SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A No. 1
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from
to
Commission File Number 1-7831
ELSINORE CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 88 0117544
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
202 FREMONT STREET, LAS VEGAS, NEVADA 89101
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (Including Area Code): 702/385-4011
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 ninety (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.
TITLE OF STOCK NUMBER OF SHARES
CLASS DATE OUTSTANDING
Common December 19, 1997 4,929,313
Elsinore Corporation and Subsidiaries
Form 10-Q/A No. 1
For the Quarter Ended September 30, 1997
INDEX
PART I. FINANCIAL INFORMATION: PAGE
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at 3-4
September 30, 1997 (Reorganized Company) (Unaudited)
and December 31, 1996 (Predecessor Company)
Condensed Consolidated Statements of Operations 5
for the Three Months Ended September 30, 1997
(Reorganized Company) and Three Months Ended
September 30, 1996 (Predecessor Company)
Condensed Consolidated Statements of Operations 6-7
for the Seven Months Ended September 30, 1997
(Reorganized Company); Two Months Ended February 28,
1997 (Predecessor Company) and Nine Months Ended
September 30, 1996 (Predecessor Company);
Combined Reorganized and Predecessor Company
for the Nine Months Ended September 30, 1997
(Unaudited)
Condensed Consolidated Statements of Cash Flows for 8-10
the Seven Months Ended September 30, 1997 (Reorganized
Company); Two Months Ended February 28, 1997
(Predecessor Company) and Nine Months Ended
September 30, 1996 (Predecessor Company); Combined
Reorganized and Predecessor Company for the Nine
Months Ended September 30, 1997 (Unaudited)
Notes to Condensed Consolidated Financial Statements 11-15
Item 2. Management's Discussion and Analysis of 15-26
Financial Condition and Results of
Operations
SIGNATURES
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
September 30, 1997 and December 31, 1996
(Dollars in Thousands)
Reorganized Predecessor
Company Company
September 30, December 31,
1997 1996
------------------- --------------------
(Unaudited)
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents 6,130 7,208
Accounts receivable, less allowance for
doubtful accounts of $237 and $347,
respectively 416 815
Inventories 279 354
Prepaid expenses 2,118 1,177
------------------- --------------------
Total current assets 8,943 9,554
------------------- --------------------
Cash and cash equivalents, restricted 914 4,445
Property and equipment, net 37,617 25,485
Investment in Fremont Street Experience LLC - 2,400
Reorganization value in excess of amounts
allocable to indentifiable 372 -
assets
Other assets 762 743
------------------- --------------------
Total assets 48,608 42,627
=================== ====================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
September 30, 1997 and December 31, 1996
(Dollars in Thousands)
Reorganized Predecessor
Company Company
September 30,1997 December 31,
1996
------------------ --------------------
(Unaudited)
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
<S> <C> <C>
Accounts payable 695 1,065
Accrued interest 401 2,137
Accrued expenses 4,628 6,176
Current portion of long-term debt 1,070 50
------------------ --------------------
Total current liabilities 6,794 9,428
------------------ --------------------
Estimated liabilities subject to Chapter 11
proceedings - 73,909
Long-term debt, less current portion 37,446 -
------------------ --------------------
Total liabilities 44,240 83,337
------------------ --------------------
Commitments and contingencies
Shareholders' equity (deficit):
Predecessor company,
Common stock, $.001 par value per share.
Authorized 100,000,000 shares. Issued
and outstanding 15,891,793 shares - 16
Reorganized company,
Common stock, $.001 par value per share.
Authorized 100,000,000 shares. Issued
and outstanding 4,929,313 shares 5 -
Additional paid-in capital 4,995 69,602
Accumulated deficit (632) (110,328)
------------------ --------------------
Total shareholders' equity (deficit) 4,368 (40,710)
------------------ --------------------
Total liabilities and shareholders'
equity (deficit) 48,608 42,627
================== ====================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Reorganized Predecessor
------------------------ --------------------------
Three Months Three Months
Ended Ended
September 30 September 30
1997 1996
------------------------ --------------------------
Revenues, net:
<S> <C> <C>
Casino 8,741 10,536
Hotel 2,110 2,591
Food and beverage 2,280 2,977
Other 892 172
Promotional allowances (1,136) (1,463)
------------------------ --------------------------
Total revenues, net 12,887 14,813
Costs and expenses:
Casino 3,395 4,437
Hotel 2,172 2,255
Food and beverage 1,437 1,813
Taxes and licenses 1,325 1,612
Selling, general and
administrative 2,509 2,559
Rents 1,034 1,010
Depreciation and
amortization 551 943
Interest 1,269 811
------------------------ --------------------------
Total costs and
expenses 13,692 15,440
------------------------ --------------------------
Loss before
reorganization items (805) (627)
--
Reorganization items - 977
------------------------ --------------------------
Loss before
income taxes (805) (1,604)
Income taxes 15 -
------------------------ --------------------------
Net loss (820) (1,604)
======================== ==========================
Loss Per Share:
Loss per common
share ($0.17) ($0.10)
======================== ==========================
Weighted average number of common shares
outstanding 4,929,313 15,891,793
