-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IHOX/LikyhKzhFX/OpQR8ffOU6PKegkaZZ1FOlX/08qofRgMuWQ55+rBRftBycQk qATr7P+wW2XYg5A9AziTYg== 0000852807-98-000013.txt : 19981111 0000852807-98-000013.hdr.sgml : 19981111 ACCESSION NUMBER: 0000852807-98-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981001 FILED AS OF DATE: 19981110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AZTAR CORP CENTRAL INDEX KEY: 0000852807 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 860636534 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12092 FILM NUMBER: 98743326 BUSINESS ADDRESS: STREET 1: 2390 E CAMELBACK RD STE 400 CITY: PHOENIX STATE: AZ ZIP: 85016-3452 BUSINESS PHONE: 6023814100 10-Q 1 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 quarterly period ended October 1, 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 1-5440 ---------------------------------------- AZTAR CORPORATION - --------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 86-0636534 - ----------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2390 East Camelback Road, Suite 400, Phoenix, Arizona 85016 - -------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (602) 381-4100 ---------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- At October 29, 1998, the registrant had outstanding 45,234,478 shares of its common stock, $.01 par value. AZTAR CORPORATION AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Item 1. Financial Statements Page ---- Consolidated Balance Sheets at October 1, 1998 and January 1, 1998 3 Consolidated Statements of Operations for the quarters and nine months ended October 1, 1998 and October 2, 1997 5 Consolidated Statements of Cash Flows for the nine months ended October 1, 1998 and October 2, 1997 7 Consolidated Statements of Shareholders' Equity for the nine months ended October 1, 1998 and October 2, 1997 9 Notes to Consolidated Financial Statements 10 2 AZTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) --------------------------------------- (in thousands, except share data)
October 1, January 1, 1998 1998 ---------- ---------- Assets Current assets: Cash and cash equivalents $ 38,207 $ 46,129 Accounts receivable, net 35,893 44,133 Inventories 6,246 6,779 Prepaid expenses 9,681 10,374 Deferred income taxes, net 13,266 11,403 ---------- ---------- Total current assets 103,293 118,818 Investments in and advances to unconsolidated partnership 8,647 9,375 Other investments 23,891 22,319 Property and equipment: Buildings, riverboats and equipment, net 782,668 802,230 Land 99,095 98,762 Construction in progress 3,733 1,215 Leased under capital leases, net 7,271 672 ---------- ---------- 892,767 902,879 Deferred income taxes, net -- 331 Other deferred charges and assets 37,231 37,774 ---------- ---------- $1,065,829 $1,091,496 ========== ==========
[FN] The accompanying notes are an integral part of these financial statements. 3 AZTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) (continued) --------------------------------------- (in thousands, except share data)
October 1, January 1, 1998 1998 ---------- ---------- Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accruals $ 54,289 $ 56,939 Accrued payroll and employee benefits 25,579 23,630 Accrued interest payable 815 13,167 Income taxes payable 4,517 896 Current portion of long-term debt 2,324 27,166 Current portion of other long-term liabilities 2,926 2,931 ---------- ---------- Total current liabilities 90,450 124,729 Long-term debt 489,273 491,932 Other long-term liabilities 23,475 24,204 Deferred income taxes 3,303 -- Contingencies and commitments Series B ESOP convertible preferred stock (redemption value $7,003 and $6,857) 7,003 6,593 Shareholders' equity: Common stock, $.01 par value (45,233,973 and 45,198,889 shares outstanding) 491 491 Paid-in capital 412,147 412,029 Retained earnings 56,813 48,654 Less: Treasury stock (17,126) (17,126) Unearned compensation -- (10) ---------- ---------- Total shareholders' equity 452,325 444,038 ---------- ---------- $1,065,829 $1,091,496 ========== ==========
[FN] The accompanying notes are an integral part of these financial statements. 4 AZTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) For the periods ended October 1, 1998 and October 2, 1997 --------------------------------------------------------------- (in thousands, except per share data)
Third Quarter Nine Months ------------------ ------------------ 1998 1997 1998 1997 -------- -------- -------- -------- Revenues Casino $173,500 $166,689 $504,926 $488,355 Rooms 14,995 13,096 41,692 39,695 Food and beverage 13,599 13,293 40,251 39,142 Other 7,995 8,796 23,213 24,825 -------- -------- -------- -------- 210,089 201,874 610,082 592,017 Costs and expenses Casino 75,757 75,650 226,576 224,112 Rooms 8,616 7,601 24,016 22,854 Food and beverage 13,805 14,024 40,546 41,351 Other 7,017 6,774 20,043 18,848 Marketing 21,773 23,682 64,991 64,522 General and administrative 18,838 16,262 57,250 52,133 Utilities 4,363 4,090 10,373 11,018 Repairs and maintenance 5,949 5,963 18,281 17,807 Provision for doubtful accounts 4,638 2,056 11,322 7,261 Property taxes and insurance 5,688 5,715 17,715 18,072 Rent 4,697 5,711 14,917 15,493 Depreciation and amortization 13,517 13,035 40,173 38,431 -------- -------- -------- -------- 184,658 180,563 546,203 531,902 -------- -------- -------- -------- Operating income 25,431 21,311 63,879 60,115 Interest income 378 514 1,717 1,541 Interest expense (14,661) (15,626) (45,043) (47,181) -------- -------- -------- -------- Income before other items, income taxes and extraordinary items 11,148 6,199 20,553 14,475 Equity in unconsolidated partnership's loss (1,049) (1,159) (3,287) (3,483) -------- -------- -------- -------- Income before income taxes and extraordinary items 10,099 5,040 17,266 10,992 Income taxes (4,472) (1,797) (7,302) (1,643) -------- -------- -------- -------- Income before extraordinary items 5,627 3,243 9,964 9,349 Extraordinary items -- -- (1,346) -- -------- -------- -------- -------- Net income $ 5,627 $ 3,243 $ 8,618 $ 9,349 ======== ======== ======== ========
[FN] The accompanying notes are an integral part of these financial statements. 5 AZTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)(continued) For the periods ended October 1, 1998 and October 2, 1997 --------------------------------------------------------------- (in thousands, except per share data)
Third Quarter Nine Months ------------------ ------------------ 1998 1997 1998 1997 -------- -------- -------- -------- Earnings per common share: Income before extraordinary items $ .12 $ .07 $ .21 $ .20 Extraordinary items -- -- (.03) -- -------- -------- -------- -------- Net income $ .12 $ .07 $ .18 $ .20 ======== ======== ======== ======== Earnings per common share assuming dilution: Income before extraordinary items $ .12 $ .07 $ .20 $ .19 Extraordinary items -- -- (.03) -- -------- -------- -------- -------- Net income $ .12 $ .07 $ .17 $ .19 ======== ======== ======== ======== Weighted-average common shares applicable to: Earnings per common share 45,233 45,164 45,219 45,097 Earnings per common share assuming dilution 46,404 46,694 46,694 46,686
[FN] The accompanying notes are an integral part of these financial statements. 6 AZTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) For the periods ended October 1, 1998 and October 2, 1997 --------------------------------------------------------------- (in thousands)
