles In November 1999, the Company filed an application for the
fifteenth and final gaming license to be issued by the Louisiana Gaming Control
Board. In July 2000, the Company was one of three groups that presented their
proposed projects to the Louisiana Gaming Control Board. The Company's
application is seeking the approval to construct and operate a cruising
riverboat casino, hotel and golf course resort complex in Lake Charles,
Louisiana. The Company anticipates amending such application to reflect
legislation recently enacted in Louisiana (see "Legislation Regarding Dockside
Gaming in Louisiana" below). The Louisiana Gaming Control Board has not awarded
such license and there is no assurance such license will be issued to the
Company or to any other applicant. At the July 2000 meeting, the Louisiana
Gaming Control Board indicated that another meeting to address the applications
for the license would be held at such time as the Louisiana State Police shall
have completed their suitability investigations of the applicants. At the
January 2001 meeting of the Louisiana Gaming Control Board, the Louisiana State
Police reported it would have its investigation completed by the end of March
2001, with a report to the Louisiana Gaming Control Board expected at the April
or May 2001 Louisiana Gaming Control Board meeting.
In connection with the application, Pinnacle Entertainment entered into an
option agreement with the Lake Charles Harbor and Terminal District (the
"District") to lease 225 acres of unimproved land from the District upon which
such resort complex would be constructed. The initial lease option was for a
six-month period ending January 2000, with three six-month renewal options (all
of which have been exercised), at a cost of $62,500 per six-month renewal
option. Representatives of the District have indicated that it will continue to
extend the option period until the Louisiana Gaming Control Board awards the
fifteenth license. These lease option payments are expensed over the option
period. If the lease option were exercised, the annual rental payment would be
$815,000, with a maximum annual increase of 5%. The term of the lease would be
for a total of up to 70 years, with an initial term of 10 years and six
consecutive renewal options of 10 years each. The lease would require the
Company to develop certain on- and off-site improvements at the location. If
awarded the license by the Louisiana Gaming Control Board, the Company
anticipates building a resort similar in design and scope to the Belterra Casino
Resort and incorporating the benefits of dockside gaming legislation recently
enacted in Louisiana (see below). However, there is no assurance that such a
resort would be built, even if the Company were awarded the license. All costs
incurred by the Company related to obtaining this license have been expensed as
incurred.
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<PAGE>
Legislation Regarding Dockside Gaming in Louisiana In March 2001, the governor
of Louisiana called a special session of the state legislature (the "2001
Special Session") to address new gaming legislation (see "Government Regulation
and Gaming Issues - Louisiana" above). In the 2001 Special Session, a law was
passed requiring riverboat casinos to remain dockside at all times and
increasing the fees paid to the state of Louisiana from 18.5% to 21.5% of net
gaming proceeds effective April 1, 2001 for the nine riverboats in the southern
region of the state, including the Company's Boomtown New Orleans property. The
fee increase to 21.5% of net gaming proceeds will be phased in over an
approximately two year period for the riverboats operating in parishes bordering
the Red River, including the Company's Casino Magic Bossier City property.
The Company believes this change in the law will benefit its Boomtown New
Orleans operations, as increased revenues are expected from casino patrons who
will no longer be required to arrange their plans to coincide with the current
cruising schedule. The increased number of visitors to the property are expected
to generate higher revenues, which are expected to exceed the increase in gaming
fees paid.
The Company also believes the new legislation would benefit its proposed Lake
Charles project (discussed above), as it would enable the Company to build a
dockside casino specifically designed in accordance with the new law.
Finally, the Company believes the increased fees are expected to initially have
a negative impact at Casino Magic Bossier City, as gaming is currently conducted
on a dockside riverboat casino that does not cruise (as permitted under existing
gaming regulations). The gaming revenue upon which the additional fees are based
upon was approximately $139,970,000 in 2000. However, the Company does believe
the proposed expansion for the property, including a new larger dockside
riverboat and land based amenities (anticipated to be completed in the fall of
2002), and the related potential additional revenue from such enhanced
operations, may compensate for the increased fees.
California Card Clubs By California state law, a corporation may operate a
gambling enterprise in California only if every officer, director and
shareholder holds a state gambling license. Only 5% or greater shareholders of a
publicly traded racing association, however, must hold a state gambling license.
As a practical matter, therefore, public corporations that are not qualified
racing associations may not operate gambling enterprises in California. As a
result, the Hollywood Park-Casino, since September 10, 1999 (see Note 4 to the
Notes to Consolidated Financial Statements), and the Crystal Park Hotel and
Casino, are leased to, and operated by, an unrelated third party.
Results of Operations
Terminated Merger Agreement On April 17, 2000, the Company entered into a
definitive agreement with PH Casino Resorts ("PHCR"), a newly formed subsidiary
of Harveys Casino Resorts, and Pinnacle Acquisition Corporation ("Pinnacle Acq
Corp"), a newly formed subsidiary of PHCR, pursuant to which PHCR would have
acquired by merger (the "Merger") all of the outstanding capital stock of
Pinnacle Entertainment (the "Merger Agreement"). Under such Merger Agreement,
each outstanding share of the Company's common stock would have been converted
into $24.00 in cash, with the possibility of an additional $1.00 per share in
certain circumstances. Consummation of the merger was subject to numerous
conditions, including PHCR obtaining the necessary financing for the transaction
and regulatory approvals, as well as other conditions. On October 10, 2000,
holders of over 78% of the outstanding shares of the Company approved the
proposed merger.
On January 23, 2001, the Company announced that it had been notified by PHCR
that PHCR did not intend to extend further the outside closing date (previously
extended to January 31, 2001) of the proposed merger. Since all of the
conditions to consummation of the Merger would not be met by such date, the
Company, PHCR and Pinnacle Acq Corp mutually agreed that the Merger Agreement
would be terminated.
As of December 31, 2000, the Company had incurred estimated costs of $5,727,000
in connection with the terminated Merger Agreement, including approximately
$2,000,000 in connection with the negotiation and
38
<PAGE>
settlement of the Purported Class Action Lawsuit (see Note 18 to the Notes to
Consolidated Financial Statements), professional fees in connection with the
Special Committee of the Board of Directors and Board of Directors' evaluation
of the terminated merger, estimated fees associated with the preparation and
filing of the proxy material with the Securities and Exchange Commission (the
"SEC"), as well as other transactional expenses. The Company does not expect to
incur additional costs relating to the terminated Merger Agreement.
Redemption of Casino Magic 13% Notes and Extraordinary Item On August 15, 2000,
the Company redeemed all $112,875,000 of the outstanding Casino Magic 13% Notes
at the redemption price of 106.5%. Upon deposit of principal, premium and
accrued interest for such redemption, Casino Magic Bossier City satisfied all
conditions required to discharge its obligations under the indenture. In
connection with the redemption, the Company recorded an extraordinary loss, net
of federal and state income taxes, of $2,653,000. The extraordinary loss
represents the payment of the redemption premium and the write-off of deferred
finance and premium costs, net of the related federal and state income tax
benefits (see Note 11 to the Condensed Notes to Consolidated Financial
Statements).
Assets Sold On August 8, 2000, the Company completed the sale of Casino Magic
Bay St. Louis and Boomtown Biloxi (the "Mississippi Casinos"), on June 13, 2000,
the Company completed the sale of Turf Paradise, and on September 10, 1999, the
Company completed the dispositions of the Hollywood Park Race Track and
Hollywood Park-Casino (see Note 4 to the Notes to Consolidate Financial
Statements). In addition (as noted above), on August 15, 2000, the Company
redeemed the Casino Magic 13% Notes and on October 27, 2000 it opened the
Belterra Casino Resort. The results of operations of the Mississippi Casinos,
Turf Paradise, Hollywood Park Race Track and Hollywood Park-Casino are included
in the results of operations only until such respective dates. Future revenue,
operating results and net interest expense will be materially different due to
the disposition and sale of these assets, the redemption of the Casino Magic 13%
Notes and the opening of the Belterra Casino Resort.
Casino Magic Acquisition On October 15, 1998, the Company acquired Casino Magic,
and accounted for the acquisition under the purchase method of accounting for a
business combination (see Note 6 to the Notes to Consolidated Financial
Statements). As required under the rules of the purchase method of accounting
for a business combination, Casino Magic's results of operations were not
consolidated with those of the Company prior to the acquisition date, thus
generating significant variances when comparing 1999 financial results with
those of 1998.
Year ended December 31, 2000, compared to the year ended December 31, 1999
Total revenues for the year ended December 31, 2000 decreased by $122,235,000,
or 17.3%, as compared to the year ended December 31, 1999. Contribution to
revenues in the year ended December 31, 2000 from the Mississippi Casinos and
Turf Paradise was $107,868,000. Contribution to revenues in the year ended
December 31, 1999 from the Mississippi Casinos, Turf Paradise, Hollywood Park
Race Track and Hollywood Park-Casino was $260,615,000. When excluding such
revenues for both periods, total revenues in the year ended December 31, 2000
increased by $30,512,000, or 6.8%, when compared to the year ended December 31,
1999.
Gaming revenues decreased by $74,128,000, or 13.3%, including a decrease of
$87,338,000 due to the timing of the various casino dispositions in 2000 and
1999. When excluding the results of the casino properties sold, gaming revenues
increased by $13,210,000, or 3.4%. Gaming revenues increased at Belterra Casino
Resort by $13,614,000, at Boomtown Reno by $6,000,000 and at Casino Magic
Bossier City by $2,663,000, while gaming revenues declined at Boomtown New
Orleans by $5,766,000 and at Casino Magic Biloxi by $3,210,000. The increase in
gaming revenue at Belterra Casino Resort is due to the opening of the property
in October 2000. Boomtown Reno's higher gaming revenue was primarily due to
increased hotel occupancy (occupancy was 87% in 2000 compared to 66% in 1999)
and new marketing programs, which translated into an increase in slot coin-in
(volume of slot play) and table game drop (volume of table game play), as well
as the better than normal winter weather (less snow and fewer road closures due
to snow
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conditions) during the first and fourth quarters of 2000. Casino Magic Bossier
City's gaming revenue improved in the first three quarters of the year,
primarily due to upgrading the slot machine product mix and to a change in the
overall marketing programs at the property. However, gaming revenue at Casino
Magic Bossier City declined in the fourth quarter of 2000, primarily due to
severe winter storms. The decline in gaming revenues at the New Orleans and
Biloxi locations reflects new competition in October 1999 and March 1999,
respectively, in each of the markets. At Boomtown New Orleans, gaming revenue
was down for the first three quarters of 2000 compared to 1999. However, gaming
revenue increased in the fourth quarter of 2000 compared to the fourth quarter
of 1999, primarily due to improved slot revenue from recapturing market share
lost to competition. Casino Magic Biloxi gaming revenues were down primarily due
to table game drop and slot coin-in being down 6.8% and 3.7%, respectively, in
2000 compared to 1999. Food and beverage revenues decreased by $7,897,000, or
19.8%, including a decrease of $12,720,000 due to the timing of the various
casino and race track dispositions in 2000 and 1999. When excluding the results
of the casino and race track properties disposed of, food and beverage revenues
increased by $4,823,000, or 24.3%. Food and beverage revenues increased at
Belterra Casino Resort by $1,444,000, at Boomtown Reno by $2,516,000 and Casino
Magic Biloxi by $1,008,000, while food and beverage revenue decreased at Casino
Magic Bossier City by $442,000. The increase in food and beverage revenue at
Belterra Casino Resorts is due to the property opening in October 2000. The
increase in food and beverage revenue at Boomtown Reno is attributed to the
improved hotel occupancy, as well as remodels to certain of the restaurants at
the property. The increase in food and beverage revenue at Casino Magic Biloxi
is attributed to increased volume from the addition of a deli restaurant in May,
2000, to the refurbishing of an existing venue in May 2000 and to some pricing
increases. The decline in food and beverage revenue at Casino Magic Bossier City
is primarily due to the overall change in marketing programs, including new
programs which increased the amount of complimentary food and beverage provided
to customers (complimentary items, such as food and beverage or hotel rooms, do
not generate cash revenue and therefore are not considered revenue as presented
on the Company's Consolidated Statements of Operations - see Note 1 to the Notes
to Consolidated Financial Statements). Hotel and recreational vehicle park
revenues increased by $993,000, or 8.5%, including a decrease of $524,000 due to
the timing of the sale of Casino Magic Bay St. Louis. Hotel and recreational
vehicle park revenue increased by $480,000 at the Belterra Casino Resort (which
property opened in October 2000), by $399,000 at Boomtown Reno (consistent with
improved hotel occupancy noted above) and by $1,062,000 at Casino Magic Biloxi
(hotel occupancy increased to 86% in 2000 compared to 82% in 1999), while such
revenues decreased by $424,000 at Casino Magic Bossier City. The decline in
hotel revenue at Casino Magic Bossier City is primarily due to the overall
change in marketing programs, which new programs increased the number of
complimentary hotel rooms provided to customers. Truck stop and service station
revenue increased by $4,138,000, or 23.5%, primarily due to continued increased
fuel prices at Boomtown Reno. Racing revenues declined by $45,757,000, or 82.9%,
entirely due to the disposition of Turf Paradise in June 2000 and Hollywood Park
Race Track in September 1999. Other income increased by $416,000, or 1.7%,
including a decrease of $3,268,000 due to the timing of the various casino and
race track dispositions in 2000 and 1999. When excluding the results of the
casino and race track properties disposed of, other income increased by
$3,684,000, or 22.2%, primarily due to an increase in the percentage of net
revenues (as defined in the relevant agreements between the Company and the
Yakama Indian Nation) received from the Yakama Indian Nation, as well as to
proceeds from the settlement of a 1998 business interruption insurance claim.
Total expenses for the year ended December 31, 2000 decreased by $149,935,000,
or 26.6%, as compared to the year ended December 31, 1999. Included in total
expenses for the twelve months ended December 31, 2000, is a gain on the
disposition of assets of $118,816,000 (see Note 4 to the Notes to Consolidated
Financial Statements), as well as expenses of $87,580,000 associated with the
operations of such assets sold. Included in total expenses for the twelve months
ended December 31, 1999, is a gain on the disposition of assets of $62,507,000,
an impairment loss of $20,446,000 (see Note 4 to the Notes to Consolidated
Financial Statements) and expenses of $214,529,000 associated with the
operations of the properties sold or disposed of in 2000 and 1999. When
excluding such gains, impairment write-down and other expenses, total expenses
for the twelve months ended December 31, 2000 increased by $53,169,000, or
13.8%, as compared to the twelve months ended December 31, 1999.
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Gaming expenses decreased by $29,665,000, or 9.6%, including $47,537,000 due to
the timing of the various casino dispositions in 2000 and 1999. When excluding
the gaming expenses attributed to such casino properties disposed of, gaming
expenses increased $17,872,000, or 8.3%. Gaming expenses increased at the
Belterra Casino Resort by $9,421,000, at Boomtown Reno by $2,622,000, at Casino
Magic Bossier City by $3,068,000, at Casino Magic Biloxi by $1,558,000 and at
Boomtown New Orleans by $1,011,000. The increased gaming expense at Belterra
Casino Resort reflects the opening of the facility in October 2000, while at
Boomtown Reno and Casino Magic Bossier City, the increases are consistent with
the increased gaming revenue. The increased gaming expenses at Casino Magic
Biloxi and Boomtown New Orleans reflect the competitive environments within
which each operate, and the costs to compete in their respective markets. Food
and beverage expenses decreased by $11,378,000, or 24.4%, including $16,269,000
due to the timing of the various casino and race track dispositions in 2000 and
1999. When excluding food and beverage expenses attributed to such casino and
race track properties disposed of, food and beverage expenses increased by
$4,891,000, or 21.6%. Food and beverage expenses increased at Belterra Casino
Resort by $2,842,000 (consistent with the October 2000 opening of the property)
and at Boomtown Reno by $1,296,000, consistent with the overall increase in food
and beverage revenue. At Casino Magic Biloxi, food and beverage expenses
increased by $1,197,000, primarily due to the overall increase in revenue, as
well as an increase in marketing costs to compete in the Biloxi gaming market.
At Casino Magic Bossier City, food and beverage costs declined $627,000, which
was primarily due to the lower food and beverage revenue. Hotel and recreational
vehicle park expenses increased by $740,000, or 12.5%, primarily due to
increased costs at Belterra Casino Resort of $1,169,000 (which property opened
in October 2000), offset by reduced costs at Casino Magic Bossier City of
$354,000, consistent with the lower hotel revenue. Truck stop and service
station expenses increased by $4,004,000, or 24.6%, primarily due to increased
fuel costs at Boomtown Reno. Racing expenses decreased by $18,561,000, or 81.8%,
entirely due to the disposition of Turf Paradise in June 2000 and Hollywood Park
Race Track in September 1999. General and administrative expenses decreased by
$26,892,000, or 19.9%, including a reduction in expenses of $32,674,000 due to
the timing of the various casino and race track dispositions in 2000 and 1999.
When excluding general and administrative expenses attributed to such casino and
race track dispositions in 2000 and 1999, general and administrative expenses
increased $5,782,000, or 7.0%, including $6,113,000 attributed to the Belterra
Casino Resort, which opened in October 2000. Depreciation and amortization
decreased by $5,822,000, or 11.2%, including $8,304,000 due to the timing of the
various casino and race track dispositions in 2000 and 1999. When excluding such
casino and race track properties from depreciation and amortization expenses,
depreciation and amortization increased by $2,482,000, or 6.5%, including
$2,294,000 attributed to the Belterra Casino Resort. Pre-opening costs for the
Belterra Casino Resort increased $12,010,000, from $3,020,000 to $15,030,000,
primarily due to the pre-opening costs incurred for a new gaming facility,
including hiring and training employees and marketing costs. The gain on
disposition of assets of $118,816,000 in 2000 is primarily due to the sale of
the Mississippi Casinos in August 2000, the sale of Turf Paradise in June 2000
and the sale of surplus land in March 2000 (see Note 4 to the Notes to
Consolidated Financial Statements), partially offset by a loss of $902,000 on
the disposition of assets. The gain on disposition of assets of $62,507,000 and
impairment write-down of $20,446,000 in the year ended December 31, 1999 is
primarily due to the disposition of the Hollywood Park Race Track and Hollywood
Park-Casino in September 1999 (see Note 4 to the Notes to Consolidated Financial
Statements). Terminated merger costs of $5,727,000 relate to the terminated
merger with PHCR including the proposed settlement of litigation relating to the
merger (see Note 3 to the Notes to Consolidated Financial Statements). Other
operating expenses decreased by $3,343,000, or 24.0%, including a reduction in
other operating expenses of $3,420,000 due to the timing of the various casino
and race track dispositions in 2000 and 1999.
Net interest expense decreased by $17,528,000, or 30.5%, primarily due to the
interest income generated from greater invested funds in 2000 (see asset sale
proceeds at Note 4 to the Notes to Consolidated Financial Statements) compared
to 1999 (interest income was $13,017,000 in 2000 compared to $7,927,000 in 1999
see Note 9 to the Notes to Consolidated Financial Statements), capitalized
interest of $8,148,000 in 2000 compared with $1,359,000 in 1999 and lower
interest expense due to the redemption of the Casino Magic 13% Notes in August
2000. Income tax expense increased $11,470,000, or 28.0%, including income tax
of approximately $48,021,000 recorded in 2000 associated with asset
dispositions, compared to income tax of approximately $22,000,000 recorded in
1999 associated with asset dispositions (see Note 4 to the Notes to
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Consolidated Financial Statements). The extraordinary loss of $2,653,000 for the
year ended December 31, 2000 relates to the redemption of the Casino Magic 13%
Notes in August 2000 (see Note 11 to the Notes to Consolidated Financial
Statements).
During the fourth quarter of 2000 (as noted above, the facility opened on
October 27, 2000), the Belterra Casino Resort generated revenues of $15,705,000
and incurred operating expenses of $22,176,000 (which amount includes
depreciation and amortization expenses of $2,294,000 and excludes pre-opening
expenses) and therefore generated an operating loss of $6,471,000. The losses at
Belterra Casino Resort were primarily attributed to the opening of the property
during the traditionally slowest period of the year, severe winter weather
conditions and delays in the implementation of marketing programs.
In addition, Belterra Casino Resort incurred pre-opening expenses of
$15,030,000, $3,020,000 and $821,000 for the years ended December 31, 2000, 1999
and 1998, respectively. Such pre-opening expenses represent the costs associated
with start-up activities and related organizational costs. The amount incurred
in year 2000 is net of $4,357,000 recorded as a business interruption insurance
receivable and approximately $2,000,000 received from the insurance carrier
related to the Miss Belterra riverboat accident (see Note 7 to the Notes to
Consolidated Financial Statements). The Company anticipates there will be
additional pre-opening costs in 2001 associated with the completion of the golf
course, which may be offset by the recovery of business interruption insurance
proceeds above the amounts recorded as of December 31, 2000.
Year ended December 31, 1999, compared to the year ended December 31, 1998
Total revenues increased by $279,890,000, or 65.6%, for the year ended December
31, 1999, as compared to the year ended December 31, 1998. Contribution to total
revenue from Casino Magic was approximately $280,723,000 in 1999 compared to
$63,621,000 in 1998. This increase is primarily attributed to the timing of the
Casino Magic acquisition. The 1998 results include operations from the five
Casino Magic casinos from the October 15, 1998 acquisition date to December 31,
1998, whereas their results are included in all of 1999. Gaming revenues
increased by $264,469,000, or 90.2%, with $260,806,000 of the increase due to
the Casino Magic acquisition. The remaining net increase is due to increases at
each of the Boomtown properties, offset by a decrease in gaming revenue at the
Hollywood Park-Casino (due to the September 10, 1999, disposition - see Note 4
to the Notes to Consolidated Financial Statements). Boomtown Reno gaming
revenues increased by $6,765,000, primarily attributed to the remodeling
completed in 1999, enhanced marketing programs and unusually warm weather in the
fourth quarter 1999 which provided increased visitor counts to the casino.
Boomtown New Orleans gaming revenue increased by $9,778,000, primarily
attributed to updated marketing and advertising programs in 1999, as well as to
a new slot machine mix for the casino floor. Boomtown Biloxi gaming revenue
increased by $1,137,000, primarily due to a growth in the Biloxi gaming market
brought about by the opening of a larger casino hotel in the second quarter of
1999, as well as to expansions by other competitors, and by the success of the
buffet marketing. Racing revenue decreased by $11,662,000, or 17.4%, including a
decrease of $12,220,000 from the sale of the Hollywood Park Race Track. Turf
Paradise revenue increased by $558,000, primarily due to increased sale of the
racing signal to out-of-state locations. Food and beverage revenue increased by
$9,307,000, or 30.5%, with $9,045,000 of the increase due to the Casino Magic
acquisition. The remaining net increase is due to increases at Boomtown Reno and
Boomtown Biloxi, offset by decreases at the Hollywood Park Race Track and
Hollywood Park-Casino. Boomtown Reno food and beverage revenues increased by
$1,561,000, primarily due to the improvements completed in 1999 and to the
higher visitor counts. Boomtown Biloxi food and beverage revenues increased by
$2,189,000, primarily due to an aggressive marketing program focusing on the
property's buffet. Hotel and recreational vehicle revenues increased by
$8,661,000, or 281.6%, with $6,821,000 of the increase due to the Casino Magic
acquisition. The remaining increase is due primarily to the hotel room additions
and room renovations at Boomtown Reno. Truck stop income increased by
$3,145,000, or 21.7%, due primarily to the increased traffic flow at the
Boomtown Reno property, and to increased fuel prices. Other income increased by
$5,970,000, or 31.5%, with $4,051,000 of the increase due to the Casino Magic
acquisition. The remaining increase is primarily due to the lease rent income
earned by the Hollywood Park-Casino (see Note 4 to the Notes to Consolidated
Financial Statements).
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Total operating expenses increased by $180,189,000, or 47.1%, for the year ended
December 31, 1999, as compared to the year ended December 31, 1998. Excluding
any gain (loss) on the disposition of assets, operating expenses increased by
$224,471,000, or 59.0%, during the year ended December 31, 1999, as compared to
the year ended December 31, 1998. Contribution to total operating expenses in
1999 from Casino Magic was $229,788,000 compared to $54,582,000 in 1998. Gaming
expenses increased by $147,959,000, or 91.6%, including $153,897,000 due to the
Casino Magic acquisition, and to decreases at Boomtown Reno and the Hollywood
Park-Casino (see Note 4 to the Notes to Consolidated Financial Statements),
offset by increases at Boomtown New Orleans. Boomtown Reno gaming expenses
decreased by $1,561,000, primarily due to improved marketing programs in 1999
(including the elimination of the costly fun flight program) and to management
changes. Boomtown New Orleans gaming expenses increased by $4,782,000,
consistent with the corresponding increase in gaming revenue, including the
improved marketing programs. Racing expenses decreased by $6,622,000, or 22.6%,
including a decrease in Hollywood Park Race Track racing expenses of $6,807,000
due to the sale of the race track and an increase in racing expenses at Turf
Paradise of $185,000 primarily attributed to the increased racing revenues. Food
and beverage expenses increased by $7,698,000, or 19.8%, including an increase
of $9,457,000 due to the Casino Magic acquisition and a decrease of $4,662,000
due to the dispositions of the Hollywood Park Race Track and Hollywood
Park-Casino. Boomtown Reno food and beverage expenses increased by $1,750,000,
consistent with the overall increase in food and beverage revenue. Boomtown
Biloxi food and beverage expenses increased by $1,175,000, consistent with the
increase in revenue and volume at the buffet. Hotel and recreational vehicle
expense increased by $4,710,000, or 388.3%, with $3,499,000 due to the addition
of Casino Magic and the remainder due to the additional hotel operations at
Boomtown Reno. Truck stop expenses increased by $3,017,000, or 22.7%, primarily
due to the increased volume at the Boomtown Reno property and fuel costs.
General and administrative expenses increased by $40,200,000, or 42.5%, with
$36,095,000 due to the addition of Casino Magic and the remainder due to
increased casino management. Depreciation and amortization increased by
$19,803,000, or 61.7%, including $20,338,000 due to the Casino Magic
acquisition, offset by a reduction in depreciation and amortization expenses
from the disposition of the Hollywood Park Race Track in September 1999.
Pre-opening costs for the Belterra Casino Resort increased by $2,199,000, or
267.8%, consistent with the development of the project. The gain on disposition
of assets of $62,507,000 is primarily related to the disposition of the
Hollywood Park Race Track and the impairment write-down of $20,446,000 relates
to the Hollywood Park-Casino. Other expenses increased by $5,507,000, or 65.5%,
including $6,502,000 due to the Casino Magic acquisition, offset by a reduction
in other expenses from the dispositions of the Hollywood Park Race Track and
Hollywood Park-Casino in September 1999. Net interest expense increased by
$35,026,000, or 155.6%, with $14,502,000 of the increase due primarily to the
debt assumed in the Casino Magic acquisition and the remaining increase due to
the 9.25% Notes issued in February 1999. Income tax expense increased by
$32,484,000, or 384.8%, with approximately $22,000,000 of the increase
attributed to the dispositions of the Hollywood Park Race Track and Casino.
Liquidity, Capital Resources and Other Factors Influencing Future Results
As of December 31, 2000, the Company had cash, cash equivalents and short-term
investments, all of which had original maturities of less than ninety days, of
$172,868,000 compared to $246,790,000 as of December 31, 1999.
The Consolidated Statements of Cash Flows detailing changes in the cash balances
are on page 61.
Operating activities used net cash of $25,484,000 in 2000, compared with cash
provided by operations of $74,207,000 in 1999. This year-over-year change is
largely due to the payment of current and deferred income taxes in 2000
associated with the asset dispositions in 2000 and 1999 and the receivables
associated with the pre-opening and repair costs relating to the Miss Belterra
accident (see Note 7 to the Notes to Consolidated Financial Statements).
Net cash provided by investing activities of $193,277,000 included proceeds from
asset sales in 2000 of $272,200,000, before income taxes, closing costs and cash
provided for net liabilities assumed by the buyers of the assets sold (see Note
4 to the Notes to Consolidated Financial Statements) and short-term investments,
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offset by capital expenditures, primarily the costs associated with the
completion of the Belterra Casino Resort (see Note 7 to the Notes to
Consolidated Financial Statements).
Net cash used in financing activities of $118,287,000 includes the redemption of
the Casino Magic 13% Notes in August 2000 of $112,875,000 and the premium paid
for such redemption of approximately $5,769,000 (see Note 11 to the Notes to
Consolidated Financial Statements).
