<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 March 31, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO
___________.
Commission file number 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
----------------------------------------------------
(Registrant's 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
May 11, 1998: 2,500 shares.
<PAGE>
ELDORADO RESORTS LLC
ELDORADO CAPITAL CORP.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
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.......... 10
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K....................... 13
SIGNATURES................................................................ 14
</TABLE>
1
<PAGE>
Part 1
FINANCIAL INFORMATION
Item 1. Financial Statements.
ELDORADO RESORTS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,060 $ 6,369
Accounts receivable, net 3,177 3,650
Inventory 3,018 2,882
Prepaid expenses 1,664 1,703
----------- ------------
Total current assets 14,919 14,604
Note receivable 512 557
Investment in joint venture 46,792 46,792
Property and equipment, net 162,063 163,443
Other assets, net 13,323 13,231
----------- ------------
Total assets $ 237,609 $ 238,627
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----------- ------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
2
<PAGE>
ELDORADO RESORTS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(unaudited)
<S> <C> <C>
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,209 $ 1,269
Accounts payable 2,590 3,710
Construction and retention payables 20 319
Interest payable 1,351 3,950
Accrued payroll, taxes and other accruals 6,916 5,910
----------- ------------
Total current liabilities 12,086 15,158
Long-term debt, less current portion 132,074 128,135
Other liabilities 947 911
----------- ------------
Total liabilities 145,107 144,204
Minority interest 5,154 5,154
Members' equity 87,348 89,269
----------- ------------
Total liabilities and members' equity $ 237,609 $ 238,627
----------- ------------
----------- ------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
3
<PAGE>
ELDORADO RESORTS LLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
----------- ------------
<S> <C> <C>
Operating Revenues:
Casino $ 21,825 $ 23,184
Food, beverage and entertainment 9,885 8,577
Hotel 3,947 3,786
Equity in net (loss) of unconsolidated
affiliate (Note 3) -- (224)
Other 1,362 1,626
----------- ------------
37,019 36,949
Less: Promotional allowances (3,585) (3,519)
----------- ------------
Net revenues 33,434 33,430
Operating Expenses:
Casino 11,052 10,432
Food, beverage and entertainment 7,770 6,308
Hotel 1,746 1,735
Other 959 743
Selling, general and administrative 6,657 6,768
Management fees 460 474
Depreciation 3,326 2,811
----------- ------------
Total operating expenses 31,970 29,271
----------- ------------
Operating Income 1,464 4,159
Interest Expense, net 3,385 3,323
----------- ------------
Net Income Before Minority Interest (1,921) 836
Minority Interest in Net Loss of
Subsidiary (Note 3) -- 52
----------- ------------
Net (Loss) Income ($ 1,921) $ 888
----------- ------------
----------- ------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
4
<PAGE>
ELDORADO RESORTS LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1998 1997
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ($ 1,921) $ 888
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 3,326 2,811
Equity in net loss of unconsolidated affiliate -- 224
Minority interest in net (loss) of unconsolidated
affiliate -- (52)
Loss on sale of property and equipment 203 --
Changes in assets and liabilities:
Decrease (Increase) in Accounts receivable, net
and due from partners and affiliates 473 (155)
Decrease in Note receivable 45 45
(Increase) in Inventories (136) (20)
Decrease (Increase) in Prepaid expenses 39 (764)
(Increase) Decrease in Other assets, net (92) 60
(Decrease) in accounts payable, retention payable,
accrued payroll, taxes and other accruals (2,976) (2,585)
----------- ------------
Net cash (used in) provided by operating
activities (1,039) 452
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (2,149) (7,384)
----------- ------------
Net cash used in investing activities (2,149) (7,384)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term and other debt 6,250 12,000
Principal payments on long-term and other debt (2,371) (6,648)
Bond offering costs -- 83
Distributions -- (1,000)
----------- ------------
Net cash provided by financing activities $ 3,879 $ 4,435
----------- ------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
5
<PAGE>
ELDORADO RESORTS LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1998 1997
----------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 691 $(2,497)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,369 5,785
----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $7,060 $ 3,288
----------- ------------
----------- ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during period for interest $5,850 $ 6,367
----------- ------------
----------- ------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
6
<PAGE>
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,
which is the successor entity to Eldorado Hotel Associates Limited
Partnership (the "Predecessor Partnership") pursuant to a reorganization
effective July 1, 1996, Eldorado Capital Corp. ("Capital"), a Nevada
corporation and wholly-owned subsidiary of Resorts, and a majority owned
subsidiary, Eldorado Limited Liability Company ("ELLC")(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 of the Company as of March 31, 1998 and
the results of operations and cash flows for the three month periods ended
March 31, 1998 and 1997. 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, 1997.
