<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 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 333-11811
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ELDORADO RESORTS LLC
ELDORADO CAPITAL CORP.
-----------------------------------------------------------
(Exact names of registrants as specified in their charters)
Nevada 88-0115550
Nevada 88-0367075
- --------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
345 NORTH VIRGINIA STREET, RENO, NEVADA 89501
-------------------------------------------------------------
(Address of principal executive offices, including zip code)
(702) 786-5700
---------------------------------------------------
(Registrants' telephone number, including area code)
NOT APPLICABLE
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Number of shares of common stock of Eldorado Capital Corp. outstanding at
August 12, 1997: 2,500 shares.
<PAGE>
ELDORADO RESORTS LLC
ELDORADO CAPITAL CORP.
FORM 10-Q
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets......................... 2
Condensed Consolidated Statements of Income................... 4
Condensed Consolidated Statements of Cash Flows............... 5
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......................... 15
SIGNATURES........................................................... 16
1
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Part I.
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ELDORADO RESORTS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
1997 1996
---------- ------------
(unaudited)
ASSETS
------
Current assets:
Cash and cash equivalents $3,384 $5,785
Accounts receivable, net 4,043 3,986
Inventory 2,493 2,471
Prepaid expenses 2,109 1,259
-------- --------
Total current assets 12,029 13,501
Note receivable 602 692
Investment in joint venture 46,402 46,402
Property and equipment, net 166,402 159,981
Other assets, net 13,611 13,717
-------- --------
Total assets $239,046 $234,293
-------- --------
-------- --------
The accompanying notes are an integral part of these condensed
consolidated statements.
2
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ELDORADO RESORTS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
1997 1996
---------- ------------
(unaudited)
LIABILITIES AND MEMBERS' EQUITY
-------------------------------
Current liabilities:
Current portion of long-term debt $ 1,260 $ 1,436
Accounts payable 2,703 3,692
Construction and retention payables 198 1,937
Interest payable 3,960 4,446
Accrued payroll, taxes and other accruals 7,196 5,859
---------- ------------
Total current liabilities 15,317 17,370
Long-term debt, less current portion 131,740 127,067
Other liabilities 835 762
---------- ------------
Total liabilities 147,892 145,199
Minority interest 5,063 5,063
Members' equity 86,091 84,031
Total liabilities and members' equity $239,046 $234,293
---------- ------------
---------- ------------
The accompanying notes are an integral part of these condensed
consolidated statements.
3
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ELDORADO RESORTS LLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---------- --------- -------- -------
<S> <C> <C> <C> <C>
Operating Revenues:
Casino $27,332 $26,541 $50,516 $49,319
Food, beverage and entertainment 10,566 8,802 19,143 16,919
Hotel 4,899 4,312 8,685 8,036
Equity in net income (loss) of
unconsolidated affiliate (Note 3) 224 423 0 (61)
Other 1,768 2,025 3,394 3,351
---------- --------- -------- -------
44,789 42,103 81,738 77,564
Less: Promotional allowances (3,863) (3,447) (7,382) (6,825)
---------- --------- -------- -------
Net revenues 40,926 38,656 74,356 70,739
Operating Expenses:
Casino 11,960 10,876 22,392 21,084
Food, beverage and entertainment 7,642 6,679 13,950 12,778
Hotel 1,871 1,910 3,606 3,571
Other 887 804 1,630 1,515
Selling, general and administrative 7,410 6,357 14,178 11,996
Management fees 455 979 929 1,984
Depreciation 3,021 2,584 5,832 5,067
---------- --------- -------- -------
Total operating expenses 33,246 30,189 62,517 57,995
---------- --------- -------- -------
Operating Income 7,680 8,467 11,839 12,744
Interest Expense, net 3,456 2,322 6,779 4,651
---------- --------- -------- -------
Net Income Before Minority Interest 4,224 6,145 5,060 8,093
Minority Interest in Net (Income)
Loss of Subsidiary (Note 3) (52) (98) 0 14
---------- --------- -------- -------
Net Income $ 4,172 $ 6,047 $ 5,060 $ 8,107
---------- --------- -------- -------
---------- --------- -------- -------
</TABLE>
4
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ELDORADO RESORTS LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1997 1996
----------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $5,060 $8,107
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 5,832 5,067
Equity in net ( income) loss of unconsolidated affiliate -- 61
Minority interest in net (loss) of unconsolidated affiliate -- (14)
Gain on sale of property and equipment (81) (463)
Changes in assets and liabilities:
(Increase) in accounts receivable, net (57) (484)
Decrease in notes receivable 90 --
(Increase) in inventories (22) (366)
(Increase) in prepaid expenses (850) (398)
Decrease in other assets 162 59
(Decrease) in accounts payable,
retention payable, accrued payroll, taxes
and other accruals (1,804) (630)
----------- --------
Net cash provided by operating activities 8,330 10,939
----------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (12,262) (9,113)
Proceeds from sale of property and equipment 90 2,554
----------- --------
Net cash used in investing activities (12,172) (6,559)
