-----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, MzO2pkqtS/+x0x5JDC39bKNToPAR/TvMWIb15mDZHjbqpLF/9B2vl/M+TMYq/+wy a/uzq3/F7tE3mviZGo9bAw== 0000950115-96-001662.txt : 19961118 0000950115-96-001662.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950115-96-001662 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLAYERS INTERNATIONAL INC /NV/ CENTRAL INDEX KEY: 0000796912 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 954175832 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14897 FILM NUMBER: 96666682 BUSINESS ADDRESS: STREET 1: 800 BILBO ST CITY: LAKE CHARLES STATE: LA ZIP: 70601 BUSINESS PHONE: 3184371560 MAIL ADDRESS: STREET 1: 800 BILBO ST CITY: LAKE CHARLES STATE: LA ZIP: 70601 FORMER COMPANY: FORMER CONFORMED NAME: PLAYERS CLUB INTERNATIONAL INC DATE OF NAME CHANGE: 19861020 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------- FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 --------------------------------- or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF SECURITIES EXCHANGE ACT OF 1943 For the transition period from _________________ to ________________ Commission file number 0-14897 Players International, Inc. Nevada 95-4175832 (State or other jurisdiction (I.R.S. employer identification no.) of incorporation or organization) 1300 Atlantic Ave., Suite 800 Atlantic City, NJ 08401 - ----------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (609) 449-7777 ------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check 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 APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of each of the registrant's classes of common stock was 29,187,480 shares at November 8, 1996. PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES INDEX
PART I - FINANCIAL INFORMATION PAGE Item 1. Financial Statements Condensed Consolidated Balance Sheets at September 30, 1996 and March 31, 1996 1 Condensed Consolidated Statements of Operations for the Three and Six Months Ended September 30, 1996 and 1995 3 Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended September 30, 1996 and 1995 4 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 8 PART II - OTHER INFORMATION Item 1. Legal Proceedings 13 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15
PART I - FINANCIAL INFORMATION Item 1. Financial Statements PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands) ASSETS
September 30, 1996 March 31, 1996 ------------------ -------------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 16,746 $ 18,786 Marketable securities, net -- 4,461 Accounts receivable, net of allowance for doubtful accounts of $298 at September 30, 1996 and $118 at March 31, 1996 3,688 4,541 Notes receivable 600 3,062 Inventories 3,046 2,719 Deferred income tax 2,969 2,970 Prepaid expenses and other current assets 5,584 5,044 ----------- ----------- Total current assets 32,633 41,583 ---------- ---------- PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of $31,139 at September 30, 1996 and $23,078 at March 31, 1996 292,609 279,916 ---------- DEFERRED INCOME TAX - long-term 4,897 4,897 ----------- ----------- INTANGIBLES, net of accumulated amortization of $2,105 at September 30, 1996 and $1,714 at March 31, 1996 36,640 37,126 ---------- ----------- INVESTMENT IN JOINT VENTURE 59,474 39,474 ---------- ----------- OTHER ASSETS 9,216 10,436 ----------- ----------- TOTAL ASSETS $ 435,469 $ 413,432 ========= =========
The accompanying notes are an integral part of these condensed consolidated statements. 1 PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands, except par value) LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, 1996 March 31, 1996 ------------------ -------------- (Unaudited) CURRENT LIABILITIES: Current portion of Long-Term debt $ 24,000 $ -- Accounts payable 5,631 6,736 Accrued liabilities 25,435 32,432 Other liabilities 6,443 537 --------- Total current liabilities 61,509 39,705 --------- --------- OTHER LONG-TERM LIABILITIES 29,462 27,100 --------- --------- LONG-TERM DEBT NET OF CURRENT PORTION 150,000 153,000 --------- --------- STOCKHOLDERS' EQUITY: Preferred stock, no par value, Authorized--10,000,000 shares Issued and outstanding--none -- -- Common stock, $.005 par value, Authorized--90,000,000 shares Issued--29,859,580 at September 30, 1996 and March 31, 1996 149 149 Additional paid-in capital 123,670 123,719 Unrealized loss on marketable securities, net of tax -- (1) Treasury stock, at cost; 672,100 shares at September 30, 1996 (7,294) (7,294) and March 31, 1996 Retained earnings 77,973 77,054 --------- --------- Total Stockholders' Equity 194,498 193,627 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 435,469 $ 413,432 ========= =========
The accompanying notes are an integral part of these condensed consolidated statements. 2 PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share data) (Unaudited)
For the Three Months For the Six Months Ended September 30, Ended September 30, 1996 1995 1996 1995 ---- ---- ---- ---- REVENUES: Casino $ 67,260 $ 73,743 $ 139,512 $ 136,853 Food and beverage 3,704 3,502 7,409 5,170 Hotel 1,768 1,600 3,579 1,600 Other 1,676 1,451 3,519 2,285 ------------ ------------ ------------ ------------ 74,408 80,296 154,019 145,908 ------------ ------------ ------------ ------------ COSTS AND EXPENSES: Casino 30,227 29,843 61,682 54,241 Food and beverage 3,708 4,194 7,453 5,740 Hotel 802 908 1,629 918 Other gaming related expenses 24,031 21,158 47,624 35,645 Corporate administrative expenses 2,690 2,494 5,062 4,324 Pre-opening and gaming development costs 1,884 2,237 3,295 7,995 Depreciation and amortization 4,746 5,780 9,382 9,258 Restructuring charge 9,007 -- 9,007 -- ------------ ------------ ------------ ------------ 77,095 66,614 145,134 118,121 ------------ ------------ ------------ ------------ Income (loss) before other income (expense) and provision (benefit) for income taxes (2,687) 13,682 8,885 27,787 ------------ ------------ ------------ ------------ OTHER INCOME (EXPENSE): Interest income 55 2,060 168 4,183 Other income, net 81 72 66 377 Interest expense (3,749) (3,963) (7,613) (7,352) ------------ ------------ ------------ ------------ (3,613) (1,831) (7,379) (2,792) ------------ ------------ ------------ ------------ Income (loss) before provision (benefit) for income taxes (6,300) 11,851 1,506 24,995 PROVISION (BENEFIT) FOR INCOME TAXES (2,457) 4,622 587 9,748 ------------ ------------ ------------ ------------ NET INCOME (LOSS) ($ 3,843) $ 7,229 $ 919 $ 15,247 ============ ============ ============ ============ EARNINGS (LOSS) PER COMMON AND COMMON SHARE EQUIVALENT Primary $ (0.12) $ 0.22 $ 0.03 $ 0.47 Fully Diluted $ (0.12) $ 0.22 $ 0.03 $ 0.47 WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES Primary 30,964,067 32,730,731 31,106,399 32,602,273 Fully Diluted 30,964,067 32,730,819 31,106,399 32,602,654
The accompanying notes are an integral part of these condensed consolidated statements. 3 PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (Unaudited)
For the Six Months Ended September 30, ------------------- 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 919 $ 15,247 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,382 9,258 Other 240 (2,169) Changes in assets and liabilities: Accounts and notes receivable 3,266 (2,276) Inventories, prepaid expenses and other current assets (867) (2,697) Other assets 572 (10,235) Accounts payable and accrued liabilities (8,200) (7,025) Other liabilities 8,469 197 --------- --------- Net cash provided by operating activities 13,781 300 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Net purchases of property and equipment (21,174) (56,336) Purchase of marketable securities -- (170,806) Proceeds from sale of marketable securities 4,401 79,244 Investment in joint venture (20,000) -- Net cash used in investing activities (36,773) (147,898) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 21,000 150,000 Payments of long-term debt -- (9,071) Proceeds from exercise of stock options -- 1,260 Other (48) (1) --------- --------- Net cash provided by financing activities 20,952 142,188 --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS (2,040) (5,410) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,786 23,886 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,746 $ 18,476 ========= ========= SUPPLEMENTAL CASH FLOW DISCLOSURE: Interest paid $ 10,232 $ 275 Income taxes paid 3,827 8,596 Unrealized gain on marketable securities, net of tax -- 394 Debt incurred to purchase land and equipment -- 667 Accrued liabilities incurred to purchase property and equipment -- 5,500 Other long-term liabilities relating to costs in excess of fair value of tangible assets acquired -- 14,656