Nine Months --------------------- 1998 1997 --------- --------- Cash Flows from Operating Activities Net income $ 8,618 $ 9,349 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 41,937 40,447 Provision for losses on accounts receivable 11,322 7,261 Loss on reinvestment obligation 372 751 Rent expense (697) (777) Distribution in excess of equity in income of partnership 728 748 Deferred income taxes 1,771 2,437 Change in assets and liabilities: (Increase) decrease in accounts receivable (2,072) (5,972) (Increase) decrease in refundable income taxes -- 1,201 (Increase) decrease in inventories and prepaid expenses 589 (2,009) Increase (decrease) in accounts payable, accrued expenses and income taxes payable (9,911) (24,160) Other items, net 3,371 503 --------- --------- Net cash provided by (used in) operating activities 56,028 29,779 --------- --------- Cash Flows from Investing Activities Payments received on notes receivable 1,493 1,310 Reduction in other investments 564 2,738 Purchases of property and equipment (19,247) (17,454) Additions to other long-term assets (6,672) (5,628) --------- --------- Net cash provided by (used in) investing activities (23,862) (19,034) --------- --------- Cash Flows from Financing Activities Proceeds from issuance of long-term debt 423,400 171,300 Proceeds from issuance of common stock 83 657 Principal payments on long-term debt (459,333) (191,888) Principal payments on other long-term liabilities (964) (964) Debt issuance costs (2,246) (195) Preferred stock dividend (649) (689) Redemption of preferred stock (379) (395) --------- --------- Net cash provided by (used in) financing activities (40,088) (22,174) --------- --------- Net increase (decrease) in cash and cash equivalents (7,922) (11,429) Cash and cash equivalents at beginning of period 46,129 44,131 --------- --------- Cash and cash equivalents at end of period $ 38,207 $ 32,702 ========= =========
[FN] The accompanying notes are an integral part of these financial statements. 7 AZTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)(continued) For the periods ended October 1, 1998 and October 2, 1997 --------------------------------------------------------------- (in thousands)
Nine Months ------------------- 1998 1997 -------- -------- Supplemental Cash Flow Disclosures Summary of non-cash investing and financing activities: Reduction in land and other long-term liabilities $ -- $ 2,000 Capital lease obligations incurred for property and equipment 8,372 552 Tax benefit from stock options and preferred stock dividend 70 229 Forfeiture of restricted stock -- 24 Cash flow during the period for the following: Interest paid, net of amount capitalized $ 55,641 $ 56,592 Income taxes paid (refunded) 1,115 (3,314)
[FN] The accompanying notes are an integral part of these financial statements. 8 AZTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited) For the periods ended October 1, 1998 and October 2, 1997 --------------------------------------------------------------- (in thousands, except number of shares)
Nine Months -------------------- 1998 1997 -------- -------- Common stock: Beginning balance $ 491 $ 489 Stock options exercised for 23,405 and 171,348 shares -- 2 -------- -------- Ending balance 491 491 -------- -------- Paid-in capital: Beginning balance 412,029 411,158 Stock options exercised 83 655 Tax benefit from stock options exercised 35 173 -------- -------- Ending balance 412,147 411,986 -------- -------- Retained earnings: Beginning balance 48,654 44,846 Preferred stock dividend and losses on redemption, net of income tax benefit of $35 and $56 (459) (480) Net income 8,618 9,349 -------- -------- Ending balance 56,813 53,715 -------- -------- Treasury stock: Beginning balance (17,126) (17,102) Forfeiture of 3,668 shares of restricted stock in 1997 -- (24) -------- -------- Ending balance (17,126) (17,126) -------- -------- Unearned compensation: Beginning balance (10) (117) Amortization 10 63 Forfeiture of restricted stock -- 24 -------- -------- Ending balance -- (30) -------- -------- $452,325 $449,036 ======== ========
[FN] The accompanying notes are an integral part of these financial statements. 9 AZTAR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 1: General - ---------------- The consolidated financial statements reflect all adjustments, such adjust- ments being normal recurring accruals, which are necessary, in the opinion of management, for the fair presentation of the results of the interim periods; interim results, however, may not be indicative of the results for the full year. The notes to the interim consolidated financial statements are presented to enhance the understanding of the financial statements and do not necessarily represent complete disclosures required by generally accepted accounting principles. There was no interest capitalized during the quarters or nine months ended 1998 or 1997. Capitalized costs related to various development projects, included in other deferred charges and assets, were $2,561,000 and $954,000 at October 1, 1998 and January 1, 1998, respectively. For additional information regarding significant accounting policies, Las Vegas Tropicana redevelopment, long-term debt, lease obligations, and other matters applicable to the Company, reference should be made to the Company's Annual Report to Shareholders for the year ended January 1, 1998. Note 2: Investments in and Advances to Unconsolidated Partnership - ----------------------------------------------------------------- Following are summarized operating results for the Company's unconsolidated partnership, accounted for using the equity method for the periods ended October 1, 1998 and October 2, 1997 (in thousands):
Third Quarter Nine Months ------------------- ------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Revenues $ 4,020 $ 4,165 $ 12,225 $ 12,470 Operating expenses (685) (684) (2,060) (2,051) -------- -------- -------- -------- Operating income 3,335 3,481 10,165 10,419 Interest expense (1,163) (1,360) (3,695) (4,093) -------- -------- -------- -------- Net income $ 2,172 $ 2,121 $ 6,470 $ 6,326 ======== ======== ======== ========
The Company's share of the above operating results, after intercompany eliminations, is as follows (in thousands):
Third Quarter Nine Months ------------------- ------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Equity in unconsolidated partnership's loss $ (1,049) $ (1,159) $ (3,287) $ (3,483)
10 AZTAR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) Note 3: Long-term Debt - ----------------------- At October 1, 1998 and January 1, 1998, long-term debt included (in thousands):
October 1, January 1, 1998 1998 ---------- ---------- 11% Senior Subordinated Notes Due 2002 $200,000 $200,000 13 3/4% Senior Subordinated Notes Due 2004 178,195 178,061 Reducing revolving credit note; floating rate; matures December 31, 1999 -- 139,000 Reducing revolving credit note; floating rate, 7.7% at October 1, 1998; matures June 30, 2003 55,000 -- Term loan; floating rate, 8.0% at October 1, 1998; matures June 30, 2005 50,000 -- Other notes payable; 7% to 14.6%; maturities to 2002 903 1,213 Obligations under capital leases 7,499 824 -------- -------- 491,597 519,098 Less current portion (2,324) (27,166) -------- -------- $489,273 $491,932 ======== ========