At December 31, 2000, the Company had signed a definitive sale agreement to sell
the surplus land in Inglewood, California for $63,050,000 in cash, which
transaction is expected to close in 2001. See Note 5 to the Notes to
Consolidated Financial Statements for additional information on this proposed
transaction. The sale of this asset is expected to generate a gain; however,
there is no assurance the transactions will be consummated in 2001, or at all.
In August 1998, the Company announced its intention to repurchase and retire up
to 20% or approximately 5,256,000 shares of its then issued and outstanding
common stock on the open market or in negotiated transactions. The Company has
recently announced an intention to continue to make such purchases under such
program. As of March 23, 2001, the Company had repurchased approximately
1,000,000 shares at a total cost of approximately $10,884,000 in connection with
this program.
The Company believes that its available cash, cash equivalents, cash to be
generated by assets held for sale and cash flows from operations will be
sufficient to finance operations and capital requirements for the foreseeable
future, and in any event for at least the next twelve months. However, the
Company may use a portion of these resources to (i) reduce its outstanding debt
obligations prior to their scheduled maturities, (ii) make significant capital
improvements to existing properties, (iii) commence new developments, including
the Lake Charles project in the event the license is awarded to Pinnacle
Entertainment, (iv) purchase of Company stock, and/or (v) make acquisitions of
other casino properties or companies. To the extent cash is used for these
purposes, the Company's cash reserves will be diminished and the Company may
require additional capital to finance any such activities. Additional capital
may be generated through internally generated cash flows, future borrowings
(including amounts available under the bank credit facility) and/or lease
transactions. There can be no assurance, however, that such capital will be
available on terms acceptable to the Company.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company's primary exposure to market risk (or the risk of loss arising from
adverse changes in market rates and prices, such as interest rates and foreign
currency exchange rates) is with respect to potential interest rate risk
associated with the long-term floating interest rate on borrowings under the
bank credit facility (see - Liquidity, Capital Resources and Other Factors
Affecting Future Results). As of December 31, 2000, the Company had no
outstanding borrowings under the bank credit facility.
As of December 31, 2000, the Company did not hold any investments in market risk
sensitive instruments of the type described in Item 305 of Regulation S-K.
Item 8. Financial Statements
Financial statements and accompanying footnotes are attached hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
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PART III
Item 10. Directors and Executive Officers of the Registrant
The information required under this Item is incorporated by reference herein
from the Company's definitive 2001 proxy statement to be filed with the
Securities and Exchange Commission within 120 days after December 31, 2000.
Item 11. Executive Compensation
The information required under this Item is incorporated by reference herein
from the Company's definitive 2001 proxy statement to be filed with the
Securities and Exchange Commission within 120 days after December 31, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this Item is incorporated by reference herein
from the Company's definitive 2001 proxy statement to be filed with the
Securities and Exchange Commission within 120 days after December 31, 2000.
Item 13. Certain Relationships and Related Transactions
The information required under this Item is incorporated by reference herein
from the Company's definitive 2001 proxy statement to be filed with the
Securities and Exchange Commission within 120 days after December 31, 2000.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as a part of this report.
1. The consolidated financial statements are set forth in the index to
Consolidated Financial Statements attached hereto.
2. Exhibits
Exhibit
Number Description of Exhibit
- ------- ----------------------
2.1 Agreement and Plan of Merger, by and among Hollywood Park, Inc., HP
Acquisition, Inc. and Boomtown, Inc., dated April 23, 1996, is
hereby incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K, filed May 3, 1996.
2.2 Agreement and Plan of Merger, dated as of February 19, 1998, among
Casino Magic Corp., Hollywood Park, Inc. and HP Acquisition II,
Inc., is hereby incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K, filed February 26, 1998.
2.3 Agreement and Plan of Merger, dated as of April 17, 2000, among
Pinnacle Entertainment, Inc., PH Casino Resorts, Inc., and Pinnacle
Acquisition Corporation, is hereby incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K filed May 1,
2000.
2.4 Letter Agreement dated August 22, 2000, among Pinnacle
Entertainment, Inc., PH Casino Resorts, Inc., and Pinnacle
Acquisition Corporation, is hereby incorporated by reference to
Annex A1 to the Company's Definitive Proxy Statement filed August
23, 2000.
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2.5 Second Amendment to Agreement and Plan of Merger, dated as of
September 15, 2000, among Pinnacle Entertainment, Inc., PH Casino
Resorts, Inc., and Pinnacle Acquisition Corporation, is hereby
incorporated by reference to Annex A to the Company's Proxy
Statement Supplement filed September 19, 2000.
2.6 Letter Agreement dated January 22, 2001, among Pinnacle
Entertainment, Inc., PH Casino Resorts, Inc., and Pinnacle
Acquisition Corporation, terminating the PHCR Merger Agreement, is
hereby incorporated by reference from Exhibit (d)(8) to Amendment
No. 7 to the Schedule 13E-3 filed January 25, 2001 by Pinnacle
Entertainment, Inc., R.D. Hubbard, G. Michael Finnigan, Paul R.
Alanis, J. Michael Allen, Bruce C. Hinckley, PH Casino Resorts,
Inc., Harveys Casino Resorts and Colony HCR Voteco, LLC.
3.1 Certificate of Incorporation of Hollywood Park, Inc., is hereby
incorporated by reference to Exhibit 3.1 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.2 Restated By-laws of Hollywood Park, Inc. are hereby incorporated by
reference to Exhibit 3.2 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
3.3 Certificate of Ownership and Merger, dated February 23, 2000,
merging Pinnacle Entertainment, Inc. into Hollywood Park, Inc., is
hereby incorporated by reference to Exhibit 3.3 to the Company's
Annual Report on Form 10-K filed March 29, 2000.
3.4 Articles of Incorporation of HP/Compton, Inc., are hereby
incorporated by reference to Exhibit 3.9 to the Company's Amendment
No. 1 to Form S-4 Registration dated October 30, 1997.
3.5 By-laws of HP/Compton, Inc., are hereby incorporated by reference to
Exhibit 3.10 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated October 30, 1997.
3.6 Articles of Organization of Crystal Park Hotel and Casino
Development Company, LLC, are hereby incorporated by reference to
Exhibit 3.11 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated October 30, 1997.
3.7 Operating Agreement of Crystal Park Hotel and Casino Development
Company, LLC, are hereby incorporated by reference to Exhibit 3.12
to the Company's Amendment No. 1 to Form S-4 Registration Statement
dated October 30, 1997.
3.8 Restated Articles of Incorporation of Turf Paradise, Inc., are
hereby incorporated by reference to Exhibit 3.13 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.9 By-laws of Turf Paradise, are hereby incorporated by reference to
Exhibit 3.14 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated October 30, 1997.
3.10 Certificate of Incorporation of HP Yakama, Inc., is hereby
incorporated by reference to Exhibit 3.15 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.11 By-laws of HP Yakama, Inc., are hereby incorporated by reference to
Exhibit 3.16 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated October 30, 1997.
3.12 Amended and Restated Certificate of Incorporation of Boomtown, Inc.,
is hereby incorporated by reference to Exhibit 3.17 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.13 By-laws of Boomtown, Inc., are hereby incorporated by reference to
Exhibit 3.18 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated October 30, 1997.
3.14 Certificate of Amended and Restated Articles of Incorporation of
Boomtown Hotel & Casino, Inc., are hereby incorporated by reference
to Exhibit 3.19 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated October 30, 1997.
3.15 Revised and Restated By-laws of Boomtown Hotel & Casino, Inc., are
hereby incorporated by reference to Exhibit 3.20 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.16 Articles of Incorporation of Bayview Yacht Club, Inc., are hereby
incorporated by reference to Exhibit 3.21 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.17 By-laws of Bayview Yacht Club, Inc., are hereby incorporated by
reference to Exhibit 3.22 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated October 30, 1997.
46
<PAGE>
3.18 Certificate of Mississippi Limited Partnership of Mississippi - I
Gaming, L.P., are hereby incorporated by reference to Exhibit 3.23
to the Company's Amendment No. 1 to Form S-4 Registration Statement
dated October 30, 1997.
3.19 Amended and Restated Agreement of Limited Partnership of Mississippi
- I Gaming, L.P., is hereby incorporated by reference to Exhibit
10.31 to the Company's Quarterly Report on Form 10-Q for quarter
ended June 30, 1997.
3.20 Articles of Incorporation of Louisiana Gaming Enterprises, Inc., are
hereby incorporated by reference to Exhibit 3.25 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated October 30,
1997.
3.21 Second Amended and Restated Partnership Agreement of Louisiana - I
Gaming, a Louisiana Partnership in Commendam, is hereby incorporated
by reference to Exhibit 3.26 to the Company's Amendment No. 1 to
Form S-4 Registration Statement dated March 26, 1999.
3.22 Certificate of Incorporation of HP Yakama Consulting, Inc., is
hereby incorporated by reference to Exhibit 3.27 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated March 26,
1999.
3.23 By-laws of HP Yakama Consulting, Inc., are hereby incorporated by
reference to Exhibit 3.28 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
3.24 Articles of Incorporation of Casino Magic Corp., are hereby
incorporated by reference to Exhibit 3.29 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.25 Amended By-laws of Casino Magic Corp., are hereby incorporated by
reference to Exhibit 3.30 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
3.26 Articles of Incorporation of Casino Magic American Corp., are hereby
incorporated by reference to Exhibit 3.31 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.27 By-laws of Casino Magic American Corp., are hereby incorporated by
reference to Exhibit 3.32 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
3.28 Articles of Incorporation of Biloxi Casino Corp., are hereby
incorporated by reference to Exhibit 3.33 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.29 By-laws of Biloxi Casino Corp., are hereby incorporated by reference
to Exhibit 3.34 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.30 Articles of Incorporation of Casino Magic Finance Corp., are hereby
incorporated by reference to Exhibit 3.35 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.31 By-laws of Casino Magic Finance Corp., are hereby incorporated by
reference to Exhibit 3.36 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
3.32 Articles of Incorporation of Casino One Corporation, are hereby
incorporated by reference to Exhibit 3.37 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.33 By-laws of Casino One Corporation, are hereby incorporated by
reference to Exhibit 3.38 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
3.34 Articles of Incorporation of Bay St. Louis Casino Corp., are hereby
incorporated by reference to Exhibit 3.39 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.35 By-laws of Bay St. Louis Casino Corp., are hereby incorporated by
reference to Exhibit 3.40 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
3.36 Articles of Incorporation of Mardi Gras Casino Corp., are hereby
incorporated by reference to Exhibit 3.41 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.37 By-laws of Mardi Gras Casino Corp., are hereby incorporated by
reference to Exhibit 3.42 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
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<PAGE>
3.38 Articles of Incorporation of Boomtown Hoosier, Inc., are hereby
incorporated by reference to Exhibit 3.43 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.39 By-laws of Boomtown Hoosier, Inc., are hereby incorporate by
reference to Exhibit 3.44 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
3.40 Articles of Organization of Indiana Ventures, LLC (subsequently
renamed Belterra Resort Indiana, LLC), are hereby incorporated by
reference to Exhibit 3.45 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
3.41 Operating Agreement of Indiana Ventures, LLC (subsequently renamed
Belterra Resort Indiana, LLC), is hereby incorporated by reference
to Exhibit 3.46 to the Company Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.42 Articles of Incorporation of HP Casino, Inc., are hereby
incorporated by reference to Exhibit 3.51 to the Company's Amendment
No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.43 By-laws of HP Casino, Inc., are hereby incorporated by reference to
Exhibit 3.52 to the Company's Amendment No. 1 to Form S-4
Registration Statement dated March 26, 1999.
3.44 * Articles of Incorporation of Casino Magic of Louisiana, Corporation.
3.45 * By-laws of Casino Magic of Louisiana, Corporation.
3.46 * Articles of Incorporation of Jefferson Casino Corporation.
3.47 * By-laws of Jefferson Casino Corporation.
4.1 Hollywood Park 1996 Stock Option Plan is hereby incorporated by
reference to Exhibit 10.24 to the Company's Registration Statement
on Form S-4 dated September 18, 1996.
4.2 Hollywood Park 1993 Stock Option Plan is hereby incorporated by
reference to Exhibit 4.2 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
4.3 Indenture, dated August 1, 1997, by and among the Company, Hollywood
Park Operating Company, Hollywood Park Food Services, Inc.,
Hollywood Park Fall Operating Company, HP/Compton, Inc., Crystal
Park Hotel and Casino Development Company, LLC, HP Yakama, Inc.,
Turf Paradise, Inc., Boomtown, Inc., Boomtown Hotel & Casino, Inc.,
Louisiana - I Gaming, Louisiana Gaming Enterprises, Inc.,
Mississippi - I Gaming, L.P., Bayview Yacht Club, Inc. and The Bank
of New York, as trustee, is hereby incorporated by reference to
Exhibit 10.37 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
4.4 First Supplemental Indenture, dated as of February 5, 1999, to
Indenture dated as of August 1, 1997 governing the 9.5% Senior
Subordinated Notes due 2007, by and among the Company and Hollywood
Park Operating Company, as co-issuers, and Bayview Yacht Club, Inc.,
Boomtown Hotel & Casino, Inc., Boomtown, Inc., Crystal Park Hotel
and Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park
Operating Company, HP/Compton, Inc., HP Yakama, Inc., Louisiana
Gaming Enterprises, Inc., Louisiana - I Gaming, a Louisiana
Partnership in Commendam, Mississippi - I Gaming, LP, and Turf
Paradise, Inc. as guarantors, and The Bank of New York, as trustee,
is hereby incorporated by reference to Exhibit 4.4 to the Company's
S-4 Registration dated March 2, 1999.
4.5 Form of Series B 9.5% Senior Subordinated Notes due 2007 (included
in Exhibit 4.3), is hereby incorporated by reference to the
Company's Amendment No.1 to Registration Statement on Form S-4 dated
October 30, 1997.
4.6 Indenture, dated as of February 18, 1999, governing the 9.25% Senior
Subordinated Notes due 2007, by and among the Company as issuer, and
Bay St. Louis Casino Corp., Bayview Yacht Club, Inc., Biloxi Casino
Corp., Boomtown Hoosier, Inc., Boomtown Hotel & Casino, Inc.,
Boomtown, Inc., Casino Magic American Corp., Casino Magic Corp.,
Casino Magic Finance Corp., Casino One Corporation, Crystal Park
Hotel and Casino Development Company, LLC, Hollywood Park Fall
Operating Company, Hollywood Park Food Services, Inc., Hollywood
Park Operating Company, HP Casino, Inc., HP/Compton, Inc., HP
Yakama, Inc., HP Yakama Consulting, Inc., Indiana Ventures LLC,
Louisiana Gaming Enterprises, Inc., Louisiana - I Gaming, a
Louisiana Partnership in Commendam, Mardi Gras Casino Corp.,
Mississippi - I Gaming, L.P., Pinnacle Gaming Development Corp.,
Switzerland County Development Corp., and Turf Paradise, Inc. as
initial guarantors, and The Bank of New York, as trustee, is hereby
incorporated by reference to Exhibit 4.6 to the Company's S-4
Registration Statement dated March 2, 1999.
48
<PAGE>
4.7 Form of Series B 9.25% Senior Subordinated Notes due 2007 (included
in Exhibit 4.6), is hereby incorporated by reference to Exhibit 4.7
to the Company's S-4 Registration Statement dated March 2, 1999.
10.1 Directors Deferred Compensation Plan for Hollywood Park, Inc. is
hereby incorporated by reference to Exhibit 10.1 to the Company's
Amendment No. 1 to Form S-4 Registration Statement dated March 26,
1999.
10.2 Aircraft Time Sharing Agreement dated June 2, 1998, by and between
Hollywood Park, Inc. and R.D. Hubbard Enterprises, Inc. is hereby
incorporated by reference to Exhibit 10.2 to the Company's Amendment
No.1 to Form S-4 Registration Statement dated March 26, 1999.
10.3 Amended and Restated Disposition and Development Agreement of
Purchase and Sale, and Lease with Option to Purchase, dated August
2, 1995, by and between The Community Redevelopment Agency of the
City of Compton and Compton Entertainment, Inc., is hereby
incorporated by reference to Exhibit 10.16 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1995.
10.4 Guaranty, dated July 31, 1995, by Hollywood Park, Inc., in favor of
the Community Redevelopment Agency of the City of Compton, is hereby
incorporated by reference to Exhibit 10.17 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1995.
10.5 Assignment, Assumption and Consent Agreement, by and among
HP/Compton, Inc., and Crystal Park Hotel and Casino Development
Company LLC, Hollywood Park, Inc. and The Community Redevelopment
Agency of the City of Compton, dated July 18, 1996, is hereby
incorporated by reference to Exhibit 10.20 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1996.
10.6 Operating Agreement for Crystal Park Hotel and Casino Development
Company, LLC, a California Limited Liability Company, dated July 18,
1996, effective August 28, 1996, is hereby incorporated by reference
to Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996.
10.7 Lease, by and between Crystal Park Hotel and Casino Development
Company, LLC and California Casino Management, Inc., dated December
19, 1997, is hereby incorporated by reference to Exhibit 10.41 to
the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
10.8 Addendum to the Lease Agreement dated December 19, 1997, by and
between Crystal Park Hotel and Casino Development Company, LLC and
California Casino Management, Inc., dated June 30, 1998, is hereby
incorporated by reference to Exhibit 10.46 of the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
10.9 Blue Diamond Swap Agreement by and among Boomtown, Inc., Blue
Diamond Hotel & Casino, Inc., Hollywood Park, Inc., Edward P. Roski,
Jr., IVAC and Majestic Realty Co., dated August 12, 1996, is hereby
incorporated by reference to Exhibit 10.22 to the Company's
Registration Statement on Form S-4 filed September 18, 1996.
10.10 Stock Purchase Agreement, by and between Hollywood Park, Inc. and
Edward P. Roski, Jr., dated August 12, 1996, is hereby incorporated
by reference to Exhibit 10.23 to the Company's Registration
Statement on Form S-4 filed September 18, 1996.
10.11 Second Addendum to the Lease Agreement dated December 19, 1997, by
and between Crystal Park Hotel and Casino Development Company, LLC
and California Casino Management, Inc. dated March 8, 1999, is
hereby incorporated by reference to Exhibit 10.11 to the Company's
Amendment No.1 to Form S-4 Registration Statement dated March 26,
1999.
10.12 Ground Lease, dated October 19, 1993, between Raphael Skrmetta as
Landlord and Mississippi - I Gaming, L.P. as Tenant, is hereby
incorporated by reference to Exhibit 10.33 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
10.13 First Amendment to Ground Lease dated October 19, 1993, between
Raphael Skrmetta and Mississippi - I Gaming, L.P., is hereby
incorporated by reference to Exhibit 10.34 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
10.14 Second Amendment to Ground Lease dated October 19, 1993, between
Raphael Skrmetta and Mississippi - I Gaming, L.P., is hereby
incorporated by reference to Exhibit 10.35 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
49
<PAGE>
10.15 Profit Participation Agreement, by and between Hollywood Park, Inc.,
and North American Sports Management, Inc., dated July 14, 1997, is
hereby incorporated by reference to Exhibit 10.40 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
10.16 Loan Agreement, by and between Yakama Tribal Gaming Corporation and
HP Yakama, Inc., dated September 11, 1997, is hereby incorporated by
reference Exhibit 10.41 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997.
10.17 Security Agreement, by and between Yakama Tribal Gaming Corporation
and HP Yakama, Inc., dated September 11, 1997, is hereby
incorporated by reference to Exhibit 10.42 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
10.18 Master Lease, by and between The Confederated Tribes and Bands of
the Yakama Indian Nation and HP Yakama, Inc., dated September 11,
1997, is hereby incorporated by reference to Exhibit 10.43 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
10.19 Sublease, by and between HP Yakama, Inc. and Yakama Tribal Gaming
Corporation, dated September 11, 1997, is hereby incorporated by
reference to Exhibit 10.44 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997.
10.20 Construction and Development Agreement, by and between Yakama Tribal
Gaming Corporation and HP Yakama Consulting, Inc., dated September
11, 1997, is hereby incorporated by reference to Exhibit 10.45 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
10.21 Voting Agreement, dated as of February 25, 1998, by and between
Hollywood Park, Inc., and Marlin F. Torguson, is hereby incorporated
by reference to Exhibit 10.1 to the Company's Current Report on Form
8-K, filed February 26, 1998.
10.22 Option agreement, by and among The Webster Family Limited
Partnership and The Diuguid Family Limited Partnership, and Pinnacle
Gaming Development Corp., dated June 2, 1998, is hereby incorporated
by reference to Exhibit 10.47 of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998.
10.23 Memorandum of Option Agreement, by and between the Webster Family
Limited Partnership and The Duiguid Family Limited Partnership, and
Pinnacle Gaming Development Corp., dated June 2, 1998, is hereby
incorporated by reference to Exhibit 10.48 of the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
10.24 Amended and Restated Option Agreement, by and among Daniel Webster,
Marsha S. Webster, William G. Duiguid, Sara T. Diuguid, J.R.
Showers, III and Carol A. Showers, and Pinnacle Gaming Development
Corp., dated June 2, 1998, is hereby incorporated by reference to
Exhibit 10.49 of the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998.
10.25 Memorandum of Amended and Restated Option Agreement, by and between
Daniel Webster, Marsha S. Webster, William Diuguid, Sara T. Diuguid,
J.R. Showers, III and Carol A. Showers, and Pinnacle Gaming
Development Corp., dated June 4, 1998, is hereby incorporated by
reference to Exhibit 10.50 of the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
10.26 Assignment of Option Agreement, by Daniel Webster and Marsha S.
Webster, and Pinnacle Gaming Development Corp., dated June 2, 1998,
is hereby incorporated by reference to Exhibit 10.51 of the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998.
10.27 Amended and Restated Reducing Revolving Loan Agreement, dated
October 14, 1998, among Hollywood Park, Inc., and the banks named
therein, Societe Generale and Bank of Scotland (as Managing Agents),
First National Bank of Commerce (as Co-Agent), and Bank of America
National Trust and Savings Association (as Administrative Agent), is
hereby incorporated by reference to Exhibit 2 of the Company's
Current Report on Form 8-K, filed October 30, 1998.
50
<PAGE>
10.28 Purchase Agreement, dated February 12, 1999, by and among the
Company and Bay St. Louis Casino Corp., Bayview Yacht Club, Inc.,
Biloxi Casino Corp., Boomtown Hoosier, Inc., Boomtown Hotel &
Casino, Inc., Boomtown, Inc., Casino Magic American Corp., Casino
Magic Corp., Casino Magic Finance Corp., Casino One Corporation,
Crystal Park Hotel and Casino Development Company, LLC, Hollywood
Park Fall Operating Company, Hollywood Park Food Services, Inc.,
Hollywood Park Operating Company, HP Casino, Inc., HP/Compton, Inc.,
HP Yakama, Inc., HP Yakama Consulting, Inc., Indiana Ventures LLC,
Louisiana Gaming Enterprises, Inc., Louisiana - I Gaming, a
Louisiana Partnership in Commendam, Mardi Gras Casino Corp.,
Mississippi - I Gaming, L.P., Pinnacle Gaming Development Corp.,
Switzerland County Development Corp., and Turf Paradise, Inc., and
Lehman Brothers, Inc., CIBC Oppenheimer Corp., Morgan Stanley & Co.,
Incorporated, NationsBanc Montgomery Securities LLC, SG Cowen
Securities Corporation, and Wasserstein Perella Securities, Inc., as
initial purchasers, is hereby incorporated by reference to Exhibit
10.34 to the Company's S-4 Registration Statement dated March 2,
1999.
10.29 Registration Rights Agreement, dated as of February 18, 1999, by and
among the Company and Bay St. Louis Casino Corp., Bayview Yacht
Club, Inc., Biloxi Casino, Corp., Boomtown Hoosier, Inc., Boomtown
Hotel & Casino, Inc., Boomtown, Inc., Casino Magic American Corp.,
Casino Magic Finance Corp., Casino One Corporation, Crystal Park
Hotel and Casino Development Company, LLC, Hollywood Park Fall
Operating Company, Hollywood Park Food Services, Inc., Hollywood
Park Operating Company, HP Casino, Inc., HP/Compton, Inc., HP
Yakama, Inc., HP Yakama Consulting, Inc., Indiana Ventures LLC,
Louisiana Gaming Enterprises, Inc., Louisiana - I Gaming, a
Louisiana Partnership in Commendam, Mardi Gras Casino Corp.,
Mississippi - I Gaming L.P., Pinnacle Gaming Development Corp.,
Switzerland County Development Corp., and Turf Paradise, Inc., and
Lehman Brothers Inc., CIBC Oppenheimer Corp., Morgan Stanley & Co.
Incorporated, NationsBanc Montgomery Securities LLC, SG Cowen
Securities Corporation and Wasserstein Perella Securities, Inc., as
initial purchasers, is hereby incorporated by reference to Exhibit
10.35 to the Company's S-4 Registration Statement dated March 2,
1999.
10.30 Employment Agreement, dated December 23, 1998, by and between
Hollywood Park, Inc. and G. Michael Finnigan, is hereby incorporated
by reference to Exhibit 10.36 to the Company's Amendment No. 1 to
Form S-4 Registration Statement dated March 26, 1999.
10.31 Employment Agreement, dated September 10, 1998, by and between
Hollywood Park, Inc. and Paul Alanis, is hereby incorporated by
reference to Exhibit 10.37 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
10.32 Employment Agreement, dated September 10, 1998, by and between
Hollywood Park, Inc. and Mike Allen, is hereby incorporated by
reference to Exhibit 10.38 to the Company's Amendment No. 1 to Form
S-4 Registration Statement dated March 26, 1999.
10.33 * Employment Agreement, dated September 10, 1998, by and between
Hollywood Park, Inc. and Loren Ostrow.
10.34 Purchase Agreement, dated as of February 25, 1998, among Hilton
Gaming (Switzerland County) Corporation and Boomtown Hoosier, Inc.,
is hereby incorporated by reference to Exhibit 10.40 to the
Company's Amendment No. 1 to Form S-4 Registration Statement dated
March 26, 1999.
10.35 Asset Purchase Agreement, dated May 5, 1999, among Hollywood Park,
Inc. and Churchill Downs Incorporated, is hereby incorporated by
reference to Exhibit 10.41 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999.
10.36 Amendment No. 1 to Amended and Restated Reducing Revolving Loan
Agreement, dated June 2, 1999, is hereby incorporated by reference
to Exhibit 10.42 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999.
10.37 Amendment No. 2 to Amended and Restated Reducing Revolving Loan
Agreement, dated September 24, 1999, is hereby incorporated by
reference to Exhibit 10.43 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999.
10.38 Asset Purchase Agreement, dated as of December 9, 1999, between BSL,
Inc., and Casino Magic Corp. is hereby incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K filed
December 21, 1999.
51
<PAGE>
10.39 Asset Purchase Agreement, dated as of December 9, 1999, between BTN,
Inc. and Boomtown, Inc. is hereby incorporated by reference to
Exhibit 10.2 to the Company's Current Report on Form 8-K filed
December 21, 1999.
10.40 First Amendment to Asset Purchase Agreement, dated December 17,
1999, between BSL, Inc. and Casino Magic Corp. is hereby
incorporated by reference to Exhibit 10.3 to the Company's Current
Report on Form 8-K filed December 21, 1999.
10.41 First Amendment to Asset Purchase Agreement, dated December 17,
1999, between BTN, Inc. and Boomtown, Inc. is hereby incorporated by
reference to Exhibit 10.4 to the Company's Current Report on Form
8-K filed December 21, 1999.
10.42 Guaranty issued by Penn National in favor of Casino Magic Corp.
entered into as of December 9, 1999 is hereby incorporated by
reference to Exhibit 10.5 to the Company's Current Report on Form
8-K filed December 21, 1999.
10.43 Guaranty issued by Penn National in favor of Boomtown, Inc. entered
into as of December 9, 1999 is hereby incorporated by reference to
Exhibit 10.6 to the Company's Current Report on Form 8-K filed
December 21, 1999.
10.44 Guaranty issued by Hollywood Park in favor of BSL, Inc. entered into
as of December 9, 1999 is hereby incorporated by reference to
Exhibit 10.7 to the Company's Current Report on Form 8-K filed
December 21, 1999.
