FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1994
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission file number 1-5976
CAESARS WORLD, INC.
(Exact name of registrant as specified in its charter)
Florida 59-0773674
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1801 Century Park East, Los Angeles, California 90067
(Address of principal executive offices)
(Zip Code)
(310) 552-2711
(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 registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
At June 9, 1994, registrant had outstanding 24,878,654 shares of its
$.10 par value common stock.
CAESARS WORLD, INC. AND SUBSIDIARIES
April 30, 1994
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets -
April 30, 1994 (Unaudited) and July 31, 1993 3
Consolidated Statement of Shareholders' Equity
(Unaudited) - Nine months ended April 30, 1994 4
Consolidated Statements of Income (Unaudited) -
Nine months ended April 30, 1994 and 1993 5
Consolidated Statements of Income (Unaudited) -
Three months ended April 30, 1994 and 1993 6
Condensed Consolidated Statements of Cash
Flows (Unaudited) - Nine months ended
April 30, 1994 and 1993 7
Notes to Condensed Consolidated Financial
Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. Other Information
Item 1. Legal Proceedings 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 24
PART I. Financial Information
Item 1. Financial Statements
CAESARS WORLD, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION> April 30, July 31,
Assets 1994 1993
(Unaudited) (a)
<S> <C> <C>
Current assets
Cash and cash equivalent investments $115,970 $108,616
Receivables, net 75,986 66,041
Inventories 12,468 11,364
Deferred income taxes 36,163 42,748
Prepaid expenses and other 14,105 12,366
Total current assets 254,692 241,135
Property and equipment, net 617,704 616,393
Excess cost of investments over net
assets acquired, net 52,732 52,916
Other assets 56,320 45,275
$981,448 $955,719
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt and
obligations under capital leases $ 29,318 $ 30,263
Accounts payable and accrued expenses 125,122 125,835
Income taxes 9,738 9,361
Total current liabilities 164,178 165,459
Long-term debt and obligations under capital
leases, net of current maturities 221,952 253,422
Other liabilities, including deferred income
taxes of $22,831 and $29,282 58,370 63,948
Shareholders' equity
Common stock 2,612 2,590
Additional paid-in capital 127,125 117,399
Common stock in treasury (32,695) (30,358)
Deferred compensation (20,955) (16,146)
Retained earnings 460,861 399,405
Total shareholders' equity 536,948 472,890
$981,448 $955,719
<FN>
(a) The balance sheet at July 31, 1993 has been condensed from the
audited balance sheet at that date.
</TABLE>
See notes to condensed consolidated financial statements.
CAESARS WORLD, INC. AND SUBSIDIARIES
Consolidated Statement of Shareholders' Equity - (Unaudited)
Nine months Ended April 30, 1994
(In thousands, except shares outstanding)
<TABLE>
<CAPTION>
Common Stock Additional Common
Shares Paid-in Stock in Deferred Retained
Outstanding Amount Capital Treasury Compensation Earnings Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance July 31, 1993 24,619,631 $2,590 $117,399 $(30,358) $(16,146) $399,405 $472,890
Stock options exercised 50,392 5 761 - - - 766
Amortization of deferred
compensation, termination
of restricted stock grants
and other, net (32,868) (3) (1,230) - 5,406 - 4,173
Common stock purchased
and held in treasury (44,048) - - (2,337) - - (2,337)
Vesting of incentive
stock grants 89,833 - - - - - -
Issuance of restricted
stock grants 199,781 20 10,195 - (10,215) - -
Net income - - - - - 61,456 61,456
Balance
April 30, 1994 24,882,721 $2,612 $127,125 $(32,695) $(20,955) $460,861 $536,948
</TABLE>
See notes to condensed consolidated financial statements
CAESARS WORLD, INC. AND SUBSIDIARIES
Consolidated Statements of Income - (Unaudited)
(In thousands, except net income per share)
<TABLE>
<CAPTION>
Nine Months Ended
April 30,
1994 1993
<S> <C> <C>
Revenue
Casino $600,763 $564,171
Rooms 51,690 51,692
Food and beverage 60,673 57,758
Other income 51,182 47,823
764,308 721,444
Costs and expenses
Casino 324,067 306,464
Rooms 15,723 15,217
Food and beverage 46,240 42,968
Other operating expenses 30,226 28,471
Selling, general and administrative 141,411 137,709
Depreciation and amortization 41,671 40,769
Provision for doubtful accounts 51,836 36,720
651,174 608,318
Operating income 113,134 113,126
Interest and dividend income 2,403 1,258
Interest expense, net (14,471) (21,596)
Income before income taxes 101,066 92,788
Income taxes 39,610 35,259
Net income $ 61,456 $ 57,529
Net income per share $ 2.51 $ 2.36
Average number of common and common equivalent
shares outstanding 24,532 24,418
</TABLE>
See notes to condensed consolidated financial statements.