----------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term and other debt 14,500 7,000
Principal payments on long-term and other debt (10,003) (12,518)
Bond Offering costs (56) --
Distributions (3,000) (200)
----------- --------
Net cash provided by financing activities 1,441 (5,718)
----------- --------
DECREASE IN CASH AND CASH EQUIVALENTS ($2,401) ($1,338)
</TABLE>
5
<PAGE>
ELDORADO RESORTS LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1997 1996
----------- --------
<S> <C> <C>
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 5,785 6,122
----------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,384 $4,784
----------- --------
----------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during period for interest $7,076 $4,194
----------- --------
----------- --------
</TABLE>
6
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ELDORADO RESORTS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. General
The condensed consolidated financial statements include the accounts of
Eldorado Resorts LLC ("Resorts"), a Nevada limited liability company,
Eldorado Capital Corp. ("Capital"), a Nevada Corporation and wholly-owned
subsidiary of Resorts, and a majority owned subsidiary, Eldorado Limited
Liability Company ("ELLC") and, for the period prior to July 1, 1996,
Resorts' predecessor, Eldorado Hotel Associates Limited Partnership (the
"Predecessor Partnership") (together, the "Company"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
In the opinion of Management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the financial position as of June 30, 1997, the results of
operations for the three and six month periods ended June 30, 1997 and 1996
and cash flows for the six month periods ended June 30, 1997 and 1996. The
results of operations for such periods are not necessarily indicative of the
results to be expected for a full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Annual
Report of Eldorado Resorts LLC and Eldorado Capital Corp. on Form 10-K for
the year ended December 31, 1996.
2. Senior Subordinated Notes
On July 31, 1996, Resorts and Capital (the "Issuers"), sold $100,000,000
in aggregate principal amount of 10 1/2% Senior Subordinated Notes due 2006
(the "Notes"). The Notes are joint and several obligations of the Issuers.
The Notes mature on August 15, 2006 and bear interest at the rate of 10 1/2%
per annum, payable semi-annually in arrears on February 15 and August 15 of
each year, commencing on February 15, 1997. Pursuant to a Registration
Rights Agreement dated as of July 31, 1996, among the Issuers and the initial
purchasers party thereto, the Issuers filed a registration statement under
the Securities Act of 1933, as amended (the "1933 Act") with respect to an
offer to exchange the Notes, which were issued in reliance on an exemption
from registration under the 1933 Act, for registered debt securities of the
Issuers ("Registered Notes") with terms identical to the Notes. The exchange
of the Notes for the Registered Notes was completed on February 26, 1997.
3. Investment in Silver Legacy Resort Casino
Effective March 1, 1994, ELLC and Galleon, Inc. (a Nevada corporation
owned and controlled by Circus Circus Enterprises, Inc.) entered into a joint
venture (the "Silver Legacy Joint Venture") pursuant to a joint venture
agreement (the "Joint Venture Agreement") to develop the Silver Legacy Resort
Casino (the "Silver Legacy"). The Silver Legacy consists of a casino and
hotel located in Reno Nevada, which began operations on July 28, 1995.
During 1994, ELLC contributed land to the Silver Legacy Joint Venture with a
fair value of $25,000,000 (a book value of $17,215,000), and cash of
$23,000,000. Additional cash contributions of $3,900,000 were made in 1995,
for a total equity investment of $51,900,000. Each partner owns a 50%
interest in the Silver Legacy Joint Venture. Galleon, Inc. contributed cash
of $51,900,000 to the Silver Legacy Joint Venture.
Under the terms of the Joint Venture Agreement, Profits of the Silver
Legacy Joint Venture (defined as the Silver Legacy Joint Venture's taxable
income with certain adjustments) in each fiscal year are allocated to the
Partners pursuant to the following formula: (i) the net operating income of
the Silver Legacy Joint Venture for financial reporting purposes (determined
in accordance with generally accepted accounting principles) for such fiscal
year, exclusive of interest expense, is credited to Galleon, Inc. up to the
amount of its Priority Allocation (as defined below) for such fiscal year,
any balance is credited to ELLC up to the amount of Galleon, Inc's Priority
Allocation for such fiscal year and any remaining balance is credited to the
Partners in proportion to their Percentage Interests, (ii) interest expense
of the Silver Legacy Joint Venture for such fiscal year is charged to the
Partners in proportion to their Percentage Interests and (iii) the difference
between net operating income for such fiscal year less interest expense for
such fiscal year and Profits for such fiscal year is credited (or charged) to
the Partners in proportion to their Percentage Interest. If this formula
causes a Partner to be charged with a loss in any fiscal year, such Partner
will be allocated zero Profits for such year and the other Partner will be
allocated all of the Profits for such year. In addition, losses of the Silver
Legacy Joint Venture (defined as the Silver Legacy Joint Venture's taxable
loss with certain adjustments) in any fiscal year are allocated to the
Partners in proportion to their Percentage Interests.