10.45 Guaranty issued by Hollywood Park in favor of BTN, Inc. entered into
as of December 9, 1999 is hereby incorporated by reference to
Exhibit 10.8 to the Company's Current Report on Form 8-K filed
December 21, 1999.
10.46 Executive Deferred Compensation Plan for Hollywood Park, Inc., is
hereby incorporated by reference to Exhibit 10.48 to the Company's
Annual Report on Form 10-K filed March 29, 2000.
10.47 Agreement for Purchase and Sale of Assets, dated as of February 24,
2000, between Pinnacle Entertainment, Inc. and Jerry Simms, is
hereby incorporated by reference to Exhibit 10.49 to the Company's
Annual Report on Form 10-K filed March 29, 2000.
10.48 First Amendment to Lease and Agreement by and between Pinnacle
Entertainment, Inc. and Century Gaming Management, Inc. dated
September 6, 2000, is hereby incorporated by reference to the
Company's Quarterly Report on Form 10-Q filed November 14, 2000.
10.50 * Option Agreement for the buyout of Full House, LLC's 3% non-voting
interest in Belterra Resort Indiana, LLC, dated as of November 6,
2000, between Pinnacle Entertainment, Inc. and Full House, LLC.
10.51 * Agreement and Joint Escrow Instructions dated as of January 24,
2001 between Crystal Park Hotel and Casino Development Company, LLC,
and The Community Redevelopment Agency of the City of Compton.
11.1 * Statement re: Computation of Per Share Earnings
21.1 Subsidiaries of Hollywood Park, Inc. is hereby incorporated by
reference to Exhibit 21.1 to the Company's Form S-4 Registration
Statement dated March 2, 1999.
23.1 * Consent of Arthur Andersen LLP
----------
* Filed herewith
52
<PAGE>
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed October 13, 2000 to report the
issuance of a press release on October 10, 2000, in which the Company
announced that shareholders of the Company approved the proposed merger
with a subsidiary of PH Casino Resorts, Inc.
A Current Report on Form 8-K was filed December 14, 2000 to report the
issuance of a press release on December 14, 2000, in which the Company
announced that PH Casino Resorts, Inc. had postponed the closing of the
proposed merger with the Company.
A Current Report on Form 8-K was filed January 16, 2001 to report the
issuance of a press release on January 12, 2001, in which the Company
announced that PH Casino Resorts, Inc. had extended the termination date
of the proposed merger with the Company from January 15, 2001 to January
31, 2001.
A Current Report on Form 8-K was filed January 24, 2001 to report the
issuance of a press release on January 23, 2001, in which the Company
announced that PH Casino Resorts, Inc. and Pinnacle Acquisition
Corporation had notified the Company that such entities did not intend to
extend the January 31, 2001 outside termination date, and accordingly, the
Company, PH Casino Resorts, Inc. and Pinnacle Acquisition Corporation had
mutually agreed that the merger agreement and all related transaction
documents had been terminated.
53
<PAGE>
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.
PINNACLE ENTERTAINMENT, INC.
(Registrant)
By: /s/ Paul R. Alanis Dated: March 27, 2001
--------------------------------------
Paul R. Alanis
Chief Executive Officer and President
(Principal Executive Officer)
By: /s/ Bruce C. Hinckley Dated: March 27, 2001
--------------------------------------
Bruce C. Hinckley
Senior Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
54
<PAGE>
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
it the capacities and on the dates indicated:
PINNACLE ENTERTAINMENT, INC.
/s/ R.D. Hubbard Dated: March 27, 2001
- ----------------------------------------
R.D. Hubbard - Director
/s/ Paul Alanis Dated: March 27, 2001
- ----------------------------------------
Paul Alanis - Director
/s/ Robert T. Manfuso Dated: March 27, 2001
- ----------------------------------------
Robert T. Manfuso - Director
/s/ James Martinueau Dated: March 27, 2001
- ----------------------------------------
James Martineau - Director
/s/ Gary Miller Dated: March 27, 2001
- ----------------------------------------
Gary Miller - Director
/s/ Michael Ornest Dated: March 27, 2001
- ----------------------------------------
Michael Ornest - Director
/s/ Timothy J. Parrott Dated: March 27, 2001
- ----------------------------------------
Timothy J. Parrott - Director
/s/ Lynn P. Reitnouer Dated: March 27, 2001
- ----------------------------------------
Lynn P. Reitnouer - Director
/s/ Marlin Torguson Dated: March 27, 2001
- ----------------------------------------
Marlin Torguson - Director
55
<PAGE>
PINNACLE ENTERTAINMENT, INC.
Index to Consolidated Financial Statements
Report of Independent Public Accountants
Report of Arthur Andersen LLP...............................................57
Consolidated Statements of Operations for the years
ended December 31, 2000, 1999 and 1998...................................58
Consolidated Balance Sheets as of December 31, 2000 and 1999..................59
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 2000, 1999 and 1998.....................60
Consolidated Statements of Cash Flows for the years
ended December 31, 2000, 1999 and 1998...................................61
Notes to Consolidated Financial Statements....................................62
Other Financial Data..........................................................89
56
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Stockholders of
Pinnacle Entertainment, Inc.:
We have audited the accompanying consolidated balance sheets of Pinnacle
Entertainment, Inc., (a Delaware corporation, formerly Hollywood Park, Inc.) and
subsidiaries (the "Company") as of December 31, 2000 and 1999, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of Pinnacle Entertainment, Inc.
and subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States.
ARTHUR ANDERSEN LLP
Los Angeles, California
February 5, 2001
57
<PAGE>
Pinnacle Entertainment, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the years ended December 31,
---------------------------------------
2000 1999 1998
--------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C>
Revenues:
Gaming $ 483,398 $ 557,526 $ 293,057
Food and beverage 31,920 39,817 30,510
Hotel and recreational vehicle park 12,730 11,737 3,076
Truck stop and service station 21,782 17,644 14,499
Racing 9,452 55,209 66,871
Other 25,340 24,924 18,954
--------- --------- ---------
584,622 706,857 426,967
--------- --------- ---------
Expenses:
Gaming 279,843 309,508 161,549
Food and beverage 35,180 46,558 38,860
Hotel and recreational vehicle park 6,663 5,923 1,213
Truck stop and service station 20,300 16,296 13,279
Racing 4,133 22,694 29,316
General and administrative 107,978 134,870 94,670
Depreciation and amortization 46,102 51,924 32,121
Pre-opening costs, Belterra Casino Resort 15,030 3,020 821
(Gain) loss on disposition of assets, net (118,816) (62,507) 2,221
Impairment write-down of Hollywood Park-Casino 0 20,446 0
Terminated merger costs 5,727 0 0
Other operating 10,578 13,921 8,414
--------- --------- ---------
412,718 562,653 382,464
--------- --------- ---------
Operating income 171,904 144,204 44,503
Interest expense, net 40,016 57,544 22,518
--------- --------- ---------
Income before minority interests, income taxes and
extraordinary item 131,888 86,660 21,985
Minority interests 0 1,687 374
Income tax expense 52,396 40,926 8,442
--------- --------- ---------
Net income before extraordinary item 79,492 44,047 13,169
Extraordinary item, net of income tax benefit 2,653 0 0
--------- --------- ---------
Net income $ 76,839 $ 44,047 $ 13,169
========= ========= =========
==============================================================================================
Net income per common share - basic
Net income before extraordinary item $ 3.02 $ 1.70 $ 0.50
Extraordinary item, net of income tax benefit (0.10) 0.00 0.00
--------- --------- ---------
Net income per common share - basic $ 2.92 $ 1.70 $ 0.50
========= ========= =========
Net income per common share - diluted
Net income before extraordinary item $ 2.90 $ 1.67 $ 0.50
Extraordinary item, net of income tax benefit (0.10) 0.00 0.00
--------- --------- ---------
Net income per common share - diluted $ 2.80 $ 1.67 $ 0.50
========= ========= =========
Number of shares - basic 26,335 25,966 26,115
Number of shares - diluted 27,456 26,329 26,115
</TABLE>
- ----------
See accompanying notes to the consolidated financial statements.
58
<PAGE>
Pinnacle Entertainment, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Assets (in thousands, except share data)
Current Assets:
Cash and cash equivalents $ 172,868 $ 123,362
Short term investments 0 123,428
Receivables, net of allowance for doubtful accounts of $2,737 and $1,864 as of
December 31, 2000 and 1999, respectively 19,007 17,132
Prepaid expenses and other assets 18,425 13,118
Assets held for sale 12,164 154,649
Current portion of notes receivable 2,393 5,785
---------- ----------
Total current assets 224,857 437,474
Notes receivable 6,604 8,912
Property, plant and equipment, net 593,718 437,715
Goodwill, net of amortization 71,263 87,481
Gaming licenses, net of amortization 38,934 41,485
Debt issuance costs, net of amortization 15,847 22,813
Other assets 10,252 9,528
---------- ----------
$ 961,475 $1,045,408
========== ==========
=================================================================================================================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 19,349 $ 21,096
Accrued interest 17,997 26,080
Other accrued liabilities 31,594 45,569
Accrued compensation 16,668 16,073
Liabilities to be assumed by buyers of assets held for sale 0 9,866
Deferred income taxes 4,335 19,542
Current portion of notes payable 3,432 6,782
---------- ----------
Total current liabilities 93,375 145,008
Notes payable, less current maturities 497,162 618,698
Deferred income taxes 9,762 826
Stockholders' Equity:
Capital stock --
Preferred - $1.00 par value, authorized 250,000 shares;
none issued and outstanding in 2000 and 1999 0 0
Common - $0.10 par value, authorized 40,000,000 shares;
26,434,302 and 26,234,699 shares issued and outstanding in 2000 and 1999 2,644 2,624
Capital in excess of par value 228,095 224,654
Retained earnings 130,437 53,598
---------- ----------
Total stockholders' equity 361,176 280,876
---------- ----------
$ 961,475 $1,045,408
========== ==========
</TABLE>
- ----------
See accompanying notes to the consolidated financial statements.
59
<PAGE>
Pinnacle Entertainment, Inc.
Consolidated Statements of Changes in Stockholders' Equity
For the years ended December 31, 2000, 1999 and 1998
<TABLE>
<CAPTION>
Retained
Capital in Earnings Total
Common Excess of (Accumulated Stockholders'
Stock Par Value Deficit) Equity
--------- ---------- ------------ -------------
(in thousands)
<S> <C> <C> <C> <C>
Balance as of December 31, 1997 $ 2,622 $ 222,350 ($ 3,618) $ 221,354
Net income 0 0 13,169 13,169
Repurchase and retirement of common stock (50) (5,490) 0 (5,540)
Common stock options exercised 8 627 0 635
Tax benefit associated with exercised
common stock options 0 888 0 888
Investment in stock - unrealized holding gain 0 0 470 470
--------- --------- --------- ---------
Balance as of December 31, 1998 2,580 218,375 10,021 230,976
Net income 0 0 44,047 44,047
Executive stock option compensation 0 828 0 828
Common stock options exercised 44 4,335 0 4,379
Tax benefit associated with exercised
common stock options 0 1,116 0 1,116
Investment in stock - realized holding gain 0 0 (470) (470)
--------- --------- --------- ---------
Balance as of December 31, 1999 2,624 224,654 53,598 280,876
Net income 0 0 76,839 76,839
Executive stock option compensation 0 414 0 414
Common stock options exercised 20 2,302 0 2,322
Tax benefit associated with exercised
common stock options 0 725 0 725
--------- --------- --------- ---------
Balance as of December 31, 2000 $ 2,644 $ 228,095 $ 130,437 $ 361,176
========= ========= ========= =========
</TABLE>
- ----------
See accompanying notes to the consolidated financial statements.
60
<PAGE>
Pinnacle Entertainment, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the years ended December 31,
---------------------------------------
2000 1999 1998
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 76,839 $ 44,047 $ 13,169
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 46,102 51,924 32,121
(Gain) loss on disposition of assets (118,816) (62,507) 2,221
Impairment write-down of Hollywood Park-Casino 0 20,446 0
Other changes that (used) provided cash, net of the effects
of the purchase and disposition of businesses:
Receivables, net (2,017) (2,242) (2,937)
Prepaid expenses and other assets (7,168) (4,780) 2,927
Accounts payable (1,747) (10,948) (3,074)
Accrued liabilities (8,351) (16,254) 2,009
Accrued interest (8,083) 9,344 516
Deferred income taxes (6,271) 38,393 (5,546)
All other, net 4,028 6,784 (4,182)
--------- --------- ---------
Net cash (used in) provided by operating activities (25,484) 74,207 37,224
--------- --------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (194,627) (58,321) (54,605)
Capitalized interest (8,148) (1,359) (2,142)
Receipts from disposition of property, plant and equipment, net 266,925 140,083 980
Principal collected on notes receivable 5,699 5,283 2,489
Proceeds from (purchase of) short term investments 123,428 (120,249) (2,709)
Payment to buy-out minority interest in subsidiaries 0 (16,500) (1,946)
Net cash paid for the acquisition of Casino Magic 0 0 (65,749)
Notes receivable issued 0 0 (12,850)
--------- --------- ---------
Net cash provided by (used in) investing activities 193,277 (51,063) (136,532)
--------- --------- ---------
Cash flows from financing activities:
Redemption of Casino Magtic 13% Notes (112,875) 0 0
Write-off of unamortized premium and debt costs
associated with the Casino Magic 13% Notes, net (3,340) 0 0
Payment of notes payable (5,119) (15,566) (7,625)
Proceeds from secured Bank Credit Facility 0 17,000 270,000
Payment of secured Bank Credit Facility 0 (287,000) 0
Proceeds from issuance of 9.25% Notes 0 350,000 0
Payment of the 11.5% Casino Magic Notes 0 0 (135,000)
Increase in debt issuance costs 0 (15,309) (2,719)
Common stock options exercised 2,322 4,379 635
Tax benefit associated with exercise of common stock options 725 1,116 888
Other financing activities, net 0 1,364 (6,793)
--------- --------- ---------
Net cash (used in) provided by financing activities (118,287) 55,984 119,386
--------- --------- ---------
Increase in cash and cash equivalents 49,506 79,128 20,078
Cash and cash equivalents at the beginning of the period 123,362 44,234 24,156
--------- --------- ---------
Cash and cash equivalents at the end of the period $ 172,868 $ 123,362 $ 44,234
========= ========= =========
</TABLE>
- ----------
See accompanying notes to the consolidated financial statements.
61
<PAGE>
PINNACLE ENTERTAINMENT, INC.
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
General Pinnacle Entertainment, Inc. (the "Company" or "Pinnacle Entertainment")
is a diversified gaming company that owns and operates seven casinos (four with
hotels) in Indiana, Nevada, Mississippi, Louisiana and Argentina. Pinnacle
Entertainment operates (effective with the opening of the Belterra Casino Resort
on October 27, 2000) the Belterra Casino Resort, a hotel and riverboat casino
resort in Switzerland County, Indiana, in which the Company owns a 97% interest,
with the remaining 3% held by a non-voting local partner (see Note 7). The
Company also owns and operates, through its Boomtown, Inc. ("Boomtown")
subsidiary, land-based gaming operations in Verdi, Nevada ("Boomtown Reno") and
riverboat gaming operations in Harvey, Louisiana ("Boomtown New Orleans"). The
Company also owns and operates, through its Casino Magic Corp. ("Casino Magic")
subsidiary, dockside gaming operations in Biloxi, Mississippi ("Casino Magic
Biloxi"); riverboat gaming operations in Bossier City, Louisiana ("Casino Magic
Bossier City"); and two land-based casinos in Argentina ("Casino Magic
Argentina"). In October 1999, the Company purchased the 49% minority interest
not owned by Pinnacle Entertainment in Casino Magic Argentina (see Note 6).
Pinnacle Entertainment receives lease income from two card clubs - the Hollywood
Park-Casino and Crystal Park Hotel and Casino. Since September 1999, the
Hollywood Park-Casino has been leased from Churchill Downs California Company
("Churchill Downs"), a wholly owned subsidiary of Churchill Downs Incorporated,
and subleased to an unaffiliated third party operator (see Note 4). The Crystal
Park Hotel and Casino ("Crystal Park") is owned by the Company and is leased to
the same card club operator that now leases and operates the Hollywood
Park-Casino.
Prior to August 8, 2000, the Company owned and operated dockside gaming
facilities in Biloxi, Mississippi ("Boomtown Biloxi") and in Bay St. Louis,
Mississippi ("Casino Magic Bay St. Louis"). On August 8, 2000, the Company
completed the sale of these facilities to subsidiaries of Penn National Gaming,
Inc. (see Note 4). Prior to June 13, 2000, the Company owned and operated Turf
Paradise, Inc. ("Turf Paradise"), a horse racing facility in Phoenix, Arizona.
On June 13, 2000, the Company completed the sale of Turf Paradise to a company
owned by a private investor (see Note 4). Prior to September 1999, the Hollywood
Park-Casino was owned and operated by the Company. In September 1999, the
Company completed the disposition of the Hollywood Park Race Track in Inglewood,
California to Churchill Downs (see Note 4).
Company Name Change In February 2000, a newly formed wholly owned subsidiary of
Hollywood Park, Inc. merged into Hollywood Park, Inc. for the sole purpose of
changing Hollywood Park, Inc.'s name to Pinnacle Entertainment, Inc.
Principles of Consolidation The consolidated financial statements include the
accounts of Pinnacle Entertainment and its subsidiaries. All significant
inter-company accounts and transactions have been eliminated.
Gaming Licenses In 1994, Casino Magic acquired a twelve-year concession
agreement to operate the two Casino Magic Argentina casinos, and capitalized the
costs related to obtaining the concession agreement. Such costs are being
amortized, based on the straight-line method, over the life of the concession
agreement (see Note 6). In 1996, Casino Magic acquired a Louisiana gaming
license to conduct the gaming operations of Casino Magic Bossier City. Casino
Magic allocated a portion of the purchase price to the gaming license and is
amortizing the cost, based on the straight-line method, over twenty-five years.
Accumulated amortization as of December 31, 2000 and 1999 was $6,821,000 and
$5,219,000, respectively.
Amortization expense was $1,602,000, $1,603,000 and $334,000 for the years ended
December 31, 2000, 1999 and 1998, respectively.
Amortization of Debt Issuance Costs Debt issuance costs incurred in connection
with long-term debt and bank financing are capitalized and amortized, based on
the straight-line method, to interest expense during
62
<PAGE>
the period the debt or loan commitments are outstanding. Accumulated
amortization as of December 31, 2000 and 1999 was $8,967,000 and $8,278,000,
respectively. During the twelve months ended December 31, 2000, the Company
wrote off $2,429,000 of unamortized debt issuance costs associated with the
Casino Magic 13% Notes in connection with the redemption of such notes (which
amount is included in the calculation of the extraordinary item - see Note 11).
Amortization included in interest expense was $3,062,000, $2,449,000 and
$1,141,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
Goodwill Goodwill consists of the excess of the acquisition cost over the fair
value of the net assets acquired in business combinations and is being amortized
on a straight-line basis over 40 years. Accumulated amortization as of December
31, 2000 and 1999 was $11,017,000 and $7,927,000, respectively. In August 2000,
in connection with the sale of the two casinos in Mississippi (see Note 4), the
Company wrote off approximately $13,128,000 of goodwill associated with these
properties, which amount is included in the net gain on asset sales.
Amortization expense was $3,030,000, $2,859,000 and $1,888,000 for the years
ended December 31, 2000, 1999 and 1998, respectively.
Gaming Revenues and Promotional Allowances Gaming revenues at the Belterra,
Boomtown and Casino Magic properties consist of the difference between gaming
wins and losses, and in 1999 and 1998 while the Company operated the Hollywood
Park-Casino, consisted of fees collected from patrons on a per seat or per hand
basis. Revenues in the accompanying statements of operations exclude the retail
value of food and beverage, hotel rooms and other items provided to patrons on a
complimentary basis. The estimated cost of providing these promotional
allowances (which is included in gaming expenses) was $45,713,000, $41,341,000
and $21,270,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.
Racing Revenues and Expenses During the period in which the Company operated
horse race tracks, the Company recorded pari-mutuel revenues, admissions, food
and beverage and other racing income associated with racing on a daily basis,
except for prepaid admissions, which were recorded ratably over the racing
season. Expenses associated with racing revenues were charged against income in
those periods in which racing revenues were recognized. Other racing expenses
were recognized as they occurred throughout the year.
Use of Estimates The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect (i) the
reported amounts of assets and liabilities, (ii) the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements, and
(iii) the reported amounts of revenues and expenses during the reporting period.
The Company uses estimates in evaluating the recoverability of property, plant
and equipment, other long-term assets, deferred tax assets, reserves associated
with asset sales, and in determining litigation and other obligations. Actual
results could differ from those estimates.
Property, Plant and Equipment Additions to property, plant and equipment are
recorded at cost. Projects in excess of $10,000,000 include interest on funds
borrowed to finance construction. Capitalized interest is based on project costs
at an imputed rate and was $8,148,000, $1,359,000 and $2,142,000 in fiscal 2000,
1999 and 1998, respectively. The increase in capitalized interest in 2000
compared to 1999 was due to the construction of the Belterra Casino Resort (see
Note 7). Depreciation and amortization are provided based on the straight-line
method over the assets' estimated useful lives as follows:
Years
-----
Land improvements 3 to 25
Buildings 5 to 40
Vessels and Barges 25 to 31
Equipment 3 to 10
63
<PAGE>
Maintenance, repairs and assets purchased below $2,500 (or a group of like-type
assets purchased below $5,000) are charged to expense, and betterments are
capitalized. The costs of property sold or otherwise disposed of and their
associated accumulated depreciation are eliminated from both the property and
accumulated depreciation accounts.
Cash and Cash Equivalents Cash and cash equivalents consist of cash,
certificates of deposit and short-term investments with original maturities of
90 days or less. There was no restricted cash at December 31, 2000 and 1999.
Short Term Investments Short-term investments are classified as held to maturity
and are carried at cost, which approximates market value (see Note 9).
Income Taxes The Company accounts for income taxes under Statement of Financial
Accounting Standards 109, Accounting for Income Taxes ("SFAS No. 109"), whereby
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that included the enactment date.
Stock-Based Compensation The Company accounts for its stock-based compensation
under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and follows the disclosure provisions of Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 123 Accounting
for Stock-Based Compensation.
Segment Information Statement of Financial Accounting Standards No. 131
Disclosures about Segments of an Enterprise and Related Information ("SFAS No.
131") was effective for years beginning after December 15, 1997, and has been
adopted by the Company for all periods presented in these consolidated financial
statements. SFAS No. 131 establishes guidelines for public companies in
determining operating segments based on those used for internal reporting to
management. Based on these guidelines, Pinnacle Entertainment reports
information under a single gaming segment.
Long-lived Assets The Company periodically reviews the propriety of the carrying
amount of long-lived assets and the related intangible assets as well as the
related amortization period to determine whether current events or circumstances
warrant adjustments to the carrying value and/or to the estimates of useful
lives. This evaluation consists of comparing asset carrying values to the
Company's projection of the undiscounted cash flows over the remaining lives of
the assets, in accordance with Statement of Financial Accounting Standards No.
121 Accounting for the Impairment of Long-lived Assets and for Long-lived Assets
to Be Disposed Of ("SFAS No. 121"). Based on its review, the Company believes
that, as of December 31, 2000, there were no significant impairments of its
long-lived assets or related intangible assets. In September 1999, an impairment
write-down of the Hollywood Park-Casino was recorded (see Note 4).
Pre-opening Costs In April 1998, Statement of Position 98-5 Reporting on the
Costs of Start-Up Activities was issued and was effective for years beginning
after December 15, 1998. Statement of Position 98-5, which the Company follows,
requires that start-up activities and organization costs be expensed as
incurred. Pre-opening costs which are reimbursable from insurance proceeds are
recorded as a receivable (see Note 7).
Revenue Recognition In December 1999, Staff Accounting Bulletin 101 Revenue
Recognition in Financial Statements ("SAB 101"), issued by the Securities and
Exchange Commission ("SEC"), was issued and became effective beginning the
fourth quarter of fiscal years beginning after December 15, 1999. SAB 101
summarizes certain of the SEC staff's views in applying accounting principles
generally accepted in the United States to
64
<PAGE>
revenue recognition in financial statements. Implementation of SAB 101 did not
have a material impact on the Company's financial position and results of
operations.
Derivative Instruments and Hedging Activities In June 1998, Statement of
Financial Accounting Standards No. 133 Accounting for Derivative Instruments and
Hedging Activities ("SFAS No. 133") was issued. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
In June 1999, Statement of Financial Accounting Standards No. 137 Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133 ("SFAS No. 137") was issued. SFAS No. 133, as amended
by SFAS No. 137, is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. The Company did not have any derivative or hedging
instruments as of December 31, 2000 and 1999.
Earnings per Share Basic earnings per share are based on net income less
preferred stock dividend requirements divided by the weighted average common
shares outstanding during the period. Diluted earnings per share assume exercise
of in-the-money stock options (those options with exercise prices at or below
weighted average market price for the periods presented) outstanding at the
beginning of the year or at the date of the issuance, unless the assumed
exercises are antidilutive.
Reclassifications Certain reclassifications have been made to the 1999 and 1998
amounts to be consistent with the 2000 financial statement presentation.
Note 2 - Supplemental Disclosure of Cash Flow Information
For the years ended December 31,
------------------------------------
2000 1999 1998
------- ------- -------
(in thousands)
Cash paid during the year for:
Interest $56,248 $58,943 $22,024
Income taxes 64,600(a) 6,223 8,195
(a) The increase in taxes paid in 2000 is due primarily to the gain on asset
dispositions in 2000 and 1999 (see Note 4).
Note 3 - Terminated Merger Agreement
On April 17, 2000, the Company entered into a definitive agreement with PH
Casino Resorts ("PHCR"), a newly formed subsidiary of Harveys Casino Resorts,
and Pinnacle Acquisition Corporation ("Pinnacle Acq Corp"), a newly formed
subsidiary of PHCR, pursuant to which PHCR would have acquired by merger (the
"Merger") all of the outstanding capital stock of Pinnacle Entertainment (the
"Merger Agreement"). Under the Merger Agreement, each outstanding share of the
Company's common stock would have been converted into $24.00 in cash, with the
possibility of an additional $1.00 per share in certain circumstances.
Consummation of the merger was subject to numerous conditions, including PHCR
obtaining the necessary financing for the transaction and regulatory approvals,
as well as other conditions. On October 10, 2000, holders of over 78% of the
outstanding shares of the Company approved the proposed merger.
On January 23, 2001, the Company announced that it had been notified by PHCR
that PHCR did not intend to further extend the outside closing date (previously
extended to January 31, 2001) of the proposed merger. Since all of the
conditions to consummation of the Merger would not be met by such date, the
Company, PHCR and Pinnacle Acq Corp mutually agreed that the Merger Agreement
would be terminated.
As of December 31, 2000, the Company had incurred estimated costs of $5,727,000
in connection with the terminated Merger Agreement, including approximately
$2,000,000 in connection with the negotiation and settlement of the Purported
Class Action Lawsuit (see Note 18), professional fees in connection with the
Special Committee of the Board of Directors and Board of Directors' evaluation
of the proposed merger, estimated fees associated with the preparation and
filing of the proxy material with the Securities and
65
<PAGE>
Exchange Commission (the "SEC"), as well as other transactional expenses. The
Company does not expect to incur additional costs relating to the terminated
Merger Agreement.
Note 4 - Assets Sold
Casino Sales On August 8, 2000, the Company completed the sale of two of its
casinos in Mississippi, Casino Magic Bay St. Louis and Boomtown Biloxi, to
subsidiaries of Penn National Gaming, Inc. ("Penn National") for $195,000,000 in
cash. Subsidiaries of Penn National purchased all of the operating assets and
assumed certain liabilities of the Casino Magic Bay St. Louis and Boomtown
Biloxi properties, including 590 acres of land at Casino Magic Bay St. Louis and
leasehold rights at Boomtown Biloxi. The property, plant and equipment and
related accumulated depreciation of the casinos sold were included as "Assets
held for sale" as of December 31, 1999. Goodwill, net of accumulated
amortization of $13,128,000, was written off in connection with the casino
sales. The after-tax gain from these sales was approximately $35,538,000.
Condensed results of operations before income taxes for the Casino Magic Bay St.
