<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 31, 1996
--------------------------------------------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE COMMISSION ACT OF 1934
For the transition period from to
------------------ -----------------------
Commission file number 1-6339
-----------------
PRATT HOTEL CORPORATION
- - --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-1295630
- - ------------------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
TWO GALLERIA TOWER, SUITE 2200
13455 NOEL ROAD, LB 48
DALLAS, TEXAS 75240
- - ----------------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (214) 386-9777
----------------------------
(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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at May 13, 1996
- - -------------------------------------- ------------------------------------
COMMON STOCK, $.10 PAR VALUE 5,186,627 SHARES
1
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
- - -----------------------------
INTRODUCTORY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - -------------------------------------------------------
Pratt Hotel Corporation, a Delaware corporation, and its subsidiaries
("PHC") are engaged primarily in the ownership, operation and management of
casino/hotels and hotels in the United States and Puerto Rico; the management of
a riverboat gaming facility located in Aurora, Illinois (the "Aurora Casino")
and providing consulting services to a gaming facility in Tunica County,
Mississippi (the "Tunica Casino"). Approximately 20% of PHC's outstanding
common shares are listed and traded on the American Stock Exchange under the
symbol PHC. The remaining 80% of the common shares of PHC are owned by
Hollywood Casino Corporation ("HCC"), a Delaware corporation which is
approximately 53% owned by certain general partnerships and trusts controlled by
Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt and by other family
members (collectively, the "Pratt Family"). The remaining outstanding HCC
common shares are listed and traded on the NASDAQ under the symbol HWCC.
A significant portion of PHC's assets relate to its wholly owned
subsidiary, Greate Bay Hotel and Casino, Inc. ("GBHC"), which owns the Sands
Hotel and Casino located in Atlantic City, New Jersey (the "Sands").
Historically, the Sands' gaming operations have been highly seasonal in nature,
with the peak activity occurring from May to September; consequently, the
results of operations for the three month period ended March 31, 1996 are not
necessarily indicative of the operating results for the full year.
The consolidated financial statements as of March 31, 1996 and for the
three month periods ended March 31, 1996 and 1995 have been prepared by PHC
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, these consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the consolidated financial position of
PHC as of March 31, 1996, and the results of its operations and cash flows for
the three month periods ended March 31, 1996 and 1995.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These consolidated financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in PHC's 1995 Annual Report on Form 10-K.
2
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 23,197,000 $ 28,067,000
Accounts receivable, net of allowances
of $16,948,000 and $16,496,000,
respectively 11,953,000 12,293,000
Inventories 4,337,000 4,462,000
Due from affiliates 2,374,000 2,435,000
Deferred income taxes 3,967,000 4,055,000
Refundable deposits and other
current assets 3,027,000 2,764,000
------------- -------------
Total current assets 48,855,000 54,076,000
------------- -------------
Property and Equipment:
Land 37,807,000 37,807,000
Buildings and improvements 185,404,000 185,077,000
Operating equipment 93,304,000 92,474,000
Construction in progress 3,316,000 2,450,000
------------- -------------
319,831,000 317,808,000
Less - accumulated depreciation
and amortization (153,159,000) (148,531,000)
------------- -------------
Net property and equipment 166,672,000 169,277,000
------------- -------------
Other Assets:
Obligatory investments 5,122,000 5,521,000
Deferred financing costs 8,455,000 8,730,000
Notes receivable 9,195,000 9,222,000
Other assets 4,286,000 3,457,000
------------- -------------
Total other assets 27,058,000 26,930,000
------------- -------------
$ 242,585,000 $ 250,283,000
============= =============
</TABLE>
The accompanying introductory notes and notes to consolidated financial
statements are an integral part of these consolidated balance sheets.
3
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------- -------------
<S> <C> <C>
Current Liabilities:
Borrowings from affiliate $ 5,000,000 $ 5,000,000
Short-term credit facilities 2,000,000 -
Current maturities of long-term debt 559,000 553,000
Accounts payable 9,911,000 9,503,000
Accrued liabilities -
Salaries and wages 3,796,000 4,349,000
Interest 9,846,000 11,856,000
Insurance 2,615,000 2,339,000
Other 10,004,000 8,868,000
Other current liabilities 2,883,000 3,630,000
------------- -------------
Total current liabilities 46,614,000 46,098,000
------------- -------------
Long-Term Debt 330,176,000 328,570,000
------------- -------------
Other Noncurrent Liabilities 8,723,000 8,747,000
------------- -------------
Due to Affiliate 5,283,000 5,283,000
------------- -------------
Commitments and Contingencies
Shareholders' Deficit:
Common stock, $.10 par value per
share; 10,000,000 shares authorized;
5,186,627 shares issued and outstanding 519,000 519,000
Additional paid-in capital 23,783,000 23,783,000
Accumulated deficit (172,513,000) (162,717,000)
------------- -------------
Total shareholders' deficit (148,211,000) (138,415,000)
------------- -------------
$ 242,585,000 $ 250,283,000
============= =============
</TABLE>
The accompanying introductory notes and notes to consolidated financial
statements are an integral part of these consolidated balance sheets.