The accompanying notes are an integral part of these condensed consolidated statements. 4 PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 - Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's Form 10-K for the year ended March 31, 1996. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows of all periods presented have been made. The results of operations for the six month period ended September 30, 1996, are not necessarily indicative of the operating results for the full year. Certain reclassifications have been made to the financial statements as previously presented to conform to current classifications. Note 2 - Casino Revenues and Promotional Allowances Casino revenues are the net of gaming wins less losses. Revenues exclude the retail value of complimentary food and beverage, hotel accommodations and other items furnished to customers, which totaled approximately $6,717,000 and $5,764,000, and $13,617,000 and $9,705,000 for the three and six months ended September 30, 1996 and 1995, respectively. The estimated cost of providing such complimentary services are included in casino costs and expenses through inter-department allocations from the department granting the services as follows (dollars in thousands): For the Three Months For the Six Months Ended September 30, Ended September 30, --------------------- ------------------- 1996 1995 1996 1995 ---- ---- ---- ---- Food and beverage $ 5,342 $ 4,002 $11,068 $ 6,786 Hotel 252 -- 526 -- Admissions and other 361 1,086 655 1,896 ------- ------- ------- $ 5,955 $ 5,088 $12,249 $ 8,682 ======= ======= Note 3 - Pre-opening and Gaming Development Costs All costs in connection with the identification and development of new gaming jurisdictions and sites are expensed, except for the cost of property and equipment which is capitalized. 5 Note 4 - Primary and Fully Diluted Shares Per share amounts have been computed based on the weighted average number of outstanding shares and common stock equivalents, if dilutive, during each period. A summary of the number of shares used in computing primary earnings per share follows:
For the Three Months For the Six Months Ended September 30, Ended September 30, --------------------- -------------------- 1996 1995 1996 1995 ---- ---- ---- ---- Weighted average number of shares outstanding 29,494,862 30,051,219 29,494,862 29,889,606 Dilutive effect of options and warrants 1,469,205 2,679,512 1,611,537 2,712,667 ---------- ---------- ---------- ---------- Shares used in computing primary earnings per share 30,964,067 32,730,731 31,106,399 32,602,273 ========== ========== ========== ==========
For the Three Months For the Six Months Ended September 30, Ended September 30, --------------------- ------------------- 1996 1995 1996 1995 ---- ---- ---- ---- Weighted average number of shares outstanding 29,494,862 30,051,219 29,494,862 29,889,606 Dilutive effect of options and warrants 1,469,205 2,679,600 1,611,537 2,713,048 ---------- ---------- ---------- ---------- Shares used in computing fully diluted earnings per share 30,964,067 32,730,819 31,106,399 32,602,654 ========== ========== ========== ==========
Note 5 - Long-Term Debt On August 25, 1995, the Company entered into a $120,000,000 reducing revolving credit agreement (the "Credit Facility") with a consortium of banks. As of September 30, 1996, there was a balance of $24,000,000 outstanding under the Credit Facility ($32,000,000 as of November 14, 1996). In October 1996, the Company informed the banks party to the Credit Facility that it had not achieved the $65 million level of earnings before interest, taxes, depreciation and amortization for the four consecutive quarters ended September 30, 1996 as required by the covenants of the Credit Facility, and thus was in default under the Credit Facility. The banks have temporarily waived such default pending negotiation and documentation of a definitive amendment to the Credit Facility (the "Amended Credit Facility"). The Company expects to have the Amended Credit Facility completed in December, 1996. Until a definitive amendment to the Credit Facility is executed, borrowings under the Credit Facility will be classified as current liabilities. Long-term debt as of September 30, 1996 consisted exclusively of $150,000,000 in 10 7/8% Senior Notes due 2005. Note 6 - Restructuring Charge During the quarter ended September 30, 1996, the Company decided to significantly reduce its pursuit of development opportunities in new or emerging jurisdictions and instead concentrate on improving its existing operations. This resulted in the sale of a non-operating riverboat held for future deployment and a corporate aircraft, the closure of two development offices and the retirement or termination of 21 senior management and staff. The affected employees included those specifically responsible for the Company's developmental activities and others necessitated to effect the Company's revised business plan. The one-time 6 charge of $9,007,000 consists principally of the net loss on the disposal of assets held for or used in development activities and the cost of employee severance arrangements. Note 7 - Subsequent Events On November 5, 1996, the voters of Calcasieu Parish, Louisiana, by a two to one margin, voted in favor of the continuation of riverboat gaming in the parish in a referendum authorized by the Louisiana legislature. This vote means that the Company may continue to operate its facilities at the present site in Lake Charles, subject to the timely renewal of its current licenses. Under current Louisiana law, any application to locate any other riverboat facility in the parish, or to change the location of an existing riverboat to another docking site within the parish, will require the approval of the voters in another referendum in the parish. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company operates gaming, resort and entertainment facilities. These include a riverboat casino in Metropolis, Illinois, two riverboat casinos in Lake Charles, Louisiana and a land-based casino resort in Mesquite, Nevada. The Company also owns and operates a thoroughbred racetrack in Paducah, Kentucky. A joint venture riverboat casino entertainment complex in Maryland Heights, Missouri, is presently under construction. The Company's fiscal year ends on March 31. References to the second quarter of 1997 or 1996, mean the three month periods ended September 30, 1996 and September 30, 1995, respectively. Comparison of Operating Results for the Three Month periods ended September 30, 1996 and 1995 Results of Operations Financial Highlights