CAESARS WORLD, INC. AND SUBSIDIARIES
Consolidated Statements of Income - (Unaudited)
(In thousands, except net income per share)
<TABLE>
<CAPTION>
Three Months Ended
April 30,
1994 1993
<S> <C> <C>
Revenue
Casino $184,505 $170,820
Rooms 16,725 17,561
Food and beverage 19,539 18,729
Other income 16,475 17,299
237,244 224,409
Costs and expenses
Casino 107,170 94,540
Rooms 4,951 5,183
Food and beverage 15,486 14,587
Other operating expenses 8,839 9,258
Selling, general and administrative 46,803 45,422
Depreciation and amortization 14,013 13,394
Provision for doubtful accounts 17,106 9,451
214,368 191,835
Operating income 22,876 32,574
Interest and dividend income 756 272
Interest expense, net (4,693) (5,371)
Income before income taxes 18,939 27,475
Income taxes 7,291 10,440
Net income $ 11,648 $ 17,035
Net income per share $ .47 $ .69
Average number of common and common equivalent
shares outstanding 24,620 24,588
</TABLE>
See notes to condensed consolidated financial statements.
CAESARS WORLD, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows - (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
April 30,
1994 1993
<S> <C> <C>
Cash flows from (used for) operating activities:
Net income $ 61,456 $ 57,529
Non-cash charges to income, net 47,242 46,371
Changes in assets and liabilities due to
operating activities:
Receivables, net (9,945) 1,344
Accounts payable and accrued expenses (713) (20,021)
Other assets and liabilities, net (12,739) (8,703)
Net cash provided from operating
activities 85,301 76,520
Cash flows used for investing activities:
Purchases of property and equipment (42,040) (25,052)
Other investing activities, net (1,921) (2,541)
Net cash used for investing activities (43,961) (27,593)
Cash flows from (used for) financing activities:
Issuance of 8 7/8 % Senior Subordinated Notes - 150,000
Increase in long-term bank borrowings - 125,000
Reductions in debt and obligations
under capital leases (32,415) (309,312)
Other (1,571) (3,769)
Net cash used for financing activities (33,986) (38,081)
Net increase in cash and cash equivalent investments 7,354 10,846
Cash and cash equivalent investments at the
beginning of the period 108,616 52,336
Cash and cash equivalent investments at the
end of the period $ 115,970 $ 63,182
Supplemental cash flow information
Cash used for:
Payment of interest $ 17,732 $ 28,372
Payment of Federal and state income taxes, net $ 39,756 $ 36,835
</TABLE>
See notes to condensed consolidated financial statements.
Note 1. Condensed Consolidated Financial Statements -- The condensed
consolidated balance sheet as of April 30, 1994, the
consolidated statement of shareholders' equity for the nine
months ended April 30, 1994, the consolidated statements of
income for the three and nine months ended April 30, 1994 and
1993, and the condensed consolidated statements of cash flows
for the nine months ended April 30, 1994 and 1993, have been
prepared by the Company and have not been audited. In the
opinion of management, all material adjustments (which
include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations
and cash flows for all periods presented have been made. All
significant intercompany balances and transactions have been
eliminated.
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 financial
statements and notes thereto included in the Company's July
31, 1993 Annual Report to Shareholders. The results of
operations for the three and nine month periods ended April
30, 1994 are not necessarily indicative of the operating
results for the full year.
The Company's independent public accountants have made an
unaudited interim review of the condensed consolidated
financial statements for the three and nine months ended
April 30, 1994 and 1993, in accordance with professional
standards and procedures established by the American
Institute of Certified Public Accountants. A report from the
independent public accountants regarding the unaudited review
of the interim financial statements is included herein in
Part II, Item 6 (a), Exhibit 15.