4
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1996 1995
------------ -----------
<S> <C> <C>
Revenues:
Casino $ 57,605,000 $63,876,000
Rooms 3,524,000 3,390,000
Food and beverage 8,950,000 7,868,000
Other 5,463,000 4,217,000
------------ -----------
75,542,000 79,351,000
Less - promotional allowances (7,119,000) (6,130,000)
------------ -----------
Net revenues 68,423,000 73,221,000
------------ -----------
Expenses:
Casino 53,113,000 49,738,000
Rooms 956,000 1,084,000
Food and beverage 2,881,000 2,590,000
Other 1,160,000 1,211,000
General and administrative 6,549,000 7,468,000
Depreciation and amortization 5,255,000 5,129,000
------------ -----------
Total expenses 69,914,000 67,220,000
------------ -----------
(Loss) income from operations (1,491,000) 6,001,000
------------ -----------
Non-operating income (expense):
Interest income 574,000 551,000
Interest expense (9,710,000) (9,616,000)
------------ -----------
Total non-operating expense, net (9,136,000) (9,065,000)
------------ -----------
Loss before income taxes (10,627,000) (3,064,000)
Income tax benefit 831,000 74,000
------------ -----------
Net loss $ (9,796,000) $(2,990,000)
============ ===========
Net loss per common share $(1.89) $(.58)
============ ===========
</TABLE>
The accompanying introductory notes and notes to consolidated financial
statements are an integral part of these consolidated statements.
5
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(9,796,000) $(2,990,000)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization, including
accretion of debt discount 7,003,000 6,821,000
Provision for doubtful accounts 567,000 805,000
Deferred income tax benefit (67,000) (127,000)
(Increase) decrease in accounts receivable (166,000) 703,000
Decrease in accounts payable and
other accrued liabilities (623,000) (2,792,000)
Net change in other current assets and liabilities (840,000) 22,000
Net change in other noncurrent assets and liabilities (53,000) 132,000
----------- -----------
Net cash (used in) provided by operating activities (3,975,000) 2,574,000
----------- -----------
INVESTING ACTIVITIES:
Net property and equipment additions (2,024,000) (3,349,000)
Collections on notes receivable 27,000 25,000
Obligatory investments (762,000) (652,000)
Investments in and advances to unconsolidated affiliates - (550,000)
----------- -----------
Net cash used in investing activities (2,759,000) (4,526,000)
----------- -----------
FINANCING ACTIVITIES:
Net borrowings on credit facilities 2,000,000 -
Repayments of long-term debt (136,000) (125,000)
----------- -----------
Net cash provided by (used in) financing activities 1,864,000 (125,000)
----------- -----------
Net decrease in cash and cash equivalents (4,870,000) (2,077,000)
Cash and cash equivalents at beginning of period 28,067,000 29,302,000
----------- -----------
Cash and cash equivalents at end of period $23,197,000 $27,225,000
=========== ===========
</TABLE>
The accompanying introductory notes and notes to consolidated financial
statements are an integral part of these consolidated statements.
6
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
Pratt Hotel Corporation, a Delaware corporation, and its subsidiaries
("PHC"), are engaged in the operation or management of casino and hotel
properties. PHC's principal assets are the Sands Hotel and Casino located in
Atlantic City, New Jersey (the "Sands") and management and consulting contracts
with gaming facilities located in Aurora, Illinois (the "Aurora Casino") and
Tunica, Mississippi (the "Tunica Casino") (see Note 5). PHC's other operations
in the United States and the Caribbean, including various ventures in which PHC
has an interest, are managed by PHC or its subsidiaries. Hollywood Casino
Corporation ("HCC"), a Delaware corporation which is approximately 53% owned by
certain general partnerships and trusts controlled by Jack E. Pratt, Edward T.
Pratt, Jr. and William D. Pratt and by other family members (collectively, the
"Pratt Family") owns approximately 80% of the common stock of PHC.
On March 29, 1996, HCC and PHC announced a proposal which provides for
PHC to make a cash tender offer for the approximately one million outstanding
shares of PHC common stock not already owned by HCC and for a "cash out" merger
with respect to any PHC shares outstanding after completion of the cash tender
offer. Funding for the proposed transactions will be provided by HCC. An
offering and merger price of $3.25 per share has been proposed, subject to
receipt by HCC of a fairness opinion from an independent financial advisor.
PHC estimates that a significant amount of the Sands' revenues are
derived from patrons living in southeastern Pennsylvania, northern New Jersey
and metropolitan New York City. Competition in the Atlantic City gaming market
is intense and management believes that this competition will continue in the
future.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PHC is self insured for a portion of its general liability, certain
health care and other liability exposures. Accrued insurance includes estimates
of such accrued liabilities based on an evaluation of the merits of individual
claims and historical claims experience; accordingly, PHC's ultimate liability
may differ from the amounts accrued.
During the fourth quarter of 1995, PHC adopted the provisions of
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets" ("SFAS 121"). SFAS 121 requires, among other
things, that an entity review its long-lived assets and certain related
intangibles for impairment whenever changes in circumstances indicate that the
carrying amount of an asset may not be fully recoverable. As a result of its
review, PHC does not believe that any material impairment currently exists
related to its long-lived assets.
The consolidated financial statements as of March 31, 1996 and for the
three month periods ended March 31, 1996 and 1995 have been prepared by PHC
without audit. In the opinion of management, these consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the consolidated financial position of
PHC as of March 31, 1996, and the results of its operations and cash flows for
the three month periods ended March 31, 1996 and 1995.
7
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(2) SHORT-TERM CREDIT FACILITIES AND BORROWINGS FROM AFFILIATES
A subsidiary of PHC is presently renegotiating a bank line of credit
in the amount of $5,000,000 which expired on April 30, 1996. As of March 31,
1996, $2,000,000 was outstanding under the line of credit; no such borrowings
were outstanding under the line of credit at December 31, 1995. Borrowings
under the line of credit are guaranteed to the extent of $2,000,000 by another
subsidiary of PHC.
