1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended June 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ____________ Commission file number 1-12168 BOYD GAMING CORPORATION (Exact name of registrant as specified in its charter) NEVADA 88-0242733 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2950 SOUTH INDUSTRIAL ROAD LAS VEGAS, NEVADA 89109 (Address of principal executive offices) (Zip Code) (702) 792-7200 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes X No ------- -------- Shares outstanding of each of the Registrant's classes of common stock as of July 31, 1998: Class Outstanding ----- ----------- Common stock, $.01 par value 61,825,666
2 BOYD GAMING CORPORATION QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1998 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION <TABLE> <CAPTION> Page No. -------- <S> <C> Item 1. Unaudited Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets at June 30, 1998 and December 31, 1997 3 Condensed Consolidated Statements of Operations for the three and six month periods ended June 30, 1998 and 1997 4 Condensed Consolidated Statement of Changes in Stockholders' Equity for the six month period ended June 30, 1998 5 Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 1998 and 1997 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 23 Item 5. Other Information 23 Item 6. Exhibits and Reports on Form 8-K 23 Signature Page 24 </TABLE> -2-
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BOYD GAMING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> (UNAUDITED) JUNE 30, DECEMBER 31, (IN THOUSANDS, EXCEPT SHARE DATA) 1998 1997 - ------------------------------------------------------------------------------------------------------------ <S> <C> <C> ASSETS Current assets Cash and cash equivalents $ 76,657 $ 78,277 Accounts receivable, net 17,858 19,372 Inventories 9,724 9,906 Prepaid expenses 16,050 14,357 Income taxes receivable 1,119 2,787 ---------- ---------- Total current assets 121,408 124,699 Property and equipment, net 757,806 771,235 Other assets and deferred charges 43,666 41,912 Deferred income taxes 2,761 6,558 Goodwill and other intangible assets, net 205,309 208,011 ---------- ---------- Total assets $1,130,950 $1,152,415 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ 1,532 $ 1,828 Accounts payable 33,013 28,535 Accrued liabilities Payroll and related 28,415 26,100 Interest and other 57,860 55,879 ---------- ---------- Total current liabilities 120,820 112,342 Long-term debt, net of current maturities 796,234 842,932 Other liabilities 2,500 -- Commitments and contingencies Stockholders' equity Preferred stock, $.01 par value; 5,000,000 shares authorized -- -- Common stock, $.01 par value; 200,000,000 shares authorized; 61,825,666 and 61,669,628 shares outstanding 618 617 Additional paid-in capital 139,950 139,054 Retained earnings 70,828 57,470 ---------- ---------- Total stockholders' equity 211,396 197,141 ---------- ---------- Total liabilities and stockholders' equity $1,130,950 $1,152,415 ========== ========== </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. -3-
4 BOYD GAMING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED (UNAUDITED) JUNE 30, JUNE 30, ----------------------- ------------------------- (IN THOUSANDS, EXCEPT SHARE DATA) 1998 1997 1998 1997 - -------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Revenues Casino $181,673 $151,609 $367,537 $ 305,574 Food and beverage 40,246 37,882 82,508 77,874 Room 18,364 19,400 36,878 38,760 Other 17,474 16,371 35,741 31,428 Management fees and joint venture 9,563 11,088 20,359 22,341 -------- -------- -------- --------- Gross revenues 267,320 236,350 543,023 475,977 Less promotional allowances 21,835 20,403 47,496 40,876 -------- -------- -------- --------- Net revenues 245,485 215,947 495,527 435,101 -------- -------- -------- --------- Costs and expenses Casino 91,567 74,088 186,975 152,153 Food and beverage 27,272 27,928 53,409 55,844 Room 6,708 6,693 12,482 13,166 Other 16,377 14,787 32,276 29,121 Selling, general and administrative 37,212 28,342 75,795 61,678 Maintenance and utilities 10,618 8,560 20,113 17,710 Depreciation and amortization 18,387 18,488 36,998 36,408 Corporate expense 5,686 8,587 10,586 13,589 Impairment and restructuring charges 5,925 5,641 5,925 131,339 -------- -------- -------- --------- Total 219,752 193,114 434,559 511,008 -------- -------- -------- --------- Operating income (loss) 25,733 22,833 60,968 (75,907) -------- -------- -------- --------- Other income (expense) Interest income 93 157 206 308 Interest expense, net of amounts capitalized (18,747) (17,251) (38,019) (34,603) -------- -------- -------- --------- Total (18,654) (17,094) (37,813) (34,295) -------- -------- -------- --------- Income (loss) before provision (benefit) for income taxes 7,079 5,739 23,155 (110,202) Provision (benefit) for income taxes 3,045 2,302 9,797 (35,927) -------- -------- -------- --------- Net income (loss) $ 4,034 $ 3,437 $ 13,358 $ (74,275) ======== ======== ======== ========= BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE $ 0.07 $ 0.06 $ 0.22 $ (1.21) ======== ======== ======== ========= Average basic shares outstanding 61,671 61,365 61,670 61,364 Average diluted shares outstanding 61,817 61,369 61,870 61,364 ======== ======== ======== ========= </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. -4-
5 BOYD GAMING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998 (UNAUDITED) <TABLE> <CAPTION> (IN THOUSANDS, EXCEPT SHARE DATA) - ---------------------------------------------------------------------------------------------------------------------- COMMON STOCK ADDITIONAL TOTAL ------------ PAID-IN RETAINED STOCKHOLDERS' SHARES AMOUNT CAPITAL EARNINGS EQUITY ------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Balances, January 1, 1998 61,669,628 $617 $139,054 $57,470 $197,141 Net income -- -- -- 13,358 13,358 Stock issued in connection with employee stock purchase plan 156,038 1 896 -- 897 ---------- ---- -------- ------- -------- Balances, June 30, 1998 61,825,666 $618 $139,950 $70,828 $211,396 ========== ==== ======== ======= ======== </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. -5-