Note 2. Net Income Per Share -- Net income per share is based upon
the weighted average number of common and common equivalent
shares outstanding for each period presented.
Note 3. Regulatory Environment -- The gaming industry in which the
Company operates is subject to extensive regulatory
supervision and, accordingly, operating results could be
affected by legislative and regulatory changes or changes in
the policies of or application of the laws by governmental
entities. There have been recent aborted proposals for a
federal gaming excise tax and for withholding on certain
gaming winnings which in either case if adopted could
materially adversely affect operating results. See also the
discussion under the caption "Regulatory Environment" set
forth on page 24 of the Form 10-K of the Company for the
fiscal year ended July 31, 1993.
Note 4. Income Taxes -- In February 1992, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes, which
supersedes previously issued standards. The Company adopted
SFAS 109 effective August 1, 1993. As permissible under the
new standard, the Company reflected the impact as a
cumulative adjustment in the fiscal 1994 first quarter and
did not restate prior periods. Under SFAS No. 109, the
liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are
determined based upon differences between financial and tax
reporting utilizing the enacted tax rates and laws in effect
when the differences are expected to reverse. The adoption
of the new standard had an immaterial impact on net income.
In August 1993, the Omnibus Budget Reconciliation Act of 1993
(OBRA) was enacted which resulted in an increase in the
federal corporate tax rate from 34% to 35% retroactive to
January 1, 1993. The retroactive impact of the enactment of
OBRA and the adoption of SFAS 109 aggregated a net charge to
the provision for income taxes in the first quarter of fiscal
1994 of approximately $750,000. Future net income of the
Company will be adversely impacted by the increased tax rate.
Note 5. On January 1, 1994 the Company adopted a 401(k) Plan for all
full-time employees having at least one year of service (as
defined in the Plan). This replaced the Company sponsored
Individual Retirement Account (IRA) Plan. The annual pretax
cost to the Company of the new 401(k) Plan will be
approximately $2 million greater than the previous IRA Plan.
Note 6. The Culinary Workers Union and Bartenders Union contracts
covering approximately 2,500 employees and another union
contract covering approximately 20 theatrical stage employees
expired on June 1, 1994 at Caesars Palace in Las Vegas and
work is continuing under a contract extension cancelable with
three days notice. The Company is continuing to negotiate
with these unions and currently does not expect a work slow-
down or stoppage as a result of these expired labor
contracts.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
Cash flow from operations together with available debt capacity are the
primary components providing the Company financial flexibility to
explore expansion opportunities and provide adequate liquidity. Net
cash provided by operating activities was $85.3 million in the first
nine months of fiscal 1994, compared with $76.5 million in the same
period of fiscal 1993. The increase in fiscal 1994 is primarily
attributable to higher net income and the changes in accounts payable
and accrued expenses which reduced the cash generated by operating
activities by a lesser amount during the fiscal 1994 first nine month
period compared with the same period in fiscal 1993. At April 30, 1994
the Company's cash equivalent investments were $76.1 million compared
with $67.5 million at July 31, 1993.
Cash used for investing activities in the nine months ended April 30,
1994 was primarily for capital expenditure projects at Caesars Palace in
Las Vegas and Caesars Atlantic City. Construction was completed in
December 1993 on two rooftop luxury suites, each costing approximately
$6 million, on one of the hotel towers at Caesars Palace. In mid-
October 1993, Caesars Atlantic City opened a new 15,000-square-foot
simulcast casino, bringing the resort's total casino area to
approximately 75,000 square feet. This new facility features high-tech
systems for race horse betting, a poker area and additional table games.
Approximately 300 slot machines were added in the original casino area
where table games had previously been located.
In the first six months of fiscal 1993, the Company completed its debt
restructuring program. The impact of this restructuring combined with
the scheduled reduction of bank borrowings has been to significantly
reduce interest expense. A description of the new notes, the new bank
loan agreement and the debt restructuring is included in Note 6 of Notes
to Consolidated Financial Statements beginning on page 40 of the Form
10-K of the Company for the fiscal year ended July 31, 1993 and in "Debt
Restructuring" of Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations on page 21 of the July 31,
1993 Form 10-K incorporated herein by reference.
In October 1993, the Company announced an additional $150 million multi-
year capital expenditure program for Caesars Palace in Las Vegas. This
will dramatically change the exterior of Caesars Palace, add
approximately 100 new suites, provide underground parking, add
approximately 40,000 square feet of casino space as well as provide new
entertainment features. This is in addition to the major capital
expenditures previously announced which include a new state-of-the-art
magical and dining entertainment facility to be opened in fiscal 1995.