On May 28, 1998, the Company completed a new bank financing consisting of a $250,000,000 reducing revolving credit note maturing on June 30, 2003 (the "Credit Facility") and a $50,000,000 term loan maturing on June 30, 2005 (the "Term Loan") provided largely by institutional lenders. The funds borrowed under the Credit Facility were used to prepay the balance outstanding and extinguish the prior reducing revolving credit note maturing on December 31, 1999 (the "Original Credit Facility"). The funds received under the Term Loan were used to repay a portion of the Credit Facility. The Company's $25,000,000 supplemental reducing revolving loan agreement maturing on March 15, 1999 (the "Supplemental Credit Facility"), was extinguished concurrently with the extinguishment of the Original Credit Facility. There were no borrowings outstanding under the Supplemental Credit Facility from its inception through the date of extinguishment. The maximum amount available under the Credit Facility will be reduced quarterly, commencing on September 30, 2000, in annual amounts of $40,000,000 in each year until maturity. Interest is computed on the outstanding principal balance of the Credit Facility based upon, at the Company's option, a one-, two-, three- or six-month Eurodollar rate plus a margin ranging from 1.00% to 2.25%, or the prime rate plus a margin ranging from zero to 1.00%. The applicable margin is dependent upon the Company's outstanding indebtedness and operating cash flow. As of October 1, 1998, the margin was at 0.50% less than the highest level. The Company incurs a commitment fee ranging from 0.225% to 0.4375% per annum on the unused portion of the Credit Facility. The Term Loan calls for quarterly principal payments of $125,000 beginning on September 30, 1999 through June 30, 2004, and $11,875,000 beginning on 11 AZTAR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) September 30, 2004 through maturity. Interest is computed on the Term Loan based upon, at the Company's option, a one-, two-, three- or six-month Eurodollar rate plus a margin of 2.5%. The collateral for the Credit Facility and the Term Loan, shared on a pari passu basis, is the same as under the Original Credit Facility. The Credit Facility imposes various restrictions on the Company similar to those imposed by the Original Credit Facility. The restrictions imposed by the Term Loan are similar to those of the Company's subordinated debt. The Credit Facility has certain quarterly financial tests, including a minimum requirement for operating cash flow, a minimum debt service coverage ratio and ratios of maximum debt and senior debt to operating cash flow. At October 1, 1998, the maximum debt to operating cash flow ratio as calculated under the Credit Facility was 3.65 to 1 and the allowable ratio was 5.25 to 1. The maximum allowable ratio decreases to 5.00 to 1 at June 30, 1999 and continues to decrease periodically, beginning June 30, 2000, in increments of .25 or .50, until it is 4.00 to 1 at June 30, 2002 and thereafter. At October 1, 1998, the maximum senior debt to operating cash flow ratio as calculated under the Credit Facility was 1.17 to 1 and the allowable ratio was 3.50 to 1. The maximum allowable ratio decreases to 3.00 to 1 at June 30, 1999 and thereafter. Note 4: Other Long-term Liabilities - ------------------------------------- At October 1, 1998 and January 1, 1998, other long-term liabilities consisted of (in thousands):
October 1, January 1, 1998 1998 ---------- ---------- Deferred compensation and retirement plans $ 11,703 $ 10,776 Accrued rent expense 10,630 11,327 Obligation to City of Evansville and other civic and community organizations 3,613 4,550 Las Vegas Boulevard beautification assessment 455 482 -------- -------- 26,401 27,135 Less current portion (2,926) (2,931) -------- -------- $ 23,475 $ 24,204 ======== ========
Note 5: Income Taxes - ---------------------- The Company is responsible, with certain exceptions, for the taxes of Ramada Inc. ("Ramada") through December 20, 1989. The Internal Revenue Service ("IRS") has completed its examinations of the income tax returns for the years 1988 through 1991 and has settled for all but one issue. Income taxes for the 1997 nine-month period included a non-recurring tax benefit of $2,323,000 in the first quarter of 1997, primarily related to cash received as a result of the settlement agreement between the IRS and Ramada. The IRS is examining the income tax returns for the years 1992 through 1996. Management believes that adequate provision for income taxes and interest has been made in the financial statements. 12 AZTAR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) Note 6: Extraordinary Items - ---------------------------- In May 1998, the Company expensed the remaining unamortized deferred financing costs in connection with the early extinguishment of the Original Credit Facility and the Supplemental Credit Facility. This item was reflected in the Consolidated Statement of Operations for the nine months ended 1998, as an extraordinary loss of $1,346,000, which was net of an income tax benefit of $725,000. Note 7: Earnings Per Share - ----------------------------- Earnings per common share and earnings per common share, assuming dilution, are computed based on the provisions of Financial Accounting Standards Board Statement of Financial Accounting Standards No. 128, Earnings per Share ("SFAS 128"), which superseded and simplified the standards for computing earnings per share previously found in Accounting Principles Board Opinion No. 15, Earnings per Share ("APB 15"). SFAS 128 replaced the presentation of earnings per common and common equivalent share under APB 15 with a presentation of earnings per common share. Earnings per common share excludes dilution and is computed by dividing income applicable to common shareholders by the weighted-average number of common shares outstanding. Earnings per common share, assuming dilution, is computed similarly under SFAS 128 as it was under APB 15 and is based on the weighted-average number of common shares outstanding after consideration of the dilutive effect of stock options and the assumed conversion of the preferred stock at the stated rate. In accordance with the provisions of SFAS 128, the Company has restated the earnings per share data for the quarter and nine months ended 1997. The computations under SFAS 128 of earnings per common share and earnings per common share, assuming dilution, for the periods ended October 1, 1998 and October 2, 1997, are as follows:
Third Quarter Nine Months ------------------ ------------------ 1998 1997 1998 1997 -------- -------- -------- -------- Income before extraordinary items $ 5,627 $ 3,243 $ 9,964 $ 9,349 Deduct: preferred stock dividends and losses on redemption (net of income tax benefits of $10, $17, $35 and $56, credited to retained earnings) (157) (152) (459) (480) -------- -------- -------- -------- Income before extraordinary items applicable to computations 5,470 3,091 9,505 8,869 Extraordinary items -- -- (1,346) -- -------- -------- -------- -------- Net income applicable to computations $ 5,470 $ 3,091 $ 8,159 $ 8,869 ======== ======== ======== ========
13 AZTAR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Third Quarter Nine Months ------------------ ------------------ 1998 1997 1998 1997 -------- -------- -------- -------- Weighted-average common shares applicable to earnings per common share 45,233 45,164 45,219 45,097 Effect of dilutive securities: Stock option incremental shares 319 629 610 674 Assumed conversion of preferred stock 852 901 865 915 -------- -------- -------- -------- 1,171 1,530 1,475 1,589 -------- -------- -------- -------- Weighted-average common shares applicable to earnings per common share assuming dilution 46,404 46,694 46,694 46,686 ======== ======== ======== ======== Earnings per common share: Income before extraordinary items $ .12 $ .07 $ .21 $ .20 Extraordinary items -- -- (.03) -- -------- -------- -------- -------- Net income $ .12 $ .07 $ .18 $ .20 ======== ======== ======== ======== Earnings per common share assuming dilution: Income before extraordinary items $ .12 $ .07 $ .20 $ .19 Extraordinary items -- -- (.03) -- -------- -------- -------- -------- Net income $ .12 $ .07 $ .17 $ .19 ======== ======== ======== ========