6 BOYD GAMING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> SIX MONTHS ENDED (UNAUDITED) JUNE 30, ------------------------- (IN THOUSANDS) 1998 1997 - ----------------------------------------------------------------------------------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 13,358 $(74,275) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 36,998 36,408 Deferred income taxes 3,797 (42,250) Impairment and restructuring charges 5,925 131,339 Changes in assets and liabilities: Accounts receivable, net 1,514 8,930 Inventories 182 349 Prepaid expenses (1,693) 4,247 Income taxes receivable 1,668 7,144 Other assets (2,231) (1,005) Other current liabilities 7,534 (32,396) Income taxes payable -- 1,103 -------- -------- Net cash provided by operating activities 67,052 39,594 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES- Acquisition of property, equipment and other assets (22,440) (19,747) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of common stock 762 669 Net borrowings under bank credit facility (45,000) (34,850) Payments on long-term debt (1,994) (872) -------- -------- Net cash used in financing activities (46,232) (35,053) -------- -------- Net decrease in cash and cash equivalents (1,620) (15,206) Cash and cash equivalents, beginning of period 78,277 70,426 -------- -------- Cash and cash equivalents, end of period $ 76,657 $ 55,220 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest, net of amounts capitalized $ 37,235 $ 28,606 ======== ======== Cash paid for income taxes $ 4,946 $ 3,066 ======== ======== </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. -6-
7 BOYD GAMING CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Boyd Gaming Corporation and its wholly-owned subsidiaries, collectively referred to herein as the "Company". At June 30, 1998, the Company owned and operated eleven casino entertainment facilities located in Las Vegas, Nevada, Tunica, Mississippi, Kansas City, Missouri, East Peoria, Illinois, and Kenner, Louisiana as well as a travel agency located in Honolulu, Hawaii. In addition, the Company manages a casino entertainment facility in Philadelphia, Mississippi, for which it has a seven year management contract that expires in 2001. All material intercompany accounts and transactions have been eliminated. Basis of Presentation In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results of its operations and cash flows for the three and six month periods ended June 30, 1998 and 1997. It is suggested that this report be read in conjunction with the Company's audited consolidated financial statements included in the Annual Report on Form 10-K for the transition period ended December 31, 1997. The operating results for the three and six month periods ended June 30, 1998 and 1997 and cash flows for the six month periods ended June 30, 1998 and 1997 are not necessarily indicative of the results that will be achieved for the full year or for future periods. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates used by the Company include the estimated useful lives for depreciable and amortizable assets, the estimated allowance for doubtful accounts receivable, the estimated valuation allowance for deferred tax assets, and estimated cash flows used in assessing the recoverability of long-lived assets. Actual results could differ from those estimates. Reclassifications Certain amounts in the 1997 condensed consolidated financial statements have been reclassified to conform to the 1998 presentation. These reclassifications had no net effect on the Company's net income. -7-
8 NOTE 2. - IMPAIRMENT AND RESTRUCTURING CHARGES During the quarter ended March 31, 1997, the Company wrote-down the carrying value of its fixed and intangible assets in the Missouri gaming market to fair value, which resulted in a $126 million impairment loss. The impairment loss was recorded due to a significant change in the competitive environment with the January 1997 addition of a significantly larger competitor in the Kansas City gaming market and a history of operating losses at the Company's Sam's Town Kansas City gaming establishment. The fair value of the impaired assets was primarily determined through a discounted cash flow analysis of the operations of Sam's Town Kansas City. On June 30, 1998, the Company recorded a $5.9 million restructuring charge in connection with its announcement to cease operations at Sam's Town Kansas City. Termination benefits of $2.6 million for substantially all of the Company's 646 employees are included as part of the restructuring charge. Other costs to exit the Kansas City gaming market of $3.3 million are included in the restructuring charge and principally represent the recognition of liabilities for various long-term commitments which the Company intends to honor. The $3.4 million current portion and the $2.5 million non-current portion of the restructuring charge liabilities are included in "Interest and other" and "Other liabilities", respectively, on the accompanying condensed consolidated balance sheet at June 30, 1998. During July 1998, the Company closed Sam's Town Kansas City and sold substantially all of its tangible assets for $12.5 million, which approximated net book value. The Company also recorded a $5.3 million impairment loss related to its 17.4% ownership interest in the Fremont Street Experience, Limited Liability Company ("FSE") during the quarter ended June 30, 1997. This impairment loss is principally due to the significant levels of operating loss and operating cash deficiency reported in May 1997 by FSE relating to its first full year of operation. Management expects this trend to continue and, therefore, does not expect to recover its investment in this entity. NOTE 3. - ACQUISITION On October 27, 1997, the Company acquired the remaining 85% equity interest in Treasure Chest Casino, L.L.C. ("Treasure Chest") that was not owned by the Company for approximately $103 million, plus the assumption of debt. Intangible license rights, representing the excess of the purchase price over the fair value of the net assets acquired, amounted to approximately $85 million. Treasure Chest owns the Treasure Chest Casino, a riverboat casino operation on Lake Pontchartrain in Kenner, Louisiana. The Company has managed the Treasure Chest since its opening in September 1994. The Company funded the acquisition and the repayment of Treasure Chest's debt with borrowings under its bank credit facility. The Company's pro forma condensed consolidated results of operations, as if the acquisition had occurred on January 1, 1997, are as follows: -8-
9 <TABLE> <CAPTION> Six Months Ended June 30, 1997 ---------------- <S> <C> Pro forma (in thousands, except per share data): Net revenues $ 489,313 Net loss (71,829) ========= Basic and diluted net loss per common share: Net loss $ (1.17) ========= </TABLE> NOTE 4. - NET INCOME (LOSS) PER COMMON SHARE During the quarter ended December 31, 1997, the Company adopted SFAS No. 128, "Earnings per Share". SFAS No. 128 requires the presentation of basic and diluted net income (loss) per share. Basic per share amounts are computed by dividing net income (loss) by the average shares outstanding during the period. Diluted per share amounts are computed by dividing net income (loss) by average shares outstanding plus the dilutive effect of common share equivalents. Since the Company incurred a net loss during the six month period ended June 30, 1997, both basic and diluted per share calculations are based upon average shares outstanding of 61,364,000 during the period. The effect of options outstanding to purchase 2,751,867 shares was not included in the diluted calculation during the period. Diluted net income per share during the three and six month