======================== ==========================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Combined
Reorganized
and
Reorganized Predecessor
Company Predecessor Company Company
------------------- ------------------------------------------ --------------------
Period from Period from Period from Nine
March 1 January 1 to January 1 to Months
to February 28 September 30,1996 Ended
September 30,1997 1997 September 30,1997
------------------- ------------------- ------------------- --------------------
Revenues, net:
<S> <C> <C> <C> <C>
Casino 21,341 6,922 32,401 28,263
Hotel 5,380 1,736 8,319 7,116
Food and beverage 5,445 1,745 9,566 7,190
Other 1,408 153 473 1,561
Promotional allowances (2,351) (760) (4,944) (3,111)
------------------- ------------------- ------------------- --------------------
Total revenues, net 31,223 9,796 45,815 41,019
Costs and expenses:
Casino 8,135 2,710 13,563 10,845
Hotel 5,021 1,410 6,141 6,431
Food and beverage 3,488 1,105 5,273 4,593
Taxes and licenses 3,213 980 5,104 4,193
Selling, general and
administrative 5,341 1,807 7,332 7,148
Rents 2,394 673 3,044 3,067
Depreciation and
amortization 1,271 529 2,837 1,800
Interest 2,947 772 1,326 3,719
------------------- ------------------- ------------------- --------------------
Total costs and
expenses 31,810 9,986 44,620 41,796
------------------- ------------------- ------------------- --------------------
Income (loss) before
reorganization
items,extraordinary
gain on elimination
of debt and income
taxes (587) (190) 1,195 (777)
====================
Reorganization items - - 2,115
Extraordinary gain on
elimination of debt - 35,977 -
Income taxes 45 - -
------------------- ------------------- -------------------
Net income (loss) (632) 35,787 (920)
Retained earnings
(deficit) at
beginning of period - (110,328) (108,772)
Fresh start adjustments - 74,541 -
------------------- ------------------- -------------------
Retained earnings
(deficit) at end of
period (632) - (109,692)
==================== =================== ==================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Operations (continued)
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Reorganized
Company Predecessor Company
------------------ ------------------ -- ------------------
Period from Period from Period from
March 1 January 1 to January 1 to
to February 28 September 30,1996
September 30,1997 1997
------------------ ------------------ ------------------
Income (Loss) Per Share:
Income (loss) before
extraordinary gain on
<S> <C> <C> <C>
elimination of debt ($.13) ($0.06) ($0.04)
Extraordinary gain on
elimination of debt - $2.26 -
------------------ ------------------ -------------------
Net income (loss) ($.13) $2.20 ($0.04)
================== ================== ===================
Weighted average number of
common shares
outstanding 4,929,313 15,891,793 15,891,793
=================== ================= ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
------------------------------------------------------------------------
Combined
Reorganized and
Reorganized Predecessor
Company Predecessor Company Company
-------------------- ---------------------------------- -------------
Period from Period from Period from Nine
March 1 January 1 to January 1 to Months
to February 28 September 30, Ended
September 30, 1997 1997 1996 September 30,1997
-------------------- ---------------------------------- -------------
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income (loss) ($632) $35,787 ($920) $35,155
Adjustments to reconcile
net income (loss) to net
cash provided by (used
in) operating activities:
Extraordinary gain on
elimination of debt - (35,977) - (35,977)
Depreciation and
amortization 1,271 529 2,837 1,800
Loss on sale of equipment 3 - - 3
Accretion of discount on
long-term debt - - 98 -
Write-off of casino
development costs - - 1,348 -
Change in other assets and
liabilities, net (5,158) 1,328 27 (3,830)
-------------------------------------------------------------------------
Net cash provided by (used
in) operating activities (4,516) 1,667 3,390 (2,849)
-------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (2,650) (141) (592) (2,791)
Proceeds from sale of
equipment 95 - - 95
-------------------------------------------------------------------------
Net cash used in investing
activities (2,555) (141) (592) (2,696)
-------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of debt (456) (12) (41) (468)
Incurrence of debt 691 - - 691
Proceeds from issuance of
common stock and
subscription rights - 713 - 713
-------------------------------------------------------------------------
Net cash provided by (used
in) financing activities 235 701 (41) 936
-------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (continued)
(Dollars in Thousands)
(Unaudited)
Combined
Reorganized and
Reorganized Predecessor
Company Predecessor Company Company
----------------- ---------------------------------- ------------------
Period from Period from Period from Nine
March 1 January 1 to January 1 to Months
to February 28 September 30,1996 Ended
September 30 1997 September 30,
1997 1997
------------------ ---------------------------------- ------------------
Net increase (decrease) in
<S> <C> <C> <C> <C>
cash and cash equivalents (6,836) 2,227 2,757 (4,609)
Cash and cash equivalents at
beginning of period,
including restricted cash 13,880 11,653 3,572 11,653
---------------------------------------------------------------------------
Cash and cash equivalents at
end of period, including
restricted cash $7,044 $13,880 $6,329 $7,044
============================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (continued)
(Dollars in Thousands)
(Unaudited)
Combined
Reorganized and
Predecessor
Reorganized Company
Company Predecessor Company