Note 8: Contingencies and Commitments - -------------------------------------- The Company agreed to indemnify Ramada against all monetary judgments in lawsuits pending against Ramada and its subsidiaries as of the conclusion of the restructuring of Ramada (the "Restructuring") on December 20, 1989, as well as all related attorneys' fees and expenses not paid at that time, except for any judgments, fees or expenses accrued on the hotel business balance sheet and except for any unaccrued and unreserved aggregate amount up to $5,000,000 of judgments, fees or expenses related exclusively to the hotel business. Aztar is entitled to the benefit of any crossclaims or counterclaims related to such lawsuits and of any insurance proceeds received. In addition, the Company agreed to indemnify Ramada for various lease guarantees made by Ramada relating to the restaurant business conducted through its Marie Callender Pie Shops, Inc. subsidiary. In connection with these matters, the Company has an accrued liability of $3,898,000 and $3,905,000 at October 1, 1998 and January 1, 1998, respectively. 14 AZTAR CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) The Company is a party to various other claims, legal actions and complaints arising in the ordinary course of business or asserted by way of defense or counterclaim in actions filed by the Company. Management believes that its defenses are substantial in each of these matters and that the Company's legal posture can be successfully defended without material adverse effect on its consolidated financial statements. The Tropicana Las Vegas lease agreement contains a provision that requires the Company to maintain an additional security deposit with the lessor of $21,000,000 in cash or a letter of credit if the Tropicana Las Vegas operation fails to meet certain financial tests. A determination was made for the period ended October 1, 1998, that the additional security deposit would be required by December 30, 1998; however, the lessor has waived the requirement. The Company has a 50% partnership interest in the lessor. The Company has severance agreements with certain of its senior executives. Severance benefits range from a lump-sum cash payment equal to three times the sum of the executive's annual base salary and the average of the executive's annual bonuses awarded in the preceding three years plus payment of the value in the executive's outstanding stock options and vesting and distribution of any restricted stock to a lump-sum cash payment equal to the executive's annual base salary. In certain agreements, the termination must be as a result of a change in control of the Company. Based upon current salary levels and stock options, the aggregate commitment under the severance agreements should all these executives be terminated was approximately $9,000,000 at October 1, 1998. 15 AZTAR CORPORATION AND SUBSIDIARIES Item 2. Management's Discussion and Analysis Financial Condition On May 28, 1998, the Company completed a new bank financing consisting of a $250 million reducing revolving credit note maturing on June 30, 2003 (the "Credit Facility") and a $50 million term loan maturing on June 30, 2005 (the "Term Loan") provided largely by institutional lenders. In addition, the maturity date of a $63 million term loan among Tropicana Enterprises and a group of banks was extended to June 30, 2003 from December 31, 1999. The Company has a noncontrolling partnership interest of 50% in Tropicana Enterprises, a Nevada general partnership that owns the real property and certain personal property that the Company leases in the operation of the Las Vegas Tropicana. The maximum amount available under the Credit Facility will be reduced quarterly, commencing on September 30, 2000, in annual amounts of $40 million in each year until maturity. The funds borrowed under the Credit Facility were used to prepay the balance outstanding and extinguish the prior reducing revolving credit note maturing on December 31, 1999 (the "Original Credit Facility"). The balance outstanding under the Original Credit Facility at the time of prepayment was $135 million. The funds received under the Term Loan were used to repay a portion of the Credit Facility. As of October 1, 1998, the Credit Facility had an outstanding balance of $55 million. The Company's $25 million supplemental reducing revolving loan agreement maturing on March 15, 1999 (the "Supplemental Credit Facility"), was extinguished concurrently with the extinguishment of the Original Credit Facility. There were no borrowings outstanding under the Supplemental Credit Facility from its inception through the date of extinguishment. At October 1, 1998, the maximum debt to operating cash flow ratio as calculated under the Credit Facility was 3.65 to 1 and the allowable ratio was 5.25 to 1. The maximum senior debt to operating cash flow ratio as calculated under the Credit Facility was 1.17 to 1 at October 1, 1998 and the allowable ratio was 3.50 to 1. The Tropicana Las Vegas lease agreement contains a provision that requires the Company to maintain an additional security deposit with the lessor of $21 million in cash or a letter of credit if the Tropicana Las Vegas operation fails to meet certain financial tests. A determination was made for the period ended October 1, 1998, that the additional security deposit would be required by December 30, 1998; however, the lessor has waived the requirement. Results of Operations Nine Months Ended October 1, 1998 Compared to Nine Months Ended October 2, 1997 The Company's consolidated revenues in the 1998 nine-month period were $610.1 million, a 3% increase over $592.0 million in the 1997 nine-month period. Consolidated operating income improved by 6% to $63.9 million in the 1998 nine-month period from $60.1 million in the 1997 nine-month period. 16 AZTAR CORPORATION AND SUBSIDIARIES Consolidated interest expense was 5% or $2.1 million lower in the 1998 versus 1997 nine-month period primarily as a result of lower levels of debt outstanding. For a discussion of income taxes and extraordinary items, refer to "Note 5: Income Taxes" and "Note 6: Extraordinary Items", respectively. TROPICANA ATLANTIC CITY Total revenues at Tropicana Atlantic City were $317.8 million in the 1998 nine-month period, up 5% from $302.5 million in the 1997 nine-month period. Casino revenue was 5% higher in the 1998 versus 1997 nine-month period, primarily reflecting an 11% increase in games revenue combined with a 3% increase in slot revenue. The increase in games revenue was a result of increases in the hold percentage and the volume of play. The increase in slot revenue was attained in spite of a 4% reduction in coin offers to slot players. Tropicana Atlantic City had operating income of $51.9 million in the 1998 nine-month period, a 27% improvement over $40.8 million in the 1997 nine- month period. Utilities expense was $1.0 million lower in the 1998 versus 1997 nine-month period primarily due to a favorable electrical contract that began in November 1997. The provision for doubtful accounts was $4.2 million higher in the nine months ended 1998 versus 1997 due to an increase in the