For so long as ELLC selects the General Manager of the Silver Legacy, as
provided in the Joint Venture Agreement, Galleon, Inc. is entitled annually
on a non-cumulative basis, commencing with the seven-month period ending
December 31, 1997 and for each subsequent 12-month period, to a priority
allocation of the Silver Legacy Joint Venture's operating income (the
"Priority Allocation") in an amount equal to approximately 11.54% of the
average of the "Adjusted Initial Investment" (as defined) at the beginning of
the period for which the determination is being made and at the end of such
period. For purposes of determining the amount of the Priority Allocation for
any period, the term "Adjusted Initial Investment" means $290,000,000 (the
"Initial Investment") as adjusted at the end of each year by subtracting (i)
the depreciation on the Initial Investment taken in such year in accordance
with the depreciation schedule agreed to by ELLC and Galleon, Inc.
(collectively the "Partners") and (ii) the principal payments which would
have been made in repayment of the original bank financing utilized for the
development, construction and completion of the Silver Legacy.
The Joint Venture Agreement provides, subject to limitations on
distributions to Partners in other agreements to which the Silver Legacy
Joint Venture is a party, including its credit agreement, that Net Cash from
Operations (defined as the gross cash proceeds from all Silver Legacy Joint
Venture operations, less cash operating expenses and certain other expenses
and obligations, including interest and principal payments on indebtedness
including the financing required for the development, construction and
completion of the Silver Legacy (the "Construction Financing"), other than
indebtedness owed Partners or affiliates as provided for in the Joint Venture
Agreement, and reasonable reserves deemed necessary to meet anticipated
future obligations and liabilities of the Silver Legacy Joint Venture) is to
be distributed quarterly to the Partners in proportion to their percentage
interests in the Silver Legacy Joint Venture after satisfaction of certain
other obligations as follows: (i) at the end of the first year of operation
only, the distribution to each Partner of an amount equal to its tax
liability attributable to the Silver Legacy Joint Venture, (ii) the payment
of interest and principal on all loans to the Silver Legacy Joint Venture
from Partners and affiliates (excluding payment of principal on the
Construction Financing), (iii) the payment of principal and interest on any
Additional Capital Contribution Loan (as defined) of a Partner, plus the
distribution to the non-defaulting Partner who provided such Additional
Capital Contribution Loan of an amount equal to the amount of such Additional
Capital Contribution Loan, (iv) the payment of certain construction cost
overruns, (v) at the end of the first year of operation only, the payment of
the balance of the principal of the Construction Financing not including cost
overruns, (vi) to the extent earned and available, the distribution to
Galleon, Inc. of an amount up to the Priority Allocation, (vii) to the extent
earned and available, the distribution to ELLC of an amount up to the amount
distributed to Galleon, Inc. pursuant to the Priority Allocation, (viii)
after the first year of operation, the distribution to each Partner of an
amount equal to its tax liability attributable to the Silver Legacy Joint
Venture and (ix) the payment of the balance of the portion of the
Construction Financing provided by Galleon, Inc. or Circus Circus
Enterprises, Inc. until such loans are paid in full or refinanced. Any
withdrawal from the Silver Legacy Joint Venture by either Partner results in
a reduction of distributions to such withdrawing Partner to 75% of amounts
otherwise payable to such Partner.
7
<PAGE>
During 1994, the Predecessor Partnership contributed land with a fair
value of $22,185,000 (cost of $15,715,000) to ELLC; the minority interest
member of ELLC contributed land with a fair value of $2,815,000 (cost of
$1,500,000) to ELLC. Based upon these contributions, the Predecessor
Partnership had an 88.75% interest in ELLC as of December 31, 1994. In
addition, during 1994, the Company loaned $23,000,000 to ELLC to contribute
to the Silver Legacy Joint Venture; this note receivable from ELLC is
eliminated in consolidation. During 1995, the minority interest member
contributed cash of $3,900,000 to ELLC; as a result, the Predecessor
Partnership's interest in ELLC was reduced to 76.76%.
Summarized balance sheet and results of operations for Silver Legacy
Joint Venture are as follows:
Summarized balance sheet information (in thousands):
June 30, December 31,
1997 1996
---------- ------------
(Unaudited)
Current Assets.............................. $ 17,112 $ 13,976
Property and equipment, net................. 332,952 340,028
Other assets................................ 2,289 2,585
---------- -----------
Total assets............................ $352,353 $356,589
---------- -----------
---------- -----------
Current Liabilities.......................... $ 14,458 $ 18,785
Long-term liabilities........................ 232,904 236,904
Partners' equity............................. 104,991 100,900
---------- ------------
Total liabilities and partner's equity... $352,353 $356,589
---------- -----------
---------- -----------
Summarized results of operations (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------------------ -----------------
(Unaudited) (Unaudited)
Net Revenues............... $ 43,671 $ 33,773 $ 78,045 $ 71,016
Operating Expenses......... $(33,785) $(29,520) $(63,211) $(60,754)
--------- --------- --------- ---------
Operating Income........... $ 9,886 $ 4,253 $ 14,834 $ 10,262
Other (Expense)............ $ (5,347) $ (5,220) $(10,744) $(10,384)
--------- --------- --------- ---------
Net Income (Loss).......... $ 4,539 $ (967) $ 4,090 $ (122)
--------- --------- --------- ---------
--------- --------- --------- ---------
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Operations (Unaudited)
GENERAL.