periods ended June 30, 1998 and during the three month period ended June 30, 1997 is determined considering the dilutive effect of outstanding stock options. The effect of stock options outstanding to purchase 2,691,679 and 2,681,179, respectively was not included in the diluted calculation during the three and six month periods ended June 30, 1998 and 2,751,867 was not included in the diluted calculation during the three month period ended June 30, 1997 since the exercise price of such options was greater than the average price of the Company's common shares. NOTE 5. - GUARANTOR INFORMATION The Company's $200 million of 9.25% Senior Notes (the "9.25% Notes") are guaranteed by a majority of the Company's wholly-owned existing significant subsidiaries. These guaranties are full, unconditional, and joint and several. In connection with the October 1997 acquisition of Treasure Chest discussed in Note 3, the Company created significant subsidiaries that do not guarantee the 9.25% Notes. Prior to October 1997, the assets, equity, income and cash flows of the non-guarantor subsidiaries represented less than 3% of the respective consolidated amounts and were inconsequential, individually and in the aggregate, to the Company. As such, the following consolidating schedules present separate condensed financial statement information on a combined basis for the parent only, as well as the Company's guarantor subsidiaries and non-guarantor subsidiaries, as of June 30, 1998 and for the three and six month periods then ended. Comparative financial information is not presented since management believes such information is not material to investors. -9-
10 CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION AS OF JUNE 30, 1998 <TABLE> <CAPTION> Combined Combined Non- Elimination (In Thousands) Parent Guarantors Guarantors Entries Consolidated - --------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> ASSETS Current assets Property and equipment, net $ 9,579 $ 89,410 $ 26,004 $ (3,585){1} $ 121,408 Other assets and deferred charges 28,014 688,181 41,611 757,806 Goodwill and other intangible assets, net 945,827 (506,682) 142,517 (535,235){1}{2} 46,427 Total assets -- 120,994 84,315 -- 205,309 -------- --------- -------- --------- ---------- $983,420 $ 391,903 $294,447 $(538,820) $1,130,950 ======== ========= ======== ========= ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $ 33,183 $ 73,800 $ 18,129 $ (4,292){1} $ 120,820 Long-term debt and other, net of current maturities 735,148 63,519 67 -- 798,734 Stockholders' equity 215,089 254,584 276,251 (534,528){2} 211,396 -------- --------- -------- --------- ---------- Total liabilities and stockholders' equity $983,420 $ 391,903 $294,447 $(538,820) $1,130,950 ======== ========= ======== ========= ========== </TABLE> Elimination Entries - ------------------- {1} - To eliminate intercompany payables and receivables. {2} - To eliminate investment in subsidiaries and subsidiaries' equity. -10-
11 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION FOR THE THREE MONTH PERIOD ENDED JUNE 30, 1998 <TABLE> <CAPTION> Combined Combined Non- Elimination (In thousands) Parent Guarantors Guarantors Entries Consolidated - ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> Revenues Casino $ -- $151,410 $30,263 $ -- $181,673 Food and beverage -- 37,790 2,456 -- 40,246 Room -- 18,364 -- -- 18,364 Other -- 9,425 8,333 (284){1} 17,474 Management fees and joint venture 29,203 11,381 5,279 (36,300){1} 9,563 -------- -------- ------- -------- -------- Gross revenues 29,203 228,370 46,331 (36,584) 267,320 Less promotional allowances -- 20,067 1,768 -- 21,835 -------- -------- ------- -------- -------- Net revenues 29,203 208,303 44,563 (36,584) 245,485 -------- -------- ------- -------- -------- Costs and expenses Casino -- 80,340 11,227 -- 91,567 Food and beverage -- 24,739 2,533 -- 27,272 Room -- 6,708 -- -- 6,708 Other -- 18,396 10,272 (12,291){1} 16,377 Selling, general and administrative -- 31,366 5,846 -- 37,212 Maintenance and utilities -- 9,684 934 -- 10,618 Depreciation and amortization 119 16,004 2,264 -- 18,387 Corporate expense 5,503 -- 183 -- 5,686 Restructuring charge -- 5,925 -- -- 5,925 -------- -------- ------- -------- -------- Total 5,622 193,162 33,259 (12,291) 219,752 -------- -------- ------- -------- -------- Operating income 23,581 15,141 11,304 (24,293) 25,733 Other income (expense), net (17,431) (1,572) 349 -- (18,654) -------- -------- ------- -------- -------- Income before provision (benefit) for income taxes 6,150 13,569 11,653 (24,293) 7,079 Provision (benefit) for income taxes (453) 3,498 -- -- 3,045 -------- -------- ------- -------- -------- Net income $ 6,603 $ 10,071 $11,653 $(24,293) $ 4,034 ======== ======== ======= ======== ======== </TABLE> Elimination Entries - ------------------- {1} - To eliminate intercompany revenue and expense. -11-
12 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998 <TABLE> <CAPTION> Combined Combined Non- Elimination (In thousands) Parent Guarantors Guarantors Entries Consolidated - -------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> Revenues Casino $ -- $306,512 $61,025 $ -- $367,537 Food and beverage -- 77,726 4,782 -- 82,508 Room -- 36,878 -- -- 36,878 Other -- 19,670 16,850 (779){1} 35,741 Management fees and joint venture 58,872 24,090 10,656 (73,259){1} 20,359 -------- -------- ------- -------- -------- Gross revenues 58,872 464,876 93,313 (74,038) 543,023 Less promotional allowances -- 44,083 3,413 -- 47,496 -------- -------- ------- -------- -------- Net revenues 58,872 420,793 89,900 (74,038) 495,527 -------- -------- ------- -------- -------- Costs and expenses Casino -- 164,480 22,495 -- 186,975 Food and beverage -- 48,387 5,022 -- 53,409 Room -- 12,482 -- -- 12,482 Other -- 38,659 19,732 (26,115){1} 32,276 Selling, general and administrative -- 63,537 12,258 -- 75,795 Maintenance and utilities -- 17,818 2,295 -- 20,113 Depreciation and amortization 197 32,329 4,472 -- 36,998 Corporate expense 9,519 373 694 -- 10,586 Restructuring charge -- 5,925 -- -- 5,925 -------- -------- ------- -------- -------- Total 9,716 383,990 66,968 (26,115) 434,559 -------- -------- ------- -------- -------- Operating income 49,156 36,803 22,932 (47,923) 60,968 Other income (expense), net (34,937) (3,225) 349 -- (37,813) -------- -------- ------- -------- -------- Income before provision for income taxes 14,219 33,578 23,281 (47,923) 23,155 Provision for income taxes 560 9,237 -- -- 9,797 -------- -------- ------- -------- -------- Net income $ 13,659 $ 24,341 $23,281 $(47,923) $ 13,358 ======== ======== ======= ======== ======== </TABLE> Elimination Entries - ------------------- {1} - To eliminate intercompany revenue and expense. -12-