The conceptual design phase of the multi-year capital program is
expected to be complete in the summer of 1994 with the construction
occurring principally in fiscal 1995 and 1996.
During the nine months ended April 30, 1994, $6.3 million was advanced
by the Company to Windsor Casino Ltd. (WCL). The Company owns one-third
of WCL, a management company that will operate a casino for the
government in Windsor, Ontario, Canada. See Item 5 "Other Information"
in Part II on page 21 of this Form 10-Q. Between April 30, 1994 and
June 13, 1994 an additional $8.3 million was advanced to WCL by the Company.
A temporary casino was opened to the public on May 17, 1994 and no
additional material advances are expected to be made by the Company
prior to July 31, 1994. WCL is currently negotiating with banks to
obtain a credit line which will repay substantially all the amounts
advanced by the owners of WCL including the Company. Such a bank
facility will be severally guaranteed by each of the joint venture
partners and is expected to be in place during the fourth quarter of the
Company's fiscal 1994 year.
Successful development of the projects described at Item 5 of Part II of
this Report and of other opportunities currently being explored will
likely require capital investment by the Company.
The Company expects to be able to meet its future debt obligations,
finance operations and capital expenditures, as well as provide for a
substantial expansion of operations through internally generated cash
flow, liquidation of cash equivalent investments, future borrowings
(including amounts available under the bank credit facilities), capital
lease transactions and/or sales of equity securities.
Results of Operations
Comparison of net income for the three month periods ended April 30, 1994
and April 30, 1993
Contribution to revenue and operating income by location, interest and
income taxes for the periods, were as follows
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended April 30,
1994 1993
<S> <C> <C>
Revenue
Nevada $142,157 $133,153
New Jersey 80,389 76,526
Casino/hotel operations 222,546 209,679
Pocono Resorts 9,798 9,734
Other (A) 4,900 4,996
Total revenue $237,244 $224,409
Contributions to operating income
Nevada $ 14,686 $ 22,893
New Jersey 11,014 12,400
Casino/hotel operations 25,700 35,293
Pocono Resorts 1,002 1,133
Other expenses (B) (3,826) (3,852)
Operating income 22,876 32,574
Interest and dividend income 756 272
Interest expense, net (4,693) (5,371)
Income before income taxes 18,939 27,475
Income taxes 7,291 10,440
Net income $ 11,648 $ 17,035
<FN>
(A) Other revenue is primarily from merchandising operations.
(B) Other expenses include the contribution from merchandising
operations and corporate expenses. Intercompany
transactions have been eliminated.
</TABLE>
Nevada Operations
Revenue increased 7% at the Nevada properties in the three months ended
April 30, 1994 compared with the same prior year period. Higher casino
revenue during the quarter resulted from record third quarter table game
and slot machine activity generated by the Company's two Nevada casinos.
The table games win percentage was lower than the five-year average but
about the same as the year earlier third quarter. Total slot win was
flat as compared with the fiscal 1993 third quarter win because a lower
win percentage offset increased slot machine activity in the fiscal 1994
third quarter. The 36% reduction in operating income from Nevada
operations during the three months ended April 30, 1994 compared with
the prior year was primarily the result of increased casino expenses and
a higher provision for doubtful accounts. Casino expenses included
marketing costs associated with the higher volume of business in Nevada
operations along with costs related to a world heavyweight championship
fight at Caesars Palace. The provision for doubtful accounts increased
$6.8 million during the quarter as the use of issuing receivable
allowances to high-betting limit customers as a marketing incentive has
intensified with the opening of three new themed casino/hotels on the
"Strip" in Las Vegas between October and December 1993. The higher
provision for doubtful accounts was also caused by a 23% increase in the
amount of casino credit issued.