allowance for potential uncollectible markers associated with the property's ongoing emphasis on the games segment of the business. Operating income is after rent and depreciation and amortization expenses. Rent expense was $3.9 million in the 1998 nine-month period compared to $5.1 million in the 1997 nine-month period. Depreciation and amortization was $18.1 million in the nine months ended 1998 compared to $16.5 million in the nine months ended 1997. TROPICANA LAS VEGAS At Tropicana Las Vegas, total revenues were $115.9 million in the 1998 nine-month period, a 3% decrease from $119.3 million in the 1997 nine-month period. Casino revenue was 7% lower in the 1998 versus 1997 nine-month period, primarily due to a 24% decrease in games revenue that was partially offset by a 9% increase in slot revenue. The decrease in games revenue was attributable in part to a decline in baccarat revenue in the 1998 versus 1997 nine-month period. The decrease in baccarat revenue was a result of decreases in the volume of play and the hold percentage. Tropicana Las Vegas had an operating loss of $8.1 million in the 1998 nine- month period compared to an operating loss of $2.1 million in the 1997 nine- month period. Operating loss is after rent and depreciation and amortization expenses. Rent expense was $7.4 million in the 1998 nine-month period compared to $7.3 million in the 1997 nine-month period. Depreciation and amortization was $7.2 million in the 1998 nine-month period compared to $7.0 million in the 1997 nine-month period. RAMADA EXPRESS At Ramada Express, total revenues were $62.9 million in the 1998 nine-month period, up slightly from $62.3 million in the 1997 nine-month period. Operating income was $7.2 million in the nine months ended 1998 compared to $8.3 million in the nine months ended 1997. Operating income is after rent and depreciation and amortization expenses. Rent expense was $0.4 million in both periods. Depreciation and amortization was $5.0 million in the 1998 nine-month period compared to $5.4 million in the 1997 nine-month period. 17 AZTAR CORPORATION AND SUBSIDIARIES AZTAR CASINO EVANSVILLE Total revenues at Casino Aztar Evansville were $94.9 million in the 1998 nine-month period, a 6% increase over $89.5 million in the 1997 nine-month period. Operating income was $24.1 million in the 1998 nine-month period, a 4% improvement over $23.1 million in last year's nine- month period. Operating income is after rent and depreciation and amortization expenses. Rent expense was $2.9 million in the 1998 nine-month period compared to $2.4 million in the 1997 nine-month period. Depreciation and amortization was $7.3 million in the 1998 nine-month period compared to $6.9 million in the 1997 nine-month period. CASINO AZTAR CARUTHERSVILLE Total revenues at Casino Aztar Caruthersville were $18.6 million in the 1998 nine-month period compared to $18.4 million in the 1997 nine-month period. Casino Aztar Caruthersville had an operating loss of $1.1 million in the nine months ended 1998 compared to $2.1 million in the nine months ended 1997. Operating loss is after depreciation and amortization of $2.4 million in the 1998 nine-month period compared to $2.5 million in the 1997 nine-month period. Quarter Ended October 1, 1998 Compared to Quarter Ended October 2, 1997 The Company's consolidated revenues in the 1998 third quarter were $210.1 million, a 4% increase over $201.9 million in the 1997 third quarter. Consolidated operating income was $25.4 million in the third quarter of 1998, a 19% improvement over $21.3 million in the third quarter of 1997. Consolidated interest expense was 6% or $1.0 million lower in the 1998 versus 1997 third quarter primarily as a result of lower levels of debt outstanding. For a discussion of income taxes, refer to "Note 5: Income Taxes". TROPICANA ATLANTIC CITY Total revenues at Tropicana Atlantic City were $113.5 million in the 1998 third quarter, up 5% from $108.6 million in the 1997 third quarter. Casino revenue was 5% higher in the 1998 versus 1997 third quarter due, in large part, to a strong market growth rate of 4% in the Atlantic City market during the 1998 third quarter. Rooms revenue was $0.7 million or 19% higher in the 1998 versus 1997 third quarter due to an increase in the average daily room rates as well as an increase in the number of occupied rooms. Tropicana Atlantic City had operating income of $22.1 million in the 1998 third quarter, a 19% improvement over $18.6 million in the 1997 third quarter. Rooms cost was 17% higher in the 1998 versus 1997 third quarter as a result of increased direct costs. The provision for doubtful accounts was $1.9 million higher in the 1998 versus 1997 third quarter due to an increase in the allowance for potential uncollectible markers associated with the property's ongoing emphasis on the games segment of the business. Operating income is after rent and depreciation and amortization expenses. Rent expense decreased to $0.9 million in the 1998 third quarter from $2.0 million in the 1997 third quarter due to a decreased number of operating leases. Depreciation and amortization was $6.3 million in the third quarter of 1998 compared to $5.6 million in the third quarter of last year. TROPICANA LAS VEGAS At Tropicana Las Vegas, total revenues were $37.7 million in the 1998 third quarter, a 1% increase from $37.2 million in the 1997 third quarter. Casino revenue was 5% lower in the 1998 versus 1997 18 AZTAR CORPORATION AND SUBSIDIARIES third quarter, primarily due to a 28% decrease in games revenue that was partially offset by an 11% increase in slot revenue. Rooms revenue was 15% higher in the 1998 versus 1997 third quarter primarily as a result of an increase in the number of occupied rooms. Tropicana Las Vegas had an operating loss of $3.5 million in the 1998 third quarter compared to an operating loss of $3.0 million in the 1997 third quarter. Rooms cost was 15% higher in the 1998 versus 1997 third quarter as a result of increased direct costs. Operating loss is after rent and depreciation and amortization expenses. Rent expense was $2.4 million in the 1998 third quarter compared to $2.5 million in the 1997 third quarter. Depreciation and amortization was $2.4 million in both periods. RAMADA EXPRESS At Ramada Express, total revenues were $20.2 million in the 1998 third quarter, up 6% from $19.1 million in the 1997 third quarter. Operating income was $1.8 million in the 1998 third quarter, a 106% improvement over $0.9 million in the 1997 third quarter. Operating income is after rent and depreciation and amortization expenses. Rent expense was $0.2 million in the 1998 third quarter compared to $0.1 million in the 1997 third quarter. Depreciation and amortization was $1.5 million in the 1998 third quarter compared to $1.8 million in the 1997 third quarter. CASINO AZTAR EVANSVILLE Total revenues at Casino Aztar Evansville were $32.5 million in the 1998 third quarter, a 6% increase over $30.7 million in last year's third quarter. Operating income was $8.0 million in the 1998 third quarter, an 8% increase from $7.4 million in the 1997 third quarter. Operating income is after rent and depreciation and amortization expenses. Rent expense was $1.1 million in the third quarter of 1998 compared to $1.0 million in the third quarter of 1997. Depreciation and amortization was $2.5 million in the 1998 third quarter compared to $2.4 million in last year's third quarter. CASINO AZTAR CARUTHERSVILLE Total revenues at Casino Aztar Caruthersville were $6.2 million in the 1998 third quarter compared to $6.3 million