13 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998 <TABLE> <CAPTION> Combined Combined Non- (In thousands) Parent Guarantors Guarantors Consolidated - ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Cash flows from operating activities $ 37,128 $ 324 $ 29,600 $ 67,052 -------- -------- -------- -------- Cash flows from investing activities (1,384) (19,896) (1,160) (22,440) -------- -------- -------- -------- Cash flows from financing activities Net borrowings under bank credit facility (45,000) -- -- (45,000) Receipt (payment) of dividends 11,437 9,850 (21,287) -- Other (741) (396) (95) (1,232) -------- -------- -------- -------- Net cash provided by (used in) in financing activities (34,304) 9,454 (21,382) (46,232) -------- -------- -------- -------- Net increase (decrease) in cash and cash equivalents 1,440 (10,118) 7,058 (1,620) Cash and cash equivalents, beginning of period 2,832 58,317 17,128 78,277 -------- -------- -------- -------- Cash and cash equivalents, end of period $ 4,272 $ 48,199 $ 24,186 $ 76,657 ======== ======== ======== ======== </TABLE> -13-
14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain operating data for the Company's properties. As used herein, "Boulder Strip Properties" consist of Sam's Town Las Vegas, the Eldorado and Jokers Wild; "Downtown Properties" consist of the California, the Fremont, Main Street Station and Vacations Hawaii, the Company's wholly-owned travel agency which operates for the benefit of the Downtown casino properties; and "Central Region Properties" consist of Sam's Town Tunica, Sam's Town Kansas City, Par-A-Dice, management fee income from Silver Star Resort and Casino, and management fee and joint venture income from Treasure Chest Casino through October 27, 1997, at which time the Company acquired the remaining 85% equity interest in Treasure Chest that it did not already own to make it a wholly-owned subsidiary. Net revenues displayed in this table and discussed in this section are net of promotional allowances; as such, references to room revenue and food and beverage revenue do not agree to the amounts on the Condensed Consolidated Statements of Operations. Operating income from properties for the purposes of this table exclude corporate expense, including related depreciation and amortization, and impairment and restructuring charges. <TABLE> <CAPTION> Three Months Ended Six Months Ended June 30, June 30, -------------------------- --------------------------- 1998 1997 1998 1997 -------- -------- -------- -------- (IN THOUSANDS) - -------------- <S> <C> <C> <C> <C> Net revenues Stardust $ 41,102 $ 43,138 $ 82,435 $ 89,097 Boulder Strip Properties 46,247 47,355 94,304 96,247 Downtown Properties (a) 52,691 46,680 103,520 90,651 Central Region 105,445 78,774 215,268 159,106 -------- -------- -------- -------- Total properties $245,485 $215,947 $495,527 $435,101 ======== ======== ======== ======== Operating income Stardust $ 4,175 $ 5,249 $ 7,426 $ 10,744 Boulder Strip Properties 6,200 7,222 13,307 15,348 Downtown Properties 3,429 3,255 5,501 3,141 Central Region 23,886(b) 22,020 51,973(b) 41,153(b) -------- -------- -------- -------- Total properties $ 37,690 $ 37,746 $ 78,207 $ 70,386 ======== ======== ======== ======== </TABLE> - ------------------ (a) Includes revenues related to Vacations Hawaii, a Honolulu travel agency, of $7,787 and $6,119, respectively, for the quarters ended June 30, 1998 and 1997, and revenues of $15,544 and $10,820, respectively, for the six month period ended June 30, 1998 and 1997. (b) Before impairment and restructuring charges. -14-
15 REVENUES - -------- Consolidated net revenues increased 13.7% during the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997. Company-wide casino revenue increased 19.8%, food and beverage revenue increased 5.2% and room revenue decreased 8.0%. Net revenues from the Stardust, Boulder Strip Properties and Downtown Properties (the "Nevada Region") increased 2.1% during the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997 primarily as a result of increased operating volume at each of the three Downtown casino properties, as well as enhanced utilization of the Company's wholly-owned travel agency, Vacations Hawaii. These increases were partially offset by declines in net revenues experienced at the Stardust (4.7%) and Boulder Strip Properties (2.3%) due to the competitive environment of those two markets. Net revenues in the Central Region increased 34% during the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997 primarily as a result of the acquisition of Treasure Chest in October 1997, as well as a 7.4% increase in net revenues from Par-A-Dice. These increases were partially offset by declines in net revenues experienced principally at Sam's Town Kansas City (21%) and Sam's Town Tunica (8.0%) due to the competitive environment in each of these gaming markets. On July 15, 1998, the Company ceased operations at Sam's Town Kansas City. See further discussion under Impairment and Restructuring Charges later in this section. Consolidated net revenues increased 13.9% during the six month period ended June 30, 1998 compared to the same period in the prior year. Company-wide casino revenue increased 20%, food and beverage revenue declined slightly (0.6%) and room revenue declined 10.1%. Net revenues from the Nevada Region increased 1.5% during the six month period ended June 30, 1998 compared to the six month period ended June 30, 1997 due to a 14.2% increase in revenues from the Downtown Properties, partially offset by declines of 7.5% and 2.0%, respectively, at the Stardust and Boulder Strip Properties. These declines are attributable to the competitive environment on the Las Vegas Strip, as well as increased competition along the Boulder Strip. Net revenues in the Central Region increased 35% during the six month period ended June 30, 1998 compared to the same period in the prior year. This increase in net revenues is primarily attributable to the acquisition of Treasure Chest in October 1997. This increase was partially offset by an 18.0% decline in net revenues at Sam's Town Kansas City due to the competitive environment in that gaming market. On July 15, 1998, the Company ceased operations at Sam's Town Kansas City. See further discussion under Impairment and Restructuring Charges later in this section. OPERATING INCOME (LOSS) - ----------------------- Consolidated operating income before impairment and restructuring charges increased by 11.2% to $31.7 million during the quarter ended June 30, 1998 from $28.5 million during the quarter ended June 30, 1997. Operating income in the Nevada Region declined 12.2% due to declines experienced at the Stardust and Boulder Strip Properties, partially offset by a slight gain experienced at the Downtown Properties. In the Central Region, operating income increased 8.5% due primarily to the acquisition of Treasure Chest in October 1997, partially offset by declines experienced principally at Sam's Town Tunica and Sam's Town Kansas City. For the six month period ended June 30, 1998, consolidated operating income before impairment and restructuring charges increased by 21% to $66.9 million compared to $55.4 million in the same period from the prior year. Operating income in the Nevada Region declined 10.3% as the competitive Las Vegas environment caused reductions in operating income at the Stardust and Boulder Strip Properties, which was partially offset by gains experienced at the Downtown Properties. In the Central Region, operating income increased 26% due -15-