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. Galleon, Inc. contributed cash
of $51,900,000 to the Silver Legacy Joint Venture. Each partner owns a 50%
interest in the Silver Legacy Joint Venture.
7
<PAGE>
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
Interests. 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
8
<PAGE>
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.
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 the Silver
Legacy Joint Venture are as follows:
Summarized balance sheet information (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Current Assets $ 16,545 $ 18,230
Property and equipment, net 321,945 326,018
Other assets 2,130 2,306
----------- ------------
Total assets $ 340,620 $ 346,554
----------- ------------
----------- ------------
Current Liabilities $ 19,179 $ 22,939
Long-term liabilities 211,000 213,000
Partners' equity 110,441 110,615
----------- ------------
Total liabilities and partners'
equity $ 340,620 $ 346,554
----------- ------------
----------- ------------
</TABLE>
Summarized results of operations (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net Revenues $ 36,222 $ 34,374
Operating Expenses (31,587) (29,426)
----------- ------------
Operating Income 4,635 4,948
----------- ------------
Other (Expense) (4,809) (5,397)
----------- ------------
Net (Loss) $ (174) $ (449)
----------- ------------
----------- ------------
</TABLE>
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
GENERAL
Eldorado Resorts LLC ("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 equityholders 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 MARCH 31, 1998 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1997
NET REVENUES
Net revenues for the three month period ended March 31, 1998 and
1997 were comparable at $33.4 million. Net revenues in the first quarter of
1997 include $0.2 million in net loss of the Company's unconsolidated
affiliate, the Silver Legacy Joint Venture. The Company did not recognize
income (loss) from its unconsolidated affiliate during the first quarter of
1998 as the 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.
Casino revenues decreased by approximately $1.4 million or 5.9% to
$21.8 million for the three months ended March 31, 1998 compared to $23.2
million for the same period in 1997. The decrease in casino revenues was due
primarily to decreased revenue from slots due to a decrease in volume and
hold percentage as compared to the previous period. Disruption from casino
refurbishment was a factor contributing to the decrease in slot revenue.
Food, beverage and entertainment revenues were $9.9 million for the
three months ended March 31, 1998 compared to $8.6 million during the same
period in 1997, an increase of 15.3%. The increase in food, beverage and
entertainment revenues was due primarily to the opening of the Eldorado
Showroom in May 1997.
10
<PAGE>
Hotel revenues increased to $3.9 million during the first quarter of
1998 from $3.8 million in the first quarter of 1997, an increase of 4.3%. The
increase is a result of an increase in the Company's average daily rate
("ADR") to approximately $53 in 1998 from approximately $52 in 1997 and hotel
occupancy increase to 91% in 1998 from 89% in 1997. The influx of visitors
attending the American Bowling Congress ("ABC") National Championship Bowling
Tournament to be held from February through June 1998 and the lack of a major
flood which occurred in Reno in January 1997 were factors contributing to the
increases in ADR and occupancy.
Other revenues for the first three months of 1998 were $1.4 million
compared to $1.6 million for the same period in 1997, a decrease of 16.2%.