---------------- ----------------------------------- ------------------
Period from
Period from Period from January 1 to Nine Months
March 1 to January 1 to September 30, ended September
September 30, February 28, 1997 1997 30, 1997
1997
---------------- ----------------------------------- ------------------
Supplemental disclosure of non-cash
investing and financing activities:
Fresh start adjustments which result
in increase (decrease) to the following:
<S> <C> <C> <C> <C>
Property and equipment,net - 13,130 - 13,130
Leasehold acquisitions
costs, net - (1,907) - (1,907)
Reorganization value in
excess of amounts
allocable to identifiable
assets - 387 - 387
Investment in Fremont
Street Experience LLC - (2,400) - (2,400)
Accounts payable - 344 - 344
Accrued interest - (525) - (525)
Estimated liabilities
subject to Chapter 11
proceedings - (72,552) - (72,552)
Long-term debt, less
current maturities - 36,756 - 36,756
Common stock, Predecessor
Company - (16) - (16)
Common Stock, Reorganized
Company - 5 - 5
Additional paid in capital - (65,320) - (65,320)
Accumulated deficit - 110,518 - 110,518
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 1997
1. Chapter 11 Reorganization
On October 31, 1995, Elsinore Corporation filed a voluntary petition to
reorganize under Chapter 11 of the Federal Bankruptcy Code and
continued to operate as a debtor in possession (Elsinore Corporation,
D.I.P.) ("Predecessor Company"). On August 12, 1996, the Plan of
Reorganization filed by the Predecessor Company (the "Plan") was
confirmed and became effective following the close of business on
February 28, 1997 (the "Effective Date"). Upon effectiveness of the
Plan, Elsinore Corporation (the "Reorganized Company" or the "Company")
adopted fresh start reporting in accordance with Statement of Position
90-7, "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code" ("SOP 90-7") of the American Institute of Certified
Public Accountants. As a result of fresh start reporting, the material
adjustments made by the Company were the revaluation of property and
equipment, write-off of the investment in Fremont Street Experience,
the revaluation of mortgage notes and other liabilities, including the
related gain on forgiveness of indebtedness, and write-off of the
accumulated deficit, additional paid-in-capital and common stock of the
Predecessor. Accordingly, the Company's post-reorganization balance
sheet and statement of operations have not been prepared on a
consistent basis with such pre-reorganization financial statements. For
accounting purposes, the inception date of the Reorganized Company is
deemed to be March 1, 1997.
The Company has prepared the accompanying financial statements without
audit, pursuant to rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of management,
the accompanying unaudited financial statements contain all adjustments
necessary to present fairly the Company's financial position as of
September 30, 1997 and the results of operations and cash flows for the
two months ended February 28, 1997 for the Predecessor Company, seven
months ended September 30, 1997 for the Reorganized Company, and the
three months and nine months ended September 30, 1996 for the
Predecessor Company.
2. Per Share Data
The Company will adopt the provision of Statement of Financial
Accounting Standards No. 128, Earnings Per Share (Statement 128) in the
fourth quarter of 1997. Basic and diluted EPS are equal to the amount
presented on the Income Statement.
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 1997
Earnings per share for the three months ended September 30, 1997 and
1996 are based upon the weighted average number of shares of common
stock outstanding as there were no common stock equivalents outstanding
during the period.
3. Shareholders' Equity
<TABLE>
<CAPTION>
Common Stock
---------------------------------
Total
Additional Accumulated Shareholders'
Outstanding Paid-In-Capital Earnings Equity
Shares Amount (Deficit) (Deficit)
------------------- ------------- ---------------- -------------------- ---------------------
Balance,
<S> <C> <C> <C> <C> <C>
December 31, 1996 15,891,793 $16 $69,602 $(110,328) $(40,710)
Stock Subscription
Rights Offering 713 - 713
Loss before
reorganization items
and extraordinary
gain on elimination
of debt - (190) (190)
------------------- ------------- ---------------- -------------------- ---------------------
Balance,
February 28, 1997 15,891,793 16 70,315 (110,518) (40,187)
Gain on Forgiveness
Debt Discharge) - 35,977 35,977
Fresh Start
Adjustments (15,891,793) (16) (70,315) 74,541 4,210
------------------- ------------- ---------------- -------------------- ---------------------
Balance,
After Fresh Start
Adjustments - - -
Issuance of Stock 1,000,000 1 4,995 - 4,996
Issuance of Stock 3,929,313 4 - - 4
------------------- ------------- ---------------- -------------------- ---------------------
Balance,
March 1, 1997 4,929,313 5 4,995 - 5,000
Net Loss (632) (632)
------------------- ------------- ---------------- -------------------- ---------------------
Balance,
September 30,1997 4,929,313 $5 $4,995 ($632) $4,368
=================== ============= ================ ==================== =====================
</TABLE>
There were no changes in other shareholders' equity for the nine months
ended September 30, 1996.
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 1997
4. Commitments and Contingencies
WARN Act Litigation
The Company is a defendant in two consolidated lawsuits pending in the federal
court for the District of New Jersey, alleging violation by the Company and
certain of its subsidiaries and affiliates of the Worker Adjustment and
Retraining Notification Act (WARN Act) and breach of contract.