% Increase Three months ended September 30 1996 1995 (Decrease) ---- ---- ---------- (Dollars in thousands, except per share amounts) Casino revenues Metropolis $20,385 $23,367 (12.8)% Lake Charles 41,407 44,869 (7.7)% Mesquite 5,468 5,507 (0.7)% ------- ------- ----- $67,260 $73,743 (8.8)% Total revenues Metropolis $21,263 $24,465 (13.1)% Lake Charles 43,547 46,294 (5.9)% Mesquite 9,269 9,181 1.0% Other 329 356 (7.6)% ------- ------- ----- $74,408 $80,296 (7.3)% Operating income (loss) Metropolis $6,115 $9,552 (36.0)% Lake Charles 7,052 12,516 (43.7)% Mesquite (1,755) (3,337) 47.4% Corporate, development and pre-opening expenses (5,092) (5,049) (0.9)% Restructuring charge (9,007) -- -- ------- ------- ----- ($2,687) $13,682 (119.6)% ------- ------- ----- Operating margin (operating income/total revenues) Metropolis 28.8% 39.0% (10.2) pts. Lake Charles 16.2% 27.0% (10.8) pts. Mesquite Neg. Neg. n.m. Consolidated, excl. restructuring charge 8.5% 17.0% (8.5) pts. Consolidated Neg. 17.0% n.m. ------- ------- ----- Depreciation and amortization $4,746 $5,780 (17.9)% ------- ------- ----- Interest expense, net $3,694 $1,903 94.1% ------- ------- ----- Net income, excl. restructuring charge $1,651 $7,229 (77.2)% ------- ------- ----- Net income (loss) ($3,843) $7,229 (153.2)% ------- ------- ----- Net income per share, excl. restructuring charge $0.05 $0.22 (77.3)% ------- ------- ----- Net income (loss) per share ($0.12) $0.22 (154.5)% ------- ------- -----
n.m. - not meaningful neg. - negative The 9% decrease in casino revenues and the 7% decrease in total revenues during the 1997 second quarter versus the prior year period, resulted from an increase in competing riverboat casino capacity in both the Metropolis and Lake Charles markets as well as competition from more distant casinos in Tunica, 8 Mississippi and St. Louis, Missouri. A competing riverboat casino opened in Evansville, Indiana, in December 1995 and in Lake Charles a competitor opened its second riverboat in July 1996. Operating income for the three months ended September 30, 1996, excluding the restructuring charge, decreased approximately 54% from the same period in 1995. The 36% and 44% declines in Metropolis and Lake Charles, respectively, resulted from a decline in casino revenues at both properties coupled with increased expenditures for advertising, marketing, promotions and entertainment incurred in response to the additional competition. In Lake Charles, operating expenses also increased as a result of the February 1996 opening of a 60,000 square foot floating entertainment "Island", which added significant dining and entertainment capacity. Additionally, the per passenger tax paid to local government in Lake Charles was increased by $.50 in August 1995. The three months ended September 30, 1995, constituted the first full operating quarter for the Mesquite facility. As such, a significant amount of non-recurring promotional and other expenses relating to the opening were incurred during that quarter. The 47% reduction in Mesquite's operating loss for the three months ended September 30, 1996, was due to a modest increase in revenue and increased operating efficiency, primarily the result of lower food and beverage expenses. Depreciation and amortization expense for the three months ended September 30, 1996, decreased by approximately 18% from the same period in 1995, primarily as a result of a change in the estimated useful lives of certain depreciable assets and intangibles, effective October 1, 1995. The restructuring charge reflected in the second quarter of 1997 reflects the Company's decision to significantly reduce its pursuit of development opportunities in new or emerging jurisdictions and instead concentrate on improving its existing operations. This resulted in the sale of the Players I riverboat which was previously held for future deployment and a corporate aircraft, the closure of two development offices and the retirement or termination of 21 senior management and staff. The affected employees included those specifically responsible for the Company's developmental activities and others affected by the Company's revised business plan. The one-time charge consists principally of the net loss on the disposal of assets held for or used in development activities and the cost of employee severance arrangements. Other Factors Affecting Net Income Net interest expense increased by 94%, to $3.7 million, for the three months ended September 30, 1996, versus the same period in 1995. Interest income decreased by approximately $2 million as a result of the decrease in investable funds resulting from the increased investments in Maryland Heights and Mesquite. Interest cost reflects the $150 million, 10-7/8% Senior Notes issued in April 1995, borrowings under a $120 million revolving bank credit facility entered into in August 1995 (totaling $24 million as of September 30, 1996) and imputed interest associated with the August 1995 acquisition of the Downtowner Hotel in Lake Charles. Capitalized interest increased by approximately $1.5 million in the second quarter of 1997, to $1.7 million, due to the ongoing investment in Maryland Heights and the development of the Mesquite golf course. 9 Comparison of Operating Results for the Six Month periods ended September 30, 1996 and 1995 Results of Operations Financial Highlights
% Increase Six months ended September 30 1996 1995 (Decrease) ---- ---- ----------- (Dollars in thousands, except per share amounts) Casino revenues Metropolis $39,536 $42,963 (8.0)% Lake Charles 88,755 88,317 0.5% Mesquite 11,221 5,573 101.3% ------- ------- ---- $139,512 $136,853 1.9% Total revenues Metropolis $41,187 $44,957 (8.4)% Lake Charles 93,375 90,903 2.7% Mesquite 18,810 9,332 101.6% Other 647 716 (9.6)% ------- ------- ---- $154,019 $145,908 5.6% Operating income (loss) Metropolis $11,850 $16,767 (29.3)% Lake Charles 18,484 27,306 (32.3)% Mesquite (3,100) (3,394) 8.7% Corporate, development and pre-opening expenses (9,342) (12,892) 27.5% Restructuring charge (9,007) -- -- ------- ------- ---- $8,885 $27,787 (68.0)% ------- ------- ---- Operating margin (operating income/total revenues) Metropolis 28.8% 37.3% (8.5) pts. Lake Charles 19.8% 30.0% (10.2) pts. Mesquite Neg. Neg. n.m. Consolidated, excl. restructuring charge 11.6% 19.0% (7.4) pts. Consolidated 5.8% 19.0% (13.2) pts. ------- ------- ---- Depreciation and amortization $9,382 $9,258 1.3% ------- ------- ---- Interest expense, net $7,445 $3,169 134.9% ------- ------- ---- Net income, excl. restructuring charge $6,413 $15,247 (57.9)% ------- ------- ---- Net income $919 $15,247 (94.0)% ------- ------- ---- Net income per share, excl. restructuring charge $0.21 $0.47 (55.3)% ------- ------- ---- Net income per share $0.03 $0.47 (93.6)% ------- ------- ----
n.m. - not meaningful neg. - negative The 8% decrease in casino revenues and total revenues in Metropolis during the six months ended September 30, 1996, versus the same period in 1995, resulted from the opening of a competing riverboat casino in Evansville, Indiana. This resulted in lower revenue even though total amounts wagered were generally consistent between periods. Casino and total revenues in Mesquite more than doubled in the six months ended September 30, 1996. The Mesquite casino resort opened on June 29, 1995. As such, it had six months of operations in the current period compared to just over three months of operations in the prior year period. The increase in total revenues in Lake Charles during the six months ended September 30, 1996 versus the same period in 1995, resulted from the acquisition of the former Downtowner hotel in August 1995 and the February 1996 opening of a 60,000 square foot floating entertainment "Island", which added significant dining and entertainment capacity. Operating income for the six months ended September 30, 1996, excluding the restructuring charge, decreased approximately 36% from the same period in 1995. The 29% and 32% declines in Metropolis and Lake Charles, respectively, resulted from a decline or flat casino revenues at the respective property coupled with increased expenditures for advertising, marketing, promotions and entertainment incurred in response to 10 additional competition. In Lake Charles, operating expenses also increased as a result of the February 1996 opening of the entertainment "Island". Additionally, the per passenger tax paid to local government in Lake Charles was increased by $.50 in August 1995. The approximately 9% reduction in Mesquite's operating loss for the six months ended September 30, 1996, versus the same period in 1995, was due to increased