Eldorado Resorts LLC (the "Resorts") was formed in June 1996 to be the
successor to Eldorado Hotel Associates Limited Partnership (the "Predecessor
Partnership") pursuant to an exchange of all the outstanding partnership
interests in the Predecessor Partnership for membership interests in Resorts
(the "Reorganization"). The Reorganization was effective on July 1, 1996.
Resorts owns and operates the Eldorado Hotel & Casino (the "Eldorado"), a
premier hotel/casino and entertainment facility in Reno, Nevada. In addition
to owning the Eldorado, Resorts' 77%-owned subsidiary, Eldorado Limited
Liability Company, a Nevada limited-liability company ("ELLC"), owns a 50%
interest in a joint venture (the "Silver Legacy Joint Venture") which owns
the Silver Legacy Resort Casino (the "Silver Legacy"), a major, themed
hotel/casino located adjacent to the Eldorado. The remaining 23% of ELLC is
owned by the principal equity holders of Resorts. Resorts, ELLC and Eldorado
Capital Corp. ("Capital"), a wholly-owned subsidiary of Resorts which holds
no significant assets and conducts no business activity, are collectively
referred to as the "Company."
The Company accounts for its investment in the Silver Legacy Joint
Venture utilizing the equity method of accounting. The Company's consolidated
net income includes its proportional share of the Silver Legacy Joint
Venture's net income (loss) before taxes as determined in accordance with the
terms of the Silver Legacy Joint Venture's joint venture agreement (the
"Joint Venture Agreement"). See Note 3 of the Notes to Condensed Consolidated
Financial Statements included in Item 1 of this Report.
The following discussion of the Company's operations relates to the
Eldorado except as otherwise indicated.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1996
NET REVENUES.
Net revenues for the three month period ended June 30, 1997 were $40.9
million compared to $38.7 million for the same period in 1996, an increase of
5.9%. Net revenues in the second quarter of 1997 include $0.2 million in net
income of unconsolidated affiliate compared to $0.4 million net income of
unconsolidated affiliate for the three months ended June 30, 1996. The
Company recognized income from the unconsolidated affiliate during the second
quarter in 1997 only to the extent it offset the loss recognized during the
first quarter in 1997, as a result of a priority allocation to Galleon, Inc.
pursuant to the Joint Venture Agreement. See Note 3 of the Notes to Condensed
Consolidated Financial Statements in Item 1 of this Report. The Company's net
revenues exceeded the results of the prior period as a result of increased
casino revenues and the expansion of the food, beverage and entertainment
facilities, through the addition of THE BISTRO ROXY in December of 1996 along
with the ELDORADO SHOWROOM in May of 1997. In addition, there was an influx
of visitors in the Reno Market attending the Women's International Bowling
Congress ("WIBC") National Championship Bowling Tournament being held from
March through July 1997.
Casino revenues increased by 3.0% to $27.3 million for the three months
ended June 30, 1997 compared to $26.5 million for the same period in 1996.
The increase in casino revenues was due primarily to increased slot revenue
in the 1997 period.
Food, beverage and entertainment revenues were $10.6 million for the three
months ended June 30, 1997 compared to $8.8 million during the same period in
1996, an increase of 20.0%. The increase in food, beverage and entertainment
revenues was due primarily to the opening of THE BISTRO ROXY in December of
1996 and the opening of the ELDORADO SHOWROOM in May of 1997.
Hotel revenues increased to $4.9 million during the second quarter of 1997
from $4.3 million in the second quarter of 1996, an increase of 13.6%,
despite a decrease in the Company's hotel occupancy rate for the three months
ended June 30, 1997 to approximately 93% from 95% during the same period in
1996. The increase in hotel revenues is a result of an increase in the
Company's average daily rate ("ADR") to approximately $66 in the second
quarter of 1997 from
9
<PAGE>
approximately $56 during the same period in 1996. The influx of visitors
attending the WIBC National Championship Bowling Tournament was a factor
contributing to the increase in ADR.
Other revenues for the three months ended June 30, 1997 were $1.8 million
compared to $2.0 million for the same period in 1996, a decrease of 12.7%.
The decrease is attributed to a $0.5 million gain on the sale of land
recorded during the second quarter of 1996. The decrease was partially
offset by the addition of retail space with the opening of SAYS WHO II in
December of 1996 and revenue from the DANIELS'S MOTOR LODGE, an 82-room motel
located adjacent to the Eldorado parking garage, which has been owned and
operated by the Eldorado since the third quarter of 1996.
Promotional allowances expressed as a percentage of casino revenues were
14.1% for the second quarter of 1997 compared to 13.0% for the same period in
1996 as a result of greater use of complimentaries to all levels of casino
patrons and participants in the WIBC bowling tournament.
