-----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, Exs3G+82hV5c2iB9dldlmXtogb+akF1ECVUugX/XL0wFqdrlRpV3WmhhNyM6JOrT pawXtzFO6upFJ1O5TZVADA== 0000892569-97-001437.txt : 19970520 0000892569-97-001437.hdr.sgml : 19970520 ACCESSION NUMBER: 0000892569-97-001437 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA HOTEL & CASINO CENTRAL INDEX KEY: 0000824412 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880121743 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-51672-01 FILM NUMBER: 97609685 BUSINESS ADDRESS: STREET 1: 2950 S INDUSTRIAL RD CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 7027927216 MAIL ADDRESS: STREET 1: 2950 SOUTH INDUSTRIAL ROAD CITY: SAS VEGAS STATE: NV ZIP: 89109 10-Q 1 QUARTERLY REPORT FOR THE PERIOD ENDED 03/31/1997 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 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 33-51672 CALIFORNIA HOTEL AND CASINO (Exact name of registrant as specified in its charter) NEVADA 88-0121743 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2950 SOUTH INDUSTRIAL ROAD LAS VEGAS, NEVADA 89109 (Address of principal executive offices) (Zip Code) (702) 792-7200 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes X No ---- ---- Shares outstanding of each of the Registrant's classes of common stock as of April 30, 1997
Class Outstanding ----- ----------- Common stock, $.01 par value 1,000
2 CALIFORNIA HOTEL AND CASINO (A WHOLLY-OWNED SUBSIDIARY OF BOYD GAMING CORPORATION) FORM 10-Q QUARTER ENDED MARCH 31, 1997 INDEX
Page No. -------- Part I. Financial Information Item 1. Unaudited Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets at March 31, 1997 and June 30, 1996 3 Condensed Consolidated Statements of Income for the three and nine months ended March 31, 1997 and 1996 4 Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 1997 and 1996 5 Condensed Consolidated Statements of Changes in Stockholder's Equity for the nine months ended March 31, 1997 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 14 Signature Page 15
-2- 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CALIFORNIA HOTEL AND CASINO AND SUBSIDIARIES (A WHOLLY-OWNED SUBSIDIARY OF BOYD GAMING CORPORATION) CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) MARCH 31, JUNE 30, (IN THOUSANDS, EXCEPT SHARE DATA) 1997 1996 - -------------------------------------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents $ 36,007 $ 28,444 Accounts receivable, net 8,792 7,414 Inventories 6,984 5,822 Prepaid expenses 11,814 10,772 Income taxes receivable 1,050 -- -------- -------- Total current assets 64,647 52,452 Property, equipment and leasehold interests, net 507,169 490,675 Other assets and deferred charges 24,407 24,139 Goodwill, net 9,987 10,254 -------- -------- Total assets $606,210 $577,520 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities Current maturities of long-term debt $ 1,514 $ 1,455 Accounts payable 36,836 29,306 Accrued liabilities Payroll and related 17,392 18,728 Interest and other 14,569 8,571 Income taxes payable -- 1,047 -------- -------- Total current liabilities 70,311 59,107 Long-term debt, net of current maturities 379,837 363,915 Due to related party -- 500 Deferred income taxes 24,211 24,148 Commitments Stockholder's equity Preferred stock, $100 par value; 200,000 shares authorized -- -- Common stock, no par value; 2,500 shares authorized; 1,000 shares outstanding 22,328 22,328 Additional paid-in capital 32,856 32,856 Retained earnings 76,667 74,666 -------- -------- Total stockholder's equity 131,851 129,850 -------- -------- Total liabilities and stockholder's equity $606,210 $577,520 ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. -3- 4 CALIFORNIA HOTEL AND CASINO AND SUBSIDIARIES (A WHOLLY-OWNED SUBSIDIARY OF BOYD GAMING CORPORATION) CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31, MARCH 31, ------------------------------ ---------------------------- 1997 1996 1997 1996 - ---------------------------------------------------------------------------------------------- ---------------------------- Revenues Casino $ 93,771 $ 95,510 $ 275,513 $ 278,684 Food and beverage 32,530 30,656 92,712 86,687 Rooms 15,951 15,881 46,874 45,738 Other 8,533 8,414 26,214 26,272 ------------ ------------ ------------ ------------ Gross revenues 150,785 150,461 441,313 437,381 Less promotional allowances 16,664 15,877 48,568 44,225 ------------ ------------ ------------ ------------ Net revenues 134,121 134,584 392,745 393,156 ------------ ------------ ------------ ------------ Costs and expenses Casino 49,924 49,031 148,648 140,387 Food and beverage 22,657 20,588 65,412 64,067 Rooms 5,347 4,991 15,894 15,948 Other 6,410 5,811 18,981 18,241 Selling, general and administrative 18,589 17,047 53,342 51,502 Maintenance and utilities 6,235 5,255 19,311 17,818 Depreciation and amortization 11,247 10,954 32,209 33,702 Corporate expense 2,600 2,650 7,400 8,560 Preopening expense --- --- 3,481 --- ------------ ------------ ------------ ------------ Total 123,009 116,327 364,678 350,225 ------------ ------------ ------------ ------------ Operating income 11,112 18,257 28,067 42,931 ------------ ------------ ------------ ------------ Other income (expense) Interest income --- --- 115 --- Interest expense, net of amounts capitalized (8,869) (7,477) (24,875) (26,306) ------------ ------------ ------------ ------------ Total (8,869) (7,477) (24,760) (26,306) ------------ ------------ ------------ ------------ Income before provision for income taxes 2,243 10,780 3,307 16,625 Provision for income taxes 871 4,880 1,306 7,633 ------------ ------------ ------------ ------------ Net income $ 1,372 $ 5,900 $ 2,001 $ 8,992 ============ ============ ============ ============
The accompanying notes are an integral part of these condensed consolidated financial statements. -4- 5 CALIFORNIA HOTEL AND CASINO AND SUBSIDIARIES (A WHOLLY-OWNED SUBSIDIARY OF BOYD GAMING CORPORATION) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED MARCH 31, -------------------------- (IN THOUSANDS) 1997 1996 - ---------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,001 $ 8,992 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 32,209 33,702 Deferred income taxes 63 1,465 Other (82) Changes in assets and liabilities: Increase in accounts receivable, net (1,378) (721) Increase in inventories (1,162) (52) Increase in prepaid expenses (1,042) (1,584) (Increase) decrease in other assets (268) 2,971 Increase in income taxes receivable (1,050) -- Increase in other current liabilities 12,192 10,732 Decrease in income taxes payable (1,047) (3,032) -------- -------- Net cash provided by operating activities 40,518 52,391 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, equipment and other assets (48,436) (31,715) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings under credit agreements 16,638 (3,500) Payments on long-term debt (1,157) (19,843) Contributed capital from parent -- 23,250 Dividends paid -- (12,000) -------- -------- Net cash provided by (used in) financing activities 15,481 (12,093) -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 7,563 8,583 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 28,444 21,798 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 36,007 $ 30,381 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest, net of amounts capitalized $ 23,322 $ 25,092 ======== ======== Cash paid for income taxes $ 2,175 $ 7,300 ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. -5- 6 CALIFORNIA HOTEL AND CASINO AND SUBSIDIARIES (A WHOLLY-OWNED SUBSIDIARY OF BOYD GAMING CORPORATION) CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY FOR THE NINE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA) - --------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL TOTAL ----------------- PAID-IN RETAINED STOCKHOLDER'S SHARES AMOUNT CAPITAL EARNINGS EQUITY ---------------------------------------------------------- Balances, July 1, 1996 1,000 $ 22,328 $ 32,856 $ 74,666 $129,850 Net income for the nine months 2,001 2,001 ended March 31, 1997 -------- -------- -------- -------- -------- Balances, March 31, 1997 1,000 $ 22,328 $ 32,856 $ 76,667 $131,851 ======== ======== ======== ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. -6- 7 CALIFORNIA HOTEL AND CASINO (A WHOLLY-OWNED SUBSIDIARY OF BOYD GAMING CORPORATION) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of California Hotel and Casino and its wholly-owned subsidiaries, collectively referred to herein as the "Company". The Company owns and operates seven casino entertainment facilities in Las Vegas, Nevada. All material intercompany accounts and transactions have been eliminated. The Company is a wholly-owned subsidiary of Boyd Gaming Corporation. Basis of Presentation In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results of its operations for the three and nine month periods ended March 31, 1997 and 1996 and its cash flows for the nine month periods ended March 31, 1997 and 1996. It is suggested that this report be read in conjunction with the Company's audited consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended June 30, 1996. The operating results for the three and nine month periods ended March 31, 1997 and cash flows for the nine month period ended March 31, 1997 are not necessarily indicative of the results that will be achieved for the full fiscal year or for future periods. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Recently Adopted Accounting Standards On July 1, 1996, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. SFAS No. 121 requires that long-lived assets be reviewed whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The adoption of SFAS No. 121 had no effect on the Company's consolidated financial statements. Note 2. Long-Term Debt The Company's bank credit facility was amended on March 28, 1997. This amendment included, among other things, modifications to its financial covenants as well as the pricing structure of the debt, which is based upon a specific financial ratio. As such, this amended pricing structure results in slightly higher interest costs to the Company, the duration of which depends upon the Company's future operating results and financial condition. Management believes the Company is in compliance with the modified covenants, as well as other debt covenants, at March 31, 1997. -7- 8 The Company, through its wholly-owned subsidiary, California Hotel Finance Corporation, has issued $185 million Senior Subordinated Notes at 11%, due December 2002. The Notes are unconditionally guaranteed on a senior subordinated and unsecured basis by the Company. The guarantee is subordinated to all existing and future senior debt (as defined in the Indenture related to the Notes) of the Company (approximately $196.3 million at March 31, 1997) and is effectively subordinated to all existing and future indebtedness and other liabilities (including trade payables) of the subsidiaries of the Company (approximately $38.3 million at March 31, 1997). The Company is not in default and there are no payment blockages with respect to the Notes. In addition, the Company is a guarantor on $200 million in Senior Notes issued on October 4, 1996 by the Company's parent, Boyd Gaming Corporation. -8- 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31, MARCH 31, --------------------- --------------------- 1997 1996 1997 1996 -------- -------- -------- -------- (IN THOUSANDS) (IN THOUSANDS) NET REVENUES Stardust $ 45,959 $ 49,930 $137,249 $146,336 Boulder Strip Properties 48,892 49,629 145,649 143,033 Downtown Properties 39,270 35,025 109,847 103,787 -------- -------- -------- -------- TOTAL PROPERTIES $134,121 $134,584 $392,745 $393,156 ======== ======== ======== ======== OPERATING INCOME Stardust 5,495 9,247 13,837 22,164 Boulder Strip Properties 8,126 7,816 19,544 17,382 Downtown Properties 419 4,280 6,549(a) 13,259 -------- -------- -------- -------- TOTAL PROPERTIES $ 14,040 $ 21,343 $ 39,930 $ 52,805 ======== ======== ======== ========
- -------------------- (a) Before preopening expense. The above table sets forth, for the periods indicated, certain operating data for the Company's properties. As used herein, "Boulder Strip Properties" consist of Sam's Town Las Vegas, the Eldorado and Jokers Wild; "Downtown Properties" consist of the California, the Fremont and Main Street Station (opened November 1996). Net revenues displayed in this table and discussed in this section are net of promotional allowances; as such, references to rooms revenue and food and beverage revenue do not agree to the amounts on the Statements of Income. Operating income from properties for the purposes of this table exclude corporate expense, including related depreciation and amortization, and preopening expense. Revenues Consolidated net revenues declined slightly, .3%, during the quarter ended March 31, 1997 compared to the same quarter in the prior fiscal year. Net revenues at the Stardust and Boulder Strip Properties declined 8.0% and 1.5%, respectively, while revenues increased 12.1% at the Downtown Properties during the comparable quarter in the prior year. The increase in net revenues at the Downtown Properties was attributable to the first full quarter of operations for Main Street Station, Brewery and Hotel ("Main Street Station") which opened in November 1996, partially offset by declines in net revenues at the California and Fremont of 19.8% and 12.6%, respectively. Company-wide casino revenue decreased 1.8% during the quarter ended March 1997 compared to March 1996, whereas food and beverage revenue and rooms revenue increased 5.3% and .9%, respectively. Consolidated