operating efficiency, primarily the result of lower food and beverage expenses. Corporate, development and pre-opening expenses declined by approximately 28% in the six months ended September 30, 1996, versus the same period in 1995, primarily due to the opening of the Mesquite property in late June of 1995 with a subsequent reduction in pre-opening expenses. Other Factors Affecting Net Income Net interest expense increased by approximately $4.3 million for the six months ended September 30, 1996, versus the same period in 1995. Interest income declined by approximately $4 million, as a result of the decrease in investable funds resulting from the increased investments in Maryland Heights and Mesquite. The increased interest cost reflects the $150 million, 10-7/8% Senior Notes issued in April 1995, borrowings under a $120 million revolving bank credit facility entered into in August 1995 (totaling $24 million as of September 30, 1996) and imputed interest associated with the August 1995 acquisition of the Downtowner Hotel in Lake Charles. Capitalized interest increased by approximately $2.5 million, to $2.9 million, due to the ongoing investment in Maryland Heights and the development of the Mesquite golf course. Capital Resources, Capital Spending and Liquidity During the six months ended September 30, 1996, cash flow from operations and $21 million in borrowings from the Company's $120 million revolving bank credit facility were the sources of funds for capital expenditures, debt service and other corporate requirements. During the comparable period in 1995, the primary source of funds for such purposes was the proceeds from the April 1995 issuance of $150 million of 10-7/8% Senior Notes. Operating activities provided $13.8 million in cash in the current six month period versus $300,000 in the prior period. The increase is primarily attributable to the costs of issuing the Senior Notes and arranging the bank credit facility in the prior period. Capital expenditures during the six months ended September 30, 1996, totaled $21 million, primarily for the development of a golf course in Mesquite, which opened in October 1996, and maintenance capital spending at the Company's three major operating facilities. Such capital expenditures do not include a $20 million investment in the unconsolidated Maryland Heights joint venture. Capital expenditures during the comparable 1995 period totaled $56.3 million, which consisted principally of the final construction costs for Players Island Resort and the addition of a second riverboat in Lake Charles. The Company's portion of the Maryland Heights project is expected to cost approximately $140 million, excluding capitalized interest. As of September 30, 1996, the Company had funded approximately $66 million of this amount. In October 1996, the Company informed the banks party to the Credit Facility (the "Banks") that it had not achieved the $65 million level of earnings before interest, taxes, depreciation and amortization ("EBITDA") for the four consecutive quarters ended September 30, 1996 as required by the covenants of the Credit Facility, and thus was in default under the Credit Facility. See Note 5 of the Notes to Condensed Consolidated Financial Statements. The Banks have temporarily waived such default pending negotiation and documentation of a definitive amendment to the Credit Facility (the "Amended Credit Facility"). The Company expects to have the Amended Credit Facility completed in December, 1996. Although the terms of the Amended Credit Facility have 11 yet to be agreed upon, it is expected that (i) the minimum EBITDA covenant in the Credit Facility will be reduced, (ii) borrowing costs will increase under the Amended Credit Facility, (iii) an amendment fee to amend the Credit Facility will be payable and (iv) additional fees and costs will be payable to fund certain future borrowing levels under the Amended Credit Facility. The Company anticipates that borrowings under the Amended Credit Facility and cash flow from operations will be sufficient to fund the completion and opening of the Maryland Heights project. Forward-looking Information Certain information included in this Quarterly Report on Form 10-Q contains, 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) contain or will contain or include, forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Such forward-looking statements address, among other things, the Amended Credit Facility and the availability of economically attractive terms of financing for the Maryland Heights project currently under development, the effects of competition, plans for future expansion and property enhancements, business development activities, capital expenditure programs and requirements, financing sources and the effects of regulation (including gaming licensure and regulation, state and local regulation and tax regulation). Such forward-looking information is based upon management's current plans or expectations and is subject to a number of uncertainties and risks that could significantly affect current plans, anticipated actions and the Company's future financial condition and results. As a consequence, current plans, anticipated actions and future financial condition and results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These uncertainties and risks include, but are not limited to, those relating to the successful negotiation of the Amended Credit Facility, conducting operations in an increasingly competitive environment, conducting operations at a newly or recently developed site or in a jurisdiction for which gaming has recently been permitted, changes in gaming, state and local laws and regulations (including local referenda to terminate the authority to conduct gaming operations), development and construction activities, leverage and debt service requirements (including sensitivity to fluctuation in interest rates), general economic conditions, changes in federal or state tax laws, action taken under applications for licenses (including renewals) and approvals under applicable laws and regulations (including gaming laws and regulations) and the legalization of gaming in certain jurisdictions. 12 PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company has the following developments to report concerning outstanding legal matters previously reported: Transam, Ltd. d/b/a/ Two Bunch Palms Resort & Spa v. Players International, Inc., et al. On or about November 21, 1995, Transam, Ltd., a Delaware Corporation, d/b/a/ Two Bunch Palms Resort & Spa ("Two Bunch Palms") filed an action in the United States District Court, Central District of California, against the Company, a subsidiary of the Company, certain principals of the Company, and certain other defendants alleging various causes of action arising out of an agreement for services entered into by the Company with Gerald Greenbach and Creative Hospitality Management. Mr. Greenbach, at the time the Agreement was executed by the Company, was an executive of Two Bunch Palms. Mr. Greenbach both individually and through Creative Hospitality Management agreed to provide the Company with a variety of consulting services with respect to the operation and marketing of the Company's spa facilities at Players Island Resort in Mesquite, Nevada. Two Bunch Palms alleges that the Company and/or Mr. Greenbach and Creative Hospitality Management engaged in copyright infringement, trade dress infringement, unfair competition, false advertising, misappropriation of trade secrets, unfair competition as well as certain related allegations with respect to the services provided by Mr. Greenbach and Creative Hospitality Management to the Company. The Company has agreed to pay Two Bunch Palms the sum of $200,000 to settle this matter. The Company anticipates that its insurance carriers will reimburse the Company for substantial portions of this sum. Poulos and Ahern Litigation The Company, certain suppliers and distributors of video poker