Louis and Boomtown Biloxi casinos from January 1, 2000 to August 8, 2000 (the
date of sale) and for the years ended December 31, 1999 and 1998 were:
For the 221 For the year For the year
days ended ended ended
August 8, December 31, December 31,
2000 1999 1998(a)
----------- ------------ ------------
(in thousands)
Revenues(b) $ 97,203 $156,736 $ 83,004
Expenses 79,952 131,247 72,288
-------- -------- --------
Operating income 17,251 25,489 10,716
Interest expense, net 90 86 339
-------- -------- --------
Income before income taxes $ 17,161 $ 25,403 $ 10,377
======== ======== ========
(a) The Company acquired Casino Magic Bay St. Louis on October 15, 1998 in
connection with the acquisition of Casino Magic, Corp. (see Note 6 to the
Notes to Consolidated Financial Statements). Therefore, the results of
operations for the year ended December 31, 1998 only include Casino Magic
Bay St. Louis' results of operations from such purchase date.
(b) Revenues for the 221 days ended August 8, 2000 include proceeds from the
settlement of a business interruption claim of approximately $1,204,000
related to hurricane damage and casino closure in September 1998.
Turf Paradise Sale On June 13, 2000, the Company completed the sale of Turf
Paradise, including all 275 acres at the Phoenix, Arizona horse racing facility,
to a company owned by a private investor for $53,000,000 in cash. The property,
plant and equipment and related accumulated depreciation were included as
"Assets held for sale" as of December 31, 1999. The after-tax gain from this
sale was approximately $21,262,000.
66
<PAGE>
The condensed results of operations before income taxes for Turf Paradise from
January 1, 2000 to June 13, 2000 (the date of sale) and for the years ended
December 31, 1999 and 1998 were:
<TABLE>
<CAPTION>
For the 165 days For the year For the year
ended June 13, ended December 31, ended December 31,
2000 1999 1998
---------------- ----------------- ------------------
(in thousands)
<S> <C> <C> <C>
Revenues $10,663 $17,644 $17,010
Expenses 7,626 13,819 13,763
------- ------- -------
Operating income 3,037 3,825 3,247
Interest income 49 0 0
------- ------- -------
Income before income taxes $ 3,086 $ 3,825 $ 3,247
======= ======= =======
</TABLE>
Land Sale On March 24, 2000, the Company announced it had completed the sale of
approximately 42 acres of surplus land in Inglewood, California to Home Depot,
Inc. for $24,200,000 in cash. The 42 acres of surplus land were included in
"Assets held for sale" as of December 31, 1999. The after tax gain from this
sale was approximately $15,322,000.
Dispositions of Hollywood Park Race Track and Hollywood Park-Casino On September
10, 1999, the Company completed the dispositions of the Hollywood Park Race
Track and Hollywood Park-Casino to Churchill Downs for $117,000,000 in cash and
$23,000,000 in cash, respectively. Churchill Downs acquired the race track, 240
acres of related real estate and the Hollywood Park-Casino. The Company then
entered into a 10-year leaseback of the Hollywood Park-Casino at an annual lease
rate of $3,000,000 per annum, with a 10-year renewal option. The Company then
subleased the facility to a third party operator for a lease payment of
$6,000,000 per year. The initial term of the sublease was for a one-year period.
In September 2000, the Company renewed the sublease until the earlier of
December 31, 2001 or the expiration or early termination of the Company's lease
with Churchill Downs.
The disposition of the Hollywood Park Race Track and related real estate was
accounted for as a sale and resulted in a pre-tax gain of $61,522,000. The
disposition of the Hollywood Park-Casino was accounted for as a financing
transaction and therefore not recognized as a sale for accounting purposes as
the Company subleased the Hollywood Park-Casino to a third-party operator.
During the third quarter of 1999, under the provisions of SFAS No. 121, the
Company determined that it would not be able to recover the net book value of
the Hollywood Park-Casino on an undiscounted cash flow basis. The Company
recorded an impairment write-down of the long-lived assets comprising the
Hollywood Park-Casino of $20,446,000 representing the difference between its net
book value of $43,400,000 and its estimated fair value. Fair value was
determined based on an independent appraisal. Due to competitive conditions in
the California casino market, sublease rentals were projected to decline over
the ten-year lease term. Pursuant to accounting guidelines, the Company recorded
a long-term debt obligation of $23,000,000 for the Hollywood Park-Casino (see
Note 11). The Hollywood Park-Casino building will continue to be depreciated
over its estimated useful life.
Due to the disposition of the Hollywood Park Race Track and Hollywood
Park-Casino in September 1999, there are no results of operations for the year
ended December 31, 2000 for these facilities. As discussed above, effective with
the disposition of the Hollywood Park-Casino, the Company receives lease income
from the operator of the facility, which was $6,000,000 in 2000 and is included
in other revenue.
67
<PAGE>
The condensed results of operations before income taxes for the Hollywood Park
Race Track and Hollywood Park-Casino from January 1, 1999 to September 10, 1999
(the date of sale) and the year ended December 31, 1998 were:
For the 253 For the year
days ended ended
September 10, December 31,
1999 1998
------------- ------------
(in thousands)
Revenues $ 86,235 $114,751
Expenses 73,019 103,760
-------- --------
Operating income 13,216 10,991
Interest expense (a) 0 0
-------- --------
Income before income taxes $ 13,216 $ 10,991
======== ========
(a) No interest expense was specifically identified for these operations.
Note 5 - Assets Held For Sale
Assets held for sale of $12,164,000 as of December 31, 2000 consist of 97 acres
of surplus land in Inglewood, California. On April 18, 2000, the Company
announced it had entered into an agreement with Casden Properties, Inc. for the
sale of the 97 acres for $63,050,000 in cash. The sale of the 97 acres is
subject to a number of conditions, including the receipt by Casden Properties,
Inc. of certain entitlements to develop the property. On July 31, 2000, the
Company announced Casden Properties had completed its due diligence phase of the
transaction and was moving forward with the entitlements necessary to complete
the transaction. The sale is expected to close on or before April 18, 2001,
unless extended by both parties, and is expected to generate an after-tax gain
in excess of $28,836,000. No assurances can be given that the sale of the
Inglewood land will be completed on such terms, or at all.
Assets held for sale of $154,649,000 at December 31, 1999 consisted of two
casinos in Mississippi (sold in August 2000), the Turf Paradise Race Track in
Arizona (sold in June 2000) and other undeveloped parcels of land (some of which
were sold in March 2000). See Note 4 for details of assets sold in 2000.
Note 6 - Acquisitions
Purchase of Minority Interest On October 8, 1999, the Company purchased the 49%
minority interest not owned by the Company in Casino Magic Argentina for
$16,500,000 in cash. The $12,300,000 purchase price paid in October 1999 in
excess of the then minority interest is being amortized over the extended
concession agreement period, as described below. The Casino Magic Argentina
operations consist of two casinos in the Province of Neuquen, Argentina. The
Company operates the two casinos under an exclusive concession contract with the
Province that is currently scheduled to expire in December 2006. The Company and
the province are in discussions to extend such concession contract for an
additional ten years. In return for such extension, Casino Magic Argentina would
commit to invest in the development of a new casino facility and related
amenities.
Casino Magic Acquisition On October 15, 1998, the Company acquired Casino Magic,
Corp. (the "Casino Magic Merger"). The Company paid cash of approximately
$80,904,000 for Casino Magic's common stock. At the date of the acquisition, the
Company had purchased 792,900 common shares of Casino Magic on the open market,
at a total cost of approximately $1,615,000. The Company paid $2.27 per share
for the remaining 34,929,224 shares of Casino Magic's common stock outstanding.
68
<PAGE>
The Casino Magic Merger was accounted for under the purchase method of
accounting for a business combination. The purchase price of the Casino Magic
Merger was allocated to identifiable assets acquired and liabilities assumed
based on their estimated fair values at the date of acquisition. Assets acquired
and liabilities assumed were, when necessary, written up or down to their fair
market values based on financial analyses, which considered the impact of
general economic, financial and market conditions. The Casino Magic Merger
generated approximately $43,284,000 of excess acquisition costs over the
recorded value of the net assets acquired, all of which was allocated to
goodwill, and is being amortized over 40 years. In 2000, the Company reduced
such unamortized goodwill by approximately $10,122,000 in connection with the
sale of Casino Magic Bay St. Louis (see Note 4). The amortization of this
goodwill is not deductible for income tax purposes. At December 31, 2000 and
1999, accumulated amortization was $2,348,000 and $1,350,000, respectively.
Boomtown, Inc. On June 30, 1997, the Company acquired Boomtown (the "Boomtown
Merger"). As result of the Boomtown Merger, Boomtown became a wholly owned
subsidiary of the Company. The Boomtown Merger was accounted for under the
purchase method of accounting for a business combination. The purchase price of
the Boomtown Merger was allocated to identifiable assets acquired and
liabilities assumed based on their estimated fair values at the date of
acquisition. The Boomtown Merger generated approximately $15,302,000 of excess
acquisition cost over the recorded value of the net assets acquired, all of
which was allocated to goodwill, to be amortized over 40 years. In 2000, the
Company reduced such unamortized goodwill by approximately $3,006,000 in
connection with the sale of Boomtown Biloxi (see Note 4). The amortization of
this goodwill is not deductible for income tax purposes. At December 31, 2000
and 1999, accumulated amortization was $1,139,000 and $773,000, respectively.
Pro Forma Results of Operations The following unaudited pro forma results of
operations were prepared under the assumption that the acquisition of Casino
Magic had occurred as of January 1, 1998. The historical results of operations
of Casino Magic prior to the Company's October 15, 1998 acquisition were
combined with the Company's results for 1998. Pro forma adjustments were made
for the following: (a) the issuance of the 9.5% Notes (see Note 11); (b)
redemption of the Casino Magic 11.5% Notes; (c) the borrowing of approximately
$222,615,000 to redeem the Casino Magic 11.5% Notes ($141,515,000) and to
purchase Casino Magic's common stock ($81,100,000); (d) amortization of the
costs associated with amending the Bank Credit Facility to provide the funds
necessary to purchase Casino Magic's common stock and redeem the Casino Magic
11.5% Notes; (e) elimination of compensation expense associated with three
Casino Magic executives who resigned and were not replaced; (f) elimination of
expenses associated with Casino Magic's board of directors; (g) amortization of
the excess purchase price over net assets acquired for the Casino Magic Merger;
(h) amortization of the premium associated with the purchase accounting write-up
of the Casino Magic 13% Notes (see Note 11); and (i) tax expense associated with
the net pro forma adjustments.
For the year ended
December 31, 1998
------------------
(in thousands, except per share data)
Revenues:
Gaming $516,622
Racing 66,871
Other 82,846
========
$666,339
========
Operating income $ 74,752
========
Net income $ 7,678
Per common share:
Net income - basic $ 0.29
Net income - diluted $ 0.29
- ----------
The unaudited pro forma combined results of operations are for comparative
purposes only and are not necessarily indicative of the operating results or
financial position that would have occurred if the Casino Magic Merger had
occurred as of January 1, 1998.
69
<PAGE>
Note 7 - Belterra Casino Resort
On October 27, 2000, the Company opened to the public the Belterra Casino Resort
located on 315 acres adjacent to the Ohio River in Switzerland County, Indiana,
which is approximately 45 miles southwest of downtown Cincinnati, Ohio. The
Belterra Casino Resort features a 15-story, 308-room hotel, a cruising riverboat
casino (the "Miss Belterra") with approximately 1,800 gaming positions, an
18-hole Tom Fazio-designed championship golf course (expected to open in the
summer of 2001), six restaurants, a 1,500-seat entertainment venue, a spa,
retail areas and other amenities. The total cost of the project (excluding
pre-opening expenses) is expected to be approximately $215,411,000, which cost
includes land, buildings, boat, riverfront improvements, furniture and fixtures,
and capitalized interest, as well as approximately $9,111,000 anticipated to be
incurred in 2001 to complete the golf course and final construction of the
resort.
The Company owns a 97% interest in Belterra Casino Resort, with the remaining 3%
held by a non-voting local partner. On November 6, 2000, the Company entered
into an agreement with the local partner providing that the local partner has
the right to require the Company to purchase, for a purchase price determined in
accordance with the agreement, the local partner's entire ownership interest in
the Belterra Casino Resort at any time on or after January 1, 2001. The
agreement also provides that the Company has the option to require the local
partner to sell to the Company, for a purchase price determined in accordance
with the agreement, the local partner's entire ownership interest in the
Belterra Casino Resort at any time on or after January 1, 2004 or, in the event
that the state of Indiana prior to such time has enacted legislation authorizing
the conduct of full dockside gaming, the later of January 1, 2004 or the end of
the calendar quarter following the second anniversary of the effective date of
such legislation.
On July 31, 2000, the Company's Miss Belterra riverboat casino was struck by a
barge on the Mississippi River near Caruthersville, Missouri en route to its
berthing site in Southern Indiana. There were no serious injuries to the persons
on the boat or barge. As a result of the accident, the expected August 2000
opening of the Belterra Casino Resort was delayed until late October 2000. The
repair costs relating to the riverboat, as well as the replacement of damaged or
lost equipment, has been or will be covered by insurance less a $425,000
deductible. At December 31, 2000, the Company recorded an insurance receivable
of $1,857,000 primarily for replacement equipment relating to the property
damage claim which had been paid by the Company but not yet reimbursed by the
insurance carrier.
The Company also maintains business interruption insurance applicable to the
Miss Belterra incident, subject to a maximum per-day limitation and to a
deductible (which was included in pre-opening expenses during the year ended
December 31, 2000). The Company anticipates that such insurance will cover a
significant portion of the additional pre-opening expenses and lost profits of
the Belterra Casino Resort between the date of the accident, July 31, 2000, and
the date of opening, October 27, 2000. The Company has not yet submitted a claim
on its business interruption insurance policy for the pre-opening costs and lost
profits during this period and, accordingly, the precise amount of any recovery
on this aspect of the policy has not yet been determined. During the fourth
quarter of 2000, the Company received a $2,000,000 advance from the insurance
carrier for business interruption and at December 31, 2000, the Company recorded
an insurance receivable of $4,357,000, of which $1,875,000 was received in
January 2001. Management believes the remaining business interruption insurance
receivable recorded at December 31, 2000 is collectible based on discussions
with the insurance carrier and that the amount of insurance ultimately received
could be greater than the amount recorded as of December 31, 2000.
Note 8 - Development and Expansion
Lake Charles In November 1999, the Company filed an application for the
fifteenth and final gaming license to be issued by the Louisiana Gaming Control
Board. In July 2000, the Company was one of three groups that presented their
proposed projects to the Louisiana Gaming Control Board. The Company's
application is seeking the approval to construct and operate a cruising
riverboat casino, hotel and golf course resort complex in Lake Charles,
Louisiana. The Louisiana Gaming Control Board has not awarded such license and
70
<PAGE>
there is no assurance such license will be issued to the Company or to any other
applicant. At the July 2000 meeting, the Louisiana Gaming Control Board
indicated that another meeting to address the applications for the license would
be held at such time as the Louisiana State Police shall have completed their
suitability investigations of the applicants. At the January 2001 meeting of the
Louisiana Gaming Control Board, the Louisiana State Police reported it would
have its investigation completed by the end of March 2001, with a report to the
Louisiana Gaming Control Board expected at the April or May 2001 Louisiana
Gaming Control Board meeting.
In connection with the application, Pinnacle Entertainment entered into an
option agreement with the Lake Charles Harbor and Terminal District (the
"District") to lease 225 acres of unimproved land from the District upon which
such resort complex would be constructed. The initial lease option was for a
six-month period ending January 2000, with three six-month renewal options (all
of which have been exercised), at a cost of $62,500 per six-month renewal
option. These lease option payments are expensed over the option period. If the
lease option were exercised, the annual rental payment would be $815,000, with a
maximum annual increase of 5%. The term of the lease would be for a total of up
to 70 years, with an initial term of 10 years and six consecutive renewal
options of 10 years each. The lease would require the Company to develop certain
on- and off-site improvements at the location. If awarded the license by the
Louisiana Gaming Control Board, the Company anticipates building a resort
similar in design and scope to the Belterra Casino Resort. All costs incurred by
the Company related to obtaining this license have been expensed as incurred.
Note 9 - Short Term Investments
As of December 31, 2000, the Company did not have any short term investments.
As of December 31, 1999, short term held to maturity investments consisted of
investments in commercial paper of $123,428,000. The commercial paper consisted
of investment grade instruments issued by major corporations and financial
institutions that are highly liquid and have original maturities between three
months and one year. Commercial paper held as short term investments was carried
at cost which approximated market value.
Interest income for the years ended December 31, 2000, 1999 and 1998 was
$13,017,000, $7,927,000 and $1,842,000, respectively.
Note 10 - Property, Plant and Equipment
Property, plant and equipment held at December 31, 2000 and 1999 consisted of
the following:
December 31,
--------------------------
2000 (a) 1999 (a)
-------- --------
(in thousands)
Land and land improvements $ 96,249 $ 71,052
Buildings 353,902 253,126
Equipment 183,523 134,701
Vessel and barges 105,829 65,580
Construction in progress 2,404 32,813
-------- --------
741,907 557,272
Less accumulated depreciation 148,189 119,557
-------- --------
$593,718 $437,715
======== ========
(a) Excludes $12,164,000 of assets as of December 31, 2000 and $213,992,000 of
assets and $69,578,000 of accumulated depreciation, as of December 31, 1999,
related to assets classified as held for sale (see Note 5).
71
<PAGE>
Note 11 - Secured and Unsecured Notes Payable
Notes payable at December 31, 2000 and 1999 consisted of the following:
December 31,
-----------------------
2000 1999
-------- --------
(in thousands)
Secured notes payable, Bank Credit Facility $ 0 $ 0
Unsecured 9.25% Notes 350,000 350,000
Unsecured 9.5% Notes 125,000 125,000
Casino Magic 13% Notes (a) 0 119,814
Hollywood Park-Casino debt obligation 20,745 22,566
Other secured notes payable 3,259 5,785
Other unsecured notes payable 1,590 2,315
-------- --------
500,594 625,480
Less current maturities 3,432 6,782
-------- --------
$497,162 $618,698
======== ========
(a) Included a write up to fair market value (net of amortization), as of the
October 15, 1998 acquisition of Casino Magic, of $6,939,000 as of December 31,
1999, as required under the purchase method of accounting for a business
combination. The net premium was written off in August 2000 with the redemption
of the notes (see below).
Secured Notes Payable, Bank Credit Facility Under the terms of the 1998 bank
credit facility with a syndicate of banks, expiring in 2003 (the "Credit
Facility"), the Company chose in May of 1999 to reduce the amount available
under the facility from $300,000,000 (with the right to increase to
$375,000,000, subject to obtaining commitments from new or existing bank group
members for the additional $75,000,000), to $200,000,000 (with the right to
increase to $300,000,000, subject to obtaining commitments from new or existing
bank group members for the additional $100,000,000). The Credit Facility also
provides for letters of credit up to $30,000,000 and swing line loans of up to
$10,000,000.
As of January 1, 1999, the Company had outstanding borrowings under the Credit
Facility of $270,000,000. Through February of 1999, the Company borrowed an
additional $17,000,000, before repaying all $287,000,000 with a portion of the
proceeds from the issuance of the 9.25% Notes (see below). The Credit Facility
has remained unused since the February 1999 repayment. There was no outstanding
balance at December 31, 2000.
Interest rates on borrowings under the Credit Facility are determined by adding
a margin, which is based upon the Company's debt to cash flow ratio (as defined
in the Credit Facility), to either the LIBOR rate or Prime Rate (at the
Company's option). The Company also pays a quarterly commitment fee on the
unused balance of the Credit Facility. The Credit Facility allows for interest
rate swap agreements or other interest rate protection agreements, to a maximum
notional amount of $300,000,000. Presently, the Company does not use such
financial instruments.
Unsecured 9.25% and 9.5% Notes In February of 1999 the Company issued
$350,000,000 of 9.25% Senior Subordinated Notes due 2007 (the "9.25% Notes"),
the proceeds of which were used to pay the outstanding borrowings on the Credit
Facility, fund current capital expenditures, and other general corporate
purposes.
In August of 1997 the Company issued $125,000,000 of 9.5% Senior Subordinated
Notes due 2007 (the "9.5% Notes"). On January 29, 1999, the Company received the
required number of consents to modify selected covenants associated with the
9.5% Notes. Among other things, the modifications lowered the required minimum
consolidated coverage ratio for debt assumption and increased the size of
allowed borrowings under the Credit Facility. The Company paid a consent fee of
$50 per $1,000 principal amount of the 9.5% Notes, which, combined with other
transactional expenses, is being amortized over the remaining term of the 9.5%
Notes.
72
<PAGE>
The 9.25% and 9.5% Notes are redeemable, at the option of the Company, in whole
or in part, on the following dates, at the following premium to face values:
<TABLE>
<CAPTION>
9.25% Notes redeemable: 9.5% Notes redeemable:
- -------------------------------------------- --------------------------------------------
after February 14, at a premium of After July 31, at a premium of
- -------------------------------------------- --------------------------------------------
<S> <C> <C> <C>
2003 104.625% 2002 104.750%
2004 103.083% 2003 102.375%
2005 101.542% 2004 101.188%
2006 100.000% 2005 100.000%
2007 maturity 2006 100.000%
2007 maturity
</TABLE>
Both the 9.25% and the 9.5% Notes are unsecured obligations of the Company,
guaranteed by all material restricted subsidiaries of the Company, as defined in
the indentures. The subsidiaries which do not guaranty the debt include certain
Casino Magic subsidiaries, principally the Casino Magic Argentina subsidiaries.
The indentures governing the 9.25% and 9.5% Notes, as well as the Credit
Facility, contain certain covenants limiting the ability of the Company and its
restricted subsidiaries to incur additional indebtedness, issue preferred stock,
pay dividends or make certain distributions, repurchase equity interests or
subordinated indebtedness, create certain liens, enter into certain transactions
with affiliates, sell assets, issue or sell equity interests in its
subsidiaries, or enter into certain mergers and consolidations.
Redemption of Casino Magic 13% Notes and Extraordinary Item In August of 1996,
Casino Magic of Louisiana, Corp. (Casino Magic Bossier City) issued $115,000,000
of 13% First Mortgage Notes due 2003 (the "Casino Magic 13% Notes"), with
contingent interest equal to 5% of Casino Magic Bossier City's adjusted
consolidated cash flows (as defined by the indenture).
In December of 1998, the Company completed the post Casino Magic Merger change
of control purchase offer whereby $2,125,000 of principal amount of the Casino
Magic 13% Notes was tendered to the Company at a price of 101% of face value.
On August 15, 2000, the Company redeemed all $112,875,000 of the outstanding
Casino Magic 13% Notes at the redemption price of 106.5%. Upon deposit of
$128,780,000 for principal, premium and accrued coupon and contingent interest
for such redemption, Casino Magic Bossier City satisfied all conditions required
to discharge its obligations under the indenture. In connection with the
redemption, the Company recorded an extraordinary loss of $2,653,000, net of
federal and state income taxes, or $0.10 per basic and diluted share. The
extraordinary loss represents the payment of the redemption premium and the
write-off of deferred finance and premium costs, net of the related federal and
state income tax benefit of $1,493,000. Following the redemption, Casino Magic
Bossier City became a guarantor of the Bank Credit Facility, the 9.25% Notes and
the 9.5% Notes.
Hollywood Park-Casino Debt Obligation In connection with the disposition of the
Hollywood Park-Casino to Churchill Downs (see Note 4), the Company recorded a
long-term lease obligation of $23,000,000. Annual lease payments to Churchill
Downs of $3,000,000 are applied as a reduction of principal and interest
expense. The debt obligation is being amortized, based on a mortgage interest
method, over 10 years (the initial lease term with Churchill Downs).
73
<PAGE>
Annual Maturities As of December 31, 2000, annual maturities of secured and
unsecured notes payable (including the long-term lease obligation related to the
Hollywood Park-Casino) are as follows:
Year ending
December 31: (in thousands)
- ------------ --------------
2001 $ 3,432
2002 3,654
2003 2,398
2004 2,337
2005 2,472
Thereafter 486,301
--------
$500,594
========
Note 12 - Income Taxes
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 Accounting for Income Taxes, whereby deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases.
The composition of the Company's income tax expense (benefit) for the years
ended December 31, 2000, 1999 and 1998 was as follows:
Current Deferred Total
-------- -------- --------
(in thousands)
Year ended December 31, 2000:
U.S. Federal $ 52,545 ($10,119) $ 42,426
State 8,249 (2,125) 6,124
Foreign 2,353 0 2,353
-------- -------- --------
$ 63,147 ($12,244) $ 50,903
======== ======== ========
Year ended December 31, 1999:
U.S. Federal $ 10,986 $ 21,963 $ 32,949
State 2,392 3,137 5,529
Foreign 2,448 0 2,448
-------- -------- --------
$ 15,826 $ 25,100 $ 40,926
======== ======== ========
Year ended December 31, 1998:
U.S. Federal $ 5,793 $ 97 $ 5,890
State 2,511 41 2,552
-------- -------- --------
$ 8,304 $ 138 $ 8,442
======== ======== ========
The following table reconciles the Company's income tax expense (based on its
effective tax rate) to the federal statutory tax rate of 35%:
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------
2000 1999 1998
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Federal income tax expense at the statutory rate $ 46,161 $ 29,741 $ 7,348
State income taxes, net of federal tax benefits 6,124 5,529 2,552
Non-deductible impairment write-down on
Hollywood Park-Casino (see Note 4) 0 7,157 0
Other non-deductible expenses (income) 111 (1,501) (1,458)
-------- -------- --------
Income tax expense before extraordinary item 52,396 40,926 8,442
Tax benefit of extraordinary item (1,493) 0 0
-------- -------- --------
Income tax expense $ 50,903 $ 40,926 $ 8,442
======== ======== ========
</TABLE>
74
<PAGE>
At December 31, 2000 and 1999, the tax effects of temporary differences that
gave rise to significant portions of the deferred tax assets and deferred tax
liabilities were:
2000 1999
-------- --------
Current deferred tax assets (liabilities): (in thousands)
Workers' compensation insurance reserve $ 819 $ 1,059
General liability insurance reserve 436 1,463
Vacation and sick pay accrual 2,230 1,584
Sale of Hollywood Park Race Track & Casino 1,739 (22,000)
Sale of Mississippi Casinos and Turf Paradise (12,555) 0
Legal and merger reserves 2,146 0
Other 850 (1,648)
-------- --------
Net current deferred tax liabilities ($ 4,335) ($19,542)
======== ========
Non-current deferred tax assets (liabilities):
Net operating loss carry-forwards $ 19,969 $ 24,615
Excess tax basis over book value of acquired assets 11,736 11,736
Alternative minimum tax credits 4,811 8,395
Los Angeles revitalization zone tax credits 11,717 11,717
Less valuation allowance (23,490) (23,490)
Depreciation and amortization (30,042) (30,160)
Other (4,463) (3,639)
-------- --------
Net non-current deferred tax liabilities ($ 9,762) ($ 826)
======== ========
Current income taxes receivable (payable) of $82,000 and ($8,773,000) at
December 31, 2000 and 1999, respectively are included in other accrued
liabilities in the accompanying consolidated balance sheets.
Prior to 2000, the Company earned a substantial amount of California tax credits
related to the ownership and operation of the Hollywood Park Race Track and
Hollywood Park-Casino as well as the ownership of the Crystal Park Card Club
Casino, which were located in the Los Angeles Revitalization Tax Zone (LARZ). As
of December 31, 2000 the amount subject to carry-forward of these unused
California tax credits (net of valuation allowance) was approximately
$1,100,000, which can be used to reduce certain future California tax
liabilities. The LARZ credits will expire between 2007 to 2012.
As of December 31, 2000, the Company had federal net operating loss ("NOL") and
capital loss ("CL") carry-forwards of approximately $34,767,000, and $1,293,000,
respectively, comprised principally of NOL carry-forwards acquired in the Casino
Magic Merger, and CL carry-forwards resulting from the disposition of Boomtown's
Las Vegas property. The NOL carry-forwards expire on various dates through 2018,
and the CL carry-forwards expire on various dates through 2002. In addition, the
Company has approximately $4,811,000 of alternative minimum tax credits, which
do not expire. The alternative minimum tax credits can reduce future federal
income taxes but generally cannot reduce federal income taxes paid below the
amount of the alternative minimum tax.