Caesars New Jersey
Revenue from Caesars Atlantic City for the third quarter ended April 30,
1994 increased 5% from the same prior year period, primarily
attributable to increased casino revenue. Slot activity was 15% higher,
which combined with a slightly lower win percentage, resulted in a 14%
increase in slot win for the third quarter of fiscal 1994, compared with
the fiscal 1993 third quarter. The Simulcast Casino, which began
operation in October 1993, also had a favorable impact on the third
quarter. Table game win for the three months ended April 30, 1994,
compared with the three months ended April 30, 1993, was down 15% due to
a comparatively low win percentage during the quarter on approximately
the same amount of table game activity. The contribution of operating
income from Atlantic City was down 11%, primarily the result of higher
operating costs, including the increased payroll costs related to the
Simulcast Casino and an increase in the provision for doubtful accounts.
Interest Expense
The Company's interest expense decreased 13% when comparing the fiscal
1994 third quarter with the fiscal 1993 third quarter, primarily due to
reduced amount of debt.
Subsequent Event
See page 20 for discussion of subsequent event occurring after April 30,
1994.
Comparison of net income for the nine month periods ended April 30, 1994
and April 30, 1993
Contribution to revenue and operating income by location, interest and income
taxes for the periods, were as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended April 30,
1994 1993
<S> <C> <C>
Revenue
Nevada $465,429 $423,334
New Jersey 250,473 251,141
Casino/hotel operations 715,902 674,475
Pocono Resorts 33,172 31,644
Other (A) 15,234 15,325
Total revenue $764,308 $721,444
Contributions to operating income
Nevada $ 80,489 $ 78,590
New Jersey 40,796 41,168
Casino/hotel operations 121,285 119,758
Pocono Resorts 6,450 6,150
Other expenses (B) (14,601) (12,782)
Operating income 113,134 113,126
Interest and dividend income 2,403 1,258
Interest expense, net (14,471) (21,596)
Income before income taxes 101,066 92,788
Income taxes 39,610 35,259
Net income $ 61,456 $ 57,529
<FN>
(A) Other revenue is primarily from merchandising operations.
(B) Other expenses include the contribution from merchandising
operations and corporate expenses. Intercompany transactions
have been eliminated.
</TABLE>
Nevada Operations
Revenue from Nevada operations increased 10% in the nine months ended
April 30, 1994 compared with the same prior year period. This increase
is primarily due to a 12% increase in casino revenue over the prior
year and is a Company record for any first nine months period. Table
game activity during the nine months ended April 30, 1994 increased 8%,
with a win percentage of 22.0% compared with 20.6% for the nine months
ended April 30, 1993. Slot activity improved 13% during the nine
months, as the number of visitors to Las Vegas increased and marketing
programs continued to generate higher levels of customer traffic at
Caesars Palace. Slot win increased by 4.8%, less than the activity
improvement due to a lower slot win percentage.
Contribution to operating income from Nevada operations for the nine
months ended April 30, 1994 was 2.4% higher than the nine months ended
April 30, 1993. Increased casino costs and a higher provision for
doubtful accounts partially offset the higher revenue for the nine
months. Casino cost increases were primarily related to the increased
activity levels in Las Vegas and include marketing related costs,
including a world heavyweight championship fight held in the third
quarter at Caesars Palace in Las Vegas, as well as increases in payroll
expenses for necessary staffing levels. The provision for doubtful
accounts was 38% higher than the nine months ended April 30, 1993,
primarily because of increased casino credit issued and marketing
incentives for high-betting-limit customers. The intensified
competition, particularly in Las Vegas, has increased nearly all types
of marketing costs in order to maintain and grow market share.
Caesars New Jersey
Revenue from Caesars Atlantic City for the nine months ended April 30,
1994 was flat as compared with the nine months ended April 30, 1993.
Casino revenue decreased for the nine months, due to lower table game
revenue partially offset by increased slot revenue. The decrease in
table game revenue was primarily attributable to a 12% lower activity
level for the nine months, compared with the same period last year.
This decrease is consistent with the Atlantic City industry trend, and
was partially offset by a higher win percentage compared with prior
year. An increased number of jurisdictions allowing legalized gaming as
well as a severe winter reduced the number of visitors to Atlantic City.
The fiscal 1994 casino revenue was favorably impacted by the opening in
October 1993 of the Simulcast Casino, which features horse race betting
and poker. The game of keno is expected to be introduced in the
Simulcast Casino area in June 1994.