PHC and its subsidiaries had outstanding affiliate borrowings from HCC
of $6,000,000 as of both March 31, 1996 and December 31, 1995. Of the amounts
borrowed, $1,000,000, which is not due until April 1, 1998, is classified as
noncurrent in the accompanying consolidated balance sheets at March 31, 1996 and
December 31, 1995. In addition, $4,750,000 is due in May 1996 and is secured by
a pledge of certain notes receivable from a partnership owned by certain numbers
of the Pratt Family (see Note 5). The remaining balance of $250,000 is due on
demand, or if no demand is made, on April 1, 1998. All such borrowings from HCC
bear interest at the rate of 14% per annum, payable semiannually. In accordance
with certain provisions under HCC's indentures for its senior secured notes, PHC
and its subsidiaries may obtain up to $10,000,000 in additional loans from HCC.
(3) LONG-TERM DEBT AND PLEDGE OF ASSETS
Substantially all of PHC's assets are pledged in connection with PHC's
long-term indebtedness. Additionally, the indentures with respect to the
February 1994 refinancing of substantially all of PHC's casino related
outstanding debt contain certain cross-default provisions.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------- -------------
<S> <C> <C>
10 7/8% first mortgage notes, due 2004 (a) $185,000,000 $185,000,000
11 5/8% senior notes, due 2004 (b) 85,000,000 85,000,000
14 5/8% junior subordinated notes, due 2005 (c) 8,738,000 8,738,000
14 7/8% secured promissory note, due 2006, net of
discount of $49,284,000 and $51,033,000, respectively (d) 48,792,000 47,043,000
Other 3,205,000 3,342,000
------------ ------------
Total indebtedness 330,735,000 329,123,000
Less - current maturities (559,000) (553,000)
------------ ------------
Total long-term debt $330,176,000 $328,570,000
============ ============
</TABLE>
(a) On February 17, 1994, a subsidiary of PHC issued $185,000,000 of non-
recourse first mortgage notes due January 15, 2004 (the "10 7/8% First
Mortgage Notes") and collateralized by a first mortgage on the Sands.
Interest on the notes accrues at the rate of 10 7/8% per annum, payable
semiannually commencing July 15, 1994. Interest only is payable during the
first three years. Commencing on
8
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
July 15, 1997, semiannual principal payments of $2,500,000 will become due
on each interest payment date. The 10 7/8% First Mortgage Notes are
redeemable at the option of the issuer, in whole or in part, on or after
January 15, 1999 at stated redemption prices ranging up to 104.08% of par
plus accrued interest.
The indenture for the 10 7/8% First Mortgage Notes contains various
provisions which, among other things, restrict the ability of certain
subsidiaries of PHC to pay dividends to PHC, to merge, consolidate or sell
substantially all of their assets or to incur additional indebtedness
beyond certain limitations. In addition, the indenture requires the
maintenance of certain cash balances and, commencing in 1994, requires that
a minimum of $7,000,000 be expended for property and fixture renewals,
replacements and betterments at the Sands, subject to increases of five
percent per annum thereafter. The indenture also contains certain cross-
default provisions with respect to the PRT Funding Notes described in (b)
below.
(b) On February 17, 1994, a subsidiary of PHC issued $85,000,000 of unsecured
senior notes due April 15, 2004 (the "PRT Funding Notes"). Interest on the
PRT Funding Notes accrues at the rate of 11 5/8% per annum, payable
semiannually commencing October 15, 1994. The PRT Funding Notes are
redeemable at the option of the issuer, in whole or in part, on or after
April 15, 1999 at stated redemption prices ranging up to 104.36% of par
plus accrued interest. The indenture for the PRT Funding Notes contains
various provisions which, among other things, restrict the ability of
certain subsidiaries of PHC to pay dividends to PHC, to merge, consolidate
or sell substantially all of their assets or to incur additional
indebtedness beyond certain limitations. The indenture also contains
certain cross default provisions with respect to the 10 7/8% First Mortgage
Notes described in (a) above.
(c) On February 17, 1994, PRT Funding Corp., a subsidiary of PHC, issued
$15,000,000 of junior subordinated notes (the "Junior Subordinated Notes")
to HCC. Principal totaling of $6,262,000 with respect to the Junior
Subordinated Notes has been assigned to PHC by HCC in recognition of tax
net operating losses of PHC used by HCC (see Note 4). The Junior
Subordinated Notes are due in February 2005 and bear interest at the rate
of 14 5/8% per annum which, subject to a PHC subsidiary meeting certain
financial coverage and other payment restriction tests required by the
indenture for the PRT Funding Notes, is payable semiannually commencing
August 17, 1994. Because the PHC subsidiary had not met the financial
coverage tests, interest was not paid on February 17, 1996.
(d) On February 17, 1994, PPI Funding Corp., a newly formed subsidiary of PHC,
issued $40,524,000 discounted principal amount of new deferred interest
notes (the "PPI Funding Notes") to HCC in exchange for the $38,779,000
principal amount of 15 1/2% unsecured notes held by HCC and issued by PCPI
Funding Corp., a subsidiary of PHC (the "PCPI Notes"). The increased
principal amount of the new notes included a call premium on the exchange
($1,745,000) equal to 4 1/2% of the principal amount of PCPI Notes
exchanged; such premium was paid to all third party holders of $58,364,000
principal amount of PCPI Notes concurrently redeemed. The PPI Funding
Notes were discounted to yield interest at the rate of 14 7/8% per annum
and had an original face value of $110,636,000. Subsequent principal
payments by PPI Funding Corp. have reduced the maturity value
9
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
of the notes to $98,076,000. Payment of interest is deferred through
February 17, 2001 at which time interest will become payable semiannually,
with the unpaid principal balance due on February 17, 2006. The PPI
Funding Notes are collateralized by a pledge of all of the common stock of
a subsidiary of PHC.