OPERATING EXPENSES.
The Company's operating expenses increased by 10.1% to $33.2 million for
the three months ended June 30, 1997 from $30.2 million during the same
period in 1996. This increase is primarily attributable to increased
expenses in the casino, food, beverage and entertainment departments,
depreciation and an increase in selling, general and administrative expenses.
Casino expenses increased by 10.0% to $12.0 million for the three months
ended June 30, 1997 from $10.9 million during the same period in 1996. The
increase was due to the opening of an Eldorado sportsbook at the Silver
Legacy in June of 1996 in addition to increased promotional expense related
to the WIBC bowling tournament and bus programs.
Food, beverage and entertainment expenses increased 14.4% to $7.6 million
in the second quarter of 1997 from $6.7 million during the same period in
1996. The increase in food, beverage and entertainment expenses was due
primarily to the addition of THE BISTRO ROXY in December of 1996 and the
opening of the ELDORADO SHOWROOM in May of 1997.
Hotel expenses in the second quarter of 1997 and 1996 were comparable at
$1.9 million. Despite a decrease in hotel occupancy, expenses were
comparable primarily due to a slight increase in marketing expenditures.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES AND MANAGEMENT FEES.
Selling, general and administrative expenses and management fees increased
by 7.2% for the three months ended June 30, 1997 to $7.9 million from $7.3
million during the same period in 1996. The increase was due to an accrual
for mid-year employee bonuses, which was not incurred in the corresponding
period of the previous year. Historically, the salaries of senior executive
officers and certain other key employees of the Company were not directly
incurred by the Company but were paid from a portion of the management fees
paid to Recreational Enterprises, Inc., Resorts' controlling member. As of
July 1, 1996, the aggregate annual salaries of such senior executive officers
and other key employees became payroll obligations of the Company. These
obligations are included within selling, general and administrative expenses.
10
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DEPRECIATION.
Depreciation for the three months ended June 30, 1997 was $3.0 million
compared to $2.6 million for the same period in 1996, an increase of 16.9%.
The increase was attributable to the depreciation of assets that were not in
service in the prior period. These assets include THE BISTRO ROXY, the
DANIEL'S MOTOR LODGE and the ELDORADO SHOWROOM.
INTEREST EXPENSE, NET.
Interest expense, net of capitalized interest and interest income in the
second quarter of 1997 and 1996 was $3.5 million and $2.3 million,
respectively, an increase of 48.8%. Interest expense increased as a result
of an increase in the average outstanding borrowings in the second quarter of
1997, as compared to the same period in 1996, and as a result of an increase
in the Company's cost of capital. This increase in average outstanding
borrowings is attributable to costs incurred in connection with the Company's
expansion activities in 1996 and 1997. The Company's increase in cost of
capital is due to the issuance in July 1996 of $100 million principal amount
of 10 1/2% Notes, due 2006 (the "10 1/2% Notes"),the net proceeds of which were
used to repay approximately $96.5 million of borrowings outstanding under the
Company's Credit Facility (as defined below), which as of June 30, 1996 bore
interest at an approximate average quarterly rate of 7.4%. The Company
capitalized interest of $0.1 million for the three months ended June 30,
1997 and 1996 related to construction costs.
NET INCOME.
As a result of the factors described above, net income for the three
months ended June 30, 1997, declined by 31.0% to $4.2 million compared to
$6.0 million during the same period in 1996.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1996
NET REVENUES.
Net revenues were $74.4 million for the six month period ended June 30,
1997, compared to $70.7 million for the same period in 1996, an increase of
5.1%. Despite a flood in Reno and severe weather in January of 1997, which
negatively impacted traffic, the Company's net revenues exceeded the results
of the prior period as a result of increased casino revenues and the
expansion of the food, beverage and entertainment facilities, which includes
THE BISTRO ROXY opened in December of 1996 and the ELDORADO SHOWROOM opened
in May of 1997. In addition, there was an influx of visitors in the Reno
Market attending the WIBC National Championship Bowling Tournament being held
from March through July 1997. The Company did not recognize income (loss) from
the unconsolidated affiliate, as a result of the priority allocation to
Galleon, Inc. pursuant to the Joint Venture Agreement. See Note 3 of the
Notes to Condensed Consolidated Financial Statements in Item 1 of this
Report.
Casino revenues increased by 2.4% to $50.5 million for the six months
ended June 30, 1997 compared to $49.3 million for the same period in 1996.
The increase in casino revenues was due primarily to increased slot revenue
in the 1997 period.
Food, beverage and entertainment revenues were $19.1 million for the six
months ended June 30, 1997 compared to $16.9 million during the same period
in 1996, an increase of 13.1%. The increase in
11
<PAGE>
food, beverage and entertainment revenues was due primarily to the opening of
THE BISTRO ROXY in December of 1996 and the ELDORADO SHOWROOM in May of 1997.
This increase was partially offset by the closing of THE CABARET in January
of 1997 to make room for the ELDORADO SHOWROOM.