net revenues were relatively flat during the nine month period ended March 31, 1997 compared to the same period in the prior fiscal year. Net revenues at the Stardust declined 6.2%, which offset net revenue increases of 5.8% for the Downtown Properties and 1.8% at the Boulder Strip Properties versus the comparable period of the prior year. Company-wide casino revenue and rooms revenue declined 1.1% and 2.0%, respectively, while food and beverage revenue increased 5.4% during the nine-month period ended March 1997 compared to March 1996. -9- 10 OPERATING INCOME Consolidated operating income for the quarter ended March 31, 1997 was $11.1 million compared to $18.3 million from the same quarter in the prior fiscal year. Consolidated operating income margin declined to 8.3% from 13.6% during the same time periods. These declines are attributable to reductions in operating income at the Stardust and Downtown Properties of $3.8 million and $3.9 million, respectively, offset by a slight increase in operating income at the Boulder Strip Properties. Main Street Station, which is included in the Downtown Properties, posted an operating loss of $1.1 million in its first full quarter of operation. Consolidated operating income before preopening expense for the nine month period ended March 31, 1997 was $31.5 million compared to $42.9 million for the comparable period in the prior fiscal year. Consolidated operating income margins declined to 8.0% from 10.9% during the same time periods. These declines are due to reductions in operating income at the Stardust and Downtown Properties of $8.3 million and $6.7 million, respectively, offset by a $2.2 million increase in operating income at the Boulder Strip Properties. STARDUST Net revenues at the Stardust declined by 8.0% during the quarter ended March 31, 1997 versus the comparable quarter in the prior fiscal year. Casino revenues declined by 8.8% primarily due to a decline in slot wagering combined with flat table game wagering offset by lower net winnings. Revenues from rooms, food and beverage also declined by approximately 7.6% during the period. Operating income for the three months ended March 31, 1997 declined 40.6% to $5.5 million, and operating income margin declined from 18.5% to 12.0% during the comparable quarters ended March 31, 1996 and 1997, respectively. These declines in operating income and operating income margin are a primary result of the declines in revenues. For the nine months ended March 31, 1997, net revenues at the Stardust declined by 6.2% versus the comparable period in the prior fiscal year. The majority of the decline is attributable to a 7.0% reduction in casino revenues, as a result of a lower win percentage in the sports book and a decline in slot wagering. Revenues from rooms, food and beverage also declined by approximately 6.7% during the period. Operating income declined by 37.6% to $13.8 million, and operating income margin declined from 15.1% to 10.1% during the comparable nine-month periods ended March 31, 1996 and 1997, respectively. These declines in operating income and operating income margin are primarily the result of the decline in revenues. BOULDER STRIP PROPERTIES Net revenues at the Boulder Strip Properties declined by 1.5% during the quarter ended March 31, 1997 versus the comparable quarter in the prior fiscal year. Casino revenue declined by 1.6% primarily as a result of lower win percentages from table games and race and sports book. Rooms revenue increased 6.3% and food and beverage revenues decreased 1.3% for the quarter ended March 31, 1997 versus the comparable quarter in the prior fiscal year. Operating income margin increased to 16.6% during the quarter ended March 31, 1997, primarily as a result of improved operating margins in the rooms and food and beverage departments at Sam's Town Las Vegas. Net revenues at the Boulder Strip Properties increased 1.8% during the nine-month period ended March 31, 1997 compared to the same period in the prior fiscal year. The increase is primarily attributable to a 2.3% increase in casino revenue as a result of increased wagering volume in table games and slots at Sam's Town -10- 11 Las Vegas. Rooms revenues and food and beverage revenue increased 8.4% and .9%, respectively, for the nine-month period ended March 31, 1997 compared to the same period in the prior fiscal year. Operating income margin increased from 12.2% to 13.4% during the comparable nine-month periods ended March 31, 1996 and 1997, respectively, due to the increase in net revenues as well as improved operating margins in the rooms and food and beverage departments at Sam's Town Las Vegas. DOWNTOWN PROPERTIES Net revenues at the Downtown Properties increased 12.1% during the quarter ended March 31, 1997 compared to the same quarter in the prior fiscal year. The increase is attributable to the first full quarter of operations for Main Street Station (opened November 1996) offset by declines in net revenues of 19.8% and 12.6%, respectively, at the California and Fremont. These two properties have been adversely affected by the opening of Main Street Station, which has attracted patrons from their customer bases. Operating income margin for the Downtown Properties decreased from 12.2% to 1.1% during the quarters ended March 31, 1996 and 1997, respectively. The decline in margin is attributable to the decline in net revenues at the California and Fremont, in addition to the $1.1 million operating loss generated by Main Street Station. In response to the recent operating results of the Downtown Properties, management has implemented various programs to improve performance. These programs include both the consolidation of certain functions and improved management structure, including the appointment of a senior manager to oversee all Downtown operations; increased use of direct marketing programs in the Hawaiian market; increased utilization of Vacations Hawaii charter operation to improve occupancies; aggressive pursuit of Fremont Street Experience customers through enhanced marketing programs; and consolidation of both front and back of the house operations to improve efficiency and decrease overall operating costs. Net revenues at the Downtown Properties increased 5.8% during the nine-month period ended March 31, 1997 compared to the same period in the prior fiscal year. The increase is attributable to the November 1996 opening of Main Street Station offset by declines in net revenues of 13.8% and 1.9%, respectively, at the California and Fremont. These two properties have been adversely affected by the opening of Main Street Station, which has attracted patrons from their customer bases. In addition, each component of the California's net revenues were adversely impacted by a rooms remodel project which reduced its room availability by