Scheduled payments of long-term debt as of March 31, 1996 are set forth
below:
<TABLE>
<CAPTION>
<S> <C>
1996 (nine months) $ 416,000
1997 3,468,000
1998 5,439,000
1999 5,479,000
2000 5,515,000
Thereafter 359,702,000
------------
Total $380,019,000
============
</TABLE>
Interest paid amounted to $10,181,000 and $10,165,000, respectively,
during the three month periods ended March 31, 1996 and 1995.
(4) INCOME TAXES
Components of PHC's benefit for income taxes consist of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1996 1995
-------- --------
<S> <C> <C>
Federal income tax benefit $ - $ -
State income tax benefit (provision):
Current 764,000 (53,000)
Deferred 67,000 127,000
-------- --------
$831,000 $ 74,000
======== ========
</TABLE>
PHC is included in HCC's consolidated federal income tax return.
Pursuant to agreements between HCC and PHC, PHC's provision for federal income
taxes is based on the amount of tax which would be provided if a separate
federal income tax return were filed. In addition, HCC compensates PHC for the
use by HCC and its subsidiaries (exclusive of PHC and its subsidiaries) of PHC's
available tax net operating loss carryforwards ("NOL's"). PHC paid no federal
income taxes for the three month periods ended March 31, 1996 and 1995. PHC
paid state income taxes totaling $25,000 during the three month period ended
March 31, 1996; no state income taxes were paid during the three month period
ended March 31, 1995.
10
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Federal and state income tax provisions or benefits are based upon
estimates of the results of operations for the current annual period and reflect
the nondeductibility for income tax purposes of certain items, including certain
amortization, meals and entertainment and other expenses.
Deferred income taxes result primarily from the use of the allowance
method rather than the direct write-off method for doubtful accounts, the use of
accelerated methods of depreciation for federal and state income tax purposes
and differences in the timing of deductions taken between tax and financial
reporting purposes for contributions of and adjustments to the carrying value of
certain investment obligations and for vacation and other accruals.
PHC and its subsidiaries have NOL's totaling approximately
$69,000,000, of which approximately $53,000,000 do not begin to expire until the
year 2003. Additionally, PHC and its subsidiaries have various tax credits
available totaling approximately $4,000,000, most of which expire by the year
2002. Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109") requires that the tax benefit of such NOL's and
credit carryforwards be recorded as an asset and, to the extent that management
can not assess that the utilization of all or a portion of such NOL's is more
likely than not, a valuation allowance should be recorded. Due to losses
sustained for both financial and tax reporting by PHC and its subsidiaries
through the first quarter of 1996, management was unable to determine that
realization of such asset was more likely than not and, thus, has provided
valuation allowances for the entire deferred tax asset for all periods
presented.
Sales or purchases of PHC or HCC common stock by certain five percent
stockholders, as defined in the Internal Revenue Code of 1986, as amended (the
"Code"), can cause a "change of control", as defined in Section 382 of the Code,
which would limit the ability of PHC to utilize these loss carryforwards in
later tax periods. Should such a change of control occur, the amount of annual
loss carryforwards available for use would most likely be substantially reduced.
Future treasury regulations, administrative rulings or court decisions may also
effect PHC's utilization of its loss carryforwards.
11
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The components of the net deferred tax asset were as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 23,341,000 $ 20,668,000
Allowance for doubtful accounts 6,884,000 6,830,000
Investment and jobs tax credits 4,417,000 4,417,000
Equity losses of unconsolidated
subsidiaries and joint ventures 3,282,000 3,165,000
Other liabilities and accruals 2,703,000 2,455,000
Other 1,224,000 1,377,000
------------ ------------
Total deferred tax assets 41,851,000 38,912,000
------------ ------------
Deferred tax liabilities:
Depreciation and amortization (8,373,000) (8,555,000)
Other (689,000) (695,000)
------------ ------------
Total deferred tax liabilities (9,062,000) (9,250,000)
------------ ------------
Net deferred tax asset 32,789,000 29,662,000
Valuation allowance (32,789,000) (29,662,000)
------------ ------------
$ - $ -
============ ============
</TABLE>
Receivables and payables in connection with the aforementioned tax
allocation agreements were as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Deferred income taxes - current $ 1,810,000 $ 1,950,000
Other noncurrent liabilities (1,810,000) (1,950,000)
</TABLE>
(5) TRANSACTIONS WITH RELATED PARTIES
PHC operates the Holiday Inn located at the north entrance of the
Dallas/Fort Worth Airport ("DFW North") which is owned by Metroplex Hotel
Limited ("Metroplex"), a partnership controlled by certain members of the Pratt
Family. During the three month period ended March 31, 1996, PHC made payments
for property improvements under the hotel operating agreement totaling $885,000;
no such payments were
12
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
made during the three month period ended March 31, 1995. PHC is also obligated
by the hotel operating agreement to make minimum rental payments equal to
Metroplex's principal and interest payments on the underlying indebtedness of
this hotel. During February 1994, PHC utilized funds borrowed from HCC to
purchase such underlying indebtedness with a principal balance of $13,756,000
from third parties at a cost of $6,750,000 and subject to third party
indebtedness amounting to $2,706,000. The required minimum rental payments (net
of debt service receipts) amounted to $131,000 and $134,000, respectively,
during the three month periods ended March 31, 1996 and 1995. PHC recorded the
note receivable from Metroplex at acquisition cost, which management believes
does not exceed the estimated realizable value of the underlying collateral.