Hotel revenues increased to $8.7 million for the six months ended June 30,
1997 from $8.0 million for the same period in 1996, an increase of 8.1%.
Despite a decrease in the Company's hotel occupancy rate for the six months
ended June 30, 1997 to approximately 91% from 95% during the same period in
1996, primarily related to the flood and severe weather in January 1997,
hotel revenues exceeded the prior period. The increase is a result of an
increase in the Company's average daily rate ("ADR") to approximately $59 in
the first six months of 1997 from approximately $53 during the same period in
1996. The influx of visitors attending the WIBC National Championship
Bowling Tournament was a factor contributing to the increase in ADR.
Other revenues for the six months ended June 30,1997 and 1996 were
comparable at $3.4 million. While other revenues in the 1996 period include
a $0.5 million gain on the sale of land, revenues in the 1997 period were
comparable primarily due to retail space added with the opening of SAYS WHO
II in December of 1996 and revenue from the DANIEL'S MOTOR LODGE.
Promotional allowances expressed as a percentage of casino revenues were
14.6% for the six months ended June 30, 1997 compared to 13.8% for the same
period in 1996 as a result of greater use of complimentaries to all levels of
casino patrons and participants in the WIBC bowling tournament.
OPERATING EXPENSES.
The Company's operating expenses increased by 7.8% to $62.5 million for
the six months ended June 30, 1997 from $58.0 million during the same period
in 1996. This increase is primarily attributable to increased expenses in
the casino, food, beverage and entertainment departments, depreciation and an
increase in selling, general and administrative expenses.
Casino expenses increased by 6.2% to $22.4 million for the six months
ended June 30, 1997 from $21.1 million during the same period in 1996. The
increase was due to the opening of an Eldorado sportsbook at the Silver
Legacy during the second quarter of 1996, in addition to increased
promotional expense related to the WIBC bowling tournament and bus programs.
Food, beverage and entertainment expenses increased 9.2% to $14.0 million
for the first six months of 1997 from $12.8 million during the same period in
1996. The increase in food, beverage and entertainment expenses was due
primarily to the addition of THE BISTRO ROXY in December of 1996 and the
ELDORADO SHOWROOM in May of 1997. The increase was partially offset by the
closing of THE CABARET in January of 1997 to make room for the ELDORADO
SHOWROOM.
Hotel expenses for the six months ended June 30 of 1997 and 1996 were
comparable at $3.6 million. Despite a decrease in hotel occupancy, expenses
were comparable primarily due to a slight increase in marketing expenditures.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES AND MANAGEMENT FEES.
Selling, general and administrative expenses and management fees increased
by 8.1% for the six months ended June 30, 1997 to $15.1 million from $14.0
million during the same period in 1996. The
12
<PAGE>
increase was due in part to increased property maintenance expenditures as a
result of expanded facilities and an accrual for mid-year employee bonuses,
which was not incurred in the corresponding periods of the previous year.
Historically, the salaries of senior executive officers and certain other key
employees of the Company were not directly incurred by the Company but were
paid from a portion of the management fees paid to Recreational Enterprises,
Inc., Resorts' controlling member. As of July 1, 1996, the aggregate annual
salaries of such senior executive officers and other key employees became
payroll obligation of the Company. These obligations are included within
selling, general and administrative expenses.
DEPRECIATION.
Depreciation for the six months of 1997 was $5.8 million compared to $5.1
million for the first six months of 1996, an increase of 15.1%. The increase
was attributable to the depreciation of assets that were not in service in
the prior periods. These assets include THE BISTRO ROXY, DANIEL'S MOTOR
LODGE and the ELDORADO SHOWROOM.
INTEREST EXPENSE, NET.
Interest expense, net of capitalized interest and interest income in the
first six months of 1997 and 1996 was $6.8 million and $4.7 million,
respectively, an increase of 45.8%. Interest expense increased as a result
of an increase in the average outstanding borrowings in the first six months
of 1997, as compared to the same period in 1996, and as a result of an
increase in the Company's cost of capital. This increase in average
outstanding borrowings is attributable to costs incurred in connection with
the Company's expansion activities in 1996 and 1997. The Company's increase
in cost of capital is due to the issuance in July 1996 of $100 million
principal amount of 10 1/2% Notes, due 2006 (the "10 1/2% Notes"), the net
proceeds of which were used to repay approximately $96.5 million of
borrowings outstanding under the Company's Credit Facility (as defined
below), which as of June 30, 1996 bore interest at an approximate average
annual rate of 7.4%. The Company capitalized interest of $0.2 million for
the first six months of 1997 and 1996 related to construction costs.
NET INCOME.
As a result of the factors described above, net income for the six months
ended June 30, 1997, declined by 37.6% to $5.1 million compared to $8.1
million during the same period in 1996.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's primary sources of liquidity and capital resources have been
through cash flow from operations, borrowings under various credit
agreements, including the Former Credit Facility (as defined below) and the
issuance on July 31,1996 of the 10 1/2% Notes. The Company has completed
several expansion and remodeling projects, accounting for a significant use
of cash flow from operations and borrowings under the Former Credit Facility.