approximately 15% during the first fiscal quarter of 1997. Aggregate operating income margin before preopening expense decreased from 12.8% to 6.0% during the nine-month periods ended March 31, 1997 and 1996, respectively. The decline is a result of the reduction in net revenues at the California and Fremont, as well as a $1.5 million operating loss before preopening expense generated by Main Street Station since its opening in November 1996. Depreciation and amortization expense increased by $.3 million and decreased $1.5 million, respectively, during the quarter and nine-month periods ended March 31, 1997 compared to the same periods in the prior fiscal year. The decline during the nine month period is a result of lower depreciation on older properties, whereas the increase during the quarter is attributable to the depreciation related to Main Street Station, which opened in November 1996. The Company also recorded a preopening charge of $3.5 million upon the opening of Main Street Station in November 1996. OTHER INCOME (EXPENSE) Other income and expense is primarily comprised of interest expense, net of amounts capitalized, which increased by $1.4 million during the quarter ended March 31, 1997, and declined by $1.4 million during the nine month period ended March 1997. The increase during the quarter is attributable to higher levels of average debt outstanding; whereas the decrease during the period is due to lower levels of average debt outstanding coupled with a capitalization of interest costs during the development of Main Street Station. -11- 12 PROVISION FOR INCOME TAXES The Company's tax rate was 38.9% and 39.5%, respectively, for the three and nine month periods ended March 31, 1997, compared to 45.3% and 45.9%, respectively, for the same periods from the prior fiscal year. The fluctuation in the tax rates during fiscal 1997 versus fiscal 1996 is primarily attributable to a reduction in the level of certain non-deductible Company provided benefits during the current fiscal periods. LIQUIDITY AND CAPITAL RESOURCES For the nine months ended March 31, 1997, the Company's principal source of funds was net cash provided by operating activities and financing activities. Net cash provided by operating activities was $40.5 million versus $52.4 million during the comparable period in the prior fiscal year. This decline is primarily attributable to the reduction in net income and the change in operating assets and liabilities for the opening of Main Street Station. Net cash provided by financing activities for the nine months ended March 31, 1997 was $15.5 million which is primarily attributed to borrowings under the Company's $500 million bank revolving credit facility (the "Bank Credit Facility") to fund the opening of Main Street Station. As of March 31, 1997, the Company had balances of cash and cash equivalents of approximately $36.0 million, a working capital deficit of $2.2 million, and approximately $136 million available under its Bank Credit Facility. The Company has historically operated with negative working capital in order to minimize borrowings (and related interest costs) under its long-term Bank Credit Facility. The working capital deficits are funded through cash generated from operations as well as fluctuating borrowings under the Bank Credit Facility. The Company's principal use of cash during the nine months ended March 31, 1997 was for investing activities of $48.4 million. This amount consists of capital expenditures, $32 million of which related to the renovation and expansion of Main Street Station which opened in November 1996. The Company, as part of its ongoing strategic planning process, has recently completed a review of its current growth opportunities. Based on this review, the Company expects to be focusing its growth efforts on the Stardust Resort & Casino. The Company is considering implementing the next phase of its master plan for the Stardust, which calls for, among other things, as many as two additional hotel towers. In addition, the Company has determined that the 61-acre Stardust site is capable of accommodating the development of an entirely new casino entertainment facility adjacent to the existing Stardust and is continuing to explore the feasibility of such a project. During the first quarter of fiscal 1997, the Company purchased a casino hotel site in Reno, Nevada with plans to develop Sam's Town Reno on the site. The Company has determined that further development of the Stardust site should take priority over the Sam's Town Reno project at this time. There can be no assurance that the above mentioned project will go forward and ultimately become operational. The sources of funds required to meet the Company's working capital needs (including maintenance capital expenditures) and those required to complete the above mentioned projects are expected to be cash on hand, cash flow from operations, availability under its Bank Credit Facility, new borrowings to the extent permitted under existing debt agreements, and vendor and other financing. No assurance can be given that required financing strategies can be effected on satisfactory terms. -12- 13 The Bank Credit Facility was amended as of March 28, 1997 to provide the Company with greater flexibility. This amendment included, among other things, modifications to its financial covenants as well as the pricing structure of the debt, which is based upon a specified financial ratio. As such, this amended pricing structure results in slightly higher interest costs to the Company, the duration of which depends upon the Company's future operating results and financial condition. Management believes the Company is in compliance with the modified covenants, as well as other debt covenants, at March 31, 1997. The Company, through its wholly-owned subsidiary, California Hotel Finance Company, has $185 million principal amount of 11% Senior Subordinated Notes due December 2002. The Notes are unconditionally guaranteed on a senior subordinated and unsecured basis by the Company. The guarantee is subordinated to all existing and future senior debt (as defined in the Indenture related to the Notes) of the Company (approximately $196.3 million at March 31, 1997) and is effectively subordinated to all existing and future indebtedness and other liabilities (including trade payables) of the subsidiaries of the Company (approximately $38.3 million at March 31, 1997). The Company is not in default and there are no payment blockages with respect to the Notes. In addition, the Company is a guarantor on $200 million in Senior Notes issued on October 4, 1996 by the Company's parent, Boyd Gaming Corporation. PRIVATE SECURITIES LITIGATION REFORM ACT The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward looking statements. Certain information included in