and electronic slot machines and over forty other casino operators have been named as defendants in a class action suit filed April 26, 1994 in the United States District Court, Middle District of Florida, by William Ahern and William H. Poulos. The plaintiffs allege common law fraud and deceit, mail fraud, wire fraud and Racketeer Influenced and Corrupt Organizations Act violations in the marketing and operation of video poker games and electronic slot machines. The suit seeks unspecified damages and recovery of attorney's fees and costs. On December 9, 1994, an Order was entered by the District Court in Florida transferring the consolidated action to the United States District Court for the District of Nevada. The defendants filed various motions seeking dismissal of the action. On April 17, 1996, the Court dismissed plaintiffs' Complaint without prejudice for failure to plead their claims with specificity and dismissed defendants' remaining substantive motions as moot. The Court permitted plaintiffs until May 31, 1996 to file an Amended Complaint, within which time an Amended Complaint was filed. The Company refiled its substantive motions for dismissal of the Amended Complaint, which motions are currently pending. The Company believes that the claims are wholly without merit and does not expect that the lawsuit will have a material adverse effect on the Company's financial position or results of operations. Schreier v. Players International, Inc., et al. On or about October 27, 1995 the Company was served with a purported class action in the United States District Court for the District of Nevada which is essentially identical to the Poulos and Ahearn litigation, except for certain variations in the definition of the purported class. The Company filed a motion to dismiss the complaint. Plaintiff's attempts to consolidate this action with Poulos and Ahern litigation were not successful. The Nevada District Court entered an order granting motions to dismiss based on defects in the pleadings, and denying as moot all other pending motions, including those of the Company. The Court granted plaintiffs until September 30, 1996 within which to file an amended complaint that complies with the applicable pleading requirements. The plaintiffs filed an amended complaint on or about September 30, 1996. The Company renewed its motion to dismiss based on abstention and related doctrines, and based on defects 13 in the pleadings. The Company believes that the claims are wholly without merit and does not expect that the lawsuit will have a material adverse effect on the Company's financial position or results of operations. Item 6. Exhibits and Reports on Form 8-K Exhibits Filed with this Form 10-Q Exhibit No. Exhibit Description - ----------- ------------------- 3.2 By-laws, as amended, of Players International, Inc. 27.0 Financial Data Schedule Reports on Form 8-K Filed During Quarter The Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 19, 1996 concerned senior management changes and an expansion of its Board of Directors. 14 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLAYERS INTERNATIONAL, INC. Date: November 14, 1996 By: /s/ Henry M. Applegate -------------------------- Henry M. Applegate, Senior Vice President, Chief Financial Officer and Chief Accounting Officer 15 EX-3.2 2 BYLAWS BY-LAWS, AS AMENDED OF PLAYERS INTERNATIONAL, INC. ARTICLE I - OFFICES The principal executive office of the Corporation shall be located at 1300 Atlantic Avenue, Suite 800, Atlantic City, N.J. 08401 and it may be changed from time to time by the Board of Directors. The Corporation may also maintain offices at such other places within or without the United States as the Board of Directors may, from time to time, determine. ARTICLE II - MEETING OF THE STOCKHOLDERS Section 1 - Annual Meetings: The annual meeting of the stockholders of the Corporation shall be held within six (6) months after the close of the fiscal year of the Corporation or at such later date as may be determined by the Board of Directors, for the purposes of electing directors and transacting such other business as may properly come before the meeting. Section 2 - Special Meetings: Special meetings of the stockholders may be called at any time by the Board of Directors or by the President, and shall be called by the President or the Secretary at the written request of the holder of twenty-five percent (25%) of the shares then outstanding and entitled to vote thereat, or as otherwise required by law. Section 3 - Place of Meetings: All meetings of stockholders shall be held at the principal office of the Corporation, or at such other places as shall be designated in the notices or waivers of notice of such meetings. Section 4 - Notice of Meetings: (a) Except as otherwise provided by statute, written notice of each meeting of stockholders, whether annual or special, stating the time when and place where it is to be held, shall be served either personally or by mail, not less than ten or more than sixty (60) days before the meeting, upon each stockholder of record entitled to vote at such meeting, and to any other stockholder to whom the giving of notice may be required by law. Notice of a special meeting shall also state the purpose or purposes for which the meeting is called, and shall indicate that it is being issued by, or at the direction of, the person or persons calling the meeting. If, at any meeting, action is proposed to be taken that would, if taken, entitle stockholders to receive payment for their share pursuant to statute, the notice of such meeting shall include a statement of that purpose and to that effect. If mailed, such notice shall be directed to each such stockholder at his address, as it appears on the records of the stockholders of the Corporation, unless he shall have previously filed with the Secretary of the corporation a written request that notices intended for him be mailed to the address designated in such request (b) Notice of any meeting need not be given to any person who may become a stockholder of record after the mailing of such notice and prior to the meeting, or to any stockholder who attends such meeting, in person or by proxy, or to any stockholder who, in person or by proxy, submits a signed waiver of 1 notice either before or after such meeting. Notice of any adjourned meeting of stockholders need not be given, unless otherwise required by statute. Section 5 - Quorum: (a) Except as otherwise provided herein, or by statute, or in the Certificate of Incorporation (such certificate and any amendments thereof being hereinafter collectively referred to as the "Certificate of Incorporation"), at all meetings of stockholders of the Corporation, the presence at the commencement of such meetings in person or by proxy of stockholders holding of record 51% of the total number of shares of the Corporation then issued and outstanding and entitled to vote, shall be necessary and sufficient to constitute a quorum for the transaction of any business. The withdrawal of any stockholder after the commencement of a meeting shall have no effect on the existence of a quorum, after a quorum has been established at such meeting. (b) Despite the absence of a quorum at any annual or special meeting of stockholders, the stockholders, by a majority of the votes cast by the holders of shares entitled to vote thereat, may adjourn the meeting. At any such adjourned meeting at which a quorum is present, any business may be transacted at the meeting as originally called. Section 6 - Voting: (a) Except as otherwise provided by statute or by the Certificate of Incorporation, any corporate action, other than the election of directors, to be taken by vote of the stockholders, shall be authorized by a majority of votes cast at a meeting of stockholders by the holders of shares entitled to vote thereat. (b) Except as otherwise provided by statute or by the Certificate of Incorporation, at each meeting of stockholders, each holder of record of stock of the corporation entitled to vote thereat, shall be entitled to one vote for each share of stock registered in his name on the books of the Corporation. (c) Each stockholder entitled to vote, or to express consent or dissent without a meeting, may do so by proxy; provided, however, that the instrument authorizing such proxy to act shall have been executed in writing by the stockholder himself, or by his attorney-in-fact thereunto duly authorized in writing. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the person executing it shall have specified therein the length of time it is to continue in force. Such instrument shall be exhibited to the Secretary at the meeting and shall be filed with the minutes of the meeting. (d) Any action, except election of directors, which may be taken by a vote of stockholders at a meeting, may be taken without a meeting if authorized by a written consent of shareholders holding at least a majority of the voting power; provided that if a greater proportion of voting power is required by such action at such meeting, then such greater proportion of written consents shall be required. ARTICLE III - BOARD OF DIRECTORS Section 1 - Number, Election and Term of Office: (a) The number of the directors of the Corporation shall be not less than 1 not more than 11, unless and until otherwise determined by vote of a majority of the entire Board of Directors. The number of Directors shall not be less than three (3), unless all of the outstanding shares of stock are owned beneficially and of record by less than three (3) stockholders, in which event the number of directors shall not be less than the number of stockholders or the minimum permitted by statute. 2 (b) Except as may otherwise be provided herein or in the Certificate of Incorporation, the members of the Board of Directors of the Corporation, who need not be stockholders, shall be elected by a plurality of the votes cast at a meeting of stockholders, by the holders of shares of stock present in person or by proxy, entitled to vote in the election. There shall be no cumulative voting with respect to the election of the members of the Board of Directors. (c) Each director shall hold office until the annual meeting of the stockholders next succeeding his election, and until his successor is elected and qualified, or until his prior death, resignation, or removal. Section 2 - Duties and Powers: The Board of Directors shall be responsible for the control and management of the affairs, property and interests of the Corporation and may exercise all powers of the Corporation, except as are in the Certificate of Incorporation or by statute expressly conferred upon or reserved to the stockholders. Section 3 - Annual and Regular Meetings; Notice: (a) A regular annual meeting of the Board of Directors shall be held immediately following the annual meeting of the stockholders, at the place of such annual meeting of stockholders. (b) The Board of Directors, from time to time, may provide by resolution for the holding of other regular meetings of the Board of Directors, and may fix the time and place thereof. (c) Notice of any regular meeting of the Board of Directors shall not be required to be given and, if given, need not specify the purpose of the meeting; provided, however, that in case the Board of Directors shall fix or change the time or place of any regular meeting, notice of such action shall be given to each director who shall not have been present at the meeting at which such change was made within the time limited, and in the manner set forth in Paragraph (b) Section (4) of this Article III, with respect to special meetings, unless such notice shall be waived in the manner set forth in Paragraph (c) of such Section 4. Section 4 - Special Meeting; Notice: (a) Special meetings of the Board of Directors shall be held whenever called by the President or by one of the directors, at such time and place as may be specified in the respective notices or waivers of notice thereof. (b) Except as otherwise required by statute, notice of a special meeting shall be mailed directly to each director, addressed to him at his residence or usual place of business, at least four (4) days before the day on which the meeting is to be held, or shall be sent to him at such place by facsimile transmission, telegram, radio, or cable, or shall be delivered to him personally or given to him orally, not later than the day before the day on which the meeting is to be held. A notice, or waiver of notice except as required by Section 8 of this Article III, need not specify the purpose of the meeting. (c) Notice of any special meeting shall not be required to be given to any director who shall attend such meeting without protesting, prior thereto or at its commencement, the lack of notice to him, or who submits a signed waiver of notice, whether before or after the meeting. Notice of any adjourned meeting shall not be required to be given. Section 5 - Chairman: At all meetings of the Board of Directors, the Chairman of the Board, if any and if present, shall preside. If there shall be no Chairman, or he shall be absent, then the Vice Chairman shall preside, and in his absence, a Chairman chosen by the directors shall preside. 3 Section 6 - Quorum and Adjournments: (a) At all meetings of the Board of Directors, the presence of a majority of the entire Board shall be necessary and sufficient to constitute a quorum for the transaction of business, except as otherwise provided by law, by the Certificate of Incorporation or by these By-Laws. (b) A majority of the directors, present at the time and place of any regular or special meeting, although less than a quorum, may adjourn the same from time to time without notice, until a quorum shall be present. Section 7 - Manner of Acting: (a) At all meetings of the Board of Directors, each director present shall have one vote, irrespective of the number of shares of stock, if any, which he may hold. (b) Except as otherwise provided by statute, by the Certificate of Incorporation, or by these By-Laws, the action of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. (c) Unless otherwise required by amendment to the Articles of Incorporation or statute, any action required or permitted to be taken at any meeting of the Board of Directors or any Committee thereof may be taken without a meeting if a written consent thereto is signed by all the members of the Board or Committee. Such written consent shall be filed with the minutes of the proceedings of the Board or Committee. (d) Unless otherwise prohibited by Amendments to the Articles of Incorporation or statute, members of the Board of Directors or of any Committee of the Board of Directors may participate in a meeting of such Board or Committee by means of a conference telephone network or a similar communications method by which all persons participating in the meeting can hear each other. Such participation is constituted presence of all the participating persons at such meeting The minutes of any such meeting shall be either signed or otherwise approved by the persons participating in the meeting. Section 8 - Vacancies: Any vacancy in the Board of Directors, occurring by reason of an increase in the number of directors, or by reason of the death, resignation, disqualification, removal (unless vacancy created by the removal of a director by the stockholders shall be filled by the stockholders at the meeting at which the removal was effected) or inability to act of any director, or otherwise, shall be filled for the unexpired portion of the term by a majority vote of the remaining directors, though less than a quorum, at any regular meeting or special meeting of the Board of Directors called for that purpose. Section 9 - Resignation: Any director may resign at any time by giving written notice to the Board of Directors, the President or the Secretary of the Corporation. Unless otherwise specified in such written notice