The note is included in notes receivable in the accompanying consolidated
balance sheets. Payments from Metroplex, including interest at the rate of
9 1/2% per annum, are due monthly with the remaining principal balance of
$13,533,000 due May 31, 1996.
On May 9, 1996, Metroplex entered into a contract for the sale of the
hotel subject to a 30-day inspection period by the buyer. Upon completion of
the sale, PHC will recover its $6,750,000 acquisition cost of the underlying
indebtedness together with payments made for property improvements in 1995 and
1996 expected to aggregate approximately $2,435,000. In the event that the sale
is not completed, it is anticipated that PHC's note from Metroplex will be
extended on similar terms prior to maturity; accordingly, the note has been
included in noncurrent assets in the accompanying consolidated balance sheets at
March 31, 1996 and December 31, 1995.
Pratt Management, L.P. ("PML"), a limited partnership wholly owned by
PHC, earns, pursuant to a management agreement, a base management fee from
Hollywood Casino - Aurora, Inc. ("HCA"), an HCC subsidiary, equal to 5% of the
Aurora Casino's operating revenues (as defined in the agreement) subject to a
maximum of $5.5 million annually, and an incentive fee equal to 10% of gross
operating profit (as defined in the agreement to generally include all revenues,
less expenses other than depreciation, interest, amortization and taxes). Such
fees totaled approximately $2,943,000 and $2,629,000, respectively, during the
three month periods ended March 31, 1996 and 1995. Unpaid fees amounting to
$2,061,000 and $2,177,000, respectively, are included in due from affiliates in
the accompanying consolidated balance sheets at March 31, 1996 and December 31,
1995.
Pursuant to a ten-year consulting agreement with Hollywood Casino -
Tunica, Inc. ("HCT"), the HCC subsidiary which owns and operates the Tunica
Casino, a subsidiary of PHC receives monthly consulting fees of $100,000. Total
fees earned for each of the three month periods ended March 31, 1996 and 1995
amounted to $300,000.
HCC is obligated under the terms of an administrative services
agreement to pay PHC $50,000 per month. In addition, PHC and its subsidiaries
share certain general and administrative costs with HCC. Net allocated costs
and fees charged from HCC to PHC amounted to $688,000 during the three month
period ended March 31, 1996 and net amounts charged to HCC by PHC amounted to
$64,000 during the three month period ended March 31, 1995. In connection with
such allocated costs and fees, payables in the amount of $232,000 and $210,000
are included in due to affiliates, respectively, in the accompanying
consolidated balance sheets at March 31, 1996 and December 31, 1995.
13
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
HCT and Advanced Casino Systems Corporation ("ACSC"), a PHC subsidiary,
entered into a Computer Services Agreement dated as of January 1, 1994. The
agreement has a term of three years and provides, among other things, that ACSC
will sell HCT computer hardware and information systems equipment and will
license or sublicense to HCT computer software necessary to operate HCT's
casino, hotel and related facilities and business operations. HCT pays ACSC for
such equipment and licenses such software at amounts and on terms and conditions
that ACSC provides to unrelated third parties as well as a fixed license fee of
$30,000 a month. HCT also reimburses ACSC for its direct costs and expenses
incurred under this agreement. Total charges incurred under such agreement
amounted to $121,000 and $149,000, respectively, for the three month periods
ended March 31, 1996 and 1995. HCA also receives certain computer-related
services from PHC subsidiaries including hardware, software, and operator
support. HCA reimburses PHC for its direct costs and any expenses incurred. Such
costs totaled $49,000 and $308,000, respectively, during the three month periods
ended March 31, 1996 and 1995.
Greate Bay Hotel and Casino, Inc. ("GBHC"), the PHC subsidiary which
owns and operates the Sands, performs certain administrative and marketing
services on behalf of HCT and HCA. During the three month periods ended March
31, 1996 and 1995, fees charged by GBHC for such services totaled $329,000 and
$206,000, respectively.
HCT and HCA are charged for certain legal, accounting, and other
expenses incurred by PHC that relate to their business. For the three month
period ended March 31, 1996 and 1995, such charges amounted to $83,000 and
$91,000, respectively.
Interest expense with respect to borrowings from HCC is set forth below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
PPI Funding Notes held by HCC (Note 3) $1,749,000 $1,692,000
Junior Subordinated Notes (Note 3) 319,000 317,000
Short-term borrowings (Note 2) 212,000 210,000
</TABLE>
During 1994, a newly formed PHC subsidiary issued $40,524,000 discounted
principal amount of PPI Funding Notes in exchange for the PCPI Notes held by HCC
(see Note 3). Accretion of interest on the PPI Funding Notes is included in the
outstanding note payable balances at March 31, 1996 and December 31, 1995.
Interest accrued on short-term borrowings at March 31, 1996 and
December 31, 1995 amounting to $235,000 and $23,000, respectively, is included
in interest payable on the accompanying consolidated balance sheets together
with interest on the Junior Subordinated Notes amounting to $795,000 and
$476,000, respectively, at March 31, 1996 and December 31, 1995.
14
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) LITIGATION
PHC and its subsidiaries are parties in various legal proceedings with
respect to the conduct of casino and hotel operations. Although a possible
range of loss cannot be estimated, in the opinion of management, based upon the
advice of counsel, settlement or resolution of these proceedings should not have
a material adverse impact upon the consolidated financial position or results of
operations of PHC and its subsidiaries. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
the uncertainties described above.