The Company's earnings before interest, taxes, depreciation and amortization
for the six months ended June 30, 1997 and 1996, as adjusted to exclude
equity in net income (loss) of unconsolidated affiliate was $17.7 million for
the six months ended June 30, 1997 as compared to 17.9 million during the
same period in 1997. Cash flow from operations for the six months ended June
30, 1997 and 1996 were $8.3 million and $10.9 million, respectively. The
decrease is primarily related to the February 1997 semi-annual interest
payment on the 10 1/2% Notes.
At June 30, 1997 the Company had $3.4 million of cash and cash equivalents
and $23.7 million available pursuant to its Credit Facility (as defined
below). The net proceeds of the offering (the "Offering") by the Company and
its wholly owned subsidiary, Eldorado Capital Corp., of the 10 1/2% Notes
13
<PAGE>
were used to repay a portion of the Former Credit Facility. The Loan
Agreement dated as of March 25, 1994, (the "Former Credit Facility"), between
the Company, the banks named therein and Bank of America NT&SA, as
administrative agent, was amended concurrently with the closing of the
Offering (as amended, the "Credit Facility"). The Credit Facility provides
for a senior secured revolving credit facility of $50 million. As of June
30, 1997, the Company had $100.0 million in aggregate principal amount of
10 1/2% Notes outstanding, $26.3 million outstanding under the Credit Facility
and $5.5 million of other long term debt (net of current portion).
The Operating Agreement of Resorts dated June 28, 1996 obligates Resorts
to distribute each year for as long as it is not taxed as a corporation to
each of its members' an amount equal to such members allocable share of the
taxable income of Resorts multiplied by the highest marginal combined
federal, state and local income tax rate applicable to individuals for that
year. For the six months ended June 30, 1997, Resorts made distributions to
its members of $3.0 million compared with distributions of $0.2 million
during the same period in 1996.
During the six months ended June 30, 1997, the Company's principal uses of
funds were capital expenditures related to progress payments for the hotel
refurbishment at the Eldorado ($1.0 million) and construction of the ELDORADO
SHOWROOM ($8.4 million). Total capital expenditures for the six months ended
June 30, 1997 were $12.3 million.
The Company's future sources of liquidity are anticipated to be from its
operating cash flow, funds available from the Credit Facility and capital
lease financing for certain of its fixed asset purchases. The Company's
anticipated uses of cash in the near term include approximately $2.3 million
for completion of a casino and hotel refurbishment program, which is
anticipated to be completed during 1997 and the first half of 1998. The
full-service health spa, originally planned at an estimated cost of $3.0
million is currently being re-evaluated.
14
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
THE FOLLOWING EXHIBIT IS FILED AS PART OF THIS REPORT.
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
4 Amendment No. 1, dated as of
July 31, 1997, to Loan Agreement
dated as of July 31, 1996 among
Eldorado Resorts LLC and Bank of
America National Trust and
Savings Association, as
Administrative Agent
27 Financial Data Schedule
for the three months and
six months ended
June 30, 1997
(b) REPORTS ON FORM 8-K
No report on Form 8-K was filed during the period covered by
this Report.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
ELDORADO RESORTS LLC
--------------------
Date: August 13, 1997 By: /s/ DONALD L. CARANO
---------------------------
Donald L. Carano
Chief Executive Officer,
President and Presiding Manager
Date: August 13, 1997 By: /s/ ROBERT M. JONES
---------------------------
Robert M. Jones
Chief Financial Officer of
Eldorado Resorts LLC (Principal
Financial and Accounting Officer)
ELDORADO CAPITAL CORP.