16 primarily to the October 1997 acquisition of Treasure Chest, partially offset by the decline experienced at Sam's Town Tunica. STARDUST - -------- Net revenues at the Stardust declined by 4.7% during the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997. The majority of the decline is attributable to a 12.8% reduction in non-gaming revenues due to a corresponding decline in the number of occupied rooms. The decline in the number of occupied rooms is primarily attributable to a $9 million suite remodel project which reduced the number of available rooms by 8.0% during the quarter. The project began toward the end of the first quarter and is expected to be substantially complete by the end of the third quarter. Casino revenue remained relatively unchanged as a 6.1% decline in wagering volume was offset by an increase in both slot and table game win percentages. Operating income declined by 21% or $1.1 million during the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997, and operating income margin declined to 10.2% during the quarter ended June 30, 1998 from 12.2% during the quarter ended June 30, 1997. These declines in operating income and operating income margin are primarily the result of the reduction in net revenues coupled with an increase in marketing expenses due to the competitive environment on the Las Vegas Strip. For the six month period ended June 30, 1998, net revenues at the Stardust declined by 7.5% versus the comparable period in the prior year. Casino revenue declined by 3.9% due primarily to a decline in slot and table game wagering. Non-gaming revenues declined 13.4% due to a 9.6% decline in the number of occupied rooms. As discussed above, a portion of the decline in the number of occupied rooms is attributable to a $9 million suite remodel project which reduced the number of available rooms by 4.8% during the six month period. Operating income declined by 31% or $3.3 million during the six month period ended June 30, 1998 compared to the same period in the prior year. Operating income margin declined to 9.0% during the six month period ended June 30, 1998 from 12.1% during the six month period ended June 30, 1997. These declines in operating income and operating income margin are attributable to the reduction in net revenues, coupled with an increase in marketing expenses due to the competitive environment on the Las Vegas Strip. BOULDER STRIP PROPERTIES - ------------------------ Net revenues at the Boulder Strip Properties decreased 2.3% during the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997 due to increased competition with the recent openings of two new properties along the Boulder Strip. Casino revenue remained flat due primarily to an increase in slot win percentage being offset by a decline in slot wagering volume. Food and beverage revenue and room revenue decreased 11.1% and 8.5%, respectively, from the prior period's levels. Operating income at the Boulder Strip Properties declined by 14.2% or $1.0 million during the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997, and operating income margin declined to 13.4% during the quarter ended June 30, 1998 from 15.3% during the quarter ended June 30, 1997. These declines are primarily attributable to the reduction in net revenues. Net revenues at the Boulder Strip Properties declined by 2.0% during the six month period ended June 30, 1998 compared to the same period from the prior year. The decline is attributable to increased competition with the recent openings of two new properties along the Boulder Strip. Casino revenue remained virtually unchanged due primarily to an increase in slot win percentage being offset by a decline in wagering volume. Food and beverage revenue and room revenue declined by 10.0% and 3.7%, respectively, from the prior period. During the six month period ended June 30, 1998, operating income at the Boulder Strip Properties declined 13.3% or $2.0 million versus the comparable period in 1997. Operating income margin declined to 14.1% for the six -16-
17 month period ended June 30, 1998 compared to 15.9% for the same period in 1997. These reductions are primarily attributable to the decline in net revenues. DOWNTOWN PROPERTIES - ------------------- Net revenues at the Downtown Properties increased 12.9% during the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997 due primarily to casino revenue, which increased 11.4% as a result of increased slot wagering volume at Main Street Station and the Fremont. Non-gaming revenues at the Downtown Properties increased 15.3% during the quarter ended June 30, 1998 versus the comparable quarter in 1997 due to the enlargement of the Company's Honolulu travel agency, Vacations Hawaii, as well as increases in food and beverage revenue and room revenue. Operating income at the Downtown Properties increased 5.3% to $3.4 million during the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997 as improvements in operating results at the California and Vacations Hawaii were partially offset by a decline in operating income at the Fremont and a slight increase in the operating loss at Main Street Station. Operating income margin declined slightly to 6.5% during the quarter ended June 30, 1998 versus 7.0% during the comparable quarter in the prior year. The increase in net revenue and the decline in operating income margin are primarily attributable to the implementation of various marketing programs and related expenses. Net revenues at the Downtown Properties increased 14.2% during the six month period ended June 30, 1998 compared to the same period in the prior year. Casino revenue increased 12.3% due primarily to increased slot wagering volumes at each of the Downtown casino properties. Non-gaming revenues at the Downtown Properties increased 17.4% during the six month period ended June 30, 1998 versus the comparable prior year period due primarily to the enlargement of the Company's Honolulu travel agency, Vacations Hawaii, as well as increases in food and beverage revenue and room revenue. Operating income at the Downtown Properties increased $2.4 million or 75% during the six month period ended June 30, 1998 compared to the same period in the prior year. Operating income margin increased to 5.3% during the six month period ended June 30, 1998 versus 3.5% in the comparable prior year period. These increases are primarily attributable to the implementation of various marketing programs to enhance operating volumes at the Downtown Properties. CENTRAL REGION - -------------- Net revenues from the Central Region increased 34% during the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997. The majority of