in the 1997 third quarter. Casino Aztar Caruthersville had an operating loss of $0.3 million in the third quarter of 1998 compared to $0.7 million in the third quarter of 1997. Operating loss is after depreciation and amortization of $0.8 million in both periods. Other Matters In April 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position No. 98-5 entitled "Reporting on the Costs of Start-up Activities" ("SOP"). The SOP stipulates that all costs that meet its definition of start-up activities, which the Company has referred to as preopening costs, must be expensed as incurred. The provisions of the SOP are effective for fiscal years beginning after December 15, 1998. Upon adoption, entities are required to write off all capitalized start-up costs as a cumulative effect of a change in accounting principle. Entities are not required to report the pro forma effect of retroactive application. The Company will adopt this SOP when required. The Company's policy is, and has been, to capitalize these costs as incurred and to expense them in the period the related facility commences operations. Adoption of the SOP will have only a prospective effect on the Company's financial statements as there are no capitalized 19 AZTAR CORPORATION AND SUBSIDIARIES preopening costs at October 1, 1998 and the Company is not, nor does it plan to be, engaged in start-up activities in 1998. In June 1998, the Financial Accounting Standards Board ("FASB") adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), which establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge of certain financial exposures. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and, if it is used in hedging activities, it depends on its effectiveness as a hedge. SFAS 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. SFAS 133 should not be applied retroactively to financial statements of prior periods. The Company will adopt SFAS 133 when required. The effect, if any, of adopting SFAS 133 has not been determined. Year 2000 A. Background In the past, many computer software programs were written using two digits rather than four to define the applicable year. As a result, date-sensitive computer software may recognize a date using "00" as the year 1900 rather than the year 2000. This is generally referred to as the Year 2000 issue. If this situation occurs, the potential exists for computer system failures or miscalculations by computer programs, which could disrupt operations. The Company utilizes computer systems in virtually all aspects of its business. In particular, Year 2000 problems in the hotel or casino systems at the Company's properties could disrupt operations at the affected properties and have a material adverse impact upon the Company's operating results. The Company is also exposed to the risk that one or more of its suppliers could experience Year 2000 problems that impact the ability of such suppliers to provide goods and services. Though this is not considered as significant a risk with respect to the suppliers of goods, due to the availability of alternative suppliers, the disruption of certain services, such as utilities, could, depending upon the extent of the disruption, have a material adverse impact on the Company's operations. B. Approach The Company has established a coordinated effort between its corporate level and responsible parties at each of its properties to address the Company's response to Year 2000 issues. Among the efforts underway to monitor Year 2000 readiness include each property's monthly submission to the corporate office of a Year 2000 status report, which is then reviewed with each property. The status of each property's Year 2000 readiness is in turn discussed at least quarterly with the Audit Committee of the Company's Board of Directors. The Company has established a program for the Year 2000 issue that consists of the following phases: 20 AZTAR CORPORATION AND SUBSIDIARIES Phase 1 Compilation of an inventory of information technology (IT) and non-IT systems that may be sensitive to the Year 2000 problem. Phase 2 Identification and prioritization of the critical systems from the systems inventory compiled in Phase 1 and inquiries of third parties with whom the Company does significant business (i.e., vendors and suppliers) as to the state of their Year 2000 readiness. Phase 3 Analysis of critical systems to determine which systems are not Year 2000 compliant and evaluation of the costs to repair or replace those systems. Phase 4 Repair or replace noncompliant systems and testing of those systems for which representation as to Year 2000 compliance has not been received or for which representation was received but has not been confirmed. C. Status 1. IT Systems The Company utilizes software purchased from vendors in virtually all critical technology systems at its properties. In certain instances, such vendor-supplied software is modified through the use of internal programming to enhance these systems. In many cases, the solution to the Year 2000 issue is simply to install a vendor-tested software upgrade ("Upgrade") and further test the Upgrade through internally generated test data. In other cases, the Company is purchasing and installing new vendor software ("Conversion") that is Year 2000 compliant. The cost and effort to install and test new software systems is more extensive than the aforementioned Upgrade and therefore these Conversions contain more risks to the Company. The Company is currently in Phase 4 on all critical IT systems at all properties. The following chart shows for each critical IT system at each of its properties whether an Upgrade or Conversion is underway and the date when installation and testing of such systems is expected to be completed. In addition, the chart identifies those IT systems where internal programming is required and the extent of such programming requirements. The more programming required, the greater the risk to the Company's Year 2000 readiness. 21 AZTAR CORPORATION AND SUBSIDIARIES TROPICANA ATLANTIC TROPICANA RAMADA CASINO AZTAR CASINO AZTAR SYSTEM CITY LAS VEGAS EXPRESS EVANSVILLE CARUTHERSVILLE - --------- ---------- --------- ----------- ------------ -------------- Casino Conversion Upgrade Upgrade Upgrade Upgrade * ** 4/99 12/98 3/99 3/99 3/99 Slots Upgrade Upgrade Conversion Upgrade Upgrade ** * 12/98 12/98 9/99 12/98 12/98 Hotel Conversion Upgrade Conversion Upgrade N/A ** 12/98 12/98 12/98 12/98 Financial Conversion Upgrade Upgrade Upgrade Upgrade 12/98 12/98 3/99 3/99 3/99 Point of Sale/ Upgrade Upgrade Conversion Upgrade Upgrade Inventory 12/98 12/98 6/99 4/99 4/99 * Indicates more significant internal programming also required ** Indicates minor internal programming also required 2. Non-IT Systems The Company utilizes embedded technology such as microcontrollers or date sensitive computer chips in its facilities including fire safety and security systems, elevators, heating and cooling monitoring systems and surveillance systems ("Non-IT Systems"). The Company is in Phase 3 and 4 in the process of ensuring Year 2000 readiness in these Non-IT Systems. Procedures being utilized include: vendor letters to critical Non-IT Systems providers asking for the Year 2000 status for each embedded chip or technology; meetings with vendors who provide maintenance for these Non-IT Systems to assess Year 2000 readiness; and testing of such systems using test data wherever possible. The Company expects to have completed Year 2000 compliance on Non-IT Systems by March 1999. D. Costs The total cost to the Company of making its systems Year 2000 compliant is estimated to be approximately $7.5 million. Approximately $7.0 million of this amount relates to the acquisition of new computer hardware and software systems as follows: new hardware and software at Tropicana Atlantic City ($5.7 million); new software at Ramada Express ($0.9 million) and personal computer upgrades companywide ($0.4 million). These costs will be capitalized and depreciated over their expected useful lives. The estimated costs related to internal programming modifications and the Company's administration of its Year 2000 project are approximately $0.5 million, and such costs are being expensed as incurred. 