(7) RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 consolidated
financial statements to conform to the 1996 consolidated financial statement
presentation.
15
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
PHC's consolidated net revenues decreased to $68.4 million during the first
quarter of 1996 from $73.2 million for the first quarter of 1995 resulting in a
loss from operations of $1.5 million in 1996 compared to income from operations
of $6 million during 1995. This decline in operating results is attributable
to decreases experienced at the Sands as discussed below.
The Sands sustained a loss from operations of $5.1 million for the three
month period ended March 31, 1996 compared to income from operations of $2.5
million for the same period of 1995. Operating results were adversely affected
by record winter snowstorms in January, two additional weekend snowstorms in
February and the advent of both unprecedented and highly aggressive marketing
programs instituted by certain other Atlantic City casinos seeking to increase
their market share. These factors, together with declines in both the table
games and slot hold percentages, combined to produce a 7.6% decline in net
revenues (from $67.8 million in 1995 to $62.7 million in 1996). In addition,
marketing and advertising costs increased by $2.7 million (16.8%) during the
first quarter of 1996 compared to the same period of 1995 in response to
competitive pressures.
GAMING OPERATIONS
The following table sets forth certain unaudited financial and operating
data relating to the Sands' operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1996 1995
-------- --------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C>
REVENUES:
Table games $ 20,175 $ 22,961
Slot machines 36,441 39,737
Other (1) 989 1,178
-------- --------
Total $ 57,605 $ 63,876
======== ========
TABLE GAMES:
Gross Wagering (Drop) (2) $134,388 $142,588
======== ========
Hold Percentages: (3)
Sands 15.0% 16.1%
Atlantic City Casino
Gaming Industry 16.5% 15.9%
SLOT MACHINES:
Gross Wagering (Handle) (2) $439,380 $469,817
======== ========
Hold Percentage:(3)
Sands (4) 8.3% 8.5%
</TABLE>
____________________________
16
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
(1) Consists of revenues from poker ($651,000 and $841,000, respectively, for
the three month periods ended March 31, 1996 and 1995) and simulcast horse
racing wagering ($338,000 and $337,000, respectively, for the three month
periods ended March 31, 1996 and 1995).
(2) Gross wagering consists of the total value of chips purchased for table
games (excluding poker) and keno wagering (collectively, the "drop") and
coins wagered in slot machines ("handle").
(3) Casino revenues consist of the portion of gross wagering that a casino
retains and, as a percentage of gross wagering, is referred to as the "hold
percentage".
(4) The Sands' hold percentage with respect to slot machines is reflected on an
accrual basis. Comparable data for the Atlantic City gaming industry is
not available.
Table games drop at the Sands declined $8.2 million (5.8%) during the three
month period ended March 31, 1996 compared with the same period of 1995. The
Sands' decrease compares with an increase of 3.6% in table drop for all other
Atlantic City casinos during the same period. As a result, the Sands' table
game market share (expressed as a percentage of the Atlantic City industry
aggregate table game drop) decreased to 8.2% during the three month period ended
March 31, 1996 from 9% during the same period of 1995. The Sands' table game
drop decrease is largely attributable to an increase in competitive pressures in
the rated table market segment, of which a significant portion is in the "high
end" and mid-market segments.
Slot machine handle decreased $30.4 million (6.5%) during the three month
period ended March 31, 1996 compared with the same period of 1995. The Sands'
decrease in slot machine handle compares with a 7.5% increase in handle for all
other Atlantic City casinos. The decrease experienced by the Sands is a result
of the same competitive pressures resulting from casino expansions and
aggressive marketing campaigns at other properties as discussed above with
respect to table games, particularly in the "high-end" slot segment. The Sands'
average number of slot machines increased 1.2% during the first quarter of 1996
compared to an increase of 7.4% for all other Atlantic City casinos. The
greater percentage increase in the number of slot machines for other Atlantic
City casinos reflects, in part, expansions of certain facilities during the
first quarter of 1996, which resulted in an overall increase of approximately
33,000 square feet of casino space in Atlantic City compared to the 1995 first
quarter.
The Sands' decrease in table games drop and slot machine handle also
reflects, in part, a return to pre-expansion market shares. The Sands increased
the size of its casino in 1994 and posted higher than industry increases in
casino wagering during the last half of 1994 and early 1995. During the first
quarter of 1995, for example, the Sands' increases in table games drop and slot
machine handle over the same period of 1994 were 16.8% and 33.5%, respectively,
compared with increases of 5.1% and 25%, respectively, for all other Atlantic
City casinos. The Sands' table game market share increased to 9% in the first
quarter of 1995 from 8.1% in the first quarter of 1994. As other casinos
complete new expansions, the Sands' previous market share gains are being
offset.
17
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
REVENUES
Casino revenues at the Sands, including poker and simulcast horse racing
wagering revenues, decreased by $6.3 million (9.8%) for the three month period
ended March 31, 1996 compared with the same period of 1995. Casino revenues
were negatively impacted by the loss of market share as discussed previously and
by decreases in both the table games and slot machine hold percentages at the
Sands during the 1996 period compared to the 1995 period.
Rooms revenue did not change significantly during the three month period
ended March 31, 1996 compared with 1995. Food and beverage revenues increased
$1.1 million (13.8%) for the three month period ended March 31, 1996 compared
with the prior year period primarily as a result of the opening of the Epic
Buffet at the Sands during the third quarter of 1995. Other revenues increased
$1.2 million (29.5%) during the three month period ended March 31, 1996 compared
to the 1995 period as a result of an increase in theater entertainment revenue
at the Sands and increased management fees earned from Hollywood Casino -
Aurora, Inc., an HCC subsidiary managed by PHC.