Costs were flat in the nine months compared with prior year, as
increases in payroll related costs associated with the new casino area
and in the provision for doubtful accounts were offset by decreases in
marketing, busing and legal costs.
Other Expenses
Other expenses increased 14% in the first nine months of fiscal 1994
compared with fiscal 1993 due to increased compensation costs and costs
related to the exploration of expansion opportunities by the Company.
See Item 5 of Part II of this Form 10-Q for a discussion of the major
expansion activities the Company is currently working on.
Interest and Dividend Income
A higher balance of interest and dividend earning cash equivalent
investments during the first nine months of fiscal 1994 compared with
the same period last year is the primary reason for the $1.1 million
increase.
Interest Expenses
The Company's interest expense decreased 33% for the nine months ended
April 30, 1994 compared with the nine months ended April 30, 1993. A
reduction in borrowings as well as the debt restructuring completed in
early fiscal 1993 resulted in the lower interest expense.
Income taxes
The effective income tax rate during the nine months ended April 30,
1994, was 1.2 percentage points higher than the same period in 1993.
The higher tax rate reflects the impact of two non-recurring tax
charges. In August 1993, the Federal tax rate increased, retroactive to
January 1, 1993, from 34 to 35 percent. The Company also changed its
method for income tax accounting by adopting FASB 109 effective August
1, 1993. The impact of this cumulative change in accounting and the
retroactive change in the corporate tax rate aggregated a net charge of
approximately $750,000 in the first quarter of fiscal 1994.
Subsequent Event
On June 13, 1994, the Company announced that due to unusually large
losses to a small number of long-term, table-game customers in June the
Company expects a substantial reduction in the Company's income for the
fiscal 1994 fourth quarter ending July 31, 1994, when compared with the
same quarter of fiscal 1993. The Company's net income for the fiscal
1993 fourth quarter was $25,686,000, or $1.04 per share. The Company
can not estimate the size of the expected reduction in net income
because about seven weeks remain in the current fiscal quarter and the
sizes of either casino wins or losses in the short-term are difficult to
predict, particularly when it comes to high-level betting activity. The
Company believes that it is highly unlikely that the effects of the
recent losses to these high-level customers at its Nevada operations,
estimated to total more than $18 million, could be offset enough to
avoid the quarter-to-quarter decline in earnings.
PART II. Other Information
Item 1. Legal Proceedings
See Item 3 of the Form 10-K of the Company for the year ended
July 31, 1993 which is hereby incorporated herein.
Item 5. Other Information
The Forum Shops at Caesars (the Forum) is a shopping complex
located on approximately eight acres owned by the Company at
the north end of Caesars Palace in Las Vegas having
approximately 235,000 square feet of gross leasable area. The
Company leases the land to an independent development company
which provided its own financing to construct the Forum and
which owns the development and pays rent to the Company. The
Company is negotiating the possible lease of approximately
four additional acres adjacent to the site to a spin off of
current tenant in order for them to add an approximate 200,000
square foot expansion to the Forum, including a new
entertainment feature. Since the project is subject to the
mutually satisfactory completion of such negotiations,
finalizing a new lease agreement, and the independent
development company obtaining the necessary financing and
obtaining regulatory approvals, the ultimate timing and
completion of this project is uncertain at this time.
On May 20, 1994, Ontario Canada Corp. and Windsor Casino Ltd.
announced details of the Interim Casino Operating Agreement
for Casino Windsor, the 50,000 square foot temporary casino
which opened to the public on May 17, 1994. The casino is
owned by the Government of Ontario and operated by Windsor
Casino, Ltd., an Ontario company owned equally by Caesars
World, Inc., Circus Circus Enterprises, Inc. and Hilton Hotels
Corporation. The interim agreement runs until April 30, 1997,
and calls for Windsor Casino Ltd. to receive 2.75 percent of
gross operating revenue and 5 percent of net operating
margins. Windsor Casino Ltd. has first refusal operating
rights for casinos in Ontario within 125 kilometers of Casino
Windsor and the parent companies agree that without Ontario
Casino Corp.'s consent, they will not be part of any U.S.-
based competing casinos within this distance. The interim
casino includes 65 table games and 1,702 slot machines. A
permanent facility, which will include a 75,000 square foot
casino and 300-room hotel, will be built in Windsor and is
expected to open within three years. Ontario Casino Corp. and
Windsor Casino Ltd. also signed a Heads of Agreement which
represents a commitment by the parties to negotiate final
agreements for the construction, development, financing, and
operation of the permanent facility.