Under several provisions of the Internal Revenue Code (the "Code") and of the
regulations promulgated there-under, the utilization of NOL, CL and tax credit
carry-forwards to reduce tax liability is restricted under certain
circumstances. Events, which cause such a limitation, include, but are not
limited to, certain changes in the ownership of a corporation. The Casino Magic
Merger caused such a change in ownership with respect to Casino Magic. As a
result, the Company's use of approximately $34,767,000 of Casino Magic's NOL
carry-forwards, and $4,811,000 of Casino Magic's tax credit carry-forwards, is
subject to certain limitations imposed by Sections 382 and 383 of the Code.
These various limitations restrict the amount of NOL, CL and tax credit
carry-forwards that may be used by the Company in any taxable year and,
consequently, are expected to defer the Company's use of a substantial portion
of such carry-forwards and may ultimately prevent the Company's use of a portion
thereof. Therefore, a valuation allowance has been recorded related to the
Casino Magic carry-forwards.
75
<PAGE>
Note 13 - Stockholders' Equity
In September 1998, the Company granted 817,500 stock options (625,000 at an
exercise price of $10.1875 and 192,500 at an exercise price of $18.00) outside
of the Company's 1993 and 1996 Stock Option Plans (see Note 17) to four
executives hired on January 1, 1999. Of these grants, 613,125 (420,625 at an
exercise price of $10.1875 and 192,500 at an exercise price of $18.00) were made
subject to shareholder approval, which approval was granted at the shareholder
meeting held May 25, 1999 (the "Measurement Date") at which time the stock price
was $14.13. Accounting Principles Board Opinion No. 25 requires that
compensation be determined as of the Measurement Date based on the excess of the
quoted market price over the exercise price of the stock and charged over the
service period of the executives in their employment agreements or option
vesting period, whichever is shorter. Compensation related to these options for
the years ended December 31, 2000 and 1999, was $414,000 and $828,000,
respectively.
In August 1998, the Company announced its intention to repurchase and retire up
to 20% or approximately 5,256,000 shares of its then issued and outstanding
common stock on the open market or in negotiated transactions. In February 2001,
the Company announced its intention to continue to make such purchases under
such program. At December 31, 2000, under the most restrictive debt agreement,
the Company could spend a maximum of approximately $15,000,000 to buy back its
common stock.
Note 14- Equipment Lease Obligations
The Company leases certain equipment for use in gaming operations and as general
office equipment. Minimum lease payments required under operating leases that
have initial terms in excess of one year as of December 31, 2000 are as follows:
Period (in thousands)
- ------ --------------
2001 $3,784
2002 3,051
2003 1,862
2004 948
2005 890
Thereafter 659
Total rent expense for these long-term lease obligations for the years ended
December 31, 2000, 1999 and 1998 was $6,516,000, $6,481,000 and $5,194,000,
respectively.
Note 15 - Employee Benefit Plans
The Company offers a 401(k) Investment Plan (the "401(k) Plan") which is subject
to the provisions of the Employee Retirement Income Security Act of 1994. The
401(k) Plan is available to all employees of the Company (except those covered
by collective bargaining agreements) who have completed a minimum of 500 hours
of service. Employees may contribute up to 18% (up to 15% through June 30, 1999)
of pretax income (subject to the legal limitation of $10,500 for 2000). The
Company offers discretionary matching, and for the years ended December 31,
2000, 1999 and 1998 matching contributions to the 401(k) Plan totaled
$1,027,000, $1,437,000 and $987,000, respectively.
Prior to the sale of the Hollywood Park Race Track in September of 1999, the
Company contributed to several collectively-bargained multi-employer pension and
retirement plans, which were administered by unions, and to a pension plan
covering non-union employees, administered by an association of race track
owners. Amounts charged to pension cost and contributed to these plans for the
years ended December 31, 1999 and 1998 totaled $948,000 and $1,690,000,
respectively. Contributions to the collectively-bargained plans were determined
in accordance with the provisions of negotiated labor contracts and generally
based upon the number of employee hours or days worked. Contributions to the
non-union plans were based on the covered employees' compensation. It is
management's belief that no withdrawal liability existed for these plans at the
time of the sale of the race track.
76
<PAGE>
On January 1, 2000, the Company instituted a nonqualified Executive Deferred
Compensation Plan (the "Deferred Plan") to permit certain key employees to defer
receipt of current compensation in order to provide retirement benefits on
behalf of such employees. The Company does not make matching contributions to
the Deferred Plan. As a nonqualified plan (as defined by the Internal Revenue
Service Code), all deferred compensation remains within the general assets of
the Company and would be subject to claims of general creditors in the unlikely
case of insolvency. The Company has the right to amend, modify or terminate the
Deferred Plan.
Note 16 - Related Party Transactions
In June 1998, the Company and R.D. Hubbard Enterprises, Inc. ("Hubbard
Enterprises"), which is wholly owned by Mr. Hubbard, (the Company's Chairman)
entered into a new Aircraft Time Sharing Agreement. A prior agreement was
entered into in November 1993. The June 1998 Aircraft Time Sharing Agreement is
identical to the prior agreement in all respects, except for the type of
aircraft covered by the agreement. The June 1998 Aircraft Time Sharing Agreement
expired on December 31, 1999, and now automatically renews each month unless
written notice of termination is given by either party at least two weeks before
a renewal date. The Company reimburses Hubbard Enterprises for expenses incurred
as a result of the Company's use of the aircraft, which totaled approximately
$97,000 in 2000, $176,000 in 1999 and $72,000 in 1998.
In August 1998, the Company received a promissory note for up to $3,500,000 from
Paul Alanis (effective January 1, 1999, Mr. Alanis became the Company's
President and Chief Operating Officer, in October 1999 he became a director and
in June 2000 he became Chief Executive Officer). As of December 31, 1998, the
Company had loaned Mr. Alanis $3,232,000. Interest on the promissory note was at
the prime interest rate, which the Company deemed a fair market rate. The
principal amount of the promissory note, along with accrued interest, was paid
in full in June 1999.
Timothy J. Parrott (a director and member of the Executive Committee, and, as of
October 2000, a member of the Audit Committee of the Company's Board of
Directors) purchased 270,738 shares of Boomtown common stock in connection with
Boomtown's 1988 acquisition of Boomtown Hotel & Casino, Inc. (which operates
Boomtown Reno). Mr. Parrott paid an aggregate purchase price for the common
stock of $222,000, of which $1,000 was paid in cash and $221,000 was paid by a
promissory note secured by a pledge to Boomtown of all of the shares owned by
Mr. Parrott. As of October 31, 1998, Mr. Parrott resigned his position as
Chairman of Boomtown, and the Company retained him as a consultant to provide
services relating to gaming and other business issues. For such services, Mr.
Parrott was retained for a three-year period, with an annual retainer of
$350,000 with health and disability benefits equivalent to those he received as
Chairman of Boomtown. Mr. Parrott's $221,000 note is being forgiven in three
equal parts on each anniversary of the consulting agreement.
Marlin Torguson, who beneficially owned approximately 21.5% of the then
outstanding common shares of Casino Magic, agreed, in connection with the Casino
Magic acquisition, to vote his Casino Magic shares in favor of the acquisition
by the Company. In addition, Mr. Torguson agreed to continue to serve as an
employee of Casino Magic for three years following the acquisition, and during
such three year period, not to compete with the Company or Casino Magic in any
jurisdiction in which either the Company or Casino Magic operates. The Company
appointed Mr. Torguson to its Board of Directors. The Company issued to Mr.
Torguson 60,000 shares of the Company's common stock as compensation for his
three-year service as an employee, and will pay him $300,000 for each year,
during a three-year period, for his non-compete agreement. In addition, the
Company issued Mr. Torguson 30,000 options to acquire the Company's common stock
as of the October 15, 1998, acquisition of Casino Magic, priced at the closing
price of the Company's common stock on that date. The foregoing payments have
been and will be made to Mr. Torguson whether or not the Company or Casino Magic
terminates Mr. Torguson's employment, except for termination for cause.
77
<PAGE>
Note 17 - Stock Option Plans
The Company has two stock option plans that provide for the granting of stock
options to officers and key employees. The objectives of these plans include
attracting and retaining the best personnel, providing for additional
performance incentives, and promoting the success of the Company.
In 1996, the shareholders of the Company adopted the 1996 Stock Option Plan (the
"1996 Plan"), which provides for the issuance of up to 900,000 shares. Except
for the provisions governing the number of shares issuable under the 1996 Plan
and except for the provisions which reflect changes in tax and securities laws,
the provisions of the 1996 Plan are substantially similar to the provisions of
the prior plan adopted in 1993. The 1996 Plan is administered and terms of
option grants are established by the Board of Directors' Compensation Committee.
Under the terms of the 1996 Plan, options alone or coupled with stock
appreciation rights may be granted to selected key employees, directors,
consultants and advisors of the Company. Options become exercisable ratably over
a vesting period as determined by the Compensation Committee and expire over
terms not exceeding ten years from the date of grant, one month after
termination of employment, or six months after the death or permanent disability
of the optionee. The purchase price for all shares granted under the 1996 Plan
shall be determined by the Compensation Committee, but in the case of incentive
stock options, the price will not be less than the fair market value of the
common stock at the date of grant. On April 26, 1996, the Company amended the
non-qualified stock option agreements issued through such date, to lower the
per-share price of the outstanding options to $10.00.
As of December 31, 2000, the 1996 Stock Option Plan is the only plan with stock
option awards available for grant; all of the 625,000 shares eligible for
issuance under the 1993 Stock Option Plan have been granted. Of the 900,000
shares eligible for issuance under the 1996 Stock Option Plan, approximately
557,000 have been granted. In addition, 657,219 shares (with a weighted average
exercise price of $10.00 per share) of Pinnacle Entertainment common stock are
issuable upon exercise of options granted under pre-merger stock option plans of
Boomtown. Of such Boomtown stock options, 655,656 (with a weighted average
exercise price of $10.00) are currently vested. In addition, 177,129 shares
(with a weighted average exercise price of $22.81 per share) of Pinnacle
Entertainment common stock are issuable upon exercise of options granted under
pre-merger stock options plans of Casino Magic. Of such Casino Magic stock
options, 155,952 (with a weighted average exercise price of $24.28 per share)
are currently vested.
On September 10, 1998, the Company granted 817,500 options (625,000 at an
exercise price of $10.1875, and 192,500 at an exercise price of $18.00) outside
of the 1993 and 1996 Plans to the new executive management team hired as of
January 1, 1999. As of December 31, 2000, none of these options were exercised.
78
<PAGE>
The following table summarizes information related to shares under option and
shares available for grant under the Company's 1993 and 1996 Plans:
Weighted
Average
Number Exercise
of Shares Price
--------- --------
Options outstanding at December 31, 1997 857,499 $11.50
Granted 219,188 $12.66
Exercised, expired or forfeited (249,866) $10.00
- --------------------------------------------------------------------------------
Options outstanding at December 31, 1998 826,821 $12.02
Granted 298,500 $12.30
Exercised, expired or forfeited (253,478) $11.72
- --------------------------------------------------------------------------------
Options outstanding at December 31, 1999 871,843 $12.12
Granted 0 $ 0.00
Exercised, expired or forfeited (116,259) $13.53
- --------------------------------------------------------------------------------
Options outstanding at December 31, 2000 755,584 $12.25
================================================================================
Options exercisable at:
December 31, 2000 564,037 $12.40
December 31, 1999 474,426 $11.86
December 31, 1998 584,846 $10.00
================================================================================
The following table summarizes information about stock options under the 1993
and 1996 Plans outstanding as of December 31, 2000:
Outstanding Exercisable
----------- -----------
Weighted Weighted
Number of Average Number of Average
Range of Shares at Exercise Shares at Exercise
Exercise Price 12/31/00 Price 12/31/00 Price
- --------------------------------------------------------------------------------
$8.63 to $10.00 389,633 $ 9.79 279,633 $ 9.85
$10.19 to $14.81 306,834 $14.30 243,326 $14.33
$16.50 to $20.25 59,117 $17.89 41,078 $18.34
- --------------------------------------------------------------------------------
$8.63 to $20.25 755,584 $12.25 564,037 $12.40
================================================================================
The weighted average remaining contractual life of the outstanding options under
the Company's 1993 and 1996 Plans as of December 31, 2000 is approximately 7.4
years.
Accounting for Stock-Based Compensation
The Company estimated the fair market value of stock options using an
option-pricing model taking into account, as of the date of grant, the exercise
price and expected life of the option, the then current price of the underlying
stock and its expected volatility, expected dividend on the stock, and the
risk-free interest rate for the expected term of the options.
In computing the stock-based compensation, the following assumptions were made:
<TABLE>
<CAPTION>
Risk-Free
Interest Original Expected Expected
Rate Expected Life Volatility Dividends
--------- ------------- ---------- ---------
<S> <C> <C> <C> <C>
Options granted in the following periods:
Third quarter 1997 5.0% 3 years 47.8% None
Third quarter 1998 4.5% 10 years 40.1% None
Fourth quarter 1998 4.5% 3 to 10 years 40.1% None
Fourth quarter 1999 4.6% 10 years 47.3% None
</TABLE>
79
<PAGE>
The following sets forth the unaudited pro forma financial results related to
the Company's employee stock-based compensation plans, with respect to the
options estimated fair value, based on the Company's stock price at the grant
date:
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------
2000 1999 1998
-------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C>
Net income before extraordinary item and stock-based
compensation expense $ 79,492 $ 44,047 $ 13,169
Stock-based compensation expense 1,187 1,510 1,905
-------- -------- --------
Pro forma net income, before extraordinary item 78,305 42,537 11,264
Extraordinary item, net of taxes 2,653 0 0
-------- -------- --------
Pro forma net income $ 75,652 $ 42,537 $ 11,264
======== ======== ========
Pro forma net income per common share - basic
Pro forma net income before extraordinary income $ 2.97 $ 1.64 $ 0.43
Extraordinary item, net of tax benefit ($ 0.10) 0.00 0.00
-------- -------- --------
Pro forma net income per share - basic $ 2.87 $ 1.64 $ 0.43
======== ======== ========
Pro forma net income per common share - diluted
Pro forma net income before extraordinary income $ 2.85 $ 1.62 $ 0.43
Extraordinary item, net of tax benefit ($ 0.10) 0.00 0.00
-------- -------- --------
Pro forma net income per share - diluted $ 2.75 $ 1.62 $ 0.43
======== ======== ========
Number of shares - basic 26,335 25,966 26,115
Number of shares - diluted 27,456 26,329 26,115
</TABLE>
Note 18 - Commitments and Contingencies
Employment and Severance Agreements The Company has employment agreements with
five officers, which grant these employees the right to receive their annual
salary for up to the balance of the contract period, plus extension of certain
benefits and the immediate vesting of certain stock options, if the employee
terminates the contract for good reason (as defined and which definition
includes a change in control), or if the Company terminates the employee without
cause (as defined). At December 31, 2000, the maximum contingent liability for
salary and incentive compensation under these agreements was approximately
$2,225,000.
The Company also has (i) a consulting agreement until October 31, 2001, with a
former employee (now a director) for which the contingent liability at December
31, 2000 was $365,000, (ii) a non-compete agreement until October 15, 2001 with
a director for which the contingent liability at December 31, 2000 is $250,000,
and (ii) a separation agreement until April 30, 2001 with a former employee for
which the contingent liability at December 31, 2000 is $33,000.
Legal Poulos Lawsuit A class action lawsuit was filed on April 26, 1994, in the
United States District Court, Middle District of Florida (the "Poulos Lawsuit"),
naming as defendants 41 manufacturers, distributors and casino operators of
video poker and electronic slot machines, including Casino Magic. The lawsuit
alleges that the defendants have engaged in a course of fraudulent and
misleading conduct intended to induce people to play such games based on false
beliefs concerning the operation of the gaming machines and the extent to which
there is an opportunity to win. The suit alleges violations of the Racketeer
Influenced and Corrupt Organization Act ("RICO"), as well as claims of common
law fraud, unjust enrichment and negligent misrepresentation, and seeks damages
in excess of $6 billion. On May 10, 1994, a second class action lawsuit was
filed in the United States District Court, Middle District of Florida (the
"Ahern Lawsuit"), naming as defendants the same defendants who were named in the
Poulos Lawsuit and adding as defendants the owners of certain casino operations
in Puerto Rico and the Bahamas, who were not named as defendants in the Poulos
Lawsuit. The claims in the Ahern Lawsuit are identical to the claims in the
Poulos Lawsuit. Because of the similarity of parties and claims, the Poulos
Lawsuit and Ahern Lawsuit were consolidated into
80
<PAGE>
one case file (the "Poulos/Ahern Lawsuit") in the United States District Court,
Middle District of Florida. On December 9, 1994 a motion by the defendants for
change of venue was granted, transferring the case to the United States District
Court for the District of Nevada, in Las Vegas. In an order dated April 17,
1996, the court granted motions to dismiss filed by Casino Magic and other
defendants and dismissed the Complaint without prejudice. The plaintiffs then
filed an amended Complaint on May 31, 1996 seeking damages against Casino Magic
and other defendants in excess of $1 billion and punitive damages for violations
of RICO and for state common law claims for fraud, unjust enrichment and
negligent misrepresentation.
At a December 13, 1996 status conference, the Poulos/Ahern Lawsuit was
consolidated with two other class action lawsuits (one on behalf of a smaller,
more defined class of plaintiffs and one against additional defendants)
involving allegations substantially identical to those in the Poulos/Ahern
Lawsuit (collectively, the "Consolidated Lawsuits") and all pending motions in
the Consolidated Lawsuits were deemed withdrawn without prejudice. The
plaintiffs in the Consolidated Lawsuits filed a consolidated amended complaint
on February 14, 1997, which the defendants moved to dismiss. On December 19,
1997, the court granted the defendants' motion to dismiss certain allegations in
the RICO claim, but denied the motion as to the remainder of such claim; granted
the defendants' motion to strike certain parts of the consolidated amended
complaint; denied the defendants' remaining motions to dismiss and to stay or
abstain; and permitted the plaintiffs to substitute one of the class
representatives. On January 9, 1998, the plaintiffs filed a second consolidated
amended complaint containing claims nearly identical to those in the previously
dismissed complaints. The defendants answered, denying the substantive
allegations of the second consolidated amended complaint. On March 19, 1998, the
magistrate judge granted the defendants' motion to bifurcate discovery into
"class" and "merits" phases. "Class" discovery was completed on July 17, 1998.
The magistrate judge recommended denial of the plaintiffs' motion to compel
further discovery from the defendants, and the court affirmed in part. "Merits"
discovery is stayed until the court decides the motion for class certification
filed by the plaintiffs on March 18, 1998, which motion the defendants opposed.
In January 2001, the plaintiffs filed a supplement to their motion for class
certification. The defendants' response is due by late March or early April,
2001.
The claims are not covered under the Company's insurance policies. While the
Company cannot predict the outcome of this litigation, management believes that
the claims are without merit and does not expect that the lawsuit will have a
materially adverse effect on the financial condition or results of operations of
the Company.
Casino America Litigation On or about September 6, 1996, Casino America, Inc.
commenced litigation in the Chancery Court of Harrison County, Mississippi,
Second Judicial District, against Casino Magic Corp., and James Edward Ernst,
its then Chief Executive Officer. In the complaint, as amended, the plaintiff
claims, among other things, that the defendants (i) breached the terms of an
agreement they had with the plaintiff; (ii) tortiously interfered with certain
of the plaintiff's contracts and business relations; and (iii) breached
covenants of good faith and fair dealing they allegedly owed to the plaintiff,
and seeks compensatory damages in an amount to be proven at trial as well as
punitive damages. On or about October 8, 1996, the defendants interposed an
answer, denying the allegations contained in the Complaint. On June 26, 1998,
defendants filed a motion for summary judgment, as well as a motion for partial
summary judgment on damages issues. Thereafter, the plaintiff, in July of 1998,
filed a motion to reopen discovery. The court granted the plaintiff's motion, in
part, allowing the parties to conduct additional limited discovery. The motion
for summary judgment and partial summary judgment are pending. On November 30,
1999, the matter was transferred to the Circuit Court for the Second Judicial
District for Harrison County, Mississippi. A trial date has been set for October
2001. The Company's insurer has essentially denied coverage of the claim against
Mr. Ernst under the Company's directors and officers insurance policy, but has
reserved its right to review the matter as to tortious interference at or
following trial. The Company believes that the insurer should not be permitted
to deny coverage, although no assurances can be given that the insurer will
change its position. While the Company cannot predict the outcome of this
action, management believes the lawsuit will not have a material adverse effect
and intends to vigorously defend this action.
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<PAGE>
Bus Litigation On May 9, 1999, a bus owned and operated by Custom Bus Charters,
Inc. was involved in an accident in New Orleans, Louisiana while en route to
Casino Magic in Bay St. Louis, Mississippi. To date, multiple deaths and
numerous injuries are attributed to this accident and the Company's
subsidiaries, Casino Magic Corp. and / or Mardi Gras Casino Corp., together with
several other defendants (including the State of Louisiana, the manufacturer of
the bus and the doctor who treated the driver of the bus and released him to
return to work), have been named in fifty-four (54) lawsuits, each seeking
unspecified damages due to the deaths and injuries sustained in this accident.
Most of the cases filed in the Louisiana state courts were removed and
consolidated with the cases which were filed and are pending in the United
States District Court for the Eastern District of Louisiana. Casino Magic has
denied liability in the cases. The federal district court entered a case
management/scheduling order which fixes pretrial scheduling deadlines and
preliminary trial dates have been set for the fall of 2001. The proceedings are
in the early stages of discovery. While the Company cannot predict the outcome
of the litigation, the Company believes Casino Magic is not liable for any
damages arising from this accident and the Company, together with its applicable
insurers, intend to vigorously defend these actions.
Skrmetta Lawsuit A suit was filed on August 14, 1998 in the Circuit Court of
Harrison County, Mississippi by the ground lessor of property underlying the
Boomtown Biloxi land based improvements in Biloxi, Mississippi (the "Project").
The lawsuit alleges that the plaintiff agreed to exchange the first two years'
ground rentals for an equity position in the Project based upon defendants'
purported assurances that a hotel would be constructed as a component of the
Project. Plaintiff seeks recovery in excess of $4,000,000 plus punitive damages.
At trial of the matter in March 2000, the judge granted the Company's motion to
dismiss the case. On April 26, 2000, plaintiff appealed the court's dismissal to
the Mississippi Supreme Court. The claim is not covered under the Company's
insurance policies. While the Company cannot predict the outcome of this
lawsuit, management does not expect that the lawsuit will have a materially
adverse effect on the financial condition or results of operations of the
Company.
Purported Class Action Lawsuits On March 14, 2000, Harbor Finance Partners filed
a purported class action lawsuit in the Chancery Court of the State of Delaware
against the Company and each of its directors, claiming that the defendants
breached their fiduciary duty to the stockholders of the Company by agreeing to
negotiate exclusively with Harveys, an affiliate of Colony Capital, LLC (see
Note 3). On June 2, 2000, the action was dismissed without prejudice.
On March 21, 2000, a similar purported class action lawsuit was filed by Leta
Hilliard in the Superior Court of the State of California. The lawsuit claims
that the Company and its directors failed to undertake an appropriate process
for evaluating the Company's worth and eliciting bids from third parties, and
that the price for the stock is inadequate. The Company believes that the
plaintiff's claims are without merit. The parties in the Hilliard lawsuit filed
a stipulation in which the plaintiff agreed to file and serve a First Amended
Complaint on or before September 15, 2000 and the defendants agreed to respond
thereto within sixty days of such filing. On September 15, 2000, an agreement in
principle was reached with respect to settlement of the purported Hilliard class
action litigation. The settlement is subject to the execution of a definitive
settlement agreement and court approval of that agreement. In the settlement,
the Company agreed to make specific amendments to the PHCR Merger Agreement (see
Note 3) and also agreed to pay attorney's fees and costs to the plaintiff's
counsel, subject to court approval. As of December 31, 2000, the Company had
incurred estimated costs of approximately $2,000,000 in connection with the
negotiation and settlement of this lawsuit. The other parties to the PHCR Merger
Agreement have consented to the settlement. The defendants' agreement to the
settlement does not constitute, and should not be construed as, an admission
that the defendants have any liability to or acted wrongfully in any way with
respect to the plaintiff or any other person.
Casino Magic Bay St. Louis Wrongful Death Litigation On February 17, 2000, three
Mardi Gras Casino Corp. (dba Casino Magic Bay St. Louis) patrons, after leaving
the casino property, were involved in a vehicular accident which resulted in the
death of two of the individuals and injury to the third. On April 13, 2000, a
lawsuit was filed on behalf of the injured individual and one of the deceased
individuals against Mardi Gras Casino Corp. seeking compensatory damages in the
amount of $2,000,000 and punitive damages, attorney
82
<PAGE>
fees, costs and expenses in the amount of $10,000,000. The suit alleges, among
other things, that Mardi Gras Casino Corp. employees negligently served
alcoholic beverages to the three individuals and the acts and omissions of the
employees were the proximate cause of the accident. The Company has submitted a
claim to its insurer under its general liability insurance policy. While the
Company cannot predict the outcome of this lawsuit, management believes the
claims are without merit and intends to vigorously defend this action.
Casino Magic Biloxi Patron Shooting Incident On January 13, 2001, three Casino
Magic Biloxi patrons were shot, sustaining serious injuries as a result of a
shooting incident involving another Casino Magic Biloxi patron, who then killed
himself. Several other patrons sustained minor injuries while attempting to exit
the casino. To date, no lawsuits relating to this incident have been filed
against Casino Magic Biloxi. However, the Company has notified its insurance
carriers of the incident, and the Company will submit any claims relating to the
incident to its insurers under its general liability insurance policy, subject
to a deductible.
The Company is party to a number of other pending legal proceedings in the
ordinary course of business, though management does not expect that the outcome
of such proceedings, either individually or in the aggregate, will have a
material effect on the Company's financial condition or results of operations.
Note 19 - Unaudited Quarterly Information; Supplementary Financial Information
The following is a summary of unaudited quarterly financial data for the years
ended December 31, 2000 and 1999:
<TABLE>
<CAPTION>
2000
-----------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31,
--------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $ 123,144 $ 141,029 $ 158,906 $ 161,543
Loss (gain) on dispositions of assets, net $ 566 ($ 59,941) ($ 35,587) ($ 23,854)
Belterra Casino Resort pre-opening costs $ 1,721 $ 7,853 $ 3,713 $ 1,743
Terminated merger costs $ 724 $ 2,878 $ 1,500 $ 625
Operating (loss) income ($ 1,214) $ 71,319 $ 54,768 $ 47,031
Net income (loss) before extraordinary item ($ 6,141) $ 37,489 $ 26,232 $ 21,912
Extraordinary item, net of taxes 0 2,653 0 0
--------- --------- --------- ---------
Net (loss) income ($ 6,141) $ 34,836 $ 26,232 $ 21,912
========= ========= ========= =========
Net (loss) income per common share - basic (a)
Net (loss) income before extraordinary income ($ 0.23) $ 1.42 $ 1.00 $ 0.83
Extraordinary item, net of tax benefit 0.00 (0.10) 0.00 0.00
--------- --------- --------- ---------
Net (loss) income per share - basic ($ 0.23) $ 1.32 $ 1.00 $ 0.83
========= ========= ========= =========
Net income per common share - diluted (a)
Net (loss) income before extraordinary income ($ 0.23) $ 1.37 $ 0.96 $ 0.80
Extraordinary item, net of tax benefit 0.00 (0.10) 0.00 0.00
--------- --------- --------- ---------
Net (loss) income per share - diluted ($ 0.23) $ 1.27 $ 0.96 $ 0.80
========= ========= ========= =========
<CAPTION>
1999
-----------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31,
--------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $ 150,675 $ 184,655 $ 199,529 $ 171,998
Loss (gain) on dispositions of assets, net $ 78 $ (42,139) $ 0 $ 0
Belterra Casino Resort pre-opening costs $ 827 $ 684 $ 802 $ 707
Operating income $ 18,937 $ 70,246 $ 33,183 $ 21,838
Net income $ 3,971 $ 26,232 $ 9,711 $ 4,133
Net income per common share (a)
Net income - basic $ 0.15 $ 1.01 $ 0.38 $ 0.16
Net income - diluted $ 0.15 $ 0.98 $ 0.37 $ 0.16
</TABLE>
83
<PAGE>
(a) Net income per share calculations for each quarter are based on the
weighted average number of shares outstanding during the respective
periods; accordingly, the sum of the quarters may not equal the full year
income per share.