the increase is attributable to the acquisition of the remaining interest in Treasure Chest on October 27, 1997, as well as a 7.4% increase in net revenues from Par-A-Dice. Treasure Chest produced net revenues for the Company of $31.2 million during the quarter ended June 30, 1998 compared to $1.3 million during the quarter ended June 30, 1997. Prior to the acquisition of Treasure Chest, the Company accounted for its 15% minority interest under the equity method. However, since the acquisition of the remaining 85% equity interest in Treasure Chest, the revenues and expenses generated by that property are now included in the Company's condensed consolidated statement of operations. These increases in net revenues during the June 30, 1998 quarter were partially offset by a 21% decline in net revenues at Sam's Town Kansas City due to a reduction in market share caused by the competitive environment in Kansas City. Pending the consummation of the sale of the property, management ceased operations at Sam's Town Kansas City on July 15, 1998. See further discussion under Impairment and Restructuring Charges later in this section. In addition, net revenues at Sam's Town Tunica declined by 8.0% due to increased competition which came on line in the Tunica gaming market toward the end of the quarter ended March 31, 1998. Operating income for the Central Region increased to $23.9 million during the quarter ended June 30, 1998 from $22.0 million during the comparable quarter in 1997 -17-
18 due primarily to the acquisition of Treasure Chest, partially offset by declines in operating results experienced primarily at Sam's Town Tunica and Sam's Town Kansas City. Net revenues from the Central Region increased 35% during the six month period ended June 30, 1998 compared to the same period in the prior year. The majority of the increase is attributable to the acquisition of the remaining interest in Treasure Chest on October 27, 1997, as well as 5.6% increase in management fees from Silver Star and a 2.4% increase in net revenues from Par-A-Dice. Treasure Chest produced net revenues for the Company of $62.9 million during the six month period ended June 30, 1998 versus $3.1 million during the comparable prior year period. Prior to the acquisition of Treasure Chest, the Company accounted for its 15% minority interest under the equity method. However, since the acquisition of the remaining 85% equity interest in Treasure Chest, the revenues and expenses generated by that property are now included in the Company's condensed consolidated statement of operations. The increases in net revenues were partially offset by an 18.0% decline in net revenues at Sam's Town Kansas City due to a reduction in market share caused by the competitive environment in Kansas City. Pending the consummation of the sale of the property, management ceased operations at Sam's Town Kansas City on July 15, 1998. See further discussion under Impairment and Restructuring Charges later in this section. In addition, Sam's Town Tunica experienced a 3.0% decline in net revenues due to increased competition which came online in the Tunica gaming market toward the end of the quarter ended March 31, 1998. Operating income for the Central Region increased to $52.0 million during the six month period ended June 30, 1998 from $41.2 million during the comparable prior year period primarily to the acquisition of Treasure Chest, partially offset by a decline in operating results at Sam's Town Tunica. IMPAIRMENT AND RESTRUCTURING CHARGES - ------------------------------------ During the quarter ended March 31, 1997, the Company, in accordance with SFAS No. 121, recorded an impairment loss of $126 million to adjust the carrying value of its fixed and intangible assets in the Missouri gaming market to fair value. The impairment loss was recorded due to a significant change in the competitive environment with the January 1997 addition of a significantly larger facility in the Kansas City gaming market and a history of operating losses at the Company's Sam's Town Kansas City gaming establishment. On June 30, 1998, the Company recorded a $5.9 million restructuring charge in connection with its announcement to cease operations at Sam's Town Kansas City. During July 1998, the Company closed Sam's Town Kansas City and sold substantially all of its tangible assets for $12.5 million, which approximated net book value. During the quarter ended June 30, 1997, the Company recorded a $5.3 million impairment loss related to its 17.4% ownership interest in Fremont Street Experience, Limited Liability Company ("FSE"), which is the entity that operates the downtown Las Vegas tourist attraction known as the Fremont Street Experience. This impairment loss is principally due to the significant levels of operating loss and operating cash deficiency reported in May 1997 by FSE relating to its first full year of operations. Management expects this trend to continue and, therefore, does not expect to recover its investment in this entity. OTHER EXPENSES - -------------- Depreciation and amortization expense declined slightly ($.1 million) during the quarter ended June 30, 1998 versus the comparable quarter in 1997, and increased by $.6 million during the six month period ended June 30, 1998 compared to the corresponding 1997 period. The slight increase in depreciation and amortization expense during the six month period ended June 30, 1998 is due to the increase in intangible and fixed assets related to the acquisition of Treasure Chest in October 1997, offset by the reduction in fixed and intangible assets related to the impairment loss recorded during the quarter ended March 31, 1997. -18-
19 The marginal decline in depreciation and amortization expense during the quarter ended June 30, 1998 is primarily attributable to an increase in fully depreciated assets, as well as the Treasure Chest acquisition and the March 1997 impairment loss discussed above. OTHER INCOME (EXPENSE) - ---------------------- Other income and expense is primarily comprised of interest expense. Interest expense increased by $1.5 million and $3.4 million, respectively, during the quarter and six month period ended June 30, 1998 compared to the corresponding periods in 1997. The increase is primarily attributable to higher levels of debt outstanding due to the October 1997 acquisition of Treasure Chest, partially offset by a decline in interest rates on certain fixed and floating rate debt. PROVISION (BENEFIT) FOR INCOME TAXES - ------------------------------------ The Company's effective tax rates were 43% and 40%, respectively, during the quarters ended June 30, 1998 and 1997, and 42% and (33%), respectively, during the six month periods ended June 30, 1998 and 1997. The fluctuation in the rates during the comparable quarters ended June 30, 1998 and 1997 is primarily attributable to state taxes, which have increased due to the enhanced earnings generated from the Company's Central Region properties. The