such resignation shall take effect upon receipt thereof by the Board of Directors or such officer, and the acceptance of such resignation shall not be necessary to make it effective. Section 10 - Removal: Any director may be removed with or without cause at any time by the affirmative vote of stockholders holding of record in the aggregate at least a majority of the outstanding shares of stock of the 4 Corporation at a special meeting of the stockholders called for that purpose, and may be removed for cause by action of the Board. Section 11 - Compensation: The Board of Directors may, from time to time, establish or alter by resolution appropriate compensation to be paid to all members of the Board of Directors who are not otherwise employed by the Corporation. The Board of Directors may also establish, and from time to time alter, appropriate compensation for service by a member of the Board of Directors as Chairman of a Committee of the Board of Directors. The Board shall establish a fixed sum to be paid to non-employee members of the Board of Directors for attendance at any Committee meetings and shall provide for the payment of expenses of members of the Board of Directors for attendance at any meetings of the Board of Directors or of a Committee thereof. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 12 - Contracts: (a) No contract or other transaction between this Corporation and any other corporation shall be impaired, affected or invalidated, nor shall any director be liable in any way by reason of the fact that any one or more of the directors of this Corporation is or are interested in, or is a director or officer, or are directors or officers of such other corporation, provided that such facts are disclosed or made known to the Board of Directors, prior to their authorizing such transaction. (b) Any director, personally or individually, may be a party to or may be interested in any contract or transaction of this Corporation, and no director shall be liable in any way by reason of such interest, provided that the fact of such interest be disclosed or made known to the Board of Directors prior to their authorization of such contract or transaction, and provided that the Board of Directors shall authorize, approve or ratify such contract or transaction by vote (not counting the vote of any such Director) of a majority of a quorum, notwithstanding the presence of any such director at the meeting at which such action is taken. Such director or directors may be counted in determining the presence of a quorum at such meeting. This Section shall not be construed to impair or invalidate or in any way affect any contract or other transaction which would otherwise be valid under the law (common, statutory or otherwise) applicable thereto. Section 13 - Committees: The Board of Directors, by resolution adopted by a majority of the entire Board, may from time to time designate from among its members an executive committee and such other committees, and alternate members thereof, as they may deem desirable, with such powers and authority (to the extent permitted by law) as may be provided in such resolution. Each such committee shall serve at the pleasure of the Board. 5 ARTICLE IV - OFFICERS Section 1 - Number, Qualifications, Election and Term of Office: (a) The officers of the Corporation shall consist of a President, a Secretary, a Treasurer, or a President and Secretary-Treasurer, and such other officers, including a Chairman of the Board of Directors, and one or more Vice Presidents, as the Board of Directors may from time to time deem advisable. Any officer other than the Chairman or Vice Chairman of the Board of Directors may be, but is not required to be, a director of the Corporation. Any two or more offices may be held by the same person. (b) The officers of the Corporation shall be elected by the Board of Directors at the regular annual meeting of the Board following the annual meeting of the stockholders. (c) Each officer shall hold office until the annual meeting of the Board of Directors next succeeding his election, and until his successor shall have been elected and qualified or until his death, resignation, or removal. Section 2 - Resignation: Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, or to the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or by such officer, and the acceptance of such resignation shall not be necessary to make it effective. Section 3 - Removal: Any officer may be removed, either with or without cause, and a successor elected by a majority vote of the Board of Directors at any time. Section 4 - Vacancies: A vacancy in any office by reason of death, resignation, inability to act, disqualification, or any other cause, may at any time be filled for the unexpired portion of the term by a majority vote of the Board of Directors. 6 Section 5 - Duties of Officers: Officers of the Corporation shall, unless otherwise provided by the Board of Directors, each have such powers and duties as generally pertain to their respective offices as well as such powers and duties as may be set forth in these by-laws, or may from time to time be specifically conferred or imposed by the Board of Directors. The President shall be the chief executive officer of the corporation, unless otherwise provided. Section 6 - Sureties and Bonds: In case the Board of Directors shall so require, any officer, employee, or agent of the Corporation shall execute to the Corporation a bond in such sum, and with such surety or sureties, as the Board of Directors may direct, conditioned upon the faithful performance of his duties to the Corporation, including responsibility for negligence for the accounting for all property, funds or securities of the corporation which may come into his hands. Section 7 - Share of Stock of Other Corporations: Whenever the Corporation is the holder of shares of stock of any other corporation, any right or power of the Corporation as such stockholder (including the attendance, acting and voting at stockholders' meetings and execution of waivers, consents, proxies or other instruments) may be exercised on behalf of the Corporation by the President, any Vice President or such other person as the Board of Directors may authorize. ARTICLE V - SHARES OF STOCK Section 1 - Certificate of Stock: (a) The certificates representing shares of the Corporation's stock shall be in such form as shall be adopted by the Board of Directors, and shall be numbered and registered in the order issued. They shall bear the holder's name and the number of shares of stock and shall be signed by (i) the Chairman of the Board or the President or a Vice President, and (ii) the Secretary or Treasurer, or any Assistant Secretary or Assistant Treasurer, and shall bear the corporate seal. (b) No certificate representing shares of stock shall be issued until the full amount of consideration therefor has been paid, except as otherwise permitted by law. (c) To the extent permitted by law, the Board of Directors may authorize the issuance of certificates for fractions of a share of stock which shall entitle the holder to exercise voting rights, receive dividends and participate in liquidating distributions, in proportion to the fractional holdings; or it may authorize the payment in cash of the fair value of fractions of a share of stock as of the time when those entitled to receive such fractions are determined; or it may authorize the issuance, subject to such conditions as may be permitted by law, of scrip in registered or bearer form over the signature of an officer or agent of the Corporation, exchangeable as therein provided for full shares of stock, but such scrip shall not entitle the holder to any rights of a stockholder, except as therein provided. Section 2 - Lost or Destroyed Certificates: The holder of any certificate representing shares of stock of the Corporation shall immediately notify the corporation of any loss or destruction of the certificate representing