Below are the material unusual and infrequent occurring items that impacted the
2000 and 1999 quarterly results:
o In October 2000, the Company opened the Belterra Casino Resort, located in
Switzerland County, Indiana. Pre-opening costs associated with the
development and construction of the resort were $15,030,000 and
$3,020,000, for the years ended December 31, 2000 and 1999, respectively
(see Note 7).
o In August 2000, the Company completed the sale of two of its casinos in
Mississippi for $195,000,000 in cash and an after-tax gain of $35,538,000,
in June 2000, the Company completed the sale of Turf Paradise for
$53,000,000 in cash and an after-tax gain of $21,262,000, and in March
2000, the Company completed the sale of 42 acres of surplus land for
$24,200,000 in cash and an after-tax gain of $15,322,000 (see Note 4).
o In August 2000, the Company redeemed all of the outstanding Casino Magic
13% Notes at a redemption price of 106.5%. In connection with the
redemption, the Company recorded an extraordinary loss of $2,653,000,
which amount represents the payment of the redemption premium and the
write-off of deferred finance and premium costs, net of the related income
tax benefit (see Note 11).
o In April 2000, the Company entered into the Merger Agreement, which
agreement was subsequently terminated in January 2001. In connection with
the terminated merger, the Company incurred costs of $5,727,000 during the
year ended December 31, 2000. The Company does not expect to incur
additional costs relating to the terminated merger (see Note 3).
o In September 1999, the Company completed the dispositions of the Hollywood
Park Race Track and Hollywood Park-Casino for $117,000,000 in cash and
$23,000,000 in cash, respectively, and an after-tax gain of $61,522,000
related to the Hollywood Park Race Track and an impairment write-down of
the long-lived assets comprising the Hollywood Park-Casino of $20,446,000
(see Note 4).
o Revenues for the three months ended March 31, 2000, June 30, 2000 and
September 30, 2000, as reported in the Company's previously issued
Quarterly Reports on Form 10-Q for such periods, have been reduced by
$1,054,000, $1,118,000 and $1,026,000, respectively, which amount was
offset by a reduction of operating expenses. The adjustment reflects the
reclassification of slot machine participation costs, at one of the casino
operations, from gaming expenses to gaming revenue, to be consistent with
the treatment of such expenses in prior years and consistent with the
other casino operations within the Company. Such reclassification did not
impact operating income or net income.
Note 20 - Fair Value of Financial Instruments
Due to the short-term maturity of financial instruments classified as current
assets and liabilities, the fair value approximates the carrying value. It is
not practical to estimate the fair value of long term receivables and long-term
debt instruments, other than the 9.25% Notes and 9.5% Notes, because there are
no quoted market prices for transactions of a similar nature.
Based on quoted market values at December 31, 2000, the carrying values of the
9.25% Notes and the 9.5% Notes approximate fair value.
84
<PAGE>
Note 21 - Consolidating Condensed Financial Information
The Company's subsidiaries (excluding Casino Magic Argentina and certain
non-material subsidiaries) have fully and unconditionally guaranteed the payment
of all obligations under the 9.25% Notes and the 9.5% Notes. Separate financial
statements and other disclosures regarding the subsidiary guarantors are not
included herein because management has determined that such information is not
material to investors. In lieu thereof, the Company includes the following:
Pinnacle Entertainment, Inc.
Consolidating Condensed Financial Information
As of and for the year ended December 31, 2000
<TABLE>
<CAPTION>
(b)
(a) Wholly
Wholly Owned Consolidating Pinnacle
Pinnacle Owned Non- and Entertainment,
Entertainment, Guarantor Guarantor Eliminating Inc.
Inc. Subsidiaries Subsidiaries Entries Consolidated
---- ------------ ------------ ------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
As of and for the year ended December 31, 2000
Balance Sheet
Current assets $ 146,941 $ 67,931 $ 9,985 $ 0 $ 224,857
Property, plant and equipment, net 23,969 567,714 2,035 0 593,718
Other non-current assets 24,309 70,927 5,693 41,971 142,900
Investment in subsidiaries 560,204 6,539 0 (566,743) 0
Inter-company 162,213 100,074 0 (262,287) 0
--------- --------- --------- --------- ---------
$ 917,636 $ 813,185 $ 17,713 ($787,059) $ 961,475
========= ========= ========= ========= =========
Current liabilities $ 43,115 $ 50,683 ($ 423) $ 0 $ 93,375
Notes payable, long term 494,729 2,433 0 0 497,162
Other non-current liabilities 18,615 (2,447) 5,800 (12,206) 9,762
Inter-company 0 256,490 5,797 (262,287) 0
Equity 361,177 506,026 6,539 (512,566) 361,176
--------- --------- --------- --------- ---------
$ 917,636 $ 813,185 $ 17,713 ($787,059) $ 961,475
========= ========= ========= ========= =========
Statement of Operations
Revenues:
Gaming $ 0 $ 463,000 $ 20,398 $ 0 $ 483,398
Food and beverage 1,056 29,300 1,564 0 31,920
Racing 9,452 0 0 0 9,452
Equity in subsidiaries 63,703 5,150 0 (68,853) 0
Other 6,157 53,565 130 0 59,852
--------- --------- --------- --------- ---------
80,368 551,015 22,092 (68,853) 584,622
--------- --------- --------- --------- ---------
Expenses:
Gaming 0 274,062 5,781 0 279,843
Food and beverage 892 32,952 1,336 0 35,180
Racing 4,133 0 0 0 4,133
Administrative and other 24,351 135,928 5,997 0 166,276
(Gain) loss on disposition of assets (119,718) 902 0 0 (118,816)
Depreciation and amortization 3,336 39,798 1,573 1,395 46,102
--------- --------- --------- --------- ---------
(87,006) 483,642 14,687 1,395 412,718
--------- --------- --------- --------- ---------
Operating income (loss) 167,374 67,373 7,405 (70,248) 171,904
Interest expense (income), net 39,279 1,017 (280) 0 40,016
--------- --------- --------- --------- ---------
Income (loss) before taxes and extraordinary item 128,095 66,356 7,685 (70,248) 131,888
Income tax expense 49,861 0 2,535 0 52,396
--------- --------- --------- --------- ---------
Net income (loss) before extraordinary item 78,234 66,356 5,150 (70,248) 79,492
Extraordinary item, net of income taxes 0 2,653 0 0 2,653
--------- --------- --------- --------- ---------
Net income (loss) $ 78,234 $ 63,703 $ 5,150 ($ 70,248) $ 76,839
========= ========= ========= ========= =========
Statement of Cash Flows
Net cash provided by (used in) operating
activities ($333,857) $ 303,312 $ 3,757 $ 1,304 ($ 25,484)
Net cash provided by (used in) investing
activities 388,466 (194,008) (1,181) 0 193,277
Net cash provided by (used in) financing
activities (5,119) (113,168) 0 0 (118,287)
</TABLE>
85
<PAGE>
Pinnacle Entertainment, Inc.
Consolidating Condensed Financial Information
As of and for the year ended December 31, 1999
<TABLE>
<CAPTION>
(b)
(a) Wholly
Wholly Owned Consolidating Pinnacle
Pinnacle Owned Non- and Entertainment,
Entertainment, Guarantor Guarantor Eliminating Inc.
Inc. Subsidiaries Subsidiaries Entries Consolidated
---- ------------ ------------ ------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
As of and for the year ended December 31, 1999
Balance Sheet
Current assets $ 220,216 $ 188,330 $ 28,928 $ 0 $ 437,474
Property, plant and equipment, net 36,671 311,165 89,879 0 437,715
Other non-current assets 28,369 40,788 44,599 56,463 170,219
Investment in subsidiaries 340,840 86,215 0 (427,055) 0
Inter-company 239,469 173,002 31,493 (443,964) 0
--------- --------- --------- --------- ---------
$ 865,565 $ 799,500 $ 194,899 ($814,556) $1,045,408
========= ========= ========= ========= =========
Current liabilities $ 75,933 $ 52,159 $ 16,916 $ 0 $ 145,008
Notes payable, long term 502,421 3,393 112,884 0 618,698
Other non-current liabilities (7,165) 83 20,114 (12,206) 826
Inter-company 13,500 406,437 24,031 (443,968) 0
Equity 280,876 337,428 20,954 (358,382) 280,876
--------- --------- --------- --------- ---------
$ 865,565 $ 799,500 $ 194,899 ($814,556) $1,045,408
========= ========= ========= ========= =========
Statement of Operations
Revenues:
Gaming $ 33,638 $ 368,993 $ 154,895 $ 0 $ 557,526
Racing 39,714 15,495 0 0 55,209
Food and beverage 8,073 27,823 3,921 0 39,817
Equity in subsidiaries 78,679 42,974 0 (121,653) 0
Other 6,661 44,324 3,320 0 54,305
--------- --------- --------- --------- ---------
166,765 499,609 162,136 (121,653) 706,857
--------- --------- --------- --------- ---------
Expenses:
Gaming 18,241 200,594 90,673 0 309,508
Racing 15,843 6,851 0 0 22,694
Food and beverage 11,060 31,237 4,261 0 46,558
Administrative and other 34,124 114,633 25,273 0 174,030
(Gain) loss on disposition of assets (42,828) 767 0 0 (42,061)
Depreciation and amortization 5,295 35,480 9,664 1,485 51,924
--------- --------- --------- --------- ---------
41,735 389,562 129,871 1,485 562,653
--------- --------- --------- --------- ---------
Operating income (loss) 125,030 110,047 32,265 (123,138) 144,204
Interest expense, net 41,030 (1,460) 17,974 0 57,544
--------- --------- --------- --------- ---------
Income (loss) before minority interests and taxes 84,000 111,507 14,291 (123,138) 86,660
Minority interests 0 1,687 0 0 1,687
Income tax expense 38,469 10 2,447 0 40,926
--------- --------- --------- --------- ---------
Net income (loss) $ 45,531 $ 109,810 $ 11,844 ($123,138) $ 44,047
========= ========= ========= ========= =========
Statement of Cash Flows
Net cash provided by (used in) operating
activities $ 592 $ 56,861 $ 19,632 ($ 1,762) $ 75,323
Net cash provided by (used in) investing
activities 897 (49,100) (2,860) 0 (51,063)
Net cash provided by (used in) financing
activities 66,941 (3,149) (8,924) 0 54,868
</TABLE>
86
<PAGE>
Pinnacle Entertainment, Inc.
Consolidating Condensed Financial Information
As of and for the year ended December 31, 1998
<TABLE>
<CAPTION>
Hollywood
Park
Pinnacle Operating (b)
Entertainment, Co. (a) Wholly
Inc. (Co-Obligor Wholly Owned
Guarantor 9.5% Notes/ Owned Non-
(Parent Guarantor Guarantor Guarantor
Obligor) 9.25% Notes) Subsidiaries Subsidiaries
-------- ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C>
For the year-ended
December 31, 1998
Statement of Operations
Revenues:
Gaming $ 46,255 $ 0 $ 221,029 $ 21,985
Racing 0 39,618 27,253 0
Food and beverage 4,881 0 25,008 381
Equity in subsidiaries 20,812 0 3,390 0
Inter-company 0 0 22,856 0
Other 3,797 1,983 30,487 214
--------- --------- --------- ---------
75,745 41,601 330,023 22,580
--------- --------- --------- ---------
Expenses:
Gaming 27,167 0 118,813 14,602
Racing 0 17,198 12,118 0
Food and beverage 9,613 0 28,490 566
Administrative and other 19,035 14,254 80,451 3,394
Loss on write off of assets 1,586 0 635 0
Depreciation and
amortization 4,346 3,985 21,451 1,429
--------- --------- --------- ---------
61,747 35,437 261,958 19,991
--------- --------- --------- ---------
Operating income (loss) 13,998 6,164 68,065 2,589
Interest expense 6,871 12,565 (226) 3,308
Inter-company interest 0 0 22,856 0
--------- --------- --------- ---------
Income (loss) before
minority interests and
taxes 7,127 (6,401) 45,435 (719)
Minority interests 0 0 0 0
Income tax expense
(benefit) (6,213) 0 14,164 0
--------- --------- --------- ---------
Net income (loss) $ 13,340 ($ 6,401) $ 31,271 ($ 719)
========= ========= ========= =========
Statement of Cash Flows
Net cash provided by
(used in) operating
activities ($153,372) $ 1,965 $ 203,874 $ 7,042
Net cash provided by
(used in) investing
activities (89,208) (2,132) (57,942) (5,844)
Net cash provided by
(used in) financing
activities 261,682 (27) (140,773) 0
<CAPTION>
(b)
Non Wholly
Owned Consolidating Pinnacle
Non- And Entertainment,
Guarantor Eliminating Inc.
Subsidiaries Entries Consolidated
------------ ------- ------------
(in thousands)
<S> <C> <C> <C>
For the year-ended
December 31, 1998
Statement of Operations
Revenues:
Gaming $ 3,788 $ 0 $ 293,057
Racing 0 0 66,871
Food and beverage 240 0 30,510
Equity in subsidiaries 0 (24,202) 0
Inter-company 0 (22,856) 0
Other 48 0 36,529
--------- --------- ---------
4,076 (47,058) 426,967
--------- --------- ---------
Expenses:
Gaming 967 0 161,549
Racing 0 0 29,316
Food and beverage 191 0 38,860
Administrative and other 1,263 0 118,397
Loss on write off of assets 0 0 2,221
Depreciation and
amortization 306 604 32,121
--------- --------- ---------
2,727 604 382,464
--------- --------- ---------
Operating income (loss) 1,349 (47,662) 44,503
Interest expense 0 0 22,518
Inter-company interest 0 (22,856) 0
--------- --------- ---------
Income (loss) before
minority interests and
taxes 1,349 (24,806) 21,985
Minority interests 0 374 374
Income tax expense
(benefit) 491 0 8,442
--------- --------- ---------
Net income (loss) $ 858 ($ 25,180) $ 13,169
========= ========= =========
Statement of Cash Flows
Net cash provided by
(used in) operating
activities $ 1,055 ($ 22,452) $ 38,112
Net cash provided by
(used in) investing
activities (72) 18,666 (136,532)
Net cash provided by
(used in) financing
activities 0 (2,384) 118,498
</TABLE>
- ----------
(a) The following subsidiaries are treated as guarantors of both the 9.5%
Notes and 9.25% Notes for all periods presented: Turf Paradise, Inc.
(through June 13, 2000), Hollywood Park Food Services, Inc. (through
September 10, 1999), Hollywood Park Fall Operating Company (through
September 10, 1999) and, with respect to the 9.25% Notes, Hollywood Park
Operating Company (through September 10, 1999) (it was a co-obligor on the
9.5% Notes through September 10, 1999), Belterra Resorts LLC, Boomtown,
Inc., Boomtown Hotel & Casino, Inc., Bay View Yacht Club, Inc. (through
August 8, 2000), Louisiana - I Gaming, Louisiana Gaming Enterprises, Inc.,
Boomtown Hoosier, Inc., HP Casino, Inc., HP Yakama, Inc., HP Consulting,
Inc. and HP/Compton, Inc. The following subsidiaries were treated as
guarantors for periods beginning on October 15, 1998, when the Casino
Magic Merger was consummated: Casino Magic Corp., Mardi Gras Casino Corp.
(through August 8, 2000), Biloxi Casino Corp., Bay St. Louis Casino Corp.,
Casino Magic Finance Corp., Casino Magic American Corp., and Casino One
Corporation. ,Crystal Park Hotel and Casino Development Company, LLC and
Mississippi - I Gaming L.P. (through August 8, 2000) were treated as
wholly owned guarantors for periods beginning in January 1998 and October
1998, respectively, when the Company acquired the outstanding minority
interests therein and they became wholly owned subsidiaries. Jefferson
Casino Corporation and Casino Magic of Louisiana, Corp. were treated as
wholly owned guarantors as of, and for the three and nine months ended
September 30, 2000 upon the redemption of the Casino Magic 13% Notes in
August 2000 (see Note 11).
87
<PAGE>
(b) Prior to the redemption of the Casino Magic 13% Notes on August 15, 2000,
(see Note 11), Jefferson Casino Corporation and Casino Magic of Louisiana,
Corp. were wholly owned non-guarantors of the 9.5% and 9.25% Notes. Upon
redemption of the Casino Magic 13% Notes, Jefferson Casino Corporation and
Casino Magic of Louisiana, Corporation became guarantors of the 9.5% and
9.25% Notes (see note (a) above). Prior to October 1999, Casino Magic
Neuquen S.A. and its subsidiary Casino Magic Support Services were
non-wholly owned non-guarantors to the 9.5% and 9.25% Notes. In October
1999, Casino Magic Neuquen S.A. and its subsidiary Casino Magic Support
Services became wholly owned subsidiaries of the Company, but remain
non-guarantors of the 9.5% and 9.25% Notes.
88
<PAGE>
Pinnacle Entertainment, Inc.
Selected Financial Data by Property
<TABLE>
<CAPTION>
For the three months ended, For the year
------------------------------------------------------------- ended
December 31, September 30, June 30, March 31, December 31,
2000 2000 2000 2000 2000
------------ ------------- -------- --------- ------------
(unaudited) (audited)
-------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues:
Belterra Casino Resort $ 15,705 $ 0 $ 0 $ 0 $ 15,705
Boomtown Reno 21,487 28,961 24,984 18,636 94,068
Boomtown New Orleans 24,642 25,570 24,967 24,995 100,174
Casino Magic Biloxi 21,922 24,883 22,525 23,894 93,224
Casino Magic Bossier City 31,786 36,790 35,650 37,776 142,002
Casino Magic Argentina 5,057 5,981 5,368 5,686 22,092
Card Clubs and Other 2,545 2,447 2,379 2,118 9,489
Pinnacle Entertainment, Inc. - Corporate 0 0 0 0 0
--------- --------- --------- --------- ---------
123,144 124,632 115,873 113,105 476,754
Operations sold
Boomtown Biloxi 0 7,253 16,456 17,504 41,213
Casino Magic Bay St. Louis 0 9,144 22,855 23,991 55,990
Turf Paradise Race Track 0 0 3,722 6,943 10,665
--------- --------- --------- --------- ---------
123,144 141,029 158,906 161,543 584,622
--------- --------- --------- --------- ---------
Expenses:
Belterra Casino Resort 19,882 0 0 0 19,882
Boomtown Reno 18,658 21,184 18,761 16,060 74,663
Boomtown New Orleans 18,269 19,166 17,851 18,196 73,482
Casino Magic Biloxi 19,749 19,632 18,557 17,811 75,749
Casino Magic Bossier City 25,792 27,903 26,722 27,204 107,621
Casino Magic Argentina 3,111 3,212 3,461 3,330 13,114
Card Clubs and Other 535 96 101 96 828
Pinnacle Entertainment, Inc. - Corporate 3,918 4,280 4,360 4,788 17,346
--------- --------- --------- --------- ---------
109,914 95,473 89,813 87,485 382,685
Operations sold
Boomtown Biloxi 0 5,387 13,213 14,388 32,988
Casino Magic Bay St. Louis 0 7,646 17,077 17,171 41,894
Turf Paradise Race Track 0 0 2,745 4,363 7,108
--------- --------- --------- --------- ---------
109,914 108,506 122,848 123,407 464,675
--------- --------- --------- --------- ---------
Non-recurring income (expenses):
Gain (loss) on disposition of assets, net (566) 59,941 35,587 23,854 118,816
Pre-opening costs, Belterra Casino Resort (1,721) (7,853) (3,713) (1,743) (15,030)
Terminated merger costs (724) (2,878) (1,500) (625) (5,727)
--------- --------- --------- --------- ---------
(3,011) 49,210 30,374 21,486 98,059
--------- --------- --------- --------- ---------
Subtotal $ 10,219 $ 81,733 $ 66,432 $ 59,622 $ 218,006
</TABLE>
89
<PAGE>
Pinnacle Entertainment, Inc.
Selected Financial Data by Property - Continued
<TABLE>
<CAPTION>
For the three months ended, For the year
------------------------------------------------------------- ended
December 31, September 30, June 30, March 31, December 31,
2000 2000 2000 2000 2000
------------ ------------- -------- --------- ------------
(unaudited) (audited)
-------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Subtotal from prior page $ 10,219 $ 81,733 $ 66,432 $ 59,622 $ 218,006
Depreciation and amortization:
Belterra Casino Resort 2,294 0 0 0 2,294
Boomtown Reno 1,947 1,926 1,910 1,900 7,683
Boomtown New Orleans 1,398 1,523 1,421 1,501 5,843
Casino Magic Biloxi 1,596 1,673 1,842 1,852 6,963
Casino Magic Bossier City 2,115 2,109 2,110 2,094 8,428
Casino Magic Argentina 384 387 396 406 1,573
Card Clubs and Other 856 1,020 1,031 1,030 3,937
Pinnacle Entertainment, Inc. - Corporate 843 944 996 1,008 3,791
--------- --------- --------- --------- ---------
11,433 9,582 9,706 9,791 40,512
Operations sold
Boomtown Biloxi 0 386 942 899 2,227
Casino Magic Bay St. Louis 0 446 783 1,614 2,843
Turf Paradise Race Track 0 0 233 287 520
--------- --------- --------- --------- ---------
11,433 10,414 11,664 12,591 46,102
--------- --------- --------- --------- ---------
Operating (loss) income (1,214) 71,319 54,768 47,031 171,904
Interest expense, net of interest income 8,391 7,666 11,079 12,880 40,016
--------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary item (9,605) 63,653 43,689 34,151 131,888
Income tax (benefit) expense (3,464) 26,164 17,457 12,239 52,396
--------- --------- --------- --------- ---------
Net (lloss) income before extraordinary item (6,141) 37,489 26,232 21,912 79,492
Extraordinary item, net of income tax benefit 0 2,653 0 0 2,653
--------- --------- --------- --------- ---------
Net (loss) income ($ 6,141) $ 34,836 $ 26,232 $ 21,912 $ 76,839
========= ========= ========= ========= =========
Net (loss) income per common share - basic
Net (loss) income before extraordinary
item - basic ($ 0.23) $ 1.42 $ 1.00 $ 0.83 $ 3.02
Extraordinary item, net of income tax - basic 0.00 (0.10) 0.00 0.00 (0.10)
--------- --------- --------- --------- ---------
Net (loss) income - basic ($ 0.23) $ 1.32 $ 1.00 $ 0.83 $ 2.92
========= ========= ========= ========= =========
Net income per common share - diluted
Net (loss) income before extraordinary
item - diluted ($ 0.23) $ 1.37 $ 0.96 $ 0.80 $ 2.90
Extraordinary item, net of income tax - diluted 0.00 (0.10) 0.00 0.00 (0.10)
--------- --------- --------- --------- ---------
Net (loss) income - diluted ($ 0.23) $ 1.27 $ 0.96 $ 0.80 $ 2.80
========= ========= ========= ========= =========
Number of shares - basic 26,421 26,356 26,303 26,260 26,335
Number of shares - diluted 26,421 27,458 27,345 27,307 27,456
</TABLE>
90
<PAGE>
PINNACLE ENTERTAINMENT, INC.
EXHIBIT INDEX
Exhibit Description
- ------- -----------
3.44 Articles of Incorporation of Casino Magic of Louisiana,
Corporation.
3.45 By-laws of Casino Magic of Louisiana, Corporation.
3.46 Articles of Incorporation of Jefferson Casino Corporation.
3.47 By-laws of Jefferson Casino Corporation.
10.33 Employment Agreement, dated September 10, 1998, by and between
Hollywood Park, Inc. and Loren Ostrow.
10.50 Option Agreement for the buyout of Full House, LLC's 3% non-voting
interest in Belterra Resort Indiana, LLC, dated as of November 6,
2000, between Pinnacle Entertainment, Inc. and Full House, LLC.
10.51 Agreement and Joint Escrow Instructions dated as of January 24,
2001 between Crystal Park Hotel and Casino Development Company,
LLC, and The Community Redevelopment Agency of the City of Compton.
11.1 Statement re:Computation of Per Share Earnings
23.1 Consent of Arthur Andersen LLP
91
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.44
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>ARTICLES OF INCORPORATION OF CASINO MAGIC
<TEXT>
<PAGE>
EXHIBIT 3.44
UNITED STATES OF AMERICA
STATE OF LOUISIANA
FOX McKEITHEN
SECRETARY OF STATE
As Secretary of State, of the State of Louisiana, I hereby Certify that
the annexed and following is a True and Correct copy of the Articles
of Incorporation, Initial Report, Amendments and 1998 Annual Report of
CASINO MAGIC OF LOUISIANA, CORP.
A LOUISIANA corporation domiciled at BOSSIER CITY,
As shown by comparison with documents filed and recorded in this office.
In testimony whereof, I have hereunto set
my hand and caused the Seal of my Office
to be affixed at the City of Baton Rouge on,
[Seal of Secretary of State
February 8, 1999 for the State of Louisiana]
CAS 34436430D
Secretary of State
<PAGE>
ARTICLES OF INCORPORATION
OF
CRESCENT CITY CAPITAL DEVELOPMENT CORPORATION
We, the undersigned, each capable of contracting, for the purpose of
forming a corporation pursuant to Chapter 1 of Title 12 of the Louisiana Revised
Statutes, do hereby certify:
FIRST: The name of the corporation is Crescent City Capital Development
Corporation.
SECOND: The address (and zip code) of this corporation's initial
registered office is
8550 United Plaza Boulevard
Baton Rouge, Louisiana 70809
and the name of this corporation's initial registered agent at such address is
CT Corporation System
THIRD: The purposes for which this corporation is organized are:
(a) To engage in any activity within the purposes for which
corporations may be organized under the Louisiana Business
Corporation Law, including without limitation, to license,
construct, develop, own and operate a riverboat casino in Orleans
Parish, Louisiana.
(b) The foregoing and following clauses shall be construed as objects
and powers in furtherance and not in limitation of general powers
conferred by the laws of the State of Louisiana, and it is hereby
expressly provided that the foregoing and following enumeration
of specific powers shall not be held to limit or restrict in any
manner the powers of this corporation and that this corporation
may do all and everything necessary, suitable or proper for the
accomplishment of any of the purposes or objects hereinabove
enumerated, either alone or in association with other
corporations, firms or individuals to the same extent and as
fully as individuals might or could do as principals, agents,
contractors or otherwise.
FOURTH: The duration of the corporation is perpetual.
FIFTH: The aggregate number of shares which the corporation shall have
authority to issue is Two Hundred (200) Shares, $.01 par value.
<PAGE>
SIXTH: The first Board of Directors of the corporation shall consist of
three (3) Directors and the name and post office address of each person who is
to serve as such a Director is as follows:
NAME ADDRESS
- ---- -------
I.G. Davis, Jr. c/o Capital Gaming International,
Inc.
Bayport One, Suite 250
8025 Black Horse Pike
West Atlantic City, NJ 08232
Edward M. Tracy c/o Capital Gaming International,
Inc.
Bayport One, Suite 250
8025 Black Horse Pike
West Atlantic City, NJ 08232
Col. Clinton Paganc c/o Capital Gaming International,
Inc.
Bayport One, Suite 250
8025 Black Horse Pike
West Atlantic City, NJ 08232
SEVENTH: The name and address of each incorporator is as follows:
NAME ADDRESS
- ---- -------
I.G. Davis, Jr. c/o Capital Gaming International, Inc.
Bayport One, Suite 250
8025 Black Horse Pike
West Atlantic City, NJ 08232
EIGHTH: Pursuant to the provisions of Section 24 of the Louisiana Business
Corporation Law, any director or officer of this corporation shall not be
personally liable to the corporation or its shareholders for damages for breach
of any duty owed to the corporation or its shareholders, except that this
provision shall not relieve a director or officer of liability for any breach of
duty based upon an act or omission (a) in breach of such person's duty of
loyalty to the corporation or its shareholders; (b) for any action not taken in
good faith, involving intentional misconduct or in knowing violation of law; (c)
amounting to an unlawful distribution or other violation of R.S. 12:92(D); or
(d) resulting in receipt by such person of an improper personal benefit.