In October 1993, the Casino Reinvestment Development Authority
(CRDA) of the State of New Jersey announced it had selected a
joint venture comprised of Doubletree Hotel Corporation, a
subsidiary of the Company and an independent developer and
operator to build in two phases, a 1,000 room non-gaming
Convention Center Headquarters Hotel in Atlantic City. The
first phase will be a 600 room first class hotel. As
currently proposed, in exchange for a non-controlling interest
in the joint venture and receipt of certain CRDA credits, the
Company will guarantee a portion of the first mortgage note on
the property. The project is subject to final agreements
among all the parties, including governmental regulatory
agencies and the obtaining of third-party financing for the
project and is currently is awaiting regulatory approval,
which is uncertain as to timing and result at the current
time.
Subsidiaries of the Company have also entered into joint
ventures to seek opportunities to own and operate riverboats
in Michigan City, Indiana and St. Louis, Missouri. The
Michigan City project is still in the proposal stage and is a
joint venture with a subsidiary of the Company being a 30%
partner.
With respect to the St. Louis project, the joint venture has
previously announced that it had proposed the "Joint Venture
Proposal", a $210 million casino and hotel development at
Laclede's Landing which includes a $110 million 976-room
convention center hotel with parking, and a 152,000 square
foot, dockside casino barge and entertainment complex expected
to cost approximately $100 million including a $10 million
investment for parking. The current plan calls for 2,658 slot
machines and 170 gaming tables on two 2,000 gaming position
barges to be built in phases about two years apart. On
January 24, 1994 the City of St. Louis (City) announced that
the Joint Venture Proposal was ranked first among the nine
proposals the City had received and the City planned to
commence negotiations for a berthing lease with the joint
venture. Representatives of the City have cautioned, however,
that it had some concerns about the Joint Venture Proposal and
if negotiations did not eliminate those concerns or were
otherwise unsuccessful, it would move to the second-ranked
candidate. Once a lease is negotiated, City agency and board
of alderman approvals and state licensing will be required.
The ultimate outcome of these negotiations and approvals are
uncertain at this time. On January 25, 1994, the Missouri
gaming law was declared unconstitutional insofar as it allowed
slot machines, baccarat, craps, roulette, and other games
which in the Court's view do not require skill in deciding the
outcome. A voter initiative directed at legalizing games that
were found to be unconstitutional did not pass at the April 5,
1994 election. Efforts are in process to obtain a sufficient
number of signatures on a petition to have a referendum on
the ballot for the November, 1994 election. Currently,
Missouri law only authorizes poker and blackjack, video games
and craps and the authorization of the video games and craps
is being challenged in court as contrary to the aforesaid
court decision. The original proposal by the Company as
described above does not appear to be financially feasible
under such a limited gaming scenario. The joint venture
currently expects to finance about 80% of the project through
mortgage bonds. Subject to further developments, the Company
currently expects to have a 37.5% interest in the ultimate
limited partnership and a 50% interest in management companies
that will manage the hotel and casino under the Joint Venture
Proposal.
The Company also is in the process of working with the Agua
Caliente Tribe (Tribe) in completing land acquisitions and
regulatory approvals with respect to a proposed management
project for the Tribe in Palm Springs, California. The
ultimate timing of this project is uncertain at this time.
The government of Greece plans to shortly issue a new request
for proposal ("RFP") to operate private casinos in Greece. The
Company has an arrangement with another company to be a
manager and investor in a project to be developed by such
other company if it is successful in obtaining a franchise
from the Greek government. This RFP will be evaluated for
submission after it is issued. The prospects and timing for
this project are uncertain.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed herewith (the * denotes documents
included in this filing):
*10(a) First Amendment dated May 24, 1994 to CWI's Executive
Security Plan as amended and restated as of January 24, 1989.
*10(b) First Amendment dated May 24, 1994 to CWI's 1985
Executive Security Plan as amended and restated as of February
21, 1991.
*10(c) First Amendment dated May 24, 1994 to CWI's 401(k)
Retirement Savings Plan dated January 1, 1994.