Company's Nevada properties are not subject to state income tax. The fluctuation in the rates during the comparable six month periods ended June 30, 1998 and 1997 is primarily attributable to the impairment loss recorded during the quarter ended March 31, 1997. NET INCOME (LOSS) - ----------------- As a result of these factors, the Company reported net income of $4.0 million and $13.4 million, respectively, during the quarter and six month period ended June 30, 1998 compared to net income of $3.4 million during the quarter ended June 30, 1997 and a net loss of $74 million during the six month period ended June 30, 1997. LIQUIDITY AND CAPITAL RESOURCES CASH FLOW AND WORKING CAPITAL - ----------------------------- During the six month period ended June 30, 1998, the Company generated operating cash flows of $67 million compared to $40 million during the comparable prior year period. The increase in operating cash flows is primarily attributable to the operations of Treasure Chest, which was acquired in October 1997. As of June 30, 1998 and 1997, the Company had balances of cash and cash equivalents of $77 million and $55 million, respectively, and working capital of $.6 million and a working capital deficit of $3.5 million, respectively. The Company has historically operated with minimal or negative levels of working capital in order to minimize borrowings and related interest costs under its five-year, $500 million reducing revolving credit facility (the "Bank Credit Facility"). The working capital deficits, if any, are funded through cash generated from operations as well as borrowings under the Bank Credit Facility. In connection with the July 1998 sale of certain tangible assets of Sam's Town Kansas City, the Company will be able to realize the benefit of approximately $35 million in deferred tax assets. The realization of these deferred tax assets will benefit operating cash flows by reducing the amount of future federal income tax payments beginning in the quarter ended September 30, 1998. -19-
20 CAPITAL EXPENDITURES - -------------------- The Company is committed to continually maintaining and enhancing its existing facilities, most notably by upgrading and remodeling its casinos, hotel rooms, restaurants and other public space and by providing the latest slot machines for its customers. The Company's capital expenditures for these purposes were approximately $22 million and $20 million, respectively, during the six month periods ended June 30, 1998 and 1997. DEBT FACILITIES AND EQUITY FINANCING - ------------------------------------ Much of the funding for the Company's renovation and expansion projects has come from debt and equity financings, as well as cash flows from existing operations. Cash flows used for financing activities totaled $46 million during the six month period ended June 30, 1998, compared to $35 million during the corresponding period in 1997, as the Company paid down outstanding debt with its free cash flow generated from operations. At June 30, 1998, outstanding borrowings and unused availability under the Bank Credit Facility were $345 million and $155 million, respectively. Interest on the Bank Credit Facility is based upon the agent bank's quoted reference rate or the London Interbank Offered Rate, at the discretion of the Company. The blended rate under the Bank Credit Facility at June 30, 1998 was 7.9%. The Bank Credit Facility contains certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of a minimum tangible net worth, (ii) requiring the maintenance of a minimum fixed charge coverage ratio, (iii) establishing a maximum permitted funded debt to EBITDA ratio, (iv) imposing limitations on the incurrence of additional indebtedness and the creation of liens, (v) imposing limitations on the maximum permitted expansion capital expenditures during the term of the Bank Credit Facility, (vi) imposing limits on the maximum permitted maintenance capital expenditures during the term of the Bank Credit Facility, and (vii) imposing restrictions in investments, the purchase or redemption of subordinated debt prior to its stated maturity, dividends and other distributions, and the redemption or purchase of capital stock of the Company. As of June 30, 1998, the Company had outstanding $200 million principal amount of 9.25% Senior Notes (the "9.25% Notes") due October 1, 2003 and $250 million principal amount of 9.50% Senior Subordinated Notes (the "9.50% Notes") due July 2007. The 9.25% and 9.50% Notes contain limitations on, among other things, (a) the ability of the Company and its Restricted Subsidiaries (as defined in the Indenture Agreements) to incur additional indebtedness, (b) the payment of dividends and other distributions with respect to the capital stock of the Company and its Restricted Subsidiaries and the purchase, redemption or retirement of capital stock of the Company and its Restricted Subsidiaries, (c) the making of certain investments, (d) asset sales, (e) the incurrence of liens, (f) transactions with affiliates, (g) payment restrictions affecting restricted subsidiaries and (h) certain consolidations, mergers and transfers of assets. Management believes the Company and its subsidiaries are in compliance with all covenants contained in its long-term debt agreements at June 30, 1998. The Company's ability to service its debt will be dependent on its future performance, which will be affected by, among other things, prevailing economic conditions and financial, business and other factors, certain of which are beyond the Company's control. EXPANSION PROJECTS - ------------------ The Company, as part of its ongoing strategic planning process, is currently establishing its priorities for the future. In Nevada, the Company continues to examine and explore alternatives to improve -20-
21 the Stardust and its 61-acre site on the Las Vegas Strip. In addition, the Company is exploring opportunities for both the expansion of its Sam's Town Las Vegas property and the expansion of the Sam's Town concept to other sites in the Las Vegas locals market. Outside of Nevada, the Company continues to monitor acquisition opportunities in many of the newer gaming markets as the industry continues to consolidate. In addition, on July 14, 1998, the Company, through a wholly-owned subsidiary, entered into an amended joint venture agreement (the "Amended Agreement") with Mirage Resorts, Incorporated ("Mirage") to jointly develop and own a casino hotel entertainment facility in Atlantic City, New Jersey (the "Atlantic City Project"). Among other things, the Amended Agreement provides for the settlement of litigation between the Company and Mirage relating to the joint venture agreement that the Company and Mirage entered into in May 1996. The Atlantic City Project is expected to cost $750 million and contemplates a hotel of at least 1,200 rooms and a casino and related amenities adjacent and connected to Mirage's planned wholly-owned resort. The Amended Agreement provides