NINTH:
(a) Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a
-2-
<PAGE>
person of whom he or she is the legal representative, is or was a
director or officer of the corporation or is or was serving at
the request of the corporation as a director, officer, employee
or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the tests of such
proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the fullest
extent authorized by the Louisiana Business Corporation Law, as
the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment
permits the corporation to provide broader indemnification rights
than said law permitted the corporation to provide prior to such
amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and
administrators: provided, however, that, except as provided in
paragraph (b) hereof, the corporation shall indemnify any such
person seeking indemnification in connection with a proceeding
(or part thereof) initiated by such person only if such
proceeding (or part thereof) was authorized by the Board of
Directors of the corporation. The right to indemnification
conferred in this Section shall be a contract right and shall
include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Louisiana Business
Corporation Law, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or
officer (and not in any other capacity in which services were or
are rendered by such person while a director or officer,
including, without limitation, service to any employee benefit
plan) in advance of the final disposition of a proceeding, shall
be made only upon delivery to the corporation of an undertaking,
by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this
Section or otherwise. The corporation may, by action of its Board
of Directors, provide indemnification to employees and agents of
the corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a)
of this Section is not paid in full by the corporation within
thirty (30) days after a written claim has been received by the
corporation, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the
claim, and, if successful, in whole
-3-
<PAGE>
or in part, the claimant shall be entitled to be paid also the
expense of prosecuting such claim. It shall be a defense to any
such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any is
required, has been tendered to the corporation) that the claimant
has not met the standards of conduct which make it permissible
under the Louisiana Business Corporation Law for the corporation
to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the corporation. Neither the
failure of the corporation (including its Board of Directors,
independent legal counsel, or its shareholders) to have made a
determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances
because he or she had met the applicable standard of conduct set
forth in the Louisiana Business Corporation Law, nor an actual
determination by the corporation (including the Board of
Directors, independent legal counsel, or its shareholders) that
the claimant has not met such applicable standard of conduct,
shall be a defense to an action or create a presumption that the
claimant has not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance
of its final disposition conferred in this Section shall not be
exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Articles of
Incorporation, by-law, agreement, vote of shareholders or
disinterested directors or otherwise.
(d) Insurance. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or
agent of the corporation or another corporation, partnership,
joint venture, trust or other enterprise against any such
expense, liability or loss, whether or not the corporation would
have the power to indemnify such person against such expense,
liability or lose under the New Jersey Business Corporation Act.
TENTH: This corporation reserves the right to amend, alter, change or
repeal any provision contained in these articles in the manner now or hereafter
prescribed by statute, and all rights conferred upon shareholders herein are
granted subject to this reservation.
IN WITNESS WHEREOF, I the undersigned, capable of contracting, have
hereunto affixed my signature on this 4th day of June, 1993.
--- ----
/s/ I.G. Davis, Jr.
---------------------------------
I.G. Davis, Jr., Chairman and
-4-
<PAGE>
STATE OF NEW JERSEY)
)
COUNTY OF MERCER )
BE IT KNOWN, That on this 4th day of the month of June, in the year of our
--- ----
Lord, 1993, before me, the undersigned, Notary Public in and for the County and
State aforesaid duly commissioned and qualified, there came and appeared I.G.
Davis, Jr., known to me, Notary, and known by me to be the person whose name
appears upon the foregoing instrument and said appearer declared and
acknowledged unto me, Notary, that he executed the said instrument for the uses
and purposes therein set forth and apparent.
IN WITNESS WHEREOF, said appearer has signed these presents, and I have
hereunto set my official hand and seal on the day and date first hereinabove
written.
/s/
----------------------------
(Notarial Seal) Notary Public
<PAGE>
ARTICLES OF
AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
CRESCENT CITY CAPITAL DEVELOPMENT CORPORATION
Crescent City Capital Development Corp., a Louisiana corporation having its
registered office in the parish of East Baton Rouge, hereby certifies to the
Secretary of State of Louisiana, that:
FIRST: The Articles of Incorporation of this corporation are hereby
amended so that article 5 thereof shall read as follows:
"5. The aggregate number of shares which the corporation shall have
authority to issue is: one thousand (1,000) shares, $.01 par value.
The sale, assignment, transfer, pledge or disposition of the security
or securities which represent five percent (5%) or more of the total
outstanding shares issued by the corporation is conditional and
subject to prior approval by the appropriate licensing authority
acting in accordance with the Louisiana Riverboat Economic Development
and Gaming Control Act."
SECOND: That in lieu of a meeting and vote of shareholders, the sole
shareholder of the corporation has given written consent to said amendment in
accordance with the provisions of R.S. 12:76 La. Rev. Stats., 1950.
IN WITNESS WHEREOF, this instrument has been signed on behalf of Crescent
City Capital Development Corp. by its President and Secretary on this 20th day
----
of January, 1994.
-------
By: /S/ Edward M. Tracy
--------------------------------
Edward M. Tracy, President
By: /S/ Harry Hornbostel
--------------------------------
Henry Hornbostel,
<PAGE>
STATE OF NEW JERSEY
COUNTY OF MERCER
BE IT KNOWN that on this 20th day January, 1994, before me the undersigned,
---- -------
a Notary Public in and for the County and State aforesaid, duly commissioned and
qualified, there came and appeared Edward M. Tracy, known to me, Notary, and
known by me to the be the President of Crescent City Capital Development Corp.
and Henry Hornbostel, known to me, Notary, and known by me to be the Secretary
of Crescent City Capital Development Corp., who signed the within and foregoing
instrument before me and who acknowledged to me, Notary, that they signed,
executed, and delivered said instrument in their capacity as President and
Secretary of Crescent City Capital Development Corp. for the uses and purposes
therein set forth and apparent.
IN WITNESS WHEREOF the said appearer has signed these presents and I have
hereunto affixed my official hand and seal, on the date and year first herein
above written, after due reading of the whole.
/s/ Edward M. Tracy
----------------------------------
Edward M. Tracy, President
/s/ Henry Hornbostel
----------------------------------
Henry Hornbostel, Secretary
(NOTARIAL SEAL)
/S/_________________________
NOTARY PUBLIC
<PAGE>
AMENDMENT TO ARTICLES OF INCORPORATION
OF
CRESCENT CITY CAPITAL DEVELOPMENT CORPORATION
STATE OF NEW JERSEY
COUNTY OF ATLANTIC
BEFORE ME, the undersigned authority, personally came and appeared EDWARD
M. TRACY, President, and WILLIAM S. PAPAZIAN, Assistant Secretary of and acting
for CRESCENT CITY CAPITAL DEVELOPMENT CORPORATION, a corporation organized and
existing under the laws of the State of Louisiana, who declare, that pursuant to
the Unanimous Written Consent by all shareholders of this corporation held on
the 9th day of May, 1996, a certified copy of said Unanimous Consent being
--- ---
attached hereto, that they do now appear for the purpose of effecting an
amendment to the Articles of Incorporation, as follows:
I.
The article entitled "FIRST" shall be amended to reflect the following:
FIRST: The name of the corporation shall be:
CASINO MAGIC OF LOUISIANA, CORP.
They further declare that the original date of incorporation was June
9, 1993.
II.
That in lieu of a meeting and vote of shareholders, the sole shareholder of
the corporation has given written consent to said amendment in accordance with
the provisions of R.S. 12:76 La. Rev. Stats., 1950.
<PAGE>
THUS DONE AND SIGNED in my office in the City of W. Atlantic City, County
----------------
of Atlantic, State of NJ, on this 9th day of May, 1996, in the presence of the
-------- -- ---
undersigned competent witnesses and me, Notary Public, after due reading of the
whole.
WITNESSES:
/s/ /s/ Edward M. Tracy
- --------------------- -----------------------------
EDWARD M. TRACY, President
/s/ /s/ William S. Papazian
- --------------------- -----------------------------
WILLIAM S. PAPAZIAN, Asst. Secretary
/s/_________________________
NOTARY PUBLIC
My commission expires:_______________________
-2-
<PAGE>
NOTICE OF CHANGE OF REGISTERED OFFICE
AND/OR CHANGE OF REGISTERED AGENT
(R.S. 12:104)
STATE OF LOUISIANA
PARISH OF EAST BATON ROUGE
TO: THE SECRETARY OF STATE
BATON ROUGE, LOUISIANA
Complying with L.S.A.-R.S. 12:104, et seq.:
CASINO MAGIC OF LOUISIANA, CORP.
--------------------------------
(Name of Corporation)
hereby makes it's notice of a change as follows:
Mailing Address and Municipal Address of Location of its Registered Office:
1701 Old Minden Road
Bossier City LA 71111
Name and Post Office Address or Location of Each Registered Agent:
Daniel K. Rester
Attorney at Law
2431 S. Acadian Thruway, Suite 600
Baton Rouge LA 70808
Name and Address of the First Directors (if selected when articles are filed):
<TABLE>
<S> <C> <C>
James E. Ernst Robert A. Callaway Jay Osman
President Secretary Treasurer
711 Casino Magic Drive 711 Casino Magic Drive 711 Casino Magic Drive
Bay St. Louis MS 39520 Bay St. Louis MS 39520 Bay St. Louis MS 39520
</TABLE>
SIGNED AND DATED at Bay St. Louis, Mississippi, on this 17th day of August,
----
1996.
/s/ Jay Osman
------------------------------
Jay Osman, Treasurer
<PAGE>
AFFIDAVIT OF ACCEPTANCE OF APPOINTMENT
--------------------------------------
BY DESIGNATED REGISTERED AGENT
------------------------------
ACT 769 OF 1987
---------------
To: SECRETARY OF STATE OF LOUISIANA - CORPORATIONS DIVISION
STATE OF LOUISIANA
PARISH OF EAST BATON ROUGE
ON THIS 15th day of August, 1996, before me, a Notary Public in and for the
aforesaid State and Parish, personally came and appeared DANIEL K. RESTER, who
is to me known to be the person, and who, being duly sworn, acknowledged to me
that he does hereby accept appointment as the Registered Agent of CASINO MAGIC
OF LOUISIANA, CORP., which is a Corporation authorized to transact business in
the State of Louisiana pursuant to the provisions of Title 12, Chapter 1, 2
and 3.
/s/ Daniel K. Rester
------------------------------------------
DANIEL K. RESTER
Signature of Registered Agent
SWORN TO AND SUBSCRIBED before me, on the 15th day of August, 1996.
/s/
-----------------------------------------
SUSAN SOILEAU - NOTARY PUBLIC
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.45
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>BY-LAWS OF CASINO MAGIC
<TEXT>
<PAGE>
EXHIBIT 3.45
B Y - L A W S
of
CASINO MAGIC OF LOUISIANA, CORP.
(FKA CRESCENT CITY CAPITAL DEVELOPMENT CORPORATION)
ARTICLE I - OFFICES
-------------------
The registered office of the Corporation shall be located in such city as
the Board of Directors shall designate. The principal office of the Corporation
is in the City of West Atlantic City, County of Ocean, State of New Jersey. The
Board of Directors has full power and authority to change the principal place of
business at any time to another location within or outside of the State of New
Jersey. The Corporation may also have offices at such other places within or
without the State of New Jersey as the Board may from time to time determine or
the business of the Corporation may require.
ARTICLE II - SHAREHOLDERS
-------------------------
1. PLACE OF MEETINGS.
Meetings of shareholders shall be held at the principal office of the
Corporation or at such place within or without the State of New Jersey as the
Board shall authorize.
2. ANNUAL MEETING.
The annual meeting of the shareholders shall be held on the first
Tuesday of the fifth month following the close of the Corporation's fiscal year
at 10:00 a.m. in each year if not a legal holiday; and if a legal holiday then
on the next business day following at the same hour, or at such other date and
time as may be fixed by the Board of Directors, when the shareholders shall
elect a Board and transact such other business as may properly come before the
meeting.
3. SPECIAL MEETINGS.
Special meetings of the shareholders may be called by the Board or by
the President and shall be called by the President or the Secretary at the
request in writing of a majority of the Board or at the request in writing by
shareholders owning a majority in amount of the shares issued and outstanding.
Such request shall state the purpose of purposes of the proposed meeting.
Business transacted at a special meeting shall be confined to the purposes
stated in the notice.
4. FIXING RECORD DATE.
For the purpose of determining the shareholders entitled to notice of
or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent to or
<PAGE>
dissent from any proposal without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any dividend or the allotment of any
rights, or for the purpose of any other action, the Board shall fix, in advance,
a date as the record date for any such determination of shareholders. Such date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting, nor more than sixty (60) days prior to any other action. If no
record date is fixed, it shall be determined in accordance with the provisions
of law.
5. NOTICE OF MEETINGS OF SHAREHOLDERS.
Written notice of each meeting of shareholders shall state the purpose
or purposes for which the meeting is called, the place, date, and hour of the
meeting and, unless it is the annual meeting, shall indicate that it is being
issued by or at the direction of the person or persons calling the meeting.
Notice shall be given either personally or by mail to each shareholder entitled
to vote at such meeting, not less than ten (10) nor more than sixty (60) days
before the date of the meeting. If action is proposed to be taken that might
entitle the shareholders to payment for their shares, the notice shall include a
statement of that purpose and to that effect. If mailed, the notice is given
when deposited in the United States mail, with postage thereon prepaid, directed
to the shareholder at his address as it appears on the record of shareholders,
or, if he shall have filed with the Secretary a written request that notices to
him be mailed to some other address, then directed to him at such other address.
6. WAIVERS.
Notice of meeting need not be given to any shareholder who signs a
waiver of notice, in person or by proxy, whether before or after the meeting.
The attendance of any shareholder at a meeting, in person or by proxy, without
protesting prior to the conclusion of the meeting the lack of notice of such
meeting, shall constitute a waiver of notice by him.
7. QUORUM OF SHAREHOLDERS.
Unless the Certificate of Incorporation provides otherwise, the
holders of a majority of the shares entitled to vote thereat shall constitute a
quorum at a meeting of shareholders for the transaction of any business,
provided that when a specified item of business is required to be voted on by a
class or classes, the holders of a majority of the shares of such class or
classes shall constitute a quorum for the transaction of such specified item of
business.
When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any shareholder.
The shareholders present may adjourn the meeting despite the absence
of a quorum.
8. PROXIES.
Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent without a meeting may authorize another person or
persons to act for him by proxy.
-2-
<PAGE>
Every proxy must be signed by the shareholder or his attorney-in-fact.
No proxy shall be valid after expiration of eleven months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by law.
9. QUALIFICATION OF VOTERS.
Every shareholder of record shall be entitled at every meeting of
shareholders to one vote for every share standing in his name on the record of
shareholders, unless otherwise provided in the Certificate of Incorporation.
10. VOTE OF SHAREHOLDERS.
Except as otherwise required by statute or by the Certificate of
Incorporation:
(a) directors shall be elected by a plurality of the votes cast at a
meeting of shareholders by the holders of shares entitled to vote in the
election;
(b) all other corporate action shall be authorized by a majority of the
votes cast.
11. WRITTEN CONSENT OF SHAREHOLDERS.
Any action required or permitted to be taken at a meeting of
shareholders by statute, the certificate of incorporation, or by-laws other than
the annual election of directors may be taken without a meeting upon the written
consent of shareholders who would have been entitled to cast the minimum number
of votes which would be necessary to authorize such action at a meeting at which
all shareholders entitled to vote thereon were present and voting. The written
consents of the shareholders consenting thereto shall be filed with the minutes
of proceedings of shareholders.
ARTICLE III - DIRECTORS
-----------------------
1. BOARD OF DIRECTORS.
Subject to any provision in the Certificate of Incorporation the
business of the Corporation shall be managed by its Board of Directors, each of
whom shall be at least eighteen years of age and need not be shareholders.
2. NUMBER OF DIRECTORS.
The number of directors shall be not less than one (1) nor more than
nine (9). The number of directors shall be fixed by the Board from time to
time.
3. ELECTION AND TERM OF DIRECTORS.
At each annual meeting of shareholders, the shareholders shall elect
directors to hold office until the next annual meeting. each director shall hold
office until the expiration of the term for which he is elected and until his
successor has been elected and qualified, or until his prior resignation or
removal.
-3-
<PAGE>
4. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number
of directors and vacancies occurring in the Board for any reason, except the
removal of directors without cause, may be filled by a vote of a majority of the
directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of directors without cause shall be filled by
vote of the shareholders. A director elected to fill a vacancy caused by
resignation, death, or removal shall be elected to hold office for the unexpired
term of his predecessor.
5. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by vote of the
shareholders or by action of the Board. Directors may be removed without cause
only by vote of the shareholders.
6. RESIGNATION.
A director may resign at any time by giving written notice to the
Board, the President, or the Secretary of the Corporation. Unless otherwise
specified by the notice, the resignation shall take effect upon receipt thereof
by the Board or such officer, and the acceptance of the resignation shall not be
necessary to make it effective.
7. QUORUM OF DIRECTORS.
Unless otherwise provided in the Certificate of Incorporation, a
majority of the entire board shall constitute a quorum for the transaction of
business or of any specified item of business.
8. ACTION OF THE BOARD.
(a) Unless otherwise required by law, the vote of a majority of the
directors present at the time of the vote, if a quorum is present at such time,
shall be the act of the Board. Each director present shall have one vote
regardless of the number of shares, if any, which he may hold.
(b) Whenever any action is required or permitted to be taken by the Board
or any committee thereof, such action may be taken without a meeting if all
members of the Board or the committee consent in writing to the adoption of a
resolution authorizing the action. The resolution and the written consent
thereto by members of the Board or committee shall be filed with the minutes of
the proceedings of the Board or committee. Meetings may also be held by
conference telephone.
9. PLACE AND TIME OF BOARD MEETINGS; NOTICE; ADJOURNMENT.
(a) The Board may hold its meetings at the office of the corporation or
at such other places, either within or without the State of New Jersey, as it
may, from time to time, determine.
-4-
<PAGE>
(b) A regular annual meeting of the Board shall be held immediately
following the annual meeting of shareholders at the place of such annual meeting
of shareholders.
(c) Regular meetings of the Board may be held without notice at such time
and place as it from time to time shall determine.
(d) Special meetings of the Board shall be held upon notice to the
directors and may be called by the President upon three days' notice to each
director either personally or by mail or by wire; special meetings shall be
called by the President or by the Secretary in a like manner on written request
of two directors. Notice of a meeting need not be given to any director who
submits a waiver of notice whether before or after the meeting or who attends
the meeting without protesting prior thereto or at its commencement, the lack of
notice to him.
(e) A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. Notice of the
adjournment shall be given all directors who were absent at the time of the
adjournment and, unless such time and place are announced at the meeting, to the
other directors.
10. CHAIRMAN.
At all meetings of the Board the Chairman or, in his absence, the
president or, in his absence, Vice President or, in his absence, a chairman
chosen by the Board shall preside.
11. EXECUTIVE AND OTHER COMMITTEES.
The Board, by resolution adopted by a majority of the entire Board,
may designate from among its members an executive committee and other
committees, each consisting of three or more directors. Each such committee
shall serve at the pleasure of the Board.
12. COMPENSATION.
Directors shall be compensated for their services and reimbursed for
their expenses as employees, officers, directors, and members of Board or of
committees. The Board shall periodically determine a reasonable basis for
compensation, and a majority of the Board must adopt any resolution determining
compensation. The Board may, if it deems it appropriate, provide for reduced or
no additional compensation for Board members who are compensated employees of
the Corporation. In addition, directors by resolution of the Board may
authorize a fixed sum and expenses for actual attendance at each regular and
special meeting of the Board. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
-5-
<PAGE>
ARTICLE IV - OFFICERS
---------------------
1. OFFICES, ELECTION, TERM.
(a) The Board may elect or appoint a Chairman of the Board, a President,
one or more Vice-Presidents, a Secretary, and a Treasurer, and such other
officers as it may determine, who shall have such duties, powers, and functions
as hereinafter provided.
(b) All officers shall be elected or appointed to hold office until the
meeting of the Board following the annual meeting of shareholders.
(c) Each officer shall hold office for the term for which he is elected
or appointed and until his successor has been elected or appointed and
qualified.
2. REMOVAL, RESIGNATION, SALARY.
(a) Any officer elected or appointed by the Board may be removed by the
Board with or without cause.
(b) In the event of the death, resignation, or removal of an officer, the
Board in its discretion may elect or appoint a successor to fill the unexpired
term.
(c) Any two or more offices may be held by the same person, except the
offices of President and Secretary.
(d) The salaries of all officers shall be fixed by the Board.
(e) The directors may require any officer to give security for the
faithful performance of his duties.
3. CHAIRMAN OF THE BOARD.
The Chairman of the Board shall preside at all meetings of the
shareholders and of the Board and shall see that all orders and resolutions of
the Board are carried into effect. The Board may designate the Chairman chief
executive officer of the Corporation.
4. PRESIDENT.
The President shall be the chief operating officer of the Corporation
and shall have the management of the operations of the Corporation. If there be
no Chairman of the Board, the President shall perform the duties of the Chairman
of the Board.
5. VICE-PRESIDENTS.
During the absence or disability of the President, the Vice President
or, if there are more than one, the Executive Vice President, shall have all the
powers and functions of the President. Each Vice President shall perform such
other duties as the Board shall prescribe.
-6-
<PAGE>
6. SECRETARY.
The Secretary shall:
(a) attend all meetings of the Board and of the shareholders;
(b) record all votes and minutes of all proceedings in a book to be kept
for that purpose;
(c) give or cause to be given notice of all meetings of shareholders and
of special meetings of the Board;
(d) keep in safe custody the seal of the Corporation and affix it to any
instrument when authorized by the Board;
(e) when required, prepare or cause to be prepared and available at each
meeting of shareholders a certified list in alphabetical order of the names of
the shareholders entitled to vote thereat, indicating the number of shares of
each respective class held by each;
(f) keep all the documents and records of the Corporation as required by
law or otherwise in a proper and safe manner;
(g) perform such other duties as may be prescribed by the Board.
7. ASSISTANT SECRETARIES.
During the absence or disability of the Secretary, the Assistant
Secretary or, if there are more than one, the one so designated by the Secretary
or the Board, shall have all the powers and functions of the Secretary.
8. TREASURER.
The Treasurer shall:
(a) have the custody of the corporate funds and securities;
(b) keep full and accurate accounts of receipts and disbursements in the
corporate books;
(c) deposit all money and other valuables in the name and to the credit of
the Corporation in such depositories as may be designated by the Board;
(d) disburse the funds of the Corporation as may be ordered or authorized
by the Board and preserve proper vouchers for such disbursements;
(e) render to the President and Board at the regular meetings of the
Board, or whenever they require it, an account of all his transactions as
Treasurer and of the financial condition of the Corporation;
-7-
<PAGE>
(f) render a full financial report at the annual meeting of the
shareholders if so requested;
(g) be furnished by all corporate officers and agents, at his request,
with such reports and statements as he may require as to all financial
transactions of the Corporation;
(h) perform such other duties as are given to him by these by-laws or as
from time to time are assigned to him by the Board or the President.
9. ASSISTANT TREASURER.
During the absence or disability of the Treasurer, the Assistant
Treasurer or, if there are more than one, the one so designated by the Treasurer
or by the Board, shall have all the powers and functions of the Treasurer.
10. SURETIES AND BONDS.
In case the Board shall so require, any officer or agent of the
Corporation shall execute to the Corporation a bond in such sum and with such
surety or sureties as the Board may direct, conditioned upon the faithful
performance of his duties to the Corporation and including responsibility for
negligence and for the accounting for all property, funds, or securities of the
Corporation which may come into his hands.
ARTICLE V - CERTIFICATES FOR SHARES
------------------------------------
1. CERTIFICATES.
The shares of the Corporation shall be represented by certificates.
They shall be numbered and entered in the books of the Corporation as they are
issued. They shall exhibit the holder's name and the number of shares and shall
be signed by the President or a Vice President and the Treasurer or the
Secretary, and shall bear the corporate seal.
2. LOST OR DESTROYED CERTIFICATES.
The Board may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the Corporation,
alleged to have been lost or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the Board may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
give the Corporation a bond in such sum and with such surety or sureties as it
may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost or
destroyed.
3. TRANSFERS OF SHARES.
(a) Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession,
-8-
<PAGE>
assignment, or authority to transfer, it shall be the duty of the Corporation to
issue a new certificate to the person entitled thereto, and cancel the old
certificate; every such transfer shall be entered on the transfer book of the
Corporation which shall be kept at its principal office. No transfer shall be
made within ten days next preceding the annual meeting of shareholders.
(b) The Corporation shall be entitled to treat the holder of record of
any share as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of the State of New Jersey.
4. CLOSING TRANSFER BOOKS.
The Board shall have the power to close the share transfer books of
the Corporation for a period of not more than ten days during the thirty day
period immediately preceding (i) any shareholders' meeting, or (ii) any date
upon which shareholders shall be called upon to or have a right to take action
without a meeting, or (iii) any date fixed for the payment of a dividend or any
other form of distribution, and only those shareholders of record at the time
the transfer books are closed shall be recognized as such for the purpose of (A)
receiving notice of or voting at such meeting, or (B) allowing them to take
appropriate action, or (C) entitling them to receive any dividend or other form
of distribution.
ARTICLE VI - DIVIDENDS
----------------------
Subject to the provisions of the Certificate of Incorporation and to
applicable law, dividends on the outstanding shares of the Corporation may be
declared in such amounts and at such time or times as the Board may determine.
Before payment of any dividend, there may be set aside out of the net profits of
the Corporation available for dividends such sum or sums as the Board, from time
to time, in its absolute discretion deems proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the Board shall think
conducive to the interests of the Corporation, and the Board may modify or
abolish any such reserve.
ARTICLE VII - CORPORATE SEAL
----------------------------
The seal of the Corporation shall be circular in form and bear the
name of the Corporation, the year of its organization, and the words "Corporate
Seal, Louisiana." The seal may be used by causing it to be impressed directly
on the instrument or writing to be sealed, or upon adhesive substance affixed
thereto. The seal on the certificate for shares or upon any corporate
obligation for the payment of money may be a facsimile, engraved or printed.
ARTICLE VIII - EXECUTION OF INSTRUMENTS
---------------------------------------
All corporate instruments and documents shall be signed or
countersigned, executed, verified, or acknowledged by such officer or officers
or other person or persons as the Board may from time to time designate.
-9-
<PAGE>
ARTICLE IX - FISCAL YEAR
-------------------------
The fiscal year shall begin on the first day of January in each year
or at such other time as may be designated by the Board of Directors.
ARTICLE X - REFERENCES TO CERTIFICATE OF INCORPORATION
------------------------------------------------------
Reference to the Certificate of Incorporation in these by-laws shall
include all amendments thereto or changes thereof unless specifically excepted.
ARTICLE XI - BY-LAW CHANGES
---------------------------
AMENDMENT, REPEAL, ADOPTION, ELECTION OF DIRECTORS.
(a) Except as otherwise provided in the Certificate of Incorporation, the
by-laws may be amended, repealed, or adopted by vote of the holders of the
shares at the time entitled to vote in the election of any directors. By-laws
may also by amended, repealed, or adopted by the Board; but any by-law adopted
by the Board may be amended by the shareholders entitled to vote thereon as
hereinabove provided.
(b) If any by-law regulating an impending election of directors is
adopted, amended, or repealed by the Board, there shall be set forth in the
notice of the next meeting of shareholders for the election of directors the by-
law so adopted, amended, or repealed, together with a concise statement of the
changes made.
ARTICLE XII - INDEMNIFICATION
-----------------------------
The directors, officers, employees and agents of the Corporation shall
be indemnified to the fullest extent permitted by the Business Corporation Law
of the State of Louisiana.
-10-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.46
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>ARTICLES OF INCORPORATION OF JEFFERSON CASINO
<TEXT>
<PAGE>
EXHIBIT 3.46
United States of America
State of Louisiana
Fox McKeithen
Secretary of State
As Secretary of State, of the State of Louisiana, I do hereby Certify that a
copy of the Articles of Incorporation and Initial Report of
JEFFERSON CASINO CORPORATION
Domiciled at Baton Rouge, Louisiana, Parish of East Baton Rouge,
A corporation organized under the provisions of R.S. 1950, Title 12, Chapter 1,
as amended,
By Act before a Notary Public in and for the Parish of East Baton Rouge, State
of Louisiana, on February 26, 1993, the date when corporate existence began,
Was filed and recorded in this office on February 26, 1993, in the Record of
Charters Book 344,
And all fees having been paid as required by law, the corporation is authorized
to transact business in this State, subject to the restrictions imposed by law,
including the provisions of R.S. 1950, Title 12, Chapter 1, as amended.