10(d) Stock Option Agreement between CWI and Evander
Holyfield dated February 22, 1994. Incorporated by reference
to Exhibit 28(ii) of this Corporation's registration statement
on Form S-8, Registration No. 33-52363 filed with the
Commission February 22, 1994.
*15 Review Report of Independent Public Accountants
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.
CAESARS WORLD, INC.
(Registrant)
Principal Financial Officer:
Date: June 14, 1994 /s/ Roger Lee
Roger Lee
Senior Vice President-Finance and Administration
Principal Accounting Officer:
Date: June 14, 1994 /s/ Bruce C. Hinckley
Bruce C. Hinckley
Vice President and Corporate Controller
FIRST AMENDMENT TO
EXECUTIVE SECURITY PLAN
(As Amended and Restated January 24, 1989)
Caesars World, Inc. hereby adopts this First Amendment to the
Amended and Restated Executive Security Plan to be effective May 24,
1994:
(1) Section 5.5 is hereby amended to add the following as the
second sentence in such section:
"All such amendments shall be formally adopted by the Board
by unanimous written consent or by resolution at a duly
constituted Board meeting in accordance with the
established procedures of the Board."
(2) Except as amended by the foregoing, the Plan shall remain in
full force and effect.
The undersigned, as Secretary of Caesars World, Inc. does hereby
certify that the foregoing amendment was duly adopted at the duly held
meeting of the Board of Directors of Caesars World, Inc. on May 24,
1994 and is presently in full force and effect.
CAESARS WORLD, INC.
/s/Roger Lee
____________________________
Roger Lee
Senior Vice President -
Finance and Administration
FIRST AMENDMENT TO
1985 EXECUTIVE SECURITY PLAN
(As Amended and Restated February 21, 1991)
Caesars World, Inc. hereby adopts this First Amendment to the
Amended and Restated 1985 Executive Security Plan to be effective May
24, 1994:
(1) Section 5.5 is hereby amended to add the following as the
second sentence in such section:
"All such amendments shall be formally adopted by the Board
by unanimous written consent or by resolution at a duly
constituted Board meeting in accordance with the
established procedures of the Board."
(2) Except as amended by the foregoing, the Plan shall remain in
full force and effect.
The undersigned, as Secretary of Caesars World, Inc. does hereby
certify that the foregoing amendment was duly adopted at the duly held
meeting of the Board of Directors of Caesars World, Inc. on May 24,
1994 and is presently in full force and effect.
CAESARS WORLD, INC.
/s/Roger Lee
_____________________________
Roger Lee
Senior Vice President -
Finance and Administration
FIRST AMENDMENT TO
CAESARS 401(k) RETIREMENT SAVINGS PLAN
Caesars World, Inc. hereby adopts this First Amendment to the
Caesars 401(k) Retirement Savings Plan to be effective May 24, 1994:
(1) Section 12.01 is hereby amended to add the following as the
last sentence thereof:
"All amendments shall be made by the Board of Directors and
shall be formally adopted by unanimous written consent or
by resolution at a duly constituted Board meeting in
accordance with the established procedures of the Board of
Directors.
(2) Except as amended by the foregoing, the Plan shall remain in
full force and effect.
The undersigned, as Secretary of Caesars World, Inc. does hereby
certify that the foregoing amendment was duly adopted at the duly held
meeting of the Board of Directors of Caesars World, Inc. on May 24,
1994 and is presently in full force and effect.
CAESARS WORLD, INC.
/s/Phil Ball
________________________
Phil Ball, Secretary
REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Directors of Caesars World, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
Caesars World, Inc. (a Florida corporation) and subsidiaries as of
April 30, 1994, and the related consolidated statements of income for the
three-month and nine-month periods ended April 30, 1994 and 1993, the
consolidated statement of shareholders' equity for the nine- month period
ended April 30, 1994, and the condensed consolidated statements of cash flows
for the nine-month periods ended April 30, 1994 and 1993. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than
an audit conducted in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Caesars World, Inc. and
subsidiaries as of July 31, 1993 (not presented herein), and, in our report
dated August 24, 1993, we expressed an unqualified opinion on that statement.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of July 31, 1993, is fairly stated in all
material respects, in relation to the consolidated balance sheet from which
it has been derived.
ARTHUR ANDERSEN & CO.
Los Angeles, California
May 16, 1994
EXHIBIT 15