Promotional allowances represent the estimated value of goods and services
provided free of charge to casino customers under various marketing programs.
As a percentage of rooms, food and beverage and other revenues at the Sands,
these allowances decreased to 58.3% during the three month period ended March
31, 1996 from 60.8% during the first quarter of 1995. Such decrease is
primarily attributable to an increase in other types of marketing programs not
associated with promotional allowances being used in lieu of complimentaries.
DEPARTMENTAL EXPENSES
Casino expenses at the Sands increased $3.4 million (6.8%) during the three
month period ended March 31, 1996 compared with 1995. This increase is
primarily due to increased costs with respect to marketing activities, which
resulted in higher allocations of rooms, food and beverage and other expenses to
casino expense.
Rooms expense decreased $128,000 (11.8%) during the first quarter of 1996
as compared to the first quarter of 1995 primarily due to increased allocation
of rooms expense to casino expense at the Sands as a result of an increase in
casino marketing activities relating to rooms. Food and beverage expense
increased by $291,000 (11.2%) during the three month period ended March 31, 1996
compared to the same period in 1995. Increased costs at the Sands associated
with the Epic Buffet were partially offset by increases in the casino's food and
beverage marketing programs, the costs of which are allocated to the casino
department. Other expenses decreased $51,000 (4.2%) during the three month
period ended March 31, 1996 compared with 1995 as increases in costs related to
theater entertainment at the Sands were offset by increased allocations to the
casino department.
18
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
GENERAL AND ADMINISTRATIVE
General and administrative expenses decreased by $919,000 (12.3%) during
the three month period ended March 31, 1996 compared to the 1995 period
primarily due to decreases in legal expenses at the Sands and payroll costs
associated with NJMI's management of the Sands.
INCOME TAX BENEFIT (PROVISION)
PHC and its subsidiaries have tax net operating loss carryforwards
("NOL's") totaling approximately $69 million (after reduction for approximately
$23 million used by HCC in 1994), of which approximately $53 million do not
begin to expire until the year 2003. Additionally, PHC and its subsidiaries have
various tax credits available totaling approximately $4 million, many of which
expire by the year 2002. Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" requires that the tax benefit of such NOL's and
credit carryforwards be recorded as an asset and, to the extent that management
can not assess that utilization of such NOL's is more likely than not, a
valuation allowance should be recorded. Due to losses sustained for both
financial and tax reporting by PHC and its subsidiaries through the first
quarter of 1996, management was unable to determine that realization of such
asset was more likely than not and, thus, provided valuation allowances for the
entire deferred tax asset for all periods presented.
INFLATION
Management believes that in the near term, modest inflation, together with
increasing competition within the gaming industry for qualified and experienced
personnel, will continue to cause increases in operating expenses, particularly
labor and employee benefits costs.
SEASONALITY
Historically, the Sands' operations have been highly seasonal in nature,
with the peak activity occurring from May to September. Consequently, the
results of PHC's operations for the first and fourth quarters are traditionally
less profitable than the other quarters of the fiscal year. Furthermore, the
Aurora Casino has also experienced seasonality, but to a lesser degree than the
Sands, and, as a result, the management fees earned have fluctuated with such
seasonality. In addition, the Sands' and the Aurora Casino's operations may
fluctuate significantly due to a number of factors, including chance. Such
seasonality and fluctuations may materially affect PHC's casino revenues and
profitability.
19
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
PHC's principal assets and sources of revenues are the Sands and management
and consulting contracts with the Aurora Casino and the Tunica Casino. During
the first quarter of 1996, PHC's net cash used in operating activities (after
net interest expense and income taxes) amounted to $4 million. A PHC subsidiary
receives a base management fee equal to 5% of operating revenues (as defined in
the management agreement) subject to a maximum of $5.5 million annually, and an
incentive fee equal to 10% of gross operating profit (as defined in the
management agreement) from the operation of the Aurora Casino. Management fees
received during the first quarter of 1996 amounted to $3.1 million. During
1994, a subsidiary of PHC entered into a consulting agreement with HCT with
respect to the Tunica Casino which provides for the payment of $1.2 million
annually by the Tunica Casino to the subsidiary for consulting services and for
reimbursement of direct costs and expenses incurred.
The Sands' earnings before depreciation, interest, amortization, taxes and
intercompany management fees have been sufficient to meet its debt service
obligations (other than certain maturities of principal that have been
refinanced) and to fund a substantial portion of its capital expenditures.
Historically, the Sands has also used short-term borrowings to fund seasonal
cash needs and has used long-term borrowings for certain capital projects.
PHC utilized existing cash together with borrowings on the short-term
credit facility during the three month period ended March 31, 1996 to meet its
operating needs, to fund capital additions ($2 million) and to make obligatory
investments at the Sands ($762,000).
In prior years, PHC's hotel operations required substantial infusions of
operating funds; however, the disposition of all but three of its hotel
properties has greatly reduced the cash required to fund hotel operations. In
connection with a certain hotel property which PHC operates pursuant to an
operating agreement with an affiliate, PHC is obligated to make minimum rental
payments equal to the principal and interest payments on the underlying
indebtedness attributable to the property.