The decrease is partially attributable to the reduction of retail space due
to the closing of Says Who in January 1998 and lower parking revenue.
Promotional allowances expressed as a percentage of casino revenues
were 16.4% for the first quarter of 1998 compared to 15.2% for the same
period in 1997 as a result of greater use of complimentaries to all levels of
casino patrons, including those participating in the ABC National Bowling
Tournament, and promotions related to the Eldorado Showroom.
OPERATING EXPENSES
The Company's operating expenses increased by 9.2% to $32.0 million
for the three months ended March 31, 1998 from $29.3 million during the same
period in 1997. This increase is primarily attributable to increased casino,
entertainment and depreciation expenses.
Casino expenses increased by 5.9% to $11.1 million for the three
months ended March 31, 1998 from $10.4 million during the same period in
1997. The increase was primarily due to increased promotional expenses.
Food, beverage and entertainment expenses increased 23.2% to $7.8
million in the first quarter of 1998 from $6.3 million during the same period
in 1997. The increase was due primarily to the opening of the Eldorado
Showroom in May 1997.
Hotel expenses in the first quarter of 1998 and 1997 were comparable
at $1.7 million.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES AND MANAGEMENT FEES
Selling, general and administrative expenses and management fees
decreased by 1.7% to $7.1 million for the three months ended March 31, 1998
from $7.2 million during the same period in 1997. The decrease was primarily
due to an accrual for mid year employee bonuses in the prior period compared
with the current period, as well as a decrease in sign maintenance
expenditures.
DEPRECIATION
Depreciation for the first three months of 1998 was $3.3 million
compared to $2.8 million for the first quarter of 1997, an increase of 18.3%.
The increase was primarily attributable to the opening of the Eldorado
Showroom in May 1997.
INTEREST EXPENSE, NET
Interest expense, net of capitalized interest and interest income,
increased 1.9% to $3.4 million in the first quarter of 1998 compared to $3.3
million for the same period in 1997. Interest expense increased as a
11
<PAGE>
result of an increase in the average outstanding borrowings in the first
quarter of 1998, as compared to the same period in 1997. This increase in
average outstanding borrowings is attributable to costs incurred in
connection with the Company's expansion activities in 1997 primarily
attributable to the Eldorado Showroom and the casino and hotel refurbishment
program. The Company capitalized interest of approximately $34,000 for the
three months ended March 31, 1998 related to construction costs, compared to
$0.1 million during the same period in 1997.
NET INCOME
As a result of the factors described above, the Company incurred a
net loss of $1.9 million for the three months ended March 31, 1998 compared
to a net income of $0.9 million during the same period in 1997.
YEAR 2000 SITUATION
As the result of computer programs being written using two digits
rather than four to define the applicable year, systems failures and
disruptions to operations may occur at January 1, 2000 (the "Year 2000
Situation"). The Company has retained the services of a consulting firm to
specifically assist in the Year 2000 Situation. The consulting firm and the
Company are currently in the process of assessing the Year 2000 Situation and
are in the process of remediating the system to avoid systems' failures and
disruptions as a result of the Year 2000 Situation. This remediation plan
includes continuing to assess the Company's inventory of issues associated
with the Year 2000 Situation, contacting the suppliers of certain of their
systems to determine the timing of applicable upgrades, and implementing the
currently available upgrades to address the Year 2000 Situation. The Company
will continue to evaluate its vulnerability in the case of suppliers' failure
to remediate their own exposure to the Year 2000 Situation. The Company's
failure to successfully conclude its remediation efforts by January 1, 2000
could have a material adverse effect on the Company. Expenditures to address
the Year 2000 Situation are currently estimated to be $500,000 and $470,000
in 1998 and 1999, respectively.