for at least $150 million in capital contributions by the Company. Funding of the Company's Atlantic City Project capital contributions are expected to be funded from cash flow from operations and availability under the Company's Bank Credit Facility. Substantial funds would be required for the expansion projects discussed above. There are no assurances that any of the above mentioned projects will go forward or ultimately become operational. The source of funds required to meet the Company's working capital needs (including maintenance capital expenditures) is expected to be cash flow from operations and availability under the Company's Bank Credit Facility. The source of funds for the Company's expansion projects may come from cash flow from operations and availability under the Company's Bank Credit Facility, additional debt or equity offerings, joint venture partners or other sources. No assurance can be given that additional financing will be available or that, if available, such financing will be obtainable on terms favorable to the Company or its stockholders. YEAR 2000 PROJECT - ----------------- The Company is conducting a review of its computer systems to identify those areas that could be affected by the "Year 2000" issue and is in the process of replacing many of its existing systems to improve overall business performance and to accommodate business for the "Year 2000". However, given the inherent risks for a project of this magnitude and the resources required, the timing and costs involved could differ materially from that anticipated by the Company. The Company expects its "Year 2000" date conversion project to be completed on a timely basis. However, there can be no assurance that the conversion project will be completed on schedule, and that the systems of other companies on which the Company may rely also will be timely converted or that such failure to convert by another company would not have an adverse impact on the Company's systems. The estimated costs directly or indirectly associated with the conversion project is currently expected to be approximately $16 million, a significant majority of which will be in the form of capital expenditures. At June 30, 1998, the Company had incurred costs of $2.7 million which were directly or indirectly related to the "Year 2000" project. -21-
22 PRIVATE SECURITIES LITIGATION REFORM ACT The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward looking statements. Certain information included in this Form 10-Q and other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Company) contains statements that are forward looking, such as statements relating to plans for future expansion and other business development activities as well as other capital spending, financing sources, and the effects of regulation (including gaming and tax regulation) and competition. Such forward looking statements involve important risks and uncertainties that could significantly affect anticipated results in the future, and accordingly, actual results may differ materially from those expressed in any forward looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, those related to construction, expansion and development activities, economic conditions, changes in tax laws, changes in laws or regulations affecting gaming licenses, changes in competition, and factors affecting leverage and debt service including sensitivity to fluctuation in interest rates, risks related to the "Year 2000" project and other factors described from time to time in the Company's reports filed with the Securities and Exchange Commission, including the Company's Transition Report on Form 10-K for the transition year ended December 31, 1997. Any forward looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. -22-
23 Part II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company's Annual Meeting was held May 21, 1998. The stockholders re-elected Messrs. William S. Boyd, Philip J. Dion, Perry B. Whitt and William G. Yates, Jr. to three year terms, ending on the date of the Company's Annual Meeting in 2001. The following persons remain directors of the Company: Messrs. William R. Boyd, Michael O. Maffie, Warren L. Nelson, Donald D. Snyder, Robert L. Boughner and Billy G. McCoy and Ms. Marianne Boyd Johnson. The number of shares, voting as to the election of each nominee and the ratification of the appointment of Deloitte & Touche LLP to serve as independent auditors for fiscal 1998 is set forth below: <TABLE> <CAPTION> Votes --------------------------- Election of Class I Directors For Withheld ----------------------------- ----------- -------- <S> <C> <C> William S. Boyd 52,570,088 269,783 Philip J. Dion 52,562,437 277,434 Perry B. White 52,563,320 276,551 William G. Yates, Jr. 52,571,966 267,905 </TABLE> The stockholders ratified the selection of Deloitte & Touche LLP as independent auditors for the Company for the year ending December 31, 1998 with voting as follows: [52,528,761] for; [281,848] against; [29,262] non-votes. ITEM 5. OTHER INFORMATION (a) During July 1998, the Company ceased operations at Sam's Town Kansas City and consummated the sale of substantially all of its tangible assets. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Impairment and Restructuring Charges." (b) Any shareholder proposal submitted with respect to Boyd Gaming's 1999 Annual Meeting of Shareholders, which proposal is submitted outside the requirements of Rule 14a-8 under the Securities Exchange Act of 1934, will be considered untimely for purposes of Rule 14a-4 and 14a-5 if notice thereof is received by Boyd Gaming after February 27, 1999. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 10.55 Amended and Restated Joint Venture Agreement of Stardust A.C., dated as of July 14, 1998, by and between MAC, CORP., a New Jersey corporation which is a wholly-owned subsidiary of Mirage Resorts, Incorporated, a Nevada corporation, and Boyd Atlantic City, Inc., a New Jersey corporation which is a wholly-owned subsidiary of the Company. 27. Financial Data Schedule (b) Reports on Form 8-K. (i) The Company filed a current report on Form 8-K dated July 14, 1998 related to the Amended and Restated Joint Venture Agreement of Stardust A.C. -23-
24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BOYD GAMING CORPORATION (Registrant) Date: August 13, 1998 By /s/ Ellis Landau ------------------------------------- Ellis Landau, Executive Vice President, Chief Financial Officer, and Treasurer (Principal Financial Officer) -24-
25 EXHIBIT INDEX <TABLE> <CAPTION> Exhibit Number Description - ------ ----------- <C> <S> 10.55 Amended and Restated Joint Venture Agreement of Stardust A.C., dated as of July 14, 1998, by and between MAC, CORP., a New Jersey corporation which is a wholly-owned subsidiary of Mirage Resorts, Incorporated, a Nevada corporation, and Boyd Atlantic City, Inc., a New Jersey corporation which is a wholly-owned subsidiary of the Company. 27. Financial Data Schedule. </TABLE>