Effective December 31, 1994, HCC began compensating PHC for the use of
PHC's available tax net operating loss carryforwards. For the year ended
December 31, 1994, such payment was effected through the assignment to PHC of
$6.3 million principal amount of the 14 5/8% junior subordinated notes issued by
HCC to a subsidiary of PHC together with $1.9 million of accrued interest
thereon. No such compensation was required during either 1995 or the first
quarter of 1996 as a result of losses sustained by HCC in 1995 with respect to
the refinancing of its outstanding indebtedness.
20
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
FINANCING ACTIVITIES
During February 1994, PHC completed the refinancing of virtually all of its
casino-related outstanding debt. The refinancing was completed through a public
offering of $270 million of debt securities consisting of $185 million of 10
7/8% First Mortgage Notes due January 15, 2004 and $85 million of 11 5/8% PRT
Funding Notes due April 15, 2004. Proceeds from the debt offerings were used,
in part, to refinance outstanding mortgage notes on the Sands and other
indebtedness scheduled to mature in 1994, to repay $58.4 million of the other
publicly held indebtedness and to provide partial funding for an expansion of
gaming space at the Sands. During the first quarter of 1996, PHC repaid long-
term indebtedness of $136,000. Scheduled maturities of long-term debt during the
remainder of 1996 are $416,000.
GBHC is presently renegotiating a $5 million bank line of credit which
expired on April 30, 1996. As of March 31, 1996, $2 million was outstanding
under the line of credit.
On March 29, 1996, HCC and PHC announced a proposal which provides for PHC
to make a cash tender offer for the approximately one million outstanding shares
of PHC common stock not already owned by HCC and for a "cash out" merger with
respect to any PHC shares outstanding after completion of the cash tender offer.
Funding for the proposed transactions will be provided by HCC. An offering and
merger price of $3.25 per share has been proposed, subject to receipt by HCC of
a fairness opinion from an independent financial advisor. The Board of Directors
of PHC has appointed a Special Committee consisting of its independent directors
to evaluate the HCC proposal. The Special Committee and its advisors are
currently evaluating HCC's proposal.
CAPITAL EXPENDITURES AND OTHER INVESTMENTS
Property and equipment additions during the first quarter of 1996 totaled
$2 million, of which capital expenditures at the Sands amounted to approximately
$1.1 million. Additional capital expenditures by PHC during the first quarter of
1996 included approximately $885,000 of property improvements at a non-casino
hotel property it operates under an agreement with Metroplex Hotel Limited (see
Note 5 of Notes to Consolidated Financial Statements). Management anticipates
capital expenditures during the remainder of 1996 will be approximately $5
million at the Sands. Projects currently planned during the remainder of 1996
include substantial upgrades and improvements to all rooms at the Sands,
including its higher-end suite product and the purchase of additional gaming
equipment. Anticipated capital expenditures under the operating agreement with
Metroplex Hotel Limited during the remainder of 1996 are estimated to be
$800,000.
The Sands is required by the New Jersey Casino Control Act to make certain
investments with the Casino Reinvestment Development Authority, a governmental
agency which administers the statutorily mandated investments made by casino
licensees. Deposit requirements for the first quarter of 1996 totaled $762,000
and are anticipated to be approximately $2.6 million during the remainder of
1996.
PHC has also agreed to contribute up to $3.9 million, approximately $2.5
million of which has been paid as of March 31, 1996, as an additional investment
in an unconsolidated hotel partnership to refurbish the
21
<PAGE>
PRATT HOTEL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
hotel facility in Orlando, Florida. No such payments were required during the
three month period ended March 31, 1996; anticipated contributions during the
remainder of 1996 toward such commitment are approximately $1.2 million. Such
contributions are in recognition of PHC's partner having agreed to make $5
million in principal reductions on the underlying mortgage note on the facility
of which $4 million have been made to date.
SUMMARY
Management anticipates that PHC's funding requirements for the next twelve
months will be satisfied by (i) existing cash, (ii) cash generated by the Sands'
operations, (iii) management fees from the Aurora Casino, (iv) consulting fees
from the Tunica Casino and (v) management fees from remaining hotel operations.
22
<PAGE>
PART II: OTHER INFORMATION
- - ---------------------------
The Registrant did not file any reports on form 8-K during the quarter
ended March 31, 1996. The Registrant filed its Annual Report on Form 10-K for
the year ended December 31, 1995 with the Securities and Exchange Commission on
March 29, 1996.
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.
PRATT HOTEL CORPORATION
Date: May 13, 1996 By: /s/ John C. Hull
-------------------- --------------------------------------------
John C. Hull
Corporate Controller
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF PRATT HOTEL CORPORATION AND SUBSIDIARIES
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 23,197
<SECURITIES> 0
<RECEIVABLES> 28,901
<ALLOWANCES> 16,948
<INVENTORY> 4,337
<CURRENT-ASSETS> 48,855
<PP&E> 319,831
<DEPRECIATION> 153,159
<TOTAL-ASSETS> 242,585
<CURRENT-LIABILITIES> 46,614
<BONDS> 330,176
0
0
<COMMON> 519
<OTHER-SE> (148,730)
<TOTAL-LIABILITY-AND-EQUITY> 242,585
<SALES> 0
<TOTAL-REVENUES> 68,423
<CGS> 0
<TOTAL-COSTS> 57,543
<OTHER-EXPENSES> 11,804
<LOSS-PROVISION> 567
<INTEREST-EXPENSE> 9,136
<INCOME-PRETAX> (10,627)
<INCOME-TAX> (831)
<INCOME-CONTINUING> (9,796)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,796)
<EPS-PRIMARY> (1.89)
<EPS-DILUTED> 0
</TABLE>