the same. The Corporation may issue a new certificate in the place of any certificate theretofore issued by it, alleged to have been lost or destroyed. On production of such evidence of loss or destruction as the Board of Directors in its discretion may require, the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the corporation a bond in such sum as the Board may direct, and with such surety or sureties as may be satisfactory to the Board, to indemnify the Corporation against any claims, loss, liability or 7 damage it may suffer on account of the issuance of the new certificate. A new certificate may be issued without requiring any such evidence or bond when, in the judgement of the Board of Directors, it is proper to do so. Section 3 - Transfer of Shares: (a) Transfer of shares of stock of the Corporation shall be made on the stock ledger of the Corporation only by the holder of record thereof, in person or by his duly authorized attorney, upon surrender for cancellation of the certificate or certificates representing such share of stock with an assignment or power of transfer endorsed thereon or delivered therewith, duly executed, with such proof of the authenticity of the signature and of authority to transfer and of payment of taxes as the Corporation or its agents may require. (b) The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the absolute owner thereof for all purposes and, accordingly, shall not be bound to recognize any legal, equitable or other claim to, or interest in, such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. Section 4 - Record Date: In lieu of closing the stock ledger of the corporation, the Board of Directors may fix, in advance, a date not exceeding sixty (60) days, nor less than ten (10) days, as the record date for the determination of stockholders entitled to receive notice of, or to vote at, any meeting of stockholders, or to consent to any proposal without a meeting, or for the purpose of determining stockholders entitled to receive payment of any dividends or allotment of any rights, or for the purpose of any other action. If no record date is fixed, the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if no notice is given, the day preceding the day on which the resolution of the directors relating thereto is adopted. When a determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders has been made as provided for herein, such determination shall apply to any adjournment thereof, unless the directors fix a new record date for the adjourned meeting. ARTICLE VI - DIVIDENDS Subject to applicable law, dividends may be declared and paid out of any funds available therefor, as often, in such amounts, and at such time or times as the Board of Directors may determine. ARTICLE VII - FISCAL YEAR The fiscal year of the Corporation shall end on March 31 and may be changed by the Board of Directors from time to time subject to applicable law. ARTICLE VIII - CORPORATE SEAL The corporate seal shall be in such form as shall be approved from time to time by the Board of Directors. ARTICLE IX - INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS Section 1 - Right to Indemnification: Each Indemnitee (as defined below) shall be indemnified and held harmless by the corporation for all actions taken by him and for all failures to take action (regardless of the date of any such action or failure 8 to take action) to the fullest extent permitted by the Nevada General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, the rights of indemnification provided hereby shall continue as theretofore to the maximum extent permitted by law notwithstanding such amendment unless such amendment permits the corporation to provide broader indemnification rights than the law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, Employee Retirement Income Security Act excise taxes or penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by the Indemnitee in connection with any Proceeding (as defined below). The right to indemnification conferred in this Article shall be a contract right and shall include the right to be paid by the corporation the expenses incurred by an Indemnitee in defending a civil or criminal action, suit or proceeding as it is incurred and in advance of the final disposition of such action, suit or proceeding; provided, however, that, if the Nevada General Corporation Law continues so to require, the payment of such expenses incurred by an Indemnitee in advance of the final disposition of such action, suit or proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by a court of competent jurisdiction that such Indemnitee is not entitled to be indemnified by the Corporation under this Article or otherwise. (ii) Indemnification pursuant to this Section shall continue as to an Indemnitee who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators. (iii) For purpose of this Article, (A) "Indemnitee" shall mean each director or officer of the Corporation who was or is a party or is threatened to be made a party to any Proceeding, by reason of the fact that he is or was director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise, including service with respect to employee benefit plans; and (B) "Proceeding" shall mean any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative. Section 2 - Indemnification of Employees and Agents: The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the corporation with the same scope and effect as of the foregoing indemnification of directors and officers. Section 3 - Non-Exclusivity of Rights: The rights to indemnification and to the advancement of expenses provided in this Article shall not be exclusive of any other rights that any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation or By-laws, agreement, vote of stockholders or disinterested directors or otherwise for either an action in his official capacity while holding his office; provided, however, if the Nevada General Corporation Law so requires, indemnification, unless ordered by a court (with respect to a proceeding by or in the right of the Corporation) or for the advancement of expenses as set forth in Section 1 above, may not be made to or behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. Section 4 - Insurance: The Corporation may purchase and maintain insurance or make any other financial arrangements permitted by applicable law on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising 9 out of his status of such, whether or not the Corporation has the authority to indemnify him against such liability and expenses. ARTICLE X - AMENDMENTS Section 1 - By Stockholders: All by-laws of the Corporation shall be subject to alteration or repeal, and new by-laws may be made, by the affirmative vote of stockholders holding of record in the aggregate at least a majority of the outstanding shares of stock entitled to vote in the election of directors at any annual or special meeting of stockholders, provided that the notice or waiver of notice of such meeting shall have summarized or set forth in full therein, the proposed amendment. Section 2 - By Directors: The Board of Directors shall have power to make, adopt, alter, amend and repeal, from time to time, by-laws of the Corporation; provided, however, that the stockholders entitled to vote with respect thereto as in this Article X above-provided may alter, amend or repeal by-laws made by the Board of Directors, except that the Board of Directors shall have no power to change the quorum for meetings of stockholders or the Board of Directors or to change any provisions of the by-laws with respect to the removal of directors or the filling of vacancies in the Board resulting from the removal by the stockholders. 10 EX-27 3 FDS
5 1,000 6-MOS MAR-31-1997 SEP-30-1996 16,746 0 4,586 298 3,046 32,633 323,748 31,139 435,469 61,509 150,000 0 0 149 194,349 435,469 0 154,019 0 70,764 74,370 0 7,613 1,506 587 919 0 0 0 919 .03 .03
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