22 AZTAR CORPORATION AND SUBSIDIARIES As of October 1, 1998, approximately $5 million has been spent on Year 2000 issues. The Year 2000 issue has not caused other Company IT system projects to be deferred; in fact, it has accelerated the spending on IT systems overall. E. Risk Assessment The greatest risk to the Company is if one or more of its properties' critical IT systems, such as casino or hotel, or Non-IT Systems, such as cooling or heating, experience problems due to Year 2000 issues which cause business interruptions or customer service problems. The Company believes that any Year 2000 problems, should they arise, would be short-term in nature and not affect the Company's liquidity or financial condition. However, because New Year's week is a very busy period for the Company's properties, Year 2000 problems at a given property could negatively impact first-quarter 2000 results. F. Contingency Plans The Company has had general discussions regarding contingency plans should Year 2000 problems arise, including the possibility of utilizing other Aztar properties' systems should a problem arise at a given property. However, a formal contingency plan has not been completed. Contingency plans will be assessed, by property, considering risk levels of non-compliance as the Year 2000 implementation and testing process continues. On an on-going basis, each property maintains certain emergency manual procedures and back-up plans. These alternatives will be considered as each property assesses its formal Year 2000 contingency plan. Private Securities Litigation Reform Act Certain information included in Aztar's Form 10-K for 1997, this Form 10-Q and other materials filed or to be filed by the company with the Securities and Exchange Commission ("SEC")(as well as information included in oral statements or other written statements made or to be made by the Company including those made in Aztar's 1997 annual report) contains statements that are forward-looking. These include forward-looking statements relating to the following activities, among others: operation and expansion of existing properties, including future performance; redevelopment of the Las Vegas Tropicana and financing and/or concluding an arrangement with a partner for such redevelopment; other business development activities; refinancing of the Company's indebtedness; arrangement of new credit facilities and the Year 2000 issue. These activities involve important factors that could cause actual results to differ materially from those expressed in any forward- looking statements made by or on behalf of the Company. These include, but are not limited to, the following factors as well as other factors described from time to time in the Company's reports filed with the SEC: construction and development factors, including zoning issues, environmental restrictions, soil conditions, weather and other hazards, site access matters and building permit issues; factors affecting leverage and debt service, including sensitivity to fluctuation in interest rates; access to available and feasible financing; regulatory and licensing approvals; third-party consents, approvals and representations, and relations with partners, owners, suppliers and other third parties; reliance on key personnel; business and economic 23 AZTAR CORPORATION AND SUBSIDIARIES conditions; litigation, judicial actions and political uncertainties, including gaming legislation and taxation; and the effects of competition, including locations of competitors and operating and marketing competition. 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. PART - II OTHER INFORMATION Item 1. Legal Proceedings (a) In connection with Case No. CV-S-94-1126-DAE(RJJ)-BASE FILE (the "Poulos/Ahearn Case"), Case No. CV-S-95-00923-LDG(RJJ)(the "Schreier Case") and Case No. CV-S-95-936 LDG(RLH)(the "Cruise Ship Case"), (collectively, the "Consolidated Cases"), as reported under Part I, Item 3 of the Company's Form 10-K for the year ended January 1, 1998, the plaintiffs, as reported under Part II, Item 1(a) of the Company's Form 10-Q for the quarter ended April 2, 1998, filed a motion on March 18, 1998, for class certification. On March 19, 1998, the Magistrate Judge granted defendants' motion seeking to bifurcate discovery into "class" and "merits" phases, and to stay "merits" discovery pending a decision on plaintiffs' motion for class certification. "Class" discovery, as reported under Part II, Item 1(a) of the Company's Form 10-Q for the quarter ended July 2, 1998, was completed on July 17, 1998; however, plaintiffs have filed a motion to compel further discovery from the defendants. If that motion is granted, defendants could be required to provide additional documents and information to plaintiffs. The defendants have filed their opposition to the motion for class certification. The plaintiffs have filed a reply memorandum and the matter has been submitted for decision. The stay of merits discovery remains in effect until the court decides the motion for class certification. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Page No. ---------- 10.1 Amendment No. 1, dated October 8, 1998, to Amended and Restated Reducing Revolving Loan Agreement, dated as of May 28, 1998, among Aztar Corporation and the lenders therein named; Bankers Trust Company and Societe Generale, as documentation agents; Bank of Scotland, Credit Lyonnais Los Angeles Branch and PNC Bank, National Association, as co- agents; and Bank of America National Trust and Savings Association, as administrative agent. * 27. Financial Data Schedule. * * See exhibit index at page E-1 of this report for a listing of exhibits filed with this report. All other exhibits have been omitted because the information is either not required or not applicable. 24 AZTAR CORPORATION AND SUBSIDIARIES Item 6. Exhibits and Reports on Form 8-K (continued) (b) Reports on Form 8-K The Company did not file any report on Form 8-K during the quarter ended October 1, 1998. 25 AZTAR CORPORATION AND SUBSIDIARIES 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. AZTAR CORPORATION ------------------------------ (Registrant) Date November 10, 1998 By ROBERT M. HADDOCK -------------------------- --------------------------- Robert M. Haddock Executive Vice President and Chief Financial Officer 26 AZTAR CORPORATION AND SUBSIDIARIES Exhibit Index - ------------- 10.1 Amendment No. 1, dated October 8, 1998, to Amended and Restated Reducing Revolving Loan Agreement, dated as of May 28, 1998, among Aztar Corporation and the lenders therein named; Bankers Trust Company and Societe Generale, as documentation agents; Bank of Scotland, Credit Lyonnais Los Angeles Branch and PNC Bank, National Association, as co-agents; and Bank of America National Trust and Savings Association, as administrative agent. 