this Form 10-Q and other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Company) contains statements that are forward looking, such as statements relating to plans for future expansion and other business development activities as well as other capital spending, financing sources, and the effects of regulation (including gaming and tax regulation) and competition. Such forward looking statements involve important risks and uncertainties that could significantly affect anticipated results in the future, and accordingly, actual results may differ materially from those expressed in any forward looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, those related to construction and development activities, economic conditions, changes in tax laws, changes in laws or regulations affecting gaming licenses, changes in competition, and factors affecting leverage and debt service including sensitivity to fluctuation in interest rates, and other factors described from time to time in the Company's reports filed with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended June 30, 1996. 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. -13- 14 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 10.59 First Amendment to Credit Agreement, dated as of March 28, 1997, among Boyd Gaming Corporation and California Hotel and Casino, and Wells Fargo Bank, N.A., as Swing line Lender, Canadian Imperial Bank of Commerce, ("CIBC") as letter of credit issuer, Bank of America National Trust and Saving Association and Wells Fargo Bank, N.A., as co- managing agents, Bankers Trust Company, Credit Lyonnais Los Angeles Branch and Societe Generale as co-agents, and CIBC as administrative agent and collateral agent. 27. Financial Data Schedule (b) Reports on Form 8-K: None. -14- 15 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. CALIFORNIA HOTEL AND CASINO (Registrant) Date: May 15, 1997 By /s/ Keith Smith ------------------------------------------- Keith Smith Senior Vice President and Controller (Chief Accounting Officer) -15- EX-10.59 2 FIRST AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 10.59 FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made and dated as of the 28th day of March, 1997, by and among BOYD GAMING CORPORATION, a Nevada corporation ("Boyd Gaming") and CALIFORNIA HOTEL AND CASINO, a Nevada corporation ("CH&C"; CH&C and Boyd Gaming being referred to collectively as the "Borrowers" and each individually as a "Borrower"), the commercial lending institutions listed on the signature pages hereof (collectively, the "Lenders"), WELLS FARGO BANK, N.A., as Swingline Lender, CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC"), as letter of credit issuer, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION and WELLS FARGO BANK, N.A., as co-managing agents (herein, in such capacity, the "Co-Managing Agents"), BANKERS TRUST COMPANY, CREDIT LYONNAIS LOS ANGELES BRANCH and SOCIETE GENERALE, as co-administrative agent and collateral agent for the Lenders (herein, in such capacity, called the "Agent"). RECITALS A. The Borrowers and the Lenders entered into that certain $500,000,000 Credit Agreement dated as of June 19, 1996 (the "Credit Agreement"), pursuant to which the Lenders agreed to extend credit to the Borrowers on the terms and subject to the conditions set forth therein. B. The Borrowers and the Lenders desire to amend certain terms and conditions of the Credit Agreement pursuant to this Amendment. NOW, THEREFORE, in consideration of the above Recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree to amend the Credit Agreement as follows: AGREEMENT 1. The Credit Agreement is hereby amended as follows: (a) The chart appearing in the definition of the term "Applicable Margin" in Section 1.1 of the Credit Agreement is hereby amended to read in its entirety as follows:
Funded Debt Applicable Base Applicable Eurodollar Unused to EBITDA Ratio Rate Margin Rate Margin Fee - --------------- --------------- --------------------- -------- Less than 2.0 0.000% +1.00 % 0.3750% Greater than or 0.000% +1.250% 0.3750% equal to 2.0,
2 but less than 2.50 Greater than or +0.250% +1.500% 0.3750% equal to 2.50, but less than 3.00 Greater than or +0.500% +1.750% 0.4375% equal to 3.00, but less than 3.50 Greater than or +0.750% +2.000% 0.500% equal to 3.50, but less than 4.00 4.00 or greater +1.00% +2.250% 0.500% for Fiscal Quarters ending on or before March 31, 1997 Greater than or +1.00% +2.250% 0.500% equal to 4.00, but less than 4.50, for Fiscal Quarters ending on or after June 30, 1997 4.50 or greater +1.25% +2.500% 0.500% for Fiscal Quarters ending on or after June 30, 1997
(b) The definition of the term "Fiscal Year" appearing in Section 1.1 of the Credit Agreement is hereby amended to read in its entirety as follows: "Fiscal Year" means any period of twelve consecutive calendar months (i) ending on June 30 for years through and including 1996, (ii) ending on June 30 and December 31 for 1997, and (iii) ending on December 31 for 1998 and years thereafter; for Fiscal Years commencing on and after January 1, 1998, references to a Fiscal Year with a number corresponding to any calendar year (e.g. the "1998 Fiscal Year") refers to the Fiscal Year ending on the December 31 occurring during such calendar year. In 1997 only, the Borrowers will have two Fiscal Year ends, and each covenant that refers to a Fiscal Year of the Borrowers shall refer to each of such Fiscal Years ending in 1997 and shall be tested as of each of such dates. (c) The definition of the term "Permitted Disposition" appearing in Section 1.1 of the Credit Agreement is hereby amended by adding the following clause immediately prior to the end thereof: "or (h) the sale by Boyd Kenner of its interest in Treasure Chest Casino, L.L.C." -2- 3 (d) Clause (v) of Section 7.2.2 of the Credit Agreement is hereby amended by deleting the figure "$50,000,000" and replacing it with the figure "$25,000,000". (e) Section 7.2.4 of the Credit Agreement is hereby amended to read in its entirety as follows: SECTION 7.2.4 Financial Condition. The Borrowers will not permit: (a) Tangible Net Worth to be less than the sum of (i) $210,000,000, plus (ii) 50% of Boyd Gaming's consolidated net income (without giving effect to any losses) for each Fiscal Quarter ending on or after September 30, 1996, plus (iii) an amount equal to the increase in Boyd Gaming's stockholders equity following the Effective Date by reason of sales and issuances of Boyd Gaming's capital stock, minus (iv) the amount of goodwill, not to exceed $130,000,000, associated with the Proposed Acquisition and minus (v) the amount of noncash write-downs taken by Boyd Kansas City in connection with its Venture in Kansas City, Missouri (net of any associated tax benefits); (b) the Funded Debt to EBITDA Ratio for any period of four consecutive Fiscal Quarters ending during a period set forth below, to be greater than the ratio set forth below opposite such period:
Period Ratio ------ ----- January 1, 1997 - March 31, 1997 4.90 to 1.0 April 1, 1997 - June 30, 1997 4.80 to 1.0 July 1, 1997- September 30, 1997 4.70 to 1.0 October 1, 1997 - December 31, 1997 4.60 to 1.0 January 1, 1998 - June 30, 1998 4.40 to 1.0 July 1, 1998 - December 31, 1998 4.30 to 1.0 January 1, 1999 - June 30, 1999 4.25 to 1.0 July 1, 1999 - September 30, 1999 4.00 to 1.0 October 1, 1999 - December 31, 1999 3.80 to 1.0 January 1, 2000 - March 31, 2000 3.60 to 1.0 April 1, 2000 - June 30, 2000 3.40 to 1.0 July 1, 2000 - September 30, 2000 3.30 to 1.0 October 1, 2000 - December 31, 2000 3.20 to 1.0 January 1, 2001 and Thereafter 3.00 to 1.0;
-3- 4 (c) the Fixed Charge Coverage Ratio at the end of any Fiscal Quarter, for the period of four consecutive Fiscal Quarters ending on such date, to be less than the ratio set forth below opposite such period:
Period Ratio ------ ----- Effective Date - March 31, 1998 2.00 to 1.0 April 1, 1998 - December 31, 1999 2.10 to 1.0 January 1, 2000 - June 30, 2000 2.15 to 1.0 July 1, 2000 and thereafter 2.25 to 1.0
(f) Clause (ii) of Section 7.2.5 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(ii) New Venture Investments in the Atlantic City Entity not exceeding $100,000,000 in the aggregate (or such greater amount as may be approved by the Majority Lenders) on a cumulative basis during the term of this Agreement," (g) Clause (a) of the Section 7.2.7 of the Credit Agreement is hereby amended (i) by deleting the figure "$300,000,000" and replacing it with the figure "250,000,000" and (ii) by deleting the figure "$100,000,000" and replacing it with the figure "$50,000,000". (h) The chart appearing in clause (b) of Section 7.2.7 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
Fiscal Year Amount 1997 $60,000,000 1998 $60,000,000 1999 $60,000,000 2000 $60,000,000 2001 (first half) $30,000,000;
(i) There shall be added to the Credit Agreement, immediately following Section 7.1.13, a new Section 7.1.14, reading in its entirety as follows: SECTION 7.1.14. Additional Pledges. On or before July 31, 1997, the Borrowers shall cause one or more Guarantors to execute and deliver to the Agent, for the benefit of the Lenders, (i) Deeds of Trust and Security Agreements, substantially in the form required by Sections 5.1.4 and 5.1.5 hereof, together with all other documentation required thereunder, encumbering such Ventures as may be required to cause the Borrowers to be in compliance with Section 7.1.11 hereof as of July 31, 1997, (ii) legal opinions in form and substance satisfactory to the Agent and -4- 5 (iii) the documentation required by Section 5.1.1, 5.1.6, 5.1.7 and 5.1.8 in respect of such Ventures. Upon the Agent's receipt of all documentation required by the preceding sentence, such Guarantor shall, if not already a Pledgor, become a Pledgor and the Ventures subject to such Deeds of Trust shall become Pledged Casinos for all purpose hereof; and (j) Exhibit L of the Credit Agreement is hereby amended to read in its entirety as set forth in Exhibit B hereto. 2. Waivers. Upon satisfaction of the conditions set forth in Section 3 of this Amendment, the Lenders (i) hereby waive any provisions of the Credit Agreement, including, without limitation, the provisions of Sections 7.1.3, 7.1.8 and 8.1.11 of the Credit Agreement to the extent that any of such provisions would be violated by the Borrowers' closure of the casino owned and operated by Boyd Kansas City and located in Kansas City, Missouri and (ii) hereby waive the requirements of Section 7.2.14 of the Credit Agreement to the extent that such Section would be violated by the change of the Borrowers' fiscal year end from June 30 to December 31. 3. Effective Date. This Amendment shall be effective on the date first written above, provided that prior thereto each of the following shall have been satisfied: (a) This Amendment shall have been executed by the Borrowers and the Required Lenders; (b) The Agent shall have received executed acknowledgement and reaffirmations, substantially in the form set forth in Exhibit A hereto, duly executed by each of the Guarantors; and (c) The Borrowers shall have paid to the Agent, for distribution to each Lender that shall have executed this Amendment on or before March 28, 1997, a fee in the amount of .125% of the aggregate amount of the Commitments held by such Lender. 4. Representations and Warranties. The Borrowers hereby represent and warrant to the Agent and the Lenders as follows: (a) Each Borrower has the power and authority and the legal right to execute, deliver and perform this Amendment and has taken all necessary action to authorize the execution, delivery and performance of this Amendment. This Amendment has been duly executed and delivered by each Borrower. The Credit Agreement (as amended by this Amendment) and the other Loan Documents constitute legal, valid, and binding obligations of each Borrower, enforceable against such Borrower in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws now or -5- 6 hereafter in effect relating to creditors' rights generally, and general principles of equity. (b) At and as of the date of execution hereof and at and as of the effective date of this Amendment and after giving effect to this Amendment: (1) the representations and warranties of each Borrower contained in the Credit Agreement are true and correct in all respects, and (2) no Default or Event of Default has occurred and is continuing under the Credit Agreement. 5. Reaffirmation of Credit Agreement. This Amendment shall be deemed to be an amendment to the Credit Agreement, and the Credit Agreement, as amended hereby, is hereby ratified, approved and confirmed in each and every respect. All references to the Credit Agreement in any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Credit Agreement as amended hereby. 6. Reaffirmation of Loan Documents. The Borrowers hereby further affirm and agree that (a) the execution and delivery by the Borrowers of and the performance of their obligations under the Credit Agreement, as amended by this Amendment, shall not in any way amend, impair, invalidate or otherwise affect any of the obligations of the Borrowers or the rights of the Agent or the Lenders under any of the Loan Documents or any other document or instrument made or given by the Borrowers in connection therewith, and (b) the term "Obligations" as used in the Loan Documents includes, without limitation, the Obligations of the Borrowers under the Credit Agreement as amended by this Amendment. 