----------------------
Date: August 13, 1997 By: /s/ DONALD L. CARANO
---------------------------
Donald L. Carano
President
Date: August 13, 1997 By: /s/ GENE R. CARANO
---------------------------
Gene R. Carano
Treasurer (Principal Financial and
Accounting Officer)
16
<PAGE>
EXHIBITS INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- -----------------------
4 Amendment No. 1, dated as of
July 31, 1997, to Loan Agreement
dated as of July 31, 1996 among
Eldorado Resorts LLC and Bank of
America National Trust and
Savings Association, as
Administrative Agent
27 Financial Data Schedule
for the three months and
six months ended June 30, 1997
17
<PAGE>
EXHIBIT 4.0
AMENDMENT NO. 1 TO LOAN AGREEMENT
This Amendment No. 1 to Loan Agreement (this "Amendment") dated as of
July 23, 1997 is entered into with reference to the Amended and Restated Loan
Agreement dated as of July 31, 1996, among Eldorado Resorts LLC, a Nevada
limited liability company ("Borrower"), the Banks therein named, and Bank of
America National Trust and Savings Association, as Administrative Agent (as
amended, the "Loan Agreement"). Terms defined in the Loan Agreement are used
herein with the same meanings. Borrower and the Administrative Agent, acting
with the consent of the Requisite Banks in accordance with Section 11.2 of
the Loan Agreement, hereby amend the Loan Agreement as follows:
1. AMENDMENT TO MARGINS. Section 1.1 of the Loan Agreement is hereby
amended so that the definition of "APPLICABLE PERCENTAGE" set forth therein
reads in full as follows:
"APPLICABLE PERCENTAGE" means, during each calendar month, the
per annum percentage set forth below opposite the Pricing Leverage
Ratio set forth in the then most recently delivered Pricing
Certificate (a) with respect to each Base Rate Loan, in the column
headed "Base Rate", (b) with respect to each Eurodollar Rate Loan,
in the column headed "Eurodollar Rate", (c) for each Letter of
Credit, in the column headed "Letters of Credit", and (d) with
respect to Commitment Fees, in the column headed "Commitment Fees":
<TABLE>
Pricing Leverage Base Eurodollar Letter Commitment
Ratio Rate Rate of Credit Fees Fees
----- ----- ----- --------------- -----
<S> <C> <C> <C> <C>
Less than 0% 0.7500% 0.7500% 0.2000%
1.50:1.00
Greater than or 0% 1.0000% 1.0000% 0.2500%
equal to 1.50:1.00
but less than 2.00:1.00
Greater than or 0% 1.2500% 1.2500% 0.3125%
equal to 2.00:1.00
but less than 2.50:1.00
Greater than or 0.2500% 1.5000% 1.5000% 0.3750%
equal to 2.50:1.00
but less than 3.00:1.00
Greater than or 0.5000% 1.7500% 1.7500% 0.4375%
equal to 3.00:1.00
but less than 3.50:1.00
Greater than or 0.7500% 2.0000% 2.0000% 0.5000%
equal to 3.50:1.00
</TABLE>
-1-
<PAGE>
PROVIDED that (a) if the Senior Debt to EBITDA Ratio, as of the last
day of the Fiscal Quarter ending immediately prior to the date of any
such Pricing Certificate is less than or equal to 1.00 to 1.00, the
Applicable Percentages set forth above for Eurodollar Rate Loans and
Letter of Credit Fees shall be reduced by O.1250%, (b) if the Senior
Debt to EBITDA Ratio, as of the last day of the Fiscal Quarter ending
immediately prior to the date of any such Pricing Certificate is less
than or equal to 0.75 to 1.00, the Applicable Percentages set forth
above for Eurodollar Rate Loans and Letter of Credit Fees shall be
reduced by and additional 0.1250%, and the applicable Percentages set
forth above for Commitment Fees shall be reduced by 0.05%.
2. PRICING CERTIFICATE. The form of the Pricing Certificate is hereby
amended to read as set forth in the attachment hereto.
3. CONDITIONS PRECEDENT. The effectiveness of this Amendement shall be
conditioned upon the receipt by the Administrative Agent of the following:
(a) Counterparts of this Amendment executed by Borrower and the
Administrative Agent, acting on behalf of the Banks;
(b) Written consents to the execution, delivery and performance
hereof from each of the Banks.
4. REPRESENTATION AND WARRANTY. Borrower represents and warrants to the
Administrative Agent and the Banks that no Default or Event of Default has
occurred and remains continuing.
-2-
<PAGE>
5. CONFIRMATION. In all other respects, the terms of the Loan Agreement
and the other Loan Documents are hereby confirmed.
IN WITNESS WHEREOF, Borrower and the Administrative Agent have executed
this Amendment as of the date first written above by their duly authorized
representatives.
ELDORADO RESORTS LLC
By: /s/ Donald L. Carano
-------------------------------------
Donald L. Carano, Chief Executive Officer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative
Agent
By /s/ Janice Hammond
-------------------------------------
Janice Hammond, Vice President
The undersigned hereby consents to the execution, delivery and performance by
Borrower, the Banks and the Administrative Agent of the foregoing Amendment
No. 1 to Loan Agreement. The undersigned represents and warrants to the
Administrative Agent and Banks that there is no defense, counterclaim or
offset of any type or nature to the Subsidiary Guaranty and the other Loan
Documents executed by the undersigned, and that the same remain in full force
and effect:
ELDORADO CAPITAL CORPORATION
By: /s/ Donald L. Carano
----------------------------
Title: President
-------------------------
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,384
<SECURITIES> 0
<RECEIVABLES> 4,974
<ALLOWANCES> 1,132
<INVENTORY> 2,493
<CURRENT-ASSETS> 12,029
<PP&E> 232,688
<DEPRECIATION> 66,286
<TOTAL-ASSETS> 239,046
<CURRENT-LIABILITIES> 15,317
<BONDS> 131,740
0
0
<COMMON> 0
<OTHER-SE> 86,091
<TOTAL-LIABILITY-AND-EQUITY> 239,046
<SALES> 0
<TOTAL-REVENUES> 74,356
<CGS> 0
<TOTAL-COSTS> 41,098
<OTHER-EXPENSES> 5,832
<LOSS-PROVISION> 480
<INTEREST-EXPENSE> 6,779
<INCOME-PRETAX> 5,060
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,060
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,060
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