In testimony whereof, I have hereunto set my hand and caused the Seal of my
Office to be affirmed at the City of Baton Rouge on February 26, 1993
/s/ Fox McKeithen
Secretary of State
[Seal of Secretary of State for the State of Louisiana]
<PAGE>
ARTICLES OF INCORPORATION OF
JEFFERSON CASINO CORPORATION
STATE OF LOUISIANA
PARISH OF EAST BATON ROUGE
BE IT KNOWN, on this 26th day of February 1993, personally came and
appeared before me, the undersigned Notary Public, the subscriber hereto, of the
full age of majority, who declared to me, in the presence of the undersigned
competent witnesses, that, availing himself of the provisions of the Louisiana
Business Corporation Law (Title 12, Chapter 1, Louisiana Revised Statutes of
1950 as may be codified and amended), he does hereby organize himself, his
successors and assigns, into a Corporation in pursuance of that Law, under and
in accordance with the following articles of incorporation:
ARTICLE I.
NAME
The name of the Corporation is Jefferson Casino Corporation.
ARTICLE II.
OBJECT AND PURPOSE
The object and purpose for which this Corporation is organized is to
engage, either for its own account or the account of others, as either agent or
principal, in any lawful activity for which Corporations may be formed under the
provisions of the Louisiana Business Corporation Law (Title 12, Chapter 1,
Louisiana Revised Statutes of 1950 as may be modified and amended); and to the
extent not prohibited thereby to enter upon and to engage in any kind of
business of any nature whatsoever in any other state of the United States of
America, any foreign nation, and any territory of any country to the extent
permitted by the laws of such other state, nation or territory. It shall have
all such power as is not repugnant to law.
ARTICLE III.
AUTHORIZED CAPITAL
A. The total authorized capital stock of this Corporation is 10,000 shares,
to be issued with No Par Value.
B. Without the necessity of action by the shareholder, shares of stock may
be issued by the Corporation from time to time by the Board of Directors. Any
and all shares so issued, if the consideration fixed for such shares is paid,
shall be deemed fully paid stock, and not liable to any further call or
assessment, and the holder of such shares shall not be liable to any further
payment thereon. All or any part of the authorized capital stock may be issued
or sold from time to time for not less than the par value, in the case of par
value
<PAGE>
stock, or for not less than the consideration fixed by the Board of Directors,
in the case of no par value stock. Stock may be given in exchange for cash,
services rendered to the Corporation, or in exchange for property transferred to
the Corporation. The capital stock of this Corporation shall be fully paid and
nonassessable and when issued shall be represented by certificates signed by the
president or by a vice president together with the signature of a secretary or a
secretary-treasurer.
C. Each holder of any of the shares of the capital stock of the
Corporation shall be entitled to a preemptive right to purchase or to subscribe,
in proportion to the number of shares he holds with respect to the number of
shares outstanding, any or all of the following: (a) any newly authorized shares
issued by reason of an increase in the authorized capital stock of the
Corporation, whether the stock shall be issued for cash, property, or in
exchange for any other lawful consideration; (b) treasury stock which has been
issued and then reacquired by the Corporation; (c) stock authorized by the
Corporation but as yet unissued; and (d) stock offered for sale to satisfy any
option or conversion rights.
ARTICLE IV.
DIRECTORS
A. The Board of Directors shall be charged with the management of all of
the affairs of the Corporation and shall have authority to exercise, in addition
to the powers and authority expressly conferred upon it, all such powers of the
Corporation and all such other lawful acts and things which the Corporation or
its shareholders might do, unless such acts or things are prohibited or directed
or required to be exercised or done by the stockholders or officers of the
Corporation, by applicable statute, or by the articles of incorporation, or by
the bylaws, or by shareholders' agreement.
B. Any director absent from a meeting of the board or any committee
thereof, may be represented by any person who holds said absent director's proxy
and said person may cast the absent director's vote.
ARTICLE V.
INCORPORATORS
The name and post office address of the incorporator is as follows:
Paul S. West
9th Floor One American Place
Baton Rouge, Louisiana 70825
ARTICLE VI.
CAPITAL SURPLUS AND DIVIDENDS
The Board of Directors shall have such power and authority with respect to
capital, surplus and dividends, including allocation, increases, reduction,
utilization, distribution and
<PAGE>
payment as is permitted and provided in Sections 61, 62, and 63 of the Louisiana
Business Corporation Law or other applicable law.
ARTICLE VII.
PURCHASE AND REDEMPTION OF SHARES
The Corporation may purchase or redeem its own share in the manner and on
the conditions permitted and provided in Section 55 of the Business Corporation
Law or other applicable law, and as may be authorized by the Board of Directors;
and shares so purchased may be reissued and disposed of as authorized by law, or
may be cancelled and the capital stock reduced, as the Board of Directors may,
from time to time, determine, in accordance with law.
ARTICLE VIII.
REVERSION OF UNCLAIMED DIVIDENDS,
RECLASSIFIED STOCK OR REDEMPTION PRICE
Cash, property or share dividends, shares issuable to shareholders in
connection with a reclassification of stock, and the redemption price of
redeemed shares, which are not claimed by the shareholders entitled thereto
within ninety (90) days after the dividend or redemption price became payable or
the shares became issuable, despite reasonable efforts by the Corporation to pay
the dividend or redemption price or to deliver the certificates for the shares
to such shareholders within such time, shall: at the expiration of such time,
revert in full ownership to the Corporation, and the Corporation's obligation to
pay such dividend or redemption price or issue such shares, as the case may be,
shall thereupon cease; provided that the Board of Directors may, at any time,
for any reason satisfactory to it, but need not, authorize (a) payment of the
amount of any cash or property dividend or redemption price or (b) issuance of
any shares, ownership of which has reverted to the Corporation, to the entity
who or which would be entitled thereto had such reversion not occurred.
ARTICLE IX.
CONVERTIBLE SECURITIES AND STOCK PURCHASE RIGHTS
The Corporation may issue convertible securities and rights to convert
shares and obligations of the Corporation into shares of any authorized class of
stock, and the right or option to purchase shares of any authorized class of
stock, in the manner or on the conditions permitted and provided in Section 56
of the Business Corporation Law or other applicable law, and as may be
authorized by the Board of Directors.
ARTICLE X.
AMENDMENTS TO ARTICLES OF INCORPORATION
Any amendment for which a larger vote is not specifically made mandatory by
the Louisiana Business Corporation Law may be made by a majority of the voting
power present of the shareholders entitled to vote under these articles,
including an increase or
<PAGE>
reduction of capital stock. In addition, if an amendment adversely affects the
rights of any class or classes of shareholders, a majority of the voting power
present of that class or classes shall be required, whether or not that class is
entitled to vote.
ARTICLE XI.
VOTING OF SHAREHOLDERS AND BONDHOLDERS
Any corporate action requiring the vote of shareholders, or of bondholders
if bonds are issued having any voting rights, including specifically, but not by
way of limitation, adoption and approval of amendments to the articles, approval
of merger and consolidation agreements, authorization of voluntary disposition
of all or substantially all of the corporate assets, and removal of a member of
the Board of Directors, may be authorized by consent in writing signed by the
shareholders having that proportion of the total voting power which would be
required to authorize and constitute such action at a meeting of such
shareholders or bondholders.
ARTICLE XII.
SALE AND OTHER TRANSFERS OF STOCK
The stock of this Corporation may be transferred freely unless otherwise
restricted by a Shareholders Stock Restriction Agreement.
ARTICLE XIII.
LIMITATION OF LIABILITY
The incorporators, officers, and directors of this Corporation claim the
benefits of limitation of liability provided in the Louisiana Business
Corporation Law, including, but not limited to, the limitation of liability
provided in La. R.S. 12:24(c) to the fullest extent allowed by law as fully and
completely as though the provisions were set forth in these Articles.
THUS DONE AND SIGNED at my office in the parish and state aforesaid, on the
day, month and year set forth above, in the presence of the undersigned
competent witnesses and me, Notary, after due reading of the whole.
WITNESSES: INCORPORATORS:
/S/ /S/ Paul S. West
- ----------------------- ----------------------------
Paul S. West, Incorporator
/S/
- -----------------------
/S/
----------------------------
Notary Public
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.47
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>BY-LAWS OF JEFFERSON CASINO
<TEXT>
<PAGE>
EXHIBIT 3.47
BYLAWS
OF
JEFFERSON CASINO CORPORATION
************************************************************************
ARTICLE I.
----------
Offices
-------
Section 1. Principal Office.
----------------
The principal office and the executive office of the corporation shall
be at 711 Casino Magic Drive in the City of Bay Saint Louis, County of Hancock,
State of Mississippi.
Section 2. Other Offices.
--------------
The corporation may also have offices in such other places, both
within and without the State of Louisiana, as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II.
-----------
Shareholders
------------
Section 1. Annual Meeting.
---------------
An annual meeting of the shareholders, commencing with the year 1994,
shall be held on the 1st day of March of each year, at 10:00 o'clock a.m., for
the purpose of electing Directors and transacting such other business as may
properly be brought before the meeting. If the election of Directors is not
held on the day designated herein for any annual meeting of the shareholders or
any adjournment thereof, the Board of Directors shall cause the election to be
held at a special meeting of the shareholders as soon thereafter as conveniently
may be done.
Section 2. Special Meeting.
----------------
Special meeting of the shareholders for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the President or by the
Board of Directors, and shall be called by the President or by the Board of
Directors, and shall be called by the President at the written request of the
holders of a majority of all of the outstanding shares of the corporation,
entitled to vote at the meeting.
Section 3. Place of Meeting.
-----------------
The Board of Directors may designate any place, either within or
without the State of Louisiana, as the place of meeting for the annual meeting
for any special meeting called by the Board of Directors; provided, however,
that if the special meeting is called at
<PAGE>
the written request of shareholders, the meeting shall be held at the registered
office of the corporation. A waiver of notice signed by all shareholders
entitled to vote at the meeting may designate any place, either within or
without the State of Louisiana, as the place for the holding of such meetings.
If no designation is made or if a special meeting be otherwise called, the place
of meeting shall be the registered office of the corporation in the State of
Louisiana.
Section 4. Notice of Meetings.
-------------------
Written or printed notice stating the place, day and hour of the
meeting, and in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than 10 nor more than 50 days
before the date of the meeting, either personally or by mail, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States Mail,
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage prepaid. If the meeting is called by
written request of the shareholders, the date of the meeting shall be not less
than 15 nor more than 60 days after receipt of request.
Section 5. Record Dates.
-------------
For the purpose of determining shareholders entitled to notice of or
to vote at any meeting of shareholders or any adjournment thereof, or for the
purpose of determining shareholders entitled to receive payment of any dividend,
or in order to make a determination of shareholders for any other corporate
purpose, the Board of Directors may fix in advance a date as the record date for
any such determination, such date in any case to be not more than 60 days, and
in the case of a shareholder's meeting not less than 10 days, prior to the date
on which the particular action requiring determination is to be taken. If no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or for the determination of
shareholders entitled to receive payment of a dividend, the date on which notice
of the meeting is mailed, or the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for determination.
Section 6. List of Stockholders.
---------------------
Prior to every election of Directors, a complete list of shareholders
having voting power present or represented by proxy shall decide any question
brought before the meeting unless the question is one which by express
provisions of the statutes of Louisiana or the Articles of Incorporation of the
corporation or by these By-Laws, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 7. Proxy.
------
At all shareholders' meetings, each shareholder having the right to
vote shall be entitled to vote in person or by proxy appointed by a written
instrument subscribed by
-2-
<PAGE>
such shareholder and bearing a date not more than three years prior to the
meeting, unless the instrument specifically provided for a longer period.
ARTICLE III.
------------
Directors
---------
Section 1. General.
--------
The property and business of the corporation shall be managed by a
Board of Directors exercising all powers of the corporation and empowered to do
all such lawful acts and things as are not by statute or by the Articles of
Incorporation or by these By-Laws directed or required to be exercised or done
by the shareholders.
Section 2. Number of Directors.
--------------------
The Board shall consist of not less than three (3) or more than seven
(7) Directors; provided that if there are less than three shareholders of the
corporation, the number of Directors may be the same as the number of
shareholders. Except as hereinabove provided, the Directors shall be elected at
the annual meeting, or at a special meeting called for that purpose, and each
Director so elected shall hold office for a period of one year or until his
successor shall be entitled to vote at the election, arranged in alphabetical
order, with the residence of each and the number of voting shares held by each,
shall be prepared by the Secretary. Such list shall be open for examination by
any shareholder at the corporation's principal office during the ten days
immediately preceding the election and shall be produced and kept at the time
and place of election during the whole time thereof, and subject to the
inspection of any shareholder.
Section 3. Business.
---------
Business transacted at all special meetings of shareholders shall be
confined to the objects stated in the call.
Section 4. Quorum.
-------
The holders of a majority of the shares of stock issued and
outstanding and entitled to vote thereat, present or represented by proxy, shall
be requisite for and shall constitute a quorum at all shareholders' meetings for
the transaction of business, except as otherwise provided by statute, by the
Articles of Incorporation, or by these By-Laws. If less than a majority of the
outstanding shares are represented at a meeting, however, a majority of the
outstanding shares so represented may adjourn the meeting from time to time
without notice, other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting where a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally called.
Section 5. Vote.
-----
When a quorum is present at a meeting, the vote of the holders of a
majority of the stock elected and shall qualify. Directors need not own stock.
-3-
<PAGE>
Section 6. Vacancies.
----------
If any vacancies occur in the Board caused by death, resignation,
retirement, disqualification, or removal from office of any director, a majority
of the directors then in office, though less than a quorum, may choose a
successor or successors, and the directors so chosen shall hold office until the
next annual election and until their successor are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at the
time of filing any vacancy, the directors then in office shall constitute less
than a majority of the whole Board, the proper court may, upon application of
any shareholder or shareholders holding at least ten percent of the total number
of the shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill such vacancies, or to
replace the directors chosen by the directors then in office.
MEETING OF THE BOARD
--------------------
Section 7. Place.
------
The Directors of the corporation may hold their meetings, both regular
and special, either within or outside the State of Louisiana.
Section 8. First Meeting.
--------------
The first meeting of each newly elected Board shall be held at such
time and place as shall be fixed by the vote of the stockholders at the annual
meeting and no notice of such meeting shall be necessary to the newly elected
Directors in order to legally constitute the meeting provided a quorum shall be
present; or, the Directors may meet in such place, and at such time, as shall be
fixed by the consent in writing of all the said Directors.
Section 9. Regular Meetings.
-----------------
Regular meetings of the Board may be held without notice at such time
and place as shall be from time to time determined by the Board.
Section 10. Special Meetings.
-----------------
Special meetings of the Board may be called by the President on 48
hours notice to each Director, either personally or by mail or telegram; special
meetings shall be called by the President or Secretary in like manner and on
like notice on the written request of any two Directors.
Section 11. Quorum.
-------
At all meetings of the Board, a majority of the Directors shall
constitute a quorum for transaction of business, except as otherwise provided by
statute or in the Articles of Incorporation of the corporation. If less than
such majority is present at a meeting, a majority of the Directors present may
adjourn the meeting from time to time without further notice until a majority is
present.
-4-
<PAGE>
Section 12. Vote.
-----
The affirmative vote of a majority of the Directors shall be required
for any act of the Board of Directors.
Section 13. Compensation.
-------------
By resolution of the Board of Directors, the Directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a regular sum fixed by them for attendance at each meeting of
the Board of Directors or a stated salary as Director. No such payment shall
preclude any Director from serving the corporation in any other capacity and
receiving compensation therefor.
Section 14. Written Consent.
----------------
Unless otherwise restricted by the Articles of Incorporation or these
By-Laws, any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting,
if all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
COMMITTEES OF DIRECTORS
-----------------------
Section 15. Designation.
------------
The Board of Directors may, be resolution passed by a majority of the
whole Board, designate one or more committees, each committee to consist of two
or more of the Directors of the corporation, which, to the extent provided in
said resolution, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the corporation, and
may have power to authorize the seal of the corporation to be fixed to all
papers which may require it. Any such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 16. Minutes.
--------
The committees shall keep regular minutes of their proceedings and
report the same to the Board when required.
ARTICLE IV.
-----------
Notice
------
Section 1. Method.
-------
Whenever notice is required to be given by any Director or shareholder
under provisions of the laws of Louisiana or of the Articles of Incorporation of
the corporation or of these By-Laws, such notice shall not be construed to mean
personal notice, but may be given in writing, by mail, addressed to such
Director or shareholder in such address as
-5-
<PAGE>
appears on the books of the corporation, and such notice shall be deemed to be
given at the time mailed.
Section 2. Waiver of Notice.
-----------------
Whenever any notice is required to be given under the provisions of
the laws of Louisiana or of the Articles of Incorporation or these By-Laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto, and such waiver need not specify the purpose of or the
business to be transacted at the meeting.
ARTICLE V.
----------
Officers
--------
Section 1. Designation.
------------
The officers of the corporation shall be a Chairman of the Board, a
President, one or more Vice-Presidents, a Secretary and a Treasurer, each of
whom shall be elected by the Board of Directors. Any two offices may be held by
the same person except that no one may hold the offices of President and
Treasurer at the same time.
Section 2. Election.
---------
The Board of Directors at its first meeting after each annual meeting
of shareholders shall choose a President from among its members, and shall
choose one or more Vice-Presidents, a Secretary and a Treasurer, none of whom
need be a member of the Board.
Section 3. Agents.
-------
The Board may appoint such agents on behalf of the corporation as it
shall deem necessary, for such terms and to exercise such powers and perform
such duties as shall be determined from time to time by the Board, and not
conflicting with these By-Laws or the Articles of Incorporation of the
corporation.
Section 4. Salaries.
---------
The salaries of all officers and agents of the corporation shall be
fixed by the Board of Directors.
Section 5. Term.
-----
The officers of the corporation shall hold office until their
successors are chosen and qualify, unless sooner removed or displaced. Any
officer elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the whole Board of Directors
whenever in their judgment the best interest of the corporation would be served
thereby.
-6-
<PAGE>
Section 6. Vacancy.
--------
Vacancy in any office because of death, resignation, removal,
disqualification or otherwise may be filed by the Board of Directors for the
unexpired portion of the terms.
CHAIRMAN OF THE BOARD
---------------------
Section 7. Duties.
-------
It shall be the duty of the Chairman of the Board of this corporation,
if present, to preside at all meetings of the Board of Directors and the
Executive Committee and exercise and perform such other powers and duties as may
from time to time be assigned to him by the Board of Directors or prescribed by
the By-Laws.
PRESIDENT
---------
Section 8. Duties.
-------
The President shall be the chief executive officer of the corporation,
and subject to the control of the Board of Directors, shall, in general,
supervise and control all of the business and affairs of the corporation. He
shall, when present, preside at all shareholders' meetings and shall be an ex-
officio member of all standing committees. He shall have general and active
management of the business of the corporation and shall see that all order and
resolutions of the Board are carried into effect. The president may sign
certificates for shares of the corporation and any deeds, mortgages, bonds,
contract or other instruments which the Board of Directors has authorized to be
executed, except in cases where the signing and execution thereof may be
expressly delegated by the Board of Directors or by these By-Laws to some other
officer or agent of the corporation or shall be required by law to be otherwise
signed or executed.
VICE-PRESIDENT
--------------
Section 9. Duties.
-------
The Vice-President shall, in the absence or disability of the
President, perform the duties and exercise the powers of the President, and
shall perform such other duties as the Board of Directors shall prescribe.
SECRETARY
---------
Section 10. Duties.
-------
The Secretary of the corporation shall attend all shareholders'
meetings and Board of Directors' meetings and keep the minutes in one or more
books provided for that purpose. He shall also: (1) see that all notices are
duly given in accordance with the
-7-
<PAGE>
provisions of these By-Laws as required by law; (2) be custodian of the
corporate records and of the seal of the corporation and see that the seal of
the corporation is affixed to all documents the execution of which on behalf of
the corporation under its seal is duly authorized; (3) keep a register
containing the post office address of each stockholder which shall be furnished
to the Secretary by such stockholder; (4) sign, with the President, certificates
for shares of stock in the corporation, the issuance of which shall have been
authorized by resolution of the Board of Directors; (5) have general charge of
the stock transfer books of the corporation; and (6) in general perform all
duties incident to the office of Secretary and such other duties as from time to
time may be assigned to him by the President or by the Board of Directors.
TREASURER
---------
Section 11. Duties.
-------
The Treasurer of the corporation shall have the custody of corporate
funds and securities and shall keep belonging to the corporation and shall
deposit all monies and other valuable effects in the name of and to the credit
of the corporation in such depositories as may be designated by the Board of
Directors. He will also in general perform all the duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
to him by President or by the Board of Directors.
Section 12. Accounting.
-----------
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and he shall render to the President and Directors, at the
regular meetings of the Board, or whenever they may require it, an account of
all his transactions as Treasurer, and of the financial condition of the
corporation.
Section 13. Bond.
-----
If required by the Board of Directors, the Treasurer shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board for the faithful performance of the duties of his
office and of the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the corporation.
ASSISTANTS
----------
Section 14. Duties.
-------
One or more Assistant Secretaries and/or Assistant Treasurers may be
designated and chosen by the Board of Directors and shall have such duties as
may be delegated to them by the Board of Directors.
-8-
<PAGE>
ARTICLE VI.
-----------
Indemnification of Officers and Directors
-----------------------------------------
Any and all directors and officers and former directors and officers
of the corporation and any person who may have served at the request of the
corporation as a director or officer of another corporation in which the
corporation owns shares of capital stock or of which the corporation is a
creditor (and the heirs, executors or administrators of any such director or
officers or former director or officer or person), shall be indemnified by the
corporation against all costs and legal or other expenses, including costs and
amounts paid in settlement, reasonably incurred by or imposed upon them, or any
of them, in connection with or resulting from any claim, action, suit or
proceeding, whether civil or criminal, in which they, or any of them, are made
parties, or a party, by reason of being or having been directors or officers or
a director or officer of the corporation or of such other corporation. Such
right of indemnification shall not apply, however, in relation to matters as to
which any such director or officer or former director or officer shall be
finally adjudged in such action, suit or proceeding to be liable for negligence
or misconduct in the performance of his duty to the corporation or such other
corporation, unless the proper court shall determine that despite such
adjudication of liability, such officer or director is fairly and reasonably
entitled to indemnity for such expense as the court shall deem proper. If any
such claim, action, suit or proceeding is settled (whether by agreement entry of
judgment by consent, or otherwise), the determination in good faith by the Board
of Directors of the corporation that such claim, action suit or proceeding did
not arise out of negligence or misconduct in the performance of duty by the
director or officer or former director or officer or person indemnified and that
such director or officer or former director of officer or person would not be
held liable for the claims, suit or proceeding in question, shall be necessary
and sufficient to justify indemnification. The right of indemnification herein
provided shall not be exclusive under any statute, By-Law, agreement, vote of
shareholders, or otherwise.
ARTICLE VII.
------------
Reimbursement of Disallowed Deductions
--------------------------------------
Any payments made to an officer or director of the corporation such as
salary, commissions, bonus, interest, rent or expenses which shall be disallowed
in whole or in part as a deductible expense of the purpose of corporate tax
reporting by the Internal Revenue Service, shall be reimbursed by such officer
to the corporation to the full extent of such disallowance. The Board of
Directors shall take all necessary steps to enforce this repayment. In lieu of
repayment by the officer or directors the Board of Directors may withhold
appropriate amounts from the officer's or director's future compensation until
the payment has been recovered; provided that the amount withheld is sufficient
to extinguish the indebtedness within five (5) years.
-9-
<PAGE>
ARTICLE VIII.
-------------
Certificates of Stock
---------------------
Section 1. Form.
-----
Certificates representing shares of stock in the name of the
corporation shall be in such forms as determined by the Board of Directors. All
certificates shall be signed by, or in the name of the corporation, the
President or Vice-President, and by the Secretary or Treasurer. All
certificates for such shares shall be consecutively numbered, and the name and
address of the person to whom the shares represented thereby are issued,
together with the name of shares and date of issue shall be entered on the stock
transfer books of the corporation.
Section 2. Transfer Agents, Registrars.
----------------------------
Where a certificate is countersigned (1) by a transfer agent other
than the corporation or its employee, or, (2) by a register other than the
corporation or its employee, any other signature on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates.
------------------
Any person claiming a certificate of stock to be lost or destroyed
shall make an affidavit or affirmative of that fact and shall give the
corporation a bond, in such sum as the Board of Directors may require to
indemnify the corporation against any claim that may be made against it on
account of the alleged loss of the certificate. The Board of Directors may
accept the affiant's personal bond if it should appear that he possesses
unencumbered property of sufficient value to assure indemnification. A new
certificate of the same tenor and for the same number of shares as the one
alleged to be lost or destroyed shall then be issued.
Section 4. Transfer of Stock.
------------------
Upon surrender to the corporation or the transfer agent of the
corporation of this certificate for share, duly executed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, to cancel the old certificate and to record the transaction on its
books.
Section 5. Holder.
-------
The corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the party of any other
-10-
<PAGE>
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Louisiana.
ARTICLE IX.
-----------
General Provisions
------------------
Section 1. Dividends.
----------
Dividends upon the capital stock of the corporation, subject to any
provisions of the Articles of Incorporation may be declared by the Board of
Directors at any regular or special meeting, pursuant to law. Dividends may be
paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the Articles of Incorporation.
Section 2. Reserve for Contingencies.
--------------------------
Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
Directors may from time to time, in their discretion, deem proper as a reserve
fund to meet contingencies or for repairing or maintaining the property of the
corporation, or for such purposes as the Directors shall deem to be in the best
interest of the corporation. The Directors may modify or abolish any such
reserve in the manner in which it was created.
Section 3. Fiscal Year.
------------
The fiscal year of the corporation shall begin on the first day of
January, and end on the 31st day of December of each year.
Section 4. Checks.
-------
All checks or demands for money and notes of the corporation shall be
signed by such officer or officers or such other person or persons as the Board
of Directors from time to time designates.
Section 5. Corporate Seal.
---------------
The corporation shall not adopt a corporate seal and no seal shall be
necessary to authenticate any action of the corporation.
ARTICLE X.
----------
Amendments
----------
These By-Laws may be altered, amended, or repealed and new By-Laws
adopted by two-thirds (2/3) affirmative vote of the shareholder voting power or
by the written consent of the shareholders possessing this power.
-11-
<PAGE>
CERTIFICATE
-----------
I CERTIFY that the foregoing By-Laws were adopted by the sole member
of the Board of Directors of this corporation by written action on the 3rd day
of May, 1994.
---------------------------------
Roger H. Frommelt, Secretary
-12-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.33
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT (HOLLYWOOD PARK)
<TEXT>
<PAGE>
EXHIBIT 10.33
-------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made on September 10, 1998,
by and between HOLLYWOOD PARK, INC. a Delaware corporation ("Company"), and
LOREN OSTROW, an individual ("Executive"), with respect to the following facts
and circumstances:
RECITALS
Executive is currently employed by Horseshoe Gaming, LLC ("Horseshoe").
Company desires to retain Executive as Senior Vice President and General Counsel
of the Company after Executive completes his obligations under his existing
employment agreement and after such agreement has terminated. Executive desires
to be retained by Company in that capacity, on the terms and conditions and for
the consideration set forth below.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein, the parties hereto agree as follows:
ARTICLE 1.
EMPLOYMENT AND TERM
1.1. Employment. Company agrees to engage Executive in the capacity as
Senior Vice President and General Counsel of the Company on the Effective Date
(as hereinafter defined) and Executive hereby accepts such engagement by Company
upon the terms and conditions specified below.
1.2. Term. The term of this Agreement (the "Term") shall commence on January
1, 1999 (or such earlier date on which Executive shall be released from his
commitments to his current employer (such date being referred to as the
"Effective Date") and shall continue in force until three years after the
Effective Date, unless earlier terminated under Article 6 below. Each 12-month
period commencing as of the Effective Date is sometimes called a year of the
"Term," and the date which is 365 days from and after the Effective Date shall
be referred to as the "Anniversary Date"). At least ninety (90) days prior to
the expiration of the Term (as the same may be extended from time to time) ,
Executive and Company shall advise each other whether they wish to renew the
term of this Agreement and the proposed basis for such renewal. If Paul Alanis
("Alanis") is not offered promotion to Chief Executive Officer of Company by
December 31, 1999, and as a result