The plaintiffs filed three proof of claims in both the Company's, as well as
Four Queens, Inc.'s, bankruptcy proceedings. Two of the proof of claims, one for
the union employees and one for the non-union employees, totaled $14,000,000 and
allege liability under the WARN Act for failure to properly notify employees in
advance of cessation of operations of Elsinore Shore Associates. The third proof
of claim, in the amount of $800,000, was based upon retroactive wage agreements
executed by Elsinore Shore Associates promising to pay its employees deferred
compensation if the employees remained with Elsinore Shore Associates during its
reorganization. The proof of claims were filed as priority claims, not general
unsecured claims.
Based upon the Order for Verdict Upon Liability Issues issued by the presiding
judge in New Jersey, as well as the Bankruptcy Code, the Bondholders' Committee
filed an objection to the WARN Act proofs of claims. The Bankruptcy Court
tentatively approved the objection and disallowed the claims pending entry of
the final order from the New Jersey court. No final appealable order has been
entered as of yet by the Bankruptcy Court.
On October 22, 1997, the New Jersey court entered its Findings of Fact and
Conclusions of Law and Judgment Upon Liability Issues, which affirmed its prior
holding denying WARN Act liability. The New Jersey court's judgment can now be
brought to the Bankruptcy Court to request a final order denying the WARN Act
proofs of claims. However, the plaintiffs' counsel has indicated that the
plaintiffs intend to appeal the New Jersey court's decision, and their time to
file such an appeal has not yet expired. If they appeal, it is likely that the
Bankruptcy Court would defer its final decision on the WARN Act proofs of claims
pending the outcome of the appeal.
A second objection was filed on behalf of the Bondholders' Committee to the
$800,000 proof of claim regarding the retroactive wage benefits. Because the New
Jersey court had found the Company to be liable on these
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 1997
obligations together with Elsinore Shore Associates, the objection filed by the
Bondholders' Committee did not dispute the allowability of the proof of claim to
participate with the other unsecured creditors in the Company's bankruptcy
proceedings. However, the Bondholders' Committee objected to the claim of
priority status in the Company's proceedings. The Bondholders' Committee
objected to the claim in its entirety in the Four Queens, Inc.'s proceeding. The
Bankruptcy Court granted the objections and ruled that the proof of claim for
retroactive wage benefits would be an allowed unsecured claim against the
Company to be treated in Class 10 of the Plan with final determination of the
actual amount of the claim to be made by the New Jersey District Court. The
plaintiffs thereafter filed a motion for reconsideration regarding the
Bankruptcy Court's order, which motion was ultimately denied. The final order
was entered by the court in July 1997, and the plaintiffs have appealed the
order to the Ninth Circuit Bankruptcy Appellate Panel.
In summary, management believes that any claims listed above, if allowed, would
be included in the Class 10 Unsecured Creditor's pool, which is capped at $1.4
million, and, therefore, will not have a material financial affect on the
Company.
At September 30, 1997, the Company and its subsidiaries were parties to various
other claims and lawsuits arising in the normal course of business. Management
is of the opinion that all pending legal matters are either covered by insurance
or, if not insured, will not have a material effect on the financial position of
the Company.
5. Proposed Merger
The Company has entered into an Agreement and Plan of Merger ("Merger
Agreement")with R&E Gaming Corp. ("Gaming") and Elsinore Acquisition Sub, Inc.
("EAS"), entities controlled by Mr. Allen Paulson. Pursuant to the Merger
Agreement, the Company would merge with EAS and, as a result, would become a
wholly-owned subsidiary of Gaming and the Company's shareholders (other than
those who exercise dissenter's rights under Nevada law) would receive, for each
share of the Company's common stock owned by them, cash in the amount of $3.16
plus an amount equal to the daily accrual on $3.16 at 9.43% compounded annually,
accruing from June 1, 1997 to the date immediately preceding consummation of the
merger with EAS. Following completion of the transaction, the Company will be
wholly-owned by Gaming and Company shareholders prior to the merger will no
longer own any equity interest in the Company.
Separately, Morgens, Waterfall, Vintiadis & Company, Inc., on behalf of
investment accounts which own approximately 94% of the outstanding
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 1997
Elsinore shares, has granted Gaming an option to purchase its shares at the same
price that all shareholders would receive in the merger and has agreed to vote
in favor of the merger.
Consummation of the merger with EAS is subject to a number of conditions,
including (i)approval by the holders of the Company's shares at a stockholders'
meeting, (ii) the receipt of all necessary approvals by the Nevada Gaming
Authorities, and (iii)consummation of Gaming's proposed acquisition of Riviera
Holdings Corporation which has been announced. There can be no assurance that
the conditions to the merger will be met or that the merger will be consummated.
6. Finley Lease
Under a 20-year lease, which was scheduled to expire on December 31, 1997, the
Company leases from The Finley Company ("Finley") approximately 7,000 square
feet of the Four Queens Casino premises affecting the northeast corner of that
property. Pursuant to a lease amendment, which was signed in September and made
retroactive to May 14, 1997, rents were increased to a minimum monthly rental
(triple net) of $50,400, with periodic adjustments tied to Consumer Price Index
increases, a security deposit for one year's rental payments was posted to
guaranty payment of the monthly rentals and the lease term was extended to
October 31, 2024.