27. Financial Data Schedule. E-1 EX-10.1 2 AMENDMENT NO. 1 TO AMENDED AND RESTATED REDUCING REVOLVING LOAN AGREEMENT This Amendment No. 1 to Amended and Restated Reducing Revolving Loan Agreement (this "Amendment") dated as of October 8, 1998 is entered into with reference to the Amended and Restated Reducing Revolving Loan Agreement dated as of May 28, 1998 among Aztar Corporation ("Borrower"), the Banks party thereto, Bankers Trust Company and Societe Generale, as Documentation Agents, Bank of Scotland, Credit Lyonnais Los Angeles Branch and PNC Bank, National Association, as Co- Agents, and Bank of America National Trust and Savings Association, as Administrative Agent (the "Loan Agreement"). Capitalized terms used but not defined herein are used with the meanings set forth for those terms in the Loan Agreement. Borrower and the Administrative Agent, acting with the consent of the Requisite Banks pursuant to Section 11.2 of the Loan Agreement, agree as follows: 1. Section 1.1. Section 1.1 of the Loan Agreement is amended by revising the definition of "Basket Expenditures" to read as follows: "Basket Expenditures" means (a) Capital Expenditures permitted by Sections 6.15(c), 6.15(d) and 6.15(e), (b) the Acquisition Expenditures permitted by Section 6.16(l) and 6.16(m), (c) the aggregate purchase or redemption prices paid in respect of Subordinated Obligations permitted by Section 6.1(b)(ii) and (d) the aggregate purchase price paid in respect of repurchases of Common Stock permitted by Section 6.5(d). 2. Section 6.5. Section 6.5 of the Loan Agreement is amended by striking the word "and" in the sixth line thereof, inserting a comma at that place and adding a new Subsection (d) in the seventh line thereof immediately after the word "Stock" to read as follows: and (d) Distributions in the form of repurchases of Common Stock for which the aggregate purchase price does not exceed either (i) $30,000,000 or (ii) when aggregated with all other Basket Expenditures made since the Closing Date, $300,000,000; 3. Conditions Precedent. The effectiveness of this Amendment shall be conditioned upon the receipt by the Administrative Agent of all of the following, each properly executed by a Responsible Official of each party thereto and dated as of the date hereof: (a) Counterparts of this Amendment executed by all parties hereto; (b) Written consent of each of the Significant Subsidiaries to the execution, delivery and performance hereof, substantially in the form of Exhibit A to this Amendment; and (c) Written consent of the Requisite Banks as required under Section 11.2 of the Loan Agreement in the form of Exhibit B to this Amendment. 4. Representation and Warranty. Borrower represents and warrants to the Administrative Agent and the Banks that no Default or Event of Default has occurred and remains continuing. 5. Confirmation. In all other respects, the terms of the Loan Agreement and the other Loan Documents are hereby confirmed. IN WITNESS WHEREOF, Borrower and the Administrative Agent have executed this Amendment as of the date first written above by their duly authorized representatives. AZTAR CORPORATION By: R. HADDOCK ----------------------------- Robert M. Haddock Executive Vice President & Chief Financial Officer BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent By: JANICE HAMMOND ----------------------------- Janice Hammond Vice President Exhibit A to Amendment CONSENT OF SUBSIDIARY GUARANTORS Reference is hereby made to that certain Amended and Restated Reducing Revolving Loan Agreement dated as of May 28, 1998 among Aztar Corporation ("Borrower"), the Banks party thereto, Bankers Trust Company and Societe Generale, as Documentation Agents, Bank of Scotland, Credit Lyonnais Los Angeles Branch and PNC Bank, National Association, as Co- Agents, and Bank of America National Trust and Savings Association, as Administrative Agent (the "Loan Agreement"). Each of the undersigned hereby consents to the execution, delivery and performance by Borrower and the Administrative Agent of Amendment No. 1 to the Loan Agreement. Each of the undersigned represents and warrants to the Administrative Agent and the Banks that there is no defense, counterclaim or offset of any type or nature to the Subsidiary Guaranty, and that the same remains in full force and effect. Dated: October 8, 1998 HOTEL RAMADA OF NEVADA By: R. HADDOCK Robert M. Haddock Title: Vice President & Treasurer AZTAR DEVELOPMENT CORPORATION By: R. HADDOCK Robert M. Haddock Title: President AZTAR INDIANA GAMING CORPORATION By: R. HADDOCK Robert M. Haddock Title: Vice President & Treasurer AZTAR MISSOURI GAMING CORPORATION By: R. HADDOCK Robert M. Haddock Title: Vice President & Treasurer RAMADA NEW JERSEY, INC. By: R. HADDOCK Robert M. Haddock Title: Vice President ATLANTIC-DEAUVILLE INC. By: R. HADDOCK Robert M. Haddock Title: Vice President ADAMAR GARAGE CORPORATION By: R. HADDOCK Robert M. Haddock Title: Vice President RAMADA NEW JERSEY HOLDINGS CORPORATION By: R. HADDOCK Robert M. Haddock Title: Vice President MANCHESTER MALL, INC. By: R. HADDOCK Robert M. Haddock Title: Vice President RAMADA EXPRESS, INC. By: R. HADDOCK Robert M. Haddock Title: Vice President & Treasurer ADMAR OF NEW JERSEY, INC. By: R. HADDOCK Robert M. Haddock Title: Vice President Exhibit B to Amendment CONSENT OF BANK Reference is hereby made to that certain Amended and Restated Reducing Revolving Loan Agreement dated as of May 28, 1998 among Aztar Corporation ("Borrower"), the Banks party thereto, Bankers Trust Company and Societe Generale, as Documentation Agents, Bank of Scotland, Credit Lyonnais Los Angeles Branch and PNC Bank, National Association, as Co- Agents, and Bank of America National Trust and Savings Association, as Administrative Agent (the "Loan Agreement"). The undersigned Bank hereby consents to the execution and delivery of Amendment No. 1 to the Loan Agreement by the Administrative Agent on its behalf, substantially in the form of the most recent draft thereof presented to the undersigned Bank. Date: October 5, 1998 BANK OF AMERICA By: SCOTT FABER Scott Faber Title: Vice President Date: September 24, 1998 ABN AMRO BANK N.V. By: JEFFREY A. FRENCH Jeffrey A. French Title: Group Vice President & Director By: M.M. VALENTINE Michael M. Valentine Title: Vice President Date: September 25, 1998 BANK OF SCOTLAND By: JANET TAFFE Janet Taffe Title: Asst. Vice President Date: October 8, 1998 CREDIT LYONNAIS LOS ANGELES By: DIANNE M. SCOTT Dianne M. Scott Title: First Vice President and Manager Date: September 13, 1998 IMPERIAL BANK By: STEVEN K. JOHNSON Steven K. Johnson Title: Senior Vice President Date: September 29, 1998 KEYBANK NATIONAL ASSOCIATION By: MARY K. YOUNG Mary K. Young Title: Commercial Banking Officer Date: October 1, 1998 THE MITSUBISHI TRUST AND BANKING CORPORATION By: Y. SATOMI Yasushi Satomi Title: Senior Vice President and Chief Manager Date: October 7, 1998 PNC BANK NATIONAL ASSOCIATION By: G.W. WESSELS Gary W. Wessels Title: Vice President Date: October 7, 1998 SOCIETE GENERALE By: DONALD L. SCHUBERT Donald L. Schubert Title: Managing Director EX-27 3
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheet at October 1, 1998 and the Consolidated Statement of Operations for the year-to-date period ended October 1, 1998 and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1998 OCT-1-1998 38,207 0 60,759 24,866 6,246 103,293 1,199,572 306,805 1,065,829 90,450 489,273 7,003 0 491 451,834 1,065,829 40,251 610,082 40,546 311,181 28,654 11,322 45,043 20,553 7,302 9,964 0 (1,346) 0 8,618 .18 .17
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