7. Miscellaneous Provisions. (a) Survival. The provisions of this Amendment shall survive to the extent provided in Section 10.5 of the Credit Agreement. (b) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF NEVADA. (c) Counterparts. This Amendment may be executed in any number of counterparts, all of which together shall constituted one agreement. (d) No Other Amendment. Except as expressly amended herein, the Credit Agreement, the other Loan Documents and all documents, instruments and agreements relating thereto or executed in connection therewith shall remain in full force and effect as currently written. -6- 7 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written. BOYD GAMING CORPORATION By: /s/ Ellis Landau ---------------------------------------- Title: Executive Vice President CALIFORNIA HOTEL AND CASINO By: /s/ Ellis Landau ---------------------------------------- Title: Senior Vice President CIBC By: /s/ illegible ---------------------------------------- Title: Managing Director CIBC Wood Gundy Securities Corp. AS AGENT BANK OF AMERICA NT&SA By: /s/ illegible ---------------------------------------- Title: Vice President WELLS FARGO BANK, NATIONAL ASSOCIATION By: /s/ Kathleen Stone ---------------------------------------- Title: Vice President BANKERS TRUST COMPANY By: /s/ illegible ---------------------------------------- Title: V.P. CREDIT LYONNAIS LOS ANGELES BRANCH By: /s/ illegible ---------------------------------------- Title: Vice President and Branch Manager SOCIETE GENERALE By: /s/ Donald L. Schubert ---------------------------------------- Title: Vice President -7- 8 ABN AMRO BANK N.V. SAN FRANCISCO INTERNATIONAL BRANCH By: /s/ Jeffrey A. French ---------------------------------------- Title: Jeffrey A. French Group Vice President & Director By: /s/ Joseph A. Vitale ---------------------------------------- Title: Joseph A. Vitale Portfolio Officer THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY By: /s/ illegible ---------------------------------------- Title: Deputy General Manager THE SANWA BANK, LIMITED By: /s/ illegible ---------------------------------------- Title: Vice President COMMERZBANK AG, LOS ANGELES BRANCH By: ---------------------------------------- Title: By: ---------------------------------------- Title: FIRST SECURITY BANK OF UTAH, N.A. By: /s/ David P. Williams ---------------------------------------- Title: Vice President THE SUMITOMO BANK, LIMITED By: /s/ illegible ---------------------------------------- Title: Vice President By: /s/ illegible ---------------------------------------- Title: Vice President -8- 9 THE FIRST NATIONAL BANK OF BOSTON By: /s/ illegible ----------------------------------- Title: Director BANK OF HAWAII By: /s/ Joseph T. Donalson ----------------------------------- Title: Vice President THE BANK OF NEW YORK By: /s/ illegible ------------------------------------ Title: VP BANQUE NATIONALE DE PARIS By: /s/ illegible ------------------------------------ Title: S.V.P. By: /s/ illegible ------------------------------------ Title: V.P. THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY By: /s/ Vicente L. Timiraos ------------------------------------ Title: Senior Vice President and Senior Manager NBD BANK By: /s/ Gary S. Gage ------------------------------------ Title: Senior Vice President THE NIPPON CREDIT BANK, LTD., LOS ANGELES AGENCY By: /s/ Bernardo E. Correa-Henschke ------------------------------------ Title: Vice President and Senior Manager US BANK OF NEVADA By: /s/ illegible ------------------------------------ Title: Vice President -9- 10 WHITNEY NATIONAL BANK By: /s/ illegible ------------------------------------ Title: Assistant Vice President DEPOSIT GUARANTY NATIONAL BANK By: /s/ illegible ------------------------------------ Title: Senior Vice President FIRST HAWAIIAN BANK By: /s/ illegible ------------------------------------ Title: Vice President GIROCREDIT BANK, AG DER SPARKASSEN, GRAND CAYMAN ISLANDS BRANCH By: /s/ illegible ------------------------------------ Title: By: /s/ illegible ------------------------------------ Title: IMPERIAL BANK By: /s/ Steven K. Johnson ------------------------------------ Title: Senior Vice President TRUSTMARK NATIONAL BANK By: /s/ illegible ------------------------------------ Title: Vice President -10- 11 EXHIBIT A to First Amendment to Credit Agreement March 28, 1997 Mare-Bear, Inc. Sam-Will, Inc. Boyd Tunica, Inc. Boyd Kansas City, Inc. Eldorado, Inc. Boyd Mississippi, Inc. Boyd Kenner, Inc. MSW, Inc. East Peoria Hotel, Inc. Par-A-Dice Gaming Corporation c/o California Hotel and Casino 2950 South Industrial Road Las Vegas, Nevada 89109 Attention: Chief Financial Officer Re: Boyd Gaming Corporation and California Hotel and Casino Gentlemen: Please refer to (1) the $500,000,000 Credit Agreement, dated as of June 19, 1996, by and among Boyd Gaming Corporation and California Hotel and Casino, as the Borrowers, the commercial lending institutions party thereto (collectively, the "Lenders"), Wells Fargo Bank N.A., as Swingline Lender, Canadian Imperial Bank Of Commerce ("CIBC"), as letter of credit issuer, Bank Of America National Trust and Savings Association and Wells Fargo Bank N.A., as co-managing agents (herein, in such capacity, the "Co-Managing Agents"), Bankers Trust Company, Credit Lyonnais Los Angeles Branch and Societe Generale, as co-agents (herein, in such capacity, the "Co-Agents"), and CIBC, as administrative agent and collateral agent for the Lenders (herein, in such capacity, called the "Agent") (the Lenders, the Co-Managing Agents, the Co-Agents and the Agent herein are collectively called the "Beneficiaries") and (2) the General Continuing Guaranties, dated as of June 19, 1996 of Mare-Bear, Inc., Sam-Will, Inc., Boyd Tunica, Inc., Boyd Kansas City, Inc., Eldorado, Inc., Boyd Mississippi, Inc., Boyd Kenner, Inc. and MSW, Inc. and the General Continuing Guaranties dated as of December 13, 1996 of East Peoria Hotel, Inc. and Par-A-Dice Gaming Corporation, executed in favor of the Beneficiaries (each such Guaranty is 12 herein called a "Guaranty"). Pursuant to an amendment dated of even date herewith, certain terms of the Credit Agreement were amended. We hereby request that you (i) acknowledge and reaffirm all of your obligations and undertakings under your Guaranty and (ii) acknowledge and agree that your Guaranty is and shall remain in full force and effect in accordance with the terms thereof. Please indicate your agreement to the foregoing by signing in the space provided below, and returning the executed copy to the undersigned. CANADIAN IMPERIAL BANK OF COMMERCE, as Administrative Agent By: _______________________________ Title: Managing Director CIBC Wood Gundy Securities Corp., AS AGENT Acknowledged and Agreed to MARE-BEAR, INC. By: ___________________________ Its: ____________________ SAM-WILL, INC. By: ___________________________ Its: ____________________ BOYD TUNICA, INC. By: ___________________________ Its: ____________________ BOYD KANSAS CITY, INC By: ___________________________ Its: ____________________ ELDORADO, INC. By: ___________________________ Its: ____________________ -2- 13 BOYD MISSISSIPPI, INC. By: ---------------------------------- Its: --------------------------- BOYD KENNER, INC. By: ---------------------------------- Its: --------------------------- MSW, INC. By: ---------------------------------- Its: --------------------------- EAST PEORIA HOTEL, INC. By: ---------------------------------- Its: --------------------------- PAR-A-DICE GAMING CORPORATION By: ---------------------------------- Its: --------------------------- -3- 14 EXHIBIT B to First Amendment to Credit Agreement Form of Certificate of the Borrowers of Compliance with the Provisions of Section 7.2 Schedule of Compliance with the Credit Agreement dated as of June 19, 1996, as amended as of ________________, 19 ___ The undersigned, _______________________________ of Boyd Gaming Corporation and California Hotel and Casino (the "Borrowers"), pursuant to Section 7.1.1(c) and (d) of the Credit Agreement, dated as of June 19, 1996, as amended (the "Credit Agreement"), among the Borrowers, Canadian Imperial Bank of Commerce, as Agent, and the various financial institutions as are, or may become, parties thereto, hereby certifies that as of the date hereof (defined terms in the Credit Agreement being used herein with the same meanings as in the Credit Agreement), the following computations were true and correct: I. Calculation of EBITDA for four consecutive Fiscal Quarters ending on the date set forth above: a. Consolidated earnings of Boyd Gaming $ ____________ before: depreciation $_____________ amortization $_____________ interest expense $_____________ pre-opening expenses $_____________ extraordinary items $_____________ taxes $_____________ plus (if applicable without duplication) b. Earnings of any New Venture which became a direct or indirect Subsidiary of Boyd Gaming during such period: $______________ 15 before depreciation $__________ amortization $__________ interest expense $__________ pre-opening expense $__________ extraordinary items $__________ taxes $__________ plus (or minus) c. any non-cash loss (or gain arising from change in GAAP $___________ EBITDA $___________ II. Additional Indebtedness Test, Section 7.2.2 a. Aggregate notional principal amount of secured Hedging Obligations under (iii): [description] Aggregate notional principal amount of such secured Hedging Obligations shall not exceed $300,000,000. b. Indebtedness outstanding under (v): [description] Total Indebtedness described above shall not exceed $25,000,000. III. Tangible Net Worth Test, Section 7.2.4(a) a. Actual Tangible Net Worth (i) consolidated net worth $___________ less (ii) intangible assets $___________ TOTAL $___________ b. Required Tangible Net Worth (i) $210,000,000 $210,000,000 plus (ii) 50% of Consolidated net income (without giving effect to any losses) for each Fiscal Quarter ending on or after September 30, 1996 $___________ plus (iii) Amount of increased equity due to stock issuances $___________ minus (iv) Amount of goodwill from acquisition of Par-A-Dice Gaming Corporation (not to exceed $130,000,000) $___________ -2- 16 minus (v) Noncash writedowns taken by Boyd Kansas City in connection with its Venture in Kansas City, Missouri $____________ TOTAL $____________ c. Actual Tangible Net Worth shown in (a) above must exceed (b) $____________ IV. Funded Debt to EBITDA Ratio, Section 7.2.4(b) a. Funded Debt of Boyd Gaming and its Subsidiaries (i) obligations for borrowed money $____________ plus (ii) letter of credit and bankers acceptances $____________ plus (iii) capitalized lease obligations $____________ plus (iv) deferred purchase price indebtedness and secured indebtedness $____________ plus (v) contingent liabilities $____________ TOTAL $____________ b. Twelve month trailing EBITDA (from Section I above) $____________ c. Ratio of line (a) to line (b) _____ to _____ d. The ration on line (c) must not exceed _____ to _____ V. Fixed Charge Coverage Test, Section 7.2.4(c) a. Twelve-month trailing EBITDA (from Section I above) plus rental payments ($____________) b. Fixed charges (i) Twelve-month consolidated net interest expense $____________ plus (ii) mandatory principal payments (other than payment of Indebtedness pursuant to Section 5.1.16 and mandatory prepayments of Loans upon Commitment reductions) $____________ plus (iii) provision for tax payments $____________ plus (iv) dividends and distributions $____________ plus (v) share redemptions and repurchases $____________ plus (vi) rental payments $____________ c. Ratio of line (a) to line (b) _____ to _____ -3- 17 d. The ratio on line (c) at the end of any Fiscal Quarter must exceed ________ to ________ VI. Expansion Capital Expenditures, Section 7.2.7 (a) a. Aggregate Expansion Capital Expenditures during term of Agreement $___________ [List Expenditures by Venture] b. Line (a) must not exceed $250,000,000 plus net cash proceeds from the issuance or sale of Boyd Gaming capital stock ($_______) $___________ VII. Maintenance Capital Expenditures, Section 7.2.7(b) a. Aggregate Maintenance Capital Expenditures for current Fiscal Year $___________ b. Line (a) must not exceed $__,000,000. VIII. New Venture Investments, Section 7.2.5 a. Aggregate New Venture Investments during term of Agreement $___________ [List Investments by New Venture] IX. Pledgor EBITDA (Fiscal Year test) a. Consolidated earnings of all Pledgors attributable to the Pledged Casinos $_____________ before: depreciation $___________ amortization $___________ interest expense $___________ pre-opening expenses $___________ extraordinary items $___________ taxes $___________ plus b. Consolidated earnings of any Venture that becomes a Pledged Casino pursuant to Section 7.1.11 $_____________ before: depreciation $___________ amortization $___________ interest expense $___________ pre-opening expenses $___________ extraordinary items $___________ taxes $___________ -4- 18 plus (or minus) c. Any non-cash loss (or gain) arising from a change in GAAP $ ------------- Pledgor EBITDA $ ------------- I hereby further certify that no event has occurred or is continuing on the date hereof which constitutes an Event of Default or a Default. IN WITNESS WHEREOF, I have hereunto set my hand as of the date first above written. BOYD GAMING CORPORATION By -------------------------------- Its: CALIFORNIA HOTEL AND CASINO By -------------------------------- Its: -5- EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS JUN-30-1997 JUL-01-1996 MAR-31-1997 36,007 0 8,792 0 6,984 64,647 842,832 335,663 606,210 70,311 379,837 0 0 22,328 109,523 606,210 392,745 392,745 0 364,678 0 0 24,875 3,307 1,306 2,001 0 0 0 2,001 0 0
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