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operation
This discussion and analysis should be read in conjunction with the consolidated
financial statements and notes thereto set forth elsewhere herein.
The following table sets forth certain operating information for the Company for
the three months ended September 30, 1997 and 1996 and nine months ended
September 30, 1997 and 1996. Revenues and promotional allowances are shown as a
percentage of net revenues. Departmental costs are shown as a percentage of
departmental revenues.
All other percentages are based on net revenues.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
(000's) % (000's) %
------- ------- ------- ------
Revenues, net:
<S> <C> <C> <C> <C>
Casino 8,741 67.8% 10,536 71.1%
Hotel 2,110 16.4% 2,591 17.5%
Food & beverage 2,280 17.7% 2,977 20.1%
Other 892 6.9% 172 1.2%
---------------------------------------------------------------------
Gross revenue 14,023 108.8% 16,276 110.0%
Less promotional allowances (1,136) (8.8%) (1,463) (10.0%)
---------------------------------------------------------------------
Revenues, net 12,887 100.0% 14,813 100.0%
---------------------------------------------------------------------
Costs and expenses:
Casino 3,395 38.8% 4,437 42.1%
Hotel 2,172 102.9% 2,255 87.0%
Food and beverage 1,437 63.1% 1,813 60.9%
Taxes and licenses 1,325 10.3% 1,612 10.9%
Selling, general and
administrative 2,509 19.6% 2,559 17.3%
Rents 1,034 8.0% 1,010 6.8%
Depreciation and amortization 551 4.3% 943 6.4%
Interest 1,269 9.8% 811 5.5%
---------------------------------------------------------------------
Total costs and expenses 13,692 106.2% 15,440 104.2%
---------------------------------------------------------------------
Loss before
reorganizational items
and income taxes (805) (6.2%) (627) (4.2%)
---------------------------------------------------------------------
Reorganizational items - - 977 6.6%
Income taxes 15 .1% - -
---------------------------------------------------------------------
Net loss (820) (6.3%) (1,604) (10.8%)
=====================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
(000's) % (000's) %
------- ------ ------- -------
Other Data:
<S> <C> <C> <C> <C>
Net loss (820) (6.3%) (1,604) (10.8%)
Depreciation and amortization 551 4.3% 943 6.4%
Interest 1,269 9.8% 811 5.5%
Income taxes 15 .1% - -
Reorganization items - - 977 6.6%
---------------------------------------------------------------------
Earnings before interest taxes,
depreciation and
amortization and reorganiza-
tional items (EBITDA) 1,015 7.9% 1,127 7.7%
=====================================================================
Cash flows provided by (used
in) operating activities (2,650) 835
============ ==============
Cash flows used in investing
activities (1,119) (141)
============ ==============
Cash flows used in financing
activities (204) (14)
============ ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
-------------------------------- ---------------------------------------
(000's) % (000's) %
---------------- ----------- ------------------- ----------------
Revenues, net:
<S> <C> <C> <C> <C>
Casino 28,263 68.9% 32,401 70.7%
Hotel 7,116 17.3% 8,319 18.2%
Food & beverage 7,190 17.5% 9,566 20.9%
Other 1,561 3.8% 473 1.0%
----------------- ------------ ------------------- ----------------
Gross revenue 44,130 107.5% 50,759 110.8%
Less promotional allowances (3,111) 7.5% (4,944) (10.8%)
----------------- ------------ ------------------- ----------------
Revenues, net 41,019 100.0 45,815 100.0%
----------------- ------------ ------------------- ----------------
Costs and expenses:
Casino 10,845 38.4% 13,563 41.9%
Hotel 6,431 90.4% 6,141 73.8%
Food and beverage 4,593 63.9% 5,273 55.1%
Taxes and licenses 4,193 10.2% 5,104 11.1%
Selling, general and
administrative 7,148 17.5% 7,332 16.0%
Rents 3,067 7.5% 3,044 6.6%
Depreciation and amortization 1,800 4.4% 2,837 6.2%
Interest 3,719 9.1% 1,326 2.9%
----------------- ------------ ------------------- -----------------
Total costs and expenses 41,796 101.9% 44,620 97.4%
Income (loss) before
reorganizational items and
income taxes (777) (1.9%) 1,195 2.6%
----------------- ------------ ------------------- ----------------
Reorganizational items - - 2,115 4.6%
Income taxes 45 .1% - -
----------------- ------------ ------------------- ----------------
Net loss (822) (2.0%) (920) (2.0%)
================= ============ =================== ================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
--------------------------------- ----------------------------------
(000's) % (000's) %
------- ------- ------- -----
Other Data:
<S> <C> <C> <C> <C>
Net loss (822) (2.0%) (920) (2.0%)
Depreciation and amortization 1,800 4.4% 2,837 6.2%
Interest 3,719 9.1% 1,326 2.9%
Income taxes 45 .1% - -
Reorganization items - - 2,115 4.6%
-----------------------------------------------------------
Earnings before interest taxes,
depreciation and
amortization and reorganiza-
tional items (EBITDA) 4,742 11.6% 5,358 11.7%
===========================================================
Cash flows provided by (used
in) operating activities (2,849) 3,390
=========== ==========
Cash flows used in investing
activities (2,696) (592)
=========== ==========
Cash flows provided by (used
in) financing
activities 936 (41)
=========== ==========
</TABLE>
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED
TO THREE MONTHS ENDED SEPTEMBER 30, 1996
REVENUES
Net revenues decreased by approximately $1,926,000 or 13%, from $14,813,000 for
the three months ended September 30, 1996 to $12,887,000 for the three months
ended September 30, 1997 due to competition and the general softness in the Las
Vegas market which has affected most of the hotel/casinos in the downtown area.