The Company's unconsolidated affiliate, Silver Legacy Joint Venture,
is in the process of assessing its exposure to the Year 2000 Situation. The
Silver Legacy remediation plan is encompassed within the remediation plan of
Circus Circus Enterprises, Inc. The failure to successfully conclude the
remediation effort relating to the Silver Legacy by January 1, 2000 could
have a material adverse effect on the Silver Legacy Joint Venture and the
Company.
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 in July 1996 of $100 million aggregate principal amount of 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 three months ended March 31,
1998 and 1997, as adjusted to exclude equity in net (loss) of unconsolidated
affiliate was $4.8 million for the three months ended March 31, 1998 as
compared to $7.2 million during the same period in 1997. Net cash (used in)
provided by operating activities for the three months ended March 31, 1998
was a negative $1.0 million as compared to a positive $0.5 million for the
same period of the prior year.
At March 31, 1998, the Company had $7.1 million of cash and cash
equivalents and $17.8 million available pursuant to its Credit Facility (as
defined below) inclusive of approximately $1.1 million in letters of credit.
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 were
used to repay a
12
<PAGE>
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 to provide the Company with a
senior secured revolving credit facility in the original amount of $50
million (as amended, the "Credit Facility"). The amount of credit available
pursuant to the Credit Facility reduced to approximately $45.3 million on
March 31, 1998 and, by its terms, the facility reduces by an additional
$1,562,500 as of the end of each subsequent quarter until March 25, 2000 when
it terminates and any balance then outstanding becomes due and payable. As of
March 31, 1998, the Company had $100 million in aggregate principal amount of
10 1/2% Notes outstanding, approximately $27.5 million outstanding under the
Credit Facility and $4.6 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 three months ended March 31, 1998, Resorts did not
make any distributions to its members as compared with distributions of $1.0
million during the same period in 1997.
During the three months ended March 31, 1998, the Company's
principal uses of funds were capital expenditures related to the Company's
hotel refurbishment of $0.6 million, the casino refurbishment of $0.6 million
and construction of the new mezzanine slot area of $0.7 located across from
Brew Brothers, which opened in February 1998. Total capital expenditures for
the three months ended March 31, 1998 were $2.1 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 $0.5 million
for restaurant remodeling and sign restoration.
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
-------------- -----------
27 Financial Data Schedule
for the three months
March 31, 1998
(b) Reports on Form 8-K
No report on Form 8-K was filed during the period
covered by this report.
13
<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: May 11, 1998 By: /S/ Donald L. Carano
--------------------------------------
Donald L. Carano
Chief Executive Officer, President and
Presiding Manager
Date: May 11, 1998 By: /S/ Robert M. Jones
--------------------------------------
Robert M. Jones
Chief Financial Officer of
Eldorado Resorts LLC (Principal
Financial and Accounting Officer)
ELDORADO CAPITAL CORP.
Date: May 11, 1998 By: /S/ Donald L. Carano
--------------------------------------
Donald L. Carano
President
Date: May 11, 1998 By: /S/ Gene R. Carano
--------------------------------------
Gene R. Carano
Treasurer (Principal Financial and
Accounting Officer)
14
<PAGE>
EXHIBITS INDEX
<TABLE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001022644
<NAME> ELDORADO RESORTS LLC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 7,060
<SECURITIES> 0
<RECEIVABLES> 4,754
<ALLOWANCES> 1,577
<INVENTORY> 3,018
<CURRENT-ASSETS> 14,919
<PP&E> 236,503
<DEPRECIATION> 74,440
<TOTAL-ASSETS> 237,609
<CURRENT-LIABILITIES> 12,086
<BONDS> 132,074
0
0
<COMMON> 0
<OTHER-SE> 87,348
<TOTAL-LIABILITY-AND-EQUITY> 237,609
<SALES> 0
<TOTAL-REVENUES> 33,434
<CGS> 0
<TOTAL-COSTS> 31,774
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 196
<INTEREST-EXPENSE> 3,385
<INCOME-PRETAX> (1,921)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,921)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,921)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