Casino revenues decreased by approximately $1,795,000, or 17%, from $10,536,000
during the 1996 interim period to $8,741,000 during the interim 1997 period due
primarily to $639,000, or 25.8% decrease in table games revenues and a
$1,949,000, or 24.3% decrease in slot revenue. Management has eliminated certain
complimentary programs which generated significant volume in the third quarter
of 1996. During the third quarter of 1997, table games drop decreased $6,570,000
or 36.7%. However, the win percentage increased by 1.2% as a result of more
stringent controls over the dice games and a change in customer mix from comp
credit players to cash paying vacationers. Slot coin-in decreased $32,909,000,
or 23%, due to the competition from aggressive marketing programs to $1.00 slot
players, competitive pressures from the opening of new properties, and
construction disruptions.
Hotel revenues decreased by approximately $481,000, or 18.6% from $2,591,000
during the 1996 period to $2,110,000 during the 1997 period due primarily to a
decrease in complimentary room revenues of $175,498 resulting from the
elimination of certain table games marketing programs. The majority of the
complimentary rooms were replaced with cash paying customers at lower room
rates.
Food and beverage revenues decreased approximately $697,000, or 23.4%, from
$2,977,000 during the 1996 period to $2,280,000 during the 1997 period due to a
decrease in complimentary revenues of $316,000 resulting from the elimination of
the table games marketing programs and the closure of two unprofitable food
outlets which were replaced by profitable leased fast food franchises. Lease
revenues from these locations are included in other revenues along with the
other shop leases and concessions.
Other revenues increased by approximately $720,000, or 418.6%, from $172,000
during the 1996 period to $892,000 during the 1997 period, due primarily to an
increase in interest income resulting from increased cash balances, additional
rental income as a result of new tenant leases (including two leased food
outlets described above), reduction in outstanding chip liability recognized in
the third quarter and payments received under a settlement agreement with the
Twenty-Nine Palms Band of Mission Indians.
Promotional allowances decreased by approximately $327,000, or 22%, from
$1,483,000 during the 1996 period to $1,136,000 during the 1997 period due to a
decrease in complimentary rooms, and complimentary food and beverage resulting
from the elimination of the unprofitable table games marketing programs.
DIRECT COSTS AND EXPENSES OF OPERATING DEPARTMENTS
Total direct costs and expenses of operating departments (including taxes and
licenses) decreased by approximately $1,788,000, or 17.7%, from $10,117,000 for
the three months ended September 30, 1996 to $8,329,000 for the three months
ended September 30, 1997.
Casino expense decreased by approximately $1,042,000 or 23.5%, from $4,437,000
during the 1996 period to $3,395,000 during the 1997 period due to a decrease in
payroll and the cost of complimentary rooms, food and beverage. Casino expenses
as a percentage of revenues remained constant at approximately 40% as management
has redirected the Company's marketing efforts from table games to slots.
Hotel expense decreased by approximately $83,000, or 3.6%, from $2,255,000
during the 1996 period to $2,172,000 during the 1997 period. This resulted from
a change in policy on the housekeeping duties for the hotel rooms.
Food and beverage costs and expenses decreased by approximately $376,000, or
20.7%, from $1,813,000 during the 1996 period to $1,437,000 during the 1997
period resulting from a corresponding decrease in revenues.
OTHER OPERATING EXPENSES
Selling, general and administrative expenses decreased by approximately $50,000,
or 1.9%, from $2,559,000 for the three months ended September 30, 1996 to
$2,509,000 for the three months ended September 30, 1997 due to lower operating
costs. As a percentage of total net revenues, selling, general and
administrative expenses were 19.6%.
EBITDA
EBITDA decreased by approximately $112,000, or 9.9% from $1,127,000 during the
three months ended September 30, 1996 to $1,015,000 during the three months
ended September 30, 1997. The decrease was due to lower revenues, as discussed
above.
OTHER EXPENSES
Reorganization items totaling $977,000 were incurred by the Company during the
three months ended September 30, 1996. These consisted primarily of professional
fees incurred as a result of the reorganization under Chapter 11 of the
Bankruptcy Code. During the three months ended September 30, 1997, there were no
reorganization items.
Depreciation and amortization decreased by approximately 392,000, or 41.6%, from
$943,000 during the 1996 period to $551,000 during the 1997 period due to
revaluation of property and equipment as a result of fresh start accounting.
Interest expense increased by approximately $458,000, from $811,000 during the
three months ended September 30, 1996 to $1,269,000 for the three months ended
September 30, 1997, due to the restatement of notes and restructured debt as of
August 12, 1996, the date of Plan confirmation. Interest had been stayed while
the Company was under the protection of the Bankruptcy court.
INCOME TAXES
Income taxes totaled $15,000 for estimated federal income tax payments resulting
from the alternative minimum tax.
NET INCOME (LOSS)
As a result of the factors discussed above, the Company's net loss decreased by
approximately $784,000, from a loss of $1,604,000 during the three months ended
September 30, 1996 to a loss of $820,000 during the three months ended September
30, 1997.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED
TO NINE MONTHS ENDED SEPTEMBER 30, 1996
REVENUES
Net revenues decreased by approximately $4,800,000 or 10.5%, from $45,819,000
for the nine months ended September 30, 1996 to $41,019,000 for the nine months
ended September 30, 1997.
Casino revenues decreased by approximately $4,138,000, or 12.8%, from
$32,401,000 during the 1996 period to $28,263,000 during the 1997 period due
primarily to a $1,895,000, or 23.9% decrease in table games revenues and a
$1,995,168, or 8.7% decrease in net slot revenue. Management has eliminated
certain complimentary programs which generated significant volume in the first
nine months of 1996. During the first nine months of 1997, table games drop
decreased $23,011,000 or 43.9%, and slot coin-in decreased $91,239,000, or
21.0%. The decrease in table game volume was partially offset by a 1.8% increase
in win percent.
Hotel revenues decreased by approximately $1,203,000, or 14.5%, from $8,319,000
during the 1996 period to $7,116,000 during the 1997 period due primarily to a
decrease in complimentary room revenues of $1,056,000 resulting from the
elimination of certain table games marketing programs. The majority of the
complimentary rooms were replaced with cash paying customers at lower room
rates.
Food and beverage revenues decreased approximately $2,376,000, or 24.8%, from
$9,566,000 during the 1996 period to $7,190,000 during the 1997 period due to a
decrease in complimentary revenues of $1,429,000 resulting from the elimination
of the table games marketing programs and the closure of two unprofitable food
outlets which were replaced by profitable leased fast-food franchises.
Other revenues increased by approximately $1,088,000, or 230%, from $473,000
during the 1996 period to $1,561,000 during the 1997 period, due primarily to
payments totaling $561,000 received under the settlement agreement reached with
the Twenty-Nine Palms Band of Mission Indians. In addition, the Company received
a refund from prior year's health and welfare insurance premiums, an increase in
interest income due to increased cash balances, and additional rental income as
a result of new tenant leases.
Promotional allowances decreased by approximately $1,833,000, or 37.1%, from
$4,944,000 during the 1996 period to $3,111,000 during the 1997 period due to a
decrease in complimentary rooms, food and beverage resulting from the
elimination of the table games marketing programs.
DIRECT COSTS AND EXPENSES OF OPERATING DEPARTMENTS
Total direct costs and expenses of operating departments (including taxes and
licenses) decreased by approximately $4,019,000, or 13.4%, from $30,081,000 for
the nine months ended September 30, 1996 to $26,062,000 for the nine months
ended September 30, 1997.
Casino expense decreased by approximately $2,718,000, or 20.1%, from $13,563,000
during the 1996 period to $10,845,000 during the 1997 period due to a decrease
in payroll and complimentary expenses. Casino expenses as a percentage of
revenues decreased from 41.9% to 38.4% due to management's redirection of the
Company's marketing efforts from table games to slots.
Hotel expense increased by approximately $290,000, or 4.7%, from $6,141,000
during the 1996 period to $6,431,000 during the 1997 period, and costs as a
percentage of revenues increased from 73.8% to 90.4%, due to the reduction in
cost of comps transferred to the Casino department.
Food and beverage costs and expenses decreased by approximately $680,000, or
12.9%, from $5,273,000 during the 1996 period to $4,593,000 during the 1997
period resulting from a corresponding decrease in revenues.
OTHER OPERATING EXPENSES
Selling, general and administrative expenses decreased by approximately
$184,000, or 2.5%, from $7,332,000 for the nine months ended September 30, 1996
to $7,148,000 for the nine months ended September 30, 1997 primarily due to
reduced energy and maintenance costs. As a percentage of total net revenues,
selling, general and administrative expenses increased from 16.0% during the
1996 period to 17.5% during the 1997 period due to lower revenues over which
fixed costs are incurred.
EBITDA
EBITDA decreased by approximately $616,000, or 11.5%, from $5,358,000 during the
nine months ended September 30, 1996 to $4,742,000 during the nine months ended
September 30, 1997 due to lower revenues, as discussed above.
OTHER EXPENSES
Depreciation and amortization decreased by approximately $1,037,000, or 36.6%,
from $2,837,000 during the 1996 period to $1,800,000 during the 1997 period due
to revaluation of property and equipment as a result of fresh start accounting.
Interest expense increased by approximately $2,393,000, or 180.5%, from
$1,326,000 during the nine months ended September 30, 1996 to $3,719,000 for the
nine months ended September 30, 1997, due to the restatement of the Company's
mortgage notes as a result of the bankruptcy reorganization plan. These notes
began accruing interest as of August 12, 1996, the date of Plan confirmation.
Reorganization items totaling $2,115,000 were incurred by the Company during the
nine months ended September 30, 1996. These consisted primarily of professional
fees incurred as a result of the reorganization under Chapter 11 of the
Bankruptcy Code. During the nine months ended September 30, 1997, there were no
reorganization items.
Reorganization items totaling $977,000 were incurred by the Company during the
three months ended September 30, 1996. These consisted primarily of professional
fees incurred as a result of the reorganization under Chapter 11 of the
Bankruptcy Code. During the three months ended September 30, 1997, there were no
reorganization items.
INCOME TAXES
Income taxes totaled $45,000 for estimated federal income tax payments resulting
from the alternative minimum tax.
NET INCOME (LOSS)
As a result of the factors discussed above, net loss decreased by approximately
$94,000, from a loss of $916,000 during the nine months ended September 30, 1996
to a loss of $822,000 during the nine months ended September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents (including restricted amounts of
$914,000)of approximately $7.0 million at September 30, 1997, as compared with
$11.7 million at December 31, 1996 (including Restricted Cash of $4.4 million),
a decrease of $4,609,000 from December 31, 1996. Significant debt service on the
Company's restated 1993 Mortgage Notes ("New Second Mortgage Notes") and other
debt issued pursuant to the Plan is paid in August and February and should be
considered in evaluating cash increases or decreases in the second and fourth
quarters. Pursuant to the Subscription Rights Agreement provided for in the Plan
of Reorganization, $5,000,000 in cash was received by the Company following the
close of business on February 28, 1997.
For the first nine months of 1997, the Company's net cash (used) by operating
activities was $(2,849,000) compared to $3,390,000 provided by operating
activities in the first nine months of 1996 due primarily to the payment of
accrued interest on the New Second Mortgage Notes which had accrued since August
12, 1996. EBITDA for the first nine months of 1997 and 1996 was $3.7 million and
$4.2 million, respectively. Management believes that sufficient cash flow will
be available to cover the Company's debt service for the next 12 months and
enable investment in remaining budgeted capital expenditures of approximately
$4.2 million for 1997, including an arrangement to finance slot machine
purchases of $1.4 million in 1997, of which $500,000 has been used as of
September 30, 1997 and the balance was used in October, 1997.
Scheduled interest payments on the New Second Mortgage Notes and other
indebtedness are $4.3 million in 1997 declining to $3.9 million in 2001. Cash
flow from operations is not expected to be sufficient to pay 100% of the $30
million principal of the New Second Mortgage Notes at maturity on August 20,
2001. Accordingly, the ability of the Company to repay the New Second Mortgage
Notes at maturity will be dependent upon its ability to refinance the New Second
Mortgage Notes. There can be no assurance that the Company will be able to
refinance the principal amount of the New Second Mortgage Notes at maturity. The
New Second Mortgage Notes are redeemable at the option of the Company at 100% at
any time without premium.
The New Second Mortgage Note Indenture provides for mandatory redemption by the
Company upon the order of the Nevada Gaming Authorities. The indenture also
provides that, in certain circumstances, the Company must offer to repurchase
the New Second Mortgage Notes upon the occurrence of a change of control or
certain other events at 101%. The Company is also required to offer to purchase
all of its restated 1994 First Mortgage Notes, the principal amount of which is
approximately $3.9 million, at 101% upon any "Change of Control," as defined in
the agreement governing those notes. (See the "Proposed Merger" discussion in
Note 5 to the Company's consolidated financial statements included herein
regarding the anticipated change in control of the Company.) In the event of
such mandatory redemption or repurchase prior to maturity, the Company would be
unable to pay the principal amount of the New Second Mortgage Notes without a
refinancing.
Management considers it important to the competitive position of the Four Queens
Hotel & Casino that expenditures be made to upgrade the property. Management has
budgeted approximately $7 million for capital expenditures in 1997. The Company
expects to finance such capital expenditures from cash on hand, cash flow and
slot lease financing. Uses of cash during the nine month period included capital
expenditures of $2,791,000. Based upon current operating results and cash on
hand, the Company has sufficient operating capital to fund its operation and
capital expenditures for the next 12 months.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements. Certain matters discussed in this filing
could be characterized as forward-looking statements such as statements relating
to plans for future expansion, as well as other capital spending, financing
sources and effects of regulation and competition. Such forward-looking
statements involve important risks and uncertainties that could cause actual
results to differ materially from those anticipated in such forward-looking
statements. Readers should not place undue reliance on forward-looking
statements, which reflect management's view only as of the date of this filing.
The Company undertakes no obligation to revise publicly these forward-looking
statements to reflect subsequent events or circumstances.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto authorized.
ELSINORE CORPORATION
(Registrant)
By: /s/ Jeffrey T. Leeds
JEFFREY T. LEEDS, President
and Chief Executive Officer
By: /s/ S. Barton Jacka
S. BARTON JACKA, Secretary
and Treasurer and Principal
Accounting Officer
Dated: December 19, 1997
